This week on our REsimpli Mastermind call, we hosted a deep-dive discussion on real estate funding strategies, covering everything from conventional loans to hard money, private money, and creative finance. The session was highly tactical, with real investor scenarios, live Q&A, and step-by-step breakdowns of how to fund deals in today’s market.
Topic: Understanding the 5 Core Types of Real Estate Funding
Challenge: Many investors struggle to choose the right type of financing for each deal and often default to the wrong option, leading to higher costs, delays, or missed opportunities.
Advice:
- Conventional (QM) Loans
- Best for primary residences, second homes, and some rentals
- Lower rates, but harder to qualify
- Works best for W-2 earners with low debt
- Often challenging for full-time investors with 1099 or K-1 income
- Best for primary residences, second homes, and some rentals
- Non-QM Loans (DSCR Loans)
- Ideal for rental properties
- Qualification based on property cash flow, not personal income
- Slightly higher rates than conventional loans
- Easier approval for full-time investors
- Often best sourced through a mortgage broker who shops multiple lenders
- Ideal for rental properties
- Hard Money Loans
- Short-term funding for flips and rehabs
- Faster approval with lighter qualification
- Common features:
- 80–90% loan-to-value
- Rehab funding via draw schedules
- 6–12 month terms with extension options
- 80–90% loan-to-value
- Some lenders offer desktop or drive-by appraisals for experienced investors
- Short-term funding for flips and rehabs
- Private Money
- Relationship-based funding from individuals
- Often used for flips, bridge funding, or transactional funding
- Flexible terms and faster execution
- Requires trust, credibility, and clear communication
- Relationship-based funding from individuals
- Creative Finance
- Seller financing
- Subject-to deals
- Hybrid structures (subject-to + seller carry)
- Best used to solve seller problems, not force bad deals to work
- Seller financing
Key Insight:
The best investors don’t rely on one funding source. They understand which financing tool fits each deal and exit strategy.
Topic: Funding Fix-and-Flip Deals the Right Way
Challenge: Newer flippers often underestimate funding requirements, rehab cash flow timing, and loan structure limitations.
Advice:
- Use hard money for acquisition and rehab, but clarify:
- How much of the rehab budget is funded
- Whether draws are reimbursed or advanced
- How much of the rehab budget is funded
- Plan for extension fees in case projects run long
- Avoid pushing ARV too aggressively
- Always have a backup exit:
- Refinance into DSCR
- Rent the property if the flip stalls
- Refinance into DSCR
Key Insight:
In today’s market, every flip should have a rental fallback option just in case timelines or sales slow down.
Topic: Creative Financing to Increase Deal Flexibility
Challenge: Sellers reject low cash offers, while investors struggle to make numbers work with rising interest rates.
Advice:
- Offer multiple options to sellers:
- Cash offer
- Seller financing at a higher price
- Subject-to existing low-interest mortgages
- Cash offer
- Use creative terms to trade price for flexibility
- Hybrid structures can bridge equity gaps:
- Take over the mortgage
- Carry the remaining balance as seller finance
- Take over the mortgage
- Always solve for the seller’s real motivation first
Key Insight:
Creative finance is a tool to align seller needs with investor returns, not a way to rescue bad deals.
Topic: How to Raise Private Money (Step-by-Step)
Challenge: Many investors hear “just use private money” but have no clear process for actually raising it.
Advice:
How Private Money Relationships Are Built:
- Investor friends and peers
- Long-term relationships
- Social media credibility and deal documentation
- Referrals from existing lenders
The Private Money Process:
- Initial relationship-building conversation
- Zoom walkthrough explaining:
- Investor background
- Deal structure
- Risk and returns
- Investor background
- Align on:
- Loan amount
- Term length (typically 6–12 months)
- Expected returns
- Loan amount
- Verbal commitment
- Draft promissory note and mortgage
- Notarize documents
- Funds wired directly through title
- Lender paid directly from the HUD at closing
Best Practices:
- Record mortgage notes for lender security
- Be transparent about risks
- Always prioritize paying back lenders, even if a deal goes poorly
Key Insight:
Private money works best when lenders feel informed, protected, and respected.
Topic: Credit, Loan Limits & Common Financing Problems
Challenge: Deals fall apart due to avoidable financing issues like credit score thresholds or loan size limits.
Advice:
- DSCR loans can go as low as:
- 620 credit with lower leverage
- 680 credit for stronger terms (up to ~75% LTV)
- 620 credit with lower leverage
- Credit utilization is often the biggest issue
- Rapid rescore options can raise scores quickly
- For smaller-value properties:
- Consider local banks or credit unions
- Portfolio loans may work better than national lenders
- Consider local banks or credit unions
Key Insight:
Many financing problems are solvable with the right lender relationships and preparation.
Topic: B2B & Referral-Based Deal Sourcing
Challenge: Direct-to-seller marketing is becoming more expensive and competitive.
Advice:
- Build relationships with:
- Real estate agents
- Title companies
- Attorneys
- Assisted living facilities
- Local professionals with community access
- Real estate agents
- Stay top-of-mind through consistent follow-up
- Segment referral partners by deal quality
- Use email marketing and personal outreach
Key Insight:
Referral-based deal flow compounds over time and often delivers higher-quality opportunities than cold marketing alone.
Best Takeaways from the Session
The investors who consistently fund and close deals are the ones who
- Understand multiple funding sources
- Match financing to exit strategy
- Build real lender relationships
- Use creative options to solve seller problems
- Plan conservative exits in uncertain markets
In today’s environment, funding knowledge is a competitive advantage. Investors who master it can move faster, structure better deals, and stay profitable even as conditions shift.
