You're about to discover 4 ways to round up some quick cash for your next good deal. Whatever the opportunity, whether a real estate deal or a new business, these 4 money sources can be extremely helpful for you. These are the very same techniques that my Apprentices use which allow them to do more deals, especially creative financing ones. You can probably employ 1 or more of these ideas right away to shore up some fast money. But make sure you use them for profit making opportunities as opposed to blowing it on personal items!
People run into problems with debt when they blow the money on personal things, like vacations or a bigger house or car that they don't need. What I'm focused on is using debt reasonably and responsibly for money making endeavors that can bring much bigger returns. In another video I have called Personal Finance Advice You’ll Hear Nowhere Else, I encourage you to be very aggressive with business expenditures, but then being very conservative with personal ones.
Here are 4 ways to get access to quick cash or credit, for GOOD deals. We don't do this for things that are unproductive, they need to be productive deals.
1. Borrow from Your 401K
I love this idea because you're borrowing from yourself and paying yourself back interest. Most 401k plans allow you to borrow money from them. I'm a huge fan of a specific type of 401k retirement plan that I call a solo 401k, and I have a video The Power of the Solo 401K that explains how that works.
The solo 401k is a great tool that allows you to borrow up to $50,000 of your own money. If your current 401k doesn’t permit borrowing, you could call your 401k administrator and ask if you can roll that over into a retirement plan that would allow you to borrow money. Especially if your employer is matching your retirement. Make sure you take full advantage of this powerful tool because it’s free money. This is my favorite way to get quick cash.
UPDATE! The new CARES Act allows you to borrow up to $100,000! And you can also take a distribution of up to $100,000 with no early withdrawal penalty and you can spread the taxable income over 3 years.
2. Lines of Credit
There are three different types of lines of credit. The one most people are familiar with is a HELOC, or Home Equity Line of Credit. This is when you borrow against the equity in your home. I have a HELOC against my house, and about every two years I expand it as the value goes up. I use this all the time to fund my apprentice’s deals and for funding my own deals. The money goes out and comes back in a few months later. Interest rates are low and it's fantastic.
However, a lot of people can't get these for several reasons:
- Not enough equity in their home to do a line of credit.
- They don’t have the credit or the application worthiness to be able to get a line of credit against their house.
- They don’t own a house.
What do you do if you don’t qualify for a Home Equity Line of Credit?
You can do what I did when I was first getting started and apply for a personal line of credit. I got a $7,000 personal line of credit at a local bank called the Bank of Nashville. It was a lifesaver and I used that to pay sellers to move out and cover a contractor before the closing. Thank you to Jonathan at the bank in Nashville for changing my world with that little 7K personal line of credit way back in the day. I don't know that a lot of the larger banks offer them, but some of the smaller banks do, and it's against your personal credit.
This one is exciting, especially for those of you who have had a business going for awhile. The business line of credit is credit against your business. So, if you set up an LLC and have been flipping houses for a year or two, you might be able to establish a line of credit. As you use it, you can begin to build it up and increase your borrowing ability. A lot of my apprentices have set up very large business lines of credit after graduating. They're making hundreds of thousands of dollars a year and they can get a line of credit against that business. This is great because you don't have to use the money, but it's there if you need it. It’s also convenient; using your online banking, you just move the money over. It's almost as good as cash.
3. Credit Cards
There are a lot of great little tips to share with you on this type of credit. First, credit cards have a higher interest rate, therefore you do have to be responsible with them. You probably already have a personal card and I hope you're moving a lot of your personal expenses through it so you can get the rewards. It’s like free money or free flights, so go for it. I personally have a Citi Double Cash. It gives 2% cashback on every purchase, 1% when you spend and 1% when you pay it off. I pay it off at the end of each month and that really adds up over time.
What I really think is exciting is business credit cards. I'm surprised by how many real estate investors don't have one of these. With a business credit card, you still get the rewards, but it doesn't show up on your credit report. This can be helpful in all kinds of ways. So, if you don't already have a business credit card, I encourage you to get one.
- American Express Blue Cash Everyday Card: The fastest card to get instant access to money.
- Bank of America Small Business Card
- Capital One Spark Business Card
- Chase Ink Business Card
- Plastiq: Allows you to pay people with your credit card that do not accept credit cards.
One quick tip for you is to request an increase in your availability from your provider. Why not? You don't have to use it but get access to more capital.
4. Other Credit Sources
Some folks that I've talked to have had been using the PayPal small loan they provide. Apparently, it's very convenient and easy to get.
Another option that is a big deal these days. This is an expansive topic that I'm not going to dive into because of my limited experience. Some of you may know a lot more about it than I do. There are a lot of different providers with different terms and specific niches.
BONUS! If none of those work for you
And if none of those techniques work for you, as a last case resort, here's a free course on how to make some fast cash by finding deals for other investors: Free Deal Finder Course.
If you would like to learn about how to get money for a real estate purchase, which is a slightly different topic than this one here, I've have a great video on that. In it I talk about hard money loans and creative financing.