All Forum Posts by: Claudia Fernandez

60 days & First week in May don't really agree. I would offer cash for keys. 

@Claudia Fernandez, Depending on when you moved out you don't need to do a 1031.  If you have lived in the house for 2 out of the previous 5 years you can take the first $250k (500K if married) in gain tax free using the sec 121 primary residence exclusion. 

If you haven't lived in it or two out of the last five then you have certainly used it as investment long enough to qualify for 1031 treatment.  But I would explore your potential tax free opportunity first.

@Claudia Fernandez it's been a while since I looked into the HomeStyle loan, but I'm pretty sure it's for first time owner-occupants?  There are lots of reasons why a conforming loan (much less an owner-occupant loan) wouldn't work for flippers.

I don't see how a lender who charges 12% interest, takes half your profit, and THEN owns the property 100% after all the work is completed by their lendee (who by the way still has to put up 10% of the project) would be considered "too good to be true."  

It's a different business model--one that some might call "disruptive"--but they're not giving anything away for free. You're essentially their bird dog, agent, and contractor all rolled into one, and you just paid THEM for the privilege. But for people in expensive markets who don't have the 25% LTC DP that HMLs want to see (which keep in mind is less than the 25% LTV that most conventional banks want), it could be a way for more beginner flippers to build capital.

Personally, I'd be a little concerned about giving up all control over the property.  I'm pretty opinionated about design decisions and know my neighborhoods well.  In addition to dictating the choices you make as the rehabber/remodeler, a company that owns the property could simply decide to hold the property and give you whatever they say it's worth.  Not saying this company would do that, but they could.  Also with this model, you ONLY have the one exit strategy.  If the market shifts by the time you're done with the rehab, you can't hold the property--you'd have to take a loss.  That's a lot of time invested to relinquish all control yet still take on significant risk.  

All that said, if I were a flipper starting out, and despite all these considerations, it's still one funding strategy I'd look into, in addition to others, if I didn't have private money or personal capital.