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Updated about 1 year ago,
Utilizing HELOC for first flip but thinking of bigger picture goal of scaling
Hi BP!
I'm beginning my journey here for my first flip and thinking of using equity from HELOC and business cash to fund my first flip, but thinking about the next deal it wouldn't be enough to go from 1 flip to say 3-4 on the 2nd set of flips unless I used some other lending options. While it does make sense as a first deal to utilize a HELOC it wouldn't be enough to even do 2 on the next even if it netted $50k-$100k profit. Current business does about $50-$70k / month in monthly gross. So I'm trying to map out the most effective way to scale without over leveraging. I'm thinking rather than using HELOC to do just 1 flip maybe it make sense to do 3 flips as my first using a combination of HELOC plus hard money? I do understand as a first flip there are things that could go wrong, but I feel confident I'll be able to execute this successfully and I want to be able to take advantage of the dropping interest rates during the summer market. I do understand there are additional variables to consider, but generally speaking more deals more flips more profit. What is the best way to scale? How do people go from 1-2 deals per year to 1-2 deals per month? Obviously with more experience and greater network there will be ways to raise money also there is hard money as an option, but I'm just looking to gain perspective from experienced seasoned flippers. I've short listed a few contractors and have gone out to their current work sites and seen finished jobs as well and very excited to begin the journey, but really focusing on process and scaling. I personally think because of the lowering of interest rates it should create tremendous opportunity for sellers in the short term which I want to capitalize but if we continue to see interest rates drop it might be a greater indicator of other economic factors such as an increase in umemployment. That may change the market dynamics and perhaps in 1 year it may result in an increase in total supply, but from my understanding it'll create more opportunity on the buy side which means even more favorable buys with more favorable interest rates. So my question to the BP community and seasoned investors or lenders or anyone else with valuable perspective, what is the most cost effective way to scale?