How Investors Are Getting Their First Fix & Flip Financed

[Brandon Lee]

I’ve been seeing a lot of first-time investors struggling to secure financing for their first fix & flip. Traditional banks are tough to work with, but there are other options that can help cover purchase + rehab costs. Curious  for those who started with flips, how did you fund your very first project?

[Evan Polaski]

Personal money and one outside investor. No bank/HML/Private lender money. All equity.

I forget the exact amounts, but I think on the equity,  I (we, really, because it was my wife and me) put in 50% of the equity and had an investor that was a close friend put in the other half.  

Any profits were split:
50% to project manager (my wife and me)
50% to equity partners

Therefore, I effectively kept 75% of the profits since I was due 50% for management, and the 50% of the 50% for the equity.  

As you note, most lenders that I know of will not lend to first time flippers, so your only real option is to use your own money or raise equity from outside investors.  I am sure there are some lenders out there, but given how lean flips are these days, your fees and interest can quickly eat all of your profit.

As for the lenders I worked with, they required at least three completed flips before they would lend to us.  And even then it was never more than 80% of total costs, so I still had to bring real money into every deal.