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House Flipping
House Flipping - House flipping is the practice of purchasing a home and then selling the home in a short period of time, in an attempt to make a quick profit.

Many times people that flip houses buy the homes out of foreclosure, from sheriff's auctions, or bank owned homes for a value that is considerably less than market value. They then go into the home after they have purchased the home and do some minor cosmetic type improvements (such as paint, carpet, landscaping, etc...) and then re-list the home for actual market value and generally they make a pretty good profit.

Be sure you have a good financial plan in place when investing and flipping properties. Many would be investors fail every year due to lack of planning.

Prior to purchasing the property make sure you can afford to keep the property. I know the "idea" is to flip the property. However some properties dont flip as easy as others.

When working with various contractors for a property to flip, keep in mind that if you find a very cheap contractor that can only work on weekends or evenings that the timeframe to finish your house will be very long. You should interview contractors that are reliable and work during the day so your project finishes faster. The longer you take, the more mortgage payments you will make.

Be careful about the financing you obtain for flipping properties. Most lenders like to loan money to people who will hold on to the loan for a long time. If you get into a loan and then pay it off within a few months, it will actually cost the lender money. If you do this often, and it shows up on your credit report, you will have a more difficult time getting mortgages, even for your primary residence, because the lenders will see that you have a history of property flipping. They will make the assumption that you are going to cost them money.

property flipping - One of the growing trends in real estate investing is to buy a property for a lower then market value price and re sell it quickly. This is known by most investors as property flipping. Flipping is not a sure fire way to make money and has its own positives and negatives that need to be understood before you try to do this on your own.

Most lenders are very cautious when loaning on a flipped property. They will research the title chain to determine if the new value is legitimate, sometimes even making the property owners produce receipts documenting improvements done to the house.

If you can show that the prior sale was a "distressed" sale many times a lender will not have a problem with the quick sale of the property for a higher sales price in such a short time. A distressed sale may include one where the previous homeowner had to sell quickly due to financial difficulties, divorce, moving to a retirement center, etc... This can still be considered property flipping but lenders do not usually have as much of a problem with this. However, the home needs to be worth the new sales price too and the appraiser should comment on the "distressed" sale.

Make sure you check with your mortgage broker on loan programs you will qualify for before making an offer on a property with little "title seasoning."

Be aware that, as appreciation rates decline or levels off, you run the risk of being unable to "flip" at a higher price.

Some investors will fix up a property and sell it on a land contract or lease option as opposed to trying to re sell it right away.

Make sure to take before and after pictures.

Always keep in mind your budget and timeframe when flipping a property. If you hire cheap labor that takes long to finish the project you run the risks of making multiple mortgage payments as opposed to hiring licensed contracts that know how to get the job done fast at a higher price.

Illegal house flipping - This often involves a collaborative effort between a real estate investor, an appraiser, and the title company. The house typically is appraised for a much higher than market value and the loan is made based on this figure. Many of these loans are going bad, and the parties involved are facing criminal charges.

Lenders have taken an aggressive stand towards this issue. Most lenders will require the broker of record to remit any Yield Spread Premium received if the home is flipped inside of 4 months from the loan.

Most lenders also require a 6 month lien seasoning period to prevent flipping.

It is possible to legally invest and flip properties as long as you use real appraised values and get the right type of financing. There are investors who will arrange short term financing for these types of deals.

Loans for Investment Properties - Acquiring investment properties has become much more simplified in regards to the financing options available. Todays mortgage programs can allow you up to 100% financing of your investment property. There are several different loan options available that are set up to maximize your cash flow.

If you are purchasing a home that is in a state of disrepair, you may want to look at a renovation or rehabilitation loan. Lenders will loan on investment properties up to 90% of the after repaired value. Monies are given out on a draw schedule similar to a construction loan.

Investors find these types of loans favorable due to not having to pay for repairs and remodeling out of pocket.

The flexibility of a pay option ARM is also a useful tool to investment property owners. Several of my borrowers use this loan not to increase cash flow, but to maximize the use of the rental income. While the property is rented they make the highest payment they can with just the rent, when the property is vacant between renters they utilize the minimum payment so there out of pocket expense is minimized. Investment property owners can also utilize the minimum payments if repairs are needed, etc. The minimum payment can off set the out of pocket expense of repairs and maintenance

Although it may seem like easy money, making money in real estate investing is a skill that takes research and experience to acquire. It requires a good plan and an understanding of the processes involved to either rehab a home or renting to tenants. Make sure you do your research and understand what you are undertaking. The last thing you want to do is put yourself into a situation where the property you buy costs you money every month.

Loans for investment properties are generally much more risky than owner occupied homes. To offset this risk the lender may require a higher down payment and a slightly higher interest rate. Also, if the investment property will be income producing then the lender will restrict how much of this income can be used towards loan qualification. Ask your preferred mortgage professional about the implications of buying an investment property with a mortgage.

Investment loans are so flexible they are allowing many investors to get into the game. It is a good idea to speak to your Mortgage Broker to see how we can get you an investment loan also!

In the world of real estate investing, a property that generates monthly cash inflow is always considered a sound investment. To create a positive cash flow situation, investors often prefer "interest only" mortgage products, which requires the homeowner to make monthly payments on only the interest accrued for the prior month. Because "interest only" payments are always lower than fully amortized payments, investors have a better chance of creating a monthly cash inflow.

Investment loans are similar to the same types of loans are available for owner-occupied personal residences. The main differences for investment property loans are that you pay a slightly higher interest rate and there are some down payment requirements.

A Pay Option ARM and an interest only loan are great choices for mortgages on your investment properties. These will allow you to have the lowest payments possible to help you utilize your cash flow to its fullest potential. There are many more loan programs now for investment properties than there were a while back. You will generally pay a somewhat higher rate on an investment property than you would on an owner occupied property due to the higher risk involved to the lender.

The Pay Option ARM is a loan that allows you to make a minimum payment that is actually LESS than the interest payment. The amount you owe on the mortgage will actually go up each month, but your payments will be very small. For investors who will be making a great deal of money off of their property, this loan may be a great tool to maximize your cash flow.

  

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Mortgage Broker | How can I be sure my loan fees are reasonable | Cash-Flow Loans | Hard Money | What should I ask a realtor before I hire them | Creative ways to buy a house | Employment History | Avoiding Foreclosure | 1031 Exchange | How to rebuild your credit after a bankruptcy | Cash Out Refinance | Home Equity Loan for Condominiums | Refinancing my investment properties
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