I am not an expert on much of anything, but your contention that short term
loans are always a higher interest rate is not always true. If for example
a lender believes that rates are going to rise they might not wish to commit
their funds for a long term at a rate that they might regret later.
The primary criteria for determining an interest rate is risk, the higher
the risk the higher the interest rate. You are accepting a risk when
lending construction funds. In the event of default by a builder suppliers
are the first in line with their mechanics liens on the property, and you
have no control over the market that may tank dwindling the value of the
parcel of land.
What you are doing is betting that the borrower will be successful in
bringing his development to fruition, selling it and having enough left over
to pay you. I also suspect that your friend with the initials after his
name got his cut off the top after selling you the proposition, making his
I hope your investments pay off, but their aint no such thing as a free
lunch and hocking the family home to lend money to someone else is taking a
risk that can go south, especially if you do not have funds on hand to cover
mortgage payments in the event of default.
About the time I had mastered getting the toothpaste back in the tube, then
Enter LLC's, corporations and family trusts. Lovely legal protective
shelters. Roger, I've been doing this a while. I have a guy that I trust
200% who does a major AM radio program all over the nation on investments.
This ain't my first rodeo. I'm 58, and fully retired. I do NOT work.
What I do is not for everyone. What I do can't be done by everyone. But it
works for me.
Bottom line is, there are lots of investment programs and profitable
ventures for every pocketbook. You just have to decide whether or not you
want to pay $40,000 for a $20,000 car or drive less and invest more. Goes
down from there to lots of everyday choices from shopping coupons vs. going
out to eat all the time. Even if you just put $20 a payday in the bank at
low interest in a savings account.
All life is choices. No need to be stupid, and get into things where there
is high risk, and the only one who makes out are the principals and the
The whole thing started over "flipping rules". What, exactly are they?
Answer ...... there are none. You can make good money, or you can lose your
ass. It's a crap shoot, but only for those who want to take risks.
I love Teddy Roosevelt's quote regarding critics ..........
"It is not the critic who counts; not the man who points out how the strong
man stumbles, or where the doer of deeds could have done them better. The
credit belongs to the man who is actually in the arena, whose face is marred
by dust and sweat and blood, who strives valiantly; who errs and comes short
again and again; because there is not effort without error and shortcomings;
but who does actually strive to do the deed; who knows the great enthusiasm,
the great devotion, who spends himself in a worthy cause, who at the best
knows in the end the triumph of high achievement and who at the worst, if he
fails, at least he fails while daring greatly. So that his place shall never
be with those cold and timid souls who know neither victory nor defeat."
Good luck in whatever you choose to pursue.
FTR, I wasn't talking about letting them move in. I said that I had
heard that was a bad idea, and your objection is one of the reasons it
is a bad idea.
In the second paragraph, I was asking why the seller had to wait the
whole winter until the 6 mos. minimum time had elapsed so that the
original buyer could complete the sale. When the buyer didn't get
financing in time to complete the purchase in the time limit stated in
the contract, he could have sold the house to someone else.
I've noticed on tv court shows that when someone sells a house or a
car or rents an apartment, and other people call later, at most they
say, "Call back in a few days. Maybe the sale won't have gone
through." What they should do is save the phone numbers of everyone
who calls, before or after, in case a deal falls through. This is
better for all concerned.
In this case, when it was clear that the buyer needed 6 months, the
seller might well have been able to end the contract in less than what
the contract stated, certainly if he had the agreement of the buyer,
and maybe without it if the buyer was making no efforts to get a
non-FHA mortgage. I would check with a lawyer on this of course, but
if the FHA has already told the buyer she won't get a mortgage within
the contract time, and the buyer is making no other demonstrable
efforts to get a mortage within that time, the seller might be able to
buy her out of the contract say for 100 dollars, if another buyer is
found, and that's a lot cheaper than the seller paying mortgage, taxes
and utilities for the rest of the 6 months.
Seems to me if the buyer is qualified, (you have their credit application
and financial data from the purchase agreement) then they are able to pay
the rent and have every incentive to behave themselves. Most places right
now the market is on the soft side and a 6 month delay while paying a
mortgage and expenses is a toss it in the sewer kind of loss, so it may be
worth the hassle of accepting the risk.
It is another story all together when a strong sellers market exists and you
are getting all cash offers over the asking price.
About the time I had mastered getting the toothpaste back in the tube, then
HOT DAMN! I was in your neighborhood today, and in the corner of the garage
was a red Coke machine. The one with the silver push down handle, and the
single hole door.
I talked and talked and talked to that lady, but no luck. It was nice, and
I don't think I've seen one of those since the sixties.
Not every flip makes someone rich, but it comes down to value and what you
can/will pay. Besides, if the person did not do the repairs for a flip,
could the buyer afford to do it?
If YES, he should have done it himself and saved a lot of money.
If NO, he should thank the other person for making a nice house available to
Don't you just love capitalism when it works?
Yes, but HUD, VHA, and like programs aren't about capitalism.
They are, at heart, socialist programs.
I'll admit that I though OPs problem was they he wasn't allowed to
sell the house w/out a penalty because of the terms of HIS loan,
but I'm still not prepared to be outraged.
COME TO MY SEMINAR!
We hear this all the time re: real estate.
We are led to believe by HGTV and others that flipping houses is as easy as
reconditioning hammocks. And every one pays off BIG TIME.
They don't tell you the downsides.
And the only ones that really make money are the ones who PUT ON the
COME TO MY SEMINAR! Only $999, includes lunch. Guaranteed to show you
things you could have found out for free, but were too stupid to do in the
But is capitalism all about using government subsidized loans? Good on folks
for enterprise, but should they get to snatch up subsidies too? So much for
being risk-taking enterprisers.... :-/
And I don't know if it works that way - either a house that can be move-in
livable fixser that a bootstrapping low income person should want, vs. a flip,
so a buyer should be happy to have it all done.
First off, a flip has a lot of stuff that is a matter of what moves in a market,
not what an individual lower income buyer may care about. Maybe that bathroom
really needed to be fixed (but the perfectly functional harvest gold fixtures
could have stayed), but does the linoleum kitchen floor really have to go - it's
Secondly, I doubt that flippers only take the lost causes (really bad fixers) -
naw, they pick up the easy fixers and turn them around. Just what a low-income
buyer, who needs to work on a house while living in it, would want instead.
Flippers get to live somewhere else while they work, they get benefit of a lot
of experience and connections, and they make the houses into something over the
heads of a lot of folks who otherwise could buy the house. I mean, good on them
for their enterprise and their work, they do have good benefits to neighborhoods
as well. But that's not what the FHA loans are for.
Banty (tired of capitalists who are capitalists until they discover they don't
qualify for some gub'ment bennie then it's waaah waaah waaah...)
I have since closed on the home a few weeks ago to a single mom with 2 kids.
She has called me twice to ask me questions & I have gone over and helped
her out. Not that it matters but she's also about twice my age. So I am not
in it for the ass. There are people in this world that aren't self centered
pricks. I guess if you could all of us... I make: "one".
Can't quite parse your last sentence, but anyway...
No need to take it personally. My response was to Edwin's statement about
'capitalism' wrt to the FHA loans.
Sounds like you're a nice guy, but still, you *are* in it to make money, right?
Again, that's not a bad thing.... just not what the FHA loans are set aside for.
Flipping a house; does not mean 'helping" the buyer after the close.
You got maybe to emotional in this house. Get in and get out, close up
If you do get "in it for ass", pre-qualify the buyer. Insist on a
pre-approved letter from the lender.
You paid cash for the house and fixed it; sold it being aggravated by
government, Why not be your own BANKER?
"My doctor says I have a malformed public-duty gland
and a natural deficiency in moral fiber, and that I am therefore
excused from saving Universes."
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