Private Lenders vs Funding partners in PA

[Brian Davis]

I have read tons of forums and WOW. SEC guidelines all over the place.
So my question is this as a new investor am I able to try and find "funding partners" people to put up the money while I find the deal, get the repairs done, and get the property sold for a split of the profit equal share???

I have spent the last week just trying to find PMLS and HMLS.

Or am I better hiring a loan broker to go out and get me funds.
I am tired of walking past deals for such a trivial problem as not having money. LOL.
I am willing to do whatever it takes to start making the deals. I am not afraid of work but spending hundreds of hours reading and taking courses just doesn't seem to be the answer. I am more hands on.

So the summary is can or should I look for Private Money lenders at a % per 1 year or should I look for Partners to fund and split the profit or should I just hire a Broker and pay their percentage? In the long run even if a broker wants 5% to find me a loan at 10-12 per annum it is cheaper than a HML with 4-5 points and 16% RIGHT????

Any help is greatly appreciated
Brian D
Shurlock Homes LLC

[Jon Holdman]

If you have a decent deal for a fix and flip, a HML at 5-ish points and 15% interest is probaly cheaper than a 50/50 split with a money partner. The 70% rule of thumb says if your purchase plus rehab is 70% of fhe selling price, you use hard money, sell with an agent and sell in six months your profit will be about 15% of the selling price. Now, that assumes a lot of things go right. The hard money costs is about 10-12% of the amount borrowed, which at 65-70% of ARV is 7-8% of the ARV. Your profit is 15%. So, with a 50/50 split with a money partner, you're splitting 22-23% 50/50, which leaves you with about 11%.

Now, with a HML, you take more risk. If things go wrong, your profit goes down while the HMLs cut does not. Worst comes to worst and you give the property to the HML.

The reality of fix and flips is that you must have some of your own cash. 10% of ARV as a bare minimum, more like 20% to avoid losing the property if something goes wrong. Without some of your own oney (could be from a line of credit or even credit cards), you will have a tough time finding money to do a fix and flip.