All Forum Posts by: Eric Loya

@Mary Ann Shlim Hi Mary Ann, Welcome to the BP club! 

It's great to hear that you're considering non traditional financing to leverage your return on investment. At the same time, I'd recommend to proceed with caution- as many "lenders" will try to ask for funds up front outside of escrow. Keep in mind, legitimate lenders will do everything through escrow, to keep your funds (and theirs) in safe hands. 

I successfully leveraged several fix and flip loans early in my investment career with success (even across state lines). These financing options are great when you're short on cash, yet have an opportunity where you know these costs will be minimal to the overall profit you expect from a deal. For example, my first deal was at 12% interest with a 5% all inclusive origination fee (aka points, junk fees, etc). Although that's on the higher side of what to expect, I still net $60k on my project of similar numbers to your example (90k purchase price, 20k rehab). 

In today's world, a fair cost to pay would be between 8-12% and incur upfront fees/points of around 2-4% of the loan value, with the maximum loan amount hovering around 65-75% of the expected resale value. Terms are usually for 1 year with interest only payments. These costs vary depending on credit, experience, and timing of the need of funds.

DM me if you'd like to talk more or have other questions!