How did you finance your first flip?

7 Replies

Hi Bigger Pockets, I’ve been doing a lot of research and am currently in analysis paralysis (also a little nervous to take the leap into Real Estate). I’m really interested in learning how to flip houses in Georgia but not sure about the best way to start. Could someone share with me their first flipping experience and how you funded your flip, how long it took, things to take into consideration, etc?

@Amy Hua It all depends on your strategy and appetite for risk. My first property I purchased using OPM. If you make money on your first flip then be happy for the education and experience. I would say most people's first project takes around 6 months.. but this all depends. Just remember if you don't have any dates and numbers set, then it is likely you will never make the leap!

My first flip took me about 6 months. Although I had done extensive research of the business for about 2 years, I was very nervous. I self financed it from my personal bank account, so I was very afraid of losing money. However, I used all the strategies and things that I had learned, and it helped me to stay on top of things. I ran into a few issues with some of the repairs (I had to replace all the pipes as well as the furnace) but due to the fact that I expected the unexpected, I kept a calm game face and I kept moving forward. After the first flip, I felt more confidence in the process and I loved the reward! Just remember to research your market, set dates as to what needs to be done by when, and have pertinence (because it will be a process) and I am sure you will do great!

Good Luck :)

Originally posted by @Ethan Henning :

@Amy Hua It all depends on your strategy and appetite for risk. My first property I purchased using OPM. If you make money on your first flip then be happy for the education and experience. I would say most people's first project takes around 6 months.. but this all depends. Just remember if you don't have any dates and numbers set, then it is likely you will never make the leap!

Ethan, can you explain your process when using OPM. I'm in the same boat, I have a friend who is willing to invest with me. Did you form an LLC before doing that first flip?

Depends on how you're doing it. If you're doing it as a live in flip versus just a standard flip. With a live in flip there are some advantages that since it's your primary residence you don't have to pay taxes on the capital gains. That one item is a HUGE margin!

In short... make sure you have the necessary funds either in savings or equity or both.

Determine what work needs to get done and come up with a schedule and plan on how you will approach the renovations. 

Go to your local "buildings permits" office and draw on the necessary permits you will need as well as schedule the inspections and follow up inspections. If you're getting other people in to do any work you will need to know the schedule of the trades people, when they can come in to do the work and where they expect to be at each phase prior to scheduling the inspections.

Roll up your sleeves and get to work. Know that every week you fall behind ends up costing you in labour costs, mortgage expenses and can slow down the whole project if you have to re-book inspections.

Thanks for sharing! I appreciate all the advice. Also, as far as picking the houses you choose to flip, are there any homes you guys would absolutely not go for, even if the price is nice?

Sounds like I should start making out a schedule for the flipping process. I must take the leap!

@Amy Hua Hi Amy, I am in a similar boat as you - currently in the education phase and hoping to flip a house in the next year or so.

For funding, I plan to use a hard money lender. I do not have enough of my own capital to meet the HML requirements, so I plan on using private money from friend or family to make up for the difference that the HML will not provide, and in return offer the private lender 50% of the profit. Although this is not the most lucrative option for myself, my goal is to just get experience and learn the process in my first couple flips.

As far as your last question goes on "are there any homes to absolutely not go for".... The way I plan to approach it at the beginning is to only focus on homes that need advanced cosmetic repairs. I am planning on avoiding anything with serious foundation repairs, sinkholes ( Florida problems..), or anything of the sort. Those kind of major/structural repairs seem to be hard to estimate for a newbie and can eat into repair budget and potentially cause you to ultimately lose money. Leave the complicated stuff to the pros...

 Just my two cents as a fellow newbie. Best of luck!