Financing options for newbies

7 Replies

I am a noob with real estate, I was looking to invest in fix and flips and I wanted to see if there were lenders who will finance these deals for me. Is this possible? Are there any hard money lenders that can help me given the fact that I have no experience in deals?

@Monte Rice The short answer is yes. If you can find deals with enough room in them, you can use hard money. It is done every day. While some lenders may be wary to work with a newcomer, others wont have an issue if the deal is a good one. As a general rule, they concern themselves more with the merits of the particular property than your credit.

Originally posted by @Matthew Meikle :

@Monte Rice The short answer is yes. If you can find deals with enough room in them, you can use hard money. It is done every day. While some lenders may be wary to work with a newcomer, others wont have an issue if the deal is a good one. As a general rule, they concern themselves more with the merits of the particular property than your credit.

I am usually finding properties at wholesale value that need TLC and because of this they are priced below ARV, would this count as enough room or equity? Do you know of any lenders I can reach out to?

 

@Monte Rice ARV stands for after repair value. So, technically, all purchases would be made below ARV. I sense that you might need to pursue your education a bit more first. At least you're in the right place and asking questions.

Originally posted by @Matthew Meikle :

@Monte Rice ARV stands for after repair value. So, technically, all purchases would be made below ARV. I sense that you might need to pursue your education a bit more first. At least you're in the right place and asking questions.

Yeah but what im saying is: because they are only 25-50% below ARV, would that count as equity when they can be bought for 20K and they are worth 60K? If I bought at 20K wouldn't I have 40K of equity?

@Monte Rice That could worth pursuing. Minus your rehab costs, holding costs, and closing costs mind you. There are many factors involved. With more specific details on a prospect, I'm sure myself and others would be willing to provide further guidance.

Originally posted by @Monte Rice :
Originally posted by @Matthew Meikle:

@Monte Rice ARV stands for after repair value. So, technically, all purchases would be made below ARV. I sense that you might need to pursue your education a bit more first. At least you're in the right place and asking questions.

Yeah but what im saying is: because they are only 25-50% below ARV, would that count as equity when they can be bought for 20K and they are worth 60K? If I bought at 20K wouldn't I have 40K of equity?

If you bought it for $20k, then it's probably only worth $20k so there's no equity. The equity will come once you have a finished product that would then be worth $60k, in this scenario. And this equity would have to take into account any additional capital you had to put into the rehab. 

Hey Monte,


Typical requirements to look for in a fairly good deal are at least 10-20% equity in as-is value upon purchase. Then your initial loan plus your rehab cost should be less than 70% ARV. If you're over these numbers, you'll likely need to use more of your own money/alternative financing (which is okay if you're still comfortable with the profit relative to the risk).

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