When I got started house flipping, I was always so nervous after I got a property in contract. It would keep me up at night wondering how I was going to put the loan structure together. When you are working with only a little of your own money this is what the first few deals feels like. Well, even after you have completed several deals it seems to feel this way because you might have 2 or 3 projects going at once. I remember the many times scrambling to find a hard money lender that would lend the highest loan amount possible. After you got that, you were scrambling to find a lender or private money joint venture partner to put up the additional down payment and rehab money.
After my first few flips I started trying to build a list of private money partners because, after all, it was always easier getting the hard money 1st trust deed. The equity or 2nd trust deed was always the missing piece that kept me up so many sleepless nights. So I networked, went to REI clubs, had lunches with money partners, and started building my list. I had 10 potential money partners after the first 30 days, so I thought I was golden.
Boy was I wrong.
Let me tell you what happened. I had found a fantastic opportunity with huge upside. This was in a luxury market and I stood to make the biggest profit on this deal. There was an upside of right around $400,000 on this one deal.
This would have set me up in a big way.
I got the property in contract, did my comps, worked with my contractor, and had a detailed line item construction budget dialed in.
All I needed to do was get the rest of the down payment and the rehab money. I thought this was a done deal.
I had 10 days to close on this per the contract. Well, it was day 9 and I had gone to all of my money partners and they all turned me down. I had 30k in escrow and I had removed all my contingencies.
Not the smartest thing to do but I thought it was a done deal. Well I thought wrong!
It was closing day and I had no chance at this point to get the funding. I had exhausted every money partner I knew of.
I had one last chance to salvage the deal and get back my deposit. I did not want to do it but I was forced. I called another local flipper who was well capitalized and had to wholesale the deal to him. I did get my initial deposit back and a wholesale few of 15k but this homerun of a deal was gone for me.
I blew it completely.
Here are the lessons I learned:
Don’t assume anything and always have a backup plan.
This was a deal with a ton of meat on the bone and I completely missed the boat. From the start I should have presented this deal to my potential money partners as a joint venture structure where I shared the profits. The money partners I approached were working with other flippers that offered a higher profit share arrangement.
Looking back now, I could have gotten the deal done with ease but I did not have the proper tools. I take this experience as a very expensive learning lesson.
This is why I founded SFR Ventures Inc., a one-stop shop to help flippers just like you get the capital you need without all the stress and sleepless nights I had.
Before you write your next offer, give me a call let’s discuss how my company can help you take it to the next level: Stepping up your game and starting all the way to spec construction projects — I can help with those as well.
I have helped numerous contractors, investors, and builders–both new and seasoned–get their funding in place without the stress and worries.
Putting my company in your rolodex will be beneficial for you. Not only do we offer great private money loan products, but we also offer our advisory services which can kick it up a gear for you and your business. So what are you waiting for?
Give me (Beau Eckstein) a call today 925.852.8261 or visit http://reiloanpro.com for more information.