Financing a flip, how should I do it?

Question

This would be my first deal of any kind, someone I know well and trust is looking for me to invest cash of about 25% of the purchase price into a fix and flip. Basically about 200k for the house, 30-50k in repairs and comps of 300k. What are some contingencies I should ask for? How would I write up a contract that basically I can't get screwed in the event something goes wrong? Should there be some type of clause that I get my money back as soon as the house is sold no matter what? Is there some kind of due diligence I should do before? How should I transfer the money? Check, bank transfer?

Basically, what are some basic things I should do?

Thanks

Basically, what are some basic things I should do?

Thanks

Wade L. · Answer

There's always some level of risk (re: "screwed in case something goes wrong")

You should reach out to your local real estate investment attorney and ask for guidance.

John Mathewson · Answer

@Fred Conway Not sure i quite understand the numbers you put out there but lending money can be very tricky and if you aren't very careful you could easily end up getting screwed. However that being said if you have done your due diligence up front and are 100% confident on the deal than I would recommend you have a mortgage recorded in your name or company name. I'm wondering though if you are just lending 25% of the purchase price that they may be getting another loan of some sort that may require a 1st lien position on the house. If that is the case you can always record a 2nd mortgage. The mortgage is what should outline the entire structure of the deal. As far as transferring money I really would only recommend transferring the money to the title/escrow company at closing. If it is really going towards the purchase price then he does not need it. the money just has to be wired to title in time for closing.

Anyway lot of info and many answers to your questions. let me know if i can help anymore. Best of luck.