Newbie questions around flipping and Hard Money

Dallas, Texas
General Real Estate Investing
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Newbie questions around flipping and Hard Money

Gregg Congrove
Member since 2022 · 3 posts · 2 votes

Hey all,

Been a lurker on here for a while. I listen to a lot of the BP podcasts and I've read several books.  BP helped me turn my primary into a long-term rental.  I've run that rental for over a year and I'm ready to expand.  I'm looking to start my first flip this December and I have a few questions that I'm hoping you guys can help me with.

1. If I use a wholesaler to find a deal, does my realtor need to be involved in the acquisition?

2. An HML says they help finance the purchase and rehab costs. Then they mention they can lend 70% of the ARV. Does that 70% go towards purchase and rehab, or is there a separate loan for rehab?

3. I see a lot of deals (from wholesalers, FB groups etc) where the seller lists the purchase price, rehab cost, and ARV. How accurate are those rehab and ARV costs? I know this is really situation-dependent, and that I should verify those numbers myself. Is this where my realtor would come in to run comps and confirm the ARV? Should I be able to do this myself?
4. in the same above scenario I assume I should have my GC verify the rehab costs? Is this something I should be able to do after i get more experience?

5. Does anyone have any recommendations for a trusted HML that services TX? I've reached out to a few that were advertised on this site. But always feel more comfortable using a trusted source that someone has used.

Please take it easy on me, some of these may be "dumb" questions.  I'll probably have some follow-up questions as this develops. 

Thanks!

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Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
3y
Quote from @Gregg Congrove:

Hey all,

Been a lurker on here for a while. I listen to a lot of the BP podcasts and I've read several books.  BP helped me turn my primary into a long-term rental.  I've run that rental for over a year and I'm ready to expand.  I'm looking to start my first flip this December and I have a few questions that I'm hoping you guys can help me with.

1. If I use a wholesaler to find a deal, does my realtor need to be involved in the acquisition?

2. An HML says they help finance the purchase and rehab costs. Then they mention they can lend 70% of the ARV. Does that 70% go towards purchase and rehab, or is there a separate loan for rehab?

3. I see a lot of deals (from wholesalers, FB groups etc) where the seller lists the purchase price, rehab cost, and ARV. How accurate are those rehab and ARV costs? I know this is really situation-dependent, and that I should verify those numbers myself. Is this where my realtor would come in to run comps and confirm the ARV? Should I be able to do this myself?
4. in the same above scenario I assume I should have my GC verify the rehab costs? Is this something I should be able to do after i get more experience?

5. Does anyone have any recommendations for a trusted HML that services TX? I've reached out to a few that were advertised on this site. But always feel more comfortable using a trusted source that someone has used.

Please take it easy on me, some of these may be "dumb" questions.  I'll probably have some follow-up questions as this develops. 

Thanks!

 @Gregg Congrove 1. This might offend some here, but NEVER trust a wholesaler's numbers for anything including as is value, rehab budget or ARV. of course their motivation is to make the numbers look as good as possible. You have to do your own due diligence.

2. The way we do it any way is lend up to 75% ARV. So, if the house is 200k, need 30k in rehab and ARV is 300k we would lend 225k. So, you would 200k to buy the house and 25k for the rehab budget.

3. see number 1. 

4. 100% have a contractor give you a scope of work with costs. 

5. Love to compete for your business. 

Hurst Real Estate, INC4.987 Reviews
WebsiteView Page
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  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @Gregg Congrove:

    Hey all,

    Been a lurker on here for a while. I listen to a lot of the BP podcasts and I've read several books.  BP helped me turn my primary into a long-term rental.  I've run that rental for over a year and I'm ready to expand.  I'm looking to start my first flip this December and I have a few questions that I'm hoping you guys can help me with.

    1. If I use a wholesaler to find a deal, does my realtor need to be involved in the acquisition?

    2. An HML says they help finance the purchase and rehab costs. Then they mention they can lend 70% of the ARV. Does that 70% go towards purchase and rehab, or is there a separate loan for rehab?

    3. I see a lot of deals (from wholesalers, FB groups etc) where the seller lists the purchase price, rehab cost, and ARV. How accurate are those rehab and ARV costs? I know this is really situation-dependent, and that I should verify those numbers myself. Is this where my realtor would come in to run comps and confirm the ARV? Should I be able to do this myself?
    4. in the same above scenario I assume I should have my GC verify the rehab costs? Is this something I should be able to do after i get more experience?

    5. Does anyone have any recommendations for a trusted HML that services TX? I've reached out to a few that were advertised on this site. But always feel more comfortable using a trusted source that someone has used.

    Please take it easy on me, some of these may be "dumb" questions.  I'll probably have some follow-up questions as this develops. 

    Thanks!

     @Gregg Congrove 1. This might offend some here, but NEVER trust a wholesaler's numbers for anything including as is value, rehab budget or ARV. of course their motivation is to make the numbers look as good as possible. You have to do your own due diligence.

    2. The way we do it any way is lend up to 75% ARV. So, if the house is 200k, need 30k in rehab and ARV is 300k we would lend 225k. So, you would 200k to buy the house and 25k for the rehab budget.

    3. see number 1. 

    4. 100% have a contractor give you a scope of work with costs. 

    5. Love to compete for your business. 

    Hurst Real Estate, INC4.987 Reviews
    WebsiteView Page
    2Reply
  • Gregg Congrove
    OP
    Member since 2022 · 3 posts · 2 votes
    3y

    @Jay Hurst, thank you for the response. So I know the lender wants me to have some "skin in the game". In the above scenario, you lend me 225k, I put 200k on PP and I have 25k for rehab. I need 5k of my own money to hit that 30k rehab budget, but that doesn't seem like enough of my own money in the deal. How does that play a factor? 

    0Reply
  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @Gregg Congrove:

    @Jay Hurst, thank you for the response. So I know the lender wants me to have some "skin in the game". In the above scenario, you lend me 225k, I put 200k on PP and I have 25k for rehab. I need 5k of my own money to hit that 30k rehab budget, but that doesn't seem like enough of my own money in the deal. How does that play a factor? 


    Should add we lend to lower of 75% ARV or 95% loan to cost. So, in the above scenario the loan to cost would be 225k (200k purchase plus 25k rehab), 95% is 213,750. 213.750 is lower then 220k of course so that is what we would lend on that particular project. i was just using a real quick example for numbers above. That is what we require for skin in the game. That being said we do not just lend to anyone and make sure the deal makes sense for all parties before making a loan which is not always the case when it comes to hard money.

    Hurst Real Estate, INC4.987 Reviews
    WebsiteView Page
    0Reply
  • Gregg Congrove
    OP
    Member since 2022 · 3 posts · 2 votes
    3y

    Thank you, @Jay Hurst, that was the missing piece for me.  I reached out to you yesterday via the Find a Lender tool here on BP. Can you shoot me a DM with your contact info? Would love to speak with you further.

    0Reply
  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    3y
    Quote from @Gregg Congrove:

    Thank you, @Jay Hurst, that was the missing piece for me.  I reached out to you yesterday via the Find a Lender tool here on BP. Can you shoot me a DM with your contact info? Would love to speak with you further.


     odd, that I do not see any emails from find a lender from you. but, no worries, DM'ed. 

    Hurst Real Estate, INC4.987 Reviews
    WebsiteView Page
    0Reply
  • Matthew MorrowBusiness Member
    Investor · PA - NY - NJ · Member since 2019 · 458 posts · 168 votes
    2y

    Hey there,

    1. Involving a realtor when using a wholesaler is not mandatory, but a realtor can provide valuable insights and help with due diligence during the acquisition.

    2. Typically, the 70% from a Hard Money Lender (HML) would cover both purchase and rehab costs, but it's best to confirm the specifics with the lender.

    3. The accuracy of purchase price, rehab costs, and After Repair Value (ARV) can vary and should indeed be independently verified. A realtor can be helpful in confirming ARV through comparable sales, but learning to do this yourself is advantageous.

    4. Your General Contractor (GC) should verify rehab costs, but gaining experience to estimate these yourself will be beneficial in the long run.

    5. For HML recommendations in Texas, personal referrals from experienced investors in your network can be a goldmine. Due diligence on any lender is crucial.

    Don't worry about the questions – we all start somewhere, and it's great that you're reaching out for guidance. Keep asking and learning!

    Best of luck with your flip in December!

    [email protected]484-791-6200
    CORE Team | Realty ONE Group Supreme547 Reviews
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