Financing my first flip- Opinions?

Question

Greeting all! I have been a member of the site for a few months now and really enjoying all the info. Thank you to every member who has contributed!

So, Im looking to finally do my first flip and somewhat confused and/or stuck as to how to proceed. I dont personally have much capital but I am pretty certain I can get a loan (family) for anywhere between 10-15k. I was going to use that as the down payment for the flip and try financing the rest through conventional means. My question is this, If I have the funds to pay the down payment, will banks still finance me for the remaining 80% of the loan? Its my understanding that banks will not finance unless the property is inhabitable?

The second part of that question is funding the repairs. Again, my goal is to purchase a property that needs rehabing, but if I spend the 10-15k i have on the down payment, were would I get the funds to pay for the actual rehab? My credit is decent, I've owned my home for about 1.5yrs now, but dont have very much equity, so thats not really an option. Any suggestions or recommendations?

Because of the market im in DC/Metro area, its quite expensive difficult to find properties under the 100k mark which sorta complicates things...

Glenn Espinosa · Answer

Troy Kelly - I hate to break it to you but you need more money. $10k - $15k all in as your contribution is not enought to break into the DC metro area.

I'd start looking into networking with current DC flippers and trying to partner with them.

Spend your time learning how to find real deals. Once you find a real deal, money should follow.

Account Closed · Answer

The homedepot store card helped me when i first started!

Mike Neubauer · Answer

No Problem.

The store card is a good point. If you open a line of credit at Menards or Home Depot, you can get interest free materials for 6months - 1yr. That really stretches your $10-$15k out.

Probates are a great lead to find these fixer upper lease options. They are usually older houses that need updating. The best possibility is finding an unsupervised estate because a judge may be hard to convince on the idea.

The other place to find these is the houses with a FSBO sign in the front yard. They usually won't be getting much activity, and if you are willing to do that plus list the house on the MLS when you are done, they will be quite excited.

Troy Kelly · Answer

@Mike Neubauer - Thanks for the advice. Thats a great option that I had never even thought of. Im going to look into that as a first choice.

@Glenn I am certainly looking to network and meeting other like minded people. I do realize that spreading the cost/risk is a necessity.

Mike Neubauer · Answer

Most HMLs will lend up to 65% of the ARV. At that percentage, you will still make good money using a HML.  You may even find a local bank willing to do it if you have good credit and some personal assets to guarantee. Your other option would be to find someone selling a "beat up" house. Sign an option to purchase it at a set price, with the ability to do rehab. Rehab the house, then sell it. In the end they cash out and get a little more and you profit from your first rehab interest free.

Example: home for sale for $100k
Sign at option to purchase it at the 100k, but explain your intentions. 
Rehab the property for $15k
Sell it for $140k

You just did your first flip with an interest free loan.

You can find people willing to sell in this way on Craigslist. Just record the option contract at the County so they can't sell it out from under you.

Kyle B. · Answer

Troy Kelly, since you can only get so much money in loans from family, I would do some networking at an REI club and see if there is anyone with money that wants to partner on deals (they provide the financing, you do all of the leg work, profits get split). I was actually at a meeting in my area a few weeks back and there was someone just like that attending.

Your other option could be a hard money lender. I have not dealt with these lenders yet, but from what I've read on BP, they lend strictly based on the numbers of the deal. If they know it's a deal where you can get them there money back with room to pay interest (and profit left over for you of course), then I would think they'd lend you the money for it. Keep in mind, this type of money is not cheap. Interest rates could be in the high teens plus you may be required to pay upfront points.

Best of luck though. Hopefully you will get some experienced investors to point you in the right direction on this forum as well.

Kyle

Financing my first flip- Opinions?

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