Advice on a fix and flip

3 Replies

Newbie here needing advice on the right kind of loan to go with. My dad is selling me his house (not on the market) for 65,000$ it's definitely a fixer upper. Estimated repairs at 45,000 and after repair value around 180,000. So my question is what type of loan would be best for me? Hard money, private, conventional, FHA 203? Just don't wanna get screwed cause this is an excellent start for me in the real estate business.

@Joseph Perez Does he own the property outright? Does he need the money right away? Would your dad be willing to do seller financing thus bypassing the cost of private money or an HML? You could pay him a down payment (ie $1k, $5k, etc.) if he owns the property outright, continue to pay dad's bills on the house (ie holding costs) while you are fixing up the property (do you have/can you get the $45k?). When you are done, sell the property and pay your dad (ie maybe even split the profit with him!). Alternatively, If your numbers are accurate, there is definitely enough spread to work with a HML if you are employed, have decent credit and can put some skin in the game (ie 10% of the purchase or so). Lastly, if you wanted to hold this property (ie would it be a good rental?) you could buy it/rehab it via an HML, put a tenant in and then do a cash-out refi which will pay off the HML, put money in your pocket and you have a property to hold/rent. I wouldn't do this unless it would make an ideal rental (ie it's in a desirable location and would be easy to rent, etc.).

Yes he does own the property. he currently rents it out (1000$ a month). He does not need the money right away but seller fiance would be "to much trouble" for him so its either all or nothing, "whenever you're ready" is what he tells me. I am employed making around 80k with a good credit score i do have 10% on a loan. I do believe the total profit on this property would be good, so id use that money to get a couple of small single family or (hopefully) a duplex. I live in west Texas, oil here makes any location desirable location.

FHA 203--you'd have to live in the house. Also they need a GC for improvement costs above $35K, adds to approval time and increases paperwork.

Hard money--90% acquisition and fix up costs, up to 70% ARV. One year loan at 11-12% interest only plus 2-4 pts up front. Should have exit plan in place--sell or re fi.

Some conventional lenders will not fund repair costs, but your first stop should be local banks/credit unions. CUs tend to have better terms. LTV should be 75-80%, 25-30 year amort.