From First-Time Flipper to Rental Property Owner: J’s Journey

How One Investor Turned a $162K Property into a Winning Fix-and-Flip-to-Rental

My friend K called me in August 2024 and said, “Hey, I have someone you should talk to.” That’s how I met J. He had found this property in San Antonio, pretty solid numbers, good neighborhood, and he was ready to go for it. Him and his partner C wanted to flip it and sell, but life had other plans (more on that later).

The thing is, J had questions. Like, a lot of questions. And honestly? That’s exactly what you want to see in a first-time flipper.

The Beginning: September 13-14

When J first reached out on that Friday, he sent over the property details:

• Purchase Price: $162,000
• After Repair Value: $260,000
• Renovation Budget: $22,000

Pretty straightforward flip, right? What made me confident about working with J was his background. Sure, he’d not done any flips, but he had six buy-and-hold properties under his belt. Plus, his credit score was 800. The foundation was there.

By Saturday, I came back with good news: we could do 100% lender-funded rehab at 10.9% with 2 points. For someone with J’s limited flip experience, this was actually a really solid rate.

The Questions Every First-Timer Asks

Here’s where J impressed me. He didn’t just say “sounds good, let’s do it.” He came with seven questions, and honestly, I wish every first-timer asked these:

1. Could we lend with two LLCs on the deed? Yes, totally. J had his LLC and C had his own. Both could be borrowing entities. Pretty common setup actually.
   
2. What’s your origination fee? For first-timers, you’re usually looking at 2-3 points. Think of points as a percentage of the loan amount you pay upfront. So 2 points on a $156K loan is about $3,128.
   
3. Are there draw fees? Yes, $295 per draw. But here’s the thing, you can request draws as many times as you want during the renovation. Some people do one big draw, others break it up. Whatever works for your project.
   
4. Credit check requirements? We do both soft or hard pull, but only after you sign the term sheet.
   
5. Closing timeline? I told J we could close in 5 days if we had to, but honestly? Give yourself 14 days. Less stress, more time to get everything together, and room for things to go sideways (which they always do). Most deals need that cushion. Luckily he had about 30 days to close.
   
6. Extension options? Standard 6-month term, but if you need more time, you can extend for 3 months. It’ll cost you 1 point, or less if you arrange it upfront.
   
7. Other fees? Documentation and valuation fees, plus the usual suspects like title, escrow, insurance.
   

By Monday morning, September 16th, J had the term sheet in his inbox. He signed it the same day. Game on.

The Term Sheet Details

Here’s exactly what J signed:

Term	Detail
Loan Amount	$156,400
Term	6 months
Initial Funding	$134,400
Rehab Funding	$22,000
Interest Rate	10.9%
Origination Points	2.00%
Doc Fee	$1,295
Valuation Fee	$995
Monthly Interest Payment	$1,421
Prepayment Penalty	None
Estimated 3rd Party Fees	Title 0.5% ($782), Escrow $395, Insurance $1,564
Purchase Price	$162,000
Total Closing Cost	$170,159 (including origination + fees)
Cash to Close (estimated)	$35,759 (subject to final HUD)
Minimum Proof of Funds Required	$44,283 (Cash to close + 6 months of interest payment)

The Roadblocks: Real-World Challenges

Okay, so this is where it gets real. Getting approved is the easy part. Actually closing? That’s where things get interesting.

Challenge #1: The Entity Documentation Maze (September 18-19)

Two LLCs meant double the paperwork: (It ended up being 3 LLCs because one of the LLC was nested under a holding company.)

• Articles of Organization for both
• Operating Agreements for both
• Certificate of Good Standing for both
• EIN letters from the IRS for both

Look, having 2 LLCs on a loan is super common, but it does mean more documents to track down. J and C were on it though. Super responsive, got everything over quickly.

Challenge #2: The Franchise Tax Crisis (September 20-25)

This one almost derailed everything. We’re cruising along and then I pull up C’s LLC status in Texas: “Franchise Tax Voluntarily Ended.” Yikes.

Here’s the thing. This happens more often than you’d think. People form an LLC, do their thing, and don’t realize the state needs you to keep your status current. We couldn’t proceed until it was fixed.

C didn’t freak out. He just filed for reinstatement immediately and kept me in the loop: “Everything has been filed. I’ll have an update by tomorrow.”

Moral of the story: Check your LLC status in every state you’re doing business in. Like, right now. Go check it.

Challenge #3: The Insurance Requirements (September 18-25)

Insurance is one of those things where everyone needs to be on the same page, or the whole deal stalls. I worked directly with their insurance agent to make sure we had:

• Coverage for the full loan amount ($156,400)
• Full Replacement Cost Value 
• Builder’s Risk Insurance for the renovation
• General Liability 
• 12-month prepayment proof
• Specific mortgagee clause language

Quick sidebar: J asked me why he needed both General Liability AND Builder’s Risk. It’s a great question. General Liability covers if someone gets hurt or their property gets damaged like if a contractor falls or damages a neighbor’s fence. Builder’s Risk covers the actual property you’re renovating if there’s a fire, theft, vandalism, whatever. You need both because they protect different things.

Challenge #4: Proof of Funds – Documentation Requirements (September 18-20)

We needed J’s bank statements showing the last two months plus the current month. There was also a $43K transfer we needed to source. Basically, we needed to know where that money came from.

J was on top of it. Within hours:

• Complete bank statements in the last 3 months with full transaction history
• Screenshot showing the $43K transfer (it was a transfer from another account, not a check or deposit)
• Additional statements showing he had the liquidity

The Solution: Persistence and Communication

From mid-to-late September, we just kept chipping away at the list. J and C stayed responsive, I kept them updated on what we needed next:

• September 19: Entity docs coming in, proof of funds verified, TruePic inspection scheduled (by the way, TruePic is super easy. It’s just a way for you or your agent to verify the property condition before we fund)
• September 20: ACH authorization submitted, more proof of funds sent over
• September 23: Checked in on insurance quotes and entity reinstatement
• September 25: Insurance updates rolling in

What made this work? J and C didn’t ghost me. They didn’t make excuses. They just handled each thing as it came up and kept everyone posted.

The Closing: October 16

We closed. Simple as that.

I reached out afterward to see how everything went, and J said, “Everything was good. The team was really helpful and timely in taking the loan to the finish line.”

That’s what you want to hear.

Timeline: From First Call to Funded

Date	Step	Key Details
Aug 16	Introduction	K introduces J to me for fix-and-flip funding
Aug 17–19	Early Conversations	J asks about terms, requests preapproval letter
Sept 11	Under Contract	J finds San Antonio deal, submits funding request with all the details
Sept 13–14	Application	J sends Scope of Work and Track Record for underwriting
Sept 16	Final Terms Approved	Term sheet ready to sign
Sept 17–18	Signing & Title	Term sheet signed, credit auth done, title opened, C submits LLC docs
Sept 19–25	Processing Roadblocks	LLC status issues, insurance coordination, updated docs clear underwriting
Oct 16	Closing	Deal closed, J happy with the process

The Numbers That Made It Work

Final Loan Terms:

• Loan Amount: $156,400
• Interest Rate: 10.9%
• Points: 2 points ($3,128)
• Draw Fee: $295 per draw
• Doc + Valuation Fee: $2,290
• 100% Lender-Funded Rehab: $22,000
• Timeline: 5 weeks from application to closing

The Project:

• Purchase Price: $162,000
• Total Project Cost: ~$170,159 (including fees)
• Projected ARV: $260,000
• Potential Equity: ~$90,000 (minus holding costs, selling costs, etc.)
• Strategy: Fix-and-flip that turned into a rental (more on this in this post)

Real Talk: Lessons for Your First Flip

1. Ask Questions Upfront

J’s seven questions saved so much time. Don’t assume anything. Ask about fees, timelines, requirements, all of it, before you sign.

2. Get Your Entities in Order EARLY

That franchise tax thing could’ve killed the deal. Check your LLC status everywhere you’re doing business. If you have a nested LLC situation, you’ll need docs for both entities.

3. Don’t Sleep on Insurance

Get quotes early. Hard money lenders require it, and if you’re stuck, ask your lender if they have a referral. (We usually do.)

4. Have Your Bank Statements Ready

Last 3 months. Lenders need to see you have enough cash to close AND pay interest for about 6 months. 

5. Communication Matters More Than You Think

J and C replied fast, sent updates without being asked, and never left me hanging. That’s half the battle right there.

6. You Need a Team

J didn’t do this solo. His agent found the deal. He brought the money. C handled construction. K made the intro to me to fund the deal. Everyone played their part. Real estate is not a one-person sport.

7. Things Will Go Wrong, Stay Calm

Franchise tax issues. Insurance headaches. Documentation confusion. It’s all normal. How fast you solve problems matters more than whether they happen.

8. Give Yourself Time

You can close fast if you absolutely have to, but 14 days is so much better. Peace of mind, buffer for surprises, less stress overall. J had a month, which gave us plenty of time for the roadblocks.

The Bigger Picture

Here’s the thing: J and C went in planning to flip and sell. But the market shifted, or maybe the numbers didn’t work out quite how they expected, whatever the reason, they pivoted to rental.

And that’s actually a huge lesson: before you commit to a flip, run the numbers on what happens if you have to hold it as a rental. Can you refinance? Can you afford the holding costs? Talk to your lender about this stuff upfront. Not every property works as both, and you need to know your backup plan.

Today, J and C are collecting rent checks from that San Antonio property every month. They’re looking for their next deal. They went from first-time flippers to rental property owners, and honestly, that might be an even better outcome than the flip they originally planned. Read a complete walkthrough of how he turned this into rental here.

One Last Thing

J’s story isn’t some motivational fairy tale. It’s just what happens when you do your homework, ask good questions, and don’t quit when things get messy.

He found a solid deal through his agent. He asked the right questions. He hit roadblocks (everyone does). He fixed them. He closed.

And now he’s a fix to rent property owner with equity in a good market.

If you’re thinking about your first flip, take notes from J. Be like J. Ask questions. Check your LLC status. Get your insurance quotes early. Communicate. Build a team. Solve problems.

You got this.

About the Author

Dahae Yi is a lender and real estate funding educator specializing in fix & flip and rental financing. She teaches investors how to structure lender-ready deals and offers flexible, relationship-based funding terms that improve as the partnership grows. Her content is designed to help investors buying their first 1-5 properties avoiding common funding mistakes.

Follow me for more insights like this @dahaeyi.lender