Using a hard money loan to get into fix & flips

[Jesse Woodall]

I am wanting to get into fixing and flipping real estate. I have a low credit score at around 600 that I'm currently trying to rebuild and only have about $15,000 in capital. Would it be wise of me to try and use a hard money loan to get started? Or should I wait and try to go a different route?

[Zach Westerfield]

@Jesse Woodall I think a better question is are you prepared to jump into flipping? In my opinion, flipping is one of the best ways to create cash quickly, which in turn can be used in other passive investments. However, it is a very challenging venture, and I think one of the riskiest in real estate. Do you have experience in construction or rehab, or other types of real estate? What about in project management? 

Not trying to turn you off, I'm a flipper myself just want to make sure you are prepared for what you are getting into. At the very least, read J Scotts books on flipping and estimating rehab costs. Once you are prepared, how you fund the flips shouldn't make a difference. The key to flipping is putting together your numbers up front. There are 4 major components to a flip: 1) the capital to complete the deal; 2) the initial purchase; 3) the renovation; 4) the sale. You cant control the sale, the market does that. Step one is to get a good idea of what your end sale will look like (both ARV and finish level). You can mostly control and predict the rehab (this is where experience comes in), but there can always be unexpected things that pop up. YOU HAVE FULL control over the purchase and the capital. If a hard money lender wants 15% interest, simply factor that into your purchase price and find a deal that works. If you cant find a deal that works with those numbers, then look for cheaper capital. Good luck!