Excited about first flip until now..HELP!

[CHRIS MITCHELL]

I'll try to make this short, I'm about to venture into my first flip, property is $58000, rehab costs $50,000, arv $180,000. My liquid funds are extremely limited so finally I found a hard money lender that will fund 100% percent of the purchase and rehab, I have to come up with closing costs ($4500). Rehab time 6-8 weeks, 3 bed 2 bath ranch 1200 sq ft in Bristol PA needs full rehab. I also have to pay origination fee of 3-5% which will be rolled into loan andmy interest will be 13-15%, (I'll know exact figures Monday). Loan term 12 months, interest only payments. My problem is finding a contrctor that will work with the draw schedule of  the lender. This lender apparently won't make any of the rehab money available up front to get the project going and every contractor I talked to wants something up front. How do other rehabbers who use this type of lending product for these situations deal with this? Does anyone have a general contractor in the Bucks County/Philly area that work within these parameters?

[Corey Beckwith]

Hey Chris,
Just my two cents here. I Also get 100% financing on some deals, expensive but I do use it. From my experience with dealing with contractors, and I've been rehabbing for 13-14 years now. I typically don't pay them upfront. If I know them very well and they happen to be short on cash, I may throw them some change to get started. However, rehabbing homes is so popular now and there's so many hard money lenders out there that contractors usually know how the game works. If your contractor doesn't, it should be fairly simple to find a contractor that has worked with investors that use hard money lenders. Contractors that have, will understand and feel comfortable with the fact that you get your money in stages from your lender. I let my guys know that I get a draw every Friday from my lender for the work that was completed. I tell them if you do $10k of work that week, then you will get paid 10k. It's that simple. Also it will help them feel comfortable with waiting as long as you have written agreements with them stating the terms. Being that this is your first time, you should also talk with your hard money lender and let him know that you will need his complete cooperation during this rehab. I.e if you show him $10k of work was done, tell him please make sure that he pays that. This way everyone will be paid on time and the job will get done on time. This way everyone is happy.

Try these options also, to stay in budget. This works for me. Sometimes GC's may not have the cheapest prices for the entire job. I find that drywall contractors will give me cheaper prices per board than my contractor. I find that hardwood floor contractors know how to price jobs better, because that's all they do. Roofing companies etc.. painting, you can get away with sometimes.

Also with material, try and buy as many discounted items as possible. With most major holidays, you can save hundreds of dollars on stainless steel appliances from Lowes and Home Depot. Even if you're not ready for them, order them and just have them delivered at a later date. Visit a paint store like Ben Moore or Sherwin williams and ask if they have any oops paint or discontinued or discounted paint. I just purchased some discontinued paint from Sherwin williams today. Usually $28 per gallon, I paid $5 per gallon. Same with roofing and siding suppliers. Always ask first if they have any close outs. There are times I've paid less than $60 per sq. on shingles that cost more than $90 per sq. same as siding. Everyone who posted before me has great advice. You should be able to take something from all of us and make this project a huge success. Sometimes 100% financing with hi interest is all you can do at that time. If you a happy with your profit at the end, being your first deal then I say go for it. Just chime in bp once in a while if you get stuck. Remember, STAY IN BUDGET,

All the best
Corey