Will my GC steal my flip?

[Evan Steadman]

Hey everyone, 

I recently found an REO that I believe to be a great flip opportunity, but this one needs a lot of work. The previous owner was rehabbing the house and stopped mid-way. I am told by the neighbors that this was due to the owner's health issues. Based on my conversations with lenders, I believe the easiest way to go about buying this property is thru a construction loan (house listed at $125K and I anticipate ~$100K in rehab and carrying costs) which require the use of a licensed GC.

Side note: construction loan requires 11% down and is a interest only payment for up to 9 months thru the construction period. Once construction is complete, the lender rolls over the loan in a 30 year loan.....I thought this was a good deal all things considered. 

I asked the lender, who I will be applying thru, if they could recommend a GC that they had worked with in the past....and they did. I had the GC come out and walk thru the house with me and informed him of my intentions to flip the house and that this particular property was an REO. He seemed like a real stand-up guy. He is supposedly working on the proposal for me to include as part of my application for the construction loan, but I am concerned that I may have opened myself up to having the GC take the deal for himself.

If anyone out there has had any experience in getting estimates from contractors prior getting a property under contract, please let me know how you handled this and how I should have handled this differently (if at all). Thanks in advance. 

[Mark Elliott]

hi evan. yes, you may have opened up the GC to stealing this one from you. but maybe not. if he is a stand up guy, ten maybe he will not steal it from you. but int he future, file a purchase agreement with the bank prior to having the GC look at it. put a contingency in there that states this offer is contingent upon a satisfactory estimate from the GC. if the bank won't bite on it because of that, well, then find another bank to deal with. also, next time, don't tell the GC anymore than they need to know. they are there to give you an estimate on the rehab, and thats all they need to know.