Got a great deal but not enough capital to do it, now what?

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Got a great deal but not enough capital to do it, now what?

Kent, WA · Member since 2017 · 31 posts · 6 votes

The Seattle area is crazy expensive but ive been seeing a ton of people making money so I started getting into real estate education to see what I can figure out and have learned a lot from BP.

I went to a BiggerPockets event I found and I got a deal sent my way with a cash on cash return of 36% and a net profit of 106k with the performa sheet I was sent.

They included pictures and comps and looks like a great chance to make money but I have no clue where to find a partner or someone with money willing to capitalize on deals

Acquisition cost of 765k, 150k in rehab, then comps selling for 1.1-1.4m

Any advice on where to find investors or share deals is greatly appreciated

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Eric Black

Rental Property Investor · Where we are parked · Member since 2013 · 584 posts · 178 votes

My first question is, if it's such a great deal and the numbers are as good as they claim to be, why is it still available at a local BP event? Why haven't the "ton of people making money" snatched it up if it's so good?

I'm not being pessimistic, negative or doubtful and I'm not trying to offend you. But if the people who have successfully been investing haven't grabbed this deal, where does the person pitching the deal go? To a local investor meetup to find a newby?

Maybe it IS a great deal. Maybe, like most "deals", the proforma is inflated to look good. Have you presented the proforma you got to anyone else in the area who has experience? Again, I'm not trying to be a downer or discourage you, I just don't want to see someone just getting started get burned.

Cheers!

Eric

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Eric Black
Rental Property Investor · Where we are parked · Member since 2013 · 584 posts · 178 votes
7y
My first question is, if it's such a great deal and the numbers are as good as they claim to be, why is it still available at a local BP event? Why haven't the "ton of people making money" snatched it up if it's so good?
I'm not being pessimistic, negative or doubtful and I'm not trying to offend you. But if the people who have successfully been investing haven't grabbed this deal, where does the person pitching the deal go? To a local investor meetup to find a newby?
Maybe it IS a great deal. Maybe, like most "deals", the proforma is inflated to look good. Have you presented the proforma you got to anyone else in the area who has experience? Again, I'm not trying to be a downer or discourage you, I just don't want to see someone just getting started get burned.
Cheers!
Eric
11 Reply
Rene D.
NV · Member since 2019 · 254 posts · 57 votes
7y
Agree with @Eric Black, pro forma numbers are typically inflated. Do your own due diligence - drive by the property, check the comps, determine what CapEx needs to be done, find out annual taxes and other operating expenses.
2 Reply
Ricardo R.Pro Member
Property Manager · Michigan Ctr, MI · Member since 2016 · 663 posts · 581 votes
7y
@Seth Rose @Rene D. - Seth, what type of property is it? Did you get or ask for a profit & loss statement, rent rolls and T-12? Rene, is right, proforma numbers are not real, they are are typically a best case scenario of what the property could bring and are based on projected returns and either depress or completely omit, things like vacancy, maintenance, increased utilities, management fees and ground maintenance. The actual numbers are VERY important and not typically found in the proforma or OM(offering memorandum) and they usually differ greatly. The purpose of the proforma is to pain the property in the best light possible, if you look usually somewhere near the bottom or near end of it, you'll see it says that the numbers are not guaranteed. -- However, what type of deal is it? A flip? A buy and hold? A BRRR? are you able to share a bit more?
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Seth Rose
OP
Kent, WA · Member since 2017 · 31 posts · 6 votes
7y
@Eric Black
It’s not being advertised. I went to an event and met a real estate/lending group who find off market deals then try to find a flipper to lend hard money. I wanted to do it by myself but all the deals around Seattle are expensive
1 Reply
Account Closed
Real Estate Agent · Panama City Beach, FL · Member since 2019 · 4 posts · 13 votes
7y
Good deals don't last, I'd be careful before jumping into something that may sound to good to be true. Do your own research before diving into this. As far as getting the capital, it sounds like you are flipping the home so you could always find a hard money lender. They will fund up to 100% + rehab. The rates are not favorable but if you plan on making a quick flip it just may be worth the extra money you pay in interest.
Goodluck!
1 Reply
Seth Rose
OP
Kent, WA · Member since 2017 · 31 posts · 6 votes
7y
@Ricardo R.
It would just be a fix and flip. Rental income wouldn’t even pay a refi mortgage of most of these properties in the Seattle city limits.
Included with any deals they find, they have a vast amount of photos. But I guarantee the deal is already gone since it’s already been a day. That’s been my experience in this area but I know a few fix and flippers who are making good money around here with how fast properties sell.
But I just don’t know what to do when I can’t afford the 25% down for the project when they come through to me so was just looking for advice on where to advertise deals for a partner but I’ll figure something out
0 Reply
Seth Rose
OP
Kent, WA · Member since 2017 · 31 posts · 6 votes
7y
@Caleb Mainor
Yeah, good deals are gone in a day around here. I decided that I needed to find off market deals to even have a chance but this particular deal is a package product and that’s how they make their money. They find the deal and then lend you the money and charge the hard money rates then list it, so they make good money from investors.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Ricardo R.:

@Seth Rose @Rene D. - Seth, what type of property is it? Did you get or ask for a profit & loss statement, rent rolls and T-12? Rene, is right, proforma numbers are not real, they are are typically a best case scenario of what the property could bring and are based on projected returns and either depress or completely omit, things like vacancy, maintenance, increased utilities, management fees and ground maintenance. The actual numbers are VERY important and not typically found in the proforma or OM(offering memorandum) and they usually differ greatly. The purpose of the proforma is to pain the property in the best light possible, if you look usually somewhere near the bottom or near end of it, you'll see it says that the numbers are not guaranteed. -- However, what type of deal is it? A flip? A buy and hold? A BRRR? are you able to share a bit more?
I will bet dollars to donuts this is a residential retail flip.. not a rental property.. that's about the median price for decent Seattle house..
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Seth Rose:
@Caleb Mainor
Yeah, good deals are gone in a day around here. I decided that I needed to find off market deals to even have a chance but this particular deal is a package product and that’s how they make their money. They find the deal and then lend you the money and charge the hard money rates then list it, so they make good money from investors.
is this vestus or east side funding or one of those.. be very cautious with their numbers.. and I suspect they will want you to put at least 20% down..
OH I see you said 25% down.. and are they buying this at court house steps ? that's where the HML have this program set up in most cases.
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1 Reply
Seth Rose
OP
Kent, WA · Member since 2017 · 31 posts · 6 votes
7y
@Jay Hinrichs
They don’t say where they got the deal but when I met them, they get them from anywhere they can. I never heard of those companies so it’s not them.
I’m just trying to figure out how to get into this world but looks like I need to do some more networking and maybe find a financial partner. I’m an electrician and have trade knowledge with some savings but not 100k. So I want to use my knowledge to get sweat equity was my plan
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Seth Rose:

@Jay Hinrichs
They don’t say where they got the deal but when I met them, they get them from anywhere they can. I never heard of those companies so it’s not them.
I’m just trying to figure out how to get into this world but looks like I need to do some more networking and maybe find a financial partner. I’m an electrician and have trade knowledge with some savings but not 100k. So I want to use my knowledge to get sweat equity was my plan
Gotcha.. many say find the deal and the money will be easy.. well I personally don't believe that especially in high priced markets like were we live.
its the other way around find the money first deals will always be there.
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4 Reply
Seth Rose
OP
Kent, WA · Member since 2017 · 31 posts · 6 votes
7y
@Jay Hinrichs
Yeah, that’s what I’ve been concluding since starting to get into it. Got to find the capital first
1 Reply
Tanner Marsey
Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
7y
If it’s too good to be true....
It took me about 2-3 “bitchin’ off market” deals sent my way to realize those numbers mean absolutely nothing. Do your own DD every step of the way.
1 Reply
Michael Ealy
Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
7y
Originally posted by @Jay Hinrichs:

Originally posted by @Seth Rose:
@Jay Hinrichs
They don’t say where they got the deal but when I met them, they get them from anywhere they can. I never heard of those companies so it’s not them.
I’m just trying to figure out how to get into this world but looks like I need to do some more networking and maybe find a financial partner. I’m an electrician and have trade knowledge with some savings but not 100k. So I want to use my knowledge to get sweat equity was my plan
Gotcha.. many say find the deal and the money will be easy.. well I personally don't believe that especially in high priced markets like were we live.
its the other way around find the money first deals will always be there.
I agree with Jay.
I heard of a phrase about finding money which is very appropriate: "Don't dig a well until you're thirsty."
When you only look for money when you're committed to a deal, you're too thirsty to dig the well (LOL).
So you got to do a lot of digging - finding through networking - people with money.
But at the same time, you got to dig also for good deals, preferably off-market deals.
Why do both at the same time?
Because, both are not easy to do and takes time so you might as well do both. Also, raising the capital becomes easier when you have a deal lined up but you have to at least know of some people you can approach to borrow private capital from.
As far as raising capital is concerned, for a flip, there are hard money lenders that can fund 90% of the total project cost (total of acquisition plus rehab) even for someone like you with NO experience. But having said that, you need to line up the 10% downpayment plus the holding cost, points and closing costs. So for your market, that amount can still be substantial, so you still need to find private lenders.
Lastly, if your credit is good (720 and above), you can also line up a business line of credit.
If you need help with any of the above, send me a PM and I can refer you to someone who can help you.
1 Reply
Joel Thompson
Investor · Kirkland, WA · Member since 2017 · 121 posts · 53 votes
7y
@Seth Rose I'm happy to get together take a look at the deal with you if you'd like. @Jay Hinrichs hit the nail on the head though, many wholesalers oversell the potential profits to lure in new investors. Unfortunately that even happens at our local BP events.
0 Reply
Seth Rose
OP
Kent, WA · Member since 2017 · 31 posts · 6 votes
7y
@Michael Ealy
I appreciate all the info. Just need to network some more to get to do a deal like this. Might have to stay in the outskirts
0 Reply
Seth Rose
OP
Kent, WA · Member since 2017 · 31 posts · 6 votes
7y
@Joel Thompson
I’m pretty sure I missed out on it because I didn’t have the financing. I’ll contact you on the next one I find though
0 Reply
Joel Thompson
Investor · Kirkland, WA · Member since 2017 · 121 posts · 53 votes
7y
@Seth Rose there are a ton of deals out there. Any idea of a target locale yet?
0 Reply
Seth Rose
OP
Kent, WA · Member since 2017 · 31 posts · 6 votes
7y
@Joel Thompson
I’m currently looking in the south king county area mostly. Want to put some sweat equity in since I’m an electrician and was in the residential side for awhile.
Plan to rent out then refinance
0 Reply
Kenneth Mooney
Rental Property Investor · Augusta, GA · Member since 2016 · 348 posts · 171 votes
7y
@Eric Black it's still there because it's a 10% ROI. Would imagine the experts are trying to jet at least $150k a flip if not more.
0 Reply
Eric Black
Rental Property Investor · Where we are parked · Member since 2013 · 584 posts · 178 votes
7y
Originally posted by @Kenneth Mooney:
@Eric Black it's still there because it's a 10% ROI. Would imagine the experts are trying to jet at least $150k a flip if not more.
I never said, and am not saying a deal's not there. This isn't my market. I haven't seen the deal. I'm just saying that in many cases, and dare I say most cases, a BP meetup isn't the first place someone goes with such a great deal. Most great deals get snatched up long before they need to be presented to a REIA or investment group. But if this truly is a great deal, more power to you and I hope you do well with it. That said, I also know there are a lot of "experts" out there pitching deals to ambitious new real estate investors.
I'm not discouraging anyone from exploring the opportunity, I'm only suggesting to proceed with caution. Proformas are often inflated to make the deal look better than it truly is.
I hope you prove me wrong.
Cheers!
Eric
2 Reply
Kai Van Leuven
Investor · USA · Member since 2015 · 325 posts · 447 votes
7y
@Seth Rose
I will say that a million dollar property for your first flip is a a lot to bite off. There are usually better margins but way higher risks. I stay away.
If I were down in that area I would be looking in the ‘burbs like Maple Valley. Good schools district and a nice area to cut your teeth.
Being an electrician will help out in your REI. I do a lot of fixing/renovating on properties and have always felt like it helped me to know the property better than the average investor.
2 Reply
Syed H.
Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
7y
Originally posted by @Seth Rose:
@Eric Black
It’s not being advertised. I went to an event and met a real estate/lending group who find off market deals then try to find a flipper to lend hard money. I wanted to do it by myself but all the deals around Seattle are expensive
"off market" deals are never off market unless you find it yourself or it is someone who you have done business with for awhile. Someone you just met at an event is sending you & 50 other people the same exact deal. I gaurantee the numbers will be inflated.
2 Reply
Seth Rose
OP
Kent, WA · Member since 2017 · 31 posts · 6 votes
7y
@Kai Van Leuven
Yeah. South king/pierce is where I’ve been looking to figure out a strategy to acquire properties.
0 Reply
Seth Rose
OP
Kent, WA · Member since 2017 · 31 posts · 6 votes
7y
@Syed H.
You’re correct. It’s first to show financing/cash gets the deal from what I understand
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