I am looking for advice on how to finance a flip.
I know right off of the bat how "risky" a flip can be. I also know that there are always questions regarding the unknowns. Furthermore, I know there are reasons that banks set their rates and lending standards the way that they do. But, I do not think I will qualify for traditional financing, even though I believe in an objective world I am a very low risk borrower.
As per my credit history (I am 29 and have had a credit card since 16), I have had a total of ZERO late payments in my life for primary residence, car loans, student loans and CC payments. I am also an individual with a credit score that is right about 800 (plus or minus a few points depending on which institution you use). I have no bankruptcies, and no significant risk that I can see. My problem is that my current debt to income ratio is just too high to qualify for a traditional loan to flip a house and get started.. so I am trying to be creative.
I'm also sure some of you will say I should stick to their standards, however, as Mustachians I think many would agree that these rates are for 'average' citizens. Why can my current debts only be a certain percentage of my income? It's not like I go out and blow the rest of it on entertainment, lifestyle, and countless other things. The MAJORITY of my income goes towards debt repayment and savings. That is why I am trying to do this anyway... so that I can bring in a decent amount of income in the short - medium run and then turn around and use that money to pay off my student loans.
Here's the only few options I have so far ... and I would love to hear any comments OR any ideas as well for where to look!
Because I am looking to purchase a flip in a small city is anywhere from 100k to 120k based upon a few resources. However, the city portion significantly pulls that down. If you look at the homes in the top 3 county school districts, the average home price quickly climbs to around 200-225k. This is why I want to target a home in the mid 5 figure range and try to have the entire thing done ASAP. I want to buy now in the winter (or next few months), to try and have ready for the summer.
My only thoughts are to either go in with a few partners (as alluded to in another post, one or two friends would be fine going in as partners, as would FIL) and just pay for the home in cash up front, but coming across 15k per person in cash would be tough... so I would probably need to go through a partnership and then the bank and etc...
OR, I was lucky enough to just go through a process of buying a home and then renovating it almost completely over this past late summer/fall period. After just getting it reappraised, I increased home value by approximately 65k - AFTER you account for home purchase and all materials. We got a great deal but am also lucky my FIL knows how to do almost everything himself from a craftsmanship point of view. My thoughts are to take out a home equity loan for that amount (which I could afford to make payments in the short run on), and then use that to finance the flip?
I know that this is long, but I just don't want to let this time get away. I am still young, and believe if I can do one of these (depending upon structure) for my market and for the time I would be able to put forward on this, I can probably bring in between 10k and 20k over the next 6 months depending on MANY variables. That would be the cash I can use to finance future flips if I choose to move forward, or just a way I can make a HUGE dent in my student loans. BUT, I just need a way to get started and don't know which way to begin.
Any help would be appreciated!