Newcomer to Chicago - Looking for the right loans for flipping?

Question

Hello Everyone!

My business partner and myself have recently begun the endeavor of looking for financing on a house that we are may be interested in flipping. However, after talking to a few of the brokers we have connections with, we have gotten responses all over the board as to what is possible and what is not in terms of securing financing. I'm hoping this isn't coming off as a "loan request" because I'm not looking for anyone to offer that to me/us but I'm just looking as to how it can be done.

The biggest question mark that faces us right now is that we are intending on using the capital we have raised for the down payment for the house and trying to get some kind of rehab loan that will not only cover the house but also the expenses required to fix up the place. Some of the brokers we have talked to said that in order to do this, it would require that we sit on the house for 6 months before we could put it back up on the market which is a bit concerning.

To cut to the chase, my simplified question is...

Is there a loan that a new flipping investor can procure that has the ability to:

1) Cover both the cost of the house and the cost of the rehab.

2) Doesn't hold the us, the buyer, to keep the house for 6 months.

Or is this a completely crazy wish to have? If you know of any other ways that we can secure financing for a home we have also been looking into grabbing other investors to help finance the rehab.

Thanks!

Joshua Daoust · Answer

I am actually in the same position as William. I am a Licensed Realtor but I am also interested in flipping. I'm also curious about the loan options. But not really having enough to use out of pocket I am wondering what kind of funding there is to cover the purchase of the house and the fix. Also wondering if that would be one loan or two different loans. As for the time limit, I'm sure it depends on what repairs need to be made as well as how good your contractors are. But I would want a property that I can sell in less than 30 days once the fix is done. Absolutely 3 months at the max.

Account Closed · Answer

I don't think you would have an issue finding a loan that would fit your needs. As far as the time frame if you purchase a property that has a deed restriction keeping you from selling the property within 3 months of purchasing it for more than 120% of the purchase I would just wanna be confident in my comps and ARV enough to know the under 6 month time frame is doable. We have only ever had one house that stayed on the market more than 6 months so just be confident in your deal! And keep in mind deed restriction issues depending on how you acquire the property.

Scott W. · Answer

do you both have equity in your own homes? if so, just get a HELOC. Cheapest $ out there.

William Michael · Answer

Do you think 3 to 6 months is a reasonable time for a house to move from rehabbing to sell? My real estate agent told me that 6 months isn't an unreasonable amount of time for a house to take that long.

JR T. · Answer

There are hard money lenders that can put those types of deals together. The rates are outrageous. You'd do better to get involved with a community bank interested in aggressive real estate lending. If you take out multiple loans or loans for the down make sure every lender involved knows of the other lenders and where all of the loan proceeds are going. NEVER lie to obtain financing - if the flip deal goes bad the lender will view your misstatements as fraud.

Josh Sartori · Answer

Hi William,

I faced the same issues when I purchased my first place in the city. I had two floors of a 3 family that was being used as section 8 housing. Those two units were converted into a duplex up at some point and I needed to refinish both floors and put a new kitchen back up on the third floor that the previous owner converted into a bedroom.

Our bank gave us a one year construction loan which would cover the purchase price and cost of materials, as I was doing the work myself. On this construction loan I only had to pay the interest and at the end of loan term we refinanced into a 30 year.

Worked out great for us as the we left one unit occupied which covered the monthly payments of interest and kept it cash flowing from day 1. I'm not sure how common this is but it sounds like this is what your looking for. If you have any other questions feel free to reach out.

-Josh

Mark Nolan · Answer

@William Michael

Welcome to Bigger Pockets. BP is full of resources. You will find resources here from blogs to pod casts and forums. You can also send messages to members. This is one of my favorite features of Bigger Pockets especially for asking specific questions.

Newcomer to Chicago - Looking for the right loans for flipping?

Newcomer to Chicago - Looking for the right loans for flipping?

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