All Forum Posts by: Chris Jensen

@Miljan Vukovic Plenty of banks will finance 75-80% of the purchase price and 100% of the rehab costs, as long as the project meets their after-repair appraisal requirements. And plenty hard money lenders will do similar. Your challenge will be to come up with capital for the down payment, purchase closing costs and holding costs (taxes, insurance, utilities, etc). Now In your situation, 10,000 isn’t much. Assuming a 25% down payment requirement, $10,000 means you could buy a $40,000 fixer-upper. Not impossible but challenging to find the right deal. The problem is you also need money for purchase closing costs and holding costs. Another option would be to find a great deal and then see if a friend or family member, or a colleague on Bigger Pockets, would be willing to partner with you and provide financial support. Or you could explore wholesaling a few properties to build capital and experience. Bottom line there are ways to get started with 10,000, but getting help will provide more options. And frankly, partnering with someone is a safer and easier way to get started. That’s how I started flipping houses almost a year ago. Best of luck to you! - Chris.

@Sean McElligott The whole idea of the first R in BRRRR is to buy a run-down property and make it nice. There’s a multiplying effect when you rehab a property. As you invest in the rehab, the value of the home should increase. Such that when you’re done, you’ve increased the value above and beyond your total investment (purch price, holding costs and rehab exp). Your goal going into the deal is to find a property that needs enough work, and has enough market potential, so that your total investment ends up being 70-75% of the new market value of the property (ARV). That way you can refinance (third R in BRRRR), leave 20-25% equity in the place as required by the bank, and you get as close as possible to 100% of your total investment back. And then repeat the process with another property (fourth R in BRRRR). In your situation, you can either use your HELOC to cover 100% of your investment, or to cover the down payment and working capital while the bank covers the rehab and rest of purch price (I personally use this option). Either way, at the end of the project you can either pay off your HELOC or do it all again. Hope that helps. Good luck to you! - Chris.

@Cutter David my business partner and I are doing exactly what @Peter Fennig described.  My partner is a local GC who contacted me about partnering up on flipping.  I handle all the financing, insurance, legal, realtor work, and he manages the rehab.  We agree that each brings equal value to the partnership, and as such we split the profits 50/50.  Partnering makes is much easier to get started, because you can draw on each other's experience, skills and background to fill in where you lack.  But key is that you bring something to the partnership that a potential partner values.  If you're looking for someone who can handle the financing, then the expectation would be that you are capable and experienced enough to manage the rehab.  Best of luck to you.

@Brennan Doherty using your parents HELOC to purchase the property and your own funds to do the rehab is a great way to start. Being a cash buyer often helps bring the price down a bit if the seller knows they can close quickly. It opens up possibilities for you to buy foreclosed properties and auction properties, many of which don't accept financing. It may be more difficult to find additional financing if they don't feel comfortable covering 100% of the purchase price, but definitely check around because you never know. I won't pretend to know all the different options available to you, but there are many to explore.

For your BRRRR strategy, you'll want to make sure that your all-in cost (purchase price, rehab costs, holding costs, etc) is no more than 70-75% of the estimated ARV (market price after all rehab is complete). This is because your bank will require you to have 20-25% equity in the property after you refinance. You'll read all about that in various BRRRR books and forums. Staying as close to that 70-75% mark will ensure you get most if not all your parents and your money back. Then you can turn around and do it again. That's the beauty of BRRRR, assuming you find the right deals.

I hope that helps.

@Brendan Turner I partnered with a general contractor who knows rehabbing and has time, but doesn't have financial resources. I don't have the time or detailed knowledge, but I have plenty of financial resources.  We each bring skills and background to the partnership that the other doesn't. It's a great way to get started.  I'd recommend a similar partnership for you while you're getting started.  You can decide when you want to venture out on your own.

@Brennan Doherty, I've not done what you're asking about, and others may chime in, but here's my two cents. Your parents can use their HELOC funds however they want, but they'll want to be aware of the associated tax consequences. It really depends how it fits into your purchase plan. If you plan to pay cash, and all funds come from your folks, full steam ahead. If you plan to finance the purchase and use some of their funds as a down payment, the requirements of the financial institution will determine what can/can't be used as source of funds. There should be plenty of good options. Good luck to you.

@Brendan Turner I fully echo the previous comments. I did exactly that a year ago and have done 5 flips since then. You make half as much profit each time, but it gets you in the door and has a much higher chance of success when just starting out. Key will be finding the right partner. Since you have time, few financial resources, and no rehabbing experience, you’ll want a partner with maybe little time but plenty of knowledge and financial resources. Search around BP and your local RE meet-ups and see if you can find someone like that. Then go out and kick some tail! Best of luck to you.

@Glenn Curry Keep looking at different banks. There should be some that will have you put a down payment on the purchase price and then add 100% of the rehab costs into the loan, as long as the ARV comes back close to expected. Our bank does this, and I know others do as well. Local banks and credit unions are always more flexible this way. Good luck.

@Dan L. Some interesting advice already. Here’s what I’d do it if were me. Take out a HELOC on one of the homes. Buy a fixer upper, rehab it, refinance it, get it rented, and then pay off the HELOC. When the dust settles, you’ve added another rental that’s fully updated and ready to go for a long time, and you haven’t permanently changed your equity position in your existing rentals. Then do it all again and continue to build your portfolio. Not rocket science but such a powerful technique! Best of luck to you.

@Matt Crawford Wow that’s guts man, way to go and thanks for sharing your story. Couple things I picked up on that seemed to really get you through this first big project. You studied like crazy, sought out the advice of people who are doing what you’re wanting to do, studied some more, exercised a crazy amount of faith, and then just lept. A lot of times that’s what it takes... prepare, have faith, dive in and then work like mad to make it work!Way to go, and best of luck on your next projects. Chris