I just picked up a flip property.
Purchase price - $70,000
Rehab - $10,000 (Rehab will be done in a week)
Comps - $115,000
Will I run into any issues selling this property in this short of time? I know the FHA Flip Rule has been extended, but not sure if lenders are still lenient.
Who knows? My crystal ball is broken.
What’s your plan B? What’s plan C?
What’s the plan if it costs more to rehab than you estimated? Everything looks bright until the inspector discovers the cracked sewer pipe because the foundation has shifted and now you have to lift the house and bust up the slab to get to the broken pipe and then redo half the drywall in the house to repair the resulting cracks.
Just sayin…
Always always and did I say always have a backup plan in case things don’t work out as you planned. I’ve done too many tax returns for too many people who thought they had a good deal.
I’m pretty confident with my numbers and have a few ways out, if needed. But, thank you for asking. It’s nice to have other people keep me in check.
My main concern is what lenders think (on the new potential buyer’s perspective) since I bought the property, put relatively low amount of money into rehab, and having it back on the market within a week. I have done several other flips, but I could always justify my cost through extensive rehab. This, on the other case, is buying the property right and needing low amount rehab cost.
It might only be a problem for FHA backed loans but not with conventional loans. I saw this on the internet and thought of you:
The FHA flip waiver is a boon for investors seeking to rehab and flip properties, because it expands the pool of eligible borrowers to include those relying on FHA-backed loans, popular with first-time homebuyers and others who lack the cash to make large down payments.
In extending the waiver through 2012, FHA said all transactions must continue to be arms-length. In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will apply only if the lender can document the justification for the increase in value, FHA said.
And this is an investor’s response to the article:
The FHA extension of this waiver and the original waiver are useless. I don’t know of any banks that are lending on less than 90 day flips. That includes Bank of America, Wells Fargo, Chase, Citibank and the rest of them.
I am selling 5 flips every month and any time the property isn’t seasoned the lender makes us wait and rewrite the contract on the 91st day.
If you know a lender that is lending on flips that are not seasoned, please post their name so I can contact them.
Hope this helps. Good luck!