Thinking of "Flipping" a Chicagoland Home?

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Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI Lic

 

Thinking of "Flipping" a Chicagoland Home? 

 

 

"Flipping" shows are increasingly popular on TV these days ...

"Flip or Flop", "Masters of Flip", "Flip this House" represent just a small sampling of the shows currently on air featuring the buying, renovating and selling of homes within a short timeframe for investment and profit.

While entertaining to watch, the rise in popularity of these shows really showcases American's ongoing fascination with home and real estate.  It's also is an indicator of the return of a healthier U.S. housing market.  

It seems Americans are once again willing and more capable of facing the monetary risks involved in "flipping".  And real estate investors are seeing a higher likelihood of making good money.

Most of the shows shown above spotlight couples focused on "flipping" as a way to make a living.  It's their family business and it generates them income.

But "First Time Flippers" on the DIY network, features friends, family members, and couples that tackle flipping a home for the first time as a way to make extra income.  They have no previous experience renovating a home, it's not their main form of employment or their main source of income.

As a Mortgage Originator, over the recent months, I've definitely seen a spike in the interest and number of questions I'm receiving regarding "flipping".  Both from contractors and investors, but from non-business related individuals too.

I think much of the interest is due to the popularity of the TV shows mentioned above.  But the fact that local housing markets have improved have also contributed.  They once again are better able to support this type of investment buying and selling. 

For those considering entrance into the "flipping" or housing investment market, there's much to know and consider.  The choice and purchase of property, its financing, and source of capital for its renovation probably head the list.

 
 Let's Talk Today!Below you'll find just a small sampling of the things that investors must know and consider before conducting a "flip" ... and in order to avoid a financial "flop":
  • Does the proposed property and neighborhood support the improvements to be made?  (Work with a knowledgeable local agent.)
  • Where are the funds to come from for the purchase and renovation of the investment home?
  • Are down payment funds available for an investment property purchase?  (Investment properties typically need a larger down payment made.  Interest Rates on investment properties are also typically higher than on primary residences.)
  • What financing program best suits the purchase and renovation being considered?  (Consider "seasoning" rules for each)  
  • What term of loan should be considered?
  • How long will the renovation take?
  • How long must the title to the renovated property be held before it can be "flipped" or sold?
  • Will "Comparables" be available to support the newly renovated property's new (sale) Appraisal?
  • Tax ramifications ... both property taxes and personal (capital gains) taxes
  • More ...
Most hopeful first-time "flippers" I've talked to have not been aware that investments of this type involve a financing "seasoning" period ... meaning a period of time in which they are required to hold the investment property before they can turn around and sell it.  
 
The length of this "seasoning" period* is dictated by the type of mortgage being sought by the buyer for the property.  As sellers consider offers on their property, it's wise that they know the "seasoning" periods associated with differing types of loans.

The following are the typical "seasoning" periods for mortgages most often utilized by buyers:
  • FHA Loan:  FHA Loans typically require a 90-Day "seasoning" period, meaning if the seller bought and closed less than 90 days from the FHA loan (Case Number Request), the deal is NOT eligible for FHA Financing at that point.
  • Conventional Loans:  Most Conventional Loans, backed by Fannie Mae or Freddie Mac, have no true waiting periods (Some individual Banks that buy and service loans may have a different policy)
  • VA Loans:  Va Loans do not have a "seasoning" period
(* The "seasoning" period starts as of the date of the investor's purchase (date of the Deed.
 
However, it must be pointed out:  In each of the above types of mortgage financing, extreme cases could warrant a second Appraisal, if the increased property value (differences) can't be supported and documented.
 
What is considered an "extreme" case?  
 
The following may trigger the request for a second appraisal to be made:
  • The Seller bought the property for sale in the previous 6 months or less, and the profit is 100% above the initial  price paid
  • The First appraisal is inconclusive, and the Lender's Underwriter requires a second Appraisal Report be done 
As you can see, the buying, renovating, and financing of a "flip" property can be a huge undertaking, even for those that are seasoned "flip" professionals.  Flipping a property can be profitable.  It could also spell financial disaster.  
 
That's why it's best to educate yourself fully and weigh all the pros and cons of this type of investment prior to taking any action.  Eliminating as many upfront risks as possible is key to reaping a positive profitable outcome ...

 Contact Gene Mundt to Find Out More
    
        
* Hoping to buy, flip, or refinance a home in New Lenox,  Will County, or elsewhere in the Chicagoland area? Contact me now!  I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.
I'm easily found at:

Gene Mundt
Mortgage Originator - nmls #216987 - IL Lic. 031.0006220 - WI License #216987
 
American Portfolio Mortgage Corp.
nmls #175656
 
Direct: 815.524.2280
Cell or Text: 708.921.6331
eFax: 815.524.2281
 Contact Gene Mundt for a FREE Quote
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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                   IL Lic. #0006220  -  WI License                                                                                                     

NMLS #175656

 

Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 

 

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Topic:
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Location:
Illinois Will County Joliet
Groups:
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Investors
Chicago Area Real Estate BUZZ!
Buyer Information - What Buyers Need to Know in Today's Market
Bananatude
Tags:
real estate investing
flipping
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chicagoland home flipping
remodeling homes for investment
financing for flipping a home

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Rainmaker
2,313,851
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I think a lot of you a level up in your life that way! And of course you level up your business!

Apr 18, 2017 11:16 PM #7
Rainer
399,767
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Most of the RE Flipping TV shows IMO are unrealistic in terms of total cost to renovate or remodel. I occasionally watched some shows and couldn't believe the total cost of renovation that was reported. It became so unbelievable that I don't watch any of these types of shows.

Most flippers IMO are DIY's and don't include their time for labor in their costs. If they did, their reported profits would be extremely less than what they are reporting, wouldn't it? Regardless, a great post regarding elements of flipping houses.

Apr 19, 2017 01:50 AM #8
Rainmaker
892,092
Kat Palmiotti
Grand Lux Realty, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

A lot goes into being successful at flipping houses. It's no where near as easy as it looks on those TV shows.

Apr 19, 2017 03:37 AM #9
Rainmaker
216,303
John Wiley
Jones & Co. Realty - Cape Coral, FL
Lee County, FL Real Estate GRI, SRES,SFR,PSA

Flipping houses should be guided by knowledge of the market area. I see people who start flipping and buy at market level then add renovations and want to sell at a profit. The problem started with the purchase price. After adding renovations they were above market and could not sell.

Education is key.

Apr 19, 2017 03:45 AM #10
Rainmaker
225,314
Dan Rosenberger
Harvest Realty - Westfield, IN

I'm not sure why flipping shows are called reality TV, because it is more entertainment than reality.  It can be done, but it takes some unique skill sets to do it well.  Some of what looks like profit can get eaten up by carrying costs, such as interest, property taxes, insurance, utilities, lawn care, etc.

Apr 19, 2017 05:18 AM #11
Rainmaker
2,873,767
Dorie Dillard
Coldwell Banker United Realtors® ~ Subsidiary of NRT, LLC - Austin, TX
Realtor-Canyon Creek- NW, Austin TX Homes For Sale

Good morning Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi ,

I'm so glad to see this post featured! Great points and I've always believed yes there is money to be made flipping homes but beware it can also lead to financial disaster if you don't know what you are doing!

Apr 19, 2017 05:51 AM #12
Rainer
192,767
Mick Michaud
Distinctly Texas Lifestyle Properties, LLC - Granbury, TX
The lifestyle you want, the place to live it

The biggest requirement apparently is to have a TV crew on hand.  It is amazing what gets done in 30-60 minutes when those guys are filming.  Otherwise, it takes days. 

 

Apr 19, 2017 05:51 AM #13
Rainmaker
803,487
Corinne Guest, Managing Broker
Barrington Realty Company - Barrington, IL
The Choice of Professionals

Over bidding going on at the court house, says one of my cash investors, the margins are very tight these days. Plus many flippers are doing poor jobs at renovating because of the yield ability being so tight. Not for the faint of heart!

Apr 19, 2017 05:57 AM #14
Rainmaker
864,066
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

Most novice flippers don't have an idea about what it takes to get this done.  The quality of some of the flips I see is sad - my pet peeve is a redone home with old 1920s windows still in place.

Apr 19, 2017 06:45 AM #15
Rainmaker
664,052
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

In an area of severe shortage of housings and strong high paid jobs, random flipping is still a hit and miss. Most flippers realize it is is higher end  homes around 1+M that one stil can make some profit. The challenge is are all have deep pocket willing to pay cash as construction or rehabit loan is an option as investors all use cash.

 

Apr 19, 2017 06:57 AM #16
Ambassador
2,988,017
Jeff Dowler
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude - Carlsbad

Hi Gene

Glad to see this featured - it's definitely become a popular endeavor although the rising costs in my area can make it a challenge unless you have deep pockets. I suspect there are plenty of people getting inspired by all the flipping shows, with new ones all the time, only to find that financially it's a huge burden. And if you don't know what you are doing, it could be a disaster.

Jeff

Apr 19, 2017 07:10 AM #17
Rainmaker
2,067,558
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

The minute you make something look easier than it is, a stampede follows. The result? People get hurt and in Real Estate, that's big money. Only pros knows

Apr 19, 2017 07:13 AM #18
Rainmaker
1,732,269
Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

Congrats on the well deserved Feature! This is something I wish I had the stomach for, but far too much risk involved for me! Great tips for those considering it.

Apr 19, 2017 10:01 AM #19
Ambassador
2,294,532
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Gene - Great advice for those considering taking on a flip. We're seeing few of these lately, adn our very low inventory levels and high demand have pushed prices to the point where there are few reasonable flip candidates and very thin margins that require expert knowledge and skills to make them work.

Apr 19, 2017 10:16 AM #20
Rainmaker
2,313,851
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I think I already commented on here and said that I might look for a Chicagoland home one. I hope the city can get better in a more all-around way.

Apr 19, 2017 04:27 PM #21
Rainmaker
2,313,851
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Dick, some great advice and some great plans and I hope they all come to fruition for you! Dick Greenberg

Apr 19, 2017 04:28 PM #22
Rainmaker
327,620
Scott Seaton Jr. Bourbonnais Kankakee IL Home Inspector
SLS Home Inspections-Bradley Bourbonnais Kankakee Manteno - Bourbonnais, IL
The Home Inspector With a Heart!

Great post, while the shows make me nuts, I am seeing a few more of them in our area. Sometimes tho, the flip is not much more than lipstick on a pig. I had a seller last week tell me by email that I had no reason to mention structural issues in his house I inspected for a new buyer, because we went to the same high school together.  BTW, I was told the repairs cost $30,000. What a jerk. 

Apr 20, 2017 04:52 AM #23
Rainmaker
1,356,232
Patricia Feager
DFW FINE PROPERTIES - Southlake, TX
Selling Homes Changing Lives

Congratulations on a well-deserved feature story! I find most novice prospective investors don't really know and understand what they are doing and the ramifications of owning investment properties.

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi  - You provided excellent food for thought. Anyone in your area would be proud to work with you and get sound advice. Just like many people like strawberries, not everyone should eat them, nor are they good for people who may suffer consequences for having something that isn't recommended or not good for them. 

Apr 20, 2017 12:21 PM #24
Rainmaker
1,189,160
Lyn Sims
RE/MAX Suburban - Northwest Suburbs of Chicago - Schaumburg, IL
Schaumburg IL Area Real Estate

Fix or Flop can be a real life TV program that can be your life! I think too many people think it's too easy & don't have a clue on the rehab knowledge required. They scare me!

Apr 21, 2017 02:13 PM #25
Rainmaker
2,953,820
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Gene

A flipper needs a good team including a Realtor . . . . mortgage lender . . . . title company . . . . and home inspector for a successful flip.

Good luck and success.

Lou Ludwig

Apr 21, 2017 08:03 PM #26
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