Flipped my first house. Ready to sell and buy another

Rehabbing & House Flipping
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Flipped my first house. Ready to sell and buy another

Jason Harbison
Oakdale, PA · Member since 2016 · 9 posts · 2 votes

Ok, so I’m new to real estate investing. I just flipped my first residential property. I am ready to sell in the next 2 weeks. I would like to get my next one under contract as soon as I sell this property (without using my own cash!)

So for this first flip, everything did not go as planned!! I purchased home with a traditional 30 yr mortgage (4.75%). Due to multiple reasons, I was not able to get much work done, at all, in the first YEAR+!! It was bad timing on my part. However 2 years later, embarrassing to say, I am 2 weeks out from being completed!!

I bought this home in a very nice area. School district ranked 9th in the state. I purchased it for $140k with $40k down. Without valuing my own time (not planned), I have $65k total into the project with $28k of that being the mortgage... eeeek!! ARV of home is $250k.

I do not want to tie up this much cash in my next purchase. Actually, I would like to use very little, if any, of our own cash on the next deal!

My goal is to become heavily involved in real estate investing. I would like to get the next property as a sheriffs sale. After a few flips, get into residential rentals so that I can put the BRRR strategy to work! Eventually, I would like to have a mix of residential and commercial (leased) properties in my portfolio.

During this past year, my wife and I made the decision that I am going to leave my career as a PM in commercial construction for multiple reasons, real estate investing being one of them!! We are finally at that stage that we can make the leap! However, my first flip didn’t go according to plans and my wife’s hopes are slowing dwindling!! I need to get her back on track as I believe this could lead to a great future!!

I am just looking for any advice on ways to purchase my next property, and funding the reno, without tying up so much of our cash (which in turn would make my wife happier as well.. lol)! I apologize for this novel. I wanted to give a little (or a ton lol) of background info!!

Thank you so kindly in advance,

Jason

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  • Kuba F.Pro Member
    Real Estate Investor · Los Angeles, CA · Member since 2013 · 2k+ posts · 694 votes
    6y

    First of all congratulations on surviving your first one. It’s usually the hardest.

    Now as far as getting your investing off the ground, I would recommend that if you can, that you keep your day job for a little bit longer. For several reasons.

    The first reason is that where most real estate investors fail, is in figuring out enough deal flow, and financing.

    Usually the two are at odds. If you have enough deal flow then you don’t have enough financing to support it, and if you have enough financing, you can’t seem to find the deals.

    So how many deals is enough?

    If you do 5 deals in a year and each one profits $20,000 then your business will have made $100,000 before paying yourself. That’s a start of a job, not yet of a business.

    And how can you get into 5 deals?

    Well you need a source of deals, and a sheriff’s auction could work, I’ve seen a number of my customers be successful at that in NC. Other people buy lists and spend marketing dollars, cold call, do email marketing, market their websites, work with wholesalers to do all of that for them, etc etc etc.

    I wrote a number of blog posts on how to find deals and there are hundreds of ways, but it still takes a while to find what works.

    (here are some links to BiggerPockets blog posts )

    27 Ways to Find Off-Market & Wholesale Real Estate Deals: Offline

    55 Resources to Find Real Estate Deals Online

    35 Relationships To Help You Find More Houses To Flip or Wholesale

    You’ll need to buy those in cash, whether your own money, private money, or hard money.

    To make $20,000 on a property you’ll need to spend at least $150,000 per project, so you’ll need access to $150,000 X 5 = $750,000.

    The easiest way to get this money is via a hard money lender, but you’ll generally need to come up with 30% of the cash and you’ll need to be able to show that you can pay the monthly payments.

    This is where your job will come in handy, in 2 ways. 1) You need to be able to make the payments; 2) Your specific job gives you a ton of credibility with hard money lenders showing them that you know what to do and how to manage a project.

    Hope that helps!

    Kuba

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  • Jason Harbison
    OP
    Oakdale, PA · Member since 2016 · 9 posts · 2 votes
    6y

    Thank you @Kuba F!!! Input is greatly appreciated!! I will definitely check out the links!!

    My apologies btw! I wrote a response the other day only to find it never sent!

    As for my job, we have already committed to leaving for multiple reasons. Most importantly, I left my job because our son was born with health issues that we wanted to be prepared for had something happened. However, he is good health and is an animal! Also, I traveled weekly to job sites, multiple nights a week. The wife had enough of me being away from home .. lol! She is able to make her own schedule so it was ideal for me to have the same options available.

    To dive in a little further, my wife is an orthodontist. She is in her 6th year of a start up as well as purchasing an existing practice. Things are going well. She of course has the loans to show for it but in 5-7 years she should be close to paying them off. She is very conservative with her money. The corona virus has made her even more cautious, understandably. We would like to have a 6 months worth of operating cash in case of an emergency at her practice. With that being said, she does not want to risk any more money at this time. She is willing to make my monthly payments, but does not want to give up large amounts of cash.

    My goal is to find a way to continue on this path using as little cash as possible. Once I have a few under my belt, I will be more cash equipped of course! Until then, I need to be creative!

    In the meantime, my wife tries her best to get me to help with her practices on a day to day basis. NO thank you! Marriage could be hard enough when you don’t see each other all day every day! Lol! I helped build her start-up practice, remodeled one of her other offices, and we recently purchased 2 acres of commercial property to build a 12-15k sq ft building that we are in the beginning stages of planning. We are going to move one of her practices into that building while leasing out the rest. So I am staying busy enough with helping her! Plus the fact that I am fully dedicated to real estate to achieve my own goals!

    Side note, today, a neighbor of this flip house stopped by to check out the interior because they are loving it! She happens to be a real estate agent and told me I would have no problem selling this property on my own! Her estimated ARV, after looking at comps, was $290k-$310k! Much more than what I expected. Another friend of mine that's an agent said the similar range. I have my agent coming tomorrow to look at property. Yes, I would love to save that 3% and do it myself, but I feel obligated to have him sell it based off our past relationship and deals. Even if i'm paying 7.5% in fees, I feel I will be getting some cash out of this property.

    With all this being said, do you see a hard money lender wanting to work with me?

    Thank you,

    Jason

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  • Odie Ayaga
    Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
    6y

    Could you specify what it is you want to know what a hard money lender will work with you around? Just in general to purchase your next property? Sure. That's how they stay in business. But in depends on your situation. 

    Also, so long as the other party has an agent you wouldn't save 3% by excluding your friend so don't feel bad. It would just all go to the other agent.

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