I was member here in 2007 and had run across a once in a life time deal. I had gone for the deal and for 8 months I was in heaven and then the 2008 bubble came and bit me in the butt and I lost 600k worth of property. 4 years later I have come back more experienced in life and ready to try this again. After losing everything I lost my taste for the business and to be completely honest I also lost all my capital. So I have started reading all my books again and have decided that I will have the money to start my business over and I am excited. I do have a general question for the forum and hope to get some sage advice. I have save 37,200 and I will be buying a home with no more than 20,000 down leaving me with 17,200 left in my savings.
My question is if it were your money would you go toward finding a rental to fix or just do a fix and flip. Also in my Area housing prices have gone up not down. So to find a deal I will be looking no less than 20 minutes away, and about 45 minutes away there are a lot of cheap houses on sale. Thanks in advance for all the input.


Part of the equation is what do you WANT to do? Do you want to be a LL or try to rehab/resell and move on? Wow…600k loss on one deal. Was that your first and only deal?
What kind of house will you get for 20k down? What will it rent for? Will it be turn key ready or will you have to use additional funds to rehab just to rent out? If you rehab/resell, how much more will you have to spend to fix it up after you put 20k down? If you decide to get a house to rent out, can you afford to have your money tied up there?
Obviously rentals are the slow road to making money, but I don’t know what you can get there for the money. If you could get a killer deal, rehab, and resell, that would probably be the best if you could stay within budget.


You’re asking about two different things. One is an active, hands-on business. The other is at worst a hobby, and at best a long term investment. The incomes from either of these is different, too. One is passive, and the other is dependent on your ongoing effort/labor.

So, only you can make up your mind if you want to work for money, or make your money work for you? The fact is, you only have $37k. How far is that going to go regardless of which direction you take yourself? Either way, you’re gonna have to figure a way to rinse and repeat using that same $37k. Which brings me to my first suggestion…

Put that money in the bank. Act like you don’t have it.

Since you’ve already lost your working capital once, this should be a really ‘clear’ lesson on why using OPM is a much ‘safer,’ if not more sophisticated approach to investing (or flipping). If you had used someone else’s money back in 2007, your credit may have been damaged, but you’d still have your money… Just saying. It’s easier to get your credit back, then to get the cash back (for most folks)…

Meantime, I can give you firsthand example of what I’m referring to…

My first long term rental investment was made using other people’s money. I had none of my own money invested. I did have extensive experience with property management and some (minor) rehabbing (baths and kitchens, etc.) in my background. I also knew how to apply elbow grease, find property, and negotiate deals.

However, the MOST important thing I brought to the table was UNDERSTANDING MY FARM. I knew what was for sale and for how much, what had been for sale and how much it sold for, who the players were (competition), who the talkers were (time wasters), who was thinking about selling, and not so oddly, who the fat-heads were.

Understanding my farm was what gave me the credibility and confidence to ask for money to invest. Everything else was just frosting on the cake.

Even then …I started REALLY small, because I needed to be successful (I was still more nervous than a pregnant nun buying my first rental house). Nonetheless, I was successful at creating cash flow out of thin air …over and over.

Later, when I made a decision to move into apartments after realizing that I was going to have to be an ‘uber slumlord’ in order to create the income I wanted, I took a massive leap of faith into apartment investing. Lo and behold, my previous ‘lenders’ turned out to be available for bigger projects. Who knew?

My point here is that if I had waited to scratch enough money together to do these deals with my own money, I would probably have done two things:

  1. become undisciplined and settled for mediocre deals, or worse… since I wasn’t profit sharing…
  2. and/or stunted my overall progress.

My question to you, “Would anyone have loaned you money privately to acquire this ‘once in a lifetime’ deal back in 2007?” I’m betting no. Things were already slowing by the middle of 2005, much less by 2007. However, YOU thought you found the deal of your lifetime right before all the amateurs got their jewels caught in a grinder. You weren’t alone I’m quite sure. Well, you’ve already given us the rest of the story, so I won’t rehash it.

My point is that using OPM is a proven way to both invest objectively; forcing you to analyze deals and prove profitability …and avoiding self-delusion about values, but just as importantly for both leveraging your resources and time, and protecting yourself largely from potential loss. That doesn’t mean you can only buy screaming wholesale-quality properties. It does mean realizing that whatever profit you make on the deal, is made at the time of purchase and anything else is just gravy that you split with your private lender (or co-investor).

The same investing principals go with fixing and flipping. See for what’s involved with this business. It’s the best blog I’ve seen on the mechanics of prospecting. Flipping is NOT the same as buy/hold investing. Prospecting for deals may be similar, but that’s really where the similarities end. Check out what he’s doing.

Either approach; fixing and flipping, or finding deals for long-term holding requires a ‘front-loaded’ effort (lots of time up front). However, fixing and flipping is an on-going effort, too.

Of course, I like flipping properties, but without the fixing part. :cool And I like to buy and hold, too, because it’s more like a ‘set it and forget it’ income stream. I work once, but get paid over and over for the same work. It’s a beautiful thing…

So, the bottom line in my opinion, when you’re starting out/over, is first become so familiar with your farm that you can both confidently recognize a deal, and attract investment cash (or private money) to buy it, but also keep your personal assets protected from loss. Later when you’ve got money to burn/lose, start using your own.

However, if you get good at making money for others, you will become quite the popular guy.

P.S. One of the better known rehabbers here in Southern California is a guy name Mike Cantu and he follows the OPM model I just explained above. However, he keeps one property for about every six or seven he flips.

The interesting thing to me is that he dedicates each house’s rental income to a certain obligation. He wanted horses, ‘but they eat and eat and eat’, he said… So, he bought a house specifically to pay for his horse’s food budget. He bought another house to pay for the rest of the horse expenses. Each income stream is dedicated to a certain obligation. I think that approach keeps everything real and immediate, if not practical.

Hope this helps…


I’ve communicated with you before and appreciate your posts.

Several years ago I purchased 6 investment properties using bank financing when they would lend 100% of the cost of the property and also include money for rehab in the loan. I basically quit being active in rei when banks started requiring a down payment.

I’m interested in finding an OPM source so I can get back into rei.

I don’t believe I would have any family/friends with that kind of money or willingness to partner. I don’t have enough equity in the investment properties that I currently own.

This has probably been discussed in other posts but would like to know how to go about finding an OPM source.

Thank you.

Wow, I’ve received more compliments in the last couple days from people on this forum… Now, if my family would just learn to appreciate me like this… j/k


Welcome back…!

As I advised benjie, you need to bring something to the table to attract money. Your knowledge of your (a) farm is the foundation to that attraction. Without that firm understanding, everything you try to do devolves into a hard sell.

My friend Tony Alvarez, here in SoCal, several years ago lost his job, ran out of money, went bankrupt, moved to hell’s half acre …where the rent was cheap and started over from scratch. He was an appraiser…of all things.

I’m skipping past all the details, but he advertised, “Appraiser Needs Money To Buy REO’s” He found people willing to loan him money, because he was an ‘appraiser’ whom they assumed knew values, knew what a deal was, and would be a safe ‘bet’ …and he showed them why.

Tony was a fast expert in his market…first. Oh, and yes he’s worth several million dollars today …working hell’s half acre. Who knew there was money in the high deserts of Southern California…?

Barney Zick said once, that showing a prospective private lender/partner the “deals that got away” is a great selling tool. These are the deals you could have invested in if you had the money. I’ve loved using that myself.

flippingjunkie has something to offer in finding private money that you should take a look at.

Private money is not hard to find.

One thing you’ve got going for you is that you’re a seasoned investor. You own several investment properties already. This is a BIG selling point for you.

Show off what you own; pictures, etc. I would say show the profit/loss statement, but you’ve got to use your judgment. Meanwhile, you assign the highest possible, imaginable (perhaps nearly unimaginable) values to each of your properties in your portfolio, including the house you live in, if you own it.

This ‘alone’ may be enough to overcome any resistance to lending to you.

BTW, when someone calls you… don’t they ‘already’ want to make money, by lending money…? This isn’t a cold call response. Otherwise, why would they call? So, it’s a matter of creating trust in you, not really a deal per se.

So, my terribly brief suggestion is just to first know your market, show off what you have already achieved (forget what appears to be true here, and spin those six properties into the “cash spitting, broken ATM machines” that they are) and then make absolutely sure that first deal is a winner, like I did.

I could write a lot more, but I’ve got to go raise more private money so I can equity-strip some old ladies. j/k