I don't like the term "flipping" when referring to buying, upgrading and reselling houses. It sounds a little callous to me. While it's important to maintain a business-like attitude, I still feel that it's okay to love each little house. That will show in the final result when it goes back on the market. Each one should have something special about it -- something that will make a potential buyer say, "I can't believe I'm getting this for such a low price." The trick will be to accomplish that without going above your budget for the upgrade.
The books tell me that in buying houses to fix up and sell, you make your money when you buy the property. That means you have to know what the upgraded house will sell for and buy it at a low enough price that you can make a profit after the work is done. Many people forget to include the carrying costs in their figures. That includes things like taxes, utilities, mortgage interest, and maintenance expenses. Also, don't forget your realtor's percentage when you sell. I wouldn't recommend trying to do that without him or her. They should be an important member of your team. You have a big enough job managing the whole thing.
After the auction and winning the property with the highest bid, I had to pay a down payment of 5% or a minimum amount. In my case, it was one and the same. That's refundable if the bank does not accept the bid. The bank had 14 days to accept or reject and they usually give their reply sooner. By this time they have been carrying the property and are anxious to get it off their books. I would have heard a little sooner, but it was Thanksgiving week so it was the following Monday when I learned that the bank accepted my bid.
Then their attorney has 48 hours to contact you to set up the closing, which must take place within 30 days or there's a penalty and a chance you'll lose the property. In this case, the bank's attorney was a little slow, but my realtor, Bill Millwood, contacted them and gave them the name of my attorney so things could move along. Meanwhile, I did receive a letter from them. There was a discount for a cash closing.
Now I'm again in a holding pattern, waiting for the attorneys to do their thing. Fortunately, I do not have to be present at the closing so it will all be done by email, snail mail and fax. The money will be sent by wire transfer.
Some books will tell you that you can still buy property with no down payment. I put my trust in the ones that tell you this is risky if not impossible. Don't count on it. But you are in a good position if you can come up with the cash. Probably your bank isn't going to be much help so you might need to be a little creative. They don't like to invest in houses that need upgrading -- especially in these times. There are other investment sources and if you use them, you should expect to pay a higher interest and figure that into your carrying costs. If you are fortunate enough to own your home, a home equity line is a possible source of financing. Just make sure you can make the payments until the new property sells.
Jean, Still Somewhere in Maine
