Fix and Flip Investor or Hard Money
Member since 2023 · 7 posts · 1 vote
Fix and Flip Investor or Hard Money
Most Popular Reply
Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votesQuote from @Brandy Luna:
I have 30k to invest in a fix and flip project. I am quickly seeing that this is a very small amount. What type of lender and terms should I be looking for? Lenders will require down payment, closing costs, reserves, etc. I have great credit. I have a small amount of cash. I am also open to partnering with another person who may find themselves in the same situation. Any guidance or advice would be much appreciated.
$30K should be enough to get off the ground - you should target a hard money lender thats not afraid to work with 1st time investors and is willing to build a relationship for the long haul. Hard Money Lenders can definitely vary - I would recommend reading reviews here and on google before you pick!
Harpoon Capital512 Reviews
22 Replies
- Investor · Orange Park, FL · Member since 2019 · 171 posts · 108 votes2yHi Brandy,
Quote from @Brandy Luna:
I have 30k to invest in a fix and flip project. I am quickly seeing that this is a very small amount. What type of lender and terms should I be looking for? Lenders will require down payment, closing costs, reserves, etc. I have great credit. I have a small amount of cash. I am also open to partnering with another person who may find themselves in the same situation. Any guidance or advice would be much appreciated.
Here's a brief overview of different funding options and their benefits:
Traditional Bank Loan: Since you have great credit, a traditional bank loan could be an option. Banks typically offer lower interest rates and longer repayment terms. However, they often require a significant down payment and have strict eligibility criteria for investment loans.
Hard Money Lenders: These lenders are more flexible than banks and usually focus on the property's potential value after renovation. They offer short-term loans with higher interest rates. This option is great for quick access to funds, but be mindful of the higher costs.
Private Lenders: Private individuals or groups willing to invest in your project might offer more flexible terms than institutional lenders. Rates and terms vary greatly, so it's essential to negotiate well.
Home Equity Loan or Line of Credit: If you own another property, you could use its equity to finance your project. This option often provides lower interest rates but puts your property at risk if you default.
Crowdfunding or Peer-to-Peer Lending: Online platforms allow you to raise funds from multiple investors. This option can provide access to capital without traditional lending criteria but usually involves paying a percentage of the funds raised as fees.
Partnerships: As you mentioned, teaming up with another investor can double your available capital and share the risk. Ensure that roles, responsibilities, and profit-sharing are clearly outlined in a legal agreement.
When considering lenders, focus on those who understand and regularly finance fix and flip projects. Look for terms that balance affordability with flexibility. Since lenders will require a down payment, closing costs, and reserves, you'll need to account for these in your budget.
Given your great credit and willingness to partner, explore options that leverage these strengths. A combination of funding sources might also be a viable approach. Always consult with a financial advisor or real estate expert before making any decisions, as they can provide tailored advice based on your specific situation and goals.
Best of luck to you,
KC - Flipper/Rehabber · CA · Member since 2023 · 1k+ posts · 1k+ votes2y
Quote from @Brandy Luna:
I have 30k to invest in a fix and flip project. I am quickly seeing that this is a very small amount. What type of lender and terms should I be looking for? Lenders will require down payment, closing costs, reserves, etc. I have great credit. I have a small amount of cash. I am also open to partnering with another person who may find themselves in the same situation. Any guidance or advice would be much appreciated.
KC really nailed the lending side of leverage for flips.
Keep in mind flipping is extremely challenging as your fixing up a structure that people will live in.
If you partner (as kc mentioned) have a well outlined structure, preferably by an attorney.
Know FL laws & regulations very well, including contractors requirements.
There are many things that can & do go wrong that are out of your control. I'd also advise having cash reserves.
Very best of luck to you
- 2yAndrew PostellPro MemberLender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
@Brandy Luna congratulations on being able to save $30k. That's a HUGE success. That shows you have discipline and the ability to budget. Both of those are skills you will need your entire investment career.
Now, it sounds crazy to think that $30k isn't that much money. I mean, it's a LOT of money but it does make some things challenging.
So, what can you do with $30k? You can buy your own primary home. You can buy a multi-family primary home. You can househack that home or just live in it for 1 year, and then buy another primary home a little later. Not everybody can do this strategy...especially if you have kids, family, etc. but if you can, now you are buying with the help of a realtor, your home is inspected, you can negotiate with the seller on things, and you get the best rate you can find. So, there are good things about going this route.
What else can you do? You can absolutely, most certainly flip....but you have to be really accurate on your math. When you flip you need to be within 5% of your ARV. You need to be within 10% of your rehab costs....and you do both of those steps BEFORE you make your offer. The other thing you do before you make your offer is you find a hard money lender that will allow you to come out of pocket $0. None of this "we lend 100% of the purchase and 80% of the rehab" stuff. I mean, you can work with whomever you want to of course...but the way the rest of us do this is we find a lender that will allow $0 out of pocket. Usually they lend 70% of the ARV (that's the math we want). That way, if I can BUY and REHAB at 70% of the ARV...now I come out of pocket $0! Ok, so you'll have to turn on the utilities and pay the monthly payments on the loan, etc. But what I mean is to have no downpayment. Admittedly, finding a property where you can get that math to work is hard...but so is everything real estate investing related. I make about 100 offers to get 2 deals. So, you might have to stick with it for a while.
And you can certainly partner with people too. I would only do this lastly though. Well, at least not until you feel REALLY comfortable with someone. Like, you know them for a year or something. The best way to meet other investors is through local Real Estate Investing (REI) Groups. Try some local real estate meetup groups. Meetup.com is a good resource for those but some of the groups will also post here on Bigger Pockets Marketplace too. Even facebook might have some good local groups for you.
I know I'm hitting these real quick but those are the concepts at least. Hope all of that makes sense. Thanks!
- Member since 2023 · 7 posts · 1 vote2y
Quote from @Andrew Postell:
@Brandy Luna congratulations on being able to save $30k. That's a HUGE success. That shows you have discipline and the ability to budget. Both of those are skills you will need your entire investment career.
Now, it sounds crazy to think that $30k isn't that much money. I mean, it's a LOT of money but it does make some things challenging.
So, what can you do with $30k? You can buy your own primary home. You can buy a multi-family primary home. You can househack that home or just live in it for 1 year, and then buy another primary home a little later. Not everybody can do this strategy...especially if you have kids, family, etc. but if you can, now you are buying with the help of a realtor, your home is inspected, you can negotiate with the seller on things, and you get the best rate you can find. So, there are good things about going this route.
What else can you do? You can absolutely, most certainly flip....but you have to be really accurate on your math. When you flip you need to be within 5% of your ARV. You need to be within 10% of your rehab costs....and you do both of those steps BEFORE you make your offer. The other thing you do before you make your offer is you find a hard money lender that will allow you to come out of pocket $0. None of this "we lend 100% of the purchase and 80% of the rehab" stuff. I mean, you can work with whomever you want to of course...but the way the rest of us do this is we find a lender that will allow $0 out of pocket. Usually they lend 70% of the ARV (that's the math we want). That way, if I can BUY and REHAB at 70% of the ARV...now I come out of pocket $0! Ok, so you'll have to turn on the utilities and pay the monthly payments on the loan, etc. But what I mean is to have no downpayment. Admittedly, finding a property where you can get that math to work is hard...but so is everything real estate investing related. I make about 100 offers to get 2 deals. So, you might have to stick with it for a while.
And you can certainly partner with people too. I would only do this lastly though. Well, at least not until you feel REALLY comfortable with someone. Like, you know them for a year or something. The best way to meet other investors is through local Real Estate Investing (REI) Groups. Try some local real estate meetup groups. Meetup.com is a good resource for those but some of the groups will also post here on Bigger Pockets Marketplace too. Even facebook might have some good local groups for you.
I know I'm hitting these real quick but those are the concepts at least. Hope all of that makes sense. Thanks!
Thanks @Andrew Postell. So the first step would be to find a lender who allows $0 out of pocket. A rehab example in this scenario would be find a property with ARV $100K. 70% is $70. If my purchase + rehab costs are less than $70k then my out of pocket can be $0? I would then use the $30k I have saved for utilities, loan payments, and fronting the beginning of project? My understanding is that most lenders allow construction draws after work is complete. So I would pay to start the project then take draws to continue?
- Lender · Santa Monica, CA · Member since 2023 · 63 posts · 26 votes2y
@Andrew Postell- curious to understand your point on a hard money lender allowing $0 out of pocket? Did not know this exists.
- 2yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Brandy Luna:
I have 30k to invest in a fix and flip project. I am quickly seeing that this is a very small amount. What type of lender and terms should I be looking for? Lenders will require down payment, closing costs, reserves, etc. I have great credit. I have a small amount of cash. I am also open to partnering with another person who may find themselves in the same situation. Any guidance or advice would be much appreciated.
$30K should be enough to get off the ground - you should target a hard money lender thats not afraid to work with 1st time investors and is willing to build a relationship for the long haul. Hard Money Lenders can definitely vary - I would recommend reading reviews here and on google before you pick!
Harpoon Capital512 Reviews - Member since 2023 · 7 posts · 1 vote2y
@Celia Lumbroso If I have a property in South Florida with $179k purchase, $45k rehab expense, $320k ARV, how much money should I expect out of pocket before the project even starts? I expect utilities. But how much closing, admin, etc will I have to bring to the table to even start the table. With $30k saved I am trying to preserve capital for rehab/draw process as well as interest payments.
- Member since 2023 · 7 posts · 1 vote2y
@Robin Simon Thank you! I am taking notes re what to look for in hard money lender. I feel encouraged that I might be able to get in the game afterall!!
- Lender · Santa Monica, CA · Member since 2023 · 63 posts · 26 votes2y
Great question.
We have closed numerous deals in Florida and are very familiar with lending in this state.
If you have no prior experience in fix & flips- this is a huge factor. If you have flipped 5 properties within the last 3 years then you will get a better rate.
Based on the numbers above, current market trends and if you have no prior experience in fix & flip: You will likely be able to qualify for a loan amount at max 168,000.
Title, closing costs, and origination fees will likely total 10,000 at closing.
At the end of the day you would walk away with 158,000.
Monthly payment- $1,680.
Thus, you would want to have more in reserves- especially if anything goes wrong in the project. My advice is to have two of everything to get the best possible quotes- 2 contractors, 2 painters, 2 electricians, this will help you get the best pricing by comparing in the market.
*Please note- This is super important. Most lenders will only give you the cash day 1 for the acquisition of the property only and hold back the rehab funds. The lender will reimburse you in arrears AFTER you have spent the costs for rehab.
Day 1 loan amount: $134,250
Rehab holdback: $33,750
Total loan amount: $168,000
If you would like to discuss in further detail please let me know.
- Member since 2023 · 7 posts · 1 vote2y
@Celia Lumbroso yes, I would like to discuss further in detail. Gathering as much info as possible to prepare for a prosperous 2024!
- 2yRiver SavaPro MemberLender · USA · Member since 2022 · 1k+ posts · 1k+ votes
Hi Brandy,
30k is defintily enough. I work with a lot of forst time investors and would love to connect and point you in the right direction. I am sending you a dm!
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
is 30K enough? answer: it depends
based on the information you provided, plus the median home price in Miami, I would say - almost certainly no it is not.
tell me if i am missing something.
way too much cheerleading going on in this post
@Andrew Postell gave the best answer
- Rental Property Investor · Miami · Member since 2022 · 247 posts · 75 votes2y
is 30K enough? answer: it dependsbased on the information you provided, plus the median home price in Miami, I would say - almost certainly no it is not.
""""
Totally agree but we are focusing on the Money....
The key here is experience to find a deal, to recognize a deal. tell me your time line and path. how are you budgeting for that. And what is your exit strategy?
My advice leverage the knowledge or a "Power Team" not just professionals that they can charge you for they services.
I tell you for experience 15 years doing rehabs,buy & Hold Multifamily etc...
DM I send you our calculator to do the numbers but that is just numbers..
You need a Plan to succeed, fast and from the beginning.
You are in the right place bigger pockets has all the knowledge you need to acquire. But experience is what is need it for success.
Go to local investor clubs, meet people who are doing what you want to do...
In Miami 30K 20% down that is 150k property very unlikely to find and all the rest ...
My personal opinion find a JV group to invest with is not easy but you will learn a lot by investigating them.
go for it Real Estate investing is an awesome way of life.
Luis Maqueira MMP
- 2yJonah SlovePro MemberMember since 2023 · 77 posts · 53 votes
Quote from @Andrew Postell:
@Brandy Luna congratulations on being able to save $30k. That's a HUGE success. That shows you have discipline and the ability to budget. Both of those are skills you will need your entire investment career.
Now, it sounds crazy to think that $30k isn't that much money. I mean, it's a LOT of money but it does make some things challenging.
So, what can you do with $30k? You can buy your own primary home. You can buy a multi-family primary home. You can househack that home or just live in it for 1 year, and then buy another primary home a little later. Not everybody can do this strategy...especially if you have kids, family, etc. but if you can, now you are buying with the help of a realtor, your home is inspected, you can negotiate with the seller on things, and you get the best rate you can find. So, there are good things about going this route.
What else can you do? You can absolutely, most certainly flip....but you have to be really accurate on your math. When you flip you need to be within 5% of your ARV. You need to be within 10% of your rehab costs....and you do both of those steps BEFORE you make your offer. The other thing you do before you make your offer is you find a hard money lender that will allow you to come out of pocket $0. None of this "we lend 100% of the purchase and 80% of the rehab" stuff. I mean, you can work with whomever you want to of course...but the way the rest of us do this is we find a lender that will allow $0 out of pocket. Usually they lend 70% of the ARV (that's the math we want). That way, if I can BUY and REHAB at 70% of the ARV...now I come out of pocket $0! Ok, so you'll have to turn on the utilities and pay the monthly payments on the loan, etc. But what I mean is to have no downpayment. Admittedly, finding a property where you can get that math to work is hard...but so is everything real estate investing related. I make about 100 offers to get 2 deals. So, you might have to stick with it for a while.
And you can certainly partner with people too. I would only do this lastly though. Well, at least not until you feel REALLY comfortable with someone. Like, you know them for a year or something. The best way to meet other investors is through local Real Estate Investing (REI) Groups. Try some local real estate meetup groups. Meetup.com is a good resource for those but some of the groups will also post here on Bigger Pockets Marketplace too. Even facebook might have some good local groups for you.
I know I'm hitting these real quick but those are the concepts at least. Hope all of that makes sense. Thanks!
can you share your HML for $0 out of pocket? I talked with a few and its 25% down or using the purchase value not the ARV.
- 2yAndrew PostellPro MemberLender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
@Brandy Luna yes, sounds like you have it. Your draws would be built into that $70k amount. Once you close, the draws pay the contractor after the work is completed. Once 100% complete, you list the property. So, that might take a little while...thus why you need money to pay the utilities, mortgage payments, etc.
- 2yAndrew PostellPro MemberLender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
@Celia Lumbroso yes, 100% financing does exist. Now, I can speak for all lenders and all markets...but many of the HML's that I know lend in multiple states. It also might be hard finding a deal that matches up to that...but it certainly exists. I don't mean to step on anyone's toes here...there are lots of good lenders that WON'T lend 100%...but there are also lenders that will. Usually, we have to network locally to find them but they are out there.
- 2yAndrew PostellPro MemberLender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
@Jonah Slove I'm always willing to share anyone and anything I have. I cannot share contact information in a forum though but I do want to explain some things just in case:
First Common Scenario - Someone is buying a property off the MLS. The property is listed for 100% of the value of the home. The buyer is under contract to purchase the property at 100% of the value. Under NO circumstances will a lender would provide 100% financing in this scenario.
Second Common Scenario - Someone has identified a property that requires rehab. The purchase price + rehab = 100% of the value of the property. This is also very similar to the above scenario. The buyer is paying 100% (actually over) for this property...and under NO circumstances will any lender lend 100% of the value in this scenario.
What scenario would we get 100% financing? - When we can buy and rehab at 70% or 75% of the ARV of the property. Now, how hard is it to find a this deal? Very hard. But in those scenarios you can absolutely get 100% financing.
What is usually likely? - What normally occurs is that someone will find a property where the purchase + rehab = 80% of the ARV. And in that scenario, if my HML will lend me 75%...now I am only coming out of pocket 5%. Where we kind of get "sold" on things is when some lenders say "We lend 100% of the purchase price and X% of the rehab not to exceed X% of the ARV"...that statement does not allow us to have 100% financing. And again, you can work with whomever you want of course but most of us want to at least have the option of getting 100% financing.
I hope that makes sense how I am describing these things.
- Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes2y
Hi Brandy, I take it from the context of your email that you're relatively new at flipping. Normally, we'll do anywhere from 75% to 90% of the property cost plus the cost of the rehab up to about 70% of the As Repaired Value. If you're newer, the approval will likely be closer to the lower-end of that range. Remember that you also need money for closing costs and reserves. It's going to be tight for you, so you might want to either find an equity partner. Sometimes we even partner with smaller investors. Let me know if you have any questions and we can chat in more detail.
- Specialist · NJ · Member since 2022 · 1k+ posts · 649 votes2y
You need to get into the right markets with that kind of starting capital and your home market is not it. I have set up networks in affordable markets for my clients, markets where you can get through the life cycle of a project with 25k.
- 12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes2y
Hey Brandy ! 30k should definitely be enough to get you into a 50k purchase 100k renovation and to be worth about 230k when complete
- Investor · Member since 2023 · 38 posts · 7 votes2y
I can help you. send you a message
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