Found great deal on foreclosure, best way to find cash partner??

Question

I live in Burlington, NJ and have recently discovered 2 great properties to fix and flip. I've done my due diligence on both properties (along-side my REA), and have used the BP fix and flip calculators. The first property is listed at $66k, is a 3/2, and would need $30k in RENO repairs. This property has the potential to make $30k profit after all expenses based on comps within 0.10 of a mile. The second property is listed for $73.5k, is a 4/2, and would also need $30k in RENO repairs. This property has the potential to make $60k after all expenses based on comps within 0.10 of a mile.

- What is the best way to find/attract a cash partner in order to proceed with either one of these deals?

Odie Ayaga · Answer

@Darren Harris If it's your first deal I would start with your inner circle. Do you have friends and family who both trust you and have the money to fill in that role? I may have missed it above but will you have skin in the game yourself or are you looking for 100% financing for the deal? Having skin in the game could help to assuage a potential investor's fears that you may be in over your head on your first.

Darren Harris · Answer

Hello, Brian

Each of these homes are market deals and less than 50yrs old. from what we can see, all work would be cosmetic only. We would of course have to get an inspector to be 100% sure, but that’s also why I’m focused on 2 properties. Like I’ve stated before, I have a close relationship with the contractor that I’d be working with, and he’s very good at rehab estimations.

Brian Pulaski · Answer

@Darren Harris are these off market deals? Also what have you determined needs to be done for each house for $30k? $30k in the Northeast is a light rehab, not major work, so I assume these houses are more or less cosmetic fixes?

Darren Harris · Answer

@Yonah Weiss, Thank you for bringing to my attention, the fact that I didn't clearly illustrate my role, and what I would be willing to offer a potential partner.

- What I bring to the table: Besides finding the deal, I bring sweat equity to the project. What I mean by that is, I know the licensed contractor that I'd like to work with personally, and have seen his work and work along side him on a few projects. This contractor lives in the same neighborhood that the flip and flip is located. The more hands able to work on the flip, the faster the project can be sold; I have the ability to be at either property within 10 min. This will help the renovation run more smoothly, and allow me to update my partner in more detail and as frequently as he/she would prefer. I also would be willing to take on the hard money loan if my potential partner would prefer to finance rather tan do a cash deal.

- What I expect from a potential partner: I'm looking for a partner that can finance the deal. If he/she would prefer to pay cash, We could establish an agreement that would suit both our needs. If the partner would prefer to only pay the down payment of the home/reno total, I would take that money and get a hard money loan. I've spoken with local hard money lender, and I was quoted 15% (of home/reno total)to be qualified for the loan. The company would of course inspect the property and verify the numbers I'm presenting before granting the loan, but I was very modest in my calculations, so that wouldn't be an issue. If my partner was an experienced fix and flipper, that 15% would be lowered considerably based on that person's proof of experience.

- What I offer a potential partner: Depending on the method of partnership, I'm willing to offer a 50/50 split of total profit (only for my first flip), if cash is their only role in the project. I'm also willing to offer a 60/40 split of total profit for a partner that is seasoned in projects such as these.

Yonah Weiss · Answer

Are you already under contract? When you say cash partner, what do mean? First you have to establish what you are bringing to the table besides finding the deals. Are you a contractor, or do you have prior experience in rehabbing properties? What kind of return would you be satisfied with, and what are you willing to offer a partner?