All Forum Posts by: Danielle Cage

@Albert Bui and @Zack Karp thank you both for taking the time to respond! I do understand exactly what you mean. It's not that FHA will have issues with me owning the property, it's that the extra hit on my DTI is something to consider. Since I partner with others through the LLC and we share expenses, I would hope that would be taken into consideration. I have a call out to my broker, who is returning tonight.

Thanks again!!

Thank you everyone for your responses! My lender is out of town for the weekend so before I took the time to analyze and view the flip, I wanted to confirm. I feel much better about putting an offer in on the house.

Hey all,

So I flipped my first house in 2017 and took a little break afterwards. I recently decided that I want to purchase a multi unit using an FHA loan. My lease is up in August, and I have it narrowed down to exactly what and where I want.

In the meantime, my broker contacted me today about an off market SFR flip that an investor of hers cannot finish. She wants to know if I'm interested. The numbers are there, so of course I am.

There's no way I can close on, rehab and sell the flip by the time I would be closing on my multi unit. I've heard that if you currently own a property, you cannot use FHA to buy a second one. To be clear, the flip will be purchased with hard money in my LLC's name. It will not be a primary residence ever.

My question is this: Will I have a problem trying to close on an FHA loan if I currently own a home in my LLC name that I'm flipping?

Thanks!

@Brandon Jackson Hey Brandon! I completed my first flip earlier in the year by using a HML. There are some out there that will lend to a newbie, however you have to be prepared for out of pocket costs:

• All HML's charge points to newbies, most up front.
• The interest rate will almost certainly be higher, even with good credit. HML's want experience before they take less risk. We paid 12%.
• Our loan was 90% of purchase price and 100% of rehab - however know that you have to pay for rehab out of pocket and get paid back in draws. Understanding that just about every contractor wants a down payment upfront on the project, depending on the scope of work it can be quite costly.
• Often the HML wants to see that you have cash reserves in order to make monthly payments for 3 or 6 months.
• You will need to make monthly payments on the loan until you sell as well as monthly holding costs (insurance, utilities, etc.)
• You will pay closing costs

There may be other things that I'm not thinking of at the moment since I'm at work, however I just wanted to throw in my experience as a recent first timer. If your cash reserves are low, you may want to consider a partner.

Many of these items vary from lender to lender. By the way, I didn't provide this info to discourage you. It's actually to realistically encourage you. Initially it's not easy, but it's worth it :)

Feel free to reach out with any questions. Good luck!

Danielle

@Jeff B. The close date is Monday. I can absolutely have them hold an amount in escrow until work and Certificate of Occupancy is received from the city. I guess my question is (and please forgive my ignorance since this is our first flip), does not having a COO prevent the buyers from physically moving in?

@Rick Ribeiro If only it were that easy. The risers are .75" too high and the railings are 1" too short. The sides were cracking, so we broke them out, inserted bars, re-poured and then put a skim coat over the tops, if that makes sense. Apparently that skim coat made it just a hair to high and when the bars were reinstalled, just a hair too low. Any other suggestions?

@Max T. I imagine we'll have to do what he is requesting. We will have to put the stairs on a post close punch list, however how will that impact the buyers moving in? Is it normal or even possible to have a final inspection for permit to happen after close and move in?

There is no permit required to fix the stairs, however since they made us do a general rehab permit, it gives them carte blanche to check everything in the house. What I don't understand is how they can check things for a final inspection that they didn't check for a rough inspection.

Hi, so we have finished our first flip. We have a contract on the house and are set to close on Monday, 4/10.

From the beginning we have had tremendous issues with the city inspector when it comes to permits. They have gone through the house and made us repair things that were in place before we purchased that we weren't changing and have made us draw up plans for the house because they "don't have them on file at the city."

We have complied with all of their requests and had them come through today for a final walk through. On the walk through, they picked out issues that they never mentioned before during the rough inspections.

Aside from that, and the largest issue is they are making us replace the entryway cement steps because the risers are .75" too tall. We did repair to the stairs after the initial rough inspections, however the originals were in place when they first came through and the inspector never checked the height.

The inspector has been irate and moody at times before, however today literally yelled at my GC, who is simply my dad. When he was asking the inspector about the stairs today, the inspector began yelling at him, saying he didn't care about what we did and that he would withhold the certificate of occupancy. Yes. He literally yelled. It was awful.

Does anyone have any advice on how to handle this? We are set to close in three days and that is not enough time to replace the stairs. We cannot financially afford to lose this deal and these buyers. I imagine if I checked, I would find numerous complaints about this guy, but I don't have time to fight city hall.

Thanks!

Danielle

@David Dachtera I never thought of Googling the former owner! There is some mail strewn about by their front door, which I can see without having to disturb it, so I will absolutely do that! I will also send them a handwritten letter in the event they do have mail forwarding. Thank you for the suggestions!!

@Account Closed Wow, that's fantastic! I'm looking in Aurora, which is in the western suburbs of Chicago.

Hey @Account Closed, good question!

Mail - So far we sent one mailing out and received 3 phone calls, of which there were no leads.

Driving - I located one potential, however it appears to be in foreclosure with the bank. The only address on file for the owners is the that home, which is vacant. I've tried asking neighbors, however no one could provide any info on their whereabouts. The loan is with Bank of America, and I have been unsuccessful in locating anyone who could provide me information.

REI club - tbd, since this will be my first meeting

RE Agent - assisted in locating an auction home on MLS which was a great possibility, however we were quickly outbid beyond our comfort level on what the home was worth.

Talking - I get a lot of people who ask about it, however no viable leads at this point.

Thanks!