Trying to get funding for rehabs. Everyone is saying, "NOOOO! NOOOO! NO!"

Rehabbing & House Flipping
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Trying to get funding for rehabs. Everyone is saying, "NOOOO! NOOOO! NO!"

Nick Dallaire
Developer · Boston, MA · Member since 2011 · 14 posts · 6 votes

There are SOME downsides to being a "young buck" in the real estate game. Being a 23 year old I find it very difficult to aquire any funding for rehabs or any type of deal for that matter. I have no property for collateral and limited credit experience given my young age. I just have to be patient and save my hard earned mulah lol A couple more wholesale deals under my belt and maybe I will have enough capital to pounce on a property myself and rehab the crap out of it. Until then, its just a waiting game for me. "In the end, you're measured not by what you undertake but by what you finally accomplish" - Donald Trump (1946)

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Anson YoungBusiness Member
Flipper/Rehabber · Denver, CO · Member since 2009 · 1k+ posts · 726 votes
14y
Originally posted by Lokesh W.:
Hard money lenders require huge down payment and points. Best thing would be to continue wholesaling. For Rehab project, initially do a couple of joint ventures with someone who has experience.

Hm, all my flips have been zero out of pocket, with the HML funding 100% of fix and purchase. *some* requite 'huge down payment', some dont. Find the ones that dont and show them the numbers on the property. If they bypass you move to the next guy. When you find someone who believes in the project, go back to the other guys when it closes and show them the HUD-1, not only for how much they missed out on making, but that you mean business.

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  • Mark UpdegraffBusiness Member
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 706 votes
    14y

    Stay strong, stay focused. And yes, SAVE your money. And no, I don't want to hear how you "saved" $10 by using a coupon. The only way to save is to NOT SPEND :D I had good luck using BoA for my first financing. They're a terrible company, run painfully bad... but they do have decent rates, low down, and let you do sellers concessions.

    Good luck!
    Mark

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  • Justin SilverioPro Member
    Developer · Andover, MA · Member since 2008 · 1k+ posts · 489 votes
    14y

    Conventional financing is difficult to obtain in your situation. Have you tried talking to a hard money lender?

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  • Richard Warner
    Portland, OR · Member since 2012 · 66 posts · 30 votes
    14y

    What about trying your luck at some sort of seller finance deal? How much do you have saved up now? I'm 22 and have approx 15k to invest, I'm still studying and havn't attempted to obtain a conventional loan yet but I know it will be tough! Creativity! Good Luck!

    0Reply
  • Joel Soforenko
    Real Estate Lender · East Longmeadow, MA · Member since 2009 · 176 posts · 21 votes
    14y

    Your enthusiasm is commendable.

    Finding financing will not be your only stumbling block. Lenders, be they conventional or private money, will be looking for your experience in the fix/flip process.

    This is an issue no matter what age a person starts in this business. Lenders want their money back and as much as possible want to stack the odds in their favor.

    Lenders look for experience in all phases of the process: purchasing, rehabbing, marketing and selling. If a person does not have this themeselves, I always advise partnering up on the first two or three projects.

    This wiill give you the advantage of learning from a person with the requisite experience and will allow you to become part of a project much sooner then going it alone.

    Will it cost you in dollars of profit? Yes. But the learnng, experience and lender familiarity will be well worth it.

    The local REI Clubs is a good place to find a partner/mentor.

    Sounds like you have an excellent start.

    3Reply
  • James Hiddle
    Altus, OK · Member since 2008 · 2k+ posts · 690 votes
    14y
    Originally posted by Justin Silverio:
    Conventional financing is difficult to obtain in your situation. Have you tried talking to a hard money lender?

    Hard money lenders these days are just as tough to credit challenged people as conventional lenders are.

    0Reply
  • Lokesh W.
    Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
    14y

    Hard money lenders require huge down payment and points. Best thing would be to continue wholesaling. For Rehab project, initially do a couple of joint ventures with someone who has experience.

    0Reply
  • James Vermillion
    Lexington, KY · Member since 2009 · 2k+ posts · 1k+ votes
    14y

    Nick Dallaire,you said everyone says no...Can you tell us who everyone is so we know which options you have tried? I also started investing when I was 23 (first rehab purchased at 24) and having a business partner has/is very beneficial in increasing the lending opportunities we have. Have you been to every community bank in your area? Do you have an LLC setup? If so, we talked to a lot of the commercial lenders at the small banks and had a lot of success. I am sure you have already tried these but I wanted to make sure. If not, it may be worth a shot.

    Make sure you go in fully prepared with a business plan, ready to talk about your goals.

    2Reply
  • Edward Hooks
    Real Estate Broker · Castle Rock, CO · Member since 2011 · 22 posts · 4 votes
    14y

    At the Conference Last Week Kevin Amolsch presented his perspective on HML (Google his name with PINE ). IF I understood him correctly, An interesting twist in his model I found was that as part of his HML process he gets REFI pre qualified to know if the deal will fly once rehabbed.

    I would check in with him, I am sure he would be happy to speak to you even if you are not in Colorado or Minnesota where he is licensed.

    0Reply
  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
    14y

    Nick Dallaire, not all hard money programs require huge downpayments. However, as a general rule of thumb, the lower the downpayment, the higher the cost. The more skin you have in the game, the better terms you can negotiate. It is not impossible to get 100% financing, but of course it will therefore be expensive.

    You might also consider finding a partner who doesn't want to manage a rehab but who is willing to put up your downpayment money. That will help compensate for your lack of experience, because, as others have said, experience matters. But you have to start somewhere. Just make sure your end value is solid, and that you plan to sell below retail in the MA market.

    1Reply
  • Anson YoungBusiness Member
    Flipper/Rehabber · Denver, CO · Member since 2009 · 1k+ posts · 726 votes
    14y
    Originally posted by Lokesh W.:
    Hard money lenders require huge down payment and points. Best thing would be to continue wholesaling. For Rehab project, initially do a couple of joint ventures with someone who has experience.

    Hm, all my flips have been zero out of pocket, with the HML funding 100% of fix and purchase. *some* requite 'huge down payment', some dont. Find the ones that dont and show them the numbers on the property. If they bypass you move to the next guy. When you find someone who believes in the project, go back to the other guys when it closes and show them the HUD-1, not only for how much they missed out on making, but that you mean business.

    Podcast Guest on Show #235
    4Reply
  • Barry Ratliff
    Flipper/Rehabber · Temple, TX · Member since 2008 · 169 posts · 46 votes
    14y

    Anson what HML still does "100%"? What ARV? I'm in Killeen/Temple Tx and have several rehabs that be done.

    0Reply
  • Anson YoungBusiness Member
    Flipper/Rehabber · Denver, CO · Member since 2009 · 1k+ posts · 726 votes
    14y
    Originally posted by Barry Ratliff:
    Anson what HML still does "100%"? What ARV? I'm in Killeen/Temple Tx and have several rehabs that be done.

    I have 3 just off the top of my head. Including one well advertised outfit here in Denver (they host a free REI happy hour thats a great alternative to the paid REI clubs in denver).

    70-75% ARV, depending on the strength of the project.
    My guy does 100%, points rolled on the back end, monthly interest only payments. 14% +2-3 points

    Podcast Guest on Show #235
    1Reply
  • Eduardo A.
    Sandy Springs, GA · Member since 2011 · 126 posts · 31 votes
    14y

    Anson Young Wow, that's a HELL of a HML. I haven't found one that does 100% anywhere.

    0Reply
  • Lokesh W.
    Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
    14y

    @Anson Young
    THat's a great deal that you have on funding! In Wisconsin there are not many hard money lenders so I know their terms are not even close to 100% financing.

    I have thought about the nationwide hard money lenders. Any suggestion on the nationwide hard money lenders?

    0Reply
  • Ray S.
    Property Manager · houston, TX · Member since 2010 · 48 posts · 20 votes
    14y

    Nick here is the secret formula that about a million people already know. You have to get out of the stands and get on the playing field and expect to get knocked down.

    If you were in Houston and you found a deal, I would either give you the money or partner with you. Dont belevie me come down here and find a deal. If I am willing to do that then there are people in your community who are willing to do the same.

    This requires networking. Most real estate is local, so even though this site is great, you have to know who the players are where you are. It takes me about 10 minutes to figure out if a deal is good, just like a million other people. Now once you find one of these people who have done this before, (maybe half million people), it then takes them about a minute to say yes as long as it works for them.

    Okay maybe I am exaggerating, but there are a lot of people who will partner or loan money and you just have to go where they hang out and make some friends.

    By the way in my experience the real money is figuring out to hold on to things. Thats where becoming an expert in partnerships will make you a wealthy person.

    1Reply
  • Kevin AmolschBusiness Member
    Real Estate Lender · Wheat Ridge, CO · Member since 2009 · 113 posts · 59 votes
    14y

    I bought my first house when I was 21 and owned rentals and was doing flips when I was 23. If age is stopping you it is because you are letting it.

    Hard money lenders do loan 100% but it wont be the national ones. Too risky. You need local hard money lenders that know the area and are not afraid of taking a house back. We loan 100% in CO because we understand the business and have been very successful with houses we have had to take back. To clarify, if you are using my money to rehab but you exit strategy is to refinance and keep the house I want to be sure you qualify for the refinance. If you are going to flip I am most concerned with a quality deal, experience or that you are working with someone with experience and you have enough reserves to hand problems. I don’t care too much about credit or income. I think other quality hard money lenders are similar.

    If the hard money lender does want down payment don’t be greedy and find a partner to provide the down payment. If you do it right you will only share profit on one or two deals and you will be off and running on your own.

    I think it is great you are doing this young and have no doubt want you get past the mindset that it is holding you back you will have a lot of success.

    3Reply
  • J. Gary
    Flipper · Chicago, IL · Member since 2012 · 35 posts · 4 votes
    14y

    @Anson Young, I've got a lender that puts up 100% too. Expensive as can be, but very valuable in this market.

    Nick, just keep at it and stay persistent, you will be successful. I started a bit like you.

    0Reply
  • Kevin PolitePro Member
    Investor · Decatur Atlanta, GA · Member since 2011 · 612 posts · 232 votes
    14y

    I just received my ok for a HELOC loan on one of my rental properties from Wells Fargo. It was a comedy of errors from them recording the wrong property, to losing documents, to telling me we could change the title from LLC to me at closing and finding out right before closing we couldn't. Perhaps we I shouldn't mention this until I actually close on Friday.

    0Reply
  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
    14y

    Hard money is just as local as real estate. What is customary in Colorado may not be the case in Massachusetts.

    In addition, each lender has their preferred locations and types of deals. If you are hitting their sweet spot, they may do it for less cash.

    National guys in general have to compensate for not knowing the area, so they are more restrictive and expensive. This is a generalization, not an absolute.

    1Reply
  • Matt Kearney
    Real Estate Investor · Springfield, MA · Member since 2009 · 142 posts · 103 votes
    14y

    Hi Nick,

    You need to try to find some private money lenders.... and you need to start within your sphere of influence..... family, friends, business contacts etc...

    I did my first rehab deal in my early twenties. I did it with 100% private money funded by one of my best friends dad, who is a very successful doctor and owns several hotels and apartment buildings. I found an awesome deal and I presented it to him and asked if he would be willing to fund it. He said yes!!! and the rest is history!!

    0Reply
  • Kali Adair
    Chepachet, RI · Member since 2015 · 7 posts · 1 vote
    11y
    Originally posted by @Anson Young:
    Originally posted by Barry Ratliff:
    Anson what HML still does "100%"? What ARV? I'm in Killeen/Temple Tx and have several rehabs that be done.

    I have 3 just off the top of my head. Including one well advertised outfit here in Denver (they host a free REI happy hour thats a great alternative to the paid REI clubs in denver).

    70-75% ARV, depending on the strength of the project.
    My guy does 100%, points rolled on the back end, monthly interest only payments. 14% +2-3 points

    0Reply
  • Kali Adair
    Chepachet, RI · Member since 2015 · 7 posts · 1 vote
    11y

    Hi Anson,

    I'm on my first flip, have a great property secured.  I'd like to connect with this lender to see if they fund in Massachusetts.  Please, would you pass along the info?  Thanks, Kate

    0Reply
  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
    11y

    Kate, if you want to tag some, especially in a thread that is 3 years old, type @ and the beginning of their name, then notice the dropdown below this box and click on their name.

    Like this:  @Anson Young 

    Otherwise he'd never see this.

    Also, what works in Colorado won't necessarily be the case here.  

    1Reply
  • Jesse T.
    Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
    11y

    @Nick Dallaire 

    Being young does present some challenges in real estate.  However it also often gives you flexibility that most people will not have.  

    Being young and starting out, I would focus on acquiring a residence that can be converted into an investment.  House hacking is a common strategy.  Another would be to live-in a property and flip it.

    0Reply
  • Account Closed
    Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
    11y

    Someone said no to you? 

    Welcome to real estate! :) :)

    They say no to me every day and I love it :) Keep chugging, you'll get to 'yes.' :)

    0Reply
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