Real Estate Agent · Orlando, FL · Member since 2015 · 177 posts · 54 votes
So here I am wanting to make the most of the new year ahead and the questions I am always interested in for investors who have been flipping houses for a while is.....
How did you fund your first flip? How did you fund your most recent flip?
I am curious to see the difference, if any, so when the time comes this year I know what I need to have to begin the process myself.
Better to Flip with a LLC or using your own name?
Any information you have for someone looking to do their first flip, other then finding the deal, would be a great read.
Real Estate Agent / Investor · Orlando, FL · Member since 2015 · 49 posts · 36 votes
9y
Hi Matthew!
I think this is an awesome thread. I am such a lurker on Bigger Pockets! I love reading the post in the forum and I find the information that people share to be very valuable. Okay, so here are my stats.
I am currently working on my 2nd flip here in Orlando. My first flip was a success and I was so grateful for the research and preparation that I did prior to starting my flipping business. Although, I am a active licensed real estate agent, I have a real passion for flipping. However, I know there is currently a trend towards wholesaling. And, in my humble opinion, I believe wholesaling is a lot more challenging than people are really sharing, and for my own personal choices, flipping feels like the right fit for me.(Everyone has to find their own way).
To finance all of my deals I used Patch of Land and I discovered them here on BiggerPockets. I like that they gave me a chance as a first time flipper and they seemed user friendly. In addition, they funded my deals with patience and walked me through the process as a newbie Investor. Also, each time I close a loan with them, they give me better rates.
Although, I could have flipped in my own name, I like my privacy and like to keep my business separate from my personal life. I did create a LLC and I close my investment properties in the LLC's name. For me it provides enough comfort and space between me and my company. (Plus some hard money lenders require you to have some sort of corporation or LLC in order to fund, but some do not. Be sure to check with your lender). By me closing in the LLC's name, my credit was used as a guarantee on my loans, but they didn't show on my credit report as a open credit line. (Please understand if I had defaulted on the loan, it would have ultimately went on my credit).
Honestly, my biggest challenge is finding qualified, affordable, ethical contractors. I prefer to work with licensed general contractors and people who understand my vision for the flip. Contractors are notorious for not staying on their timelines, and I find it difficult to keep them on my time schedule. Anyone who knows a good contractor, please PM me and share. :)
For 2017, I am looking to find a few buy and hold multiplex’s because I want to continue to grow my portfolio. In addition, I would like to ultimately have enough money to fund ALL of my own deals, even though I know this will take time. I definitely will continue to flip and find great deals.
I think Central Florida is a great community to invest in and we are definitely in an upward transition in many industries in the area. I will continue to stay plugged in to Bigger Pockets and feel free to ask me any questions. ;) I hope that helped!
Rantoul, IL · Member since 2016 · 18 posts · 8 votes
9y
My first flip closes next week. It was intended to be a Brrrr deal. We paid for the house with cash, the labor a cash advance on a credit card and materials on Lowes and Menards cards. The profit will help make funding the next one not so crazy.
Our initial cash was from sale of our personal home. We decided to take profits from renovating it to fuel our investments.
Wife hates juggling credit cards so I'd hope this is just something we laugh about later.
Real Estate Agent · Orlando, FL · Member since 2015 · 177 posts · 54 votes
9y
Aweomse @Will Barnard A seasoned vet finally responds! What it seems like to me is that your first flip was actually an accident hahah either way, first one done! Now what i am gathering that is that aftertime and saving you are able to essentially become the lender for the flips, would that sound correct? You have got to the point now where you have enough capital to fund the flips yourself. You have gone from the GC to the money man basically. Taking a backseat while you hire the appropriate people to do the job. Thanks for information. I greatly appreciate it.
Real Estate Agent · Orlando, FL · Member since 2015 · 177 posts · 54 votes
9y
@Andrew Henson Nice man, so this is a different way to go about it. You seemed to leverage credit cards to help finance the deal through to the end. Was the intention to sell your personal house to begin this REI journey or did it just happen to fall into place that way?!
Rantoul, IL · Member since 2016 · 18 posts · 8 votes
9y
Ya we bought our personal home as a foreclosure and were shocked at how much equity we had. It hurt, but we sold it to start investing.
We ended up in an apartment for the short term. We have another foreclosure lined up for personal house again, that and looking for rentals to Brrrr. Wife is totally bought in. She helps plan and do a lot of the rehab.
Real Estate Agent · Orlando, FL · Member since 2015 · 177 posts · 54 votes
9y
@Andrew Henson that's so dope. She is a keeper for sure hahaha. Not only that but to hear how you put yourself out there to start investing by downsizing and renting. That's an inspiration to start getting into the game.
Real Estate Agent · Key West, FL · Member since 2016 · 23 posts · 6 votes
9y
@Andrew K. Hi Andrew- Awesome success story, congrats! I live in Key West and am a real estate agent here in the process of doing my first flip. I'd love to meet up for a beer or cocktail while you are in Key West and talk real estate!
Investor · Washington, DC · Member since 2014 · 54 posts · 28 votes
9y
We are in our flip # 4 in 2 years and our funding strategy has stayed the same. We fund 35% of the project with our own cash equity and take a commercial real estate loan from a local bank for the remaining 65% on a 1-year term. The bank also funds 100% of the construction.
We were lucky to get started with the bank right from our first flip because we own several investment properties and the lender felt comfortable funding us. We now have a great working relationship with them and give them a lot of business.
Investor · Charlotte, NC · Member since 2016 · 21 posts · 12 votes
9y
My first flip (May 2016) used our HELOC. We started small buying a $65k home in Mount Holly NC. The rehab budget went over but we learned a lot about the process. Our exits were to sell or worse case rent. After reading above @Sam Ally
"Not to be melodramatic, but with the wrong combination of forces I could not only lose the flip but my own home too since I took out the HELOC to do this."
I kinda chuckled. This ran through my head too but I reasoned that if they took my primary I still had a house I owned out right. Oh well, the flip turned out great and we made money.
My second flip (Oct 2016 still going) was purchased with a combo of Hard Money and proceeds from the first flip. This helped us manage the risk with our HELOC. We should have this one back on the market in about 10 days and then look for another.
I am interested in other creative funding options, but have not tried one yet. I had one verbal deal where I was going to put 8 months of a homeowner's mortgage payments in escrow and take profits over a predetermined amount after rehab and sell, but the homeowner could not wrap his head around the deal.
Anyways, always looking for ways to use less of my money or leverage my money to do more deals.
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
9y
Work on finding your first flip first. Good deals are hard to find. The funding is the easy part when you have a good deal. Most people don't have a good deal .
Real Estate Agent · Orlando, FL · Member since 2015 · 177 posts · 54 votes
9y
@Ian Walsh I have done my fair share of wholesale deals. Finding the deal isn't the problem. I am just looking for different peoples experiences and no better place to ask how people are doing it then BP. The main reason for this thread to see how big of a difference funding was between the 1st time flipper and someone who has done 10 or more.
Lancaster, PA · Member since 2015 · 27 posts · 5 votes
9y
@Matthew Rollo very interesting thread. I'm a newbie myself and hoping to do at least 1 flip in 2017. I've enjoyed reading all of the responses so far. Glad to see all the attention this is getting, but would like to hear from some of the more experienced flippers.
Lender · Orlando, FL · Member since 2009 · 121 posts · 74 votes
9y
@Krystal Thomas if you are in Key West and want to hook up with a Pro's Pro seek out John Dessauer ..look him up. An amazing dude I learned a great deal from years ago, I believe he has a brokerage as well. You would be well served to know him.
Aweomse @Will Barnard A seasoned vet finally responds! What it seems like to me is that your first flip was actually an accident hahah either way, first one done! Now what i am gathering that is that aftertime and saving you are able to essentially become the lender for the flips, would that sound correct? You have got to the point now where you have enough capital to fund the flips yourself. You have gone from the GC to the money man basically. Taking a backseat while you hire the appropriate people to do the job. Thanks for information. I greatly appreciate it.
I don't think you understood the last part of my reply. I combo my funds with private money and partner funds thereby leveraging capital to do more deals at once. I am not just funding my own deals now. Also, I don't sit back at all, I am very active in each and every rehab I do.
Rental Property Investor · Arlington, TX · Member since 2012 · 788 posts · 640 votes
9y
First flip I used conventional financing. This week I purchased two properties: 1. with CA$H (my primary way of funding projects) on the courthouse steps 2. with a rehab lender (6%/1point)
Houston , TX · Member since 2017 · 31 posts · 11 votes
9y
I am hitting the second question. To create an entity LLC, or go it exposed?
I tend to prefer establishing a legal entity, in order to separate personal assets from the project. Create and dissolve, and close the books on it. I have worked with developers who use this model, developing several projects at one time, and hiring the primary corporation as the PM. If things run south,such as they did in 2007-2008, you are protecting your personal assets. Too, you never know when that slip and fall may show up at your property.
Washington, DC · Member since 2017 · 19 posts · 17 votes
9y
@Andrew K. That's great man! I'm trying to learn to do DIY's so bought like different saws and learning to use them with laying down our flooring. I bought a fixer-upper rowhouse in DC with the goal of renovating the basement and separating it completely to make it a rental. Doing the work yourself definitely helps to keep costs low? How did you learn your handyman skills?
@Jeffrey Stasz How was acting as your own GC? I'm tempted to be my own for the basement reno I'm trying to do but I'll have to use one if I use the reno loan I applied for through the bank. Did not know about HML's until now and to think I just bought the place 6 months ago. Had I known, I would have held off moving in here until I flipped it into a 2-unit house but oh well, you learn something new everyday as they say :)
@Will Barnard Excellent point on talking about building a portfolio of stunning work. I'm in the same ship in a way with the renovation I'm tackling. I'm trying not to get too attached with all the potential furnishings that it will get, but don't want it to be the basic builder-grade. I lived in a flipped house where the flipper just bought the bare, cheapest materials and it the work was done sloppy. So now I'm trying to find a delicate balance of trying to maintain the cost down, and not spend an exorbitant amount in renovating it. I got an estimate today for like 90k lower than all the bids that I was getting but I'll have to get all the materials. I think it'll still be cheaper than the average bids I'm getting. My goal is to be like you where I become the GC and build a relationship with good subs, though of course, finding them will take time but they're out there.
Investor · Charleston , SC · Member since 2014 · 160 posts · 142 votes
9y
@Kristopher Allen. Acting as my own GC was really hard on the first one. I grew up on a farm and did a lot of construction has a younger man so I thought I knew what I was doing...turned out I knew a lot less then I thought.
But I stuck with it and ended up hiring a really experienced sub-contractor (framer) that ended up taking me under his wing and teaching me a ton about the business. So, it's a harder road for sure but I think it leads to a better place.
One thing to check on are the laws in the District about acting as your own GC. Some places allow it, some don't and some only allow it but only if certain conditions are met.
As for the bank...that is going to be tricky. Banks are starting to let me do GC my own stuff but I am a licensed Commercial Builder so it's a little different. One option might be to find a licensed sub in the area that will take most of the work (wood framing, concrete etc) and try to work out an arrangement with them.
Waldorf, MD · Member since 2017 · 9 posts · 0 votes
9y
For my first property, I used HML. The loan will season in one year. I have started talking to lenders, and my goal is to refi into a conventional 30 yr fixed, as I have excellent credit, but the problem for me is that I have no proof of income and little cash reserve.
Once I am able to refi, I will use a HELOC to help with the purchase of my next property.
If I am unable to refi, I will sell and use HML or private money to buy another house.