A question for those who fund Fix & Flip Investments

Buying & Selling Real Estate
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A question for those who fund Fix & Flip Investments

Ryan Horne
Rental Property Investor · Smyrna, GA · Member since 2016 · 86 posts · 28 votes

Hi Everyone,

So I am a new investor who is looking to work on fix and flip properties. I am trying to put together a business plan so that I can approach investors who fund projects when I find the right deal. I am researching and trying to find out what all needs to be included in a good business plan but decided I would come straight to the horses mouth and get some answers from here as well. 

So, for those of you who finance fix and flip deals, if a newbie investor came to you with a business plan and a deal in hand asking for your money, what would you want to see that would instill enough confidence in that person to help finance their first deal? 

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y

PP   real rehab budget and HUDS from your last 5 to 10 deals to prove you were successful

NO experience  NO joy from most experienced investors in this space.

if you have zero experience you need to put family and friends together or work the REIAs hard and find some one that takes a liking to you

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    PP   real rehab budget and HUDS from your last 5 to 10 deals to prove you were successful

    NO experience  NO joy from most experienced investors in this space.

    if you have zero experience you need to put family and friends together or work the REIAs hard and find some one that takes a liking to you

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  • Ryan Horne
    OP
    Rental Property Investor · Smyrna, GA · Member since 2016 · 86 posts · 28 votes
    9y

    thanks @Jay Hinrichs definitely planning on hitting the REIAs hard. Attended my first meeting last week and planning on going to many more. For everyone else maybe just forget that I said this is for my first deal as I am just looking for general info on ways to make yourself stand out to private investors through a good business plan. Is there anything in particular you all look for other than the usual mission statement, market analysis, comps, exit strategies, etc that instills confidence in the person you're investing with?

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    your welcome  carry on and best of luck to you....   

    also check on Gorilla capital in Eugene Oregon tell them I referred you they have a pretty good program for newer folks.  and they may take a first timer if you have enough skin in the game.. 

    I know another company that will take a first timer but you need significant skin close to 50% which most first timers don't have .. but some do and thats a niche they provide.

    careful of a company like dohardmoney they want big up front fee's with no gurantee's 

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  • Rick Pozos
    Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    If I was to put up money with or for someone I would have to know you pretty good. I would have to know that you really know what you are doing. How can I know that if you have never wholesaled, purchased, closed, did rehab budgets, managed contractors, came in under budget, reacted well when contractors did not show up, marketed properties for sale, and again closed on the sale, that you will be able to do it for the first time and do it well?

    I have been doing this for a few years and just now my family is starting to see that I am for real. They have seen my rehabs, they have even bought a couple wholesale deals from me that they made a bunch of money on. But before that happened I had to prove myself to a hard money lender charging 18% and several points (2004). After making a good chunk of change and telling everybody what I did (self-promoting), after time, people were trusting of me. 

    Just like in any industry, you have to pay your dues. People will not be very trusting of you until you have some sort of track record. They have to see that you are serious and have the long term commitment.

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  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    9y

    @Ryan Horne,

    The people in my group would have two basic requirements to start with:

    First, you must be educated. "Learn by doing people" are too risky. We are all educated investors. You wouldn't want to work with uneducated investors / lenders, anyway. They would be too risky.

    Second, show us the numbers. Show us how the deal works, how a lender's money is protected, where the pay-back and profit - yours and the lender's - come from, your exit strategy, and your plans in case "plan A" falls thru.

    Those two will get you in the door. Once we see that you can analyze a deal and present it intelligently, we will be quite willing to get to know you enough to perhaps put the deal together.

    Your experience, to us, is not as important as whether you know how to find and analyze a deal and present it the way your prospective lenders expect. THAT shows us you've been educated and you know what you're doing, even if you've never done it before. We will expect, of course, that you will partner with an experienced investor from among us who will help keep you on course and make sure your lender(s) and other partner(s) are protected.

    For what it's worth ...

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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    There are tons of people looking for money so lenders can pick and choose. For me you must have a previous track record in successful flips. I have no reason to loan to anyone that is unproven in todays market.

    I started using my own money so if you can not do that you need a partner to flip with.

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  • Ryan Horne
    OP
    Rental Property Investor · Smyrna, GA · Member since 2016 · 86 posts · 28 votes
    9y

    @Thomas S. Thank you all for the detailed follow up. It appears a proven track record, bringing solid deal analysis, and multiple exit strategies are the most important aspects to have when working with investors. 

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  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    9y

    @Ryan Horne , I'll add one more thing that can get you a loan - having an amazing deal.

    If you are bringing me a property with tight numbers, one unexpected thing - and there's always at least one unexpected thing - can blow your budget out of the water.

    If you bring me a deal with a giant spread - and can back up the spread with real numbers - I'm far more likely to lend on it, because even with one giant unexpected thing, you can probably turn a profit, stay in business, and most importantly, pay me back.

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  • Account Closed
    Investor · West Los Angeles, CA · Member since 2014 · 230 posts · 239 votes
    9y

    @Ryan Horne

    I would suggest fill out a hml application or just request one.  Look over the form backwards & forwards.  If you can comfortably answer all of the questions, those are the same questions pl will ask.

    My criteria: must have done at least 100 deals in good and bad markets.  Before Great Recession during GR after GR.  They must be worth 7 figures.  They must be a full time investor.  They must have their own money in the deal.  I must like them as a human being.  

    Good luck

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  • Ryan Horne
    OP
    Rental Property Investor · Smyrna, GA · Member since 2016 · 86 posts · 28 votes
    9y

    Thanks @Account Closed great advice from both of you!

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  • Randy Johnston
    Residential Real Estate Broker · Beaverton, OR · Member since 2014 · 335 posts · 149 votes
    9y

    @Ryan Horne, As a private money lender, I only loan to people I know and trust. So to @Jay Hinrichs  point, talk with your family and friends, you may be surprised by the interest you generate. I usually get a 10% interest rate with payments of interest only, which works out real well for me.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Account Closed that's quite a robust underwriting critera.. if someone makes all of those points they probably don't need to borrow money.. they all ready made it LOL.. although I easily do but on occasion I will borrow from private or HML when I have my bank lines maxed out..

    rates are dropping like a rock too for hML on west coast.. I did one in Sac at 1.7 points and 8% no junk fees.. that's pretty aggressive for a company.. I think I could get realty shares to do the same and lending home.

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