House Flipping

House Flipping Risks And Rewards Buying And Selling Flipped Homes

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About House Flipping Risks And Rewards Buying And Selling Flipped Homes

House flipping is the name of the game. Never in history has house flippers enjoyed such a profitable profession. There are literally lines of homebuyers waiting for house flippers to acquire that perfect home and customize it to their likings. Homebuilders have never enjoyed such a profitable era in decades. Homes are selling out even before permits are issued. Many are concerned about the housing bubble in the coming months. However, there is still housing demand like never before. Home prices have increased 14% in just the last 12 months. Home prices have been steadily increasing for the past 7 years with no signs of correction. In this article, we will discuss and cover house flipping and the rewards of buying and flipping homes in today’s booming housing market.

What Is House Flipping?

What Is House Flipping?

House flipping is when real estate investors purchase a home in need of work. Investors can buy a foreclosure, short sale, bankruptcy sale, or regular sale. The investor purchases the property and rehabs it. Then sells it for a profit. House flipping used to be very common prior to the 2008 real estate and mortgage collapse. Due to the credit freeze for real estate investors and tough credit markets, it came to almost an abrupt halt. However, with the real estate and housing market recovery, house flipping is back. Many real estate developers and builders are purchasing homes that are foreclosed and rehabbing them, and selling them for a nice profit. It is normally a win-win situation for both sellers, buyers, and the neighborhood. Sellers, the developers, make money, buyers get nice renovated homes at market prices. The neighborhood goes up in value due to the renovations of short sales and foreclosures.

Tips For House Flippers

The key for investors interested in house flipping is to purchase the home at the right price. Remember that when real estate investors acquire a short sale home or foreclosed home, every aspect of the home needs to be inspected and everything needs to be done by code. Make sure to take out the proper permits. The new buyer of the home will most likely be an FHA home buyer. FHA appraisals are stricter than conventional mortgage loan appraisals and stress safety and security. Material costs can be quite expensive. Just in the past 12 months, lumber prices have doubled.

Over Budget On Home Renovations On House Flips

Which means exceeding the budget for home renovations on house turns

There is no end to how much rehabbers can spend on rehabbing a home. This holds especially true if it is a gut rehab. House flippers are business people. Therefore, keep in mind that their main goal is to make a profit. Over-improving home for the area is never a good idea. There are so many cases where developers and house flippers have overspent on a renovation project that it is impossible to get that money back. Plan on sitting on the home for the right buyer if the home is unique or a while elephant (biggest house on the block). Non-QM loans have come out with some great mortgage loan programs for house flippers and developers. Gustan Cho Associates are experts on non-QM and alternative financing loan programs for real estate developers.

Home Buyers For Your Home

Investors who are house flippers need to always think about the potential home buyer.

  • There are tough financing rules and regulations concerning house flipping
  • There are strict house flipping mortgage guidelines

FHA home buyers purchasing homes that have been in the market for less than 180 days here are house flipping guidelines:

  • If the seller of the home is selling the home for 100% or more than their acquisition price, two appraisals are needed
  • Home Buyer cannot pay for the second FHA Home Appraisal
  • Either the lender or the seller needs to pay for the second FHA Home Appraisal

The home buyer’s lender might also require proper permits for additions and structural repairs. The home buyer’s lender may also require a home inspection. Professionals who are in the house flipping business need to be sure that they do all the work per code. Need to take out the proper building permits or else might not be able to sell a home in today’s tough regulated real estate and mortgage markets.

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