May 17, 2006
Flip Financing Update: Knock Knock – Anybody Home?
After getting approved with a couple different mortgage brokers and comparing their programs, interest rates and upfront fees, I ended up going with the broker that my agent recommended. The numbers that the different mortgage companies came back with were all largely the same, so I ended up making my decision based on the experience of the actual person I would be working with. While I liked a Manhattan broker the best (pleasant, easy going, very professional), I ended up working with a fast-talking NJ mortgage guy because he understood exactly what my investment objectives were and was able to assemble a loan program that accommodated my desire for minimal upfront costs, no pre-payment penalties, etc. The other brokers I spoke with seemed completely unfamiliar with the concept of purchasing a house solely for the purpose of fixing it up and re-selling it in short order.
Everything has been going smoothly and I’m happy with the financing plan that we have set up (5% down 30-year fixed rate mortgage with zero out-of-pocket closing costs thanks to a 3% seller’s concession), but I had an odd conversation with the mortgage guy yesterday when I noted that he had checked the “Owner Occupied” box on the application forms. I believe I had told him that I live in NYC and would be working on the property during the week, so I wanted to clarify that he heard me correctly – even though I suspected he was giving me a break by filling in the owner occupied box so I would qualify for a wider range of programs. His response was a chilling mini-lecture on how it certainly is an owner occupied property (rib-rib nudge-nudge) and how all my other documents will of course reflect that as well. He then repeated that message, prefacing the statement with: “Just to be ABSOLUTELY CLEAR…”
This exchange was a little unnerving, but I suppose he is just trying to cover his butt and make sure I don’t put contradictory information on any other forms. Also, it isn’t that much of a stretch to call it an owner occupied property because I’m not renting it out and I will likely spend many, many days and nights occupying the home over the coming months. I can’t imagine I will be able to continue securing owner occupied financing after 3 or 4 flips in a single year, but I feel fortunate to have an aggressive broker working to get me a good deal as I first start out.
Flip Financing Update
Mortgage brokers for a house flipper….
They probably have their own special meanings for everything, but who else is occupying the space? You and….uh…you. Just you. There are people that travel for business, and they aren’t always in their home 24/7, but they ARE the only occupant of that home. When I was moving to this place, I wasn’t moved in overnight. It took several trips of moving things via small cars to get the necessities here. I spent time here, moving things, unpacking, getting the boxes folded for recycling or for repacking another load. I didn’t spend the nights here sleeping. But who lived here? The only person that could be living here was me, and I was here some of the time.
You haven’t hired a crew to come and live there while you’re in the Bahamas. You don’t have a heathen group of teens painting and then drinking beer out back (yet). I think that the language might be to prevent possible problems if a bunch of other people were present. Does that make sense?
They are approving YOU for the home and want YOU in the home and to do the work or to be there when other people might be doing the work, and you can supervise. They aren’t approving the crew of teens.
When that home is sold, you’d still have your other place. There are a lot of people that have more than two homes. Uh, not me. But some folks have a nice family home, and then the work apartment in the city. Or homes in two far areas that they are always having to travel to, because if you’re going back and forth, the cost of hotels would get to be as much as a second place. And you don’t have to check in when you have a second home, you just walk in and relax.
Of course, you’d STILL be owner-occupied when you get a second home to work on, and then the third. And so on. So what if you move? If your bills are paid, the mortgage people are happy as can be. The homes are sold to a new family, you can’t exactly stay there with the new family. Uh, can you? I’m still trying to weasel my way into the little room at the top of the stairs.
You may well end up staying in those homes as much as your other place. It seems a shame to have to pay for two, but scheduling would be a bear to try to live in one while selling it and work on another. Hoping that the home sold soon enough, but not so soon that the newest house wasn’t yet fit to live in (like no heat in winter or something).
I want to tag along from a distance (I’m in California, I’ll never see these homes!) and try to do more of the binder picture ideas. I do have an ulterior motive. I need to find something that might supplement the Social Security Disability check, that I can do from home, at whatever time I am up and enthusiastic and least in pain.
It’s not that I’m not a hard worker. I just can’t always work when someone would prefer me to work. And the pain makes it so I won’t really be going anywhere physically. I think there could be a little bit of income from doing binders. Like I suggested. I find the pictures. I send the links. You (or whomever) does digital pictures and posts them where I can access them. Technology is wonderful, we don’t have to meet at any time inconvenient.
I just spend hours at this end finding pictures of rooms, and making some pictures to change the looks of some rooms. I’ll get better at that as time goes on. Might spring for some kind of Photoshop tool that is actually recent (my software no longer exists, nor does the company that made it). I could get a faster Internet connection, so I could load things faster, which saves me a lot of time.
Mostly I want to see if the binder idea really helps. Like if you have a buyer who kind of shrugs, and then looks at the binder, and THEN demands you take it off the market because they’re going to buy the house BECAUSE of the ideas.
Not that it isn’t a lovely home as is, and I think it IS a lovely home. I showed my mom, and she LIKES the drapes, other than the swags. She’d be fine with the wallpaper too, but would prefer the hardwood over the carpet. She’s in her 80’s, and there ARE people in that age group that ARE looking to buy. Uh, but not that expensive.
The binder will show all ages what could happen in that home.
Your question at AT got quite a few responses. And they were split. Make wall holes, don’t make wall holes. One question and the group was split. What about the entire house? How many things would make or break a sale? That’s where the binder comes in.
Yes, it’s excellent for young couples. Look, this can be the perfect nursery. Yes, it’s great for party couples, look, this basement transforms into your own rave dance party with the simple installation of a disco ball. Yes, it’s great for older couples (that have no stair climbing problems), look, you can entertain on the main level. Sure, you can run home schooling downstairs. Sure, go ahead and put in that cool inflatable hot tub (they have them) downstairs for your spa and exercise room. It’s a play room for kids. It’s a hobby room for adults. Or a play room for adults and hobby room for kids. Whatever.
You could do a total English Country Garden in the back. You could do Zen. You could have decks. You could possibly do some kind of multi-level deck that would put a french door on both upper back windows that leads down to the main deck (the upper level serving as a roof). A water slide from the second story! Oh, well, maybe that’s a little too much. But it WOULD be fun.
We can even see if folks really look at the pictures by inserting the occasional “And here’s where the llama pen will be” with pictures of llamas grazing in the backyard.
Andree
Since you are currently renting (which I gather from you saying that this is your first purchase), there is no reason why you shouldn’t purchase this property with the intention of it being owner occupied. If you continue an upward move in property type and/or value, you should be able to continue purchasing property the same way. Why not, who says you can’t move as much as you want? If you start holding the property, then you may have to dance around a bit.
Hello, I just stumbled across this post, which I found very interesting. Just out of curiosity, did you flip this house or do you occupy it?