Seed Capital Allocation - Golden Ratio?

Question

Hello, is there a golden ratio to the amount of Seed Capital that's wise to spend on different parts of the process? How much should, for example, go toward materials, compared to labour, etc.? Is there a ratio that works for you?

Account Closed · Answer

I would say have your 20% deposit for the loan, and an additional 20% in reserve to begin the project, and cover any necessary issues until you can acquire further funding. Seems like a good utilization of seed capital to me.

John Krasner · Answer

A good building team is what you need. If you are a bean counter type person, you shouldn't have to split hairs on whether or not your foreman is being honest with you. Get a good crew you can trust, and put your trust in them to make the right decisions on the projects you decide upon.

Hank Wu · Answer

I would trust your foreman. I can speak for myself only when I say that I know plenty about the numbers, but I am certainly no builder, and will trust my foreman when he gives me lists of requirements.

Barbra Thebenyane · Answer

@Antoine Martel,

We are just getting our first flip on. I believe I have raised the seed capital required over many years of saving and cost management. I am just wondering if there is some sort of construction type ratio involved I can use to compare the costs of labour and materials to. Maybe this ration can be devised after some feedback? (I spent some time teaching math, I love ratios!)

Antoine Martel · Answer

Seed capital to begin your real estate investment business?

Where are you finding this seed capital?

Austin Soros · Answer

I have no true idea what this thread is about.

Flor Santana · Answer

The only golden ration I'm familiar with is the one used on paintings, photographs and architecture. Your spending should always depend on the project, the investment, not some rudimentary mathematical ratio.

Account Closed · Answer

It may in fact be a more important question to ask what percentage of the project can you cover with just your seed capital before you need to acquire more capital to complete. Ideally, I suppose if it were a new construction, you would need to progress your project to a mature enough stage you can qualify for further financing with a financial institution.

Account Closed · Answer

https://www.biggerpockets.com/forums/67/topics/887...

Someone has previously had much the same question about how best to spend their seed capital. I suppose it depends on the type of project; are you constructing a new home, or merely renovating @Barbra Thebenyane?

Tyrel McAllister · Answer

@John Krasner I couldn't agree more!

Seed Capital Allocation - Golden Ratio?

Most Popular Reply