Rental Property Investor · Burtonsville, MD · Member since 2014 · 13 posts · 1 vote
Hello,
I am a licensed Real Estate Agent in Maryland and I have decided I want to move over to flipping homes. My husband and I would like to start doing this but we do not know how to get the start up money to purchase our first property.
does any have any suggestions for the best options?
How is the best way to find great properties to flip?
what is the first things you should do once you find that first property to flip?
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
11y
Start up money - You can negotiate seller financing, purchase sub2, raise private money funds, hard money is also an option but expensive and without any of your own capital and experience, very difficult to get 100% funding.
Finding deals - MLS is one option, though competitive, you must make lots of offers and negotiate the right deal. Knowing what to offer on and how to negotiate with a seller that is more motivated is key. Direct marketing is your best option to find a good deal.
Once you find that deal (and you should have already lined up money), you want to start the rehab process immediately, time is your enemy and cuts into profits.
Education is paramount and you must know how to evaluate rehab costs and properly calculate the ARV (exit value).
Hard Money Lender / Investor · Denver, CO · Member since 2011 · 50 posts · 34 votes
11y
Myisha,
Welcome to investing! You have some really good questions. You also have a leg up on a lot of beginners because you are an agent.
I might be biased because I am a hard money lender but if you do not have the cash to buy your first property outright, I would reach out to your local hard money lenders. BP has a great list of hard money lenders. I would start there if you do not know of anyone. Hard money lenders can be a great resource because they are usually investors themselves and you can lean on their experience as well as their money. Each lender will be slightly different so be sure to ask a lot of questions. Depending on your cash situation, you might want to find one that will lend both the purchase price and the repairs. These lenders will base their loan on the after repair value (ARV). In doing their due diligence on you and the property they will be able to double check your math and make sure that it is a good deal. a good rule of thumb is to have your purchase price and repairs be as close to or under 70% of the ARV if possible. Of course if you find a lender that will give you this much money, it will not be cheap so be prepared for higher points and interest rates.
Once you get a couple of deals under your belt and have more confidence and the experience to back it up, you might be able to raise some private money from friends and family. This is usually cheaper than hard money.
Being an agent, I think that you have a leg up on most investors when it comes to finding good deals. Most of the market is on the MLS so having access to the MLS gives you an advantage. I would also be networking with wholesalers whose job it is to find good deals and then assign them to fix and flippers. you might also want to be calling those bandit signs, the ones that want to buy houses, they also generally sell houses too.
Once you think you have found a good property, I would run the numbers to be sure it is a good deal. Put together a quick but accurate scope of work (SOW). Pull some comps to be sure of your ARV. Take a look at what your acquisition costs would be (purchase, repairs, closing costs to buy) and compare them to your net after sale (ARV minus closing costs to sell, usually 10%, minus your holding costs). If the difference shows a profit you are comfortable with, get that deal under contract!
Once you are under contract, put together a more detailed SOW, Line up the financing, and get those crews ready to tear into that property as soon as you close. Time is always of the essence on a flip so you want to be in and out as fast as possible.
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
11y
First I would get educated. I recommend reading Flip and the J. Scott's guide to flipping that you can find here on BP. Also, join your local REIA and start talking to seasoned investors.
But don't wait too long, maybe give yourself 3 months of getting educated before jumping in. We've had a lot of luck with buying REO's (making lots of offers on MLS-listed REO's) and mailing to people in foreclosure. In some markets, anything on the MLS is pretty much a no go. So I would say mailings is the best choice if you can only do one thing.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
11y
Start up money - You can negotiate seller financing, purchase sub2, raise private money funds, hard money is also an option but expensive and without any of your own capital and experience, very difficult to get 100% funding.
Finding deals - MLS is one option, though competitive, you must make lots of offers and negotiate the right deal. Knowing what to offer on and how to negotiate with a seller that is more motivated is key. Direct marketing is your best option to find a good deal.
Once you find that deal (and you should have already lined up money), you want to start the rehab process immediately, time is your enemy and cuts into profits.
Education is paramount and you must know how to evaluate rehab costs and properly calculate the ARV (exit value).
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
11y
Flipping is one way (getting an option contract and selling it to a rehabber).
For low equity deals, consider:
Buying on Sub2 or a wrap and renting, or lease optioning.
Do a lease option assignment and assign.
Like @Will Barnard said, get an attitude of solving problems for sellers and "don't be a one trick pony".
If your marketing to home sellers gave a range of issues, then you could give a terms offer with a low all cash offer.
Think of your first priority is finding a motivated seller, and asking the motivated seller questions like...
Asking About The Existing Financing:
Do you own the house free and clear? • Do you know if your mortgage loan assumable? • Would you sell the house for what you owe? • If not, how much are you looking to get above what you owe? (Subtract that from sales price to get loan balance.) • How much are the monthly payment on the mortgage? • Are the payments current?
What Kind Of Deal Can You Get:
If I paid you all cash and closed quickly, what is the least you could take? (Follow-up by asking if that is truly the least they would take.) • Will you consider leasing the property to me with an option to buy if I guarantee the mortgage payments and maintenance? • Do you have a problem with someone living in the property until I get it sold? • Would you consider optioning the property to me, if there is absolutely no risk or cost to you?
Real Estate Agent · Mount Airy, MD · Member since 2014 · 34 posts · 4 votes
11y
Good luck - its a tough market in Maryland; but I just started a few months ago. Be patient and look for a deal with good returns. It's excellent that you are a realtor - that will help you a lot. I found some free analysis software on the web - search around, but you want to calculate your purchase costs, rehab costs, holding costs and selling costs if you are flipping. Most MLS properties I am finding are selling close to retail and they still need lots of work. Check out my thread on costs of REOs.
Lender · Burke, VA · Member since 2013 · 177 posts · 28 votes
11y
Great questions and awesome follow-on posts. I love BP!
Myisha.....all good info here. We have a local DMV REI at George Mason that meets once a month. Our next meeting/get together is next Tuesday 21 Oct. It's going to cover a lot of the basics on finding deals, rehab strategies, and other items when you are looking and executing a rehab/flip property. Should be a great meeting.
I am also a Private Lender in the DMV and have done a few properties in PG county/southern MD. Shoot me a private message and we can discuss more.