All Forum Posts by: William Harvey

@Tom Dempsey To touch on the 3 bullets:

1. Best markets for rehabs/flips - personally, I wouldn't get too caught up with this because a flip is something where you are looking to get in and get out as quickly as possible. Especially if you have a high-interest hard money loan. I would find a neighborhood-type property as opposed to rural where it is fairly straightforward to figure out the ARV. As long as you don't expect the market to slide in the immediate future, and as long as you are conservative with the ARV you estimate, you should be okay no matter what market you end up in. I would advise you to focus on a market you know very well. We only flip in the Northern VA market where myself and my partner have lived our whole lives. We know the area very well and can therefore expect less error when it comes to estimating ARV.

2. Best way to get started with little to no money - I would start talking to people and find a good, local HML. If you have a few people you can send a deal to who are interested in funding as a hard money lender, and if you are buying the property well, you can likely get 100% financing and possibly even get the renovations funded as well. For my first flip, we bought at 53% of what the property ended up selling for once it was fixed up, so even with our lack of experience we were still able to get 100% financing plus renovations so we didn't have to put anything into the deal. Had we not bought the property so well though, this likely wouldn't have happened. You make money when you buy, not when you sell!

3. I would talk to someone who has "been there done that" and they can help you know some conservative rehab figures to use when looking at a property. I'd also check out DealSimple, we made this deal analyzer because nothing we found was simple and effective. Knowing your numbers and exactly how much you can pay for a property to be profitable is everything. The biggest metric to focus on is ARV....I can't stress how much (especially in this evolving market) you should focus on being accurate/conservative here. Almost every other item will not blow up the deal if you get it wrong, but ARV almost always can and will.

Also, here is a walkthrough of analyzing a flip that I put together that might be helpful. Feel free to reach out with any more questions and I hope this helps!

@Zac Stiles For the most part, we are just relying on good ole Google and paying $3k or so for leads. We churned through multiple mediocre (at best) ads managers until we found one who is fantastic. Their name is Lead Plug. These Google leads seem to be sporadic, but are by far the best leads we've gotten. They are also the most expensive, but we have been very profitable over the long term using this strategy.

One thing we recently started doing that seems to be promising is sending handwritten notes to people that are going through probate. I think if you are empathetic and overall just a compassionate human, this can be a great channel. Most of the people doing this seem to be morons sending "yellow letter" type mailers to people in a very cold and uncaring way. They basically all sound like "Bummer to hear about your loved one passing away, but if you ever need to sell your house for cash we can help!" 

We've been doing these handwritten and we only send one time so that they are not peppered with mail during a tough time in their lives. My partner @Dan White had a parent pass away years ago and just saw how difficult and overwhelming it can be for a spouse or child to inherit a property and have no clue what to do with it. Because of this, he writes these letters from a place of empathy/experience and simply sets himself up as a resource in case they need a referral for an attorney, contractor, realtor, or if they would simply like to sell the property for cash. 

By doing it this way, we certainly stand out when compared to all the clown show wholesalers sending junk mail and have began getting good responses from this. Time will tell whether this is truly a good marketing channel or not, but so far it has been effective. Even if there is no financial reward and we never get to purchase any house from this, it certainly feels good to be able to assist someone that is in a tough spot. Hope this helps! 

@Jack Wang My personal advice (based on my own experience) would be to find a partner who is well-versed in the construction aspect of things to partner up on the first deal with you. This is exactly how I found my current partner, @Dan White. I was a loan officer at the time and financing came super easy to me, and he was a remodeler in the past and construction came super easy for him. 

Neither of us had ever flipped a house, but collectively, we had the knowledge to do so. I was able to get the hard money secured for this first deal and then my partner handled everything on the construction side of things (dealing with contractors, bids, etc.)

We both did a part of the business that came easy to us, and to this day we continue to flip houses and our skillsets compliment each other's weaknesses. Again, this is what worked for us and is just "food for thought." I now have the knowledge to handle a renovation, and he has the knowledge to handle the financing side of things, but we still continue to stay in our lanes to focus on what we are good at. Hope this helps! 

@Chris Oak My suggestion would be to attempt to find private/hard money lenders that would be willing to do 100% LTV + renovations. You likely won't find this from any of the bigger HML's, I would focus on finding high net worth guys that you can build a relationship with. Every flip I have ever done has been with hard money from private individuals where we get at least 100% of our purchase price and usually also get renovation costs built in too.

The caveat here, especially since you are newer, is that the deal has to be absolutely killer in order to get a lender excited and on board to fund 100% of the purchase plus reno. Our first deal was one we purchased for $170k and put about $50k into it. We got 100% financing plus draws for the reno and the property ended up selling for $320k. We bought for 53% of the ARV as you can see, and this is why the lender was willing to talk the risk. He was experienced and knew that if we ended up failing and he had to take the property back, that he would simply be able to finish the flip himself and still make money. So, because of how well we bought it, it really was a no-lose situation for him.

I can't emphasize enough how important it is to find a great deal. If you do this, and can intelligently explain to a private lender what your plan is and what you are asking for from them, you should be able to do this with little to no money out of your own pocket. 

Best way to do this is to start fostering relationships with guys you know that have money to lend. There are plenty of people out there looking to simply lend money privately and get a return, you just need to find them and show them why investing with you is a great option for them! Definitely easier said than done, but once you do your first one, it should open tons of doors and also give you more leverage when you are negotiating the terms with these lenders. 

For example, on that first flip I mentioned above, we paid 3 points on the front and 12% interest. This is because our lack of experience. Now, we are generally paying .5-1 point and 8-10% because we have a few different lenders we work with and they are willing to do this because they have worked with us in the past and know how we operate. 

Hope this helps!

@Tia Long I am in Virginia so I'm not sure some of the banks we have used would go into Maryland. But if you own a primary residence with some equity, I highly recommend checking out Tower Federal to get a HELOC. They are based in Maryland and have an amazing product where they will go to 100% LTV on a primary residence. I have a HELOC with them on my house I live at and then I use that to fund renovations and such on flips that I do. Hope this helps!

@Brian Fabel I'm certainly not an attorney and this is not legal advice, but I would just simply create an entity (123 Main Street LLC) and then draw up an operating agreement spelling out the roles of each person, their ownership, contribution, etc. There are plenty of OA templates online to choose from and you can tweak based on what verbiage you specifically need, and any advice from an attorney if you choose to talk to one.

Then, move the property into the name of the entity (as long as this won't cause issues with the lender). A title company should be able to help you with this, or you can just do a quit claim deed transfer. 

This goes without saying, but obviously you want to ensure the entity is properly covered, insurance-wise and you want to make sure you are operating the entity based on the laws of whatever state you are in. 

Again, this is just what I would look to do if this is what you were looking to accomplish, but I'm sure you could ask 10 people this same question and get 10 different answers. 

 @Joe Pascale Yes, this is completely possible and really has been exactly what I/we have been doing. I've used the cash generated by flipping to pay living expenses, and also to fund investments in rentals, passive multifamily investments, etc. From personal experience I think this strategy is great. I think of flipping as my "day-job" (that is way better than an actual 9-5 day job) that gives me the cash to fund other ventures that are more long-term. 

Hope this helps!

@Matthew Novelli Check out these links below. I put these together last week going over how to analyze each of the following deal types:

Fix and Flip Analysis

Rental Analysis

BRRRR Analysis

Hope this helps! Feel free to PM me with any more specific questions!

@Evan O'Brien The equity in the property is simply the difference between the current loan balance and the market value or appraised value. 

If you are focused on refinancing the property then you'll be more concerned with the appraised value. This is what someone doing a BRRRR would focus on.

If you are focused on selling the property, then you will be focused on the market value, which is the price someone will be willing to pay for the property. This is what someone doing a flip would focus on. 

If you buy a property for $100k and the original loan is $80k and do a rehab and now the value is $150k based on market or appraised value, you have essentially created $50k in equity. Hope this helps!

@Andrew Weiler We haven't really changed this, nor do we follow an ARV % in the first place. Every deal is different and has different rehab amounts, etc. So buying 2 properties at the same ARV % could lead to 2 completely different outcomes.

In the current environment with the market softening substantially, and rates rising, we are more focused on pegging a rock solid ARV and being very conservative with that. If we think something is $500k ARV, we will probably go a bit lower just to have a buffer and mitigate any further market swings. To me, this is the most important metric to focus on. We shoot for 10% net profit based on ARV, so if we miss the mark here by 10% it could entirely wipe out any profit. Hope this helps!