Rehabber · Randolph, NJ · Member since 2013 · 13 posts · 0 votes
I'm an experienced builder looking for private funding or advice on how to acquire funding for a 3 bed 2 bath flip I have been looking into.
Purchase Price $16,000
Repairs $50,000 (padded for the unexpected)
ARV $105,000(have several in the neighborhood as high as $120,000)
I have the knowledge and ability to do the work but lack the know how on putting together the funding. I have about 10k I can put towards the house so any thoughts or ideas from the BP community about how to make this work would be greatly appreciated, thanks
I would seek out a hard money lender (HML) in your area. You would have very little out of pocket up front on this deal (maybe $1,300 max) and if the numbers are accurate on repairs and ARV as you indicate this gives you an easy deal for a HML.
Check out BP or google hard money in your state. I think there are a few active investors locally that are also members on here.
Thanks David, I will look into some HML's from BP that fund in Virginia and hopefully maybe get a response from some here. Since the funding end is new to me I will need to find out what they will be looking for so I can put together a proposal for them. I am confident the repair estimate is high and found multiple comps very close by but going over that with a local realtor for a professional opinion. Thanks again for your response
David hit the nail on the head, we still want to make sure you are invested into the project, and you will need to justify such a large rehab budget compared to purchase price.
1) Bank Financing: Low interest rates and fees but require lots of documentation. Some banks shy away from investor. loans but there are many that back the investors that bring them solid business plans/proposals. Some things to be careful of are prepayment penalities and fees. Banks will also require money down usually 20%. Closing is usually a 30 day process which is not always the best for investors.
2) Hard money lender: Higher interest rates and fees with moderate to little documentation. HMLs will also have you make monthly payments. HMLs dictate the terms. Cash is available quicker and closings are usually 10-15 days or sooner. Usually (like mentioned above) you will have to put up points or pay the higher fee up front.
3) Private funding: Higher fees (usually no interest rate) with little to no documentation. PF has no monthly payments (fee is paid at closing). Terms vary and are negotiated between both parties. Cash is available quicker and closings are usually 10-15 days or sooner. Points vary and may be deducted from the loan amount (thats how our business does it). Collateral is also high. If the project is fully funded (purchase and rehab) then the PF investor would have 1st lien. PF also charges penalty points for partial or full months over the term date along with requiring perosnal guarantees. They may also ask for a unencumbered asset as collateral as well. These items may also be part of an HMLs collateral package. The best part of PFs is the money is not fiancned so no monthly payments.
4) Seller fianancing: Moderate fees with moderate interets rates. Monthly payment to a creditor and the seller. Terms are negotiated but usually are identified by the seller.
Hope this helps and feels free to contact me if you are interested in Private Funding. My company offers the PF option.