​12 Houses in 12 Months for 2015; A Monthly Journey - April

(Photo: Gladwin House, stripped)

April started to really heat up for us in the business. We had two rehabs going on simultaneously with Parker and Gladwin houses. Justin was managing two very different crews at properties that were about an hour apart from each other. The Parker crew was a number of different subs that he managed and Gladwin was what we thought to be an all-in-one shop. Things were humming along with a lot of promise for the Spring real estate market. A lot of pent up demand during this brutal Winter in Massachusetts and house sales were happening even with a little snow still on the ground.

Up to this point my other company (Couture Partners) was funding the acquisitions and Justin's other company (Simmons Ventures) was funding the construction. We quickly realized that this was not a recipe for continued momentum. We could probably fund one more acquisition/rehab this way, but we would be stalled until one of these properties sold. Both properties still had another month of rehab and then factor in another month or two to market and close a sale. So we started looking into financing options for recovery funds.

We call it recovery funds because we needed to get our cash out to have reserves to acquire more properties. To remain competitive we had to be able to buy properties in a matter of days. We pulsed our network of investors and got some great leads on portfolio lenders. A portfolio lender is a bank that loans from its own vault and not strictly subjected to the Fannie Mae guidelines. Most other lenders resell their loans to Fannie Mae or Freddie Mac and must follow those guidelines. Normally these portfolio lenders are credit unions or local savings banks. We started this conversation months ago and were now about to close on a few loans.

The first loan would be for Parker house. Our conversations with this particular bank started strong with 80% loan to value of purchase price and 100% loan for construction at 5.25% interest and interest-only payments up to one year. We ended up with about 50% of what we expected at the same terms. The bank was revising its flip loan policy and loaned based on rent rolls. Its argument is if we could not sell then it was protected for the debt service from rent. This was far from ideal but 50% was better than nothing and could still help us maintain momentum. Overall it took about 60 days to get this loan closed and it happened in April.

(Side note: I did two other loans with this bank for my other company Couture Partners. I had my last rehab going on before the S&C Homebuyers partnership and got a similar loan there. Also I did a blanket loan where the bank combined three of my rental properties into one mortgage and I was able to cash out about 50% of the values of those properties. That also helped us keep momentum going)

Very few banks like the house flipping business especially if no one in the company has W2 income. We are full time real estate entrepreneurs which is unsettling for banks. We had to seek out other funding sources. As a new company we had a very limited track record and thus a tough sell for private lenders. We explored hard money lenders and crowdfunding. The hard money just seemed astronomical to us and we couldn't find a way to make that profitable.

We came across a crowdfunding source FundThatFlip. J Scott is on the advisory board which gave me confidence and we decided to explore this avenue of funding for the Gladwin project. Matt Rodak and his team at FundThatFlip were simply awesome. They turned the money around quickly and as promised; very transparent with the fees and terms; and flexible with us throughout the process. It was a win-win as our project got fully funded on their site within a matter of days. FundThatFlip will commit/fund your project, but then get backfilled funding from their online platform by accredited investors. Worked out great!

So things are firing on all cylinders at S&C Homebuyers - two rehabs in full swing; financing sources and relationships developed; and our first wholesale deal under our belts. The wholesale was the Ethan house and that closed at the end of April. Our friend Matt Scott now is a new real estate investor with a rental property. Things are good!!

Monthly Results

Offers = 24

Acquisitions = 1

Sales = 1

Year To Date

Offers = 97

Acquisitions = 3

Sales = 1