28. How to Use Hard Money for Real Estate Flips with Martin Castro Silva

Most aspiring real estate investors shy away from debt, thinking it's risky or even cheating. But what if leveraging other people's money could fast-track your success—without the fear holding you back? Martin Castro Silva dives deep into the truth about using private and hard money to turn dreams into reality, revealing how he quit a high-salary job and built a thriving flipping empire in Florida.
He'll share the raw lessons learned—like how to find private lenders when everyone seems broke, why having a solid business plan is non-negotiable, and how to navigate the stormy waters of contractor nightmares. Discover the secret to acquiring deals with up to 90% financing, how velocity of money can explode your profits, and why execution trumps everything in this game.
This episode is a must-listen for anyone feeling stuck, afraid of failure, or unsure how to even start—because Martin’s story proves that action, confidence, and a little bit of boldness can change your life. Whether you're just getting started or needs that final push, you'll leave inspired, empowered, and ready to take your shot.
Ready to see how leveraging others' money can unlock your freedom? This is the blueprint you didn’t know you needed. Don’t wait—your real estate breakthrough starts now!

Connect with Martin:
 @Martinmelmac  
https://martinmelmac.com/

Transcript

Violeta 0:00

In our community, we grew up thinking we needed cash for everything. So when we discover about investing in real estate, maybe flipping houses or rental properties, we don't think that we can get it done without raising our own funds. Once you start learning about utilizing debt, maybe like hard money lenders or private money lending, it kind of feels kind of scary. And it feels like cheating because our community, we really pride ourselves in doing things ourselves, raising our own money. But today we have a special guest that's going to tell you how he was able to use other people's money to launch his real estate investing uh journey and career. And the lessons that he learned along the way.

Lindsay 0:49

Martin Castro Silva used hard money and private money to launch his real estate flipping career. Welcome, Martin. How are you doing today?

Martin 0:58

Thank you, ladies. I'm so happy to be here with you. My name is Martin. I'm in Florida, the state of Florida. Uh Vito Beach City is my main, my main primary market where I invest. I've been in real estate since 2022. I started flipping houses, is what I do mainly, but um I also buy and hold. And I've been doing it since then, you know, I think with some sort of success. And yeah, it's it's fun. Let's talk about it.

Violeta 1:23

First of all, I heard your episode with Bigger Pockets podcast. So definitely check out that episode. And one of the things you mentioned there is that you went from like a high salary job, and then you went and just like quit and then started using other people's money. So I'm kind of curious like how your mindset, like, first of all, did you have the similar mindset of debt, like afraid of debt, and how what switched that with you?

Martin 1:50

Well, I have always been very diligent with my bills and my money. I think that that is a plus. Um, my background is in accounting, and I was working at a bank for over a decade, right? So I kind of have an understanding of money. When I decided, my wife and I, when we decided to go into real estate, we knew uh it was gonna be a complete different industry. We didn't have much of an experience, but we knew we knew one thing for sure. We wanted to do something different, and we wanted to do something, we wanted to try it. We hey, don't get me wrong, we were very afraid of doing it. Um the uncertainty kind of like played a big role, and it took me a year and a half, to be quite honest, to make that move, to take that leap of faith. So for from whenever that is seeing this podcast, you know, don't if it's taking you a month, six months, a year, two years, that's okay. You know, we're all gonna move when when we feel ready. But the way that we started is um we just wanted to do something different. We were very lucky also because we took advantage of uh when interest rates drop significantly, we were able to refinance our home and pull some money. It wasn't much, but it was enough for us to understand that where we used to live, we couldn't invest because it was it was too expensive. So we felt that it was right for us to look, think outside the box and look for other markets where our money would help us and give us that push to start.

Lindsay 3:24

Thank you for saying that, because it is not a thing that you just wake up with, right? Like all of a sudden Sunday I learn about real estate, and Monday I'm gonna go and like pull money out of my house and then go do it. Because there's gonna be an adjustment period for everybody that's learning about this or even seeing other people doing this. Like you were saying, you were a banker, you were seeing other people that were investing in real estate and they were talking to you about their deals. And this is the information that I got from your throat on your podcast with bigger pockets. But it is not, it takes time to make the transition of say of saying, like, you know, I'm gonna venture into this new business and I'm looking to make a profit on my first deal, but also like I'm gonna think about it, we'll mull it over, and I'm gonna take the necessary steps to put me in a position, like going and refinancing my house, pulling out equity of the house, and have like that as a backup before I like go ahead and venture into this new this new thing, right?

Martin 4:29

Absolutely, yeah. And one of the things that I can really share now that I'm you know a few years in the industry is that you gotta have a plan. You gotta have a business plan. If you don't know how to write one, it's just a this is what I did. I remember I kind of like, I mean, I knew my my my bills, my expenses, right? And when I when I refinance my house, I I got like a chunk of money and I was like, okay, so I'm gonna give this real estate thing a try. And I'm gonna put aside three months worth of expenses. If I don't make it happen in three months, if I don't, if I see it's not going anywhere, I'm gonna try to to do something different. But I'm gonna cross that bridge when we get when I get there, if I get there. So that's what I did. I kind of like planned ahead, I had a budget, I knew, and I I just took a leap of faith. And that's very important that you have to believe in yourself. You have to believe that if you study, you learn, you read, you watch videos, you talk to other people that aren't doing it, chances are, you know, you have higher chances of doing it successfully than failing. And it's just that courage that um there's a saying in Spanish, it's basically nothing has been written about cowards. Just gotta take that, take that leap of faith, just go for it.

Violeta 5:48

And look, if it doesn't happen, it doesn't happen. The fear of failure stops a lot of people, and we gotta be like, you know what? Failure is okay. Like if it didn't work out, then you know, find something else, or maybe figure out what you did wrong, and then try again. Because sometimes it's something that like maybe you maybe you didn't have a business plan, they misjudged how much real estate investing is, you know, how much it takes.

Martin 6:12

I don't remember that you miss 100% of the chances you don't take. So, and you know what I I mean, I I'm a father, I have two little ones. So I've realized that time flaps, you know, if you don't execute, if you don't take action, whatever it is that you want to do and you want to achieve, right? It's gonna be really hard. You don't want to live with that regret. Oh, I didn't do it when I was 25, I didn't do it when I was 30, I didn't do it when I was, you know. So might as well just try it. Hey, listen, you can always come back. And uh perhaps that might be uh um immigrant mentality because you know we came from nothing, and then we just, you know, what do we have to lose? At some point, we just didn't have anything, and then we started building, you know, we started doing something for, you know, we started building ourselves, our career, our working experience.

Lindsay 7:03

Yeah, I definitely understand. Like a lot of people I ask, like, how do you have this confidence to go and do these things? Um, and then they're all like, oh, well, I need to have experience, I need to have competence prior to do these things. And I'm like, how do you get the experience if you never have tried it and never have done it? I don't want to sound like a gym bro, but like you have to have reps, you have to go and do the, you know, train the muscle before the muscle becomes a harder muscle or bigger muscle. So you have to go and try it out for yourself. I wanted to ask something that we haven't dwelled in into the and this podcast is harmony. And if you can explain to us what harmony is and how do you use it for your deal?

Martin 7:45

So harmony, I did not know that um until my second or third deal, I have the same mentality as buying everything cash, right? But um I was able to make really good connections with people. I have used private lenders, people that have excess of cash, good problem to have. And they were able to lend me, lend me some money on their terms. You know, you gotta pay points. What people need to understand is hard money is just person that has money that is willing to lend it to you using the asset, the property as a collaborator, right? In case you default, you don't pay, or even if you die, right? They will be able to get their money back, no questions asked, because there will be a uh mortgage note recorded on the property of property appraiser of whatever accounting you buy, and then they'll be able to claim that. So they typically they lend up to 70, 80%, you know, when you're first starting, when you don't have any experience, quote unquote uh riskier borrower, right? Because you don't have the experience. So get a title, you find a title company that is gonna do the closing, right? And then you bring your lender. You tell the lender, hey, listen, I wanna buy this house for $150,000, right? Or let's say $200,000 and then they're gonna lend you $150,000. So you would have to come up with a difference, right? 10, 20, 25%, whatever the case may be. A title company would get in touch with the lender and they're gonna tell it, I was told, I understand you are gonna be Martin's lender for property one to three main street. Um, I'm gonna tell you what the wire that you need to send. So the day of closing or the day before, that lender will wire the money out into the title company's account. And the title companies withhold the money for closing. You bring your share because also you gotta remember as a new investor, you have to have skin in the game. You have to have some money. Okay, I know a lot of people say, oh, buy this house with no money, with zero dollars, that could happen, but in reality, you know, I've I've never I don't know any anyone that has done it that personally know. Like you have to have at least something because you also have to have something to lose. So what they do is closing the accounts, the money is entitled company, you bring your own money, you do your own wire, and then what do they charge you? They typically charge you points for originating the loan, right? Point origination, and then based on your experience, they will give you an interest rate, which is interest only. For instance, if they lend you $50,000, they typically ranges from 12 to 15%, right? That you're gonna pay on that amount for a year. Most lenders lend for a year, 12 months, because typically you're gonna go in, renovate the property, and try to sell it within less than a year, right? That's why it's very important, very imperative to run your numbers conservatively. You have to make sure you run your numbers because you definitely wanna be in and out of the property. Hold it for, I mean, no more than six months, I I would I would say.

Lindsay 10:51

Want to mention that different hard money lenders would have different criteria. Yes, and also like the way that they disperse the money is not the same, right? Some people do disperse the money for the whole project at the beginning. Some people do have like a drawing period in which you access on stages, if I'm not mistaken.

Martin 11:13

I'm gonna I'm gonna tell you how I operate with my hard money. Hey, Blake, if you're seeing this, you know, kudos to you. Um, so I'm at a point where uh I I get 90% financing. Say I bring I bring I bring a deal to the table, 200,000. Let's let's talk with numbers so people would understand it, right? 200,000 is the purchase price. My lender would give me up to 90% of the purchase price, which it'll be 180, right? And I have to tell them that what the rehab budget would be. Let's say this house is gonna be 40,000. So I have to make sure that the 90% of the purchase price plus the rehab budget does not go over 75% of the ARV value. In this property, then I have a property under control right now, so the ARV is 325. So 70% of 325 shouldn't be higher than 180 plus 40. 220. We do a quick math. That's let me see 27,500, and my budget is 220. So I'm good, good to go. That's how it works. I of course, you know, points change with experience. Typically, lenders charge 2-3%, depending on your experience, or maybe less. And then um, you pay for closing costs, interest rates are raised at 12 to 15 percent. But the goal is this business, one thing that I learned is velocity of money. The faster you get in, the faster you get out, the more money you can make. And of course, you don't wanna rush things, right? There are things that take time. The rehab, you're not gonna be able to rehab a do a full gut job in a week, you know, let's be realistic. But you have to account for those things. So when you do your when you run your numbers, you definitely want to run for you definitely want to account for the purchase price, the rehab, and the holding cost, right? How long it's gonna take you to rehab that property. So you wanna make sure you have that buffer in a sense that um, you know, if you go over one, two, three months, then you already accounted for that and you're in good shape. Because the goal is to make money, right? We all work for profit. But um the expectation when you're first starting is to go your due diligence ahead of time and be confident that you're gonna succeed. But if you fail, that's okay. If you don't if you break even, that's okay. If you were expecting to make 15,000, 20,000 on your first deal, but you end up making five or breaking even, that's okay. That's okay because in this business, every single flip, especially flips, will be a home run.

Violeta 13:50

So, what do you say to people like that that might like hearing that interest rate might deter them from going into a deal? It's like, oh, that's too much money.

Martin 13:59

So people that are comparing traditional lending, conventional FHA, and all that good stuff to hard money, these are two complete different worlds. Because one will allow you to leverage deals when you're in in real estate investor mode. The other one, yes, you can definitely do some techniques like house hacking and and you know, like you buy a house as a primary residence, live in it, live in it for two years, then you buy another one and stuff like that. But there's two different strategies. Everyone has to understand what they're trying to accomplish. If you want to move fast, faster, then using a hard money lender would be the route to take. If you still have your W2 job, you're still unsure you like real estate, but you don't really want to dive in, you know, 100%, then do a traditional lending. You know, make sure you always buy you like each year or every 15 months you purchase a property, and that way you can start building your portfolio as well. So both routes are great. Like one needs to know what they really want to do. So you you have to be confident with yourself. You have to know your goals. What are your goals? What are you trying to accomplish? What are you trying to accomplish? Do you do you wanna leave your W2 job because you don't you no longer feel passionate about it and you wanna do something different and you found real estate as the vehicle for you to get that freedom? Fine. Then the the route you're gonna take is the hard money route. You're gonna have to partner with hard money lenders, you're gonna have to put a lot more work. But you're okay, you know, you love, you still enjoy your profession, you still like what you do, you make very good money, decent money, but you all also wanna have what wanna take a pick of what it's like to be a real estate investor, then do the traditional route, you know. Um I I've heard a lot of people that um recommend to keep your W-2 job as much as you can, right? Because you're more valuable. Banks look at you even better because you're bringing income. And then you add rental income to that income, that's even better.

Lindsay 16:03

You also mentioned that you use private money lenders in the beginning of their journey. And a lot of people would think that, you know, I don't know anybody that has extra cash and and or and then network. Like when you see around you, every side it everybody seems like they're struggling to make ends meet, to buy groceries, to go on vacations. How do you meet these people that have the extra cash to lend you? Like, how do you go about networking with these individuals?

Martin 16:30

Surprise, but just getting into the business and people seeing that you're doing flips or you're buying rentals, they would connect you. The very first private lender that I met was the closer of the telecompany for my first flip. He introduced me to actually the second, the second lender, private lender. He's like, Hey, Martin, you need money? I got you. And you know somebody who will lend you the money. Really? But they don't know me. Hey, they're looking at the property, they're looking at the asset. So that's you just have to speak up to everyone. You would never know who the bank account. You know, there is another saying, don't judge the book by its cover. You don't know, you don't know who has the money, and they they will, you know, if they're in real estate or they understand that they will lend it to you.

Violeta 17:16

I haven't used like a private money money lender or a hard money lender yet, but I've met them through the networking and just by talking about it and people that I didn't even like uh know on my Facebook. They're like, hey, you know, I also do that. Interesting, let's connect. Right.

Lindsay 17:32

If you don't tell anybody, then nobody's gonna share with you, yeah, I have a you know extra $300,000 in my bank. Nobody's just gonna be like, are you making, you know, are you trying to get a profit? Are you trying to get 12% on your money? Or do you know anybody, right? Do you know if it's not directly? I I remember somebody telling me, if you don't feel comfortable asking somebody for money, even though they're a private money lender, you always start with, like, do you know somebody that would like to make 12% on their money? So now that you have your business on the wraps and your systems are old in place, what does your deal look like?

Martin 18:08

You definitely want to have a real estate and investor-friendly agent, right? An agent that understands that you are not a regular buyer, that you will move quick, and someone that will bring you deals and help you comp deals. Because let's be honest, we you know, we don't have all the tools to know what's gonna be like when a deal comes my way. Um I probably know or don't know the area. Perhaps this agent has had a listing in the past, and you know, he can give you, he or she can give you insight, and that you know, hey, listen, it took a lot of time for me to sell this in this neighborhood. Um, I don't think that would be a good buy, or houses in this neighborhood sell in no time. That would be one, two, lender, right? I finance all my deals with hard money because it's faster. They know me, they give me good pricing now, so it's a lot easier for me to just pick up the phone and send them the address or send them a text message. Hey, I'm looking to put an offer on this property, boom, boom, boom. All they ask me is purchase price, ARB, rehab. I give them those three numbers, they either give me thumbs up or thumbs down. Um and then I have my crew. I have a crew that I work with, right? Where when I bring the deals, houses to rehab, just give it to them.

Lindsay 19:32

You start it without experience, but how do you go about estimating rehab and costs?

Martin 19:37

Great question. Well, at first, I'm not gonna lie, you know, people rip me off because I didn't know better, and I believe that's everyone's fear, right? But what I always recommend to new investors is try to get a light cosmetic rehab project. You definitely don't want to do a bad job if you don't have the experience. And what I what I mean by that is something where you just have to change the countertops on a kitchen, light pictures, faucets, maybe panities. I mean, if you have to do an entire bathroom, that's okay, it's not that bad. But something that even if you pay a little more money, it'll be easier because that one deal will give you the experience to make connections, know people, right? To understand how they work. You definitely wanna, I mean, you don't wanna babysit anybody, but sometimes at the beginning you may have to do it because you know, this is your money, this is your business, and you cannot be just like naive and and believe that everyone is gonna do their job how they're supposed to. So at first you just have to kind of like it's it's part of the process, part of the learning curve, part of the learning experience. But when I estimate the way I do to estimate my flips is I always I try to be conservative and I try to give myself a little buffer, right? So I know at least down here in Florida, bathroom remodeling could go from anywhere from five to eight thousand dollars. Uh a kitchen could go from depending on the size, eight to fifteen. But you also wanna develop relationships with the contractors and explain to them, hey listen, I am an investor. You can give me a decent price. I'm gonna keep calling you, you know, decent price, decent job means repeating business. Simple as that. But you have to have that conversation with every single contractor, subcontractor. I've had it with my AC guide, I've had it with my counter guy, I've had it with my settick guy, and they know we're not empiers, we're we're doing repeating business, and we're gonna give them my roof guy, you know, we're gonna give them businesses, like multiple businesses within a year. So you just just have to break the ice and be upfront and let them know I am an investor, and that's It's something that more new new investors they have to believe. They have to believe that they're investors and they're bringing money, they're creating jobs, and they're making money flow in the investment real estate ecosystem.

Lindsay 22:13

We all watch HGTV and we all see flipping houses. They look great, but the reality is different. What is the hardest thing nobody warns you about that you push through without giving up?

Martin 22:24

I believe my second flip. I hired this electrician, you know, in this new city that I had just moved in, and he charged me, he asked me for some money, right? From he did some, he did the work. Like he went one day, kind of like I was telling you the breaker panel. He took the breaker panel out, he installed a new one, and he left me with one breaker. One. Oh no. He did not come back in two months. My entire operation froze. I couldn't do much. I couldn't do anything. I was like going nuts. I would call him, he wouldn't pick up. I would call him, you know, I tried to reach out in different ways. And I remember now, and yes, I want to I want to throw in the towel. Because how is how is this possible? This is this is a licensed electrician. You know, this is someone that is local, this is someone that why would he do that to me? What did I do? I thought I don't owe him any money. He wouldn't, he just wouldn't come and he had opened the permit, you know. So like going to a different electrician, I would have to pay what he has already done. So he was gonna be double the work and it wasn't expect a cheap ticket item. So managing contractors, I think, would be one of the highest uh or more difficult tasks in this business. But as as long as you develop relationships and you're being fair with them, I think they so far so good, nothing would besides that experience, everything else has been has been fine.

Lindsay 23:51

How did you end up resolving the issue?

Martin 23:53

I ran into him two times at Home Depot and confronted him. Yeah. I was like, dude, what the hell?

Lindsay 24:01

I'm gonna follow him and come back to my house, fix it.

Martin 24:04

I called him, I called his office, his secretary, and then he came. I was I bugged him so much because I mean he needed to finish the job. You know, I didn't want to hire somebody else because then I would have to pay double, close the permit, open a new permit, delays and all of that. So I ended up just like I got him to come, but he didn't close the permit. And it wasn't until we had the house on the contract that I personally had to go to the city, close the um, I'm sorry, could meet a request for to open a new permit, and then he managed it. And I had but I but by then I already had everybody else, like both of the listing, well, both of the agents of the transaction, you know, title reaching out to himself. It's just about business, you know. Like I would they would say, oh, never refer to this guy, never refer to this company because yeah, they're not gonna deliver. Yeah, that was a dark moment.

Lindsay 24:58

What would you say to yourself if like back then if you were going through the same thing?

Martin 25:03

What I do now, because I still run into hurdles, you know, it's not easy. This job is not easy, but it's very rewarding. I just take a deep breath and tell myself, hey, listen, there's nothing you can do. You've done everything that is in your control, and as long as you're good with it, you're gonna think for the next day. There is always tomorrow, and you can always, you know, with a fresh mind, you'll be able to tackle that that problem and hopefully solve it. Yeah. So I'll tell you some sorry, very small, sorry, recent story. So I finished the flip, and the very we were just cleaning it up, getting a credit for pictures, right? And then we heard a hiss on the one of the pipes. I didn't see any water anywhere. Oh my god. So I called my contractor. Hey, listen, was this sound here? Do you hear this sound when you were here last? No, no, no, no. And I I didn't see any water, so but then I went to the main main lane, water lane, line, and I saw the the meter that was running. I was like, okay, so everything is shut off. Why is it running? It has it has to be underground. So clearly, yeah, I had to shut off the main valve, you know, call a plumbing company to find the underground link, fix it. Not only that, then I rebuilt a fence that was in that house and I just did it nicer, but I was just redoing it, so I did not pull a permit for it. Right? So I got a complaint from the city and a violation notice, so I had to deal with it. So the point I'm trying to make is you will always find obstacles, you will always find things that they're not gonna go the way you plan, but you just have to understand that you're just gonna have to solve them. And this is what this is what this profession is about. You just you put out fires every single day, right? And you just have to have the conviction, the the willingness to tackle them down and and make sure you're gonna be successful at it. That's it.

Violeta 27:00

And just to like finish on a a good positive note, like what's some like motivation for our community that you would say that um to help somebody that's like on the fence?

Martin 27:13

Well, just kind of like going back to what we discussed before, having a plan is key. Understanding, you know, I'm not I'm not here to promote, quit your job, and you know, jump on it. That depends, that's very personal, and you have to know your personality and the kind of risk that you want to take. But if you are willing to learn about real estate, if you have the means, right, the tools and the the help, the support, just go for it. Even if you don't, if you just want to do little by little, right? Or get yourself involved in any aspect of real estate. If you want to get into become an agent, become an agent that way you understand, you know what an ARB is, you know what a baseline market means, what properties sell, what properties don't sell, right? But execute it. Execution is key. Execution is what most people lack. Everyone talks about it, very little people do about it, right? Just do it, execute it. Even you don't have to, you don't have to survive buying like a $600,000 house. Or you don't have to, you don't have to survive, just start small. Partner up with someone, right? Someone that you trust, someone that you if you don't know anybody that is willing to do real estate, then surround yourself with people that are in the circle, in the network, right? Because you have to you have to have those contacts, you have to have that willingness to learn from others and always be humble. But but the main takeaway would be execution. Execution is key. I have spoken to a lot of people, a lot of people, hey, yeah, it's cool. What do you do? Blah blah blah. And we talk for hours, okay. And then I like they would bring deals to me to help them analyze, and I will do it gladly. Boom, boom, boom. Place this offer, I would place this offer. Hey, do you place the offer? Here you talk to the lender. So if you're not gonna execute, but if you're willing to do it, yes, and start small, you don't have to serve.

Violeta 29:06

Thank you for for coming on here and sharing your your expertise. Where can people find you?

Martin 29:12

They can find me on Instagram uh at Martin Melmack. Melmac is stands for my kids, Melanie and Matthew Castro. That's how you came up with that name. So it's not my last name, but it's the name of my company. And my website is martinmelmac.com, you know. And if they wanna refer anyone they know if someone's selling, you know, I also pay a referral fee if I get too close on that house. So Martin Melmack is my website, and Instagram is what I use most at Martin Melmack, and then LinkedIn, Martin Castro Silva. That's how I am.

Lindsay 29:43

Thank you for coming on the episode. If you want to hear about more about Martin, please reach out to him. All the information will be under below, and so you can click on it and we can continue to build this little community that we have. Hey, don't forget to um like and follow. Other than that, we'll see you in the next one. Bye.

Violeta 30:01

Bye guys, bye.