Posted by Ben (NJ) on January 21, 2003 at 10:02:41:
you convert a short term capital gain to a long term
gain which saves a fortune in taxes. I am about to do this with one of my nicer, local properties. The ones
that are far away and in a shambles I just want to move out of my life ASAP!
FHA and flipping-more bad news - Posted by Ben (NJ)
Posted by Ben (NJ) on January 20, 2003 at 14:07:41:
I spent the weekend in Philly and read an interesting article in the Philadelphia Inquirer about a flipping scam.
Nothing new there except for the quote from an FHA rep-this is almost verbatim “if FHA sees that a seller has owned a property for less than one year AND is making more than a 15% profit, we want absolutely no part of the deal”. This is really mind boggling. In fact, with this policy in effect I can NEVER sell to an FHA buyer. Luckily there are a ton of cash buyers out there lately since the stock market tanked.
Knock on wood - Posted by Ron (MD)
Posted by Ron (MD) on January 20, 2003 at 16:35:34:
Ben,
I’ve been selling about 15 rehabs per year in Baltimore City. Baltimore has been the focus of HUD due to many cases of fraudulent flipping…we get a lot of attention from HUD. Nearly every one of my buyers is going FHA (and the loans are scrutinized by their Philadelphia office). In most cases, I have owned the house less than six months, always less than a year. My selling price is typically 3-4 times what I paid for it. (e.g., buy for $15k, sell for $60k…after a major rehab, of course.)
I have not had a single problem with the FHA loan. In the worst cases (about one out of three), the appraiser asks for a Scope of Work for his file. (The amount of work we’ve done is very evident, but they sometimes ask for this to support the dramatic increase in price. Frankly, I think the photos should be enough, but I’m happy to oblige with a summary of my scope of work.)
A few years ago, when the stuff hit the fan here regarding the flipping fraud, I backed off buying for a while because I expected the FHA bureaucrats to over-react. Again, I’ve never had a problem. Every house has always appraised to the selling price.
A few years ago, when the lender would request a case number from FHA, HUD would send the letter a letter saying that the seller (i.e., me) had purchased the house only four months earlier for $x and now was selling it for a dramatically higher price. Hence, HUD wanted to see the entire loan file, not just the appraisal and they might order a second appraisal. I never had a second appraisal ordered, nor any other problem.
I suspect the situation would be different if I bought a house at a bargain price (that needed little work), then re-sold it at a significantly higher price without a major renovation. But, for folks doing major rehabs, I don’t think FHA loans are much of a problem.
Ron Guy
Re: Knock on wood - Posted by Jennifer
Posted by Jennifer on January 21, 2003 at 08:36:35:
How about L/O for a year to get through that 1 year mark? You can sell for a little more and make a little more monthly. You can also fill it quicker…
Hmmmm…just a thought :o) (I’m not a rehabber)