Finanacing Q

[thehebrewhero]

What are the best ways to finance a property if your not a 100% cash buyer?

Im trying to start 3 companies to flip houses

Company 1 I have a 100k line of credit and 25k cash

Company 2 I have 100K all cash

Company 3 25K in creditline and 40K cash

Company 3 is giving me the most grief as my partner doesnt have the cash my other partners do and we may have to just buy homes the conventional 25% down way and finance the rest with a ARM or interest only loan. Is this a bad idea?

The reason Im doing 3 companies is due to investors and my feeling is by deversifiying into 3 companies instead of just 1 I can do more flips and take advantage of the home buying season.

Let me know what you guys with expierence think of this plan

[Lady Flipper]

Conventional financing can be a pain - if the house doesn't sell when you want you will be stuck with payments - and they are more or less direct losses. If you do this, make sure it's an assumable loan. Personally, it scares me and I would want to have the cash.

[realestatehound]

I have been there with the partners and so on. You should do all your flips yourself and take all the money. I have had several partners and I end up doing all the work and they take half the money. I would much rather flip 5 house and make $20,000 off each one them than I had to flip 10 and make $10,000 off each one. I use what we call around here a construction loan. I put 20% down and finance the balance and if it don't sell in 9 month's I have to pay the interest on it. But I figure that in up front and if it sells quick I just made some extra money. I probably will never have another partner again, it has just never worked out for me.

[thehebrewhero]

I've never heard of this "construction loan" How exactley does it work? Do most banks have it? Yeah Im going to end up doing most of the project managment due to the fact Im self employed and my partners all have office jobs. Also I have cash but when your self employed getting loans is hard especially when you have other loans in the works. Bassically Im using their lines of credit to the LLC to purchase and my cash to renovate. My goal is to flip 4-5 houses this year so I can just go off on my own next year.

[badmomma]

Here is a brief explanation of what a construction loan is and what it entails. I did see that both wells fargo and chase banks offer these types of loans.

Construction loans are story loans. That means that the lender has to know the story behind the planned construction before they're willing to loan you money. Because it's a story loan, it's not going to be standardized like mortgage loans underwritten to Freddie Mac or Fannie Mae guidelines. That said, there are some common features to a construction loan. Construction loans typically require interest-only payments during construction and become due upon completion. Completion for homeowners means that the house has its certificate of occupancy.
Construction loans are usually variable-rate loans priced at a spread to the prime rate or some other short-term interest rate. You, the contractor and the lender establish a draw schedule based on stages of construction, and interest is charged on the amount of money disbursed to date.
Another variable in construction loans is how much of the project cost the lender is willing to lend. If you already own the land, then that can be considered as equity on the construction loan.
Many homeowners use construction-to-permanent financing programs where the construction loan is converted to a mortgage loan after the certificate of occupancy is issued. The advantage is that you only have to have one application and one closing.

It may be too your benifit to discuss loan options with your banker. Do a little research and you may well find something that suits your business and expectations for your future. Good luck.