Is There Such A Thing as All-In-One Fix and Flip Loan?

Question

I've been trying to get a fix and flip loan where I can get the rehab portion upfront along with the purchase but all I've been able to find is the kind where the rehab is reimbursed after repairs. This is just my 3rd flip and I don't have a lot of capital reserves, so I'm trying to find out if there are loans that include both the purchase and rehab upfront or at least part of the rehab?

Charlie John · Answer

@Daniel Townsend exactly. I believe it’s only a few hundred dollars to have my attorney create a promissory note. Just let the attorney know what you are trying to do with your lender (amount, interest rate, length of loan, payment made in full at sale of house, etc) and they can write it all into the document. Easy peasy

Jay Hinrichs · Answer

sure there is but your GC has to understand they are not getting paid until work is done and inspected.. we do this all the time. Some HML will acutally require you to pay GC personally then reimburse but plenty will pay the GC direct.

the issue is usually with billy bob GC who cant go 5 days without getting money.. you need GC and subs who can carry a job and pay for the materials up front.. this is hard in the rehab business.. but the way it works for new construction.. and new construction subs understand this..

Lena Claybon · Answer

Account ClosedBeen trying that route as well. Just haven't found anyone yet but thanks for the advice.

Account Closed · Answer

Fix & Flips are the riskiest and highest taxed way to go. I'm not surprised it is difficult. I stopped doing them and changed to 'cash flow" but they might not work in L.A., So California but the do work in places like Phoenix Arizona like this.

Average Turnkey Cash Flow Per Door In Phoenix Metro Area No Bank Needed

https://www.biggerpockets.com/forums/600/topics/584916-average-cash-flow-per-door-in-phoenix-metro-area

Account Closed · Answer

Not really that I've seen. You might want to do a Joint Venture with someone that provides the financing. It will go faster. Then when you have enough reserves you can go it alone.

Teri Feeney Styers · Answer

@Lena Claybon I have an arrangement with my personal bank (small & local). They require that I put in 25% of the money and they loan 75% of the money for purchase and rehab. The loan is for 6 months. They reserve the right to approve the project and require a project overview and budget at the time I make application. They can close quickly once the loan is approved. Much better interest rate than HML. I will say that I have a long track record as a customer and borrower along with excellent credit.

Daniel Townsend · Answer

@Charlie JohnDo you just find an attorney and give them the information to fill out the mortgage and promissory note? I’ve been trying to find this answer to my question and I’m having a hard time.

Evan Wiesner · Answer

Private money will do it sometimes, depending on the deal and your track record. For example, I know groups that will do 70% LTV based on the after repair value, and are willing to pay out the rehab directly to your contractor as needed. So if you find a good enough deal they would be willing to front all of the funds as long as you don't cross that 70% LTV number.

Now finding deals with that much meat on the bone is harder today than in 2012, but if you get one then that's a route to go. Until you build a track record with a private lender they will surely want you to have some skin in the game so there's that side of things you have to resolve with them. If it's only 5-10% of all the capital needed for the deal then you're in good shape I would think.

Charlie John · Answer

I have done about 8 flips in the last two years. Every cent was paid for by my private money lender. The purchase price including earnest money, closing costs, rehab costs and holding costs. I paid them between 10-15% on every dollar they put out. They got paid back in full when the house sold, no interest payments.

For me, this was actually easier to put together than a traditional loan or hml. They require too much paperwork. My private lenders know that I can perform so it’s all based on a handshake and trust. Yes , we do a mortgage and promissory note for each deal to protect them- but the attorney prepares that included in her closing cost.

Go find a deal and then ask a bunch of people. Good luck!

Tom Shallcross · Answer

@Lena Claybon - I agree with the other posts about JV or finding private capital, but will also offer another option that may or may not work for your situation.

Not sure how close you are with your GC/contractors, but if you have a good relationship, you can have them agree to payment terms where they receive payment after each check-in draw with your lender (so I would assume a week or two later than typically expected). You can then pay some additional flat fee upon the sale of the property in exchange for your favorable pay schedule. This provides you more flexibility where you don't make rehab payments until after each draw and the contractor ends up with more money in their pocket in exchange for this convenience.

Is There Such A Thing as All-In-One Fix and Flip Loan?

Is There Such A Thing as All-In-One Fix and Flip Loan?

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