Brand newbie

[Adam Spencer]

I am new to real estate and new to this site as well.  I have been studying for years and reading lots of books on RE. Been listing to the podcast as well.

So with that being said I am ready to dive in. I am looking to do a flip. I have a few asset based lenders ready to lend on the right home. Forming an LLC at the moment. I have looked at 10 or so homes in my area and and going to make some offers soon. One question I have about holding costs is how the heck do I pay the bills for 4-6 months on this thing while its being rehabbed? I'm looking at homes under 150k but still thats going to be 10-15k in holding costs. Is there a creative way to pay this with OPM that I have not come across? Anyway just wanted to put up my first discussion

Thanks

[Steve G.]

If you have your own home and have equity in it, you could setup a line of credit account. You'll be paying interest on any amount you borrow of course, but it's generally cheaper than using a credit card. Though the credit card may also be an option - just pay the interest off each month until the project is completed and sells. 

Paying interest on a loan is just "the cost of doing business" but must of course be factored into the overall finances/ROI.

Otherwise, do you have a family member / friend who might want a slice of the pie? Offer them a small percentage of the profit in return for a loan to do the rehab. Depending on how you structure the deal & how much work is needed (cost related), could work out cheaper than interest payments. 

One other thing to remember here is, make sure any borrowing - especially with a family member - is fully documented. You might want to have a chat with an attorney about this as they'll have standard forms for each party to fill out.

Finally, remember - providing your credit is good, you can usually setup an account with Home Depot (or whoever your supplier of materials is )etc.. So if your project is 4 months from start to sale, you'll start work at the beginning of the month, get the invoice for the first months supplies at the end of the month, and the invoice will usually need to be paid at the end of the next month (60 days from project start - so far). So (in anticipation that you line up a buyer before the project is finished), your loan will only need to be for 2 months and not 4. Cold work the same with a credit card of course.

Cheers