I want to get funding for a property to re flip it in as is condition
what discount % off of the propertys AFTER REPAIR value must I get these deals for in order to: BE ABLE TO GET FUNDING WITH NO CASH OUT OF MY POCKET OR ATLEAST HOLD OFF ANY PAYMENT UNTIL I RE SELL THE AS IS DEAL?
Hi,
Typically hard / private money lenders want borrowers to have skin (cash) in the game. Most new investors don't have sufficient track records to prove their ability to borrow and flip property as lenders analyze risk differently from person to person based on experience and expertise.
Most hard money lenders will loan 75 or 80% of as is purchase price as it is much harder to find companies willing to fund all or part of rehab / remodel costs.
Typically you want to buy at 70% of FMV in pristine condition requiring no upgrading or remodeling and having no deferred maintenance. Any repair or remodeling costs should be deducted from the 70% number, and in a strong market this may push upwards somewhat depending on market dynamics.
Essentially your describing wholesaling where you don’t actually own title but have equitable control over the property and can deliver rights to purchase either by assignment or transactional funding. You do not want to own the property you flip in “As Is” condition but rather control the rights!
Good luck,
GR
I definitely agree with GR’s answer. You cannot get 100% financing. So maybe you should be looking for a partner or private lender that is willing to provide the money and share in the profit. It will all depend on your experience level. It might be easier, at the beginning, to sell the property to fix & flip buyer. As far as “At what discount one should buy the property” depends on who is end buyer. If you buyer is a flipper, he or she have to buy it close to 70% of ARV. Usually I allocate 10% for escrow commissions and carrying costs, other 10% is allocated to fix up cost and last 10% is your profit. If you purchase price and fix up cost exceeds 80% than your 10% profit is being reduced and your risk is greater. But again, even if you buy it at 60% of ARV lender will still require you to have a skin in the game. Some lenders might be willing to take a deal under their control and you get part of the profit. So essentially you get paid for finding a good deal.