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My goal is to purchase a small apartment building, but as you all know, those are rather expensive. In the meantime, I would like to start flipping cheaper single family homes to save up for a nice down payment for my apartment building. I am ideally looking to purchase homes in the $15k-$30k price range and put $2k-$10k into them for repairs, then flip them. Re-invest my profits and repeat until I have a sizable down payment. I have enough money saved up for a 20% down payment and I'm looking for a hard money or private lender to finance the rest. Do any of you guys have experience with hard money lenders and if so, could you recommend a legit one? I am in Cleveland by the way.
If you buy at $25,000, put $8,000 into it and resell, what is your sales price, and gross profit after costs.
Assume all cash, for analysis.
It really depends on the exact neighborhood or suburb. I would have to do some more digging and research, but I would estimate the sales price could be anywhere from $40k up to $75k
It really depends on the exact neighborhood or suburb. I would have to do some more digging and research, but I would estimate the sales price could be anywhere from $40k up to $75k
$40,000 in that scenario is just not worth it. With costs getting in and out, you make almost nothing, or even lose money. You must get to $60,000+ to even contemplate it.
"Legitimate hard money" made me grin. I have never seen anything but terribly ugly terms.
IMO it is akin to check cashing stores, or pawnshops, without their <sarcasm>charitable and ethical boundaries.</sarcasm>
$40,000 in that scenario is just not worth it. With costs getting in and out, you make almost nothing, or even lose money. You must get to $60,000+ to even contemplate it.
"Legitimate hard money" made me grin. I have never seen anything but terribly ugly terms.
IMO it is akin to check cashing stores, or pawnshops, without their <sarcasm>charitable and ethical boundaries.</sarcasm>
$60k+ is definitely doable. I guess I was just ballparking it. I would obviously have to consult with my realtor to get a better idea. If you believe hard money is a bad route, do you have any other suggestions for financing?
Hard money is expensive and the hard money lenders like to be well covered. You are going to be in a $15,000 purchase for 20% down and borrow all the rest? You won't have much skin in the game. I'm not convinced that a hard money lender would be interested because the loan isn't secured.
If you are really good at securing those $15,000 houses that will turn into a $40,000 house, maybe you could wholesale a few of them, make a couple thousand dollars on each one, until you have a larger down payment. Then you could buy and flip using hard money.
For $15,000, that isn't a very desirable house, so maybe you could get one owner financed. Then put the renovations on your credit card.
If you get hard money, you'll have to work fast and get it done and resold fast, or all your "profit" will go to the lender in interest. That is not cheap money. Hard money lenders get a substantial return for taking the risk, doubly so since you don't yet have a history of successful flips.
The reputable hard money lender I know here does 12% interest with a two-year balloon and I think they want 35% down. They want skin in the game for flippers.
$60k+ is definitely doable. I guess I was just ballparking it. I would obviously have to consult with my realtor to get a better idea. If you believe hard money is a bad route, do you have any other suggestions for financing?
Honestly, IMO, the hard money guys I see are often using guys like you for bird dogs, with no hesitation to take the property over with the 35% or 40% margin you provided with your down payment when you cannot make the balloon. Some of them even run seminars at high tuition to recruit pigeons to play.
Silverfall's hard money example is actually very appealing compared to some with 60 and 90 day balloons. I am accustomed to seeing 35%--40% and 5 to 8 "points" and a shorter balloon.
How to get rolling?
Cash is king.
If you want to go all in, and I truly don't recommend this, you can take a HELOC on your primary, and get more, better, quicker deals with cash. Risk.... High Risk to play, but more control.
I really wonder if there is enough margin to pay an agent in this affair. You are working with very slim margins.
If you need an agent to locate properties, you need to learn to bird dog. And, if your agent is selling them, you need to negotiate expenses.
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