All Forum Posts by: Kurt G.

A HELOC got my wife and me started. We are currently on our third flip using our HELOC, and it is going very well, as did our second. Although an experienced partner would have been a very good idea, we didn't have one to work with. I have project management experience, and it was extremely helpful in getting us through a marginally successful first project. As @Robert L. said, it comes down to what you're willing to risk, and how you're able to manage those risks. Previous project management experience, networking extensively, and estimating everything conservatively have served us well so far, but that will vary from person to person.

Thanks so much Brian Jordan - excellent feedback and steps in getting it done. Much appreciated!

We got frustrated and 'jumped' on our first property. We justified un fixable problems by saying we would make everything else so nice that buyers would look past them. They didn't. We also knowingly gave up a critical backup exit strategy due to HOA rules, and then needed them when we were having a hard time selling. Although we made a little (~$5,500), it was pure stress and we learned never to compromise on certain issues. Don't let frustration push you into a bad property, instead learn where to find a better deal.

Thank you @John Thedford!  I can't disagree with you on paying $600 to make $30k in the least, but I may have misunderstood.  I understood your reply to mean that the 1-2% would be based on my profit instead of the money they put up...  Is that correct?  I don't expect to be netting $30k in Louisville wholesale deals often (if ever), so 1-2% on profit wouldn't be much of an incentive for the lenders.

We are pretty much committed to flipping properties one at a time for now, but I am interested in upping my marketing game and wholesaling as we go.  The more I read, the more I am leaning toward double closings, however I lack the funds when a large rehab is underway - like now...  I have a number of friends/family/coworkers offering to invest in our business, so I am leaning strongly toward using their money for transactional funding which does not appear to be very common.  A couple of questions I have are:

1. I see that typical rates are 1 - 2 points.  What would be appropriate to offer friends and family, and how is the deal structured?
2. What would a contract with the PML look like?
3. What are the logistics of transferring funds, especially if they are coming from a family member from a distance?
4. Are there any legal and/or tax considerations we would need to know about?  I am in Kentucky, but could be working with private lenders in Kentucky, Wisconsin or Florida.

Thanks so much!

My wife and I talked about it for years, and I even remained skeptical until just a few years ago. One day we realized that we had enough equity in our home to fund a flip, and that the proceeds could quickly pay down the rest of our mortgage. I started reading up on it, which helped figure out how to manage risks, and we pulled the trigger on our first project a year and a half ago. We are on our third project now with plans to add rental properties to our portfolio using flips to generate cash for down payments. I think it's been the best financial decision I've ever made.

We used a type of 'resilient channel' in our home years ago to sound proof between our family room in the basement and main living area.  It is essentially a spring between the floor joists and the drywall that absorbs sound vibrations instead of transferring them through the joists.  We also insulated between the joists with sound batts to be sure we got the best possible result.  The channel was relatively inexpensive and works great, but it will require another layer of drywall or tearing the existing out and re-drywalling the ceiling.

I would agree, but a lowball offer implies something deceptively low. I am talking more about an offer that is realistically low... For example, if a house has an ARV of $200k, but it is older and in need of serious rehab (rewiring, new plumbing, roof, etc, etc) then a fair offer might be 35% of ARV. It's low, but it certainly isn't lowball. In this case it's the right number, but it could potentially shock the seller.

When your maximum allowable offer on an off-MLS property is lowish relative to ARV due to condition of the property, what is the best way to handle seller's costs, such as transfer tax and prorated property taxes? Is it better to make a slightly better cash offer and then have the seller walk away with less at closing after paying their costs, or is it better to make a lower cash offer up front and explain that that is exactly what the seller will have in hand when they stand up from the closing table because I will have covered their costs?

Example A:  Offer is $70k cash, seller receives a check for $68,500 at closing after expenses

Example B:  Offer is $68,500, and buyer pays all buyer and seller costs at closing, and seller naturally receives $68,500 at closing

I've done it both ways in the two deals I've done, however one seller was real estate savvy, and the other was anything but.  It seems to me that it comes down to making sure that everyone has the same understanding, and that expectations are completely met when all's said and done at the closing table.  On the other hand, while the seller's net should be the same, there is a psychological element on the seller's side and it would seem that one way should work better than the other.  It's nice to know exactly what I am going to get when selling a property, but there's something to be said for a larger figure when you offer...   So I am curious - in general, which approach is more likely to land an accepted offer, assuming you know nothing about the seller's familiarity with buying and selling real estate?

1) Got antsy and settled for a basement level condo thinking that the level of improvement would overcome the property type and location. Wrong and wrong. 2) Did not place contractor under contract and he dragged the job out way too long without any recourse available. 3) Federal Pacific breaker box. If you see one, budget replacement! 4) Made my listing irresistible to crooks and lost a washer / dryer combo in a burglary. 5) Did too much work on my own, and wish I could get that time back. In spite of all those errors and an extended holding time, we still managed to net $5,500 due to a good purchase price. The $6,000 or more that we didn't make was well spent as tuition at the school of hard knocks, lol. We won't repeat any of those mistakes.