Financing my first flip

3 Replies

Hi,

Looking to purchase my first flip. My primary home has 500K equity and I have a rental condo worth 220K (no mortgage). After researching the forums it seems to me a HELOC on my primary home to fully purchase the flip (150K-250K purchase range) would make the most sense.

Does this make sense?

Thanks,
Wayne

@Wayne Gaudette

Hi Wayne,

The short answer is that it may make sense. The cool thing in this scenario is that you have options.

It looks like there are a three ways you can access the liquidity you need to do this first flip project.

1. Access liquidity through a HELOC

2. Pull cash-out of your free and clear condo

3. Use other funds outside of the two aforementioned assets to fund the deal

One thing that you might want to pin down in this case is the total project costs. If you are looking to purchase a flip in the 150k-250k range as mentioned, what is your construction budget? Getting a good idea of the total project costs will help inform which route you decide to go, as you will discover how much liquidity you need to unlock. Finding a good example of a project may help eliminate some options, or at the very least will make it more clear which option makes sense to pursue at this time.

Hope this helps,

Michael

@Wayne Gaudette

Non recourse hard or private money. Every time. So much love on BP for leveraging your own assets to do deals or risk doing them all cash with own money that always confounds me. Lenders everywhere are falling all over themselves to give you insanely high leverage at 8-12% money depending where you live. A flip is a 12 month or less endeavor and all the loans are one year terms and most have no prepay clauses. 10-20% down payment plus giving you most if not all rehab money too. HMLs are not evil, people. They want you to succeed so you become long term clients. Simple SFR flips that need cosmetic rehabs are HML all day long.

Thanks for the replies. I'm closing on a 350K HELOC with the first yr at 3.45% which seem to be a no brainer. After that, I can repeat at closer to 6% as it goes variable but for short term flips it seems like the way to go.