House Flipping Problems

Investors Beware of Houses that Fail to Flip

We know an enthusiastic house flipping hopeful who bought a rundown house in a street of rundown houses that he planned to remodel and flip for a big profit.

When he finished his remodel and found a buyer an appraiser gave him a heartbreaker of a reality check.

The house did not appraise for the price he hoped to get from a buyer. The buyer could not get a mortgage for the agreed upon price. The deal died. problems like this can be disasterous when commercial hard money loans are involved.

It’s a reality of the appraisal business.

A house that is in a particular location is worth about what all of the houses around it are worth. So if you buy a house on a street where all the houses are worth about $25,000, that’s all your house will be worth when it goes to resale…regardless of what improvements you make to the property.

This particular property was in Birmingham, AL but there are many locations where this would also be true, especially in Midwest rustbelt cities like Detroit. They have started bulldozing houses rather than leaving them unoccupied for squatters and drug dealers to take over. These cities are losing population and tax payers in record numbers and have been for some time.

We owned a house in Dayton that we were lucky to sell when we were transferred. Our neighbor across the street had his house for sale for the entire 18 months we lived there and had no lookers, much less buyers.

We sold our house by advertising ourselves and enlisting the help and interest of our neighbors with flyers and conversation. No one has a greater interest in who buys a property than the neighborhood. They WANT a good neighbor enough to tell friends, relatives and other contacts. Our next door neighbor sold our house to some close friends of theirs. The realtor never even showed the house before it was sold and closed in about 1 month.

Dayton is another of those cities that is losing population and has inner city crime problems. For many potential buyers this is a quality of life issue. They want to be in a safe neighborhood that is comfortable and secure for them and their families.

Dayton was not safe. Even people who had lived there for years do not feel comfortable. During the time we were there I almost had my purse snatched at the mall and our dog had to actively prevent a home invasion. Our upscale subdivision was still unsafe even though the houses were pricey. Our 149 pound Great Pyrenees insured our safety, but not everyone has one that is well trained and capable.

The municipality disapproved of him and gave us a hard time about keeping him controlled even though he had never bitten anyone and our yard was fenced. I suppose if we had not had him we could have called the police and waited however long it took them to come.

What a lousy plan. The dog worked for us and the home invaders never completed the break in out of fear of the dog. He never came into direct contact with the bad guys. His big bark scared them away.

These types of locations are undesirable for many reasons. Unless municipalities can get it together enough to keep people relatively safe these cities will continue to shrink and fail as government entities.

Look for better places to flip houses or rent them. It is critical to your success as an investor. Your success quotient might improve if you have developments with private security.

This requires plenty of money to back up investments so pay attention to building your financial health.

Why Does It Take So Long To Get A Commercial Mortgage

Is the cost of renting a commercial premise too high? If that is so, you need to consider investing in a property. You need to explore the range of commercial mortgage options prior to thinking of financing for the commercial property. When it comes to a commercial property, the rent will not shoot up all of a sudden but the monthly repayment can raise high due to the variable rates of interest. But then, you can get a fixed rate for a mortgage loan. Commercial mortgages, however, are perceived to carry more risk and so the repayment option is pretty different from that of a residential property. The commercial mortgage rate of interest is higher. You may be asked to make a large deposit to mitigate the risk. The deposit amount may be 20% of the total amount. The process of loan is also lengthy.

Factors involving commercial mortgage

A lot many formalities are involved in a commercial mortgage which consumes time. The rate of interest is already high and necessary arrangement has to be made. There has to be standard valuation of the mortgage and the legal fee is involved. You need to clarify too many things from the lender. Commercial mortgage providers can be many. You can opt for the high street banks, specialist lenders for commercial mortgage. Do a lot of research work to arrive at the lowest rates of interest. Anyone offering you the right price can tick the box.

The trading history considered!

When you want a commercial mortgage, trading history needs to be considered. Lenders will make sure whether your business is in the position to repay or not. Commercial mortgage is a complex borrowing and so it may take time. If you find a lender who is ready to offer the loan, it will take time to do the paperwork, fill up the application, form submission and to get the approval.

Why it takes longer?

If both the parties agree on the commercial mortgage, the commercial mortgage application will take some weeks till everything can take place. Although the money is drawn out for your purchase of commercial property, still it takes weeks. A lot of paperwork is needed. The borrower will have too many requirements before you are offered the commercial mortgage.

The process of getting commercial mortgage

You will have to complete the application form which will surely include the business plan provision. It incorporates the cash flow forecast, the audited accounts of last three years, the up-to-date management account and the trading profit and loss account. A qualified surveyor will be hired to survey or assess the lender. The lender is supposed to complete the process of assessment. The mortgage application will be thoroughly assessed prior to forwarding the loan. Legal work also needs to be done.

When you think of applying for commercial mortgage loan, you must plan out things much in advance. Devote sufficient time to assemble all the paperwork. Make sure that all the information you present creates a favourable impression about yourself. This can fasten the process of commercial mortgage.

Finding Commercial Short Sales

Where to Find Commercial Short Sales?

The condition of commercial short sales in Canada is in a condition of distress. The sellers are not able to find much deal, and under these circumstances, you may come across hostile situations in real estate matters. So, you need to know how to find commercial short sales. The buyers are inclined to the age old system of visiting a new city and go from one property to another, and finally, buy the property of his choice. The trick lies in tapping the potential buyers to make a deal and sell off the property. Now the question is where to find the property sales? Well, you will have to do some sort of research in order to find what you are looking for.

There are very few customers who are looking out for short sales. They may be visiting the major lenders or going online to get in touch with the necessary contacts, but in reality, there are a very few people looking for direct sales. In order o catch these customers, you need to think out of the box. You should look beyond the old ways of business, and this may help you out in the critical business situation.

Different places to find commercial short deals:

  • You can view the Notice of Default back in the city. However, there is a problem that you may face in this case. The residential and commercial property is placed under the same heads, and you will find it tough to separate the options. In case you do not know the addresses of the property, you will have a hard time determining the nature of the property.
  • Another option is to visit the REO website of the lender, which will help you to find the deal. But this option is not free from flaws too. The people do not update the portals at regular intervals, and hence, you may not have the latest information related to property.
  • There is another option open to you when it comes to short sales. However, you will have to determine a particular area before proceeding further. After selecting the area, you can speak to the property owners of the area, and this will help you to find the needle out of the haystack and proceed on the deal. However, you will find that not many people are willing to talk about the deal. So, you need to go on tapping the potential resources unless you can find the right sort of deal.
  • You can also contact the property managers, who can provide you with the right kind of contact. There may be a few people who may be debt, and are willing to get indulged in a profitable deal. As long as you do no find the right kind of deal, you need to go on tapping all the possible places.

At the end of the day, you will be relieved if you are able to find the proper business you were looking for. These four methods will definitely land you out of all sorts of trouble.

What Are Typical Closing Cost Items For A Commercial Real Estate Loan?

What Are The Closing Costs?

Before we further move into the article one should have a clear idea of what the closing costs actually are? One should know that the closing costs are the very fess or the expenditures that are made at any type of closure of any real estate transactions. This particular costs can be mutually bearded by the buyer and the seller or individually depending on the circumstances. This is the time when legally the property do actually belong to the buyer.

real estate loans

So What Are The Typical Closing Items For A Real Estate Loan?

The following are the examples of the typical closing items. This can be extremely helpful for people for further transactions:

  • The Document Charges: one can say that the document charges along with the charges for the stamp or the taxes that actually can be incurred by one or both the parties mutually can be considered in this list.
  • The Commission For The Brokerage: this particular cost is generally incurred by the seller as the brokerage firms assure finding the buyer for the firm. One can say it is the commission for the brokerage firm which is usually some percentage of the sales amount. This is also one of the important closing item.
  • The Charges For The Attorney: this particular cost is also said to be incurred by both the parties. One should always have their own set of attorneys to finalize the deal in the most appropriate and legal way possible. The lawyers are very much required for the dealings especially if there are firms among which the deals are being made.
  • The Fees For Inspection: this particular cost is generally incurred by the buyer. In this cost one needs to appoint a person or an attorney who would help in legally verifying the property for the buyer. In this process all the property claims are thoroughly investigated and inspected.
  • The Homeowner Association Dues: his needs to be incurred individually by the seller or the buyer or mutually by both of them. If the property somehow is covered by the home owners association then the due will be equally implied on both the owners. They need to have good understanding on the part where they can allow each other to pay or both pay together.
  • The Application Fees For The Mortgage: this particular fee needs to be incurred by the buyer. It should be paid to the lender by them. Many of the times the buyer can pay it directly to the lender while many times it can be added as the fee that may be included in their closing costs.

  • The Insurance For The Private Mortgage: this particular fee needs to be paid by the buyer. But it can be very much reimbursed by the seller. Then lenders generally require to have a mortgage property if by any chance the down payment is less than that of 20%.b the buyer needs to pay the mortgage insurance premium in advance.

These are few of the many closing costs that one may want to know about.