Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
9y
@Ben C. most banks will want to see an appraisal on the property before granting a Line of Credit (LOC) on it. If the home is in disrepair this may not be the best strategy since they may want the property renovations completed before the approve the LOC. Is there a reason why you wouldn't want to use a loan to purchase the property or just buy the property with cash and pay for the renovations in cash?
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
9y
@Ben C. most banks will want to see an appraisal on the property before granting a Line of Credit (LOC) on it. If the home is in disrepair this may not be the best strategy since they may want the property renovations completed before the approve the LOC. Is there a reason why you wouldn't want to use a loan to purchase the property or just buy the property with cash and pay for the renovations in cash?
Metuchen, NJ · Member since 2015 · 374 posts · 27 votes
9y
Andrew Postell you really can't get a regular loan on fix and flip properties. Only option seems to be HML who charge out the wazoo.
Have been using cash and it seems like that will continue to happen going forward.
Do you have any alternatives to cash for the flipping business?
Jacksonville, FL · Member since 2017 · 9 posts · 0 votes
9y
besides the obvious which is the high interest, what else would be wrong with using other people's money like a HML?? If the ROI is sufficient wouldn't be worth it?
Metuchen, NJ · Member since 2015 · 374 posts · 27 votes
9y
Michael George just depends on the person I guess. For me I am not getting out of bed to work to pay the astronomical interest on a HML while they sit on their *** lol
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
9y
@Ben C. I have investors who use regular loans on fix and flip properties all the time. The restriction is really the closing time, which is around 25 days if you can get preapproved. But you are right, trying to limit your out of pocket costs is important. If you have the cash to buy and to renovate then that's the course I would take. Nothing wrong with using other people's money either. Maybe use a little amount of Hard Money and use the remaining cash. I don't feel confident that a Line of Credit will be granted on the property types you are describing though.
Metuchen, NJ · Member since 2015 · 374 posts · 27 votes
9y
Andrew Postell loans in general get in the way on flips in my experience. The appraisal, draw system for renovation payments frustrate contractors and slow down pace. Just my 2 cents
Metuchen, NJ · Member since 2015 · 374 posts · 27 votes
9y
Andrew Postell in addition the type of properties that are be candidates for either fix and flips or tear downs they will be getting investors bidding...
Aka cash offers!
Combine the fact that you will need to lower your offer (to account for interest eating into your margins) and have a longer closing period with more contingencies (you will likely not win nearly as many bids!)
Flipper · Morton, IL · Member since 2017 · 15 posts · 7 votes
9y
I use a line of credit from long term hold properties and then cash to fix up. For my first flip, I had equity in my personal residence (this was before my rentals had much equity) then I asked a friend for a loan and offered him a generous rate of return on his money. The flip profited 20k. I paid him back his money plus 5k profit and took my 15k profit to invest in the next hold property.