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If you had 15K...

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John Jabson

Wheaton, Illinois

Dec 11 '12, 10:05 AM


If you were starting out with 15,000 cash and you wanted to flip homes, what steps would you take first? 15K is obviously not enough to flip an entire home.

This is what I'm starting with right now. I have done alot of contracting work (I'm not an expert on anything-I can do generally good work but would need to hire somebody for precise carpentry in certain circumstances).

I work a regular 8-4 job and live in a rural area. Homes can range from 20K (or lower for trash) to 200,000. Average first time home buyers pay between 60 and 100 in our area.



Marc Bodinger

New York City, New York

Dec 11 '12, 10:28 AM


Have you thought about investing in REITs? This might be an alternative where you invest in these types of companies and collect dividends on a monthly or quarterly basis. Even though it is a risky investment as it is a security but the money is liquid so you buy/sell anytime during trading hours.

Some of these REITs have 7%+ dividends thats pretty good when you are talking about 15K in cash. It is better than investing in US Treasuries.



Callum K.

SFR Investor from Tulsa, Oklahoma

Dec 11 '12, 10:48 AM


REITS carry their own type of risk. As they are required to pay out at least 90% of their net income to shareholders, their primary growth is through new sources of funding. I think they are a good/stable asset class for an investment portfolio but given the wishes of @John Jabson I expect he wants a more hands on approach to his investment.

With $15,000 down and a full time job, you can approach a bank to possibly leverage your money to get a loan for a home to flip if that is what you are looking for. If I were you, worst case scenario, I would go talk to several banks and see what kind of financing you might be able to get with that. That might help you determine what you can and can't do with your money in regards to direct real estate investing.



James H.

SFR Investor from Texas

Dec 11 '12, 11:08 AM
3 votes


You have just enough (by my standards of risk tolerance) to utilize a hard money lender to assist with a deal provided you have some additional consumer credit lines to fund material purchases to do a pretty decent rehab on an ARV 100K house or less, purchased at 70% ARV minus repairs, needing up to about 30K in rehab.

For example, you find a house that is worth 100K retail.

You see it needs about 20K in rehab including all holding costs not including debt service (utilities).

You pay 70K (70% ARV) minus 20K = 50K

You get a HML and put in 10% DP = 5K

You use your remaining 10K to fund rehab and use consumer credit to fill out the rest (or a different combo of cash and debt, or you can get draws on the HML, but that is more expensive - of course you might need to do it that way because the HML may not want to work with a loan of only 40K).

Now you have 70K wrapped up in the project plus there will be around probably 5K in HML fees for origination and 6 months of holding.

To sell the house for 100K you are lookng at somewhere around 8 percent for realtor fees and closing costs.

So in all, you paid 15K of your own money, and have a profit of:

Selling price - aquisition - rehab - holding costs - realtor fees and closing = 100K- 50K - 20K - 5K - 8K = 17K.

Profit = 17K

ROI = 113%

Please somebody with more experience check this scenario out. I have only studied the method to determine if I should do it and have not actually done this before.



John Jabson

Wheaton, Illinois

Dec 11 '12, 11:25 AM


I do not have any other money other than 15K and Callum is right, I want a more hands-on approach. Callum-I have already tried the bank route and it's not working. I need to find a private party. Is the best option to start talking to people around town? Maybe I can find somebody who is willing to "invest" 25K at a 15% payback or something. Where else can you make $3750 on 25K in a few months? I know it's risky but I'd do it if I had 25K. Let me know your thoughts on that. I'm really clueless so I'm wondering where you guys would look for private investors and how you would go about it.



Ryan R.

Real Estate Investor from Central, Texas

Dec 11 '12, 11:28 AM


@John Jabson, you've got to split your $15,000 into two categories.

The first is acquisition costs = Down Payment, closing etc.
Since you will probably have to put down 20%, this means your purchase price should be no more than about $40,000.

Look for houses that you can buy for $40,000, that will have some equity the moment you purchase it. Then spend the little bit of cash you have left on paint, flooring, landscaping etc. You said that you have done some contracting, so put that skill to work.

Since your rehab budget will be small, only look at properties that need cosmetic work. These properties will yield less profit, but will allow you start getting in the game and making some money.

Don't forget, although you can only purchase properties around $40,000, you still want to make offers on houses above this amount. You have to make money when you buy.



James H.

SFR Investor from Texas

Dec 11 '12, 11:30 AM


@John Jabson,

As I stated in my post, you can get draws from the HML rather than using additional lines of credit (if you don't have any), but it will increase your debt service fees.

The only way to find a private lender like you suggest is to just look around at people you kow or get to know new people. The problem with that is most people in a position to lend 25K for your purposes will need to see that you have done this at least once before. Besides if you have your 15K along with someone else's 25K, that only leaves you with 40K which is just enough to get a property acquired but not enough to do a rehab to retail in most cases. Remember, the end product needs to sell for at least 50K, preferably 75K, or buyers will have a hard time getting a mortgage because banks don't want to mess with anything less than 50K in all cases and 75K in most cases.



Brandon Turner Verified

Real Estate Investor from Montesano, Washington

Dec 11 '12, 11:33 AM


Hey @John Jabson, one idea, building off the idea you just mentioned: find someone else who has good credit and a good job history and partner with them on a flip. You fund the down payment, they get the mortgage or hard money loan and perhaps (if they can) they pay for the repairs. Split the profit in the end. I've done this a few times and it works nicely, of you don't mind giving up some profit.



Medium_bp-squareBrandon Turner, BiggerPockets
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James H.

SFR Investor from Texas

Dec 11 '12, 11:33 AM


Originally posted by Ryan Richard:
The first is acquisition costs = Down Payment, closing etc.
Since you will probably have to put down 20%, this means your purchase price should be no more than about $40,000.

I'm afraid it will be very difficult to find a lender willing to loan the 32K comprising the remaining balance after down payment. OP will still need to look for alternate sources of financing in this case.



Ryan R.

Real Estate Investor from Central, Texas

Dec 11 '12, 11:42 AM


Brian Hoyt, that's a dang shame if true. There has got to be local institutions willing to finance a deal like this, especially if OP commits an additional $5,000 to improvements. I can see a higher rate and short term but since he is looking to flip, this shouldn't be a hindrance.

Think about them lending $40,000 auto loans with practically 0 down and the asset loses 15% value the moment they drive it off the lot.



John Chapman

Real Estate Investor from Dallas, Texas

Dec 11 '12, 11:58 AM


Brian Hoyt is spot on about the difficultly in finding a lender to lend the $32K. It's just too small for most lenders. (Most don't want to go below $50K on a purchase money mortgage).



Ryan R.

Real Estate Investor from Central, Texas

Dec 11 '12, 12:19 PM


@John Jabson, check out this forum from a year ago. It looks like financing under $50,000 is possible but you will have to seek it out.

http://www.biggerpockets.com/forums/49/topics/67157-can-anyone-refer-a-lender-for-an-investor-loan-below-50-000



Glenn Espinosa

Rehabber from

Dec 11 '12, 06:23 PM


Get creative, find a cosigner, put up some collateral. Sell some toys, get a home depot credit card and put all your materials on there.



Callum K.

SFR Investor from Tulsa, Oklahoma

Dec 11 '12, 10:59 PM


@John Jabson I honestly have no experience with private funding so the comments from the others is probably a better answer for you.

One item I would be concerned with even if you could get a loan from a bank would be transaction costs. As an example, most banks I have met adhere to similar standards no matter what size of loan you get (with the exception of very large loans), so because of this, closing costs may be proportionately higher for a loan as small as $32k vs say a loan for $100k. That means you will have to seek higher ROI's to recoup that expense.

I personally like the idea of teaming up with someone. I would find someone who is in the business niche you want in your area and get to know them. Read BP posts, ask questions, and go to local REI meetings, talk to friends and family and chances are you will find someone looking for money. I bet your $15k will come in handy AND you might also get advice while also obtaining the hands on experience you are looking for.



John Jabson

Wheaton, Illinois

Dec 12 '12, 09:20 AM


What would you say if I considered using a line of credit for the down payment of a 50,000 house and then using my own cash AND a Lowe's credit card? The lowe's credit card doesn't kick in the interest until 6 months. It is 25% APR after that. That's rough. Is it worth the risk of doing that? I would hope I could do a general rehab and sale within 6 months if I aimed to do so.



John Jabson

Wheaton, Illinois

Dec 12 '12, 09:22 AM


The line of credit would pay for the down payment. My 15K cash would pay for part of the repairs. Any remaining repairs would require the Lowe's credit card. That's what I'm getting at.



Ryan R.

Real Estate Investor from Central, Texas

Dec 12 '12, 09:44 AM


What is your estimate for repairs? How much?
What interest rate on the loan?
How much profit are you looking at?
What is your level of confidence in rehabbing within your budget?
What's your targeted sales price after rehab? How does this compete with the comps in that area?
Have you taken into account realtor fees/closing costs?

If you go over your rehab budget, it takes longer to rehab than you estimate, you start to accrue interest on your lowes card and the property is not worth as much as you thought, how much money are you going to make?

Do a worst case scenario formula and see if you still can make a profit.


Edited Dec 12 2012, 09:54 by Ryan R.


Marc Bodinger

New York City, New York

Dec 12 '12, 10:33 AM


@John Jabson I don't recommend betting on a credit card with 25% interest after 6 months unless you can predict the future and foresee no issues. The interest rate on that card is huge and could be very bad if something were to happen and you weren't able to finish your payments.



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