How to find the money when making ur first deal

Question

Hey everyone just looking for advice on finding money for my first deal i been scaning bp closely these last few days an its a lot of good info, im learning alot.  I have 3 properties now in my local area that im intrested in did some digging on the city assesment website found good info on all 3...but the one im going to try and put under contract is listed for 39,9k im going to offer 25k it sold last year for 148k it assesed @ 126k i been on a walk around and inside it very little repair need i would est. 8k to get it rentable with the average rent in the area going for 850...
so some numbers:
Sold for 148k(last year)
Assesed @ 126k (this year)
Listed @ 39,9k
repairs @ 8k
taxes @ 1200
Offering 25k
Misc & Closing 12k
So i guess my question is would it be best to take out a small loan 40k with a bank, partner, or HML then refinance to a conv. for 85k pay loan back and make profit or Hold and Landlord...What are my Options to find the money and make the money...

Andy Bankston · Answer

If you're looking at a flip scenario, the assessed value of the property has no bearing on your numbers except that it determines how much property taxes will be paid.  I successfully petitioned the county to lower the assessed values (and therefore the property taxes) on my personal residence, rental property, and flip property.

Instead of assessed value, you need to look at good comps for the area to see what homes are really selling for right now.  The home could have sold for $1.2M last year, but if they are only selling for $120K right now then that's where you're going to get your ARV from.

Where are you getting rental comps from?  I'd be sure to call the "for rent" signs in the same neighborhood or as close as possible to get an idea of what kind of rent to expect.  Rents for a general area or city can vary greatly from what the home will actually rent for in that neighborhood... for better or for worse. 
Also, you'd probably be well served to get a contractor or two to walk the potential properties with you to give you a realistic idea for rehab pricing.   Don't expect them to do it for free, especially if you don't have the property under contract.

Good luck and keep us posted.

Shanequa J. · Answer

If the house sold for $148K last year why is the owner listing it for $40K? How long has it been on the MLS and why hasn't anyone snatched up this house? I'm asking this because if the  house if worth what you say, it would have been under contract in 1 day.

James Gefke · Answer

Hi Andre,

If the properties you are working on are truly a deal then it shouldn't be too hard to find the money.  If those properties have been exposed to the market for over a month it is most likely not a great deal.

Assessment data from the city is no indicator of value.  You need comps of recent SOLD similar properties in the area to get an idea of what the true value is.  Most the sales in my area are selling at a fraction of the "assessed value"

You will also try and identify multiple exit strategies.  For example, you buy a house with a HML and own it free and clear.  If your plan is to refinance and take money out you want to make sure you have a bank lined up to do that.  A cash out refinance of a free and clear non-owner occupied SF house may be more challenging than you think from a bank.

You need to first make sure you have a deal and then figure out how you would handle various scenarios.

Andre Ruffin · Answer

Thanks for all the great advice and im definitly at the beginning of my journey and grinding it out @Andy Bankston im putting together a team lawyer, contractor, etc. i do understand and thanks for the great advice @Matt Dusold im really going to make that move market market market yourself!!!(thanks didnt think about it like that)...time to take a Pro step...lol and @Ms. Shanequa J. thanks for the info and your thoughts maybe at some point in the future i'll have a deal i can pull you in on...Thanks to all again...

Shanequa J. · Answer

Andre Ruffin Your best bet would be to find homeowners willing to do a short sale before it is listed on the MLS because if it's a great bargain competition will be fierce and the price could be driven up. If I was you, I'd market to distressed owners and get a mortgage loan.

Matt DuSold · Answer

Andre, I know exactly where you are. When you are starting out it is tough to find money. It sounds incredibly simple but tell EVERYBODY you know what you do. You never know who may be interested.

There's a lot of information here about how to raise funds, talk to people you know with retirement plans or even CDs. With the amount you are looking for it makes it a lot easier than someone who needs several hundred thousand.

Have you been to your local real estate clubs? Don't over look simple things like better memberships on BP either. I can say that it helped me gain interest of other members for deals I have going and while it didn't come through, I'm sure those partnerships will in the future. Starting out is the hardest part just keep grinding.

Andre Ruffin · Answer

Okay the house is a short sale its happening alot in my local market and thats one of the main reasons i couldnt wait to get into this RE investing game...i have 5 other properties im doing leg~work on with the same story... all my numbers come from the City Assesment office and the MLS this property has been on the market for 38 days...i would be more than happy to network and partner some deals with any investor that shares my same drive...

How to find the money when making ur first deal

Most Popular Reply