Purchasing a house to flip before securing financing for renovations!

[Laura Pruitt]

Hello BP!

I was wondering for some advice - my husband and I are about to embark on our first house flip (exciting!!), we have analyzed the numbers etc and we are ready to try to secure our first house. 

We have not yet secured a lender for the rehabbing costs, can anyone shed some light on their experiences and what route they went? 

We don't have very good credit so we cannot go the bank route for a loan, we are looking for hard money lenders but we just have not yet got approved, we have been saving to make this dream a reality so to speak and are just a little concerned with investing all of our savings in a shell without knowing we will begin work straight away. 

Should we purchase the shell knowing the numbers work (??) and then just stay focused on finding an investor, or is it smarter to wait until all our ducks are in a row so to speak. 

We have been doing a lot of research and learning etc.we are just ready to get moving and grooving! 

Any advice welcome!! :)

[Gilbert Dominguez]

If I understand you right  you do have the money to buy the house outright but not the money to do the rehab? Am I right?

My questions would be;

. How sure are you of your figures? 

. What process did you use to come up with the rehab costs?

. How did you come up with the ARV?

. Are you sure you will have enough for the escrow fees, etc. 

. If you chose to keep it, hold it, can you sustain the holding costs?

. How about property taxes? Can you handle those for a year at least?

. How safe of a neighborhood is the house in?

. What is the likely hood the house will be vandalized or damaged without anyone being there?

. It there a possibility the house can be set on fire in your absence?

How much work did it take you to find this house and identify it as a good deal?

. How confident are you that if you wholesale it to another investor you will find more good deals similar to this one?

. How much is the potential gain on this house between acquisition, holding, and all related costs in relation to the net ARV?

. If you did ever do the rehab and sold it are you accounting for real estate agent commissions?

. Over all would this house serve you better as a buy and hold, rent it, refinance it , then repeat in the future?

I see  you live in Philly. What is the attitude of your local building department on owners who have houses they are not actively repairing. I own a house in Penn state and was threatened with a lien on my house if I did not show signs of making immediate improvement but that is in Pittsburgh so I am asking about Philly. I was threatened with a $6,000.00 fine so of course I got the work started right away all be it before I was truly ready to deal with that expense.

If you chose not to wholesale it but keep it can you pay for it to be boarded up and made safe including keeping the landscaping and surrounding areas clean and likewise safe?

Do you live close enough to drive by or visit the house frequently to make sure of its continued condition?

Would it make sense for you to seek a joint venture with another investor or a contractor?

Is there any possibility of you living in the house as is while you make repairs? I am assuming not but I am still asking?

You say you cannot afford the rehab costs or a loan but do you have any money you can use to at least get started with the repairs?

Do you have  enough for all the needed materials but simply lack the money to pay for the labor needed to effect the repairs in total?

Try answering the above questions and then I can see if I can imagine a manner for you to proceed. No guarantees mind you I am simply thinking of what might be possible for you.