How much capital to realistically begin flipping?

Question

Wondering what you guys thought would be a good amount of capital to realistically start flipping houses as a full time job. Assume no debt and good credit.

ps, I am an American living abroad at the moment. So I would be able to relocate to any city in the US.

Thanks

Derek T. · Answer

For me in my market I need about $40k per house while using hard money.   My purchase price is normally $100-200k with ARV from $225-400k.  $40k allows me to get in,  front draws and have a safety net.   So hopefully that helps give you an idea.

Account Closed · Answer

Does a live in flip change that number?

Devin Cohan · Answer

Thanks @Darrell Shepherd for the details. I see you're in GA, what is your market? How did you find your best lender?

Andrew Brannick · Answer

I have not begun to do any fix and flips but the team that I work with has given me some great advice. The team that I work with has multiple projects going all the time with two full time crews for some incite.

Doing one house at a time as a full time flipper (depending on price point) is very tough. You have to look about the estimated amount of time on the market/time between flips and the amount of money that you are realistically looking to make in this time frame.  You also want to make sure that you have a solid reserve, nothing worse than hard money guy looking for his money!

They told me to have at least 100k for me and my partner 100k as well. You can jv with someone experienced to learn the in's and out's and be in with less money!

Darrell Shepherd · Answer

Depends a lot on your price range and how many you want to do.

Let's take an example with round numbers.  $200k ARV you could buy for $100k that needs $40k in repairs.

Using my best lender, they'll fund 90% of purchase (net of origination) and 100% of he rehab.

So they'll give you $90k less the $3,500 origination, so $86,500.

You'll have to prepay insurance ($1k) and pay closing costs ($1k) so you'll need $15,500 to buy it.  Draws are generally done in 1/3 increments so you'll need $15k or so in operating capital.  That can also serve as an overage hedge, because they pretty much always go over, but if you don't you've got that money when you finish.

Then you'll need some money for payments and utilities- $1,300ish/mo for 6 mos.  Lets just call that $8k.

I'd feel pretty comfy going into that one with $40k.  You could actually do it with $30k if you had resources to pull from if you got a surprise or two and an Amex since that $15k operating money can cover the monthly when you're done.

Realistically you could do it with the $16k to close, $8k for holding, some temporary cash to get to the draws (or a contractor willing to work on that draw schedule), plus some plan for surprise expenses, but if recommend having bigger reserves than that.

Devin Cohan · Answer

@DerekTyler With your above mentioned numbers $100-200k purchase price, how much does your hard money lender want as down payment, how much (ballpark of your average experience) of the $40k goes towards the renovation (labor and materials)? Newbie here, thanks for your time and insight!

Medellin Heel · Answer

Yea I was thinking about 40k. I think I will wait until i get 100k to be on the safe side.