How much money do I need to save?

2 Replies

Hello! I am Anthony from metro Detroit area, I am very hard working welder that is tired.. lol

Right now I am currently in the process of saving. I have 5k in savings and 2k a month free. I am interested in flipping.

How much should I pool together to do a hard money strategy?

Do you suggest another creative way to fill the gap between where I am now and the void to get going on a flip?

I'm looking at homes between 40-60k (PP) and around 20-40k (Rehab costs) also in the market with 120-150k (ARV).

I have not 100% done a full analyzation of a specific property.

Thank you for reading my post. I’m not sure if there are many posts like this or not.

@Anthony Barone for a deal like that you would need around $20,000 to $25,000. Depending on if you can find a lender who would do 90% of purchase and rehab. Plus closing cost along with reserves for estimated 6 months payments and funds to start the rehab since most lenders offer 100% rehab. Cause most likely with homes that need rehab you need to have a cushion just in case you run into any hiccups. Feel free to message me for more questions or help.

Originally posted by @Anthony Barone :

Hello! I am Anthony from metro Detroit area, I am very hard working welder that is tired.. lol

Right now I am currently in the process of saving. I have 5k in savings and 2k a month free. I am interested in flipping.

How much should I pool together to do a hard money strategy?

Do you suggest another creative way to fill the gap between where I am now and the void to get going on a flip?

I'm looking at homes between 40-60k (PP) and around 20-40k (Rehab costs) also in the market with 120-150k (ARV).

I have not 100% done a full analyzation of a specific property.

Thank you for reading my post. I’m not sure if there are many posts like this or not.

Anthony. 

You are likely to need 25%-35% down plus a few thousand ($5k?) for loan closing costs plus more for contingencies and don't forget to have enough to start rehabbing at least until the first draw milestone. Oh and some extra to actually carry the loan until you can exit.

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Here is something else to consider: Most HMLs have a minimum loan size. Often around $75K and sometimes more. Rarely less.

You are unlikely to get more than a percentage of purchase. You will still need skin in the game. As a newbie you will probably get a lower percentage of purchase than experienced borrowers.

Lets assume that your purchase and As-Is value are the same. As a newbie you will likely only get 65% of the purchase (plus rehab). 65% of the highest purchase range you wrote is $39,000. So you will need at the higher end of both your purchase and your rehab just to make the minimum loan amount.

Then consider that we, for instance, as lenders want the non-Rehab amount to be a minimum of $50K and the rehab amount can make up the rest of the difference. 

Then consider that you even if you are just peeking over the minimum loan size, as a newbie your estimate of the As-Is value may not be what the appraiser thinks its worth. All you need is a low appraisal and once again you will be below the minimum loan size.

Just something to consider.

Best wishes in your real estate endeavors.

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