How do i gain the capital to do fix and flips

Question

Im new to investing i currently own a owner occupied multi family but wanting to add more real estate to my portfolio. Only problem is i lack the capital to buy house straight cash. I been researching hard money lenders but i was wondering if anyone else had some suggestions on ways to get into this game if you lack capital? Any guidance is appreciated TIA

Matthew Paul · Answer

The deals on flips generally speaking go to straight cash buyers . I dont mean pre approved for a loan or using hard money , but they go to the person who strokes a check and settles real quick .

Now if you dont have experience in fixing and flipping , the education will be costly .  Its not HGTV . Depending on the property a quick cosmetic rehab will run 2 to 3 months with contractor scheduling  tight , to 1 year if they run into unforseen issues .  To get it done faster , you will pay more .

Just to give you an Idea on some numbers , I am doing a 2100 sq ft house , class A neighborhood ,  clean out , removing some walls to go open floor plan , minor electric , some mid level replumbing , full custom paint , new kitchen , new bathrooms ( 2.5 ) , new windows , refinish hardwood upstairs , Vinyl plank downstairs .  I will be all in on the inside work at $77,000 . NOW this is a low number since I am a contractor  ( And this is going to be my house )  And I called in some favors . .  You as a customer would be paying considerbly more .

Doing flips your real enemy is TIME .  Time cost you money , time cost you lost opportunity , and not knowing what rates will do 6 months from now could cost you even more .

Rick Albert · Answer

Can you house hack into another multifamily and rent out the previous property? That would likely be the easiest.

How much equity do you have in your current property? Can you get a HELOC and use that money towards the next purchase? I've done that twice now.

Hard Money Lenders can be a great resource but they generally want to lend to someone with experience and the terms are expensive versus conventional financing.

Another route is to partner with people. If you have the income and credit, maybe you can sign on for the loan and someone else provides the down payment? Not saying this is a great idea but just trying to give an example of creative options.

Wale Lawal · Answer

@Karalyn Duncan

Entering the real estate investing game with limited capital is a common challenge, but there are several strategies you can explore to overcome this hurdle. Here are some options to consider:Leverage: Use financing options such as mortgages to leverage your existing capital. With a down payment, you can secure a mortgage to purchase properties. This is a common approach for real estate investors.House Hacking: If you're open to living in one of the units, consider house hacking. Purchase a multi-unit property, live in one unit, and rent out the others. This can help cover your mortgage and potentially generate additional income.Partnering: Look for potential partners who may be interested in real estate investment. This could be friends, family, or other investors. Partnerships can provide additional capital and expertise, helping you access larger deals.Seller Financing: Explore seller financing where the property owner acts as the lender. This can provide more flexible terms and potentially eliminate the need for a traditional mortgage.Private Money Lenders:Private individuals or companies may offer loans for real estate investment. While the terms might be different from traditional financing, private money lenders can provide capital when you don't qualify for conventional loans.Creative Financing Techniques: Learn about creative financing techniques such as subject-to deals, lease options, or seller carry-back financing. These strategies can help structure deals with minimal upfront capital.Before diving into any strategy, thoroughly research and educate yourself on the specific approach you choose. Real estate investment involves risks, and understanding the nuances of each strategy will help you make informed decisions. Additionally, consider seeking advice from experienced investors or a real estate mentor to guide you on your journey.

Jose Jacob · Answer

Hello,

I am flipping houses for last 7 years.  Its not easy to flip houses as a new investor.  There are lot of things can go wrong.  Money is only ONE of the elements in fix & Flipping.  There are several others out there.  My suggestion for you to find an experienced flipper and JV with that person for couple of deals to learn all about flipping.   Then you can do it yourself.  So many GURU's out there  make it sounds like its so easy to make seven figure income just to sell their course.  Not that easy like they present.  Good luck

Bob Stevens · Answer

Refi cash out of partner with someone

Shawn Parsh · Answer

Karalyn,

You have been given some great advice. I would read through each of the responses and pull out what makes sense in your situation. I may have missed it above, but I would add look into properties that you can lease option. I have had success finding properties listed for sale, listed for rent, or not listed at all that I have been able to negotiate a lease option with little to no money down. If the property is in rough enough shape the current owner will have limited options and therefore may be willing to lease the property. If you explain that you will be putting thousands of dollars into the rehab the current owner has little risk.

As stated above, there is a lot involved with flipping houses so make sure you do your homework. Getting control of the property is just the first step. Make sure you lock in the right price. Your profit will be greatly influenced by buying the right property for the right amount. Don't get scared away from flipping if that is what you want to do, you can make a lot of money by doing so. Good luck.

Jacob Sherman · Answer

Do you have 25-30% down?

Mike Klarman · Answer

You should be able to find a program that offers you 75%/80% financing.

Bill J Fay · Answer

Sounds like you have taken a good first step in house hacking your primary. When did you purchase your property? Depending on the equity, you can refinance and pull cash out and house hack again. It really depends on what you are looking for in your next purchase. Hard Money Lenders will be able to offer you 80% LTC (purchase + renovation), so you would have to come to the table with 20% on a flip or fix/hold. Depends on if you want to owner occupy the next one or use it strictly as an investment.

Steven Goldman · Answer

Hi Karalyn: Starting out by JVing with experienced partner is always a good idea. The only way you are going to make that work is by contributing something to the deal. Concentrate on finding a good flip property. Your contribution to the deal will be the property. In my experience a good property is harder to find then the funds to execute the deal. So if you can find a good property and lock it up with a wholesale agreement you will be able to find an investor who will either pay you a wholesale fee or, JV with you on the deal.  I know a lot of investors who used that formula to get started when they did not have capital. Good luck! ( You really do not need cash to lock up a deal if you think outside the box. Just a down payment.)

How do i gain the capital to do fix and flips

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