Financing a Fixer-Upper

[Taylor Guest]

Greetings,

I am new to BiggerPockets, and REI as a whole, but have read that traditional financing is hard to come by when dealing with a fixer-upper. I would like to know your strategy on financing a fixer-upper. Any information you have would be greatly appreciated. Thanks to everyone at BiggerPockets for opening up the world of REI to those that want to know what you know.

Respectfully,

Taylor Guest

[Charlie Fitzgerald]

A greater number of savvy fix/flip investors and buy/hold investors are using hard money lenders to finance their initial acquisitions of real estate and also to access cash in investment real estate they already own or have recently acquired.  There are a lot of myths about the world of Hard Money Loans, which I covered in a Blog I wrote on this BP site some months ago (search the blogs if this interests you).  The bottom line is that if the transaction is fundamentally and financially sound, "Hard Money" costs the investor no more than any other type of financing they may be able to use and in a fix/flip transaction LESS than other forms of conventional financing would.  The reason for this is that acquisition costs related to financing are entirely paid for by the gain made in the transaction (at entry, or at exit, or by appreciation OR, by all three (and there are other means/types of gain and profit as well...), NOT by the pocket book of the investor.  Some will argue this, and that is fine.  Ron White has a saying for that, however in the interests of being kind, I'll not repeat it here.  The fact is that if you as an investor are not recouping 100% of your costs IN ADDITION to your desired profit from the gain of your investment transaction, then you are doing something wrong.