Diary of a newbie getting started in the Flip game- Fresno, Ca

[Yosef Fares]

I wanted to start this topic just in case there are any other newbies going through the same start as I am. That's just educating yourself for your first flip and trying to figure out how to the finance the first deal without huge cash reserve. Getting started is rather a tough deal. First convincing my wife to buy into the process and start learning along with me was a process in its own. The bigger pockets website has been very valuable to me. I first started and got introduced to the site through the webinar "How to Invest in Real Estate While Working a Full-Time Job." This caught my interest because my wife and I both have full time jobs. In the past we bought and held properties and have two rentals and a primary resident as of now. We wan't to get into flipping houses because of the potential profit you can make. We then want to re-invest and buy & hold a few. My dad is a real estate agent and is successful at it so i have a knowledge source there as well. I also know a few flippers and investors in the area that have helped me along the way. The podcast also has been a great source of knowledge and i listen to them when ever I can. I've learned a lot from the bigger pockets website and from its members. 

Right now I'm trying to figure out how to fund my first project. I've saved up money to put a down payment on another rental but have decided to try and flip with that money. So wanting to know if its even possible I began my research on flipping. I first decided to meet with some lenders. Wells Fargo was our first meeting and we sat down with a nice guy that was very helpful on breaking down how mortgages work on investment properties. Because of my knowledge I acquired through my education phase i was able to talk the same language and ask the right questions in this meeting. We talked about 203k loans, Conventional, and a renovation loan. I was surprised that the bank offered the renovation loan. This loan would finance the purchase of the house and the renovation money needed to put the house back on the market. This is not a 203k loan because FHA requirements are not attached. The way the loan officer explained it, the information was very limited and said that there was a separate department for these type of loans. He said from his understanding you need to have a walk thru with 2-3 contractors done and pick the estimated rehab cost of your choice. Then the loan is done on a 110% of the ARV so the way he explained it is if you buy a house at $80,000 the rehab cost $20,000 you are paying on a the loan at 110% of $100,000 so the loan will be at $110,000 and your down payment is based off of that number. You only need to put 10% down for this kind of loan. The interest would be at 5%. We are setting up a meeting with the loan officer at Wells Fargo who specializes in this particular loan to get more information.

A couple days later we meet with a conventional loan officer for a smaller firm and found out how much they would qualify us for. They can't loan the renovation money but qualified us for a good amount. They told us we had to have a 6 month reserve on our rentals and our new investment property (Wells Fargo said the same thing). But they tried to tell us we had to hold on to the new property for 6 months. This raised a red flag because Wells Fargo did not say that at all. They only said if we sold to an FHA buyer we had to hold on to the property for 90 days if it were a conventional loan buyer we could sell when ever we wanted to. So i explained that to the lady and she stepped out of the office to talk with a supervisor. When she came back in, she told us that we were correct. The lender takes a hit i guess if the loan is sold off before 6 months. Again my education process allowed me to ask the right questions

That same night we attended a Guru seminar for Tarek and Christina on flip or flop. I was disappointed that they were not there but i guess that's the norm for these deals. They tried to sell us on their model and pay for a three day education course. The only thing that real grabbed my interest was the access to the lenders an how that worked. But at the break when you start asking questions about the lending process and how it works they let you know it will all be explained at the three day seminar. That was it for me we left at the intermission I could see how this thing was going to go. From my education process I read other members post on this exact guru deal and new what to expect.

So far this has been my experience in this process of trying to start my first flip. I am currently gathering the knowledge of acquiring private money. I'm Listing to podcast and webinars on that very subject. I'm also going to sit down with a hard money lender to see what that would look like. I will try and post anything new here that i come across. I look forward to comments and advice from you guys. There isn't much i can offer to the site besides my current experience and the process I'm going through.