Hey BP! For the record, I typically would not write a humbling post like this one so please don't view as someone complaining (how I would view myself writing this). Simply trying to step out of my comfort zone and get creative with funding projects through other's experiences.
Currently analyzing deals in Hampton Roads, I often run across distressed property that I can see being an offer for someone with access to quick capital or someone like me looking to connect those buyers with motivated sellers. I have been looking to fund my own flips in the area but have been running into private/hard money lenders requiring 25% down to fund rehab and purchase. I can respect why this is necessary; however, I do not have the capital required in cash and am not ready to pull equity out of my Norfolk Va house (~$70K) or fund with Credit Cards until I feel more confident with the process. I am looking more for simply increasing my flipping experience vice a good profit spread for a successful flip at this point as well. My original plan was to connect enough buyers and sellers via assignment to put down my own 25% for hard money but I wanted to reach out to the BP-universe is see if people have had success with other options in Hampton roads:
1. Partnering to fund a flip and give up majority of the profits but do the work (thinking 75/25 split, does that sound fair to give 75% profit for the partner to fund 100%)
2. Finding a Hard/Private lender to fund 100% of purchase/rehab costs and have numbers work out to flip at any kind of profit.
3. Having seller finance purchase and partnering to fund rehab costs, splitting profit (I would think 25/75 in this case?)
Spit Balling ideas to generate conversation, the location here (Hampton Roads) is less important than people's success with the concepts I mentioned; however I would like to try to do one of these 3 while I generate enough capital to either finance myself without a partner or BRRRR a property.
Very interested in what you all think!
@Gary Boggs I would recommend going to a local meet up and see what some of the players in your market are doing. The strategies you mentioned all can work however it's difficult to determine what the splits should be with so many variables like experience, risk, total profit, and length of loan to name a few. If you are looking to get started and have a deal consider working with someone on the first project for free or being compensated for work done in a rehab situation to get the experience that will give you more negotiating leverage as you move forward.
Gary, if you are looking for a good HML in Hampton Roads, I would be happy to connect with you. We are HML that are local to Richmond and Hampton Roads and fund both rehab and new construction deals. Terms usually depend on the deal but most of our borrowers bring a lot less cash to closing than competitors if freeing up working capital is your main objective.
Hey Gary! I have a couple local HMLs I can put you in contact with, which appear to require less down. Just send me a message.
@Gary Boggs Hi Gary. What you're feeling is fairly normal when just starting out. Something to consider about funding, you said you weren't comfortable taking equity out if your house or using your credit cards, and my interpretation of your reasoning is that you were concerned you would lose it. A hard money lender is also concerned about losing their money in your deal so you shouldn't expect them to take on more risk with you than you are willing to accept for yourself.
Totally understandable, I can appreciate this. After reading the responses I applied for a HELOC of my Norfolk Property and increased the limits on my credit cards to raise my own capital for down payment. This combined with HML should fund one project at a time at least.
@Gary Boggs And if you can save all your profits and just live off your W-2, you can scale up pretty quick.