Mortgage for doing a fix and flip?

Question

Hello All,

I have a buddy that wants to perform a fix and flip - he has one thing in his favor and another not.

The first, a problem, is that his credit is pretty bad. Maybe around 600.

The second, maybe a problem, I don't know, is that he has a lot of cash. Upwards of $200,000.

We saw a house for $275,000 and was trying to figure out - if he wanted to finance - is there any amount they'd accept as down-payment? I could co-sign for him, but we're not that close ... so I thought I'd ask here. How could he do this deal if no mortgage - anyone have any ideas? I've looked around and haven't stumbled onto anything.

Chris Soignier · Answer

Why are you asking the question for him?   Point him to BP, and if he doesn't have enough initiative to solve his own problems, he's not likely to make it as a real estate investor.   I would not recommend co-signing, unless you're willing to risk having your credit pulled down to his level.

Sam LLoyd · Answer

Have you gone to several lenders or mortgage brokers and tried to get financing.  If your buddy does not have very many residential loans, he should be able to get financing (depending on his day job) with 25% down.  Also, the more he puts down, the more likely a lender will be willing to give better terms given his credit score.

Speaking from personal experience.... do not cosign on a loan unless you are willing to take over the administrative side such as finding insurance and inspectors... and willing to take over the practical work of fixing the place or finding contractors.

Sidenote:  Lenders usually take the worst credit... so if you are both signing, they are going to use his credit score anyway.