is it easy to get financing to flip a home?

Question

I curently live in a three story townhome that I rent. I don't like the neiborhood but my landlord wants to sell it. it's worth about $297.000 he wants to sell it to me for $250.00 is it worth buying and selling for a profit and moving elsewhere? Is financing easy to grt to do this.

Answer 1

When I became a realtor 9 years ago in class we were told that our state is illegal and our does not allow flipping properties because it raises the cost of homes/apartments/duplexes too high and then people can't afford to buy them here, and here is a tourist area. Seems that law has gone by the wayside because properties here have increased by twice or more in the past five years, and the problem to keep people here is starting. Nine years ago I was looking at condos for $65,000 here.

If you intend to buy the condo maybe you might want to do that city a bit of good and rent it out to teachers or people in other industries like firefighting or police who can't afford otherwise to rent or lease and still work.

It takes a while to sell a house now that everyone has increased the prices of homes, and just to sell their homes people are starting to have to decrease the price (maybe that's why your landlord has dropped the price). The investment is yours to predict. If the bubble bursts you might be stuck with it and have to resort to renting it out if you decide to leave.

Answer 2

If you don't like the neighborhood, don't invest. Consider a lease to own home in a better area and then as you build equity consider buying rental properties in better areas. You need to make sure that the neighborhood is getting better and not worse. Why do you think the landlord wants to sell??? Consider working with http://www.ameridream.org that can help with down payments assistance for primary residences. You need a decent place to live. Don't worry about investing in real estate until that need is tended to.

Answer 3

You lose important tax breaks if you flip and don't reside in the property and financing for property you don't live in is at a higher cost. Ask yourself why your current landlord is willing to unload the property for a discount. The market has been dropping, what happens to you if you can't turn around and unload the property? Are you willing to live in it if you can't sell it?

Answer 4

No it is not easy. Further, if it was worth more, he wouldn't be offering it to you for so much less. He's probably more capable than you are to get a higher price if he could. You still have to consider capital gains, realtors commission, closing costs, etc. This does not sound like the deal for you.

Answer 5

It may not worth $297K as he claimed. Because housing market continues to slump.

http://money.cnn.com/2006/09/08/real_estate/caught_in_the_bubble/index.htm?postversion=2006090814
http://money.cnn.com/2006/09/07/news/economy/housing_forecast.reut/index.htm?postversion=2006090713

Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.

Let's use following example:

Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.

If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.

In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.

It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.

Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.

It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.

One may ask, why is there a discrepancy between two perspectives of the buyer and owner?

The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.

Answer 6

It depends on how long you plan on holding on to this property. There are 'Lenders' that will loan you the money @ 15% interest (or more) for a short term mortgage.

These people are generally referred to as "hard money lenders" and will give you a mortgage for 6 months. After 6 months though, they WILL foreclose. These people are private investors, so they are not conventional lenders.

Answer 7

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Answer 8

it depends on your fico.