STUCK! Am I missing anything that I could do?

Question

Hey fellow BP members, I come to you guys for some much needed advice. About 2 years ago I bought a property as my primary residence, It has been great but now I am looking to actually move up and tackle some of my REAL goals. I have wanted to do a flip for a while but have been unsure of how I should go about raising the capital. I have 720-760 credit and almost 25k in assets. My main issue is employment history. This makes it to where I will not qualify for a traditional loan. The property I own now has roughly 30k of equity in it with an interest rate of 5.8% I guess my main question is do I tap into the equity of my home to try and do this flip? I also would like to have a better primary residence. I am willing to put off a flip to move into a nicer primary. I just do not know how I would be able to get financing for another primary residence without qualifying traditionally besides a private money loan or hard money. I unfortunately do not know of any private money as I am sure a lot of us are in the same boat on that one! and hard money would be too expensive, Am I missing anything guys??? I appreciate all the help in advance and please feel free to ask me to clarify further on certain things!

Remington Lyman · Answer

you should get a hard money loan to do the flip in Ohio

Melanie P. · Answer

To do a flip you'll need to use hard money. The cost is very high interest and origination fees. But there is an important benefit: As a new flipper you will have a hard time underwriting your transactions accurately. The hard money lender has tons of experience with lots of flippers in your market and if they approve the loan you'll know there's enough fat in the deal for them to be repaid. Find a HML local to you. There are a lot of Ohio investors here. Hopefully one will stop by and give you a referral.

Zeke Liston · Answer

As everyone else is saying, I would consider using hard money to do a flip. It's a bit risky with the capital you have saved up, so make sure it's an amazing deal.

Bruce Woodruff · Answer

Not sure of property prices in Ohio....but you will probably need more $$. The most important thing is to price the rehab very accurately, this is where most flippers get into trouble.

Samuel Diouf · Answer

I would focus on the flip and building capital before you try and upgrade the primary. Find a great deal then use hard money to secure the purchase+rehab costs.

Crystal Smith · Answer

Forget about upgrading the primary residence. If you do that first, you'll never execute a flip. I'd start attending as many local real estate investment meetings and meetup and see if you can find some partners. Maybe some partner with experience. See if you can partner up on a deal.

Andrea R. · Answer

Hi D'Andre, A few thoughts to share with you. You may want to take some time to write down your long term and short term goals, and use that as a way to work backwards towards what is the best next step. Sometimes our short term wants can shadow what our ultimate goal is. Sounds like you want to do a flip for capital and also find a new primary residence. Is there opportunity to put some money into your current home to increase the equity and sell (you would need to get more than $1 back in the sale for every $1 put into it)? An option to purchase could be a duplex to house hack, this can help you bring in extra income, and/or if it needs rehabbed you can live in the property while you do the rehab. Obviously you will need to be able to buy something if you choose to sell your primary, I would advise talking to your lender on how to get creative on that side of things. Best of luck!

Philip Polski · Answer

When you consider a HELOC, keep in mind that you need to apply and qualify for that as well. It doesn't cost anything to shop around to see if you can find and qualify for. When you say $25k in assets, what is that? HELOCS can go from 80% - 90% total LTV (loan to value) depending on the bank or credit union.I would recommend shopping for a small unit that doesn't need too much rehab. Look for "as is" properties and ask the seller to carry the loan. Can you do most of the work yourself? That should save you a lot of cash. Start small and make sure that if the market changes that you have a good long term rental that cash flows. You can also sell it to someone with a large down payment to recover your cash, and hold the loan until they can refinance. This would cash you out and provide some cash flow monthly. Treat it like a lease with the option to buy with a non refundable down payment.Keep thinking creatively and shop your market every day looking for deals. "The harder you work, the luckier you get"

Caleb Brown · Answer

I don't think you have enough equity to tap into, it also seems to risky to use it. If something goes wrong you'd jeopardize your primary residence. Hard money is out there but 25K doesn't leave a lot if something goes wrong. I'd honestly work on increase your income and saving more, try to get to 40K then go the hard money route. Nothing wrong with taking it steady rather then rushing into something for the sake of doing it