Attracting private money for fix and flip

7 Replies

Show me the money......

Jerry Mc Guire had it to prove himself just like all of us that fix and flip homes.  I'm starting my 8th deal next week and have developed a great team of Realtors, contractors, and bird dogs finding me deals, rebuilding a quality product, and getting me top dollar when I sell.

In our market in Southern California we have figured out how to aquire property on a 12 to 25%  margin. So far to date we have only been able to close on the healthy deals with the bigger margins.  We just don't have the cash flow to work on more than 3 at a time. Theremember are opportunities we are passing on and wholesaling and I see it costing us money.  

We are doing all we can right know to better understand how to attract, and manage a private investor.  I would love to here how any of you have done it, what you did to attract, and what is your on going strategy when it comes to accounting and financial reporting to your investor.

Thanks for your help 

Jim 

Originally posted by @Jim Keller :

So far to date we have only been able to close on the healthy deals with the bigger margins.  [There] are opportunities we are passing on and wholesaling and I see it costing us money. 

I guarantee that every rehabber we know just wishes they had your problem, Jim.

Run the numbers and you should easily see that profit splits with private investors are almost never in your financial interest, compared to a private/hard money loan, especially if it's a 50/50 split. Lender costs out here will be much closer to 5 to 25% of your profit depending upon how fast you can finish, loan terms, and the amount of meat on the bones.

Lenders want to make sure you have a decent deal, and the experience and wherewithal to complete the project and pay them back. No need for coddling, fancy presentations, accounting, or financial reporting to impress anyone. This might have been necessary for your first few deals, but after eight successful(?) flips, you could now call yourself experienced by any lender's standards, with nothing more to prove.

There's a lot of money available now. Experienced flippers, especially those doing many deals at a time, regularly borrow both their purchase and rehab money (i.e. 100% leverage). Sometime it's from one lender, depending upon your relationship, and sometimes it will involve two.

More traditional lenders will expect you to invest up to 35% down, and be careful of those that will not allow a second TD, but don't for a minute believe you're stuck here. You really just have to shop around and meet as many potential lenders, large and small, as possible. It will take time to prove yourself as a reliable borrower, but this side of the industry is currently awash in money that's very willing to compete.

This post has been removed.

Jim, just keep doing what you are doing and make sure to tell EVERYONE you come into contact what you do, that you are looking for places to buy, and you will be surprised who might just come to you with ideas on partnering up or loaning you money on deals.

That is something I do not do enough, though what I have done so far has generated me great partners, but I if I want to get even more, and I do,  I need to get more proactive on informing everyone what I do.    Referrals from existing partners/lenders are also a great way to get more private money.

You may benefit from a niche lender who's rates are in the 8% range rather than hard money.  I'm setting up a relationship with a lender that would be perfect for you in the next week.  Let's stay in contact on this.

Medium spf jpegDarren Eady, Secure Private Funding | [email protected] | http://www.secureprivatefunding.com

Jim,

If you have a stron portfolio and good track record there are many private money investors to help.  Lending at 7.99 and repayment options that fit your budget.

This post has been removed.

Jim,

  • Congratulations on your 8 successful transactions here in So Cal. What we like to do is provide our PML the contractors scope of work/ pricing, and provide them with a change order in the event we need other materials. I do weekly videos and send to them on updates of the project, and I also invite them to come visit the project 1st hand so they can see where their money is being used. We created a credibility package, a short video on the basics of PML and how it would benefit them. We go to a lot of meetings where self directed IRA's are being discussed, and introduce to our-self to these people who want to invest into real estate. Get on Kaaren Hall's list to find her events, or even Belinda Savage. Keep us posted on your success...