All Forum Posts by: Aaron R.

@Will Zena. I wouldn't call it "fronting" money. It is an investment in our business and we look at it as they are fortunate to have the opportunity to make a 10% secured return on their money. We made a case to many people: friends, family, old co-workers, REIA members etc. We got way more no's than yes's. But if you don't go out and search for money it will not come find you. There is plenty of private money out there right now, but just like good deals, it takes work to find.

Now if you don't have friends or family that have money to invest, you will need to expand your network and search. If you are finding good deals and can make a good business case, you will get private money.

On our first flip we asked friends and family and ended up funding the purchase 100%. We paid 10% interest on their money and paid for the rehab out of pocket. Things went well and at the end of the deal all the investors wanted to roll their funds into another deal we had going. Most even increased from their original amount loaned. 

@Ray Slack. Great points. Flipping houses has many different "jobs" involved. If an investor wants to take on many different aspects such as managing subs vs. managing a GC, then they had better be prepared to do that job well or it will not be worth the effort. Sounds like you know what you are doing with respect to managing subs. If I wanted to do this in Phoenix effectively, I'd have to significantly improve my spanish!

@Jim Stevenson On the flip I was considering no hardware on, I just decided yesterday I couldn't deliver it with no hardware. My wife and I have have a tough time not delivering functionality to the buyer!

@J Scott. I agree. Your book does a very good job at providing procedures and a methodology that if followed will lead you to the the information you need to make good decisions. 

@Manolo D. Good point on advice from outside California. My experience is in Arizona where I'm sure labor is less expensive and construction methods are different.

@Ben Leybovich. From what I've seen here in Phoenix, a full cosmetic in a reasonable area (300k +ARV) is going to run around 30-40k. It has been nearly impossible to find properties that only need cosmetics from wholesalers. I'm sure if I did my own marketing I would find them.

Start adding in roof, HVAC, windows, opening walls, changing bathroom layouts and you will easily go 60-70k or more. Once you start opening things up on houses built in the 50s and 60s you are almost guaranteed to find electrical and plumbing issues that need to be addressed. 

@Bonnie Low. The price you got from the contractors seems way too high. On a project I'm doing now, my GC is stucco'ing the entire 2100 sq ft house for about 3,500. Currently the exterior is a mix of stucco, block, and wood siding.

@David Biederbeck It took me about 2 months to find my first deal. The first deal did not perfectly meet my criteria, but after 2 months I felt I needed to just get started. I bought it from a local wholesaler and ended up doing a descent amount of the work myself to keep the rehab costs down. It ended up working out fine and since then, through lots of networking, I have been finding plenty of deals that have enough margin that I can hire a GC for the whole job. Just curious, what is your criteria for a deal? 

I agree with most comments on this post. I generally don't flip houses with ARVs under 250k, so my min profit would need to be about 25k assuming a straight forward cosmetic remodel. This will usually include some contingency on my rehab costs as well as a conservative sales price. As the scope increases I expect to make more. On a project such as an addition that may take 6 months before it comes back on the market I expect to profit considerably more (2-3x) as there is more risk and cost involved.

@Allende Hernandez The deal you show above for 175k purchase, 15k rehab, 214k sales price is scary. If I was doing that in Phoenix, with private money @10% interest, I would break even.