As a house flipper, you should be constantly looking for ways to raise money. Friends, family and associates can be a great avenue to get started. However, you will want to be careful on the amount and the terms used for the money you receive. Lets say your grandfather wants to help you get started in your house flipping business. He offers to give you money for this duplex that you just got under contract. This doesn’t mean that he can just write you a check for any amount and of you go. Uncle Sam may want his cut.
Did you know your utility company gives discounts and rebates for your flip? Depending on your project and whether or not you are holding or flipping, this can mean considerable savings for you or your tenant. The discounts are normally available when you buy energy saving appliances, install additional insulation, replace old air conditioners, space heaters, install double pane windows, and many others upgrades.
The return comes in the form of cash vs. a loan, and can cover anywhere from 50 to even 100 percent of the cost of the qualifying upgrade. You will need to check with your local utility company to find out more information. In some cases you need to apply before the work is performed. The utility company may want to inspect the work before final approval.
Well today I found out that my bank will no longer be offering rehab loans to investors. This is a huge blow and the timing could not be much worse. I was banking on this loan for the most recent property that I landed through a foreclosure auction. My loan officer is attempting to get my loan through since it was already in progress, but there are no guarantees. I’m not sure how this is going to affect my other loans but we will see. In the mean time I will need to line up other financing. I had become comfortable with this banker and the relationship was in place. Its time to start a new relationship all over again! ARRGGG!!!!! I really dread having to do this, especially in the current mortgage market.
As a business owner or entrepreneur we must remember that quitters become losers. If we are easily discouraged by roadblocks or even failures we will never win. If we learn from the experiences and continue to push on we can do nothing but succeed. I’ll keep you posted…
In another attempt to fend off a recession yesterday, the Feds once again cut short term interest rate 1/4 point to 2 percent. While this may not affect mortgage rates it does however affect Home Equity Lines Of Credit (HELOC). These lines of credit are normally tied to short term rates vs. the long term rates that affect a traditional mortgage. These short term rates are also typically lower. Many property owners have benefited from the recent rate cuts. It’s a good time to pay down your lines if credit. One way is to continue making the same payments from before and applying the extra directly to principal. However, there may be a better way to take advantage of these rate cuts.
In almost all states and major cities in the country there are housing assistance programs. These programs exist for first time home buyers, teachers, low income families, etc. These programs are normally public, non-profit or church based. These organizations offer a variety of programs and assistance to first time home buyers. One service in particular is the down payment and closing cost help program. They offer funds in the form of grants and loans which buyers can use toward the down payment and closing costs for the purchase a home.
Real Estate investors need to know as much about writing contracts as they know about real estate. This series of posts is a continuation from the Negotiating Real Estate Contracts article. In Part 1, we will discuss 5 clauses that are commonly used by investors in real estate purchase contracts.
Gone are the days where lenders could get Fannie Mae to back mortgages that come with low credit scores. Although its not official reports are that the minimum score will be 580 for most loans with some possible exceptions. This is just another step in fixing this broken system and moving into the next phase. According to the Wall Street Journal Fannie Mae said it will increase the period needed for borrowers to re-establish their credit history after a foreclosure to five years from four years. They will also allow shorter recovery periods for those who have “legitimate circumstances” for being foreclosed.
This can be the biggest challenge for new investors. How do I know how much to pay for a property? There are so many factors involved that it can feel a little overwhelming. In fact it scares some investors away from buying their first property. I’m here to tell you that it’s not rocket science. A class in using a spreadsheet program such as Microsoft Excel or learning to use a financial calculator might be the most difficult part of the process. There are several performance measurements commonly used when valuing property. Three measurements commonly used by investors include CAP Rate, Net Operating Income (NOI), and Return On Investment (ROI). There are many other ratios and measurements used in real estate finance such as Gross Rent Multiplier, Debt Service Coverage Ratio, Operating Ratio, etc. This information can be found in many finance books or at finance courses at your local Community College.
My contractors are all pretty good, so they don’t need me watching over them all day. When I’m not flipping houses, I’m usually looking for the next flip or rental to add to the portfolio. Well, actually I should say when I’m not physically at any of the properties… Of the houses I saw today, this property looks like a decent deal. The asking price was $69,900 and has been reduced to $53,900 in just under a month! The details are as follows:
I’ve been attempting to get my head around this thing for a while. How could banks have been so reckless, all the while knowing what the future held? As we all may know by now the Feds have done it. Last week they decided they would help poor little Bear Sterns from a messy collapse. It may not stop with them either. There must be a line at the Feds doorstep by now. After all its not the banks fault for their poor practices and questionable ethics. It must be the taxpayers fault, since we are the ones who will pay for this in the end. What this says is that banks are basically allowed to use poor standards and practices , jeopardize the economy and be bailed out in the end. When it comes to large banking institutions, it seems they are.
Don’t get me wrong, I am not against what the Feds and JP Morgan did to help Bear Sterns. I believe that the ramifications, of allowing them to fail, would have been huge. Poor performing Securities would have been dropped and written down by every institution on Wall street. But maybe in the end that is what needs to happen before the economy will begin to fight its way back. Can the government bail out every institution facing trouble?
