GO FLIP YOURSELF! Buy a home with an FHA 203k Mortgage Loan

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That's right I said it and I will say it againGo flip yourself.  ---And you'll thank me if you do.

What am I talking about?  Well, I am not trying to be profane.

I'm saying "flip" a house...to yourself!  How?  Let's look at how a "flip" works.

Speculators "flip" a house using the following recipe:

A) Start by finding a house at a competitive price (because it is in need of repair)

B) Purchase the house and add needed improvements (like a new kitchen, new bathrooms, new windows, and a new roof)

C) Presto Change-o you created a new, completely renovated house that is worth more than your purchase price + the cost of improvements.

In other words. you just created equity (money/value)!










                   Before - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -After

Well maybe not that extreme of a change, but you can make a significant change nonetheless.

The speculator would then attempt to sell the house and pocket the spread.

However, this process requires the speculator to:

1) Have a down payment of at least 30% of the purchase price to purchase the property (because purchasing a property for investment requires a large down payment, regardless of your credit and income),

2) Have cash to pay for closing costs, less any seller concessions

3) Have cash to pay for the improvements,

4) Have cash to pay the mortgage payments during the renovation and until the sale, and

5) Have the good fortune/patience/money to hold the property until you get the price you need to earn your profit.

Speculators are at a significant disadvantage compared to YOU,

if you purchase a home and "flip it" to yourself.

 Why? Because speculators do not have access to the best loan product out today


For you to "Flip Yourself" using an FHA 203K loan you have to:

1) Have a down payment of only 3.5% of the purchase price plus the improvements you choose (because purchasing a property for yourself to occupy requires a relatively small down payment), and

2) Have cash to pay for closing costs, less any seller concessions.

That's it. 

What about #s 3, 4 and 5?  Well a 203K loan allows you to

3) Finance the improvements in the same loan, at the same low rate as your purchase money mortgage, (leaving your savings intact),

4) Finance the mortgage payments during the renovation, again in the same loan, and

5) Enjoy living in the terrific "new" house you customized for yourself while delighting in the knowledge that you just created equity in your home!

Note: If you have already closed on your home you can refinance with a 203K loan and get the same benefits!


Making Life Better, One Loan at a Time

Comments (13)

Vickie Nagy
Coldwell Banker Residential Real Estate - Palm Springs, CA
Vickie Jean the Palm Springs Condo Queen

Peter, it's so different in other areas. The disclosure issues are massive. The concerns override the desires in some areas.

Mar 19, 2010 05:09 PM
Vickie Nagy
Coldwell Banker Residential Real Estate - Palm Springs, CA
Vickie Jean the Palm Springs Condo Queen

When I moved back from Florida I flew out again to review current disclosure issues in CA. They were stronger than ever  before.

Mar 19, 2010 05:10 PM
Charles Stallions Real Estate Services
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

Realtors should buy and flip, who better to know the deals that are out there.

Mar 19, 2010 05:12 PM
Frank Castaldini
Compass - San Francisco, CA
Realtor - Homes for Sale in San Francisco

Very enjoyable post.  I dont' believe I will flip myself off but I like what you have to say.

Mar 19, 2010 05:14 PM
Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

Clever title but I have watched those who try flipping and some make it most don't.

Mar 19, 2010 05:17 PM
Ron T. Weems Jr.
Weems Property Group | KW North Sound - Bothell, WA
Managing the details one home at a time.

Very interesting information. Never thought of it in that way. Thanks for the information.

Mar 19, 2010 05:18 PM
David Dee
RMX REALTY - Alhambra, CA
Real Estate - San Gabriel Valley (L.A.) & N. Orang
Peter, this is a different type of flip in regards to the 203k. It is a great way to finance the construction cost to repair it.
Mar 19, 2010 05:24 PM
Kevin Dunlap
Trident Investments Group - Las Vegas, NV

I agree with David above.  Just make sure everything is on the up and up.

Mar 19, 2010 06:25 PM
Don Spera
CR Property Group, LLC - East York, PA
Serving York and Adams County, PA

Its a matter of taking having the guts the patience and the money to get started.  You can make much more if you are handy yourself and have the time, if not your profit margin is obsorbed very quickly.  It is not worth your while as far as I am concerned if you can't make at least 30% profit.  Then you have to watch all the government regulations as far as the time frame for resale as they limit you on the amount of profit you can make, as the flip has to be seasoned.  Best wishes.

Mar 19, 2010 07:50 PM
Stephen Arnold
HomeSmart Elite Group - Scottsdale, AZ

Hello Peter! I tell this to my clients all the time!! I also tell them to stay under the FHA loan limits...higher priced properties are a beast to flip and the underwriters are wanting to see a record of every dollar spent if you are making a few bucks!

Mar 20, 2010 12:40 AM
Peter Mastroianni
RealPartner.com - Pelham, NY

Vickie, Joyce, Frank, Tim, Don and Stephen: I believe my suggestion is confused in the title. 

I am not actually recommending that anyone "flip" anything.  A "flip" requires two title transfers: the first to the speculator, and the ultimate transfer to the end buyer. I am not suggesting this at all.

Let me clarify:  In order to qualify for a 203K loan you must occupy the property yourself after the construction is complete.  In the case of a 203K, "flipping" would violate the terms of the loan.

I am using the phrase "Go Flip Yourself" to suggest to purchasers (not speculators) that they use a 203K loan to buy a house in need of repair, use the financing allowed in the loan to pay for the repairs, then live there and enjoy the equity they created for themselves. 

I believe Ron and David saw what I meant: it is a different way of thinking about a 203K loan, and puts the purchasers in the position of the speculator, but only in that they gain the equity in the propertyThey will not realize this gain immediately because there is necessarily no ultimate transfer allowed

However, by "flipping" the property to themselves, buyers can purchase a "new" home at a reduced cost, instead of buying a completely renovated home and paying the speculator the profits.

I agree with you all that there are significant pitfalls involved with actual "flipping."  Disclosure requirements, underwriting guidelines and market conditions can easily turn a profit into a loss.  That is why I wrote that the speculator has to "have the good fortune/patience/money" to get the price they need to profit.

My suggestion is for purchasers to consult with their real estate agents to find out what properties are competitively priced because they are in need of repair (i.e., short sales/foreclosures), and to use a 203K loan to purchase the property, repair it, and live there happily ever after.

Mar 20, 2010 03:35 AM
Dee Bundy
Fort Collins Realtor @ C3 Real Estate Solutions - Fort Collins, CO
Helping You Make Colorado "Home"

Thank you for clarifying, Peter - I was also wondering where you were going with the post as far as your audience and suggestions.  Your clarifications were spot-on for clearing up that confusion.

I did have to commend you, however, as the title alone was worth opening the post.  Very Catchy!

May 25, 2010 08:01 AM
Peter Mastroianni
RealPartner.com - Pelham, NY

Thanks Danielle!  I realize that I should have been clearer in my original post.  I appreciate you taking the time to read the post and my clarifying comment. 

I thought of the title because "flip" is often thought of as a "dirty" word when it comes to property transactions.  Keep smiling!


May 25, 2010 03:11 PM