How to Fund and Flip Homes in an Expensive Real Estate Market, With Brian Daly on Business Lunch with Roland Frasier

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Key Takeaways

  • When starting out, focus on creating relationships with real estate agents
  • Motivational sellers are a good target group, especially if they want cash
  • Look for any properties needing a little touch-up – or even a full renovation
  • Look for homes that are neglected and won’t qualify for financing
    • Analyze comps in the neighborhood
    • Estimate repairs
    • Estimate what you can sell it for
    • Estimate how long it will take to sell
  • Hard money financing is a loan which can close in between 3-5 days = asset-based loan
  • Before starting out, be honest about your skillset
    • If you’re personable, go knock on doors
    • If you’re better with finances, go with that

Intro                                                                                                                                         

Brian Daly is a successful real estate investor, entrepreneur, writer, and speaker in California. Brian flipped 25 properties last year in the San Diego area and is on pace to flip 60 this year.

How Did Brian Identify Suitable Properties?

  • In 2011 the market was overrun with inventory, that’s when Brian started investing
  • He worked for banks during the financial recession as an asset manager and honed his skills dealing with real estate agents
  • “We worked like every other entrepreneur. We had a nine to five, which was more like a nine to seven, and then from 7 pm to 12 am. We would scour the MLS and make a list of who we wanted to call the next day. Then, on the way to work, we would start going down the list as we were driving. It was a routine that we did for about six months”. – Brian Daly

What’s Your Current Approach?

  • Originally, Brian did a lot of direct marketing to sellers
  • However, in the past five to ten years, big marketing has created marketing machines that are hard to compete with
  • Brian now partners with real estate agents
  • We focus on creating dialogue, creating a relationship with and leaning on real estate agents. And then, the leads come to us, and that’s how we focus on growing, our strategy.”  – Brian Daly

What Should Real Estate Agents Look For?

  • Motivational sellers are his target group, especially if they’re motivated to sell quickly for cash

Walking Through a Deal

  • Brian calls his real estate agent and asks if there are any properties needing a little touch-up – or even a full renovation
  • He looks for homes that are neglected and won’t qualify for financing
  • “When the property condition is rough, a lender is not going to finance it. They’re going to require a lot of repairs. In most cases, when the property is like that, the seller is not in a position to do repairs”. Brian Daly
  • Brian then does a desktop analysis:
    • He scans comps in the neighborhood
    • Estimates repairs
    • Estimates what can he’ll sell it for
    • Estimates how long it will take to sell
    • Then his model comes up with an offer
  • Brian takes that verbal offer to the seller – usually within 24 hours and without contingency
  • Most deals are closed within ten days

Cash or Financing for Purchases?

  • Brian uses financing – from two primary hard money lenders
  • Hard money financing is a loan done in such a way that you can close between 3-5 days using the value of the property as the focus = an asset-based loan

Are You Liable For the Loan?

  • Originally Brian was liable but now he no longer needs to use his personal guarantee

Target Percentage Return on Properties

  • Yes, Brian’s maximum offer is usually 9% cash on return
  • On a typical house, out of pocket cash is about $510,000 (in San Diego)

How Much of That Comes from Hard Money Lenders?

  • 90% comes from the hard money lender
  •  The remaining gap is funded by investors

What Returns Do Investors Get?

  • Through a joint venture that Brian does with his investor(s), they receive about 30-40% return on their money

Other Tips

  • Before starting out, be honest about your skillset
    • If you’re personable, go knock on doors
    • If you’re better with finances, go with that
Business Lunch with Roland Frasier : , , , , , ,
Notes By EWerbitsky

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