Buying A Fixer Upper Home With 203k Loans Versus Fix And Flip Loans
This BLOG On Buying A Fixer Upper Home Was UPDATED On December 10th, 2018
The 2008 real estate market and credit market collapse has devastated millions of American homeowners throughout the country.
- A substantial percentage of homeowners has lost all of the equity in their homes they have accumulated over the years
- Countless of others have loan balances higher than the value of their homes
- Bankruptcies and foreclosures soared to historical record numbers
- Home values have tanked throughout the country
- Many residential homes are selling below the cost of building the home
- Fast forward five years, there still is ample inventory of homes that can be bought at bargain prices
- Many first time home buyers have expressed interest in buying a fixer upper home
- This is because they feel they will get much more for their money
Buying A Fixer Upper Home: Think Budget!
Buying a fixer upper home is a great idea as long as the buyer know budget ahead of time.
- On many cases with buying a fixer upper home, the estimate the homeowner gets and the actual cost of rehabbing the home can be quite different
- Homeowners run into extras from contractors and cost overruns
- Buying a fixer upper home can be disastrous as well
- Homeowners should hire a competent home inspector and make sure you get a detailed report
- Many times homeowners do not realize that buying a fixer upper home can have major electrical, plumbing, and structural issues
Do Research When Buying A Fixer Upper Home
Always get at least three bids from reputable contractors.
- If one of the three contractors has a ridiculously low bid compared to the other two, find out why that bid is so low
- Do not fall victim to a bait and switch where the contractor low balls just to get the job and later are stuck with paying thousands of dollars in extras
- Always review the construction contract and write NO EXTRAS
- Do not advance money to the contractor until work has progressed
- Those with construction loan or a FHA 203k loan, an inspector will come out and see if the work has been done correctly before the lender advances the contractor funds
Always Pull Proper Permits
Make sure contractor gets all of the proper building permits.
- Structural, electrical, and plumbing work should be done by licensed professionals and needs to be thoroughly inspected before it is covered by drywall
- Before giving contractor final payment, make sure home passes inspection by both private home inspector and the city inspector
- Make sure a certificate of occupancy is issued by the building inspector
- Make sure all paperwork including architectural drawings, permits, copies of licenses from contractors and guarantee paperwork
- These paperwork will probably be requested when it comes time to refinancing home or selling home
Buying a fixer upper home can be fun and challenging. Coordinate it right, it can be very profitable for the homeowner.
Update Fix And Flip Rehab Loans
New loan programs for real estate investors is now available:
- No doc fix flip rehab loans to real estate investors, real estate developers, property flippers, and consumers needing short term financing
- Gustan Cho Associates at Loan Cabin Inc. offers private money loans and hard money loans in all 50 states
- 20% down payment is required on all purchase hard money loan transactions:
- 65% loan to value is required on all cash out refinance private money loan transactions