Flipping my first house

[Frank Brown]

Hello Everyone my name is frank and I’m from the metro Detroit area, and I’m looking to do my first flip using a hard money lender I have 10k to put toward the deal with the lender. Just looking for advice on what price range should I be in and where do I exactly find a house to flip?

[Bill Ernst]

So you have 10k and you view this as your nest egg to get started in flipping? You can possibly do it if you carefully ask yourself these questions:

1) how much can I afford each month to hold a subject property?

2) how much will the subject property cost me to fix up?

3) if I fix it up and can’t sell it, can I rent it and cover my costs? 

The private “hard” money loan terms must be understood first. I started out with less than 10k and didn’t understand the term “hard money” when I contracted for my first fixer/flip. I would opt for Seller Financing.

Seller financing is “private” money just like high interest “hard” money. It is safer, and allows for much more flexibility in terms. Terms-terms-terms; you want terms; terms that you create and are comfortable with. My first deal was for a 225k house that was in terrible shape; conventional financing wasn’t possible, so Seller had to have an all cash buyer or come TO TERMS with acting as the financier... 

I sold myself to him; said I’d give him his asking price, give him $5000 down non-refundable (220k balance), 500 a month for 12 months, and pay him off after the year. I then added a back door: if I couldn’t pay him off after 12 months, I’d give him a 10k balloon payment and $1000 a month interest only payments for another 12 months. 

He went for it. Liked me/believed in me enough to take the risk. I recorded something against the property at the county to create a record or “cloud” to secure my private contract. Then went to work and eventually made 85k profit nine months later. 

I say make an offer you won’t lose sleep on. Don’t qualify a property by any other standard. Always give yourself a “back door” (ie: some plan B option if things don’t go as plan A).