As the economy slowed and the housing bubble popped, real estate flipping became something of the past. Most lenders and government agencies quickly enacted rules against the practice. In most cases buyers were unable to get financing for properties that had been purchased less than 90 days prior. Even if you were outside the 90 days there was issues pertaining to the amount of profit made on the resale. No Body wanted an inflated priced home on their books.
Now things are different. There is an opportunity to flip properties once again. HUD, the government entity that controls FHA loans, has placed a moratorium on their 90 day rule. This is an effort to reduce the foreclosure inventory currently on the market. Many of the foreclosures and even short sale on are homes that have been neglected. In order to qualify them for financing someone will have to fix them up. So they are temporarily suspending the rule in hopes that it will bring investors back into the market and help reduce the growing inventory of neglected homes.
Don’t think this is a free ticket to the Wild West Real Estate Show that existed in from 2000 – 2007. There are some rules ad underwriters will be paying close attention to make sure past abuses don’t resurface. You won’t be able to slap some paint on the front door and make a 50% profit. If you want to successfully FLIP property, you must document everything. Repairs, hours worked, receipts for materials and a letter justifying the increased cost.
The main feature to pay attention to is the 20% rule. If you are selling the home for more than 20% of your acquisition cost, you need to document repairs and improvements to justify the increase. It doesn’t need to be dollar for dollar however their needs to be documented improvements. If you keep good record and you’re not trying to scam someone, you’ll be fine. If your records aren’t great, in some cases you could get a second appraisal and that would help solidify the new value and justify the above 20% increase.
VA loans don’t have a Anti-Flip rule however they still abide by the 20% rule.
So there is opportunity to make money flipping properties in this new housing market. Actually there is a great opportunity. So get out there and find some deals. Call me if you have any questions or can use some help navigating through the process. Office 843-388-5763, cell 619-347-0207