Needing advice on how to start.

[Amanda Bruce]

I'm looking to invest in a property. I would be a first time flipper. How should I present a deal? I don't have money to bring to the deal but the potential for the flip is there. The  house is 29k. The comps around the area go for 190k-230k. The renovation would need a full gut. I believe the estimated rehab would be 70k to 90k What should I do and is that a good investment?

[Aaron Byrne]

Hi Amanda,

Personally, that is not a deal I would pursue for my first project. Considering the extensive rehab, there seems to be potential for a lot of unknowns during the rehab that would eat into my profits or wipe them out entirely (like major unexpected repair items, overages in current budget, or increased holding costs as my renovation scope expanded or progress gets delayed...which is bound to happen at some level). For my first deal, I would personally look for a property at a higher price point (nicer asset/neighborhood), needs work in the dollar amount of no more than half of what I paid for it (less room for error and mainly cosmetic items), and has a reasonable spread based on comps after taking into account all expenses on a 6 month hold (so I can at least try to break even should unexpected circumstances arise). 

Also, I would never go into a deal without my own capital. While leverage is good, being overleveraged is not. Having my own reserves/equity serves as a safety net to fill gaps on the project where needed.

Either way, good luck! Everyone has to start somewhere and I wish you all the best.