All Forum Posts by: George Moehlenhoff

So on my first flip I got linked up with a mortgage broker. He put me in contact with a HML who's terms were 4 months before penalties started to be assessed. The mortgage broker said once the rehab is complete, we refi out of the HML and then retail the property... Sounded fine to me....

Now as I am about a month or so into the rehab, I am getting uneasy with this broker and want some advice.

First of all, once the rehab begins, he informs me after I refinance I would not be able to retail the house untill 4 months after the refi. He says I could list it, but if someone puts an offer in, have them prequalify through him and then let them live there paying rent untill the 4 months is up then close the sale? HUH? He swears this was discussed, which it NEVER was. He says if I sold it before the 4 months, I could be viewed as a "Loan Jumper". I had another topic on this, but I believe the common opinion was the broker would not get paid unless I kept the house for 4 months? Thoughts?

Now today, I get the good faith estimate to refi and it lists closing as being about $3999; he originally stated it would run 2500-3000. When I asked his employee why there was such a drastic increase, he said because the refi was only for 78,000. I explained the broker knew the details of my deal before he ever shot me a closing costs estimate.

I'm not happy with this situation at this point I still have 2.5 months before the hard money starts charging continuation fees etc....

I'm wondering if I should find another broker to refi with; will most brokers refinance a hard money loan into a conventional? Is that common practice for most lenders? (The HML will be owed 78,000; house will appraise for at least 115000.) Also, concerned if the hard money lender would take issue with me switching brokers as this broker introduced me to him. Do HML lenders care, or do they usually just want their money?

I know I've asked alot, all responses/advice appreciated.

Going through a mortgage broker for my current flip.

The plan was to use hard money to rehab, refi out to a conventional, then sell.

Rehab is about 50% complete and as I begin the refi process, he's says I can list after refi but cannot sell for 120 days. Have any of you heard of this, restrictions on sale after refi?

As always, all info appreciated.

Added a new album with first week rehab/plumbing progress. See my signature. Things are moving along.

can't list untill after refi I believe. Refi starts 3 weeks before rehab is compoets.

My 6'months figures include 4 months with a hml, refinancing, and 2 months on a "normal"'loan if you will.

See before pics in my signature. Thanks everyone!

Thanks Jackie and J!

Yes I have. My holding costs include 6% commission, 3000 for closing, 500 for home warranty, and 500 for termite letter.

Also J Scott is correct, the seasoning I referred to is the Fannie Mae deed restriction.

Good point. I reak of newbie sometimes!

So I should be closing on my first flip next week. I am going to do my best to give back to this community by blogging as much as I can in this topic concerning my first flip... This will also be an easy way for me to document it for the future as well.

Everything I have learned has been from the most generous community here at BP; and a few books. I have never paid a dime to a mentor or a guru....

I've never swung a hammer, and I don't plan to start now. I'll be managing the process; thats what I consider my position to be on this team, besides the obvious financial backing.

I may succeed, I may fail.... But I'm giving it my best shot, and thats what counts right? So here are the details so far.

It's a 2/1 Fannie Mae in St. Louis. I am using hard money to acquire the property. Hard Money is just that, HARD. 5 Points to start, 13% interest only payments, funding a total of 65% of the ARV of the home. The term is 4 months, after which I have to be refi'd out of the hard money loan.

Between the comps from my realtor and the desktop appraisal, the hopeful selling price is $120K The house next door which is identical sold for $120 in late November with a 15 year old kitchen. Currently there are 3 similar properties within a block that are listed at 150k, 150k, and 135k respectively.

Fannie had the property at 90k, then 80k, then 70k. The day it hit 70k i offered 45. They countered 60, I countered 50, they countered final/best offer, I said 52 and they took it.

It needs a new kitchen, removal of boilers/radiators, hvac installed, paint, water heater, new plumbing, minor roof work, minor stone work on front steps, a 3 seasons room in the rear to be pretty much redone entirely and some other minor issues.

I then had an inspection done and used that to form my scope of work for my contractor walk throughs.

I estimated as best as I could 30-36k for the rehab. I had 2 walk throughs with general contractors. One who showed up on time, was very personable, had a written estmate back to me in a day. The other one who came, questioned how at my young (ha, I'm 30, young....) age could afford this, questioned if I bought it low enough, etc This contractor never even got back to me with an estimate; this after i provided both the inspection report and the CMA report that listed sq footage and issues with the home. Because I had a good feeling about my meeting the initial contractor as well as having great references, being licensed, and an A score through the BBB I went with him. I also like that his team is rather small, and he will be doing a fair amount of the work himself. He quoted me 25K for what I needed; I couldn't have been happier as I again, have never swung a hammer and was estimating as best as I could.

1 week after contracting the house, the house gets kicked in and all the copper is stolen along with the water heater. GREAT!! Luckily it was still during my 10 day inspection period; Fannie agreed to credit me 2k for the damage.

I then spent numerous hours and sleepless nights figuring my holding costs.... Cheap Plug, J Scott's site is pretty much a manual for flipping... I've referenced that site more than 1000 times I'd imagine at this point.

My closing is scheduled for next week, with rehab to start on 4/25/2011 and a completion date of 6/6/2011. Title seasoning will prevent me from officially selling the property untill 7/25/2011, however it will go back on the market hopefully by 6/13/2011.

For my final #'s I figured a 6 month holding time; but hopeful to retail it way sooner than that.

Purchase Cost: 50K
Holding Cost 24K
Rehab Cost: 27K (2k for theft damage)
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101k total cost. Also to refi I am figuring an additional 3k (worst case scenario). Keeping the numbers simple, I figure a total cost of 105k @ 6 months. My hopeful profit is 120k (selling price) - 105= 15k profit.

I am truly looking at this as an education that is paying for itself. My wife is of the opinion that as long as we walk away with any profit (1 dollar, 100 dollars, 1000 dollars) we were successful. While thats great for her, I am going to be honest and say if I do not walk away with at least 10k from this deal, I will be disappointed..... TIME SHALL TELL.

So please BP, send your positive thoughts this way, any and all comments please feel free to leave, and I will update as I continue down this new and exciting path.

HERE WE GO!!!!!!!!!!!!!!!!!