Flipping Houses - thinking about it.?

Question

You've all seen these shows where people flip houses and make thousands of dollars. How do they get financed for these?

I see some people get 90 day loans. What kind of loans are those, who can get them, and can you borrow enough to the purchase price and renovations?

I also see some get construction loans. Are these different than what I listed above?

Also, when I bought my house I had to wait 30 days to close the loan. How can they buy a house, sell it in two weeks, and never close?

Answer 1

I have done this several times--but on a much smaller scale. You really have to watch out or you can lose your shirt on these houses. I didn't lose anything (well except for a few months of my life that I will never get back) but on a couple of houses I just broke even. That is way too much work to just break even.

I had a bank that I had used for years, so I had a line of credit--so I could just cash out on the dump house. Closing took a week maybe at the most. But I worked a full-time job as did my (now ex) husband. Thus we could not just go in there and work on the house 18 hours a day. Hiring help will eat up your profits very, very quickly.
Then there are all the permits, bringing everything up to code, and the hidden problems that everyone runs into. Soon you see, there is not much of a profit.
If you still want to try this, remember the 3 things that make a house valuable: location, location, location.
A house that is at a GREAT price, needs some work, and is in a wonderful neighborhood are far and few between. All those great deals are snatched up by the real estate agents before they even get on the market. (I used to be a real estate agent and saw it happen daily).

Trust me, there are far easier things to do to make money.

Answer 2

They get the loans by working with a lender and getting pre-approved. The 90-day loans are balloon loans which are due in full after the 90-day period. There are numerous types of constructions loans, but they are probably 1 year balloons.

If you buy a house the 'normal' way, both parties have to get their acts together to close on the house. The current resident may have to arrange to move, etc. The buyer arranges to have inspections and appraisals. This is why a typical house closing takes 30 days. When you buy a foreclosure house, you get the whole house as is and there is usually no one living there. So the closing process is much quicker.

I think those show are 50% reality and 50% fiction, and I think most of them were filmed 2 years ago when the housing market was still in a boom. What they don't show is the long hours of doing nothing but hunting for houses they want to buy. House after house from sun up to sun down. I also noticed that the estimated profits are just guesswork, and do not reflect what someone will actually offer.

Answer 3

My wife of 20 years also watches those programs. And has the same idea. I would love to meet with the producers for a private discussion.

Its not as simple as it seems.

My wife was renting her house to her father, who passed away last year. Started to fix up the house before selling it for top dollar. Found extensive termite damage. Couldn't find a contractor would who take on jacking up the house and replacing all of the floor joists. So I got DRAFTED. After about 9 months of repairing, my wife was still finding things for me to fix.

Sister-in-law visited from another state. As a realtor she said the house was ready to go on the market. So we did. That was in September.

Due to close on Dec 28th.

We listed the house ourselves.

The guy who came out to do the house inspection was joke. Didn't bring a ladder. Didn't turn anything on. Didn't check under the house. Could have meet him someplace and bought him a beer and just said the inspection was done.

Yet when we bought a townhouse in 2000, the inspector checked everything - even each electrical outlet to see if they worked, checked the temp of the hot water, and heating/cooling, etc.

Never know the quality of the person you will get to do the work. Never been able to guess what are the "hot buttons" of the "potential buyers" who look at the house. Had a lot of "Sunday drivers" come by, but they didn't really have any money.

Answer 4

First, the loan doesn't start until you close and the bank has to actually fund the loan. You don't get possession of the house, thus you can't do any work, until after the close.

If you have good credit and you have a decent relationship with your bank they'll be willing to finance your flip, particularly if you're paying less than appraised value and putting some money down. You're unlikely to make money on a flip unless you're paying less than appraised value.

Answer 5

Its TV. Dont think for a second its an easy undertaking. I have been flipping houses for years and you really need to know your stuff to do it right. You need some solid cash behind you for the unforeseens, you need to know your construction costs, and you need to know your real estate market. If the house is habitable you can get a regular mortgage and pay for repairs out of pocket or with credit cards or lines of credit on your current home. But if you go over budget or the house doesn't sell as quick as you think beware. If a bank wont finance it you can try private investors but they come with a hefty price tag.