Re: Would like advice please regarding flipping houses

Andrea2528

My partner has been offered an opportunity to invest a few hundred thousand in a house flipping enterprise.  The person he is lending the money to has actually got a house in mind and  he says that partner will supposedly get 10% return on his investment and I thought it would actually be 10% of the profit of the house profit.  How risky is this with a first charge put in place?

swingaloo

So basically someone wants your partner to pay out so he can gamble. It is not an opportunity.

Andrea2528

Surely, if there also a first charge in place, then it is safe?

Hoenir

Where did your partner find this opportunity on Facebook? 

Andrea2528

 wellHoenir said:

Where did your partner find this opportunity on Facebook? 

he knows the person quite well

mr_stripey

how much is the other person investing?
does your partner have experience with house renovations, building or other trades etc?

a "few hundred thousand" seems like a lot, especially if others are fronting similar amounts. What sort of house are they intending to buy and renovate?

Andrea2528

He isn't investing anything and my partner is only investing 

Section62

Andrea2528 said:

My partner has been offered an opportunity to invest a few hundred thousand in a house flipping enterprise.  The person he is lending the money to has actually got a house in mind and  he says that partner will supposedly get 10% return on his investment and I thought it would actually be 10% of the profit of the house profit.  How risky is this with a first charge put in place?

Why hasn't the person made enough profit on their previous flippings to be able to do this one without needing someone else to help fund it?

If the answer is "they haven't done this (much) before" then in terms of risk it is probably up there with sending money to a lawyer in Nideria who is handling the estate of a wealthy person recently deceased etc etc.

Your partner would effectively be going into business with this person... he needs to understand what he's getting himself into.

eskbanker

Andrea2528 said:

He isn't investing anything and my partner is only investing 

😮

Run away. Fast.

400ixl

Andrea2528 said:

Surely, if there also a first charge in place, then it is safe?

It is still high risk even if a charge is put on the property.
How will it work?
If you buy the property at auction they will need the funds immediately and any charge on the property will not be in place
They will need funds to do the work, how are they protected before sale?

Is it a limited company that they will be lending to or an individual? What if they decide to go bankrupt or close the business? You would be one of many debtors, at best left with a portion of an unfinished house and money invested owed to trades.

Andrea2528

This is actually the first time person is doing it, he doesn't have any experience with it.  They don't have the money to it themselves, all their money is tied up in assets.