Tim Bell explains why using your own money is a viable funding source for fix-and-flip real estate deals. He argues it is often the cheapest and easiest option, can offer higher returns than passive investments, gives greater control over invested capital, and—when combined with proper deal analysis—reduces risk. He recommends considering personal funds especially for the first few deals and highlights the need to compare current returns (vs. inflation/taxes) before deciding.
Chapters
Okay, now that we've talked about funding for wholesale, we're going to move on to fix and flip funding. Now, you can see that there are several different choices on this list. Okay? I'm going to start at the bottom instead of starting at the top and we're going to kind of move this around a little bit. Okay? Alright. So down at the bottom you can see the last item on this list is your own money. Yes, it's okay to use your own money to fund your real estate deals. Okay? Some instructors, some trainers will tell you, oh, never use your own money. Well, you know, I don't think it's bad to use your own money. It's certainly in most cases the least expensive and easiest way to find money for your fix and flip deals. If you hesitate to use your own money because of risk, then the question I have to ask you is, did you understand the analysis discussion that we had earlier? Because if you understand the analysis process, then you're dramatically reducing or even eliminating your risk in your real estate transaction for your using your money. Again, if you're not doing your due diligence, if you're not doing a correct analysis process or something like that, yeah, you should be worried about risk. But remember, you know how to correctly and appropriately analyze properties at this point, so you shouldn't be too worried about the risk. Because if you've correctly analyzed that property, then your risk is negligible in terms of using your own money. Here's another question. If you're considering or thinking it might not be a good thing to do to use your own money, here's a question. How much are you currently earning annual interest on your money? You got to ask yourself that question. If you're not earning 4 or 5% on your money, you're not even keeping up with inflation and taxes, okay? That's a guaranteed loss of purchasing power. If you're not earning 4 or 5% in our current marketplace with the current inflation rate and the current tax rate, okay? So you got to earn at least that much on your money. If you're not earning that much on your money, you're getting a guaranteed loss of purchasing power on your money. Again, you got to ask yourself, what kind of return am I currently getting on my money? If it's not the same type of return that you could get on your real estate investment business, 10, 20, 30, 40, 50, 100% return on your money? If you're not getting that kind of return, why would you leave it in the current investment that you have it in, why wouldn't you put it in your real estate investment business? Here's another question. Depending on what you have it in, how much control do you have over your current invested money? For example, if you've got it in the stock market, how much control do you have over the companies that you're invested in? In the stock market, the answer is probably none at all. Okay. Again, the nice thing about real estate is that when you have your own real estate investment business, you have more control over what happens with your money. Okay, I like that. And so all I'm saying is you don't have to use your own money. Now, if you don't have any money, that's a whole other discussion. You don't need to worry about it. But all I'm saying is if you do have money, you may want to consider using your own money, especially for your first few deals, because your first few fix and flip deals, because it's the simplest, usually cheapest, usually easiest access to money that you'll ever find. So consider doing that.
