As mentioned in the previous chapters. Securing the money to fund the rehab is probably the most important part of the process. The money is the life (blood) of the project and without it, there is no project. Many people start projects without fully securing the funds to only find themselves at a deficit and unable to complete the project. 

There are different ways to secure funding for your project, such as: 

• Using personal savings and liquidating other investments (such as stocks, bonds, etc.) 
• Taking out a personal loan, securing a second mortgage or line of credit on primary or secondary properties. 
• Borrowing from your retirement accounts 
• Borrow from an investment group fund pool 
• Borrowing from a hard money lender (this is very costly, and I do not recommend it for rookies) 

Hard money is very expensive, the interest rate exceeds the market rate on an average of 10 points, and based on the terms of the loans, the balance is due in full after one year a.k.a. balloon payment. 

Sample investment model to reach your desired margin of profit: 

• Property cost $10,000 
• Settlement expense may equal 1-3% or $1,000 – $3,000 
• Commission 5% = $500 
• Property insurance $1,000 paid at time of settlement 
• Investment cost including fees: 10k + 3K + $500 = $14,500 
• Rehab cost $100,000 plus investment cost = $114,500 
• 6-months interest payments @6% = $572.50 a month = $3,435 annual 
• Total investment over 6 months = $117,935.00 
• Comps in the area $150,000.00 (comparable sales within a 1-mile radius) 

LET’S REVIEW TO DETERMINE IF THIS IS A GOOD DEAL 

• 6-months on the market debt to lender = $114,500
  • Commission on this deal @ $150,000 = 5% to realtor = $7,500 
  • Transfer and seller closing cost 3.5% = $5,250 
  • Fees = $127,250 + $3,435 (carry cost) = $130,685 

Fund the Project 

• Net to seller – $19,315.00 = 15% (divide your net against your debt) 
• Sell – $150,00 – $130,685