Metuchen, NJ · Member since 2015 · 374 posts · 27 votes
Hello,
I would love to hear everyone's opinions and experiences funding flips...
If you had enough cash to finance the acquisition and renovation costs would you go that route?
While I understand the incentive of using financing, it takes both time and a lot of interest...
And traditional banks typically aren't interested in financing fix and flip properties.
Thoughts? Look forward to a great discussion!!
Brian G. If you are paying cash for the property you obviously have instant equity. I am saying buy a property cash open HELOC use funds to renovate then sell property then repeat. Thought?
@Ben C. I've heard of people doing this to avoid multiple sets of closing costs but I have no first hand experience so perhaps someone else can chime in with more details.
Michael Noto yes that is a good point that hasn't been brought up. When you need to deduct that 10% interest and points certainly does cut your margins down and as a result your offer!
Not to mention there is nothing that makes a project go smoother with less headaches like cash!
I know this is a few months old and you've probably figured it out, but just in case - I did a lot of due diligence on many HML's leading up to the two lenders I settled on for my current two (and first two I might add) fix and flips. My observation is that majority of HMLs do in fact operate in the way you mentioned - typically you will have to front cash for the first draw if your specific contractor requires that for materials, drawings, dumpster etc. Then you will submit draw requests as your contractor requests them of you. The lender sends the inspector out - lender determines how much is disbursed based on inspection report. One of my lenders has a 2-4 business day turnaround, the other is 5 business days.
I’ve been asking the same exact question as you - does it make sense to use more of my own cash, whether it’s on the purchase side or the rehab side? Still debating that as I think ahead to my future projects.
I reached out to a lender, he can give me plenty of money, but we want to live in the house. He explained that it is only for fixing and selling, no owner occupied. Can I sell the house to a friend? Or a better question is, who can i NOT sell it to once fixed?