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How would you protect yourself on a flip?


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2020 Dec 19, 7:54am   2,365 views  51 comments

by GlocknLoad   ➕follow (0)   💰tip   ignore  

I have the opportunity to lend on a flip. The return is pretty good.

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31   B.A.C.A.H.   2020 Dec 20, 11:39am  

Blue says
Never ever give money to friends or relatives


That's a little harsh. As others have pointed out here, OK to "give" as there's no expectation of being repaid. It's a gift.

But "lend"?, - forget it. Why can't they get conventional financing from conventional sources?
32   Dholliday126   2020 Dec 20, 11:48am  

Flippers use hard money to buy and finance repairs to their properties. If someone tells you they are a great flipper but then asks for money it means they're not a good flipper. Not only that but they have probably exhausted their hard money options which means they have been a shit flipper.
33   GNL   2020 Dec 20, 11:58am  

Well, thanks for giving me all this advice...

"DON'T LEND, WHAT ARE YOU, CRAZY OR SOMETHING!!!?"

People take risks. Housing and stocks never go down or something?

The bitcoin cheerleaders here never lost on bitcoin? Lol.

I just want to know whether or not there is a best way to protect myself. I have never done a lien but, if I understand correctly, a lien is first in line to be paid at closing. Is this true? I know this guy.

I know he is successful as I have seen him do several flips. It's what he does...full time. Northern Virginia is rife with flipping. The most successful ones do back to back flips and even do 2 or 3 at the same time. They are able to do this because they have a crew (NOT employees) that follow them from flip to flip. This is imperative to successful flipping. Without a crew you ain't got shit. If a crew does not get enough work, they find another flipper or find their own work and then the flipper is fucked.
34   B.A.C.A.H.   2020 Dec 20, 12:15pm  

WineHorror1 says
I know he is successful as I have seen him do several flips. It's what he does


Great!

Partner with him. But don't lend.
35   B.A.C.A.H.   2020 Dec 20, 12:20pm  

Guys,

Maybe we should be open minded that Winehorror is the flipper, and he's fishing for talking points to pitch to his soon-to-be-exfriend, on how his friend can lend to him and also protect himself.

Wonderful world of blog.
36   GlocknLoad   2020 Dec 20, 1:13pm  

B.A.C.A.H. says
Great!

Partner with him. But don't lend.

Ok, what would that look like? Create an LLC for each flip? Purchase the house together so Winehorror1 is on the deed? It sounds like he/she just wants to put money in and that's it.
37   B.A.C.A.H.   2020 Dec 20, 1:27pm  

GlocknLoad says
Ok, what would that look like? Create an LLC for each flip? Purchase the house together so I am on the deed?


(Assuming that you are not the flipper "asking for a friend", as they say):

What would it look like? He should tell you. He's the one who wants access to your money. He should do the work to figure that stuff out.
38   Blue   2020 Dec 20, 1:41pm  

Flipper is making stone soup to get you in. You are one flip away to become his enemy if it goes south.
39   GNL   2020 Dec 20, 2:02pm  

Ok, so there is NO way to protect myself?

Btw, I believe it is my responsibility to ensure I get my $$ back, not him.
40   B.A.C.A.H.   2020 Dec 20, 2:13pm  

WineHorror1 says
I believe it is my responsibility to ensure I get my $$ back, not him.


That's hilarious.

I get it, you're posting here for comic relief entertainment.

Thank you.
41   GlocknLoad   2020 Dec 20, 2:28pm  

B.A.C.A.H. says
WineHorror1 says
I believe it is my responsibility to ensure I get my $$ back, not him.


That's hilarious.

I get it, you're posting here for comic relief entertainment.

Thank you.

If he takes the right steps to protect himself, he will get paid. Doesn't the lender make the rules?
42   Blue   2020 Dec 20, 3:06pm  

GlocknLoad says
If I take the right steps to protect myself, I will get paid. Doesn't the lender make the rules?


sounds logical but upset the stone soup maker.
43   clambo   2020 Dec 20, 8:47pm  

Nobody has suggested that they get married.
44   Patrick   2020 Dec 21, 7:23pm  

WookieMan says
why not just buy the property is my take. If the guy is that good at flipping and it's a deal, he should have no problem saying X percentage is yours once my work is done.


I like the this solution.

If the flipper won't trust you, why should you trust him?
45   GNL   2020 Dec 21, 8:06pm  

Patrick says
WookieMan says
why not just buy the property is my take. If the guy is that good at flipping and it's a deal, he should have no problem saying X percentage is yours once my work is done.


I like the this solution.

If the flipper won't trust you, why should you trust him?

The flipper is the one who is finding the deals. Does everyone here, think flipping is simple?
46   WookieMan   2020 Dec 21, 8:39pm  

WineHorror1 says
The flipper is the one who is finding the deals. Does everyone here, think flipping is simple?

I've done it. But got loans from banks/partnership though and not friends or family. Or own it yourself and release cash as you see progress and a plan going well as I said. If he's good at flipping, getting money from a bank with a track record is a piece of cake. So it seems fishy.

Even if it's your brother, have you checked tax records from recent flips? Generally you can see who owns the place, potentially loans, etc. Flippers asking for money privately are likely lying to you no matter how much you trust them. Desperate people do desperate things. 5 profitable flips could be wiped out with one bad one and the bank won't loan so they run to friends.

Finding deals just takes time and bird dogging. It's a time thing and frankly not difficult if you know the data and market. You could find 3 in a month or 3 in a year. The key is to not pick shitty one's. If you pick shitty ones, you lose money and banks won't lend to you and you crawl to family and friends to get out of a hole.

Fact is, the guy should have capital in a bank that lends commercially and borrow from them. Higher interest rates, but if I was lending privately the conversation doesn't start until we're at 10%, interest only, and points up front so there's skin in the game. As I said previously, there could be an amazing opportunity for you. It's just what is your risk tolerance. I'd vote no to lending privately unless it's money you're willing to lose and cannot make more in other places. A lien, 1-3% points and 10% interest only and they guarantee title so there's no other bull shit liens.

I managed REO's for about 5 years for banks and you're going to get your ass handed to you if you have to go that route as a private lender. It's mega expensive, which is why I don't see a foreclosure crisis coming with Covid. You want to be on the hook for property taxes and insurance after this guy potentially screws you over and drags a foreclosure out for a year? Can't rent it because you don't own it even if you have a lien. Meanwhile it's dead money and expenses. Potential property damage and vandalism? It's a nightmare.

If you choose to do it, you have all the leverage. Just remember that. No hard feelings. You are 100% more at risk than who you're lending to.
47   GNL   2020 Dec 21, 9:46pm  

WookieMan says
WineHorror1 says
The flipper is the one who is finding the deals. Does everyone here, think flipping is simple?

I've done it. But got loans from banks/partnership though and not friends or family. Or own it yourself and release cash as you see progress and a plan going well as I said. If he's good at flipping, getting money from a bank with a track record is a piece of cake. So it seems fishy.

Even if it's your brother, have you checked tax records from recent flips? Generally you can see who owns the place, potentially loans, etc. Flippers asking for money privately are likely lying to you no matter how much you trust them. Desperate people do desperate things. 5 profitable flips could be wiped out with one bad one and the bank won't loan so they run to friends.

Finding deals just takes time and bird dogging. It's a time thing and frankly not difficult if you know the dat...

Definitely an interesting comment, Wookie. Btw, can you expand on why you don't think we will see a foreclosure crisis? Seems like we would have bigger problems than 2008.
48   HeadSet   2020 Dec 22, 7:09am  

WookieMan says
WineHorror1 says
The flipper is the one who is finding the deals. Does everyone here, think flipping is simple?

I've done it.


I take my hat off to you, if I understand that you bought a distressed home, fixed it up, and sold immediately for a profit.

I have bought several houses and fixed them up, but I kept them as rentals for years before selling them. Even doing the work myself (electric, insulation, plumbing, paint, but not roofing or HVAC) and even with my own financing, I would not have been able to sell at a profit right after finishing the rehab. Now I did do a flip on my very first rehab house, which I used FHA 203k financing, but that took me 4 months and I made $4,000. I consider that house my "training." That was also the only house I was able to sell without a Realtor.
49   Patrick   2020 Dec 22, 8:11pm  

HeadSet says
I take my hat off to you


And I take off my hat to you for selling at least that one without a realtor @HeadSet
50   WookieMan   2020 Dec 22, 8:29pm  

Patrick says
And I take off my hat to you for selling at least that one without a realtor

Not pumping Realtors, but you're at a huge disadvantage if you're not in the MLS. You can for sure do some legwork and talk to neighbors of a house you're flipping. A lot of times word of mouth from neighbors can get it done without brokers involved. Just takes time and a bit of charisma and personality to work the neighbors up. Avoid the broker expense on the buy. That's the key. 90% of the time there's going to be a commission involved whether you like it or not. At least if you want to make the most. And it's usually on the sell after the work is done.
51   HeadSet   2020 Dec 22, 9:01pm  

I have bought 3 houses without a Realtor, 1 was a military guy who was transferring and I talked to him before he listed, another was a teacher friend of my wife who I also talked to before she listed. The 3rd was the house I am in now, which I bought direct from the builder. Price comes way down when you have no Realtor and are paying cash.

However, when I sold off the houses I rented out for a while, I was unable to sell without a Realtor. I did get the commission down to 4.5% on two I sold. The problem is that the overwhelming number of serious buyers get a buyer's agent because they are unfamiliar with the buying process. Just for grins I tried to see what "We Buy Ugly Homes" would give, and it turns out to be about half of what the house is worth, plus they want the seller to pay the loan closing costs. They must be looking for some twit who just inherited his mom's house, and will sell for half price just to get the cash today.

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