Is 70k enough to get started ?

Question

I have about 80k in equity in a condo and wondered if it is enough to get started on a flip. I would need to sell my current home and rent for the time being but I would have 70k cash.

Caleb Brown · Answer

It may be feasible. I would look at a solid house hack to start though. Maybe a 2-4 unit. If you are in an expensive market 70K probably wouldn't be enough.

Deborah Wodell · Answer

Depending on the type of property you want to flip. I'd say start to look at 50k-150k houses that only needs light rehab for starters. But yes if you get a fix & flip hard money loan, 70k would be enough for dp, closing and holding costs.

Saadallah Kassir · Answer

Alex, the replies so far focus on whether $70k is enough for a flip. I’d ask a different question first: what does the $80k in equity do if you leave it alone?

Put the two paths side by side over five years. Path one: sell the condo, pay selling costs, rent, and move, then put the leftover cash into the flip. Path two: keep the condo and invest or pay down debt, with whatever the condo earns after its costs. Compare the net worth at the end of each path, not just the cash on hand today.

The flip has to beat that comparison by enough to cover the extra risk. Rent and moving costs are money you pay for the privilege of taking the project, so count them as a cost of the deal.

Also check whether the condo’s equity can be borrowed against instead of sold. A HOA-free home equity line could give you the cash without the selling and rental costs, though you’d carry the interest. Run that path too.

John Leland · Answer

There are ways to do that with $70,000 but first, figure out how much it costs to sell inluding any taxes you would owe, any loss of appreciation because your house would no longer be an asset and the inconvenience of moving.

We suggest that investing $25,000 to $50,000 into the typical project and getting that back along with a nice return is where we place our investors. Keep in mind, you don't have to borrow from a bank or hard money lender to do fix & flips. But, you should have reserves set aside.

Erik Estrada · Answer

Hey Alex,

$70k could be enough if you are looking at properties in the $100-$250k range. It would give you some cushion for holding costs and repairs, assuming you do light rehabs and can qualify for a high FICO fix and flip program (currently up to 90% of the purchase and 100% of the repairs can be financed)

Arman Ahmed · Answer

$70K can definitely be enough to get started, but it depends heavily on the market. If you’re in an expensive market, $70K probably wouldn’t go very far, which is why a lot of investors look at the Midwest. The Midwest market is worth comparing because your capital can potentially stretch further, but I’d still keep plenty of reserves for overruns, holding costs, and the unexpected stuff that comes with flips.

Wale Lawal · Answer

@Alex Roa

$70K may be sufficient for a startup but I wouldn’t throw all my money into the deal, particularly when it involves losing your present residence and paying rent somewhere else. I’d go backwards from the purchase price, financing, closing costs, rehab, holding costs and good contingency when such deal only works by throwing all my money at it, I’d look for another one.

Good luck!

Alex Crivelli · Answer

Alex, lender here. $70K is plenty to get started if you use leverage. Many flip lenders fund most of the purchase and all of the rehab, so your cash mainly goes to the down payment, closing costs and a few months of interest. Keep a real reserve for surprises. Some lenders want to see flip experience, so partnering on your first deal or bringing in an experienced GC can get you better terms.

Adam Tafel · Answer

Hard money is typically 10% down, if you have the skills and access to distressed properties go for it!

Sam McCormack · Answer

I'm going to be transparent, that sounds like an awful idea. 70k is enough to invest and have a padding for emergencies, but selling your condo with good equity and then putting your money into a flip in a market like this? And then renting?? It sounds like a very bad idea. Save up capital and leave your equity out of the equation for now

Is 70k enough to get started ?

Is 70k enough to get started ?

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