100% Financed Flip - What’s the catch?

8 Replies

Does anyone have any experience dealing with ‘100% financed flips’?

Looks like several companies offer it but I’d suspect there is a catch.

Dohardmoney.com

Freelandlending.com

Rehabbuilder.net

Are a few I’ve looked at.

@Jessica Wygal Garza

It's always in the fine print

Most of these companies require you to purchase their service software or some other add on support product at a cost of 3000 to 6000 Plus. Look up their BBB rating to see the lists of complaints.

@Jessica Wygal Garza hard money is very expensive and usually will not do 100% unless you have a lot of experience and a track record with them.

Best way to do it is get private lenders to put up all the money. There are lots of people out there looking to invest in solid operators.

@Jessica Wygal Garza Almost never worth it.  From the lender's perspective you can guarantee that if their putting up 100% of the funds they're going to take more than their fair share of the proceeds.  

My opinion is that is a better option 100% of the time to find a capital partner to get started.

Of all the ways to get started with little money out of pocket. 100% financing on a personally backed loan has to be the most hazardous.  

@Jessica Wygal Garza - I had a client get under contract for a good deal (4/2, buy 90, worth 130 right away, ARV 170-180). He paid for dohardmoney training and they charged him fees to appraise his deal. I'm not sure how much in fees. The training package was 3000-6000 like they said. The "appraisers" (3-5 local real estate agents collecting a fee) waited until the end of the 14 day inspection period to tell me / him they couldn't or wouldn't access the property . (Creepy seller has video cameras, "what do you want" automated Voice recording by front door, TV on all the time even if nobody home.) seller's agent was like what's going on, I thought your guy was paying cash and random people keep trying to come into the property to "appraise". Anyway, buyer drops the contract because they wouldn't guarantee him the money and he didn't want to lose his earnest money and didn't have a backup plan of bank of grandpa and didn't want to cash out a 401k. I didn't have cash ready to buy the property if he dropped the contract (it was a good deal but I was working on another rehab and very pregnant). Anyway I felt bad because the guy wanted to do his first deal, I win him the contract in a multiple offer situation, and he doesn't get the money from dohardmoney, pays all kinds of fees, and gets taken advantage of. It was his fault for not working on any other backup financing including with other hard money lenders.

I do not know the companies. Consider the following two points.

1. Why would someone put up all the cash and take all the risk and then not expect to make all the profits?

2. Agents work for free until the deal completes. If I had cash, I could get an agent to do the work and pay for results.

Originally posted by @Jessica Wygal Garza:

Does anyone have any experience dealing with ‘100% financed flips’?

Looks like several companies offer it but I’d suspect there is a catch.

Dohardmoney.com

Freelandlending.com

Rehabbuilder.net

Are a few I’ve looked at.

I don't know the companies listed but here are some thoughts about 100% HML financing to take to heart:

1. Are they selling "training courses" or the like? What you need from a HML is money.

2. Have a look at the fine print. Make sure that your LLC owns the property. Not an LLC that you can be booted off the moment you don't make payment - losing all equity including all that rehab you sweated over in the property.

3. Have a look at all fees, points and interst rates. Getting charged 15% interest only and 5 points means they have made 5% from the start and that interest rate will bite very quickly. 

In the end no one gives something for nothing. Most of us HMLs want you to have skin in the game, to share the risk. Those that don't, even if they are honest, will protect themselves from or cover their risks one way or the other.