Full Fix and Flip Financing – Mark “The Lender” Abramovich


Hi everyone this is Mark the lender
Abramovich and this video is about the full project finances for a fix and flip
renovation project the entire project The entire project finances are split between all the project costs and the project income The project costs are all the expenses for
the project this includes the purchase and renovation costs as well as all the
additional project costs and fees The full costs and fees include the purchase costs such as the appraisal, inspection, insurance, and attorney fees holding
costs such as the utility homeowner association and loan interest payments
and the sale costs such as the real estate agent Commission fee. All of the
costs and expenses as well as the earn are on the project side. On the capital
side we have the different ways to pay for the project. We have the different
financing options such as cash, a loan, equity, and a mix of the possible options. With cash the investor has enough cash of their own available to pay for all of
the project expenses, fees, and costs and uses it to do so. Keeping all of the
profit when the project is completed and sold. It’s good to note that the sale
costs while being a cost are paid from the sale proceeds and not part of the
money invested but rather come out of the project earn and profit. With a loan
part of the project cost is borrowed with the investor using their own
available cash to pay for the remaining costs and expenses. Typically the loan is
for a part of the purchase and renovation cost. The source for the loan
may be a hard money lender or a private source such as friends and family. The interest paid for the loan is
part of the project holding costs and the investor keeps the profit when the
project is completed and sold. Typically hard money lenders will provide 60% to 90% percent of the purchase and 100% of the renovation costs. The
investor provides 10% to 40% of the purchase amount and the purchase
and holding costs. A variation is when there is a loan for the majority of the
purchase and renovation amount and the investor borrows an additional loan for
the 10% to 40% gap in the purchase amount. The investor uses their
own cash to pay for the purchase and holding costs. If the investor is able to
negotiate it, this additional gap loan may be for the entire remaining amount
not covered by the initial loan including the purchase and holding costs.
An equity investment is when the investor instead of borrowing a loan
partners with another investor who provides their cash in addition to the
investor’s cash according to a negotiated work investment and profit split. Depending on the situation and arrangement the equity partner may
provide all of the cash necessary for the project. The profit split may include
some amount of interest for the cash invested, and a percentage of the
remaining net profit. The cash, loan, and equity investment options can be mixed
together to achieve the best possible results depending on the situation and
what all the parties agree to. Take particular care with the project
analysis to make sure there is a healthy profit to keep everyone’s investment
safe, and that there is a sufficient profit to make the entire project worth
everyone’s and especially the investor’s time.

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