A friend and I were thinking of buying a house in need of a little repair to fix up and sell. We would be doing most of the work ourselves and anything that we can't fix we could figure out. Not looking to get rich, but we think it would be a good way to make some extra income without working 7 days a week at our current jobs. Hopefully get to a point where we could do this full time and maybe build a house or two. Gotta dream BIG!! Anybody here do this? What about capital gains taxes? What about bank financing? Will they lend x amount over the price of the house to cover repairs? Any suggestions where to get more info? TIA
Buying and selling houses
- Thread starter gn1220
- Start date
GN One Day...
Senior Member
- Joined
- May 28, 2001
It can be a very good way to make money, but how easy it is depends on how much you can start off with, the type of house you have in mind and the buyers you are marketing to.
You can shop around for a lender that will provide the money, similar to a construction loan, or even a line of credit, like a builder, for the houses. What you may have trouble with is the fact that it will be non-owner occupied, which will raise the rate, and come with a strict set of guidelines. Not all lenders will do it. I think this will be difficult, but that isn't the type of lending I do. There is always a lender for whatever you want, they may just be hard to find. Maybe someone will chime in with an idea. If you purchase the house and use your own money for the upgrades, you may have to be ready for 10-20% down. Plus, a higher rate than owner occupied property. Best bet might be a small, local bank where you can establish a relationship. A new bank if possible.
Do this ONLY if you find a GREAT buy on a house. Don't count on HUD homes, HUD will not do any repairs on the house, as a matter of policy. And they usually need it. If you don't get a house that you can make a good profit on, you might end up eating it from the interest you pay while trying to sell. Start slowly, learn the market.
Some lenders have gotten to the point where they will require the house to have been in your name for _____ months to a year before they will close a loan on that property. The reason for this is "flipping". A person can do what you are talking about, get in bed with a shady appraiser and buy a worthless appraisal with an inflated value. You can't just slap a coat of paint on a house to make it look good in a picture and all of a sudden make an extra 30% on the house. It all comes around. You sell the house for more than it is really worth, and then the person is upside down in the house. They find out when they try to sell later adn get an honest appraisal. They can't afford to sell. Often, the house ends up in foreclosure, the appraiser is in jail, and you could be next, or at least sued. If you do this, do it with houses that will attract strong borrowers in good neighborhoods. There are good buys out there that will let you do it right and make some really good money.
Don't go into this like some have, learning from some infomercial guru. Don't get into trying to sell houses that aren't yours, closing your purchase at the same time as your sale to keep from putting money down. That's BS and won't last long. Be careful what advice you get, but this can be done if you do your homework and keep track of the dollars and cents of what you're doing. Some people make really good money doing it, I know of a few guys that have been able to do it full time. They turn out some good houses and everybody wins.
*PS Don't even think about mobile homes.
You can shop around for a lender that will provide the money, similar to a construction loan, or even a line of credit, like a builder, for the houses. What you may have trouble with is the fact that it will be non-owner occupied, which will raise the rate, and come with a strict set of guidelines. Not all lenders will do it. I think this will be difficult, but that isn't the type of lending I do. There is always a lender for whatever you want, they may just be hard to find. Maybe someone will chime in with an idea. If you purchase the house and use your own money for the upgrades, you may have to be ready for 10-20% down. Plus, a higher rate than owner occupied property. Best bet might be a small, local bank where you can establish a relationship. A new bank if possible.
Do this ONLY if you find a GREAT buy on a house. Don't count on HUD homes, HUD will not do any repairs on the house, as a matter of policy. And they usually need it. If you don't get a house that you can make a good profit on, you might end up eating it from the interest you pay while trying to sell. Start slowly, learn the market.
Some lenders have gotten to the point where they will require the house to have been in your name for _____ months to a year before they will close a loan on that property. The reason for this is "flipping". A person can do what you are talking about, get in bed with a shady appraiser and buy a worthless appraisal with an inflated value. You can't just slap a coat of paint on a house to make it look good in a picture and all of a sudden make an extra 30% on the house. It all comes around. You sell the house for more than it is really worth, and then the person is upside down in the house. They find out when they try to sell later adn get an honest appraisal. They can't afford to sell. Often, the house ends up in foreclosure, the appraiser is in jail, and you could be next, or at least sued. If you do this, do it with houses that will attract strong borrowers in good neighborhoods. There are good buys out there that will let you do it right and make some really good money.
Don't go into this like some have, learning from some infomercial guru. Don't get into trying to sell houses that aren't yours, closing your purchase at the same time as your sale to keep from putting money down. That's BS and won't last long. Be careful what advice you get, but this can be done if you do your homework and keep track of the dollars and cents of what you're doing. Some people make really good money doing it, I know of a few guys that have been able to do it full time. They turn out some good houses and everybody wins.
*PS Don't even think about mobile homes.
I've done 1 house so far, then I was kept busy with other things and now I'm thinking about doing another, too. Years ago, I bought the package you see on TV by Carlton Sheets called "No Down Payment". Now before you start, I bought it before I ever saw any infomercials. An employee of mine told me to get this stuff and gave me the 800 number. A partner and I bought it and it is really worth it. It's not rocket science, but the information is definately worth the cost. Of course, the no money down deals are few, but the keys to getting in with little cash are there.
A partner and I got REAL lucky on my first house. A true no money down, no payments for 9 months, and payoff in 2 years. We rehab'd it and sold it for 19k profit in less than the first 9 months.
You can get loans based on it's "rehabed" est value, but the rates are typically higher. I think financing is pretty easy. I have been talking with another guy to partner with and he just did one with financing and doesn't even have a job!!!
Good luck.
A partner and I got REAL lucky on my first house. A true no money down, no payments for 9 months, and payoff in 2 years. We rehab'd it and sold it for 19k profit in less than the first 9 months.
You can get loans based on it's "rehabed" est value, but the rates are typically higher. I think financing is pretty easy. I have been talking with another guy to partner with and he just did one with financing and doesn't even have a job!!!
Good luck.
Little6pack
Active Member
- Joined
- Jun 2, 2002
DO's & Don'ts
Just materials alone can run you a lot of money.
Your time = labor.. Will you have time besides a normal job to work on the place?
Do you plan to rent the property or sell asap after fixing?
DON't buy with family members
Don't buy in a bad area
Do buy a fixer upper in a moderate or good area.
I could go on & on about this but for now I will leave it at this.
Just materials alone can run you a lot of money.
Your time = labor.. Will you have time besides a normal job to work on the place?
Do you plan to rent the property or sell asap after fixing?
DON't buy with family members
Don't buy in a bad area
Do buy a fixer upper in a moderate or good area.
I could go on & on about this but for now I will leave it at this.
Thanks guys, this is the info I've been looking for. We want to start off with a solid home in a good area, maybe one with an older owner, that needs paint, updating, etc. Not a huge money pit but something to polish and re-sell. Also, we don't expect to make a killing on the first one but slowly work our way up and just keep reinvesting our profits. I have quite a bit of equity in my house and my friend has cash so we figured between the two of us we could make something work. My Uncle does this on the side but he is in a position to pay cash for everything, so that gives him a lot more options than we have. He makes good money doing this, and he has to pay for all the work, so I know we could save a lot doing most of the work ourselves. Location, Location, Location
TexasT
Texas, Where are you from
- Joined
- Sep 10, 2002
Be Careful
gn1220,
You said it all in the last three words(location). I know a guy that makes a good living just loaning money to people that do what you want to. He said that he doesn't have too much of a problem because most of them know that they need a loan for the next one. Good luck.
Rich
gn1220,
You said it all in the last three words(location). I know a guy that makes a good living just loaning money to people that do what you want to. He said that he doesn't have too much of a problem because most of them know that they need a loan for the next one. Good luck.
Rich
Ken Cunningham
Post No Bills
- Joined
- May 24, 2001
Both statements above touch on the key aspect of success in this business: you make your money when you buy the property.
I have worked with successful real estate investors for over 20 years, most of my clients buy 'blue-collar' properties, some fixers, etc. And the best of these investors tell me they make their money when they buy right. No amount of diligent repair work or dynamite financing or creative selling can help you if you paid too much at the beginning. On the other hand, if you buy right, then [almost] no amount of repair disasters can destroy your profits.
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