So you have 10k and you view this as your nest egg to get started in flipping? You can possibly do it if you carefully ask yourself these questions:
1) how much can I afford each month to hold a subject property?
2) how much will the subject property cost me to fix up?
3) if I fix it up and can’t sell it, can I rent it and cover my costs?
The private “hard” money loan terms must be understood first. I started out with less than 10k and didn’t understand the term “hard money” when I contracted for my first fixer/flip. I would opt for Seller Financing.
Seller financing is “private” money just like high interest “hard” money. It is safer, and allows for much more flexibility in terms. Terms-terms-terms; you want terms; terms that you create and are comfortable with. My first deal was for a 225k house that was in terrible shape; conventional financing wasn’t possible, so Seller had to have an all cash buyer or come TO TERMS with acting as the financier...
I sold myself to him; said I’d give him his asking price, give him $5000 down non-refundable (220k balance), 500 a month for 12 months, and pay him off after the year. I then added a back door: if I couldn’t pay him off after 12 months, I’d give him a 10k balloon payment and $1000 a month interest only payments for another 12 months.
He went for it. Liked me/believed in me enough to take the risk. I recorded something against the property at the county to create a record or “cloud” to secure my private contract. Then went to work and eventually made 85k profit nine months later.
I say make an offer you won’t lose sleep on. Don’t qualify a property by any other standard. Always give yourself a “back door” (ie: some plan B option if things don’t go as plan A).
Well, rely on your own research. Your lender (“hard money lender”) makes a living off of the risks you take. He’s risking too, but usually you’re risking a heck of a lot more.
Is there a chance to approach a seller directly? Or seller’s agent? Out here agent commissions total 6 percent. Six percent of fifty is only three grand. You could offer to pay agency, pay an additional 2500 cash, and then ask the Seller to be your bank for 18 months at four percent interest only. That would be $167 bucks a month payment while you’re fixing it up (50,000 x 4% divided by 12 = 166.7). Wouldn’t this be cheaper for you than hard money interest and up front points (those are fees just to get the loan)?
And “Do I think this is possible” to make that kind of profit out there in Detroit? I believe so; though I don’t know the market out there. Generally speaking, to know a market you need to go view in person actual recent sales. I think it would take me about two weeks of diligent searching to grasp a certain market - but I would need the help to discover recent sales, etc..
It’s a treasure hunt; fun, exhilarating, and pure American Dream stuff.