How do you Rehab/Flip 20+ houses a year? Few questions please

Question

Hello, I've been reading a few posts regarding rehabbing and I've read that a few members on here do more than 20+ houses a year. Are local banks financing a large amount of houses at one time? I don't think the hard part is building systems, hustling, etct. I believe the financing would be hard part to finance all of these. Financing / banking strategies would be greatly appreciated. Thank you.

PS- I heard a guy here doing over 100+ houses a year. How is that possible?

Thank you again.

PS- I heard a guy here doing over 100+ houses a year.  How is that possible?

Thank you again.

Steve L. · Answer

There is actually a lot of money chasing successful flippers.  Most of the money is very expensive though.

Cheapest to most expensive here is where the money will come from.

- Personal Funds
- Bank Money / Lines of Credit
- Private Money (Lazy Money)
- Equity Fund / Private Placement
- Hard Money
- Money Partner on the Deal

I use a mix of hard money, my own money and private money.  I have not been successful convincing any of the local banks to work with my business yet.

These days in pretty much all of the above cases you will need some of your $$ in the game (except maybe a full on money partner or private placement) and you will have to slowly work your way up to doing volume.

Some of the big guys around here are backed by hedge funds, have a massive pool of their own funds or have many different money partners.  Every so often some of the biggest players will get a blanket commercial loan from a bank on a group of properties for 5 million - 25 million which I would imagine is only a small piece of their outlay.

Going to that level is a totally different game, you will have a bunch of employees, substantial overhead and a big pot of money which basically forces you to continue buying so you don't have to give the money back and cut your employees.

The bottleneck really is finding the great / profitable deals. The money has always seems to show up for me.

J Scott · Answer

The others have pretty much nailed it.  A combination of personal cash, portfolio/bank loans and private money is how I do it, but like those above, the bottleneck is finding enough deals that make sense.

Ryan Pyle · Answer

I've been at the 10/yr level for a few years now. I'd love to get to 20. My problem is I can't find enough good deals to get there. I would really have to increase my risk by accepting lower margin deals. In this market I'm just not willing to do that, especially with prices continuing to fall.

BTW...once you get some experience under your belt, the money is pretty easy to find. I use a combination of my own money, lines of credit, private money and hard money.

Mark Yuschak · Answer

My issue is never finding the money.  It seems that I've had countless people offering up their money for me to borrow since they know I can produce, and I pay high interest rates.  However, my issue is what Ryan and Jason already stated: it's finding the right deals.  Right now I'm down to two concurrent flips.  When these are done, I have nothing else in the pipeline.  I'm never too quick to jump on thin deals since it could be easy to be upside down on a property.  I just won't do it.

Rob Gillespie · Answer

Be careful comparing your personal reality to everyone's social mask. What I mean by this, is you have know idea if they are profitable, or just doing deals to keep cash flow and living their lives in a giant ponzi scheme! 
When I first got in the biz, I used to meet folks telling me about all of the deals they were doing, and it turns out they were in foreclosure and bankruptcy in no time flat. 
I would focus on quality over quantity. I have had single deals that have netted me over 50k, and I have done multiple ones in volume that took up a ton of time and resources that I barely got out of alive!
I am not saying you cant do a  bunch of deals, but grow into it slowly, and make sure you are liquid! Good luck!

Bill Gulley · Answer

SOmething that I have seen is that investors have asked how the get the consturction financing after the purchase taken care of. For those looking at in that light, you should approach the bank or primary lender with the paln of improvements, additions/improvements with the purchase money financing. The plans and specifications should be going to the appraiser for the initial loan. You can then get 70  to 80% of the finished value. This way, the appraisal will be based on the finished product rather than the "as is" value.

80% is still available in my area with my regional bank. Loans are made on a case by case basis, and there is none of your skin requirement,so long as it makes sence.

If you are still dealing with your bank in the real estate department as a flipper and you have been doing it for say 5 years, you need to start talking to them in the commercial loan arena.
You need to negoiate for loans that fit your needs and understand that it has to be as or more profitable for the bank than giving you the street price on a portfolioed RE loan.

Pledging other properties in a blanket loan can provide 100% of your financing needs for the next property. You'll be working off a credit limit rather than the next property being the limiting factor.

Blanket loans are not just for bankes, your other sources of funds can also work off this concept if you can point out the advantages. It is more paper work so to speak, so some hard money lenders may shy away, not saying others will, but can.

Get to the commercial real estate side and treat your business like a process manufacture with "floor planning" instead of a one at a time real estate investor.

Account Closed · Answer

At some point your financing will have to come from both banks and private individuals or firms. One big factor is your debt to equity ratio, as you purchase more homes, this number gets bigger. When flipping you liquidate the property which alleviates yiur debt burden, but doing many homes at onces may cause a banker to be skeptical. After you win the bankers trust and develop a relationship it could improveyour chances of borrowing. This is in fact the one of the limitations you allude to. As you get your track record audited and formalized, you may be able to attract private investors to allocate capital to your real estate "fund" this will allow you increased access to financing.

If one is very successful and has made quite a bit of cash another avenue is private banking. Good luck im sure other posters will have additional more useful advise than myself.

How do you Rehab/Flip 20+ houses a year? Few questions please

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