How to finance my first flip?

[Michelle Madtes]

Hello all,

Thank you for taking the time to read my post. Now that my youngest is in pre-school I am now a full time real estate agent in Suffolk County, New York. The years home with my kids I used as an opportunity to learn everything about real estate investing! Although I enjoy turn-key the time has come where I MUST do my first flip! Please help.....

Again, I just showed my husband a 4 bed 2 bath Hi Ranch being sold by the bank for $200,000, last sold for $420,000 in 2006 with current comps supporting a resale of a minimum of $350,000 and renovation costs approx $30,000. But everything might go wrong and we need to be wealthy before we start this!!!!!!!!!!! AAAggghhhhh, so my personal finances are not an option! And I'm sure that one is probably gone as its been on the market for over a week now! 

So how do I start? Aside from the fact that my current home was a foreclosure and a fabulous deal, and I've only had about 9 deals in real estate in past 18 months (was part time), I have no track record to offer, nor capital. Would a hard money lender give me financing? I made an offer to an investor on the above deal- if he funded, I would completely run it and because I have no track record, he could decide my value at the end and pay me what he wanted. But he very nicely declined. I'm sure I have missed this one but how do I make the next one happen?

I am so gracious for your time and any suggestions.

Thanks so much,

Michelle

[Rashad Nelson]

Hi Michelle, 

I'm sorry you missed out on this deal, bummer, :-(.  You definitely have the right idea - private money / financing is the answer.  Here's what you'll need to convince your future money partners:

Written Presentation / Proposal - I use a software called "Rehab Valuator", (rehabvaluator.com) developed by Daniil Kleyman, an investor / developer based in Richmond, VA. I use this software daily to evaluate every deal I come across. It can also be used to generate professional looking reports detailing the investment capital needed, profit returns, etc. Investment partners want to know what the potential return is and this report provides it. I pay $197 annually for the premium version. *Disclaimer - I am not compensated in no way, shape, or form for recommending this software.

Written Repair Quote - you'll need a very reliable, trusted, and licensed GC to provide you a detailed, written proposal of the work needed to get the property into the desired condition for resale.  

Subject-To Appraisal - this is the icing on the cake. You can hire a local, licensed appraisal to provide a subject-to appraisal to prove out the ARV. Since you're a licensed realtor, you most likely can just pull existing comps and skip this step, but getting an appraisal report ups the ante in my opinion. Plus you'll have a little skin in the game at this point (appraisal fee).

Organic Relationships - the best money partners are people you already know and trust (family, friends, close colleagues).  If the trust is already established, combined with these three deliverables, you should have a much better shot at getting them to invest with you.  

Credibility - of course, people will naturally ask how many deals you've done in the past. You mentioned you've done (9) deals, but didn't elaborate if they were investment deals or deals as a real estate agent.  You can definitely leverage that experience.  

I hope this helps.  I hope you get the next one, :-).