My first fix and flip

31 Replies

I have a very good deal I think. I've been working with a realtor and an appraiser about this property here in Florida. It's a 3 bed 2 bath, about 1400 square feet. Built in 1959 and the list price is 67500. Comps in the area show similar homes built close to that 1959 and they sold this year. Nice neighborhood and close to a community college, a park, and many other places and amenities. I estimated the rehab to be 12k-18k for some cosmetic and flooring issues. The realtor that I'm working with sent me the HUD inspection report and everything seems fine. I set an appointment to look at the property this Friday. As far as funding I don't have much money so I decided to go with a hard money lender but, he offered me a deal. I bring the DD fees (underwriting, processing, and appraisal) which is about $2500 then we can split the profit of the home. The ARV is estimated at $120k if rehabbed correctly. I don't necessarily have $2500 either. Is there anything I can do to get the money? Does this sound like a good deal? Looking for feedback please and thanks. I think it would make a great first deal! Looking forward to reading your advice!

A hard money lender saying to split the profits if u come up with 2500...sounds like a sad deal, the reason u go to them is to borrow money not make them money, to pay them back with some interest & u make money off it.

I wud decline that but I wud be interested to hear what others have to say as I havent go that far yet, but purely based on knowledge I wud keep looking!

All the best

I haven't made my first deal yet, but here is what I am thinking...

Since this is your first flip and the lender is asking for half of the profit, I personally would take deal that since it is your first deal.  The lender has a lot of risk in lending to you as a first timer.  From what I understand, the toughest part is getting someone to agree to finance a deal for a first timer.

And your issue with not having the $2,500.. If you have good credit, I would put that on a credit card in a heart beat, that is, if that can be paid with a credit card.  If not, I'm sure you know someone that has at least 2,500 to loan to you.

Experienced investors, please let me know if I am wrong, as I am also a newb.

Aloma Yiannett I see your point. Most hard money lenders will require to have some kind of skin (your money) in the game. I think this is a bit of a break from what I've been hearing. And like @Jeremy Coyle said it is hard enough that I have not done my first deal yet but if I can secure the $2500 i think it would be a great first deal. Since I don't have good credit it looks lol I have some asking to do. I appreciate you both for responding with feedback!

Yeah the main thing is that u are searching, so u cud keep looking coz u never know what u mind find, or go with it & find the 2500, u might find a better deal in the process!

I hope it all works out well for u Jemiah, good on u for putting action to it!

Your hard money lender - are they wanting interest on the financing AND half the profit? No deal if that is the case. If they are willing to finance the deal and all you have to come up with is $2500, and you split the profits, that is not a bad deal.

What else does your hard money lender bring to the table? Rehab experience? Do they know contractors in the area?

What is the worst case scenario? If you guys are totally wrong and end up losing money, how much would you lose? If I understand you correctly, all you'd be out is the $2500 you put in. If that is the case, I say go for it. You will learn a ton.

Just be careful who the person is & where the money is going to. There are a lot of people out there that take upfront deposits & then run away. 

I've heard it said,"1/2 the profit is better than no profit"  And like others said, since its your first deal, it can be a good start. I wonder if you could have both mutually choose a RE attorney draw up the deal. Then at least you both know you're protected and its done correctly in writing. 

@jamiah 

What's the address? 

Also, is the HUD owner occupant period expired?

@Jamiah James undefined

@Bill Hinshaw I should have asked those questions as well. I sent him the comps and the deal and he jumped at it. And I asked him what I needed to bring to the table and all he said was the DD fees and we'll split the profits 50/50. I took it as all I need to bring to the table is $2500. So in guessing that I should find a lender that's closer? This institution is from New York. Nothing in stone yet with him. It's been hard trying to find someone to partner let alone finance a deal for a first timer.

@Alex Zokan thanks! Which is one of the reasons I left the privatemoneygoldmine site alone. I didn't feel safe there. He seems legit so far. It's been really tuff to find someone to work with let alone lend to a first time investor.

@Stanley Okazaki the address is 450 16th street, winter haven fl
As far as the owner occupancy I'm not sure. I set an appointment to check the property out tomorrow morning. The realtor informed me that the title company he uses has the title free and clear.

Also guys I was informed that the price has been dropped from $67500 to $62950. And the seller will take $1500 earnest money and we will be able to close next week. Even tho I don't have the $1500 I just thought that it was worth mentioning.

I would say it's a great starting point if there's no interest or origination fees on the money. but if he wants 50 percent of the profit on top of the normal hard money lender fees penalties and timelines, then steer clear of this "deal".

I also get a lot emails from them too..but I haven't done anything with them yet. 

I would check out the lender online( google name and #, also the BBB). If they are a reputable company I say take the deal, split the money and gain the experience. 1/2 of 30000= 15000....... 1/2 of 0=0. 

@Stanley Okazaki which explains why he keeps dropping the price. I figured he was a wholesaler because he said "he needed to get mor inventory." Thanks!

@Jamiah James

That makes me even more skeptical. 99% of wholesalers never leave enough on the table for the next guy. Quite frankly they're selfish. HUD inspection report isn't very thorough and only tests basic functional things. I don't know the numbers, but I would suggest skipping out.

It's hard to find a truly good deal from wholesalers in my opinion. Unless you're the first person they go to when they find a deal, chances are the deal isn't worth your time

Originally posted by @Stanley Okazaki :

@Jamiah James

That makes me even more skeptical. 99% of wholesalers never leave enough on the table for the next guy. Quite frankly they're selfish. HUD inspection report isn't very thorough and only tests basic functional things. I don't know the numbers, but I would suggest skipping out.

It's hard to find a truly good deal from wholesalers in my opinion. Unless you're the first person they go to when they find a deal, chances are the deal isn't worth your time

 I would not pass on a deal simply because it is from a wholesaler.  There are many awesome wholesalers out there. Stating there are selfish is plain silly. They want to make money just like all of us do on this site. I base a deal on the numbers not who is selling. 

Mark Ferguson, http://Investfourmore.com | [email protected] | http://investfourmore.com | CO Agent # IA40029358 | Podcast Guest on Show #68

@Mark Ferguson

If the ARV is 120K I would say that leaves plenty of room & worth pursuing. I'm very biased towards wholesalers and may be wrong for bad talking just because I've had bad experiences...but in general I think it's safe to say most wholesalers aren't pitching great deals.

This is why I love bigger pockets over 10 different users commented but it only sounds 3 have ever done a deal before. I dont mean that in a bad way, just take everyone's advice with a grain of salt (i guess i said that right) including mine.

1. Lock this deal up, give your self some due diligence time and figure this out while you have it under contract. If you cant figure this out before you can secure the finances atleast you have the option to wholesale it.

2. Call every lender in america until you get some one that will fund your deal. Get all there terms and fees before you take money from anyone.

3. I would never take on a flip if i could not personally afford $2,500. If you dont have $2500 PLEASE wholesale it and be done. if things go over budget, if you have to make draws on the rehab, if you have small fees that your responsible for, if if if. if you dont have $2500 liquid cash either find it or walk away.

4.Find some cash. the name of the game is get the deal done. Ask friends, family, co-workers, any one that will float you some cash so that you will have it IF (more like when) something unexpected occurs. offer them equity, interest monthly or for terms.

Wholesalers are an intricate part of my business and to limit my potential and profitability because of generalizations would be idiotic and in poor judgement for my business. I do agree most wholesalers do not have a clue of what they are doing but what industry doesn't have a weak link.

Carelessness, misunderstandings, and the inability to recognize and act on a good idea, creates opportunity for the next man. Investors pass up deals everyday because BAD wholesalers/agents don't quite understand the complete relm of investing and its almost like other investors just want me to have all the deals and they just want to complain about lack of inventory. There has been multiple times where i have had the wholesaler/agent go back to the seller reduce the price and get it at the price i need it and still give the wholesaler their cut.

I pay wholesalers for access not their expertise, thats my job. Wholesalers give me access to motivated sellers that I would not have the time or energy to access. My job is to then source and confirm their information and numbers. Good wholesalers just make my job easier they dont make me more money. Im not looking for easy Im trying to MAKE a deal.

Hi @Jamiah James

 Congrats on taking action! so many people don't bother in the first place, in regards to your situation I would be careful with the lender if their only asking 2,500 and nothing else it means they see the potential of the deal but please make sure your 2,500 is protected you can figure this out by reaching out to a few lenders on BP and ask them questions. But it sounds very interesting because not only are you able to learn and make money with a small investment.  Also lest say worst case scenario this what people are scared to say you lose your 2,500 and they bail chuck it up to experience and move on! I've spend more than that alone on my hobbies and "Guru" education which was a waste but i learned and moved on investing is a "risk" after all lol.

in regards to getting 2,500 if friends or family cant come up with it use credit cards. where on the same boat actually I got a job though and have been saving for a while it sucks cause its a low income job but I saved enough to start marketing and now I don't have waste time with agents mls and other sources because sellers are reaching out to me directly. The crazy part is i started this months and have the potential to close 3 deals already just make sure to not give up! 

I have been flipping, rehabbing and funding deals for thirty plus years. On SFR, you want the purchase price (including any wholesale fees) plus your rehab budget to be no more than 65% of the ARV. Nice comments on this site. Splitting with an investor on a deal is better than no deal at all. Especially, if you are new at this game, the experience is well worth the split. Also, I like wholesalers. Have been one and buy from them when a deal is sensible. Always make sure you have any property under contract where the deposit is refundable during the contingency period so you protect your deposit. This will permit you time to perform your due diligence and hold back on giving anyone the address until the property is under your control by option or purchase contract.

Kind regards,

Creative Flips, Inc.

Ken Sheppard

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