How do you get loan to flip homes

[myprincessgirlisa]

Hi,

Not sure if anyone knows this but:

How do you get a loan to flip a home??

We already have a 1st & 2nd mortgage from fixing our home(thats where we caught the remodeling bug)

I thought I read somewhere that you have to propose something to a personal banker on your plan.
not sure
Do they have a name for thsi type of loan??
How do these loans work???

I see These shows all the time & wonder how they get all this money to buy & remodel a home ???

Any tips would be great....& thanks for the REO thread that was helpful

 

[katerkat]

Our friends are flipping a house and they came up with the down payment and money to redo the house with a second mortgage on their existing house, and money borrowed from his parents. Um, nine months later, they're on their third mortgage on their own house and selling his car so they can finish the house. AND our housing market has slowed drastically so they will probably have the house for a year or more before being able to sell it. And they were only going to break even if they finished/sold it by September...which past quite a while ago!

 

[PatMcDuck]

i love TO WATCH the houseflipping shows on TV for ideas...... BUT, there is no way to flip in 3 weeks here in central NJ! You need permits and inspections for EVERY little thing, and you need licensed electricians, etc. So, that part of the process seems oddly left out of those programs, unless some states just let you do it all without those inspections... (some shows show permit issues, but most do not)

I would love to be a flipper, DH is a carpenter, and I am very handy, too. But I am glad we did not jump into it, the market is so down now.

 

[Good Deeds]

My husband and I have "rehabbed" two homes and resold them. One we did great on, one we didn't (Had a bad contractor walk on us...)

Anyway, It can be done successfully, but you have to take your lumps too...my husband always says there is a learning curve.

Best advice I can give is to find a good deal. We always try to find them before they are listed. You will always make your money when you purchase the home (As stated before...NEVER pay too much!), Our experience has shown, that you can always find funding if you have a good deal!

Best Wishes

 

[lisabarr]

I bought my rental property which I rehabbed in 2 weeks, with 100% financing. My rent covers the mortgage and our 2 year prepay penalty is up in June. I will refinance w/ a lower rate, although I have a pretty good first mtg. I did an 80/20 loan and the sellers paid all my closing costs and gave me money for repairs and a new roof!

ETA: I came in w zero money out-of-pocket. I must mention, that I do not flip. I rehab and hold. We want to have properties paid off by the time we retire to give us an extra income stream. Also, I am a Realtor, so I do have a bit more experience than the average Jane!

 

[Chicago526]

I'd like to preface this by saying I've never fliped. I do watch a lot of shows about fliping, and I have owned two homes of my own. But again, I've never fliped and don't pretend to be an expert.

Like politics, all real estate is local so your area could still be ripe for fliping, but nationwide, most markets are going down, not up. Before you do anything you need to research the area you plan to buy in and see what's-what. Don't just look at today's asking prices, but look up the actual selling prices of homes over the last year or so, and see if they are trending downward, holding steady, or going up. Now just because prices are falling doesn't mean you can't make money on a flip, if you buy low enough and don't have to put too much money into the house, you can still make a profit, you'll just have to be extra careful in how you do the flip. You need to get a great deal on a house, make a budget and time table for rehab work and carrying costs and STICK TO IT. From all the tv shows I've watched on the subject, the faster a flip goes, the more money they tend to make. This means that you may want to spend more money to hire a profesional to do something in a day that would take you a week to DIY, the time savings is worth the labor cost sometimes.

 

[DVC-Don]

Good friends of ours have flipped two houses in the past 18 months. The first one went a bit over their budget but it sold fast and they made quite a bit of money after expenses. The second one had some problems and took 5 months to rehab (estimated 2) and then did not sell until last week. They lost a lot of money on that one due to having to carry the mortgage months longer than they planned on and the house sales slow down. Housing prices have slipped here recently. They had planned on buying into DVC after this last one, but that's not going to happen now.

 

[ducklite]

If you can't afford to pay a mortgage on the house plus have cash on hand for various expenses, you can't afford to do this.

There are two ways to flip houses. One is to get in one a hot market that is being built, and to sell it at a profit as the market rises during the building process. VERY risky.

There are people in my neighborhood who bought houses like that intending to flip them, then the market dried up. Several have been handed over to the bank as a deed in lieu. My builder bought back a house for what was the original cost was before anyone ever moved in. Once he actually sells the house he'll pocket over $250K. He can afford to just hold on to it and only pay basic upkeep and taxes. The people who originally bought it as a vacation home split up before it was finished and then couldn't sell it. They couldn't afford to keep it now that they also have seperate households. They actually got lucky that they got most of their investment back.

The other way is to buy fixer-uppers, often at auction, put the work into them, and then sell for a profit. This is also risky, as when you buy a house at auction, it's as is. You can run into termite damage, mold, leaking in-ground oil tanks, polluted well water, radon, and any number of other problems that can be extremely costly to repair. If you can't do most of the work yourself, you're just rhowing your profit out the door. Most people who successfully flip have either experience as a real estate agent or a builder.

Most people who flip have a line of credit to draw on. Don't use the equity in your home, you're potentially putting your HOME at risk. While there are some
rehab loans available, they have strict guidelines that go with them. Often they require good sized down-payments, have income restrictions, or are only available for inner-city properties. Many require that the property be owner-occupied within a certain time period after closing.

Bottom line, this is a very, very very risky business, and a high percentage of people who flip either barely break even or even lose money. What type of background do you have? Can you do the work yourself? Can you afford to carry the cost of that house for an indefinite period of time if the housing market cools?

DH and I are currently looking for a flip. We're in no rush and taking our time. We want something that would appeal in size, style, and price to a first time buyer. We are experienced in electrical (DH was former electrician), tile, basic plumbing, painting, sheetrocking, and more. We would need to pay for carpeting to be installed. We've got a good friend who's licensed in HVAC and my brother does custom woodwork, cabinetry, and counters, so we can get amazing deals and advice on that stuff. And we won't buy anything that we can't carry a loan and have the cash to put into it with risk to our credit. We have a private investor willing to put up the downpayment or possibly even outright buy the home for a percentage of the profit.

Anne

 

[Kay1]

This is an interesting site that shows what is actually happening right now:

http://flippersintrouble.blogspot.com/

 

[ceecee]

In our area, house sales have gone way down. Many of the "flipped" houses in this area are still for sale. One was done so shoddy it will never sell in it's present condition, obviously these people did not know what they were doing. Another person I know ended up renting the house to be able to pay the mortgage on it.

 

[arminnie]

This is an interesting site that shows what is actually happening right now:

http://flippersintrouble.blogspot.com/

Wow that is scary - looks like Texas in the 80s.

Investing (not home purchasing) in real estate right now is kind of like buying into the dot com market in 2000. Not that there still isn't money to be made (I've done quite well with Google), but there are a lot more ways to lose money than to make it right now.

 

[C.Ann]

If you can't afford to pay a mortgage on the house plus have cash on hand for various expenses, you can't afford to do this.

There are two ways to flip houses. One is to get in one a hot market that is being built, and to sell it at a profit as the market rises during the building process. VERY risky.

Anne

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This is what my brother and his GF did several times in Florida (Vero Beach area).. They made some very hefty profits - but also quit before the market started to go soft..

If it improves, they'll do it again - if not, they're more than happy with all the $$$$$ they made..

A friend here in NY - and his GF - have been buying, doing all the work themselves - and flipping houses for a number of years now.. They always made a very nice profit - until the housing market went soft here.. The last house wasn't profitable for them at all.. (His Dad is in real estate, so he's always able to jump right on the best deals..) For now, they have backed off..

In order to do something like this, you have to be very comfortable with gambling.. I couldn't do it - I'd be a wreck - but I know my SIL would be VERY good at it because he can do everything himself and therefore would be getting all of the profit..

 

[Toby'sFriend]

yes, if you watch those "flipping" shows on tv nearly all of them now have centered in on the crazy housing markets like in California - where people are buying structures that we'd barely call Garden Sheds here, putting in a new toilet, and then selling it for $750,000.

In most parts of the country, it is far more difficult. I do know one guy who does it. But he is a Single Dad with a teen boy. They literally move into their flips with sleeping bags and a camp stove and put them together room by room. They've even learned how to do roofing repairs themselves. They've both gotten pretty good at it, but since they don't pay a mortgage on another house, they have more financial room to wiggle around in.

 

[C.Ann]

. I do know one guy who does it. But he is a Single Dad with a teen boy. They literally move into their flips with sleeping bags and a camp stove and put them together room by room. They've even learned how to do roofing repairs themselves. They've both gotten pretty good at it, but since they don't pay a mortgage on another house, they have more financial room to wiggle around in.

--------------------

This is pretty much what my friends here in NY did - until they actually purchased a home of their own.. After that, they had to be much more careful because they didn't have as much "wiggle" room..

 

[crisi]

Its a very risky investment. Expect a bank to treat it as such. Also be careful, some sorts of flipping are illegal. (Flipping itself is legal, but there are some behaviors in flipping that some people engage in that are fraudulent - I'd avoid the term "flipping" when talking to any bank - though I doubt a bank would give you a loan to flip currently

One of my accounting profs has a best friend who was flipping. He is now declaring bankruptcy.

 

[maggiew]

You have a first mortgage AND a second mortgage on your own home and now you want to get a loan for a 3rd mortgage to flip a house??

I would be WAY too scared to do that!

Maggie

 

[SplshMtn99]

Not sure where the OP lives, but around here, with prices of houses coming down & sitting on the market for a long time....the days of flipping are pretty much done!!

I would say you are a few years too late to make any money flipping.

But hang in there....eventually the timing will be right again.

 

[PaulaMurf]

Me & DH have done a few flips (he is a carpenter, I do mortgages - so we are "in the business" anyway) there is definately financing you can get on the Rehab house and not put a third mortgage on your primary residence- depends on the state you are looking to flip in.

However, as several posters have mentioned, you need to make sure you get the right house at the right price to start with and not plan on market prices going up to secure a profit -especially now with many areas seeing the sales soften a bit.

PM me if you have specific questions on how we did it.

Good Luck!!
Paula in CT

 

[snowbunny]

yes, if you watch those "flipping" shows on tv nearly all of them now have centered in on the crazy housing markets

Not only that, but most of the flip shows end with the asking price on the remodeled house and calculate profit from there - without including the realtor commission, holding costs if the house doesn't sell right away, and so forth.

Did anyone see the El Segundo house on Property Ladder? Those flippers ending up having to hold that house for several months, shelling out $5000 the first of each month for a mortgage payment, right out of their paper "profits." That's one of the few shows that tells the reality of it.

Some flippers bought a house on my street for $220k, put $75k into it, and listed it for $445k. After holding it for over a year, they finally sold it for $335. Meaning they barely got out whole.

If you have two mortages on your home already, you would be taking a huge risk to get into flipping, just as the real estate market is tanking nationwide. You would have to be prepared for the worst case, which is losing everything.

 

[Mono~rail]

I wouldn't even know how to get flip financing.

I have some stories to tell though about the flip houses that I've seen.

#1 - In our 1st house, our next door neighbors moved out suddenly one Saturday morning. Come to find out, they had been foreclosed on, and the house was put up for sale at the parish auction. It became apparent that the new owners were flipping it. A painting contractor spent a few days over there before a For Sale sign finally went up in the yard. We looked it up on the net and the asking price was astronomically outrageous! The house sat on the market for close to a year before finally being sold for approx half of the original asking price.

#2 - In our 2nd house, the house across the street was a flip house. Once again the asking price was astronomically outrageous! The house sat on the market for close to a year and finally sold when the price was drastically reduced.

#3 - We looked at a house that was clearly a flip when we re-located down here. Once again, the price was ridiculously out of range for the neighborhood. Some cheap laminate flooring had been put in - it was so horrible and cheap that it would cost quite a bit of money ripping it up and re-doing it properly with quality material. There was a in-ground gunite pool that looked like a sewage pit - smelly, muddy water with leaves and floating garbage, what had been a once nice slide laying in the grass, broken pump. We kept an eye on it, and I'm not sure if it has sold or not but it isn't on the market any longer. We saw where they were reducing the price each month by $20,000 before it disappeared off the market.