I feel lost and naïve

[Kevin Kirby]

I’m working on a fix and flip deal and the biggest obstacles I’m running into are on the financing side. ( I feel pretty Naive and frustrated)

Every hard money lender I’ve talked to wants me to bring a decent chunk of cash to closing (down payment, points, and closing costs).

That’s tough because I’m trying to minimize how much I have out of pocket going in. I’ve always heard the hardest part is “finding the property”. Ive found the property. Now that I found the property I keep hearing contact a hard money lender with no money down blah blah blah and it’s clearly not the case. Books and content creators are all saying they are able to do it with “$0 money down” or “0 out of pocket”

I’ve also heard the loan is based on the “strength of the deal” not your credit score but yet they want my credit info.

 I believe I have a great deal with a pretty big margin for a fix and flip. Stay with me!

On top of that, the rehab funds aren’t given upfront. Instead, they’re held back and only reimbursed after I complete work and get it inspected. That means I’d have to float all the construction costs myself first, which is a big cash flow issue for me.

Then there are the interest-only payments. They start right away during the rehab period, which adds pressure to get the job done quickly and sell fast. If the project drags out, I’m on the hook for those payments even longer.

I’ve tried negotiating terms to roll more of the upfront costs into the loan, but so far lenders haven’t been flexible.

Between the upfront cash, the reimbursement setup, and the ongoing payments, I’m worried this deal might eat into my profit margin or worse, put me in a bad spot if rehab goes over budget or takes longer than expected.

Has anyone dealt with this before? How do you structure financing so you’re not constantly out of pocket during a flip? Is it even a possible. They all say wow your numbers are great but I just don’t have the upfront cash required for the deal. It’s really frustrating when that the only thing in the way from making this happen.

Here’s some numbers:

201,995 list price (175-180k target price) 330,000 arv 40-50k rehab

And I can’t get the deal financed 🤦‍♂️ any advice and sorry so long? 

[Ryan Kelly]

@Kevin Kirby this is typically how the vast majority of hard money loans work. Flipping is a cash intensive business and higher risk, which is why the rates and points are built into the loan. If you are low on cash, you may need to find a partner who can bring funds and you manage the labor.