HELP!!! Deal financing issue!

[James Williams]

I am looking for funding but I don't have much to bring to close. Property is $82K purchase price, ARV is $198K and reno is $35K. The numbers are great. My credit is not strong at all and I only have about $8K cash reserve. Am I going to have to let this incredible opportunity go?

[James Williams]

@Tommy Daggett that is not a dumb question at all. Most hard money lenders will not cover your project 100%. They want you to have some skin in the game. Though they specialize in asset based lending, they lend based on the after repair value of the project. I as a newbie flipper could come in and completely botch my budgeting and if I cant handle the interest payments they may have to take the property. Also, beyond the initial numbers for the loan, I would need at least a 10% down payment for the purchase price of the property. In this case, that's already $8,200, and that does not include closing cost. I need about $15K total to close the deal. As far as reserves, beyond the purchase and closing cost, I would need money to start the rehab project. Hard Money Lenders typically work on a draw schedule. I would front the funds for a scheduled portion of the work, they send someone to inspect and verify that it's done properly, then they reimburse me for that portion so that work can continue. Repeat that cycle until project is complete. Not to mention utilities and incidentals. All of which are part of my carrying cost along with the interest payments. I would need about $25K minimum in reserves if I use most Hard Money Lenders. If you have any questions about this, send me a message and I can give you a call to discuss the whole process.