Personal Loan for down payment to get started???

Question

Hello BP family,

What are your thoughts on taking out a personal loan of $10K to use as a down payment to get started on RE flip?

Has anyone done this before?

What are the pros & cons?

Nalo Coban · Answer

@Patrick B. Thanks. The most important thing I learned is to refinance right after the rehab before putting up for sale. I cant refinance this HM loan unless its off the market for 6mos. I should have done that first. The crazy thing is that I read about that on BP and totally forget to do that. The property is about an hr away and the distance factor played a major role in getting it rehabbed fast. But nonetheless we got it done. I'm a little OCD so when it came to addressing minor details, the contractors didn't want to come all that way for minor things. The contractor lived an hr away too. So another lesson learned... go with local vendors if possible or don't pick a project so far away. We worked with what was there as far as layout of kitchen & pipes, but next time I will spend the time to re-design kitchen in needed. Im ready for my next project as soon as I get this one sold.

Nalo Coban · Answer

@Patrick B. I did not use that lender. I went with a HML this March and did my rehab flip on a 4plex. I learned a lot and now have the property for sale. I have 2 units rented out and working on leasing up the other 2 units. It cashflows great, but I need to flip, it instead of holding it for personal reasons. While its up for sale, atleast its paying the mortgage.

Joe Stafford · Answer

Loans, borrowed money, lines of credit even credit cards are all acceptable. Make sure to account for the interest or the cost to obtain that money into all of your figures. Borrowing money can be expensive and wipe out your profit  especially when new because there is a lot you may not account for or under estimate with a rehab (in my opinion).

I have a line of credit on my personal home that I use on flips and then pay it right off when it sells. I do not use this line for buy and holds as it is an interest only line. I even have a very high limit Credit card that I put most everything for my rehab on so it cost me very little out of pocket to keep flips moving.

Hope this helps.

Bryan L. · Answer

Personally, I don't think that I would do that - but then again, I don't do direct mail.  There's plenty of other free or low-cost ways to find deals.  Keep reading a lot on here and you will learn about many of those ways.

Patrick B. · Answer

@Nalo Coban Ah ha, I see. You certainly do make some very good points. Thanks for sharing and best of luck to you moving forward.

Patrick B. · Answer

@Nalo CobanOh wow, a 4 unit flip! I was going to suggest posting it to the marketplace but I see you're already on it. Congrats on your cashflow success.

If you don't mind elaborating a bit, what were your biggest takeaways / lessons learned / things you'd do differently next time around? If this was your first flip, I applaud the boldness of tackling a 4 unit!

Patrick B. · Answer

@Nalo Coban Did you end up closing on this deal with the financing arrangement you outlined above? How did everything turn out?

Nalo Coban · Answer

Thanks guys. I found a lender that will lend 90% of the purchase & rehab costs. I need to come up with the 10% down payment. That is why I'm going with a personal loan. the lender offers interest only and no pymts for the first 90days. So I must flip quickly. I know there is a lot to consider. I would be making payments on the personal loan, then when I flip I pay off personal loan and rehab loan. I would love to do the line of credit against my home but Im upside down in my personal home value. So I'll here for a while.

Bryan L. · Answer

If you buy right and have some other income to carry you, it can work.  Be sure to allow enough in the deal to cover your carrying costs.  And all of your other every-day expenses (groceries, gas, etc).  Don't stretch yourself too thin.  Things can happen that you do not anticipate.  Repairs can go over budget, a house can take longer than expected to sell, etc.  And all this time you're having to make payments on your loans.

Personal Loan for down payment to get started???

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