On the Verge

Russ and I submitted our pre-approval paperwork to the bank last week, then had a conference call with the loan officer a few days later.  Things all sounded pretty good, and we were told that oftentimes the cost of renovations could be wrapped into the loan on an investment property.

Unfortunately there were some additional items requested by the loan officer.  This is too bad because we found a foreclosure property today and contacted our realtor to put in an offer, but were told that we needed that darn pre-approval letter first.  Hopefully we will get the letter early next week and can still submit an offer.

Actually, this pre-approval process raises a big question - is it even possible to flip houses via a typical mortgage from a local bank?  Isn't the primary value proposition of a house flipping company its ability to rapidly purchase a property with cash in hand, thus avoiding the potentially lengthy process of listing a house?  Will we ever be able to beat out other investors who have cash?

After listening the excellent BP Podcast 196 I have decided that Russ and I need to set up an LLC within the next couple weeks.  I had wanted to avoid this because we have limited cash for our first deal and I am compelled to protect every penny, but due to the nature of our 50/50 partnership I think that we need to do this now.  A BP member referred us to a RE attorney in our area, who quoted $1200-1500 to establish an LLC of this nature.  Seems pretty reasonable to me.  If we have to set up more LLCs in the future we might try doing it ourselves, but I feel that the first one should be done by a professional (aka not legal zoom).  I also reckon that this attorney works with other investors and might serve as a good networking contact.

Also, I used craigslist to sell the motorbike I left back in the States when I moved to Australia.  It's a bit of an emotional sacrifice but the money will be put to good use on our first property acquisition.  I'll get another one after we flip our first house ;)

^ near Jensen, Utah