Forums / Getting Technical / Finance / Financing for flipping houses

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  • Profile photo of renov8rrenov8r
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    @renov8r
    Join Date: 2014
    Post Count: 6

    Hey everyone !
    First time writing on the forum so take it easy on me.

    I am looking at flipping houses under my company/trust an I will be doing this as my full time job. What is the best way to get financing from a bank or private lender, while there is no income coming in? I will have 100k in equity and no debt with a very good credit rating.
    Any advice to the situation would be awesome !
    Thank you

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hello and welcome aboard.

    You’ll need to demonstrate that you can service the loans. For a self employed applicant, this usually means providing two years of financials for a full doc loan.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of wilko1wilko1
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    @wilko1
    Join Date: 2010
    Post Count: 510

    First 2 years are the hardest.
    I would recommend that if you have friends or family that work in business if you can be employed on a on off type arrangement. where you work fulltime hours whilst at work and then when you are renovating you have time off or say you cannot work for 4 weeks. I say friends and family because not many normal employers would be able to cope with it.

    Another way is to work odd hours at a job. Ie a 5pm – 2am type job.

    Or you could get a partner/ another director who comes In for a percentage of profit after costs. They supply the serviceability and you provide the work and have say $1k a week for 40 hours of your time as a expense.

    Profile photo of renov8rrenov8r
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    @renov8r
    Join Date: 2014
    Post Count: 6

    Thanks for your response guys helps out ! Keep it coming :) also would a garentor help with the situation ?

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Nope wont help the situation at all unless they are also party to the Title.

    We do a lot of short term finance deals for flippers and developers.

    Sure the rate of interest is not cheap but you factor it in to your profit.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Jacqui MiddletonJacqui Middleton
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    @jacm
    Join Date: 2009
    Post Count: 2,539

    Hey everyone !
    What is the best way to get financing from a bank or private lender, while there is no income coming in? I will have 100k in equity and no debt with a very good credit rating?

    Well… put yourself in the lender’s shoes. The want to be able to see that you can make repayments. Sounds like that is not possible, so a conventional lender (ie bank) might not work for you…

    A private lender might be ok with it, given the right parameters.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,173

    Dont give up your day job until you have 2 years of good financials

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of renov8rrenov8r
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    @renov8r
    Join Date: 2014
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    There has to be a loopol in the system somewhere.. This Can’t be impossible ! Surely someone has done it before.??

    Profile photo of TerryTerry
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    @talsar
    Join Date: 2014
    Post Count: 7

    Yip your right
    The ones I have come across have lied through their back teeth, conned every one they come across I.e. Contractors
    And then have gone broke
    A typical person in this category is very excitable runs around a lot looking busy, but doing nothing, can be very friendly & engaging looking to earn lots of money with no real effort
    Promise every thing deliver nothing but cayouse & frustration
    Early warning signs are large grand plans quickly followed by being late and unreliable
    They dont necessarily have to be a developer they can contractors as well, some of us are even lucky enough to employ them for short periods, I guess the they become contractors, then developers then broke
    How ever their are some real clever ones who keep all Their money, but there is another name for them

    I would strongly advise all to stay well away from people who fit into the above

    But hay best of luck

    • This reply was modified 5 years, 3 months ago by Profile photo of Terry Terry.

    Terry | TRC Property Services
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    Remember: nothing stays the same and you can't make change with out changing

    Profile photo of TerrywTerryw
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    @terryw
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    There has to be a loopol in the system somewhere.. This Can’t be impossible ! Surely someone has done it before.??

    Lenders won’t be keen on these loans even if you had a job – short term soon to discharge. Brokers will not be keen as they have to give any commission back to the lender.

    All you need is a stable income source – and dreams about income from flipping don’t count, need strong evidence of success

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of renov8rrenov8r
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    @renov8r
    Join Date: 2014
    Post Count: 6

    <div class=”d4p-bbt-quote-title”>renov8r wrote:</div>
    There has to be a loopol in the system somewhere.. This Can’t be impossible ! Surely someone has done it before.??

    Lenders won’t be keen on these loans even if you had a job – short term soon to discharge. Brokers will not be keen as they have to give any commission back to the lender.

    All you need is a stable income source – and dreams about income from flipping don’t count, need strong evidence of success

    Thanks for you imput Terry,
    Also I am a qualified carpenter. Is there a way were you could prove that your earning your income from the job that way ? By sub-contracting to my investing company?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,173

    Contracting means self employment so does working for a company you own. this means 2 years financials.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Mick CMick C
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    @shape
    Join Date: 2010
    Post Count: 1,099

    It’s possible but requires a few years of planning on the right loans and buy structure, lender and most importantly pre-planning…not something you can do off the bat.

    Most of our flip clients who’s doing this now full time ( flipping 2-3 properties per year ) had to go through a 12-18+ month planning stage. As the only way to get this across the line without working was to consider the “flip project” as a BUSINESS ie your a professional flipper…

    ^ As you can imagine, getting the 1st years income is the hardest and hence why we can’t write the loan till a good >12-month after planning with our brokers and your accountant.

    Else the easy way out is to keep your full time job and using that income to service the loan for the flips. But at the same time you may want to plan for the ^ above if your wanting to do this full time.

    But you can imagine the amount of work required and planning, so really we also pre qualify our clients before we take them on board this flip journey to make sure their financial, mental and desire is strong enough to last the 12-18 month pre planning.

    Mick C | Shape Home Loans
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    Same Banks. Better Rates. Served With a Passion.

    Profile photo of renov8rrenov8r
    Participant
    @renov8r
    Join Date: 2014
    Post Count: 6

    It’s possible but requires a few years of planning on the right loans and buy structure, lender and most importantly pre-planning…not something you can do off the bat.

    Most of our flip clients who’s doing this now full time ( flipping 2-3 properties per year ) had to go through a 12-18+ month planning stage. As the only way to get this across the line without working was to consider the “flip project” as a BUSINESS ie your a professional flipper…

    ^ As you can imagine, getting the 1st years income is the hardest and hence why we can’t write the loan till a good >12-month after planning with our brokers and your accountant.

    Else the easy way out is to keep your full time job and using that income to service the loan for the flips. But at the same time you may want to plan for the ^ above if your wanting to do this full time.

    But you can imagine the amount of work required and planning, so really we also pre qualify our clients before we take them on board this flip journey to make sure their financial, mental and desire is strong enough to last the 12-18 month pre planning.

    This is the info I’m after! Thanks Mick C :)
    The job I’m in atm is keeping me from putting 1000% into my future career (flipping houses). I am all about due diligence, I have read a lot of books and gone to a few seminars.. I was thinking of doing the “renovating for profit workshop”. I have set up a company an discretionary trust for flipping houses and my first project will be my dad’s house with a 10% renovation budget of the current value of the property ($450k) then will buy my first investment property with aprox. 100k savings. I am in the process of putting together a business plan and a hard copy of my due diligence to find, filter & buy property.

    Profile photo of RachaelRachael
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    @keiley
    Join Date: 2016
    Post Count: 2

    Hi Renov8r, I am looking at trying to accomplish the same thing! I am also a tradie and project coordinator and have been working on houses as a side project for years…breaching that gap and launching into it full time is bloody hard! I am not sure there really is any simple solution but I agree the juggle of working full time and renovating full time is certainly taxing on the body, mind, lifestyle, family etc.

    Some of the problems that I am still trying to get around include:
    – keeping a borrowing capacity within the first few years (as mentioned above)
    – Maximizing the profit if possible and maintaining cash-flow
    – factoring in tax, stamp duty, agent fees etc – it all seems to add up and eat into profit!

    Just a thought if you were willing to look at options for the first few years to get yourself started. Perhaps you could consider JV’s? Its the path I am travelling down

    Anyways goodluck and keep us posted on your journey

    Rach

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