Newbies Flipping Our First Home
Hi Tyler here, I am new member and looking to get my foot in the door. Quick info on me, I am a 25 yr old. veteran with a stable decent paying job. I am in south east Texas specifically Pearland area.
My current road block is the financial part. I have researched ideas i.e. hard money lenders, personal lenders, and traditional bank lending, or a combination of the two. So what I am looking at doing is applying for the mortgage from my personal bank, and then using maybe a VA loan for the renovations/ down payments. Keeping in mind that I do not have a huge savings to do either of those. What would be a good direction to head into as far as getting funding for your first flip.
Also my Price range is under 100k purchase price, 10k to 20k reno and sell for profit obviously. And before you shout at me, those are extremely rough numbers, that is to just give you and idea of where i am focusing on. I have an appointment with my bank to find out what they will lend me and I can update this when I find out.
Many banks and lenders will not do short term FHA or VA loans as they are intended for a primary residence that you would live in. Especially if you do not have the cash on hand to complete the rehab your best bet will probably be a hard money lender because you can often finance the cost of repairs as well as the property.
Originally posted by @Aaron K.:
Many banks and lenders will not do short term FHA or VA loans as they are intended for a primary residence that you would live in.
Right, as i have been informed by a VA home loan rep. but as far as the bank is concerned the home will be my primary residence that I would live in. Is there a specific time frame you need to stay in a home in order for it to not be a short term loan? I'm not looking for a short term loan, I'm looking for a primary mortgage loan and then a renovation loan which could come from a hard money lender.
For FHA I believe it is 1 year. Is this going to be a live in flip or is it strictly an investment?
Originally posted by @Aaron K.:
For FHA I believe it is 1 year. Is this going to be a live in flip or is it strictly an investment?
it will be a live in flip, but not looking to live in it for a year. what if i go with a traditional mortgage from my bank which is a credit union. Offhand do you know if they have a year wait as well or is that lender specific?
Every lender is going to be different, so it doesn't hurt to ask but generally with conventional financing you would have to put 20% down which may or may not be an option for you.
Originally posted by @Aaron K.:
Every lender is going to be different, so it doesn't hurt to ask but generally with conventional financing you would have to put 20% down which may or may not be an option for you.
Ok, thank you for the information you provided. I didn't know about the 1 year deal on a FHA so thank you for that. I do have an appointment for a lender and see what they have to offer.
@Tyler Shaulis Hey Tyler! Glad to hear you're seeking options to get into the real estate investment game. Good idea to acquire a property under market value, and build that "sweat equity." It will payoff in the long run as you build your real estate portfolio.
Take into consideration the FHA 230(k) loan. This program offers a low down payment option used to finance a primary residence, and also provides funding to conduct repairs on the property. Depending on how good a deal you secure, you may be able to refinance in a few months/years and pull out the equity to take on flips of your own down the road.
Talk to some mortgage brokers in your area. Look here on Bigger Pockets for leads. They may be able to shop around and get you a better rate than your local bank. Your a vet that is awesome, look at buying a small multi family property with your VA. You can rehab as live there and make a decent investment.
Originally posted by @Jimmy Dudley:
Talk to some mortgage brokers in your area. Look here on Bigger Pockets for leads. They may be able to shop around and get you a better rate than your local bank. Your a vet that is awesome, look at buying a small multi family property with your VA. You can rehab as live there and make a decent investment.
I have been listening to some of biggerpockets podcasts and I've noticed that some of these newer investors are getting into multi family units, and it's starting to become an option. Thank you for the information.
Hey Tyler,
I used a VA loan to purchase my second property. They are fairly strict about occupancy upon closing. You must certify the house will be used as your primary residence. They require this because the program is designed to help military members and families buy a home not to benefit investors. That being said, there is no set time for that occupancy. The VA understands people move or buy new houses (especially military people). It’s why you can have more than one VA loan at the same time. Individual lenders might have different requirements but the VA occupancy certification is intent to occupy upon closing. Now if you apply for another VA loan a couple months after the first they might have some questions for you.
Beyond the occupancy certification the house itself has to meet certain requirements. Very similar to a FHA it has to be in good condition and livable (for obvious reasons).
The VA home loan program is a powerful tool though. Used correctly it can be a great benefit to us as investors IF you work within the program’s rules.