How Do I Obtain The Capital

[David Corvin]

Can someone shed some light on the details involved in obtaining a loan, be it from a bank or private lender or some other source unfamiliar to me?

Our specific situation:

Myself and two partners (one of which is already pre-approved for a loan of up to 60k, with the stipulation that the purchase cannot be for less than 50k), are currently seeking a HUD home to flip as our first project. We have a good understanding of the formula involved in deciding which house to choose, ((ARV X 70%) minus rehab cost = maximum purchase price), and we understand the costs associated with purchasing, holding and selling and have a good handle on general rehab costs as they go.

Having said all that, what is the procedure for obtaining the funds for the rehab? What are all of our options? Who do we turn to? Private lender, bank or other? What is to be expected from each and what does each expect of us?

What should we expect to have to pay out of pocket during the purchase? Or can all of these fees (inspection, closing, lender fees, etc.) be included with the loan that my partner is pre-approved for? Is a deposit and/or earnest money always required? Can the fees be covered instead by whatever money is acquired, in whatever fashion, for the rehab costs?

Also, at what point in this process is the home appraised? Between which steps? Will a lender require an appraisal prior to lending? Obviously we'll have to have all of our ducks in a row in a concise and readable fashion to present to the lender.

I myself have approximately $1,000 to play with (my very small emergency fund that I'm reluctant to touch). Offhand, I don't yet know what my two partners have, but I know it can't be much, if any. We're willing to take a pretty big hit on interest rates and points just to get this first deal under our belt. After that we'll have gained a good bit of experience and confidence and have at least a bit of seed money on hand for the next undertaking.

Lots of questions, I know. Thanks to all who took the time to read over it and even more thanks and appreciation to those who provide some insight!

David