While we are primarily teaching our Agent Magnet family to make money in real estate without holding the property there will be times when it makes perfect sense to buy and hold, or when you need to put a little money into the project you are flipping in order to get a retail buyer to sign on.

Investing in apartments, multifamily units, or rehabbing an occasional house flip can make sense when the cash flow and long term wealth building potential are large enough to be worth the extra risk of holding property long term.

The problem with buy and hold strategies is that it takes cash to make these deals work, and traditional lenders are still not opening up the coffers to many of these deals.  Even when commercial loans are available, the numbers of properties that can be financed in one portfolio are limited to between three and ten, depending on the rules of the lender.

Generally, the buy and hold Investor will need to come to the table with quick cash.  Fortunately, there are a number of great sources for private money:

1.  Personal sources.  Your 401K can be converted into a self-directed source of funds for property investment.  Companies like Equity Trust and Security Trust can show you how to transfer funds to an account that you can self direct without incurring a penalty for withdrawal.  Whole life policies are also a great source of low-interest funds.  Typically, you can borrow up to 80% of the funds that have been put in and as long as the amount borrowed and interest is paid back over time, the funds are not subject to taxation as capital gains.

2.  Friends, family, and local professionals. These sources will often be willing to partner with you on a good investment that will pay back at a rate that is higher than they are earning in stocks, bonds, savings and retirement accounts.  Since the stock market crash a couple years ago a lot of money has been sitting on the side lines and a well thought out presentation on the returns available in real estate can easily lead to a fund that can be used for investment at a payback rate of 9 to 15 percent per year.  There are some rules that need to be followed to make sure this is not viewed as an investment pool subject to SEC rules.  Each investor should be deeded a mortgage interest in specific property, and no two investors should be pooled in one mortgage.  Be sure to check with an attorney in your state to be absolutely sure about how to structure your dealings with private lenders to keep yourself AND your lenders safe.

3.  Hard money lenders.  There are fewer hard money lenders around since the housing crash as many got caught with defaulted loans, but hard money lenders are still a major source of short term, quick cash for rehabs.  You will pay 12 to 18% and 2 to 5 points for the money lent and will have to pay back the loan in 6 to 18 months generally.  While hard money lenders are primarily interested in the return on investment, they will check credit and may have a minimum credit score that will be required in order to borrow funds, and the credit score may affect interest rate and points.

4.  Partner with cash buyers in your area.  Your local REIA will be a good source for meeting seasoned investors with cash to spend for rehabs and buy and hold properties.  If you have a project that will have a good return, you may very well find a joint venture partner among other investors in your area willing to fund the deal while you farm the deal.

5.  Build up business credit by developing strong relationships with local commercial lenders.  Establish credit accounts with the building supply and office supply companies you work with regularly.  Your business will start getting regular credit applications as it builds cash flow, but this is not a great way to build credit for your company because most of the standard credit cards require your personal guarantee as well as your business guarantee.  Use the help of a business credit consulting service to help you find sources of business credit that report only to business credit reporting services and not on your personal credit, and do not require a personal guarantee.  These credit building methods take time, but over the course of a year or two of successful business, you should be able to build a substantial credit line.