West Jersey Real Estate Investors Association

Do you flip houses? Are you in the market for buying, rehabbing and selling properties? In both cases, FHA is helping to make it easier by extending its waiver of the ‘anti-flipping’ rule for 2012.

This FHA waiver means that homebuyers who have relied on FHA insured financing can buy homes that have been ‘flipped’.

As an investor in home properties, this waiver is a great boon. Now, one can continue to buy, rehab and sell properties with the FHA’s blessing. Not only does this move expand the pool of eligible borrowers, but it also makes it easy for first time homebuyers to buy rehabbed properties.

However, the FHA will still continue to ensure that all transactions are ‘arms-length’. Where the sale prices of the property are over 20% of the buying price for the seller, then the lender has to document the justification for the value increase

FHA said it insured 21,000 90-day property flip loans worth more than $3.6 billion in 2010 that would otherwise not have qualified for financing. That number has since grown to nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.

But, while you are considering going for the FHA, here’s something to think about: while the FHA might waive the 90 day minimum holding requirement, the lender might have its own guidelines that forbid this. So you have to make sure that the buyer’s loan officer is aware of the lenders that DO allow this.

In this circumstance, it might also make sense for you to develop a network of contacts of loan officers who know about such lenders.

If you want to know more, just call me at (908) 343-9996, and I’ll be happy to help.

Rehab is all about turning an ugly house into a pretty house. That means, Murphy’s Law applies everywhere: Anything that can go wrong, will go wrong.

In a way that’s good, because then we can really make sure that we’ve done a real good job with the rehab.

After we closed the deal, we ordered oil to be delivered to the house for heating, and for the plumber to come turn on the heating. Fortunately, the driveway of the house was partly plowed (we’ve been having some real big snowstorms lately).

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The plumber showed up the next day and discovered that the winterization of the heating system wasn’t done properly. It seems after draining the pipes, it is necessary to blow them to remove water collecting in the low points. The winterization service had not done this. So, we now had frozen pipes. As we tried to turn the heating on, some of the pipes burst. The plumber had to fix those frozen pipes and stop them from leaking.

Also, to fix these leaks, he had to make holes in the ceiling. So we needed to fix that with sheetrock. Fortunately, he was very experienced at this and made neat holes that were easy to close up.

This meant a couple of days of extra, unanticipated work and expense.

Meanwhile, there are other things that are waiting for us after we fix these pipes. Once the heat is on in the house, we’ll begin work on them.

• There’s a lot of wallpaper all over the house that needs to be taken down. We’re hoping to get that started next week. Then painting begins.
• Also, the carpets need replacing – so we’re taking estimates to find out the costs.
• And last, but not the least, we’re going to refinish the flooring.

So, there you go: a few discoveries made, a few jobs underway and a few more waiting for us. Isn’t that just fun!

Stay tuned for more updates and find out what’s happening at our rehab house!

This post is going to begin with good news: we closed the deal! We are now the owners of the house that we’ve been waiting for! Yay!

I must say though, that it wasn’t easy getting to this part. You must’ve read through the earlier 2 posts about how we decided on buying this house and make an offer to the seller, and how we made an interesting deal with the seller of the property.

Well, after all that, the seller agreed with our offer, and we waited for all the closing formalities to begin. But we were in for a bit of wait because the seller could not deliver the title of the house to us in time. The wait went on for almost three weeks till they finally delivered the title. I hear this is a common occurrence these days – the banks are back-logged with checking and double checking their paperwork to avoid lawsuits of kind in the news recently.

The closing itself was scheduled at my REMAX office. We were paying cash and using the title company of the seller while the seller was paying the title insurance. We wired the money to the title company (they said something about some scams going on with certified checks) – and that was it!

We all met at the REMAX office, and we were out of there in 5 minutes flat!

Phew! I think that went pretty well.

Now begins the part where we get started with the rehab! Stay tuned for more adventures, because here’s where the real fun begins!

All of us were left wondering about the bank for some time. While we waited, the bank did some fact finding for itself! (We kind of thought that it would.)

The bank requested quotations from independent contractors and estimated the cost of the repairs, and compared them with the costs that we had presented. We believe that the bank did this because the costs that we had put forward were more than $1000.

A couple of weeks went by, and finally the bank got back to us with the news we’d been waiting to hear! They agreed with our request, and we were going ahead with the purchase!

Now the final price that we have to pay is a bit less than what we had thought it would be. Also, we are paying cash, we aren’t taking up a mortgage. So, the bank made us an offer and told us that if we use their title company  then the bank would also pay for the Title Insurance. (That’s another $1000 saved! Woo Hoo!)

So, here’s how the picture is looking so far:

Estimated Cost of Repairs and Rehab for home: $15000 to $20000

Closing Costs: $2000 to $3000

So now, we wait for the paperwork and the formalities take place (and we know that sometimes these things take their own sweet time)… once the closing and the deed formalities are done, and the home is finally ours, the real fun will begin!

Can’t wait! Can you?

Keep watching this space for more updates about what happens next!

Our story begins, naturally, with a ugly, and very investment-worthy home – a 4 Bedroom, 2 1/2 Bathroom Colonial that is located in a very nice street. And because it is a bank owned property, the listing price was low. All of this made this home a very interesting deal to snap up!

The best part – we already had 2 investors ready to participate!

Naturally, before we decided anything, we went in and looked at the home. The first thing we checked for is to see if anything was broken and needed fixing. And, this home did require a few things that needed to be fixed, such as:

1. The hardwood floors needed to be finished
2. The wallpaper needs to be removed and the walls need to be re-painted
3. The kitchen needed some updating
4. The laundry room needed a bit more work
   1. The cabinets were ripped apart, so those needed to be put back
   2. The sheetrock needed to be replaced completely
   3. We saw some water stains upstairs, so we figured there might be a leak in the roof – so we need to check it out and fix it
   4. Some of the old carpeting needed to be replaced

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All this home needed, was a bit of a rehab, and then it would be just fine. So we decided to take a look at the financials.

We saw the listing price of the home, and decided that a bit of bargaining was in order. So we made our offer (a price that was lower than the listing price), and they countered (with a price a bit more than what we had offered).

We accepted their offer, contingent on doing:

1. A septic test, and,
2. A well water test

A week goes by, and the results of the tests were in: there were some minor problems with the septic tank. We had our guy look it over and got a cost estimate from him.

We gave the bank the estimate for the repairs and asked for credit – of course, the bank would do no repairs, so we offered that we would do the repairs ourselves and the price of the property would be reduced by the amount that we were going to spend on those repairs.

When we asked the listing realtor to forward this proposal to the bank, she was skeptical about whether the bank would accept. She said that the property was for sale ‘as-is’, In another deal, a different bank had refused.  But we urged her to present our offer to the bank anyway.

In our experience, it just doesn’t hurt to ask.  There have been situations where we did get what we asked for. And so the bank’s realtor forwarded our request to the bank.

Meanwhile, all of this was taking far too long for one of the investors. He backed out.

How do you think it’s all going to turn out? Stay tuned for the next blog-isode of our story that’ll be posted on this site soon!

Ever wondered what happens when you buy a property? I bet you’ve been curious to know what are the small and big things that you might have to do in order to become an investor in a property. Well, your curiosity is about to get satisfied!

We at WestJerseyREIA.Com have something pretty exciting planned out for you! Ulka Rodgers, one of our founders is going to share their experience in a rehab investment. This blow-by-blow journal will help you understand the kinds of challenges we face and the risks involved.

Very recently, we came across a very investment-worthy REO (bank-owned) property that we are now in the process of purchasing. And we thought that it would be great if you were a part of this interesting process.

How are we going to do that?

Well, we’ve planned a series of blog posts that will not only take you through the process of purchasing a REO property, but it will also give you a peek into the behind-the-scenes activity that goes on before, during and after we purchase the property!

So join us on our adventure, and be a part of this exciting journey!

I always thought investing in real estate meant buying a property and renting it for income. Like many people, I was a little skeptical about becoming a landlord. Tenants just meant a lot of headaches. First of all you have to find them to make sure your property is not vacant. Then you negotiate the rent you want and keep  them for a longer period to minimize your vacancy cost. The worst fear is to have to respond to untimely requests for repairs. My husband just fed fuel to my fears with anecdotes of how he spent every Christmas eve fixing burst pipes and blocked toilets when he worked as a plumber with his dad.

So imagine my surprise when I met many investors over the past 3-4 years who work in many other ways. Here are some interesting methods in which I have seen other landlords manage their property holdings:

• Distressed Property Flipping

In this approach, the investor finds a property that is either in the process of foreclosure or is now owned by a bank. They negotiate a below-market price with the bank and then resell it to a “retail” buyer – i.e. one who will purchase at close to the market price. These properties may be rehabilitated or not depending on the investors’ choice.

• Buy and Hold for Income or Appreciation

Buy a property such that its rental income at least covers all expenses and perhaps a little more to provide an income stream. The investor may manage the property themselves  (like my nightmare) or hire a property manager to take care of maintenance and renting. If the property is in a growth area, it may be sold at some point for gains.

• Loan Money to A Real Estate Investor

This is the simplest way to invest in real estate and is sometimes called ‘Private Money’. Your loan works just like a real estate mortgage. You hold the note secured by a specific property. You are paid an interest by the Investor at a rate agreed between you which stops when the property is sold and your principal is repaid. The interest income may be taxable.

• Buy a Fractional Ownership Unit

In this approach you are buying a portion of a property. You receive a prorated portion of any income or profit from its sale. You receive tax write-offs each year as an owner which you may use  each year or accumulate based on your situation. When the property is sold, any accumulated write-offs may be tax-deductible against the gains. The managing members of Fractional Ownerships typically manage all maintenance and rental activities.

• Wholesale-ing

Some investors are middlemen who buy volume properties and resell them to individual investors.

I am sure there are other variations that I haven’t listed here. If a reader knows of some, please comment.

Today’s environment is an unusual combination of good news-bad news. One person’s bad news, while tragic, is another’s good fortune. Someone losing home could be another’s bounty. The good news is that this combination of low housing prices and low mortgage rates are the opportunity of the century.. or possibly a lifetime.

I remember buying my first home in the recession following the savings and loan debacle. We were fortunate that we had saved enough for a 20% downpayment – required in those days to get a mortgage. The choices of mortgages were around 17% interest for a 30-year fixed or a couple of percent lower for an adjustable rate mortgage.

In today’s market, there are options for as little as 3% down with an FHA mortgage for qualifying buyers, Rates dipped recently to as low as 4.6%, and although they may be higher now, they have been close to or below 5%. These low rates mean you can afford to buy in a higher price range, or have lower monthly mortgage payments.

In addition to these conditions, there is a $8000 tax credit for first-time home buyers – defined as those who have never owned a home or not owned a home for at least 3 past years. The requirement is that the purchase closes before Dec 1, 2009. An additional provision, if you have already bought in 2009, you can take this $8000 tax credit immediately on your 2008 return.

These conditions are unprecedented: low housing prices, low mortgage rates and bennies from the government for buying! I wish I were a first time home buyer now – I could’ve paid off my first home within 12-15 years and built up a nice equity for my childrens’ college fees.

With the government working hard on getting the housing market out of the slump, it won’t be long before homes are selling quickly. Those who wait on the fence through this year will be kicking themselves for years to come.

Today is the first day towards to your financial freedom. Make the most of it!

I am excited about the opportunities available today to the serious investor. Millionaires will be made in real estate during the next year or two. West Jersey REIA is just the place for newbies and experienced investors to network, mingle and grow their business. On this blog I’ll be posting my thoughts and ideas as well as methods I learn as we grow together. Join me in this adventurous journey to prosperity.