Hello ladies and gentlemen. My name is 'Wayne' and I'm from Washington State. I was hoping to ask for a little advice. I am starting out as an investor and was hoping someone with experience could point me in the right direction.
I am looking to buy and fix up my first property. A little about my current situation:
1. Licensed, Bonded & Insured General Contractor with good solid experience.
2. Have remodeled homes for investors in the past, as well as my own projects.
3. I own a home with a small amount of equity in it. Approx. $30-$35k.
4. I have decent credit, but not 'good' per se. 650-660 fico.
5. Very Limited cash on hand and assets.
6. Have a pretty good general grasp on basic investing as a whole. (ie, HML, Rates, 70% rule, etc, etc)
7. Am not putting this off anymore and have dreamed of my first project for 15 years. I will not accept 'No' for an answer.
Based on the above formula, what would you seasoned investors do if you were in my shoes and just starting out? Looking back on your experience?
I'd sure love to hear your suggestions and would be greatly appreciated.
@Wayne Brault Your experience would make you a desirable partner for investors. You can create value for investors by sourcing and operating deals. I would build a network of investors who do not have operational experience but a desire to diversify/invest in real estate with a trusted partner.
Learn the market you are going into see if the 70% rule applies to where you want to invest there are many places that it doesn't, the Seattle metro likely being one of them (I haven't checked to make sure). You have a great leg up on other investors by being a contractor, so you have a much better idea of rehab costs, with limited cash your best options are probably to either save enough that a hard money lender would be willing to work with you or find someone who is willing to give you a percentage of the profits in exchange for your rehab services.
Thank you both for your input. The area I live in is rather small, but the market is doing well here. I am not fully opposed to 'partnering' with an investor and doing the work, but not exactly what I am after at this stage of my life. I've done a lot of that in the past. It seemed like the various people I was working for at that time were more concerned about their own pockets, than they were mine. Lot's of hurdles, personality conflicts, and set backs. I am 40 years old and would like to do my own project this go around.
I've heard that if you source a good enough deal equity wise here locally, HML's are willing to do no money down in certain scenarios. This of course, would be ideal.
I also like the idea of completing a project on your own, but it is very hard to do without having at least some cash on hand. Maybe in your small area there is an ability to find properties that are great deals and don't have the competition that would take them out of the range where a HML is willing to lend 100%. Unfortunately in most larger cities there are enough of these investors that even if something comes on the market at a great price they will offer significantly above asking taking the property from a great deal to an okay deal.
@Wayne Brault As others have already mentioned, it will be hard to do a deal with no cash. Although some HML might come close to 100% financing, they will most likely want to see prior investing experience. Your experience as a contractor should allow you to find a partner that could put up the equity capital required. There are countless ways to structure these types of partnerships, and it should be a mutually beneficial arrangement - make sure you find someone who doesn't only have their own pockets in mind. If a deal is good enough, there should be plenty of profit to go around.
@Wayne Brault Your title says that your a lender? If you are, look for a 100% HELOC on your primary and use the cash to get into a small flip that you can turn quickly and increase the amount of cash you have available to go to the next deal. If you look around, there are 100% HELOC's out there, ie credit unions, mortgage brokers, community banks and even the big boys of the banking industry.
Most HML's wont give you 100% on your first deal with them. They want a track record before they will do that, but to get 90% on the purchase and 100% on the rehab is do-able. So with your 25-35K cash from the HELOC, you should have enough to do a flip with an all in price of 150-200K.
If that wont work, find a private money investor to loan you the 25-35K that you will need to get started. They can place a 2nd mortgage lien on both your primary and the flip to secure their money.
Another alternative for the down payment is GAP funding. It can be expensive, but if that's the only thing holding you back from getting this off the ground, then consider it the cost of doing business. PM for recommendations.
Thank you for this reply Kevin! It's interesting you mention the HELOC! I have an appt. this morning with my Credit Union to discuss this very thing. And my proposed strategy was just that... to pull what I could as a down for a HML. I really appreciate your input and suggestions! And it's very nice to see someone on here locally! I worked on a HUD home last summer up in your neck of the woods!
@Wayne Brault If I can be of any help, let me know? I'm always happy to meet with and help fellow investors. I focus my lending on that side of the street, so I have a lot of unique knowledge that goes with that side of things. Let me know if you ever have any questions, happy to help.
I really appreciate that! It's nice having a local resource with financial expertise! I believe I sent you a colleague request as well. Thanks again!
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