Does anyone know how these flippers finance the property while working on it. They talk about going over their time line and having another interest payment due....do they get a short term construction loan? If so, as long as you can cover that monthly interest payment how difficult is it to qualify for one of these loans...some of these flippers seem like blue collar people without much resources....please help... thanks!
There is a wide variety of financing that has/"HAD" been available the past several years.
These generally are not construction loans. In the last 7 years in particular the No Money Down Loans have become more and more available. They are always far more expensive than standard financing because of the lenders risk. Also plenty of 5% down payments loans, 10% down payemnt etc, etc.
The no money down loans are gone and the cost of borrowing is a bit higher now.
All of the above became available with little or no income verification as well as no asset verification. Hence the current problem with the mortgage market. To much risk usually invites fraud from borrowers and that is what the lenders are hurting from most now.
That being said, there have also been some rehab loans available. Not everyone will qualify. It makes a difference if you own a current home or not.
Some people on these shows borrow from everyone and anyone. Borrow on their current homes in the form of 2nd Mortgages. Take out hard money loans which have much higher interest, etc.
** The best thing to do is to 1st seek out financing options with a mortgage lender. See what you qualify for and what options they may have for you.
You can search for investment loans on the web - you will find several different investors that will lend up to 70% of the after repair value ... but you would need to get the details of fin. from them. I also know regular lines of credits with the banks are used .... not ever flipper knows people with tons of cash so please dont think that they are just getting funds from normal folks. Now some may have investors that finance the deals...you could also go with a non hard money lender like a bank and do a investment purchase but make sure you will have no prepays (no fee to pay off or sell the house before a certain time)and remember these types of loan require a nice down payment but you may be able to find a smaller bank that may do something around 5 to 10% down ... You just need to start calling around. Each state is different I am sure .. I am in Texas. Good Luck!
I got a construction loan packaged with my mortgage... basically they loaned me 71K on my 54K purchase, and let me use the balance for renovations. I went over budget, and put the rest on credit cards (new cards with 0% intro APRS of course), but in the end I did OK. The loan was from Wells Fargo, but i don't reccomend Wells Fargo at all. Everyone I dealt with was rude, and unhelpfull. Once they saw my 19K annual income, I guess they thought I wasn't worht their time. The ENTIRE process was an uphill fight, and even after the deal was closed, they kept changing the rules on me (sound like "bait and switch" fraud to anyone?). I even called a lawyer and threatend them with a lawsuit. I will never do business with them again, and will dissuade as many others as I can.
If you are a person making a reasonable salary.. is it possible to get a mortgage on a 2nd home?
I tried buying a house to rent out last year. The house was less than 30 miles from my primary home. It was nearly impossible to find a lender to get me a mortgage on the 2nd house.. and eventually the financing fell apart.
Are there are other ways to get that 2nd home financed? or does having one mortgage already make it essentially impossible until I make more than 6 figures... (I am still probably a few years, and a few job changes from getting to 6 figures).
I don't know what your financial situation is. You can't do what Reray did unless you live in the house. Or it is for you future Primary residence. It's a grey area. If you could convice a broker you were purchasing the house to renovate then move into. You may be able to get a swing loan. But the flip would have to be done quick. Then you just tell them you somemone appraoched you about buying the home. Then you sell is out right.
As far as a 2nd home loan. That would depend on the equtiy in your own home. As well as your assets. As a general contractor myself I have no trouble aquiring my projects. Because I have it down to a science. I do partner flips with invstors that have found properties. I finance the rennovaions for a percentsge of the profit in the sale.
I make very little money, approvximately 20K a year (take home) from my full time job. With that money, i bought my first house. Now I am in the process of buying a 4-plex. We close next tuesday.
I took the equity in my first house (after fixing it up) out, and am using it as a down payment on the 4-plex. Now if I can do all this making 20K a year, I don't see why so many others are having a hard time. The only thing that might help me is my 800+ credit score (at least thats what it was before I used my credit cards to renovate my house, now my debt to income ratio is a little on the high side, but still sitting pretty at a 730 avg credit score).
It was a lot of hard work (18-20 hour days for 6 months straight with only 4 days off the whole time), but how else is a guy like me gonna get ahead. Now, with my rental income and work income all factored together, I went from 20K a year to 50K a year in just under a year.
I should add that I know nothing about tax law (I always did the 1040EZ), and am looking for some advice come tax time so i can protect my investments... I used H&R block this year and was VERY dissatisfied...
I guess it really just comes down to my primary mortgage. Reray that is great that you got approved on the 1st.. and now approved on the 2nd purchase.. and things will move along.. But I'm sort of in a bind since I have a mortgage on a $200k house to deal with, only one income, plus other bills... where, despite having a decent salary, a lender doesn't think I can tack on any sort of new mortage to my bills.
Very frustrating. I enjoy watching P-L.. I have some degree of construction management experience.. I think I would do a nice job.. but I don't see any shot at doing any project unless I opt to sell my current house and then move in to a flip.
Bob you need to look into a hard money lender they work with your credit score and lend 70% of the after market value of the home. I also know mortgages have gotten harder and harder to find but maybe if you can find a stated income investment purchase that would work. In the world of lending the underwriters will not go for a "2nd home" close to your home. Good luck ... I think you should be able to find something that would work w/o having to sell your home. But, that may not be a bad way to start ..... Good luck to you.
Bob ... I forgot to tell you that you can search the web for investor loans and that should give you something in your areas. I called it hard money but dont know what that would give you should you search it via the wonderful internet.
Bob, my real estate agent always says: "don't wait to buy real estate; buy real estate and wait". In other words: don't buy house only for a flip, you never know in today's market. But if you buy a house for a rent, you are making a great investment. Not only somebody else is paying your mortgage, but the house is also gaining on its value (it's said about 3% a year even in a slow market)! I thing the easiest is to buy a duplex for a beginning (single family - one rent, it wouldn't be enough to pay the payment; a fourplex may be to much if you don't have any experience with renting). As for the loan... you need to get a non owner occupied loan (an investment loan). Any lender should be able to get it for you. The only thing you need for it is a good credit and a down payment (usually between 10 to 20%) (the same would be for a flip; just mention it to the lender, they may come up with a 1 year APR with would bring your monthly payment down. I wouldn't recommend flipping a house in a slow market with a loan like this, though). if you don't have a high income, don't worry, the rent will be included to your income. Hope it will help.
