Advice on first deal

[Mark Lenox]

Hi, all. I am just getting started as a REI and could use some advice.

I got into contact with another local investor/flipper who also wholesales occasionally. He offered a property wholesale, with this deal analysis:

$150,000 Purchase Price

$25,000 Repair Costs

$225,000 ARV

also holding and transaction costs...

$30,495 Estimated Net Profit

First I told him that my capital is limited to $125,000, to which he replied he can help me get a hard money loan for the rest with no problems. (The above estimate included the financing for a hard money loan of $60,000). So... I took two potential project managers out to look at the property, both with extensive contracting/re-habbing experience. Both of them said the property needs well over $25,000 in repair costs and seemed to be more like $35,000. In addition, neither was willing to take the job because the property is at least 45 minutes away.

Now, the wholesaler is offering a different opportunity to me. He is proposing that I come in as the hard money/equity lender. I would hold a mortgage on the property worth my capital investment of $120,000. I would be paid 10% (annualized) interest or 30% of the profit on the deal, whichever is higher. I would also be involved in the entire flip from start to finish, learning all of the details.

From an educational standpoint, this sounds like a great deal. I get to be educated in REI from a pro while getting paid for it. I just wanted to get some feedback as to whether this sounds too good to be true.

Thanks in advance for your input!

Mark

[Sam B.]

@Mark Lenox Personally, for a first deal, I'd move to something smaller and more manageable, where you can have complete control.

I'm not sure of your relationship with the wholesaler but it doesn't sound solid. It sounds like he wants you in a deal; good, bad or indifferent.

Surely in Cleveland, you can find something more straight forward (albeit smaller) to get your feet wet on?

Jumping into a quarter million dollar first shot isn't ideal IMO, especially when you have an abundance of lower dollar entry level deals close by.