Читать книгу Flipping Houses For Dummies - Ralph R. Roberts - Страница 46

Every day that you own a property, holding costs chip away at your profit, unless of course the property is a rental. Holding costs are the daily expenses — interest payments, property taxes, utility bills, homeowner association fees, and maintenance costs. The trick to reducing these costs is to flip the property as quickly as possible, and that means planning well in advance. Make sure that your plan covers all five stages of the flipping process:

1 Secure cash or financing.With financing (or, preferably, cash in hand), you can move on the deal much more quickly than other buyers and negotiate from a position of power if other prospective buyers have no cash. See Chapter 4 for more about financing your flips, and see Chapter 11 to determine how much you can pay for a property to earn a decent profit from it.

2 Search and research.The fun, exciting step in the process of flipping houses is searching for and finding diamonds in the rough. To limit your exposure to risk, however, you need to follow up your search with research, particularly if you’re buying a home in foreclosure. See the chapters in Part 2 for more about finding properties to flip, and see Chapter 9 for guidance on how to research distressed properties.

3 Purchase.Buying the property is probably the easiest step in the process, but you want to be sure to negotiate (or bid) a price that’s at least 20 percent less than the cost of buying, renovating, holding, and selling the property. You also need to negotiate other terms, including the closing date and the date on which the previous owners move out.

4 Rehab.Jot down a list of improvements you want to make to the property when you first see the house, and schedule the work before you close on the purchase. Ideally, you should start renovating the property the same day or the day after closing. Chapter 10 walks you through the process of inspecting a property for the first time; Part 4 is devoted to fixing up your fixer-upper.

5 Sell or lease.As soon as you know the closing date for purchasing the property, set the date on which you want to put the house back on the market or have it available for tenants. If you’re selling the house, also decide whether you want to sell it yourself or work with an agent. You don’t have to wait to market the house until renovations are complete — the activity that surrounds the house during renovations can be an excellent marketing tool. It gets the neighbors talking. See Chapter 20 for various ways to realize a profit from your investment and chapters 21 and 22 for more about selling your rehabbed property.

Mark Workens, owner of Mortgage One (http://mortgageone.com) and a good friend of mine, offers some other FHA-related mortgage input that every house flipper should know. As you develop a flipping strategy, keep these rules in mind:

 HUD/FHA 90-day rule: According to the Department of Housing and Urban Development’s (HUD’s) 90-day rule, you must own the home for longer than 90 days before you can transfer the title to a buyer who’s using a Federal Housing Authority (FHA) loan to finance the purchase. If you’re planning to sell to first-time buyers, this rule can reduce your pool of prospective buyers and you may need to hold the property for longer than you had planned. Owning the home for fewer than 90 days voids your eligibility for an FHA-insured mortgage.

 HUD/FHA 91-to-180-day rule: If you resell a home between 91 and 180 days after you buy it and the resale price is 100 percent or more than what you paid for the property, a second appraisal is required if the buyer is using an FHA loan to finance the purchase. If the second appraisal is 5 percent or more higher than the first appraisal, the lesser of the two appraisals is used for FHA loan approval.

 The 24-month history rule: Banks require title reports to determine chain of title dating back 24 months. If any more than one person has owned the property in that 24-month window, fraud might have played a factor. As an investor, always be careful about how many sales occurred in the past 24 months. Anything more than one and there might be a problem. Simply strolling into your county’s register of deeds and asking for all details recorded on a particular property within the past 24 months alleviates all doubts about the chain of title.

Keep in mind that most buyers (except cash buyers) require financing and that certain types of financing, such as FHA loans, come with rules that can eat into your profits. When I put my real estate on the market, I target cash and conventional loan offers first. If I’m not getting offers, I consider buyers with government financing. When a buyer is receiving an FHA loan, the government essentially sets the rules of engagement. For example, you’re prohibited from selling to an FHA buyer until you’ve owned the property for at least 90 days. Also, FHA may require a second appraisal that could lower the price the buyers agreed to pay.

For more information on FHA mortgage related questions, visit http://portal.hud.gov/hudportal/HUD.