I know - wrong section but please read: How do you finance your first home flip?

I know this is in the wrong section. I wanted to put it in several different sections in case people had friends who did house-flipping. My husband & I may be interested in house-flipping. What we cannot figure out is how seemingly young, median income folks get the financing for the first house. I assume they must get a loan from the bank for the home but what about the money to actually renovate the house? On the home-flipping shows, I've seen renovations cost anywhere from $20k-100k....that's on top of the monthly mortgage they are paying. I can understand a bank risking a loan on you if you've already successfully flipped a house before but for your first one...I just don't see any bank doing that. Please enlighten me. How do first time home-flippers get their financing?

Public Comments

1. The best way to make a small fortune by flipping houses, is to start with a large fortune . . . . . .
2. I fliped my first through the bank, you must have a good presentation plan to present to them to wipe out any doughts they might have about getting their money back. ie material estimates, labor estimates, visual drawing of completed work,estimated value after completion, time frame, things like that. Also look for houses that don't need a lot of work at first. Then go bigger on your next one with your profit from the first. My first I paid 50,000 done 8,000 in new flooring, deck, french doors, oak stairs,cosmetics. Doing all the work myself and It sold for 92,000
3. From family members, usually. You will need to have a healthy pocketbook to make any money at flipping. There is no substitute for knowledge, will need to choose a house wisely. I have worked on some houses that people were entirely unprepared for, needed lots of structural work done that was not anticipated.
4. This is not a particularly good time to look at house flipping unless you can afford to sit on the houses for awhile. You can get them cheaply but turning them is another thing altogether. Your best bet for the $$ for the renovations is to seek out investors. Put together a good business plan and find some investors. You can go the bank route but it's very difficult right not because of the overall economy. Good luck.
5. The reason flipping had become so popular is that it was so easy in recent years to get a high-risk home loan. Lenders were throwing money at people, lending more than the homes actual value so that people could come out with cash at closing for the renovations. There were a lot of people who simply took the money and ran, or even ran out of money mid-renovation and ended up in foreclosure. It is very difficult to find financing now that many of these lenders are out of business. Unless you have stellar credit, can show that the home has a lot of marketability (most markets are slumping now and you might never sell), and can show that you are very knowledgable about home renovations, it is going to be very difficult to find financing right now.
6. My husband and I did our first AND LAST house flip through the bank. HUGE MISTAKE. In today's market, we haven't been able to sell the flip for what we owe on it much less for what we dumped into it (40K). Getting ready to rent it....going to be a total loss. Wouldn't recommend doing it unless you have the cash up front and a long term plan for how to deal with it if you get stuck with it. Bottom line, you really HAVE TO KNOW WHAT YOU ARE DOING. We thought we did, obviously not. Knowing how to do the repairs and decorate is not enough in a tough market. We are competing with more than 6,000 houses on the market in our city. There were only 1500 on the market when we started. I have a friend who flips for a living and he has a financial "partner" who backs him. Also, he stated that my mistake was purchasing an executive home (400K) to start with. He stated that he doesn't buy a home unless he can SELL it for 10% under market value meaning he buys them at at least 25% below market value. He also doesn't buy anything over 200K. Now of course that's for our market....but you get the point, don't buy an expensive home. We thought if you start big, you get big profits. Again, know what you are doing. Lenders are nervous and the housing market is horrible. Those flip shows don't show you that!!!! If you decide to do this, I really wish you the best of luck. It would be nice to know that an average joe could have some success at it.