All Forum Posts by: Wendell De Guzman

Hi BP Nation. It's been a while since I've posted something here. 

I know a lot of you wants to flip houses given the popularity of fix-n-flip shows. SO for those of you beginners who don't have much cash and you want to flip a house, here's a 3-step process on how you can do your first fix-n-flip with no cash out of your pocket:

Step 1: Raise Your Downpayment Using a BUSINESS LINE OF CREDIT

Hard money lenders require that you have "skin in the game" or downpayment. Usually, HMLs lends you up to 80% of the purchase price and up to 100% of the renovation cost. You also need to pay points (2-4) and the cost of money (holding cost of 6-12 months). A typical $200,000 project will require about $60,000 cash out of your pocket.

If you have great credit (720 and above), you may be able to qualify for a BUSINESS LINE OF CREDIT. This business line is UNSECURED so you can use it as downpayment money or you can use it for repairs, or whatever you need it for. 

I've seen beginning real estate investors get $40,000, $60,000 even $100,000 in business line of credit. 

There are 2 forms of BLOC - business credit cards and a checkbook line of credit. If you have another business in a legal entity (LLC or corp) that has been in existence for 2 or more years, you may qualify for a checkbook line. Business credit cards are available even for brand new LLCs provided your credit is 720 or higher. You can then convert these business credit cards into cash.

The thing is, you need to get the cash "seasoned" in a bank account for 2-3 months so when your hard money lender sees the cash, that cash will qualify as part of your downpayment or part of your liquid assets.

You can search Biggerpockets for legitimate business line of credit providers or you can ask other BP members who have gotten unsecured BLOCs. BEWARE of BLOC providers who ask for money upfront! The legitimate BLOCs work based on a success fee. If they are successful in lining up BLOCs for you, that's the time you pay. The payment is usually between 8-15% of the BLOC amount they are able to get for you.

Step 2: Line up a Good Deal 

A good deal is where it all starts. So learn what a good deal looks like. Use a spreadsheet like below so you can analyze your leads and decide which lead is worth making an offer on. How do you find good deals? Search my posts here on BP entitled "The Science of Finding Deals" so you can have multiple sources for finding good deals.

Step 3: Line up a Good Hard Money Lender That Works With Newbies or Partner with More Experienced Investors On Your First Deal

Usually HMLs give loans to experienced real estate investors. There are some HMLs who lend to newbies but they charge 16% interest rate and 4-5 points. The thing is - ONCE YOU'VE DONE YOUR FIRST DEAL, the interest rate they charge goes down to 11-13%. So, you can choose to BITE the bullet and pay the HML a higher cost of money or you can partner up with a more experienced investor on your first deal. You can use the fact that you have some cash (which you got from Step 1 above) as your contribution to the partnership. The more experienced investor might have the deal for you and together, you both can qualify for the hard money loan.

Once you sell the property and cash out, you can pay your unsecured business line of credit so you can use that again to buy your next deal and so on.

By properly leveraging 2 different types of loans (unsecured business line of credit and hard money loan), together with finding a great fix-n-flip deal, you can get started rehabbing a house with NO CASH COMING OUT OF YOUR POCKET!

I need houses in Bellwood, Oak Lawn, Cicero and Berwyn.

We have qualified TENANT/BUYER prospects in these 4 cities looking for:

• 3 bed/2 ba/ 1100+ sqft homes
• in the price range of $150K to $250K
• with rents between $1200-$2000/month
• in move in condition or rent-ready condition

These tenant/buyers will buy your property at TOP RETAIL PRICE (or even higher than market value) and will not negotiate on the price. These qualified tenant/buyers have $10,000 downpayment and have verifiable income to pay you the rent over 2-3 years and then they will cash you out.

If you don't need the money from the sale of your property and you like the cashflow you're getting, why not convert your rentals into rent to own.

Here are the reasons why you should do so

1. Rent to own attracts higher quality tenants. They put $10K down + the first month's rent so they tend NOT to default
2. Even if they default, the fact that you get more money upfront, you have more cash as "reserves" so you won't go into negative territory when you have a vacancy
3. With rent to own, you - the Landlord - is not responsible for maintenance and repairs. So you have less headaches and less management
4. Because tenant/buyers tend to stay in your house and not move every year (because they want to become homeowners), you have low or no vacancy
5. Because you don't need a Property Manager for a rent to own property since there are no maintenance calls, your CASHFLOW IS HIGHER with rent to own

If you have a vacant rental property in Bellwood, Oak Lawn, Cicero and Berwyn, and you're interested in converting them to rent to own, let our Acquisition Analyst - Chuck ([email protected]) knows. We have qualified tenant/buyers in these areas who motivated, willing and eager to move into your property. 

We get 50% of the non refundable option fee as our fee for getting you a great tenant/buyer and you keep the rest. Contact me or Chuck NOW. We need 20 houses in each city (total of 80 homes!)

Hi Landlords, and wanna be landlords,

Does anyone provide a TURNKEY Rent to Own?

The typical turnkey property is a long term buy-and-hold. 

Buy-and-hold is good but rent to own is good for the BIG chunk of cash on the back-end. Also, with rent to own, maintenance and repairs are the responsibility of the tenant so that's additional cashflow and less headaches.

Thanks in advance!

Hey BP,

We've been recording a new video series where we cover every aspect of our deals so newbie investors can learn how we operate. In this episode we cover exactly how we acquired, marketed, and sold a 3 flat on Chicago's South side in the South Shore neighborhood.  Please let me know what you think; comments, ideas, complaints :)

Episode 3: How We Sold A 3 Flat in 12 Hours

We come out with an episode once a week so we're taking any and all ideas for future videos that you think could be helpful. Thanks for watching and stay tuned!

Hey BP, Today I'm selling a brick, 4 bedroom 2 bath Single Family House in East Garfield Park on the West side of Chicago. 

Asking $69,000

Rehab: $100,000

ARV: $242,000

Any potential rehabbers are more than welcome to use my company for a hard money loan if you don't have the funds yourself. With a loan covering 75% of the purchase price and 100% of the rehab you're looking at $39,989 in needed cash for this project. 

End profits are around $35,406 giving you an 89% ROI.

Please contact me or @Evan Thoma for more info on this deal. 

[email protected]

If you're a General Contractor in the Chicago area, I have an offer you can NOT refuse.

Are you sick and tired seeing real estate investors whom you work for MAKE the big money and not you?

If you answer YES, then read on. You can NOW be a real estate investor yourself.

If you are doing a great job renovating houses for them then you should get a profit share not the measly 15-20% of the repair budget as your fee.

How?

We can provide you with FUNDING so you can now buy your own projects instead of relying on other real estate investors.

If you have a credit score of 640 and above, you  have done at least 3 projects successfully, then we can PARTNER UP. 

I can put up the downpayment you need to qualify for a hard money loan. I can find you a good hard money lender also. All you need to pay is the points and the holding cost.

Then we can split the profit 60% (to you) and 40% to me.

The downpayment has a cost of money of 12% p.a.

If you're interested in being an investor instead of just managing the contractors for someone else, contact Evan Thoma, our Vice President of Investor Sales at [email protected].

Tell Evan you're interested in our hard money and our Gap Funding programs. Tell him you're a general contractor. You need to submit the following:

1. Proof of your experience (at least 3 projects - pictures of before and after plus the SOW and Repair Cost of each project together with the address of each of these projects)

2. Your general contractor license credentials and which Chicago town/suburb you're registered as a GC

I look forward to hearing from you and partnering with you.

BP Nation - You're welcome :-)

I don't agree completely with your grandfather.

Not worrying about the price only works - IF YOU CAN HOLD onto the property.

The price matters - why? It determines your cashflow. Pay too much and you'll end up in NEGATIVE cashflow territory. How long can you feed ALLIGATORS? Watch out - as they might bite your hand too :-)

And of course if you buy in the war zones, you can lose money if you don't know what you're doing. Just listen to my podcast - http://Biggerpockets.com/show65 to see how one can mess up up and lose money on a buy-and-hold

 Dawn, you're very funny. My tenants have not "butt-dialed" me yet.

But even if they try, they won't because they don't know my number.

I have Property Managers for my multi-family apartments and for my houses, I have the head of my Sales & Leasing department as the one who answers tenant-inquiries. Also, for my houses, I do rent to own so getting calls for maintenance and repairs is rare to begin with.

 Lily,

Instead of walking away, then submit a low ball offer ($50K lower). If the bank says yes, you can always wholesale the deal.