All Forum Posts by: Rob Beeman

@Tim Craycraft  Tim, although I am no longer an active flipper, I flipped in multi-states for a decade or more, and am always happy to offer my opinions. Additionally, I migrated from flipping to lending so since I have been on 3 sides of the table (buyer, seller, lender), I might be able to help you see projects from the lender's eyes also. Good luck, Rob.

@David Miller  Along with the other responses - NO!!!

If a contractor wants to be a flipper, you are better off introducing them to a rehab lender and let them handle their own project(s). Besides all of the items already mentioned about why its a bad idea, another is that at this point, it is likely that the contractor that I assume you are using on flips doesn't know the income earned on each project (they only know what their fee is). Once they discover that profit figure you run the risk of price increases from the contractor. Best not to muddy the waters, and maintain the contractor for their services only (not as a partner).

If the thought of taking on the contractor as a partner was because of making it easier to have the total funds needed for a flip, perhaps consider one of 2 other options:

1.) Take on silent partners (low amounts of membership)

2.) Search out a rehab lender that lends close to, if not 100% of the purchase & rehab amounts (can suggest one).  Or a combination of both options.

@Lamont Marable  Just sent you a private message with a contact. Rob

@Adalberto Alvarado

@Adalberto Alvarado

@Abraham Lowy Few items:

1. Always insure your assets! No one can predict the future and replacement cost from being uninsured has the potential to destroy your business.

2. The most important figure in any purchase & rehab formula is the PURCHASE PRICE. 

3. The required element in order to gain the property at the proper purchase price in your formula is a MOTIVATED seller. This is best found when NOT buying where everyone else does (MLS, auctions, REO's,etc.) and dealing directly with the motivated source.

4. When you plug in your PROFIT as a COST in your formula, you stand a better chance of accomplishing the profit figure. Treat it as a cost, no different than the contractor fees, utility fees or others tied to the project. The only difference is that you are paying that cost to YOU, and work the calculations backwards, beginning with the ARV and subtracting all fees/costs to get to the maximum purchase price that will make sense. Overpaying on the purchase price will lower the profit figure (as the other figures in the calculations are less able to be adjusted).

5. As a rehab lender, we have borrowers gaining properties under the 70% rule, however they are buying OFF MARKET, often NON-Advertised properties. In some cases they might by from a wholesaler vs sourcing the asset themselves, but almost NEVER buy off the MLS. So, yea, they are earning a better profit, but they are also working hard to locate those deals.

@Caleb Smith Caleb, as mentioned in other posts here, when the loan is supplied to an entity (LLC), commonly called a DSCR loan, the income underwriting that is used is the lease of the property. The income from the property must cover its bills, PLUS earn positive cash flow.

As for LTV, typically the LTV is driven by the additional guarantor's (you) FICO scoring. The rate is typically driven by the LTV. The better the FICO, the higher the LTV options. The higher the LTV chosen, the higher the rate. Hope that helps, Rob.

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@Nicole Johnson Nicole, in reading the heading of your post, I am not certain if this is your FIRST FLIP ever, or the First Flip in DFW area. If its your first ever, my suggestion is to NOT flip too far from home, and do not do a gut rehab. If however you are a seasoned flipper/rehabber and this is the first in that market, then you may be comfortable with the location/distance from home and the heavy lift on the rehab.

Not certain on DFW rehab pricing, but the Northeast where I am at, a rehab to the studs would be much larger than your budget shared. As for ARV, like others have mentioned, you should allow for reductions. In the Philly market (and other also I am told) I have seen as much as a 25% decline in SFR values in the last 6 months. So investors here are adjusting their anticipated ARV accordingly.

As for the 100% financing, it can be gained depending on the ARV and the borrower's track record over the last 3 years.