How do I make my first flip count ?

Question

I am just about done with my first flip. I've been wanting to get into flipping houses for a while . I fixed up my personal house pretty much a full rehab bathrooms and kitchen down to the studs but since it took 4 years and I didn't sell it don' really count it as a flip. So my grandma owns this house in a small town 30 minutes from where I live my aunt used to live there then my cousin and then I think it sat for a few years. She told my dad and my uncle that they could fix it up and split the profits with her. I'm pretty sure my grandpa bought the property 20 years ago for 10k$ my dad was smart enough to bring me in the deal was me and my dad would do all the work my uncle would help when he could and put up all or most of the money so what actually happen is my dad put up 90% of the money I did 90% of the work by dad helped a little and my uncle worked a few days but that's not what this is about I stand to make about 25k$ at east 20 I stopped working for 3 months to do this flip I want to flip another house as soon as I finish this one but I won' be able to get a conventional loan because I have no w2 money for that last 2 months

Question 1: how can I use this flip as experience to possibly get a hard money loan

Question 2: should I get a hard money loan or just wait till I can do conventional?

Question 3 : I also have 80k in equity in my primary residence that I can't get because again not having my w2 income for the last few months

Question 1: how can I use this flip as experience to possibly get a hard money loan

Question 2: should I get a hard money loan or just wait till I can do conventional?

Question 3 : I also have 80k in equity in my primary residence that I can't get because again not having my w2 income for the last few months

Jennifer Petrillo · Answer

The money you make on this flip IS income. The IRS will certainly see it that way next April! So I would definitely include that. Present it so that working seasonally works in your favor--you plan to flip homes during your off season when you have more time to project manage or work on them yourself. Having an off season from your W2 income allows you to complete flips faster than you would if you were working full time. Have an "elevator pitch." Our is "We buy, rehab and resell 3/2 SFRs in two blue ribbon school districts, preference for distressed, bank owned homes." Yours might be "I plan to house hack a duplex and pay off the mortgage with the rental income" or "I renovate undervalued SFRs in such and such neighborhood" or "I plan to rehab, rent out and refinance a small multifamily." Remember, you are giving the lenders an opportunity to invest in your project! I would take the money out of your house, that's a good low rate if you can cover the higher payment, you'll get to deduct the extra mortgage interest that you pay too, which you cannot do with private/hard money!

Tarik Turner · Answer

Most HML are all about the deal

If the numbers are right they will do the loan. Besides that they typically look at how many deals you have completed in a 24 month span so having this as one flip wouldn't really change rates or affect your approval much

Jennifer Petrillo · Answer

As @Brandon Turner says, make this flip part of your "portfolio" that you can show lenders, print out the MLS listing, print out pics, print out the numbers, turn it into a nice, professional presentation so that when you go to a local bank, credit union, hard money lender, etc, you can show them your experience rather than just telling them about it. Most people don't take the time to do this and it will impress them. Can you get a HELOC on your home and use that for investing? Or do a cash out refi? That said, you may end up using hard money just because that is how many of us have to start out. Costly but quick and it works, just make sure you will be able to pay it back on time!

Nghi Le · Answer

@Dustin Mathenia

Sorry for the late reply; I didn't see your message since the tag didn't work.  Yeah, I've seen as low as 8% rates for hard money rehab lending.  Usually comes with more experience though.

I find my deals primarily through wholesalers, although a few on the MLS from time to time.

Jody Schnurrenberger · Answer

Congrats on the current flip!  Sorry I can't answer your questions, but my responding will bump this thread up again, so maybe someone else will.  If not, you can always read Brandon's book about buying houses with low or no money down.  :-)  I haven't had this problem (yet), so I can't help.

Good luck!  :-)

Dustin Mathenia · Answer

@Nghi Le thanks for the reply. I'e looked at some hard money lenders never heard of interest that low I think 12% 3 points is the lowest I've found but but that gives me hope to keep looking. 10% 2 points sounds awesome actually leaves some room for profit .where do you usually find your deals ?

Nghi Le · Answer

@Dustin Mathenia

1.  If you wanted to use this experience to qualify for better terms with a hard money lender, you most likely will not be able to.  They require title of the property to be under your name, and it also needs to have been flipped (i.e. purchased and sold/refinanced) within a certain timeframe to count (usually 1-2 years).

2.  I usually recommend hard money for flipping, and that's what I've always used.  But it's definitely not the cheapest option, although cheaper than a lot of people think.  I've been getting 8-10%, 2 pts.

3.  If you have other properties with good equity, some lenders will cross-collateralize them as your down payment.  Hard money lenders usually don't want to touch anything owner-occupied though.

Dustin Mathenia · Answer

@jennifer petrillo I like that I'm going to try and put something like that together ... I have the equity and from the options I heard I really like the idea of a second mortgage they just give me 50k at 4% but they wanted last 2 years tax returns and last 2 months of pay stubs but I stopped working to flip this house and my job is seasonal so I won' really start full time until May is there a way to count the money I get as income ?

How do I make my first flip count ?

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