I am preparing to begin flipping houses. To do this, I am trying to get all my ducks in a line (agenets, contractors, subs, understanding construction costs, what market I will buy in, etc). With regards to financing, I have access to money that is around the Prime Rate. Enough to pay for the entire flip (purchase, holding costs, repair, and selling expenses). What would be the reason to use OPM (other people's money) whether it be a bank, HML, or other? I understand the concept of leverage in real estate. However, if I am focused on one flip at a time, do I need to use leverage? Does using OPM offset the risk?
Thanks for your input.
I've primarily used my own money because there's far less hassle involved. You won't have to wait on inspections to get draws, spend time putting documentation together, or worry about timing when it comes to paying contractors. You can also create a track record using your own money that you can leverage later when you decide to use OPM to get the best terms. I wouldn't say that using OPM offsets any risk - 1. if you walk away from an obligation, you'll wind up having to use your own money on every deal for a while and 2. if you have assets, the lender you walked away from is going to come after them to cover the remaining loan balance any way.
For someone new, there is some benefit in having experienced people looking at your deals and agree that they make sense by financing them.....but you can get help here, thru local real estate investor groups and via the network you are creating to do the same thing.
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