Young Investor Fix and Flip Advice?

[Jarrett Williams]

I am brand new investor and have been doing research on the various types of investing. After everything I have read I am leaning towards Fix and Flips. I have various contacts and can get pretty good deals from contractors. My only problem is I am stuck as to where to get financing. This is a tough market to start out in and many banks in my area won't even think about lending to an investor. I have heard about Hard Money and Private Money but do not know much about either. Is there a difference between the two? Is one easier to get than the other? Any advice on financing or just getting started in general would be greatly appreciated.

[Trevor Kohlhepp]

Jarrett,

It is important to start looking for financing before making any offers. Being pre-approved can help you obtain a lower purchase price, allow for a quicker closing, and save a lot of time.

Hard money typically is an investor or company that has money that they are willing to lend to investors to purchase real estate. Typically hard money lenders prefer 6 - 12 month terms and have high interest rates, this is because they do not usually have any type of credit check. Whether they lend or not will usually be determined on the property. Often they will ask to see some sort of appraisal and home inspection. Once you get a hard money lender on board they are able to close quickly. I’ve work a hard money lender that has closed in as little as 24 hours. (This is not typical, usually hard money lenders require 7-10 minimum for due diligence reasons.)

Private money typically comes from private lenders. Typically these private lenders require more documentation and have more requirements for the borrower, however they are more forgiving than conventional lenders. Depending on the private lender requirements vary, however do aspect to provide a credit report and there to be a minimum down payment amount. Interest rates for private lenders vary, however it’s typically 1-2 points higher than going rate.

The best way to find these types of lenders is by telling everyone you know what you are looking for. Eventually you will tell someone that knows these types of lenders/investors. You can also post ads on the free websites like Craigslist and backpage, let people know you are looking for money and they will find you.

Hope this helps some! Look forward to networking with you more!