Hard Money Down Payments

9 Replies

Hello everyone! Newbie investor here. My plan is to Fix and Flip a SFH in the Savannah, GA area and take profits the profits as a down payment to BRRR another property for steady cash flow as a way to diversify. Then Fix and Flip into my next rental property and so forth. My situation is, I'm saving for a wedding so I don't have discretionary income to save for a down payment. What is the typical down payment process for a Hard Money Loan? I've read a ton of books on flipping and even have a local company that is showing me their process, but I always get stuck with the barrier to enter.. $$$! What are some of your creative financing strategies to come $0 out of pocket on your first Fix and Flip deal?

@Matthew Powell well 1st off stop reading books. Connect with a local investor , learn and apply what you learn. If you do not have any money, simply find a deal and give it to an investor, they will pay you a fee. Do enough then go on your own . You cannot do anything without any of your own money, especially with zero experience 

Good Luck 

@Matthew Powell I just closed on a HML. They are generally just going to fund 90% LTC, even for newbies they'll typically do that. Despite the 10% of the purchase you need to bring to the table, they need to see liquidity for both that 10% and about 6 months of debt service. We were charged 2 points and a 8.95% rate, pretty typical for hard money. It's still a somewhat annoying process, makes you feel like you don't have that much control over the deal. Will now be looking for private money at 2 points and 10%, simply because the ease is worth the extra interest and that's a solid return for a private money lender as well.

#'s example: 100K purchase, needs 20k in work, 9% interest. You need to have have 12k (10% down plus 2 points) + 4500 (6 months of debt service) + 2000 (closing costs) = $18,500 in liquidity that you can show the HML to qualify for this type of loan. They will generally lend the rehab costs, they did for us, but we also had over 5 properties we had taken title to between my partner and I, so you may be quoted differently.

You could raise the money you need for the down payment on the HML and reserves, give them a chunk of the deal or a simple promissory note would work. Definitely gets hairier when you go this route and I'm not looking forward to 2022 tax season.. But, that money needs to be in your personal or entities accounts for 3 months generally to be able to show on bank statements.

The hard part about Savannah is finding deals currently. Basically you will need to be marketing yourself, even the wholesalers are keeping everything in house to flip or wholetail. That's not meant to be discouraging just be ready to fight for deals and do your own marketing. Don't try and make offers on flips on the MLS, because there quite simply aren't any deals, and if they are 'deals' they are complete demos and rebuilds which I imagine you don't want to do for your first deal.

Best of luck!

Dylan, thanks for that! I’ve been driving for dollars for the last month, skip tracing, DMing renters, and now considering direct mail. I’ve quickly learned the competition here in Savannah is tough. My recent moves have been to partner with some other investors in Savannah getting in on deals by simply adding value for them. I owe you a coffee!


It sounds like you are doing what you are supposed to be doing. Now just keep doing it and doing it every day all the time. THEN it will take about 6 months to get a deal.

Did anyone say it was a get rich quick deal?? It takes time to get started. It takes time and practice when you talk with people.

I remember when I first started talking to people, they thought I had a stutter because I was so nervous. After a while I was more comfortable, smooth in my talking. It took me about 4 months of getting doors slammed in my face, 8-10 hours a day 6 days a week before I got my first deal. I had to suck it up for 4 months without pay to get my first deal!!

Patience grasshopper!!

Originally posted by @Rick Pozos :

It sounds like you are doing what you are supposed to be doing. Now just keep doing it and doing it every day all the time. THEN it will take about 6 months to get a deal.

Did anyone say it was a get rich quick deal?? It takes time to get started. It takes time and practice when you talk with people.

I remember when I first started talking to people, they thought I had a stutter because I was so nervous. After a while I was more comfortable, smooth in my talking. It took me about 4 months of getting doors slammed in my face, 8-10 hours a day 6 days a week before I got my first deal. I had to suck it up for 4 months without pay to get my first deal!!

Patience grasshopper!!

One of the tougher real estate cycles to start in right now thats for sure..  wholesaling takes money   flipping takes money every thing real estate related takes money..  Time = Money  ..  So maybe the time spent should be spent on finding money partners.  Once those are secured then go shopping.  my other thought right now for those starting  LIstings are MONEY IN THE BANK period.. get a license only takes 60 days or so and probably less than 500.00  hit warm market hard get that listing and you now have money in the bank without spending a ton of money on marketing..  ???   I also really like for those that have no money but if they have taken the real estate courses etc they can probably market themselves as a transaction coordinator all good agents need these folks my wife pays 400.00 per file .. Her coordinator makes great money handling about 10 agents.. its great for stay at home  ZERO over head other than a computer and scanner and printer.   Just some random thoughts.. 

 

@Jay Hinrichs

Jay I’m interested in learning more about how I can learn more about being a transaction coordinator! Currently I’m driving for Dollars for a local real estate investment firm and adding value on a new flip that just finished scoping. My goal is to get sweat equity on a deal until I’m able to reinvest into my own deal one day. Hopefully between that and paying off the wedding can land me in a deal!

Originally posted by @Matthew Powell :

@Jay Hinrichs

Jay I’m interested in learning more about how I can learn more about being a transaction coordinator! Currently I’m driving for Dollars for a local real estate investment firm and adding value on a new flip that just finished scoping. My goal is to get sweat equity on a deal until I’m able to reinvest into my own deal one day. Hopefully between that and paying off the wedding can land me in a deal!

I see folks doing this driving for other investors etc etc.. to me it just seems like your being used and abused.. unless they are paying you for your gas and car and time.. why not invest in your own business instead of theirs. I know people offer this to me all the time.. but the success rate is just so low I feel bad leading someone on that they can make money trying to bird dog deals for us.. right now in the cycle the money is made on the MLS listings = money.. keep in mind your selling for the highest price much easier to talk someone into listing with you to maximize their return then to try to buy a property far under what it will sell for on the open market.. your pool of sellers is just very very small.. where as your pool of retail sellers is very very large.. I mean do the math.. This is why successful wholesale or flippers if they are generating their own deals spend 10s of thousands a month on marketing WHY because you need to.. so for the one off person who is starting I cant think of a tougher lower chance of success than what your doing. I would go work for someone who would actually pay you.. Not have you use your own money to try to find them deals its basically a one way street I know it all feels good and talk a good game etc etc .. but having 4 plus decades at this I can tell you your only as good as the last deal you bring them.. And your simply not building any kind of lasting career or business with this approach is my personal opinion.. Real estate is not get rich quick its get rich maybe slowly.. Or go find a pot full of money and execute a business plan.