Do I have enough money to start private lending for fix and flips?
Member since 2024 · 23 posts · 19 votes
Do I have enough money to start private lending for fix and flips?
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesdepends on market most of FLA that wont move the needle.
rust belt mid west you can find deals for those amounts.. going to be rougher areas of course.
do NOT follow the advice of anyone suggesting second postions or gap funding. U dont have enough capital for those risks
25 Replies
- New to Real Estate · Milliken, CO · Member since 2018 · 16 posts · 4 votes1y
Hello Ivan,
I do not work for BP, but my suggestion is that you follow the Build Your Investing Team link at the top of this page if you have not and follow each step including speaking with the prospective members of the team you want to build and with that I believe you will obtain the answers you need. I am new to this, and you may find the answers with this process as well of course so I consider asking here worthwhile as well. The 60% LTV is based on the ARV, and that is why practicing calculating the ARV is an important skill that can be learned over time and with a lot of practice.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Quote from @Ivan Castanon:
Hello all!
I am currently reading books and educating myself about private lending. I am interested in jumping in, but I am not sure if I have enough money. I have $110k ready to invest in Florida. I would like to fund a fix and flip deal with a first lien position in Florida.
Is this reasonable or do I need more money? I know that I should try to stay at 60% - 70% LTV. But is this possible with my current capital? Is this LTV based on ARV or the purchase price?
If I don't have enough for a first position lean, is it even worth it getting second positon liens?
Thank you!that will be a lower priced property that you most likely will be lending on. can it be done yes. It will just be a lot of work to find experienced flippers playing in that price point
7e investments53 Reviews - Lender · Nashville, TN · Member since 2024 · 700 posts · 284 votes1y
Everyone starts somewhere :)
- Lender · Nashville TN, USA · Member since 2024 · 142 posts · 30 votes1y
With $110K, you can absolutely start private lending for fix-and-flip deals in Florida, but there are a few things to consider:
1. LTV Consideration – The 60%-70% LTV is usually based on the After-Repair Value (ARV), meaning your loan should be within that range relative to the projected value after renovations.
2. First vs. Second Lien Position – A first lien position is safer, but $110K may not always cover the full loan amount for a flip. If a borrower needs $200K+, you may need to partner with other lenders or take a second lien position, which carries more risk.
3. Smaller or Partial Deals – You could fund lower-priced flips or offer gap funding (covering down payments, rehab costs) alongside a hard money loan.
4. Risk & Due Diligence – Ensure the deal has strong equity, a solid exit strategy, and an experienced investor before funding.
While $110K is a good starting point, consider structuring deals wisely to minimize risk. If you can secure a solid first lien within your budget, it’s a great way to get started.
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
depends on market most of FLA that wont move the needle.
rust belt mid west you can find deals for those amounts.. going to be rougher areas of course.
do NOT follow the advice of anyone suggesting second postions or gap funding. U dont have enough capital for those risks
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes1y
Quote from @Ivan Castanon:
Hello all!
I am currently reading books and educating myself about private lending. I am interested in jumping in, but I am not sure if I have enough money. I have $110k ready to invest in Florida. I would like to fund a fix and flip deal with a first lien position in Florida.
Is this reasonable or do I need more money? I know that I should try to stay at 60% - 70% LTV. But is this possible with my current capital? Is this LTV based on ARV or the purchase price?
If I don't have enough for a first position lean, is it even worth it getting second positon liens?
Thank you!If you've got to ask this question, no, you should not start lending.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Quote from @Jay Hinrichs:
depends on market most of FLA that wont move the needle.
rust belt mid west you can find deals for those amounts.. going to be rougher areas of course.
do NOT follow the advice of anyone suggesting second postions or gap funding. U dont have enough capital for those risks
I love the second position holders who get in with small dollars, then see the $200k first position lien go into foreclosure and they need to pay it off / bid at foreclosure but do not have the money and get wiped out....
7e investments53 Reviews - 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Chris Seveney:
Quote from @Jay Hinrichs:
depends on market most of FLA that wont move the needle.
rust belt mid west you can find deals for those amounts.. going to be rougher areas of course.
do NOT follow the advice of anyone suggesting second postions or gap funding. U dont have enough capital for those risks
I love the second position holders who get in with small dollars, then see the $200k first position lien go into foreclosure and they need to pay it off / bid at foreclosure but do not have the money and get wiped out....
Yup a prudent second position lender only does that if they have the cash to pay off the first. lest they get in trouble as you have described.. happens a lot to those who get sucked into it.. Mainly because many seconds the rate on the note is a few points higher so greed takes over with no real understanding of the risk.. I have done seconds but 30% apr is my minimum for the risk - Member since 2024 · 23 posts · 19 votes1yThank you for the advice. But what is wrong with a second position lien? What if the combined first and second liens are < 65% LTV? What is the risk there?
Quote from @Jay Hinrichs:
depends on market most of FLA that wont move the needle.
rust belt mid west you can find deals for those amounts.. going to be rougher areas of course.
do NOT follow the advice of anyone suggesting second postions or gap funding. U dont have enough capital for those risks
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Ivan Castanon:
Thank you for the advice. But what is wrong with a second position lien? What if the combined first and second liens are < 65% LTV? What is the risk there?Quote from @Jay Hinrichs:
depends on market most of FLA that wont move the needle.
rust belt mid west you can find deals for those amounts.. going to be rougher areas of course.
do NOT follow the advice of anyone suggesting second postions or gap funding. U dont have enough capital for those risks
LOL.. Chris spelled it out.. but I will do it again. borrower has an issue and cant pay on the first. The first goes to foreclosure you will need to cash out the first before it goes to sale other wise you will get wiped out.. Now you can let it go to sale and hope it bids higher than the first you would get any overage but dont count on it.. more than likely you would love your entire investment.. this is a very frequent event.. I have been doing these type of loans for 30 plus years and buying foreclosures since the late 70s.. seen it time and again ..
So thats the risk - Member since 2024 · 23 posts · 19 votes1y
Quote from @Jay Hinrichs:
Quote from @Ivan Castanon:
Thank you for the advice. But what is wrong with a second position lien? What if the combined first and second liens are < 65% LTV? What is the risk there?Quote from @Jay Hinrichs:
depends on market most of FLA that wont move the needle.
rust belt mid west you can find deals for those amounts.. going to be rougher areas of course.
do NOT follow the advice of anyone suggesting second postions or gap funding. U dont have enough capital for those risks
LOL.. Chris spelled it out.. but I will do it again. borrower has an issue and cant pay on the first. The first goes to foreclosure you will need to cash out the first before it goes to sale other wise you will get wiped out.. Now you can let it go to sale and hope it bids higher than the first you would get any overage but dont count on it.. more than likely you would love your entire investment.. this is a very frequent event.. I have been doing these type of loans for 30 plus years and buying foreclosures since the late 70s.. seen it time and again ..
So thats the riskI was genuinely curious. I was not trying to argue. After doing some research I realized that the first lien lender has so much control over the purchase price. I assumed that foreclosure house sales are usually sold near ARV or maybe at a slight discount. I didn't know that, but now I understand the risk better.
- Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes1y
Early last year, one of our borrowers, an extremely experienced rehabber who had recently been diagnosed with diabetes, informed us that he’d been in and out of the hospital so frequently that he wouldn’t be able to complete the flip we had loaned on as first position lenders.
We were aware that he had borrowed an additional $110k from a second-position lender. I bring this up because it’s identical to the amount you have. He was also in escrow to sell the house as a busted flip, as-is. This would pay us back less than we were owed but still enough to come out whole.
We all tried to negotiate a short payoff with the second-position lender, who foolishly demanded payment in full. As a result, the sale was canceled, we foreclosed, and the second-position lender was wiped out. We now own the beat-up POS property that we need like a hole in the head. Fortunately, we are currently in escrow to sell it. The second position lender will get nothing. Who wins here?
Your statement, @Ivan Castanon, that “… foreclosure house sales are usually sold near ARV or maybe at a slight discount,” couldn’t be further from the truth. Foreclosure auction buyers cannot walk the property and have no idea of its condition. Nor can they see any construction plans to assess true value. Thus, they take extreme risks and look for corresponding discounts.
Additionally, after the first position lender accounts for default interest, penalties, legal fees, foreclosure fees, accounting fees, and everything else, the equity in your combined <65% ARV loan can easily erode to zero. This is real.
The two comments above can’t be repeated enough. Never lend in second position unless you have the wherewithal to pay off the first. Never lend far from home.
If you don’t have enough money to lend locally in first position, you don’t have enough money to lend.
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Ivan Castanon:
Quote from @Jay Hinrichs:
Quote from @Ivan Castanon:
Thank you for the advice. But what is wrong with a second position lien? What if the combined first and second liens are < 65% LTV? What is the risk there?Quote from @Jay Hinrichs:
depends on market most of FLA that wont move the needle.
rust belt mid west you can find deals for those amounts.. going to be rougher areas of course.
do NOT follow the advice of anyone suggesting second postions or gap funding. U dont have enough capital for those risks
LOL.. Chris spelled it out.. but I will do it again. borrower has an issue and cant pay on the first. The first goes to foreclosure you will need to cash out the first before it goes to sale other wise you will get wiped out.. Now you can let it go to sale and hope it bids higher than the first you would get any overage but dont count on it.. more than likely you would love your entire investment.. this is a very frequent event.. I have been doing these type of loans for 30 plus years and buying foreclosures since the late 70s.. seen it time and again ..
So thats the riskI was genuinely curious. I was not trying to argue. After doing some research I realized that the first lien lender has so much control over the purchase price. I assumed that foreclosure house sales are usually sold near ARV or maybe at a slight discount. I didn't know that, but now I understand the risk better.
I did not take it as arguing.. I see Jeff S. responded he is one of the most experienced lenders PM lenders who owns his own company here on BP.. You can take his advice to heart many others on this site are merely brokers.. Jeff and I lend our own money and at least for me I do have some investors that I manage their funds along with my own. - Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes1y
That is enough albeit only a cheaper property and, while I don't know Florida that well, I doubt there are many in that price range.
Also, I would be hesitant to do private lending with all my investment capital on one property. Yes, it's secured and if you have to foreclose you can sell and recoup at least some of your investment. But it's a bit too "all your eggs in one basket" for lending to someone else.
- Investor · Coppell, TX · Member since 2018 · 311 posts · 166 votes1yYou've received excellent advise from others here. And I agree, you have enough funds to fund something in the lower price point. Also, research other areas where you can invest as a private money lender (fix and flip is just one option)...
Quote from @Ivan Castanon:
Hello all!
I am currently reading books and educating myself about private lending. I am interested in jumping in, but I am not sure if I have enough money. I have $110k ready to invest in Florida. I would like to fund a fix and flip deal with a first lien position in Florida.
Is this reasonable or do I need more money? I know that I should try to stay at 60% - 70% LTV. But is this possible with my current capital? Is this LTV based on ARV or the purchase price?
If I don't have enough for a first position lean, is it even worth it getting second positon liens?
Thank you! - Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes1y
Ivan, I'm in Tampa too and I'm a lender with formal commercial credit background from two of the largest lenders in the world and 34 years of lending experience. I am not trying to be condescending, but your question is akin to "I have a really sharp knife. Do you think it would be a good idea to start performing discount surgeries for people?" I've seen some of the books on private lending and I can't help giggling when I see them. Go to the authors' Linked In profiles and see what real experience they have. If they've not got progressively more in depth lending experience on their resumes, don't listen to a damn word they say. That being said, $110K is a bit light to start a lending practice. Ivan, I didn't mean this to at all be condescending, so please don't take it that way. I just don't want to see you lose your money. Since I, too, am in Tampa, DM me and I'll buy you a cup of coffee. You can ask me any question you want. I would love to help...if nothing more than to ensure you don't miss something you didn't know existed and, therefore, loose your $110K.
- 1yJorge VazquezBusiness MemberReal Estate Broker · Tampa, FL · Member since 2017 · 1k+ posts · 684 votes
Hi Ivan,
After investing for 20 years, I’ve seen lenders get pretty creative to make their money work. With $110K, you’re in a good starting spot, but Florida flips can burn through that quick, so sometimes you gotta think a little different. Here are a few ideas I’ve seen work:
- Gap Funding (Second Position): Risky—like lending your buddy cash to fix his car, hoping he doesn’t crash it. Fast returns, but if the first lender forecloses, you could get wiped out. Works best if you trust the flipper.
- Wrap + Second Position Combo: This is a cool little move—you work out a wrap-around mortgage with the seller, then assign that contract to your borrower, and still lend in a second position for repairs or closing costs. You get a fee upfront from the assignment and your loan is still earning on the back end. Bit more paperwork, but you get paid twice.
- Flat Fee + Profit Split (Repair Funding): You cover the repairs, but you set a minimum fee (like $15K) to protect yourself. The goal though is to split the profits 50/50 if the flip goes well. Flat fee is your safety, profit split is your upside—works best when you really trust the investor.
- Equity Sharing + Second Position: Kind of like the repair funding idea, but you just lend for repairs and instead of only charging interest, you get a piece of the final profit too. Bigger upside, but second position always carries more risk—if the first lender forecloses, you could lose it all unless you can step in.
Best move? First position loans are still the safest, especially when starting out. But if you want to get a little more creative and maybe make more, that wrap-around play or the profit split repair funding can give you a shot at better returns—just gotta make sure you know the borrower and the numbers are solid.
Here if you wanna talk it through,
Jorge
Graystone Investment Group4.6271 Reviews - New to Real Estate · Tampa, FL · Member since 2022 · 11 posts · 3 votes1y
Hey Ivan. I live in the Tampa Bay Area but I’m building out in Port Charlotte. If you’re interested in a 20% annualized return, reach out! I’ll also be dm’ing you.
- New to Real Estate · Tampa, FL · Member since 2022 · 11 posts · 3 votes1yUpdate: the project has been fully invested in.
Quote from @Deja Clark:
Hey Ivan. I live in the Tampa Bay Area but I’m building out in Port Charlotte. If you’re interested in a 20% annualized return, reach out! I’ll also be dm’ing you.
I hope you find out a good way to make your money work for you!
- Lender · Clermont, FL · Member since 2020 · 168 posts · 87 votes1y
Quote from @Ivan Castanon:
Hello all!
I am currently reading books and educating myself about private lending. I am interested in jumping in, but I am not sure if I have enough money. I have $110k ready to invest in Florida. I would like to fund a fix and flip deal with a first lien position in Florida.
Is this reasonable or do I need more money? I know that I should try to stay at 60% - 70% LTV. But is this possible with my current capital? Is this LTV based on ARV or the purchase price?
If I don't have enough for a first position lean, is it even worth it getting second positon liens?
Thank you!There are ways to do a portion of a deal, so the 110K would be more than enough. Make sure you know what security documents you need and the process to ensure that you're actually protected. Never send money directly to a person, everything must go through a title company. Items needed:
- Title policy to protect you against mistakes a title company may make
- Lien on the property, so they can't sell that property or do a cash out refi without paying you out.
- Make sure you're listed as a loss payee on the insurance policy.
- Promissory note that outlines the details of the loan itself
- Personal guarantee, but it's only worth something if the person who's borrowing from you isn't totally broke.
- Lender · Tampa, FL · Member since 2018 · 18 posts · 4 votes1y
Avoid 2nd position like the plague, and consider saving up until you have roughly the median sales price of homes in your area. This will give you wiggle room when you find your first client. Never go over 70% LTV on exisiting, ignore ARV values. Only lend on what you can see today, everything else is speculation and where you stand to lose the most money. Ensure you have a great Attorney who specializes in lending law to draft docs for you and your clients.
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