First time flip and need advice on finding funding

Rehabbing & House Flipping
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First time flip and need advice on finding funding

Brian Figueiredo
Member since 2019 · 5 posts · 0 votes

I am looking to get into house flipping as a starting off point with a long term goal of having multiple rentals and doing an occasional flip. I contact a company named "All in one real estate consultants". Apparently, they are fairly well recommended and basically loan you 70% of the ARV of the home you want to flip. Initially, they take up to 50% of the profit, which bothers me to a degree BUT I also understand they are posting the most risk, but after several deals, they take less, down to 10%, or so I am told. Has anyone dealt with them? Is this a fairly common type of company/lender in the real estate game? I don't really know any other way to get the money to start this. I have a construction background (built houses) and excellent connections for all that's needed to rehab a home. I own a home but have a small HELOC on it and don't want to tap my 401K. my credit is pretty good with a 740 FICO.

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Jason Coyle
Contractor · Fort Worth, TX · Member since 2017 · 100 posts · 49 votes
7y

Most hard money lenders are asset based, with pretty minimum credit required. 70% of ARV is pretty standard. you will of course pay percentage and points on the money, but never heard of anyone wanting a cut of the profit?

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  • Jason Coyle
    Contractor · Fort Worth, TX · Member since 2017 · 100 posts · 49 votes
    7y

    Most hard money lenders are asset based, with pretty minimum credit required. 70% of ARV is pretty standard. you will of course pay percentage and points on the money, but never heard of anyone wanting a cut of the profit?

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  • Scott Scheel
    Flipper/Rehabber · Fort Lauderdale-Miami-Boca Raton, FL · Member since 2017 · 130 posts · 65 votes
    7y

    @Jason Coyle I agree, that does seem odd that "they take up to 50% of the profit". I can understand a partnership where profits are split 50/50, but not from a HML.

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  • Jason Coyle
    Contractor · Fort Worth, TX · Member since 2017 · 100 posts · 49 votes
    7y

    Maybe it's a special program where they dont charge points or interest in return for a portion of the profit, but seems like the loans would have to be privately funded for terms like that?

    I have seen some of these "one stop shop" REI companies recently that likely have a structure similar to this, but haven't looked into them. Seems a little sketchy and probably more expensive than going straight hard money depending on the spread?

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  • Brian Figueiredo
    OP
    Member since 2019 · 5 posts · 0 votes
    7y

    Gents, thank you. It seemed odd to me as well BUT so does the concept of giving someone money for basically their word and a credit score (that seems odd to be I guess due to all the hoops I jumped through get my mortgages in the past), but I’m glad I’m not the only one who thinks it’s strange. To answer the question above, yes, they ALSO charge points AND interest. I guess I should look for a hard money lender who DOESNT do that since you guys both say the norm is no cut of the profit. 

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  • Ryan BlakePro Member
    Lender · TX · Member since 2018 · 936 posts · 713 votes
    7y

    @Brian Figueiredo Both @Jason Coyle and @Scott Scheel are right. This is very strange. It is a weird partnership thing. I would suggest using a standard HML company. They will fund very similar to what this group is offering without taking a cut of the profit. Please post below and tag me if you have any hard money questions.

    [email protected]214-420-7324
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  • Brian Figueiredo
    OP
    Member since 2019 · 5 posts · 0 votes
    7y

    Ryan,

    I really appreciate your reply. The only thing I can think of with this company a particular doing business the way that they do is possibly because they require no money at all other than $700 to do an appraisal and some other paperwork. I've been told a lot of HM el I really appreciate your reply. The only thing I can think of with this company in particular doing business the way that they do is possibly because they require no money at all other than $700 to do an appraisal and some other paperwork. I've been told a lot of HML's Will require a bit of money down before they'll lend you anything and some will only lend 60 to 65%. My problem is I have absolutely zero to put down due to my financial situation. I'm not broke and I'm not poor. But I just do not have extra money, which is why am actually pursuing doing something like this so I can get a second stream of income.

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  • Mike Burkett
    Lender · Colorado Springs, CO · Member since 2018 · 241 posts · 97 votes
    7y

    @Brian Figueiredo  Brian, there are two pieces of capital in these transactions, equity, and debt.  You are asking the lender to put up 100% of the risk capital for you project and you have no experience in this business.  The lender is putting up 100% of the debt and equity and taking 100% of the risk.  "Lenders" don't take 100% of the risk.  This lender is providing the equity as well.  That makes him a joint venture partner.  For that, he is asking to be compensated for his equity with a % of the profits.   In addition, you are paying him interest for his debt contribution.  

    If you only want to pay interest and origination fees for the debt portion, then you would need to bring a part or all of the equity.  

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  • Brian Figueiredo
    OP
    Member since 2019 · 5 posts · 0 votes
    7y

    Mike, I mentioned that I kind of understood that. It makes sense to me. I’m basically getting everything on my word. My main concern was if companies are legit as it seems too good to be true. Then again, I guess giving up 50% of your profit isn’t “too good” but again, I kind of get it. You’re 100% right. They’re hedging all the risk. I can’t rightfully expect to reap 100% of the reward. I think that in the long run, it’s kind of worth it FOR ME as I’m not risking much but if I do the right thing, I get pretty well compensated. 

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  • Ashley Larsen
    Member since 2018 · 6 posts · 1 vote
    7y

    @Brian Figueiredo, I'm with everyone else giving up 50% of the profit is very strange.  But No matter how you do it your going to have to come out of pocket with something to close.  Even if you get 100% financing from someone you're still going to need to pay the points and title fees/insurance.   And then your going to need to front your rehab up until your first draw unless you have someone that will be willing to do the work without pay until you get you draw.  Contrary to what you hear, you'll come out of pocket a bit majority of the time, but if you do your numbers back you'll recoup it all and then some in the end! 

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  • Casey Spivey
    Realtor · Evansville, IN · Member since 2008 · 55 posts · 10 votes
    7y

    Hmm, odd. So they will give you up to 70% ARV up front?

    Contact Jason at Lending One and see what he can do for you. 

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  • Brian Figueiredo
    OP
    Member since 2019 · 5 posts · 0 votes
    7y

    All this info is so helpful. Very glad I signed up for this site. I don’t Jason from lending one. Is there a directory on here or something of that nature?

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