Fix & Flip Financing

[Ryan Butler]

I recently decided to start flipping houses as my full-time job. I’ve known for a while now that I wanted to make a career switch into real estate and was waiting for the right opportunity but decided I was tired of waiting and decided to go all in. I bought a 2-family house in Wakefield a couple years ago that I have been using as a house hack so I’ve had a little bit of experience but not much compared to what I will be doing now.

Currently I have around $50k of savings that I can invest and $300k in my 401k that I am very willing to use, either as a loan (I believe the max is $50k) or a full withdrawal (which should be a little over $200k after taxes & fees). I am looking into all options for funding though, including private money lenders. I think this is the biggest hurdle for me at the moment and the area I am most uncertain about. If anyone has any thoughts on this or general advice about getting into the house flipping business, please feel free to comment or reach out to me.

[Brian Teeter]

Im in Little Rock, Arkansas. Bought my first home in 1997, duplex. Lived in one unit and rented the other side. Rental side almost covered my entire mortgage. I was hooked! Still own that same duplex today, plus many more. So I think you are on to something!

I always buy value add, distress property. What I have always had good success with is going to local bank and getting a construction loan. Sometimes they will offer 80% loan of projected ARV (after repair value). They will take your list of repairs and provide to appraiser. Appraiser will come up with the ARV. Sometimes, if you are lucky, the purchase price of the home, plus your repair estimate combined will come in below the 80% ARV and you can get into the home with no money down and interest only for 1 year etc. Make your repairs and then either sell or refi the home to a 30 year if you decide to keep as a rental.

Of course, thats a best case scenario with no money down and a lot of things have to line up, starting with making a good deal on the buy! BUT, even still, if it doesnt work out in that scenario,  you may get into it for less than 20% down.  

So start with a local bank. Ive also had success with credit unions.