Just got this email:

Ryan,

"How do I get hard money financing when I spent my last dime on education? Everyone told me I could find money but now that I spent 70k and have no more, they say hard money lenders want 20% skin in the deal??????"

Thanks,

Frank

Dear Frank,

Ouch, $70k? That's a LOT of coinage...

I know it's too late to save you now, but for future reference, I use this litmus test to evaluate people giving me advice on real estate investing and hard money financing.

Just simply ask the person this question:

Will you give me the money to back up your advice?

You'll find that 99.99% of all of them will fail to meet that test.

Having said that, here's a misnomer that these gurus perpetuate. The true definition of 100% financing and how hard money finance really works.

Yes, it is possible to get 100% financing on a deal...

But I see that happening in less than half of the deals we fund.

Here's why:

To get 100% financing for purchase and rehab costs, those numbers together have to be less than 70% ARV. And it's the ARV determined by the lender - not you.

Only the sweethearts of deals will meet this criterion. Those that don't fit into it will require money down for you to close.

Another one has to do with points. The points are where we make our profit on the loan and as a result, they cannot be financed by us.

This is typical among hard money lenders.

The gurus don't talk about this because it dilutes the message they are using to sell their program to you.

And let me tell you Frank, you are NOT alone! I've been swindled by these guys for over $10 grand myself... and I hear from countless others like us that have been hoodwinked too.

Here's the answer you are looking for...

First, you have to make sure you are getting the best deal to start off with - that's numero uno.

Do it right and then you'll have enough profits to get into another deal with some money down if you have to. Things will start to snowball from there.

If you are going to be in real estate you have to have the proper expectations. The correct mindset is that if you are looking to become wealthy, it won't happen from one deal. You will need to do many deals to get rich.

I've been involved in over 398 real estate transactions now and on average, profits are $10,000 - $15,000 per deal. So you should plan on doing 100 flips to get to the magical million dollar mark.

You might have just spit your Diet Coke out onto the screen over that 100 flip number, but let me tell you - IF you do things right, it won't take long. My personal record is 25 flips in one year...

You also have to get creative with how you get your financing for your first deal.

There's ways you can find money to cover the "gap" in what hard money financing you can get and what you need to close.

You can find financing for the points too. That way you can cover your whole deal without coming out of pocket at all.

These are a few things that we've been working on helping our clients with. Be on the lookout for an announcement of a new partnership we've developed soon.