flipping
I'm new to the real estate game and I'm trying to acquire my first flip (put an offer in Friday) My plan was to move into a home and work on doing the renovations myself, then sell it in 3 months. I know that a FHA loan requires you to live in the house for at least a year. I was under the assumption that with a conventional loan, I could sell it after 3 months of closing. I asked my bank today, and I was told that you have to occupy the house for 6 months before you can sell it.
I have looked into hard money and the rates do not leave much room for a profit. Does anyone know of a way to finance a house where I could sell it in 3 months without hard money or cash?
Thanks in advance!
Jason
Most Popular Reply
I am not sure about the rules surrounding your bank loans, but one word of caution: If a HML makes the deal real tight for a 3 month hold I am wondering how tight the deal is to start with, as you pay a lot more closing costs with a bank loan than you typically do with a HML so the few percentage points (even if a 6 month minimum on the HML) shouldn't be making or breaking the deal.
Make sure your deal is really a deal before you jump in. Run the numbers by us or another investor in your area if you would like some feedback.
I am not sure about the rules surrounding your bank loans, but one word of caution: If a HML makes the deal real tight for a 3 month hold I am wondering how tight the deal is to start with, as you pay a lot more closing costs with a bank loan than you typically do with a HML so the few percentage points (even if a 6 month minimum on the HML) shouldn't be making or breaking the deal.
Make sure your deal is really a deal before you jump in. Run the numbers by us or another investor in your area if you would like some feedback.
@davesavage
Thank you for your response.
I was wanting a 3 month turn around on it because I'm looking to complete at least 4 flips this year. I guess I need to compare a HML against the convential loan to see what my best option would be. What would your advice be?
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Raymond
Personally if you are going for 4 flips in a year, try and find 1 or 2 good HMLs while you are searching for private money lenders who will give better terms - they will allow you the flexibility to make all cash offers which will be more attractive to sellers.
Access to capital will be key as you grow so establishing relationships with the HMLs for your first few deals may help you a year or two down the road when you are finding multiple deals at once and need more capital.
@Dave Savage
Thanks for the advice. After looking at the figures, a HML would be much better than a conventional loan.
Thanks again
No problem, good luck and feel free to bring more questions to the forums
I would suggest talking to a few local banks (portfolio lenders) we have at least three banks locally that dont have an issue with early payoff. Rates at 5% instead of 13%-20% with hard money lenders.
@Dell Schlabach are your local banks able to give financing quicker than traditional mortages 2+ months in NY? Part of my traditional sales pitch is the ability to close quickly and I am able to do that with HML and not so sure I could do that with the banks.
Definitely would be worthwhile to start asking around - I have been considering a line of credit to help with rehab costs, but until that gets built up it won't be enough to buy houses.
@Dave Savage The main local bank that we use can typically close in two weeks.
They provide a letter from the bank that says, "Borrower" has an account with $xx.xxx available to purchase property located at 1234, delilah ave, city, ohio.
This technically a loan but we write as cash offer.
The fee is also less than half of the cheapest HML fees around here, which typically start at 3,000 and go up to 5,000, the two I am most familiar with locally.
Sounds good @Dell Schlabach thanks for the info, I will start checking with local banks in my area
@Jason Greenway You should take a look at my company website, iFunding - we crowdfund real estate projects by allowing accredited investors to co-invest as little as $5,000 and participate in real estate offerings. Crowdfunding is the newest avenue of obtaining real estate financing and we have successfully funded 18 projects for a total of $25.6M.