Hard Money Loan for Fix & Flip

[Jacob Montgomery]

I have $10,000 I am ready to use to make the plunge into Flipping.

I plan to use Hard Money to finance a property with my 10K as a down payment and grow from there.

What are some of your experiences with this strategy?

I am also open to hear alternative strategies.

[Michael Glist]

So I would suggest talking to a few lenders first to make sure you are able to get approved. Although 10k is a nice amount of money it may not be enough to get you started. Assuming that the lender requires only 10% down of the purchase price (which is low for a first time investor) and will fund 100% of the rehab that means on a $50,000 property you would have to bring $5,000 as a down payment. You need to also remember that there will be title fees, taxes, insurance, points, etc. that will also be due at closing. Most lender will also want to see that you have money left over after all closing costs to start making your interest only payments as well as potentially have some reserves to get the rehab started before they release the first construction draw. 

So you will want to talk to a few lenders first to make sure you are good to go. If not you may need to bring on a partner. Yes bringing on a partner means you will have to split the profit, but splitting the profit is not only a great way to learn but 50% of a deal with a partner is better than 0% of a deal by yourself if you can't get funding.