Just remember that you will be holding these homes for at LEAST 91 days BEFORE you can even ENTER INTO a sales agreement based on new FHA lending laws…In New England every bank I deal with (and everyone I don’t) follows this 91 day rule.
So…Just make sure you can hold the property for 4 to 5 months before you get paid.
Call your local mortgage brokers and bankers and confirm what I’m telling you…That 91 day rule is for entering into SALES AGREEMENTS…So you buyer won’t be able to start the UNDER WRITING process until you hit that 91 day mark. A 4 month turn, in my neck of the woods is almost impossible because I can GUARANTEE YOU that the under writing bank is going to ask for 2 APPRAISALS when they find out you’ve owned the property for just 90 days…This adds time to the process and the banks do not care about YOUR hard money lender.
You can make good money rehabbing houses…But you can make the same money or MORE by finding great deals NOT LISTED ON THE MLS and selling them to REHAB contractors for CASH.
I run the numbers on all my projects before I buy them…In almost all cases it doesn’t make sense financially to hold these properties for rehab. This is because it includes… Apply for all permits, waiting for engineering for new septic systems, demolition of outdated rooms, ordering all the materials for each phase, coordinating contractors, inspectors, deliveries, picking out finish materials, rehabing kitchens and baths, then staging the house for sale and dealing with the the BANKS and RETAIL BUYERS.
I specialize in wholesaling my properties to rehabbers…My holding time is DAYS…My CASH is constantly WORKING, and in the end, the overall return on investment is much higher than what the rehabbers manage to achieve.
I’ve done BOTH and have rehabbed dozens and dozens of homes…Here’s my bottom line advice…
If you can manage to find numerous low cost, OFF THE MLS properties…REPEATEDLY…Then wholesale them and just keep turning your money over…If you can only find 2 or 3 deals a year…REHAB them if the numbers make sense.
PS…I buy all my properties with MY cash. The more CASH you have, the more CASH you can make which leads to making even MORE CASH!! The KEY to this is DISCIPLINE, because as you get good at this, MANY temptations will be placed in front of you as you suddenly realize…I can pay CASH for that vacation house, or that PORSCHE…The KEY to this is NOT letting those temptations WIN…SAVE YOUR MONEY…At a point further down the road all those things will come to you…At the START you need to WALK AWAY and BANK YOUR CASH…There is no cheaper way to buy property than with YOUR OWN CASH.
At some point your BANKER will become VERY INTERESTED in the large amount of $$$$$$ you have in his institution and at THAT POINT you can work out TERMS which are favorable to YOU and allow the use of THEIR MONEY to fund SOME OF YOUR DEALS…The key to this is BORROWING money you really DON’T NEED to borrow. As you get bigger the balance point becomes SELF CONTROL…That means…NOT BORROWING more than is HEALTHY for YOU…I’ve seen a lot of very successful builders go belly up because thewy got HIGH on CRACK MONEY (bankers money!) Don’t make this mistake.
Have a plan, and FOLLOW IT!!! Use credit when it’s SMART to use it! An example of SMART borrowing is using the banks money when you have opportunities that would make your cash position “TIGHT.”
In my experience properties always come in GROUPS…It’s never one at a time…It’s always multiples in the same week…be smart about WHICH properties you use credit to buy. If you can leave $100,000 in the bank as a cushion and use your credit to buy a $50K property, that’s smart use of credit…Worst case scenario you pay off the credit with your 100K cash…BEST CASE…You make ONE PAYMENT on your credit line on that $50K and pay what amounts to $250-$300 to borrow $50K which made you $20K profit in 2 weeks.
Oh…and THAT $20K on a $50K purchase is a REAL WORLD NUMBER…Just did one this week…Purchased it for $40K, sold it 3 days later for $75K…DID NOTHING TO IT…Literally NOTHING, not even a clean out.