Don’t get overexcited if you spot an online listing you’d like to flip and the profit projections look great on paper. There are specific properties that might never qualify for Texas Fix and Flip Loans, and even if they are eligible, there are certain deals you should avoid.
When it comes to flips, you want properties that will qualify for financing that is unless you’ve got hundreds of thousands stuffed under your mattress, and above all, you want properties that will sell and sell quickly.
If you can’t flip a house within a few months, you could be on the hook for a massive balloon payment, so first, let us talk about homes that don’t sell or even if they do sell they sell at a steep discount.
• Houses in high crime areas: Most buyers might want to take Fido for a walk after their evening meal. Before purchasing a house to flip, drive to the neighborhood in the late evening and ask yourself “Would I feel comfortable walking around here after dark?” If the answer is no, it’s a deal you should avoid.
• Houses in high noise areas: Buyers have alarm clocks for a reason. No one wants to be roused from sound slumber by a blaring cargo train, the horn of a semi, or the roar of an approaching jet, so avoid flipping homes in high noise areas.
Even though these houses are bad deals, you’d likely still be able to get a loan for them. But there are some houses that you shouldn’t bother with because most lenders avoid them like the plague.
• Houses with a history of meth manufacture: If Walter White previously inhabited your home, lenders aren’t going to touch it. The cost of environmental remediation is not an expense lenders want to cover.
• Houses with extensive mold or fire damage: In any flip, you might expect some damage, but if the cost of resolving the issue exceeds a couple thousand dollars, this is an expense most lenders don’t want to cover.
• Houses with severe roof or foundation issues: Re-pouring a foundation or putting a new roof on would be a considerable expense that you will need to take care of before you can even begin any rehab work. Most lenders aren’t interested in taking on such a cost.
• Houses that have been pillaged: In the rehab business, you can’t expect properties to be in mint condition. However, if you notice that someone has a stripped a house of its wiring and copper pipes, most lenders won’t consider the cost of fixing the property to be worthwhile.
Notice that in the above cases, you could pay for these costs yourself, and you might still be able to get a loan. You could flip a house in a high crime area, next to the airport, or that has been used to make meth. Yes, you could flip such houses, but do you want to?
If a flip has any of the above issues, you should move on. Trust that there is a better deal out there.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.