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so I'm planning on buying my first home this next year but will most likely sell it within a few years as I am looking for something I can remodel my self and flip.
There are a lot of diferent opinions on this but my question is what would be the best type of loan in for this situation. I have good credit and a solid middle class single income but will not have a huge chunk of cash for a down payment.
does anyone have expierence with 40 year loans? I've been told that if your just going to sell then go big and reduce the monthly morgage as much as possible. I also read this can be a recipe for disaster.
The biggest thing is avoiding upfront cost/fees and try to spread them over time. The type of loan is less relevant but you want to look at your upfront costs to get different types of financing and then compare the costs over the first 4-5 years of the loan.
But the real key to making money is to buy the house for (at most), 70-75% of FMV and buy in a neighborhood where prices/incomes match up and cost to own/cost to rent is pretty reasonable. If you do both of these it's fairly likely you won't lose money, even assuming a pretty bad case scenario with the real estate market.
If you don't have money to put down on the house, where are you getting money to remodel it?
The biggest thing is avoiding upfront cost/fees and try to spread them over time. The type of loan is less relevant but you want to look at your upfront costs to get different types of financing and then compare the costs over the first 4-5 years of the loan.
But the real key to making money is to buy the house for (at most), 70-75% of FMV and buy in a neighborhood where prices/incomes match up and cost to own/cost to rent is pretty reasonable. If you do both of these it's fairly likely you won't lose money, even assuming a pretty bad case scenario with the real estate market.
If you don't have money to put down on the house, where are you getting money to remodel it?
I 'll have money to put down but not 20% of the home cost. I plan on buying something in the 150k to 200k range and remodeling it over a few years while living in it.
But the real key to making money is to buy the house for (at most), 70-75% of FMV
People who do this for a living, like me, consider 70% INCLUDING THE COST OF REPAIRS, to be the top price. Granted, you're looking at a house to live in, not a place to flip. A flip is QUICK, remodeling your residence over a few years just puts you in line with average Americans, who tend to move every 5-7 years.
People who do this for a living, like me, consider 70% INCLUDING THE COST OF REPAIRS, to be the top price. Granted, you're looking at a house to live in, not a place to flip. A flip is QUICK, remodeling your residence over a few years just puts you in line with average Americans, who tend to move every 5-7 years.
Yeah, I think the other consideration is a lot of flips that someone like you would do is they aren't livable when you buy it, and need to incur significant time/costs to make them habitable.
so I'm planning on buying my first home this next year but will most likely sell it within a few years as I am looking for something I can remodel my self and flip.
There are a lot of diferent opinions on this but my question is what would be the best type of loan in for this situation. I have good credit and a solid middle class single income but will not have a huge chunk of cash for a down payment.
does anyone have expierence with 40 year loans? I've been told that if your just going to sell then go big and reduce the monthly morgage as much as possible. I also read this can be a recipe for disaster.
your opinions?
I'd advise against the approach you're taking.
The whole mentality of "I'm going to buy a house a house and stay in a couple of years, and then move on" is very 2006. So is the thought of taking a 40-year loan to buy a house that you can't afford. 40 years is too long. Even 30 years is too long if you're over a certain age.
You can't count on selling your house in a set timeframe, and place yourself at risk if that doesn't pan out. So many people took adjustable rate mortgages that were cheaper in the short run, but more expensive in the long run, because they were sure that continually rising equity would sweep them into a bigger and better house in 2-3 years. Instead, they're stuck with payments adjusting upward that they can't afford.
What you're talking about doing isn't flipping. Flipping is buying an unhabitable house, or a house that can sustain radical changes, renovating it as quickly as possible, and selling it without personally living in it. You're simply talking about buying a house that's probably more expensive than you can afford, and expecting to move to a different house in a few years.
The whole mentality of "I'm going to buy a house a house and stay in a couple of years, and then move on" is very 2006. So is the thought of taking a 40-year loan to buy a house that you can't afford. 40 years is too long. Even 30 years is too long if you're over a certain age.
You can't count on selling your house in a set timeframe, and place yourself at risk if that doesn't pan out. So many people took adjustable rate mortgages that were cheaper in the short run, but more expensive in the long run, because they were sure that continually rising equity would sweep them into a bigger and better house in 2-3 years. Instead, they're stuck with payments adjusting upward that they can't afford.
What you're talking about doing isn't flipping. Flipping is buying an unhabitable house, or a house that can sustain radical changes, renovating it as quickly as possible, and selling it without personally living in it. You're simply talking about buying a house that's probably more expensive than you can afford, and expecting to move to a different house in a few years.
Thanks DAD! LOL (kidding)
No I'm talking about buying an older house that’s livable but could use some remodeling with a mortgage that's literally half of what I could afford allowing me to slowly remodeling it over a few years only to sell it make a profit and use the money to put down on a home I actually plan on staying in for the next 30 years.
In my zip code median income is 59k. I made 63k last year and will make more this year so a 150k-200k home is well within my means. Maybe you live in another part of the country? My cousins from Michigan think I'm rich but I'm just an average Joe in my neck of the woods. LOL
No I'm talking about buying an older house that’s livable but could use some remodeling with a mortgage that's literally half of what I could afford allowing me to slowly remodeling it over a few years only to sell it make a profit and use the money to put down on a home I actually plan on staying in for the next 30 years.
In my zip code median income is 59k. I made 63k last year and will make more this year so a 150k-200k home is well within my means. Maybe you live in another part of the country? My cousins from Michigan think I'm rich but I'm just an average Joe in my neck of the woods. LOL
I live in Connecticut. A lot of this is localized. Here, you can't really make money simply remodeling a house that is liveable. You get back less than 100% of the amount spent on improvements made. An 85% return rate is considered good, so financially that is still a loss, other than the benefit to yourself from living in an improved house. But I don't think that's what you were after here. I suspect the situation is similar in Michigan.
I guess the big exception I would make is if you're able to get a house at a significantly lower price than market, due to special circumstances. Then it would be a matter of doing improvements and/or waiting for the market to recover, and then you could maybe make a profit.
What concerned me was your mention of taking a 40-year mortgage. A lot of people got into trouble taking mortgages that delayed principal payments that they couldn't afford. The longer the loan term, the riskier it is. A mortgage 3x your income should probably be about the maximum that you would find affordable, give or take some other variables, so I'd say that $150-200K is at the top of your price range.
I don't mean to be a "dad" here, just answering the questions you posed to the best of my ability. I am relatively conservative financially, but not totally. I think debt serves it's purpose, but everybody needs to realize that taking on debt is taking on risk, and the more the debt is and the longer it's outstanding, the greater the risk is. In theory, it always works out to help you make more money, and sometimes that is borne out in reality. But sometimes it isn't. You always have to think of the risk.
I live in Connecticut. A lot of this is localized. Here, you can't really make money simply remodeling a house that is liveable. You get back less than 100% of the amount spent on improvements made. An 85% return rate is considered good, so financially that is still a loss, other than the benefit to yourself from living in an improved house. But I don't think that's what you were after here. I suspect the situation is similar in Michigan.
I guess the big exception I would make is if you're able to get a house at a significantly lower price than market, due to special circumstances. Then it would be a matter of doing improvements and/or waiting for the market to recover, and then you could maybe make a profit.
What concerned me was your mention of taking a 40-year mortgage. A lot of people got into trouble taking mortgages that delayed principal payments that they couldn't afford. The longer the loan term, the riskier it is. A mortgage 3x your income should probably be about the maximum that you would find affordable, give or take some other variables, so I'd say that $150-200K is at the top of your price range.
I don't mean to be a "dad" here, just answering the questions you posed to the best of my ability. I am relatively conservative financially, but not totally. I think debt serves it's purpose, but everybody needs to realize that taking on debt is taking on risk, and the more the debt is and the longer it's outstanding, the greater the risk is. In theory, it always works out to help you make more money, and sometimes that is borne out in reality. But sometimes it isn't. You always have to think of the risk.
Yes you’re right on as the market here is similar to Michigan in that you can literally go on a tour bus of foreclosures in my area and yes making a profit would definitely depend on the market recovering. Both your posts where very helpful as you obviously know a lot more about buying a home than myself. I didn't mean to sound like a smart ass but your response sounded like you and my parents drink beers and go golfing together! LOL my family is very fiscally conservative and is always telling me not to live beyond my means.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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I would call what you are looking at 'Rolling-your-primary-residence' (my own term, so you can call it what you want).
Your objective seems to be making some dough while having a low cost of housing (admirable and possible, even in Portland or Coos Bay)
Since I'm a parent too... (and have advised my kids on this, who BTW have remodeled homes as well as each built there own homes in Columbia Gorge as 'homeschool' projects during Jr High)
After trading about 20 properties myself, I find 'REPAIR / Fixup' to be the 'standard plan' and highly competitive, expensive, saturated market, & not too profitable.
I'd...
Avoid a fixer
Avoid buying something already on the market (realtor represented props are not bargains), find your own, get creative, be a 'digger', get some connections with someone VERY successful and willing to mentor.
Find a niche you can develop and compete on your own (till some joker finds out and starts copying you)
I find the land / location is of far more value potential than the house, thus... I
Prefer trashed places in the way of progress (likely / possible to rezone, possible to teardown and sell property at a profit, or move in a repo-modular and resell, Build a shop with apartment and sell to someone who wants to build their 'dream-house' (let them worry about HOUSE permits / taxes / contractors...). As you look for props in PNW, use the mindset, "This would make a great site for a Fred Meyer Store"
Follow some of the above advice (buy low INCLUDING fix up expenses), 70% of FMV is a good place to start (lower is better), as you need to realize that just the transaction / hassle moving costs, re-marketing... will cost you 10% off the top.
Don't buy something that you cannot resell tomorrow for a profit.
Get 'unique' and desirable properties (View, on park, neat architecture, stone, serene setting)
Know what you want and be prepared to BUY it (pounce on it)
Be creative in financing, sounds like you should find owner finance, but you will need some 'capital' to get the owner to 'trust-you'
Quite honestly, it is sometimes better to buy a jumker / or land @ a really nice location, and stick a mailbox up, and get utilities registered at the address (making it your primary residence). Then put as little as possible into it (teepee / tent / RV), then sell it for $250k profit in 2 yrs. ($500k if married.. TAX FREE) and do it again, and again, and again. There are conditions that allow you to move and do this more frequently than 24 months, BUT you cannot exceed $250K gain every 24 months as single IRS status. (exempt conditions include serious Health issues, job location moving over 40 miles further commute (EZ to do ) or having multiple births (more Difficult).
Define your objectives and get creative. Buy stuff attractive to the new generation of buyers / downsizers (Boomers). They want small (at least low tax Check the local levies!!!!!!, can vary A LOT), safe, accessible, EZ to maintain (and leave while traveling), all services on one floor, near bus routes / library / college. Older, single gals are crying for these type of places.
If it is just cheap living with potential gain, keep the place as cheap as possible in a nice (and improving) neighborhood. I NEVER buy a tract house or a Bi-Level BTDT ONCE(tho it was on a golf course, and I THOUGHT it would sell ez... Wrong). When you go to sell a tract home there are 4 zillion competitors and nothing special about yours.
As you get some capital working for you and get older & wanting someone to pay your rent / mortgage for YOU (while you are in Tahiti), then I would buy a multi-family place, or a commercial place with multiple tenants (ez to evict) and a small apartment on-site for you. NEVER tell the tenants you own the joint, just pretend to be the 'manager'. Keeps you on 'even ground'
good luck
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) and do it again, and again, and again. There are conditions that allow you to move and do this more frequently than 24 months, BUT you cannot exceed $250K gain every 24 months as single IRS status. (exempt conditions include serious Health issues, job location moving over 40 miles further commute (EZ to do 
) or having multiple births 
(more Difficult).
(tho it was on a golf course, and I THOUGHT it would sell ez... Wrong). When you go to sell a tract home there are 4 zillion competitors and nothing special about yours.
just pretend to be the 'manager'
. Keeps you on 'even ground'
