Funding Your Deal
Expected Air Date: 5/18/19
Today we are going back to my upcoming book, “Flipping Houses in Ten Days” and I’m going to read Chapter 4: Fund the Deal. What’s the point of finding a deal if you can’t pay for it. But on the other hand, I’m pretty sure that if you find a really good deal, you’ll be able to put together the funding for it or at the very least, get it sold. Why do I say that? Because YOU my friend have access to a powerful resource for wholesaling properties: The FAN, aka the Flipping America Network at flippingamericanetwork.com. You can post it there and if it’s a deal, it WILL get sold. You also, by virtue of the fact that you are listening to me right now, have access to me, your humble Flipping America host. I buy deals still and I know other people across the country who are buying them. I might be able to hook you up with either a lender or a buyer. But that’s beside the point. In Chapter 4 I explain your various options about deal funding, do a bit of the math for you and give you some practical steps to take to get your first deal funded.
First I need to finish my answer to an email – I ran out of time on the last show.
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- Lunch with me every Wednesday. Baraonda
- My latest article in Forbes is out. bit.ly/findredeals.
- The FAN is here!
- Would you like to invest in the Flipping America projects across the country? Coming soon you will be able to for as little as $100. That’s right, Flipping America is partnering with Ground Floor Funding to create a crowd-funded platform where you can invest in the deals we are doing here. The fund will pay out a 8% preferred rate of return and can go as high as 16%. You can make money with me, the Flipping America Guy.
- Flipping America App is in the app store. You can listen to the show, read the show notes, and the entire catalog of shows is now available to you. It’s a free download and there are no upsells or in-app purchases. Free to download, free to listen. Go ahead and give it a try and drop me a line and let me know what you think.
- Want a quick analytical tool to tell you how strong a potential fix and flip deal is? Download the Property Grade app. You answer 10 simple questions about the property and the app instantly tells you what you can expect to make, your return on investment, your return on cash, and then the program gives the project a letter grade using the proprietary Flipping America Investment Property Grade algorithm.
- Redfin is losing money but making up for it in volume? https://www.fool.com/investing/2019/05/16/with-losses-mounting-in-a-hot-real-estate-market-i.aspx
- CNN is finally reporting on the NAR lawsuit https://www.cnn.com/2019/05/15/economy/real-estate-commissions/index.html
- Coastal markets will see a decrease, sales will continue upward but slower. Opportunity zones will become a thing… https://theoofy.com/46532/real-estate-trends-and-housing-market-forecast-2019-what-to-expect-from-housing-and-real-estate-during-2019-fri-may-17/
- Because you will do better than 20 or 21. Economy may turn. https://realestate.usnews.com/real-estate/articles/why-you-should-sell-your-home
- Rise in interest rates, millenial home buyers, growth of secondary cities, home affordability, opportunity zones, Alan Donenfeld, CityVest https://www.forbes.com/sites/forbesrealestatecouncil/2019/03/19/five-trends-that-will-impact-real-estate-investing-this-year/#4eee8d951915
Your Questions: Send emails to email@example.com
- Linda, Jacksonville, FL “This roofer had put on two roofs for me doing the hurricane last year so I trusted him. He did mention that his company had merge with another and his job function had changed. Because of the previous relationship with my other two rentals didn’t think I would get screwed, The roof that was removed was shingle so the quotes were given on that. The following invoices were sent out first for repairing the roof $4,531.92 (wasn’t aware of a repair quote dated 4/2/19, second invoice 4/3/19 in amount of $5,361.92, third invoice sent 4/11/19 in amount of $11,789.54 & finally invoice no date but received via emails on 4/13/19 after numerous requests for an updated invoice. Yes the insurance company has all invoices but remember I was told because of the pitch shingles could not be installed. The requirement for shingles is a 2″ pitch across entire roof. Yes this is a rental & yes I believe I’m being screwed but I will seek legal advise on this problem. Any suggestions will be appreciated. Maybe I need to share this roofing company with the group. What do you think? Surely wouldn’t like this to happen to anyone else. By the way, the square footage of the home is less than 1200 sq. ft. & my friend got a modified roof installed 4 years ago & his cost was less $7,000 ( I have his receipt). My friend house was approximately 1400 sq. ft. Thanks again for your interest & help.
- The charges do seem unreasonable. I’ve used rolled roofing on low pitch roofs and the cost wasn’t much different than shingles. The repairs (I’m assuming the decking) might be legitimate, but this could have been known ahead of time to some extent. Did they get up on the roof to inspect or just use a drone? When I get to a situation like this (I’ve done 900 flips and bought over 200 rentals so far, so I’ve seen a lot unfortunately) I realize none of the options are really pleasant. But here is how I proceed:
- Is the insurance company going to pay or fight the charges? If they do not want to pay they may help you fight them.
- Next I try to talk with the decision maker. My part would go like this: “The pitch of the roof was known when you quoted. I expect you to honor your quote, even if you made a mistake. I’ve made mistakes in this business and no one is paying for them but me. I shouldn’t pay for yours. We have a written and signed agreement.”
- If that doesn’t work here’s my next step: “I belong to a group of investors here that collectively own hundreds of properties. And I’ve been in touch with a nationally syndicated radio show (that would be Flipping America, my show). They know about this situation. Is this how you want me to tell them it ended?” You have to be careful when telling your story. If the company is litigious you may face a lawsuit for slander or libel. But you are permitted to state the facts.
- If that doesn’t work (and I’m assuming he completed the work): “Ok then, I’m going to honor what we agreed to in writing even if you won’t.” That’s all I say. This is basically inviting them to lien the property. In Georgia if a contractor liens the property they have 1 year to follow through and sue for foreclosure of the lien or it just expires. If you plan to keep the house the worst the can happen is you get to tell this to a judge. 9 times out of 10 the liens just expire because 9 times out of 10 the contractor knows they can’t win. This is personally a bit distasteful for me because I strongly desire to be honorable in all my dealings. But I’ve realized over the years that people will run over me if I let them. So I stopped letting them.
- Here’s the potential downside. If they have a case and pursue that case, you will have legal expenses and even if you win, you will still have those legal expenses. If they pursue the case within the time limit I would recommend you consider settling at a reduced number. This is not legal advice. Please consult counsel if it comes to that. I’m just making you aware of the practical issue here. Settling is almost always cheaper than paying lawyers to fight it out.
- Sawyer, Birmingham, AL “I haven’t been able to make it to one of your FlipStarter events but I have some friends who have been and said it was great – they couldn’t believe what they learned for the price of admission. Are you coming to Birmingham or will you be making a video of this available?”
- Alberto, Houston, TX “What are the ways you advertise a wholesale deal?”
- Candace, Pittsburgh, PA “I just saw an ad for a duplex in Johnstown PA at a great price. I called the number and cracked up when Flipping America answered the phone. Why would you sell a duplex in Johnstown? And why sell it for $12,000?”
- Alaina, Milwaukee “Is there ever an occasion when you go outside of your formulas?”
- Erica, Atlanta “When you’re new and starting out and you want to partner with someone who has money, how do you know this person is the right person?”
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Motivational Thoughts for the day
- “Everything worth doing is worth doing poorly the first attempt and getting better as you go along” —Gordon Catts