If you had 15K...

[John Jabson]

If you were starting out with 15,000 cash and you wanted to flip homes, what steps would you take first? 15K is obviously not enough to flip an entire home.

This is what I'm starting with right now. I have done alot of contracting work (I'm not an expert on anything-I can do generally good work but would need to hire somebody for precise carpentry in certain circumstances).

I work a regular 8-4 job and live in a rural area. Homes can range from 20K (or lower for trash) to 200,000. Average first time home buyers pay between 60 and 100 in our area.

[James H.]

You have just enough (by my standards of risk tolerance) to utilize a hard money lender to assist with a deal provided you have some additional consumer credit lines to fund material purchases to do a pretty decent rehab on an ARV 100K house or less, purchased at 70% ARV minus repairs, needing up to about 30K in rehab.

For example, you find a house that is worth 100K retail.

You see it needs about 20K in rehab including all holding costs not including debt service (utilities).

You pay 70K (70% ARV) minus 20K = 50K

You get a HML and put in 10% DP = 5K

You use your remaining 10K to fund rehab and use consumer credit to fill out the rest (or a different combo of cash and debt, or you can get draws on the HML, but that is more expensive - of course you might need to do it that way because the HML may not want to work with a loan of only 40K).

Now you have 70K wrapped up in the project plus there will be around probably 5K in HML fees for origination and 6 months of holding.

To sell the house for 100K you are lookng at somewhere around 8 percent for realtor fees and closing costs.

So in all, you paid 15K of your own money, and have a profit of:

Selling price - aquisition - rehab - holding costs - realtor fees and closing = 100K- 50K - 20K - 5K - 8K = 17K.

Profit = 17K

ROI = 113%

Please somebody with more experience check this scenario out. I have only studied the method to determine if I should do it and have not actually done this before.