Introduction & my game plan

[Shawn Finley]

Hello! I am new here and sort of stumbled upon the site while trying to answer some specific questions and brainstorm my way (somewhat blindly) into my goals, and I see now theres so much more info here that I'm going to be reading for a while! I'll start off by saying that I am currently a foreman for a home builder, and so am approaching the world of house flipping from the Contractor side as opposed to the Real Estate side, and with that in mind, please pardon my ignorance in many areas--although I think this may be why most of the information I find doesn't quite fit my needs.

My name is Shawn, and I am trying to work my way into my first "official" home flip. Over the past few years, my wife and I rehabbed our home and sold it with enough of a profit to fund a move from Central Oregon to Kansas City to where my wife's family lives, purchase a new (albeit much smaller) home and make a few improvements to it, cover medical expenses for our baby boy who was born a couple months after we moved, and allowed me to take a few months off work to stay home with my little family. Along with the move, I made a big career change from a sales and product-line-management job that paid great and in most respects was a DREAM job, just not my dream...into doing what I really enjoy, which is working on houses. 

As above mentioned, I am currently the foreman for an small, but established Home Builder and Remodeler, and have been honing my skills and knowledge for the past year, and mustering up the courage to start my own remodeling and home improvement business. On our most recent project (a HUGE remodel for some pretty particular clients...) I started thinking about the kind of customers I wanted to attract, and that "Man, I really wish I could just work for myself..." and that's when my ideas started to form. I have always been interested in flipping homes, but figured a person had to have quite a bit of money in the bank to get going, and as a means to survive until the property sold--but it occurred to me that perhaps I could hire myself (or rather my newly formed construction company) to be the prime contractor on my flips, and therefore I could take a draw on the construction funds during the flip so I wouldn't starve to death (you know, until I'm swimming in cash and don't have to worry about those things, right??). Of course when the property sold I would then also benefit from the profits on the sale. 

I can't seem to find any info on anybody who does this and so am nervous that maybe I'm missing something? I realize this model doesn't scale very well beyond more than a few houses at a time, and only a handful per year, but at this point in my life, I'm ok with that. I am a pretty simple guy, and enjoy the satisfaction of a hard days work with my bare hands that I used to create something, or make something better. Perhaps that will change some day, and I'll want to spend all my efforts hunting for new deals, and will hire out all my work, and that's ok--I'll adjust when the time comes, but for now...I want to get my hands dirty. 

So I ask, is this a feasible plan overall? Or should I consider getting into flipping from a different angle?

More specifics about my ideas here: I plan to use a hard-money lender to finance the flip, and will tap into my current home's equity to cover closing and carrying costs, as well as contribute a little to the capital of my LLC so I can cover the initial construction work until I can take a draw on the construction funds from the loan based on the value I have put into the house (I gather that is how hard money lenders operate, yes?). Essentially, I intend to run my LLC as if I had been hired to do the work by any other client--the client will just happen to be me, wearing my real estate investor hat. I intend to hire an agent to help me find and sell my homes until I see it appropriate to get my license and handle that aspect myself.

Thanks in advance for any feedback or thoughts!

[Dan Krupa]

@Shawn Finley welcome and you are simply missing some key info. I started flipping over in Parkville area nine months ago. You don't need huge sums of money. Nor do you need hard money lenders. As long as you can come up with 20% of the purchase of a property there is a great local bank that will fund the rest. Which will allow you to pay yourself as the prime contractor and pay subs and for material.

How it works: (easy math example) You find a property where the ARV would be 150k fixed up. It needs 50k of work and you can buy the property for 70k. (these are realistic numbers for where we live) In this scenario, you would simply need to bring 28k to the table. The bank would lend the additional 42k to finish the purchase and up to 80% of the ARV of 150k. 80% of 150k = 120k minus the 70k you used to purchase, which gives you 50k to do the renovations. Rates are 6% interest on this loan per month and you have six months to complete it. (these terms are unbeatable)

We use this product on almost all of our flips. We are finished 5 flips in 9 months but are 2 weeks away from having two additional flips done. (So 7 flips in 9.5 months, plus more under contract)

Anyways, don't reinvent the wheel. Reach out to us who are doing this full time. (I am a MO agent and GC) Join the Northland REI meet up group in Parkville. Lots of people, including myself, who will gladly help you out as you start this journey.

Hope to hear from you soon. Dan