Does anyone know a good way to get a lender to fund a flip?

Question

I'm trying to find a way to fund my first flip I have no experience on doing flips and I'm just going off of what I have researched over the past year and two. I know about hard money lenders and private money but would either help fund my deal if I'm inexperienced and working a minimum wage job? It's been a dream of mine to own properties to either BRRRR or to flip and feel like jumping into this as soon as I can!

Michael Dumler · Answer

@Derek Fernandez, as others have mentioned, if you have a solid flip opportunity, then I highly advise that you partner with someone who actually knows what they're doing. This includes someone with experience in working and having relationships with hard money lenders, a team of resourceful contractors, an agent on the backside to list the home at a reduced commission, etc. Without experience, it doesn't matter how sweet the deal is, especially with current market conditions. JV with someone who knows what they're doing and structure the agreement so it's a win-win situation. This also provides a great opportunity for you to learn and stay connected with the top performers in your market. Hope this makes sense and helps!

Joseph Beilke · Answer

@Derek Fernandez

First off we need more info on the property you are trying to flip. Secondly, you said you work for minimum wage but you didn't say what you do?  Does your current job provide you any leverage in applicable experience or maybe a partnership in the flip.  Lastly, back to partnership, have your reach out to family or friends.  This might be your best way to gain experience for the hard lender on the next deal.  See if you can structure a partnership with a relative or friend that puts the least amount of risk on them and gives them the highest reward.  You might ask yourself, then why should I do it if I have most the risk and less gain?  The answer in short is what you lack most, experience.  The knowledge growth is your biggest pay out, and each time you do a project your slid the scale more and more to your favor.  Before you know it, lenders will be giving you the best possible terms and hold the most risk.

How I see it working best for you with out knowing the numbers is giving up majority equity, and give up majority profits for your blood sweat and tears. I know this is vague and I wish I could provide you with better plan, but we need to know more.

Mike Klarman · Answer

Derek, the barriers of entry for anyone new with no experience is cash and credit.  If you have both then you can find a lender, just be prepared to float 40k - 50k to get a deal done with an as-is value around 150k - 175k.

So as a newbie, even if someone works with you, you will get gauged on your first.  Everyone does.  Lowest leverage, highest rate.  That's the cost of doing business for the first one and that's if you have the cash and the credit.  If you're missing one then the terms will change, well if youre missing the cash then you're dead on doing a deal, with skecthy credit add 20% cost hike to deals.  So a deal that should cost 50k may cost you 60k to float. Bank asks you to take a bigger piece.

Luther Wilson III · Answer

Where are you wanting to invest, @Derek Fernandez?  Wherever you decide to land you'll be able to find money there.  Especially if the deal is sweet!  That's the key right there...  Finding the right deal.  You still might want to have your lender ready to go first, though.  With you being new you may want to consider doing a JV or partnership of sorts.  Or if you got some capital and a higher risk tolerance you can make it work by yourself too.  Even with the private or hard money lender odds are you'll need some of your own capital to get through the deal.

Patrick Drury · Answer

@Derek FernandezReach out to hard money lenders. They should be able to help.