I am new to real estate and new to this site as well. I have been studying for years and reading lots of books on RE. Been listing to the podcast as well.
So with that being said I am ready to dive in. I am looking to do a flip. I have a few asset based lenders ready to lend on the right home. Forming an LLC at the moment. I have looked at 10 or so homes in my area and and going to make some offers soon. One question I have about holding costs is how the heck do I pay the bills for 4-6 months on this thing while its being rehabbed? I'm looking at homes under 150k but still thats going to be 10-15k in holding costs. Is there a creative way to pay this with OPM that I have not come across? Anyway just wanted to put up my first discussion
If you have your own home and have equity in it, you could setup a line of credit account. You'll be paying interest on any amount you borrow of course, but it's generally cheaper than using a credit card. Though the credit card may also be an option - just pay the interest off each month until the project is completed and sells.
Paying interest on a loan is just "the cost of doing business" but must of course be factored into the overall finances/ROI.
Otherwise, do you have a family member / friend who might want a slice of the pie? Offer them a small percentage of the profit in return for a loan to do the rehab. Depending on how you structure the deal & how much work is needed (cost related), could work out cheaper than interest payments.
One other thing to remember here is, make sure any borrowing - especially with a family member - is fully documented. You might want to have a chat with an attorney about this as they'll have standard forms for each party to fill out.
Finally, remember - providing your credit is good, you can usually setup an account with Home Depot (or whoever your supplier of materials is )etc.. So if your project is 4 months from start to sale, you'll start work at the beginning of the month, get the invoice for the first months supplies at the end of the month, and the invoice will usually need to be paid at the end of the next month (60 days from project start - so far). So (in anticipation that you line up a buyer before the project is finished), your loan will only need to be for 2 months and not 4. Cold work the same with a credit card of course.
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Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and rehabbers (cash buyers). Perhaps you could partner with someone.
Two Great reads, I bought both J. Scott The Book on Flipping Houses, The Book on Estimating ReHab Costs http://www.biggerpockets.com/flippingbook
Consider checking out HUD homes for small multi's owner occupied gets first crack.
Download BP’s newest book here some good due diligence in Chapter 10. Real Estate Rewind Starting over
Thanks for the info guys. I have no home so the heloc is out right now. I did just get a couple of cards with 0% on them for 15 months so I will use those if I run out of savings. I am also starting to ask friends and family if they want to get in on the action. I really just want to do a succes flip before I ask for money. I am also looking to get into a multi unit and live in one rent the rest out!
@Adam Spencer , the live-in, multi family unit idea is a great way to get started, it also affords you the "luxury" (if you can call it that) of keeping an eye on the other apartments - if you're intending to tenant them for the long term until you move out of your unit.
However, if you are intending to tenant them, don't loose sight that this is anything less than a business, and credit, police and previous landlord checks (etc) are not to be overlooked - tenancy contracts must be signed at all times (make sure you also have a good umbrella insurance policy too).
If however, you're fixing to flip, short term tenancies may once again be a way to help keep the project afloat for 6-12 months while you're doing the work on the other units. Just make sure you find the right tenant - one who's going to pay regularly and look after the place so it's in good condition when you want to sell. There's a great section on tenant screening under the resources tab on the BP site.
Keep us up to date on progress.
Thanks Steve again for more great info!
@Adam Spencer - you're very welcome.
Keep posting with details of your progress !
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