Ok I know you pros out there get bogged down by all these little stupid questions from us rookies,but take a minute to read one more.
I got a small rehab only needs paint,carpet and some light fixtures. I got a private lender to fund this. This will be a fix and sell. I plan to move it quickly since there is not much work to do here,but lets say I have it for 3 months. How do I go about taxes and insurance on this? Can I get insurance from month to month? Now that I’m thinking about it I guess I’ll take care of taxes when it sells. Let me know if you guys have a website that breaks down all the cost of a rehab from electric, water all the little things and not just the obvious.
When you bought the house you probably had an escrow account set up. When you make your monthly payments, assuming you didn’t get an interest only loan and didn’t put down 20%, you’re paying the Principal, Interest, Taxes, Insurance aka the PITI. The principal and interest will go to the lender and the taxes and insurance go into your escrow account. So you’re paying them when you pay your mortgage payment.
Depending on who’s going to be doing the work on the house, if you have contractors come in you should also IMO get a builder’s risk policy. Some insurance companies will let you add that to your plan, some wont. You may have to call around to find a company. If you’re going to be doing all the work yourself if it were me I’d just get a regular homeowner’s policy to cover theft, vandelism, fire, etc.
My rehab insurance $30 per month for a 160k house and i use Sentry Insurance, cheapest out there I can find. Be super careful about putting the minimum into it as you may need to rent it. I tried to flip a house at just the wrong time a year ago and it is now a rental. I went out on a limb and made it a beauty but could not sell it due to poor credit of buyers. I very much regret fixing it up that much due to tying up so much money I can’t get out. Next time I will fix it up enough to be a “handyman special” and sell at a low price or plan to rent if I have to.
How long have you been in this business ? I have just started for about one month and is in the process of buying two homes, I have one question for you. Do you have a LLC set up for your business ?
I do have an LLC but did not use it for this house. I have really no worries as it a pretty simple deal but I think if you want to learn the process an LLC is the way to go. This was my first deal so I learned a great deal–the enormous value of wholesaling. I am out of the rehab business until I have major cash reserves from wholesaling. Risk is enormous in rehab until you have a strong feel for values and can bid way low with a good sense of rehab costs and a group of rehabbers at low cost; I do have a dream guy I pay $20 per hour to do unbelievable interior work. I am now bidding on a rehab to live in and plan to pick up 50k of equity by bidding way low and use my $20 per hour guy to rehab it over time. My last flip attempt was a HUD and I way overpaid–I still have 40k equity to pull out of it but I could have done better. I will bid again on those but super low…