First flip funds problem

10 Replies

Ok so I need some of your opinions guys plz!

I’m just turned 20, I have been studying for the last 4 months on real estate investing and I’m now at the stage where I’m trying to systemize everything to make the process faster. But now I’m having trouble with the funds part.

Originally, I was gonna get a 100% funded investor which turned out to be a MLM company. My credit is around a 660 and I make about 2k per month. I have zero of my own money to put into a deal.

So I tried hard money loans and private investors but they all want at least 20%. Credit unions won’t give me enough for the 20% and I do not really have family with money. I’m having trouble finding joint ventures because there are not too many out looking for workers who can’t bring money into the deal

What should I do? It looks like I need to save up more money before I can flip which is the last thing I want to do if I’m being honest. I have put so much work into this and prolonging the process is driving me insane.

So any thoughts or tips will help thx!!!!

Originally posted by @Michael Caro :

Ok so I need some of your opinions guys plz!

I’m just turned 20, I have been studying for the last 4 months on real estate investing and I’m now at the stage where I’m trying to systemize everything to make the process faster. But now I’m having trouble with the funds part.

Originally, I was gonna get a 100% funded investor which turned out to be a MLM company. My credit is around a 660 and I make about 2k per month. I have zero of my own money to put into a deal.

So I tried hard money loans and private investors but they all want at least 20%. Credit unions won’t give me enough for the 20% and I do not really have family with money. I’m having trouble finding joint ventures because there are not too many out looking for workers who can’t bring money into the deal

What should I do? It looks like I need to save up more money before I can flip which is the last thing I want to do if I’m being honest. I have put so much work into this and prolonging the process is driving me insane.

So any thoughts or tips will help thx!!!!

 Michael,

I feel you man! I was in your situation after losing everything in early 2000s. I started with $0 but has acquired over 1,000 apartment units. Here's Part 2 of my story (How I rose up from losing everything):

https://www.biggerpockets.com/forums/55/topics/692382-from-bankruptcy-to-1-000-units-part-2-rising-from-the-ruins

Hopefully that inspires you. But here's a suggestion to answer your question:

Focus on finding good deals for an experienced investor and then "sell" your deal in exchange for getting equity (or ownership) in the properties you find.

By doing this, you do it with NO MONEY coming out of your pocket.

You then rinse and repeat - until you have $50K cash or more in your bank account. The advantages of approaching it using "Mike Ealy's HUSTLE Way" (the above way) are:

1. You become really good at finding deals (which is, the most important skill for a real estate investor, right up there with raising capital)
2. You generate cash that you need as downpayment to do your own deals later on
3. You gain experience (HMLs will allow you to borrow 90% of the project cost when you have experience)

Hope this helps!

@Michael Ealy

Thx for the tip mike. Will definitely think about that. A couple things I can ask you if you don’t mind

1.) after you found a property and did comps and it’s a good deal, what platform or site did you use to find investors who wanted to buy it?

2.) did you target a specific type of property?

3.) what was your biggest challenge when doing this?

If you don’t answer no worries thx for the help

Yeah you need to have skin in the game. Nobody is going to just give you a bunch of money especially where you have no track record. If you own your own home you can do a heloc or a 401k loan for a down payment. Otherwise you need to save up some money for a down payment. An other possibility is sell a car or finance a car that you own with no loan and use that as a down payment.

Originally posted by @Michael Caro :

@Michael Ealy

Thx for the tip mike. Will definitely think about that. A couple things I can ask you if you don’t mind

1.) after you found a property and did comps and it’s a good deal, what platform or site did you use to find investors who wanted to buy it?

2.) did you target a specific type of property?

3.) what was your biggest challenge when doing this?

If you don’t answer no worries thx for the help

1) You put the property under contract first. You then market it via Craigslist, you can market it here and other websites, you can go to your local REIA (real estate investors association) and talk to everyone there about your deal

2) Yes - focus on the properties other investors are looking for in your market. If single family homes in the $150K price, 3 bed/2 ba is what rehabbers are buying, then focus on that. Understand what other investors are buying and help them find the deals.

3) Biggest challenge - is finding the deals specially in this market. It takes a lot of work to find good deals. You can't just rely on the MLS anymore. You have to hustle.

@Michael Ealy

Thanks for all the help and support Michael. I think what I’m going to do it get personal line of credit(maybe two) to get the 20% and invest out-of-state. I live in California so the prices are so much higher here. Thanks to David Greene I feel more confident doing it

Originally posted by @Michael Caro :

@Michael Ealy

Thanks for all the help and support Michael. I think what I’m going to do it get personal line of credit(maybe two) to get the 20% and invest out-of-state. I live in California so the prices are so much higher here. Thanks to David Greene I feel more confident doing it

Since you only make $2K/month, you won't get a BIG personal line of credit. Also, your credit score of 660 is not as high as the banks want to give you an LOC. I know a Business LOC provider for example, and their minimum credit score requirement is 720, and they prefer someone who makes more than $50K/yr.

Make MORE money first while simultaneously increasing your credit score and LEARNING how to find deals in the market you want to buy.

That's the solution to your problem...not borrowing more money.

And read my story - that's exactly what I did starting with $0.

@Michael Caro

I hear where you're coming from..It's a good thing you have plenty of time on your side. I've been doing Real Estate since 2010 and have been all over the place. I think the other commenters made some good points and I can totally relate.

For perspective I have some funds and I'm still struggling. I only have around $25K project money to my name, a listed property (needs rehab) out of state that is just sitting due to super high lakeshore levels (20-30 ft+ from cabin - 100/yr anomaly), and money tied up in other areas.  I've been eating/breathing Real Estate for years so I can appreciate your hunger and desire to learn. If I didn't move to reestablish myself my income would've likely helped me, but ya..

Hang in there and keep pushing forward, get some skin in the game and with the right networking and persistence I'm confident you'll eventually make something happen. As for myself I'm to the point where I'll go anywhere. 

Good luck,

Dave

@Michael Caro first of all congrats on trying to take this plunge at age 20! They say hindsight is 20/20, boy do I wish I started then! I feel with persistence, you will be educating us in just a few years! Lol. Keep in mind that you are young and have so many years to get into it all. As others have said, I think you just need to save more money. Why not consider house hacking now though if you’re able to get into any property at all before looking to flip? The other thing that I believe could get you over the hump is try to find other like minded people and form a partnership! Sometimes it’s all about strength in numbers particularly when you’re green. You may indeed have to look out of state. I live in CT so empathize with how little your money gets you. Good luck!!!

I would recommend a live-in flip. You can get a really low down payment because it's your home. Usually you only have to live there for a year and then can sell and get another one. I wouldn't recommend going out of state. Unless you have lots of cash to pay someone else to do all the work, I don't see how you will be able to flip it.
I don't know if it interests you, but I'm going to be getting my kids started in tri and 4-plex rentals when they head off to college. Live in one and rent the rest out. Low down payment because you'll be living in it, manage it yourself, live for free or close to free, and save up to buy more.
Best wishes to you.