How To Present Your Fix and Flip Deal to Investors and Lenders
There is a word in the lexicon of real estate investing that really bothers me.
This word is used freely, especially among those in the industry that like to promote their opportunity to the unsuspecting masses.
That word is killer.
A few days ago, I received a message on Facebook. Here’s what it said:
I’m very eager to begin flipping and redeveloping homes, but having trouble finding legitimate sources of funding. Do you know of any lenders that you would recommend? By the way, I have recently come across multiple killer deals in my area and I’m just looking for the right source of funding.
Here was my reply:
There are an abundance of hard-money lenders out there right now. There’s more money than there are deals. Just curious, what makes you think these deals you’ve come across are “killer”? What type of research have you done on these properties that led you to believe this about them?
No Data = No Money
These days, you can find research statistics, analysis, and supporting data on just about every product or service that exists on this planet.
Looking for a review of a blender? Amazon has got you covered.
Want to buy a new computer? PC Magazine issues a report every year on the 10 best buys.
How about a new car or truck? Motor Trend magazine, and a slew of other ratings agencies, provide research on every vehicle in the world.
It’s likely you’ve used this information before to help you make a buying decision.
So let me ask you a question…
What intelligent investor or lender would seriously consider funding your “killer” deal without some data to support your claim?
The Only Three Things That Matter to an Investor and Lender
We teach our students how to put fix and flip deals together without using any of their own money. We use these exact same strategies to fund our own deals in Phoenix and Milwaukee.
Part of this strategy is presenting the prospective investor or lender with this information:
The estimated ARV (after repair value) of the property
Supporting comparable properties in the neighborhood/area
The estimated rehab budget for the property
Estimating the after repair value of the property is part art, part science. In order to give your investor or lender this information, you’ll need to have access to your multiple listing service.
The same goes for finding supporting comparable properties. Searching the MLS for historical data is key to determining what your house will be worth after it’s all fixed up.
Finally, you need to know how to estimate the rehab budget.
Fortunately, we’ve put together this video to help you with all of three of these items. Click here to watch. All that’s left for you to do next is put this information together in a nice, neat presentation.
It doesn’t have to be fancy.
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A simple Excel spreadsheet, with a link to your comparable properties (from the MLS), and a breakdown of your rehab budget, is all an intelligent investor really needs to decide whether or not to fund your deal.
If there is enough margin between the purchase price of the property, the rehab costs and the after repair value, then it’s highly likely you’ll get the cash you need to close on the purchase of the property.
As a matter of fact, using this approach we’ve had over $5 million in deals funded since 2015.
‘Killer Deal’ Kryptonite
So as for that message I received about all the killer deals. It’s been more than a week and I’m still waiting for a reply. Chances are, the sender hasn’t done any research, and doesn’t know how.
Remember, fixing and flipping houses is a serious business.
You’re not buying a blender on Amazon. If you can’t provide strong supporting data to an investor or lender, then you’re just like Superman with kryptonite. Your weak deal won’t get funded.
For a more in-depth explanation of how to present your fix and flip deal to investors and lenders, check out this video: