All Forum Posts by: Rick Turman

@Julie Marquez maybe we shouldn't be so worried.  I will weigh in my odds and see where this goes.  If others are buying in this area, it must not be that big of a deal.  Just need to confirm with a few lenders around here what their thoughts are.  Thanks so much you two!

@Julie Marquez Thank you kindly for your reply. No FEMA assistance here. My agent quoted 350/mo for flood insurance. The river these homes are nearby floods every time it rains horribly. The last flood we had here was in 2007. River went 6" over major flooding range and into the city. That brought serious attention to a flood plan in the city, and we received a grant from the government to take action to correct it. They were planning to break ground to clean up the river from debris this spring. Of course I can't use that as a selling point, but was looking at weighing in the odds.

Thank you again for your honest opinion, and I will see where this goes.  Wish me luck :-)

So today I made an offer on a property and all seems promising. However, I put that the Seller must provide a Flood Elevation Certificate and must be approved by me. The MLS shows that the property is not in the flood zone, however the County Auditor site show that it comes up to the stoop of the dwelling.

I contacted a second lender to get their opinion on whether flood insurance would be needed for both myself to flip and the new home owner once financing changes over and she said she if the dwelling is in any flood zone, the buyer would need to have flood insurance before even lending on the home.  

Has anyone ran into this before?  How does this affect the Value of the home as well as what I should ask for to sell?  

Purchase = 93,900 HC= 26k RC= 50k ARV= $210k

Thanks everyone!

Originally posted by @Steven Gesis:

 Rick, NICE JOB!!  Not so bad, great information you put out here, people need to listen --- these are easy, quill access to easy capital ---

Now, the thing with the closing, thats weird, wold like to hear more about that, that is a strange scenario, how do they take over the right of the accepted offer... please provide more information .... sounds to good to be true :) 

Thanks for your comment Steven! I may have confused you on the story. The loan company was not the one that was offering the HomeStyle. The second loan company I spoke of was offering another option as they did not offer Homestyle. Long story short, they had a "Service" that they use their own contractors, pay cash for the deal to work down the close value to make their cut, flip the house within your budget built on your suggestions, appraise the property, and resell to you at the cost you had envisioned prior to turning around and selling it at ARV or Market value against comps.

It sounds like a fantastic Idea!  Like a Birdog/Wholesale/ Joint Venture hybrid Mortgage Machine or something haha.  I would be surprised by how many companies are like this out there and how many people have had success using this service.  The company is American Loan in Findlay, OH and they are wonderful to work with.  Great group and have great reputation around here.  Kind of thinking about this for a second mortgage property while I use HomeStyle for the first flip, so I can do 2 side by side.  

Cannot wait to hear from everyone on this.  Thanks again!  

I have obtained a treasure trove of information over the weekend with regards to Mortgages, Rates, Suggestions, Training, etc which I believe I have a better understanding on what to do now.  

Since the HELOC is no longer an option for me, I am leaning more towards the HomeStyle Renovation Mortgage Loan. Rates are dirt cheap here in Ohio, and my Contractor stated that he is used to these in CA which should be a breeze for him. I spoke with my Loan Officer at the local bank and he mentioned I could put anywhere from 5-25% down and could get a rate as low as 4.75%. Renos need to be completed in 12 months, the contractor gets a max of 5 draws, however contractors need to be licensed and insured.

These loans are great as the Loan and Reno costs are included in the loan however there is a huge process behind it and can take 45-60 days to close.  This type of loan is almost exactly the same as a 203K however it is for Non-owner occupancy rather than owner occupied.  Base credit of 720 is needed to be considered.  

Here is the kicker, I received a return call from a local loan company who offered me an ultimatum. They stated they will come with me to the table, pay cash for the property for a fast close, and if for say I am willing to spend a max of 74,9 on a property, they will try to get for 70 and if accepted they will make their money by getting it for less. I bring them properties, they flip them, and resell the property to me post renovations with my approval on renos and costs. I purchase at a conventional mortgage rate and turn around and sell the property for the ARV of the home.

It sounds to good to be true, and am a little skeptical about this.  Has anyone heard of this before?  Would you pull the trigger and do this since there is very little overhead?  Thanks, and looking forward to everyone's responses!

Originally posted by @Mindy Jensen:

@Rick Turman, I would never advocate misleading the lenders as to what the funds are going to be used for. Maybe not volunteer the information, but if asked, tell the truth. I'm guessing you'll be asked, though.

Thanks Mindy. I am a very trustworthy individual, and would never do such a thing as misleading the lender. In my case, I would be up front with any plans for LOC's. Who knows maybe all will go my way and be in a better position than I would have been without. Again thanks for the advice, and looking forward to what lays ahead!

Thanks guys! 

@Mindy Jensen & @Steven Gesis,

The HELOC decision was on my father in law as he was all for our en-devours until the what-if's struck. In laments terms, he stated show me 2 or 3 successful flips, and I will invest. Very disappointing, however I completely understand.

There has not been any offers yet, Just trying to have my team and my financing together in case I strike a good one.  

I have an awesome Agent who has found great properties and he actually found me our prize winning Contractor this week.  He is licensed and insured and was working at my agent's neighbors house on a kitchen remodel.  My agent new I was looking for another team mate and exchanged contact info, and the rest is history, well so far :-)

He came from the Fresno CA area managing over 1000+ rehab homes for a company and recently moved here about 3 years ago.  While living here in my area, he has increased a rehab company's profit margins from 20 to 47% while working there.  Now he has his own practice and is bringing the Building code to our area as a guideline as our area has no code!

Now for the fun stuff.  I read about 203K in J. Scott's books.  From what I understand, with this type of loan is I believe you need to live in the home post renovations, and they will provide the additional funds for the renovations included into your Loan.  This is a huge benefit to those that are looking at Multi-family homes.  Buy the house, Reno then Rent out, or Rent out 2/4 units, move into 1, while you move tenants around to renovate the others etc.

In our situation, I am trying to have a nest of funds available so I can start.  I am walking 5 properties next Tuesday, which a few just hit the market Yesterday.  If I like what I see, I want to take the leap.  

I think what I need to do at this point, is go to the local Banks and just listen to what they have to offer in my situation. I may head there here in a few to gain more knowledge. Is there anything I should refrain from asking? Do they need to know the LOC's will be towards Investment properties or could I tell them i'm using it to start a used make-up collection business (That was the first thing that came to my mind for some reason not that I would ever go in business for that haha.)

Long story Long, thanks again for all your input.  I have come a long way with everyone's knowledge and help!

It looks like our HELOC option has fallen apart,

To our successful past experienced investors:

What are the other options you have used? I know we are pretty much up against LOC's and or Mortgages at this point. Hard Money Lending may take too long, and I do not have a portfolio for that just yet. If I were to apply for a mortgage, can I use the mortgage to cover the home, and the cost of the repairs affiliated with it? From what I'm reading, others mention that the lender of the mortgage may do an appraisal on the home so that the full value of the home is what determines the price of the mortgage. Please confirm all statements above, and help guide me in the right direction as I am hoping to make the leap into the first deal next week! Thanks so much, and hope to hear from everyone soon!

P.s. At what point do you need to incorporate if you are a flipper. Do you need to at all? If not, how do you account for services and 1099's? Or is it always safe in an LLC or bigger when that time comes?

Thanks!

John Wulf , I am also new to the forums as well as Real Estate Investing and looking into purchasing a 4-Plex with lots of questions in mind. However, after reading over your post a few times it kind of got me thinking. The home you have now (what you consider the 5th rental) rents for 500/mo correct? And you are willing to sell for 130k or make roughly that amount. If you were to keep that home and take the 500/mo for the next 21-22 years you would make your 130k. What I think you should do, since lenders are getting tight for you, is to look at selling the property and use both your LOC and your equity on this home to use towards future flips. Eg. You use the 130k cash to flip a home where you know you will bring in at least 40k from. Rinse and repeat 3 more times that year and you made back your 120k. Now you have 250k in liquid on top of your open LOC so now you have 400k in liquid that I would use towards either bigger and better ROI properties or use this as your investment funds for future flips of said caliber. Hope this helps. Good luck with your endeavor! -Rick

@Steve Babiak, Thanks for the clarification!  I know a lot more now than I did this morning thanks to the advice from all.  I will wait to hear back on the numbers and if I do not, I will do my due diligence in contacting the right people.  

As for any other advice, have we not discussed anything else that you would bring up with the owner? I would like to cover everything as I am new to the Rentals.  Thanks again for the help, and have a great remainder of the day ahead!