New Investor - No Money, but have a deal

Starting Out
9yFollow

New Investor - No Money, but have a deal

Ryan Hawkins
San Diego, CA · Member since 2016 · 5 posts · 1 vote
Hey everyone, I'm new to real estate investing, and I came across a potential flip opportunity in San Diego, CA, that may yield a potential profit of $100,000-200,000. I need some help though. Here are the high-level details: - 5br/4ba - 4100 square feet - indoor pool/sauna/gym etc - 3 fire places - on a lake - appraised at $750,000-800,000. - the house is nearing foreclosure, but can be purchased for $550,000 from owner (personal friend). - needs $50,000-100,000 in renovations. - I live in San Francisco, but family and all connections in San Diego. - I'm a real estate agent part of my family owned real estate office in San Diego. Questions: - I have no money to invest in the property, but would like to work with an investor to assist with the flip. What is the process for taking out a loan using investor money? Will I be responsible for taking out a loan if the investor puts 20% down? - for a potential profit of $100,000-200,000, what is a typical split for an investor? - is there any advice/information that would be helpful to gather prior to pitching the deal to an investor? Thank you so much for your help - I'm looking forward to having a very successful first deal!
0Reply
31 views

Most Popular Reply

Anthony Angotti
Real Estate Agent · Pittsburgh, PA · Member since 2015 · 1k+ posts · 846 votes
9y

Hi @Ryan Hawkins

I'm not in your area to partner, but this is an awesome example of how to get started! Good job!

1Reply
See this reply in the discussion

8 Replies

Jump to latestLatest
  • Kevin FoxPro Member
    Real Estate Agent · San Diego, CA · Member since 2014 · 1k+ posts · 635 votes
    9y

    Hey Ryan,

    You are certainly asking the right questions.

    Can you please clarify what you mean by "the process for taking out a loan using investor money?" (I.e. Are you asking about a hard/private money loan? Or having an investor provide the necessary funds for a conventional loan?)

    As for whether you'd be responsible to take out a loan if an investor puts 20% down; unless you have another means of procuring the other 80% - yes. 

    Splits usually correspond to the value each party brings to the deal, more so than the dollar amount of potential profit.

    As for your last question - there is definitely a good number of info I'd recommend you gather before pitching to potential investors. 

    0Reply
  • Anthony Angotti
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 1k+ posts · 846 votes
    9y

    Hi @Ryan Hawkins

    I'm not in your area to partner, but this is an awesome example of how to get started! Good job!

    1Reply
  • Justin R.
    Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    @Ryan Hawkins I've invested with people before on projects along these lines locally before.  The terms have varied greatly depending primarily on the level of risk involved.

    Generally someone like me will provide the capital to purchase and rehab the property - you wouldn't have to come up with capital or qualify for a loan.  Typically the other partner (you) handles the day-to-day execution based on a project plan we mutually agree on.  Not sure how you'd do that in this case since you're in SF.

    There's all sorts of variations based on how much value each partner brings to the table, up to and including the investor buying the property and giving you an equity stake - you just sit back and get a check when it's sold.

    As for splitting profits, it really depends on the risk involved.  If you're putting no money or credit at risk, expect a 50/50 split with below-market money costs included as a project expense.  Or, if the project really has very high profit margins, I've done a preferred return (basically, investor gets paid the first $X in profit, then split the rest 25%me/75%you, for example).

    0Reply
  • Ori SklootPro Member
    Investor · Berkeley, CA · Member since 2016 · 242 posts · 304 votes
    9y

    Hey Ryan,

    If the numbers are really that good, you may want to consider taking this on yourself. Sounds like you have resources down in that area, which would probably be key since you are new to this. You could look at borrowing private money from friends/family for the down payment (paying them a fixed rate, say 10% interest-only payments) and then getting a hard money lender to loan the remaining balance (at around 2-3 points and 10% interest-only payments). The hard money lender won't care where your down payment comes from and the money doesn't need to be seasoned. This could allow you to close on the deal quickly. Just make sure that your ARV really is correct and this could be a great first deal for you. Good luck!

    0Reply
  • Mike Hanneman
    Investor · Coeur d'Alene, ID · Member since 2016 · 551 posts · 218 votes
    9y

    Check with your family for contacts that can help you with this. Since they own a real estate office they should be able to guide you in the right direction with trusted people.  

    0Reply
  • Account Closed
    Johnson City, TN · Member since 2014 · 586 posts · 705 votes
    9y

    Your numbers on this deal concern me a bit. You have a fairly wide variation in potential sale price as well as renovation costs. At the potential worst you are looking at 100k profit IF your numbers are right. I know you are a realtor and you have family in real estate but realtor fees must be calculated anyway. Cost of a hard money loan figuring a six month holding period and points could run up to 50k. A lender would also want to see you with skin in the game so you might need to pony up 50k. After you consider all of this, the deal may not be so great. You really need to get your estimates firmed up before further considering this deal.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free