Hi BP family,
This is my first post on here. I'm looking at my first potential fix and flip property and am looking for some guidance on how to secure funding. I can get it for 42k. It'll cost about 20k to fix up w and estimated AVP of 99k. Any suggestions would be welcomed.
You could look at a hard money lender but you will likely need equity in the property or some of your own cash going into the deal. You will also likely need to have a business entity already set up as hard money lenders don't typically lend to individuals. You could look at private money such as friends or family or owner financing. Commercial lenders will likely look at your experience in real estate investing so that could limit your options. You could have the Seller finance the purchase and use your own money for the rehab. Do you have any cash to put into the deal?
@Nick Cannon there are many ways to fund the deal. But first of all make sure your numbers are good. It is very easy to underestimate rehab cost and overestimate ARV after repair value. And what about holding cost and selling expenses? OK I am getting side tracked.. BTW I have never been able to fix a house for less than 25k...most of them more, but I dont know what your plan is...
As for the funding: it depends on how much cash do you have? There are many ways to fund a deal like this, but it depends on your abilities to pay or borrow. I assume all cash is not an option, but this is a small deal and chances are you can fund it using a home equity line, borrow from your 401k or even credit cards with promotional low interest rates. Best is to have all these things in place before you start looking for a deal, as they take time. The rule of thumb is nobody wants to lend you money when you need it, so get credit lines established before you need them. Also a good option worth considering is private money - a friend or family member who would like to make 8% per year instead of .5% on a money market account..
In any case and sorry I sound like a broken record, make sure your numbers are good. You could easily be looking at a not so good deal:
42k purchse price
2k closing cost
35k rehab (instead of 20k budget, because you did not know about the bad sewer line, happened to me recently)
4k holding cost
6k realtor fees (selling the house)
You list it for 99k and after 3 months you get an offer for 89k. Now what??
@Marcus Auerbach Thank you for your response. I've heard about hard money lenders and I guess my question is where would I go to find one? I know they are very expensive and usually only fund about 65% but once I vet this deal out it may make sense.
In Ohio buy on a land contract and get private lender money for the fix up
Land contracts are awesome to get title quickly
If the numbers are thin you can look at doing a joint venture with the seller
where you are buying on land contract or sub2
use priate money to improve and
then on your joint venture agreement when you resell have some kind of profit share
@Nick Cannon if you have not done this before defintley read J. Scotts Book on Flipping Houses - it will provide you more expert and no BS know how than you will learn from your first 10 rehabs combined.
On the GC: what you will find is that there is sometimes a 30%, 50% or more difference between GCs and even if you get two quotes you still dont know if the lower one is actually a good one. Big difference between investor pricing and what get's charged in a subdivision for home improvement...
The other thing you need to watch out is scope creep. You decide to remodel the kitchen but leave the bathrooms. So your budget does not include bathrooms. Your GC did not quote bathrooms. But after the new kitchen is installed you realize how dated the bath looks in comparison.
Again, read the book, I think you can get it also as an ebook. BTW - You can find J Scott here on BP too...
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