Flip Opportunity - Need Help Figuring out Funds

[Anna Kate Kingston]

Hi all - I'm about to complete my first flip (on the market by the end of the month). Given that, my funds are tied up right now. However, there is an insane flipping opportunity just listed in the same market as a foreclosure. The property is listed for $381K (4B,3B, 3000sqft), realistically needs $200-250K in rehab, and an ARV of at least 1.1M. What strategies have you all used to secure additional properties when you cannot personally be the guarantor for the loan?

[Oladimeji Sonibare]

Hi, @Anna Kate Kingston!

Thanks for putting yourself out there. Creative financing would likely work best in these kinds of scenarios. One popular solution is something called a "Novation" or "Executory Contract". Here's what happens:

1. The seller gives you power of attorney over property. There's a specific way to do this that would give you permission to market the property on their behalf.

2. You partner up with a capital partner for the rehab. Since this property is likely super unvalued as-is, you can borrow these funds from a private money lender. This lender would secure their loan with the as-is equity in the property. Not with a personal guarantee. If you default, they can always repossess the property and finish the project or sell the property as-is. You'd need to pay for an appraisal to be sure this is possible.

3. Sell the property.

Obviously this is a simplification and there are other nuances to pay close attention to. This is what the gist of this strategy would look like. Happy to answer any follow-up questions!