New to BP and looking at our first property to flip.

[Ryan Mosch]

Hey guys! My first post here. My wife and I are going to look at a property on Wednesday. This would be our first “purchase to flip” property. It’s great deal at $37 a square foot and in a great neighborhood. It is labeled as a fixer upper but we won’t know the true extent till Wednesday. Based on pictures we already love the property and location and the ideas we have for it. Our problem: We have the ability to finance the purchase. What we struggle with is finding the funding for the remodel itself. Does anyone have any suggestions for us as to how to get the funding through the bank?

[Patrick Daniel]

Hi Ryan,

Thats great that you found a potential deal! If it is indeed a great deal, then there are a few ways you can fund the rehab.

1. Hard Money (The flip I am currently working on, we used a Hard Money loan for the purchase of the home and the renovation)

2. Some contractors will allow you to finance your renovation projects through them.

3. Partnership. (If you can fund the purchase of the home, maybe you can find a partner to front the cost of the renovation and split the profits.

A few things to think about:

If it is truly a real fixer upper, then conventional funding may be hard to get. Also, it is great that you love the house, but make sure you are loving it for the right reason (That it is a good investment) and not that you can make it look awesome. My wife and I fell in love with our first flip and made very little off it because we were more interested the aesthetics than the finances. 

Best of luck and let us know how we can help!

P.s. What is ARV and estimated rehab?

Patrick

[Michael Lee]

Hello and thank you for coming here Ryan and wife!  You may not believe everything I say and nothing is said to hurt you personally.  Unless you are doing any kind of special you might ought to borrow money from someone who lends you enough for the purchase and the repairs/rehab expense.  Private Lenders, Hard Money lenders, or doing a "cash rich" Partner that will make you be able to do your entire project.  Even your Bank may not allow a 2nd note see the contract and see if it contains any language about that.

Remember that the bank does most things that will benefit them, not you. Their interest rate may be the lowest but in the end, the loan you get usually makes your outcome not matter very much to the planned outcome. Your final considerations are Credit Cards or a HELOC but do their benefits carefully and pay them off in time. Don't make their plan work.

Who the hell am I and what should believe is true that I say.  One reason is my age of 61, about 30 years in construction management, about 30 years I had real estate broker license in Texas, and I got a college graduation degree in Business (that emphasized real estate) , and being born and raised in Dallas, Texas.

I'm completely un-knowledgable and where to be in Minnesota and is beyond my knowledge.   Your circumstances may prevent you for going where the action is but if you have no family obligations always be able to move to where that economy helps y'all.

Good luck to both of you!

[Ryan Mosch]

@Patrick Daniel Its a 3 bed 1 3/4 bath. 2,545 sq ft. Purchase price sits at 95k right now. Before doing the walk through my estimated repairs will include. -Full kitchen tear out and rebuild $10000-12000 -All new flooring $3000-$4000 -Paint $1000 -A few fixtures $1500-2250 -appliances $4000 -roofing $6000-8000 -Siding (is a maybe depending on how the rest of the neighbor looks) $3500-5000 -deck repairs $1000 - garage door $800-1500 - Bothroom upgrades $3000 Depending on the lay out we would be looking at doing master suite with a Bathroom. Early ARV estimate is $199,500

[Ryan Mosch]

@Michael Lee Thanks for input. We will not shy away from anyone who is willing to give us some advice! Thank you for your response.

[John Woodrich]

Without any experience a hard money lender is probably your way to finance this.  With the amount of cash you are bringing to the table this shouldn't be an issue getting a loan.

Looking at the numbers you presented it sounds like you are planning on around a $50k renovation.  I do not know the condition of the house but if you have to fully renovate a 2,500 sqft house with all new flooring, exterior package, etc I don't see this being enough unless you plan for sweat equity.  

Flooring estimte looks low.

New windows?

Window wrap, aluminum facia and soffets?

Trim and doors?

Plumb/Ele repairs?

I would spend a lot of time looking over costs as the first flip usually will go over budget.

[Patrick Daniel]

@John Woodrich is spot on. The numbers baloon alot unless its sweat equity. 

Have you read J. Scott's books on flipping houses? It made me realize and think of things I have never thought of before. Probably saved me $20k in missed flip items.

[Account Closed]

If you have a little cash you can probably get your deal funded

[Ryan Mosch]

@John Woodrich This would be our 2nd remodel, but first true flip. (We are currently holding the first one). A vast majority of the work will be done by myself and a few close friends. Those are early estimated repairs before we have even seen the house. We have a few people who going to go through it for us today and give us their feedback on it as well. Our ARV May be moving closer to 240-250k the more comps we look at.

[John Woodrich]

@Ryan Mosch sounds good.  Just make sure you are pretty firm on the numbers as it is easy to get smoked on the first couple of deals by missing some of the items I posted above.  I have seen people miss many obvious things (drywall, insulation, HVAC, etc) and they were costly lessons.  

I started out with sweat equity, moved to the point where it was a contingency plan if something went wrong, and now I am rarely involved the physical side of remodel projects.

[Ryan Mosch]

@John Woodrich That’s where I would like to get as well. We looked at the house. And this deal is not for us. We found that all 4 walls in the basement are buckling in and the house needs to be lifted with a new foundation put in. This would have left us with an off between 40k-50k. The realtor said there are already half a dozen offers on the table and the asking prices has already been met. I don’t understand how someone can make any money at that price point with what the house needs. But I am curious to see if they actually repair the massively damaged foundation, or try to hide it by “finishing” the basement.

[John Woodrich]

Originally posted by @Ryan Mosch:

@John Woodrich

That’s where I would like to get as well. We looked at the house. And this deal is not for us. We found that all 4 walls in the basement are buckling in and the house needs to be lifted with a new foundation put in. This would have left us with an off between 40k-50k. The realtor said there are already half a dozen offers on the table and the asking prices has already been met.

I don’t understand how someone can make any money at that price point with what the house needs. But I am curious to see if they actually repair the massively damaged foundation, or try to hide it by “finishing” the basement.

Ethics run the entire spectrum in real estate.  There is always someone out there who is willing to sweat equity a whole project to make a "wage" of $25k and there will always be someone out there who is willing to cover up some problems to make a buck.