How to pay for my first flip or income property?

Question

Hi All,

I am newbie to RE investment and I am wondering how I would pay for my first flip or rental income property. I first wanted a multi-family home to live in one unit and rent the other, but in my area that is no less than $500k. So I started thinking to do a small flip. Buy some small house (under $80k), not necessary close to me, rehab for no more than $30k and try to flip it. It would be a small profit, but not much money to lose while learning.

One of my main concerns is that I might need a loan, because I don't have cash to present "cash offers". I even thought about FHA loan and live in the property for at least 1 year (not sure how right or wrong this is) and later rent or try to sell. Also thought about hard money loans, but since I have no experience, the rehab could take longer than planned and I would end with massive interest...

Anyone would like to share how they started or has any suggestion how should I?

Thank you!

Account Closed · Answer

Hi Mariana,

I started by cashing out my 401k. Now, I will warn you, that if you go down this road, you educate the living crap out of yourself, so you know what you're getting into. You can also look for private lenders (friends/family), or do a partnership.

Hope that helps!

Jennifer Griffin · Answer

@Marcus Johnson I def agree. This is very much a "last option" for me. :)

Michael D. · Answer

Why do you think you need to make a cash offer to be successful? If you would buy a house for $80k plus $30k rehab, do you have the $50k or so in cash required for down payment plus the rehab?

If you really feel like you need more money to be successful and have some money yourself, you could always take on a more experienced partner. This has a lot of advantages in the education department as well. And if you can't get an experienced flipper to partner with you on a deal, then you can take that as a sign that the deal isn't that good anyway and save yourself the trouble.

Ron Garner · Answer

In my opinion private money is the best way to get your flipping business started.

Jennifer Griffin · Answer

I'm in the same boat as you. I have thought about obtaining personal lines of credit and using those to go towards the cost of a flip until I build enough of a cash reserve to put towards a buy and hold property. I also applied for an LLC and plan to get a business credit card just to help build company credit to make it easier for me to apply for business lines without a personal guaranty down the road. It's a process but well worth it if you are serious about it :)

I seek to achieve this initially through combination of joint ventures with more experienced investors and turn keys companies to help me manage certain steps of the process. I am currently in Hawaii but want to buy properties on the mainland because real estate here on the island is quite high.

I invested into some real estate education as well (since I can write the cost off on my taxes anyway) to help me get up to speed on REI as I am a total newbie myself.

I have no motivation to bankrupt my current retirements savings to start investing when there are other options, however, am comfortable to taking a dip in my IRA if needed if I feel I can make enough profit to replenish it eventually.

How to pay for my first flip or income property?

How to pay for my first flip or income property?

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