Posted by Ron (MD) on January 19, 2002 at 18:44:15:
Stu,
I don’t think seasoning is really much of a problem for rehabbers…at least if a significant rehab has been done.
I occasionally come across a lender who won’t do an un-seasoned property, but generally it’s not an issue. I’ve recently had buyers financed by Bank of America, Wells Fargo, Chase Manhattan Mortgage, and other (smaller) lenders.
Sometimes, the appraiser will ask me for a summary of my scope of work to document my file, but usually not. I had one appraiser a couple years ago ask for copies of repair receipts.
I am considering jumping into this business, and my plan is to be a retail flipper (I buy, rehab, and sell). I have access to enough cash so that I can handle the purchase and w/o any debt on the property. My question: with most commercial lenders requiring ‘seasoning’ of title, how does my BUYER secure a loan to purchase a property which I purchased maybe 3-4 months earlier? Any way around the seasoning issue? Any good lenders left who will do 3-4 month flips? (assuming the deal is above-board, i.e. no fraud like I’ve read about) I am not particularly interested in carrying a lot of paper.
Stu,
Just one point, this is NOT flipping, this is rehabbing and there are lots more potential problems and pit-falls. Having just completed one of these myself, be sure you have things in place as far as, contractors you can depend on who can take care of permits and inspections, good comps to predict the final selling price, financing sources in case you run out of money (it ALWAYS costs more than you think), mortgage broker who is experienced with financing retail rehabs who can tell you what to look for in a buyer etc.
Also, you really need to be careful with your rehab not to fix it up as if you were going to live there. Clean, safe affordable housing is your goal.
Something else you want to consider is selling with owner financing and selling the note at closing. Send a note to Mike Morrangeillo (sorry for the butchered spelling) who posts on this site. No seasoning problems and from my correspondence with him the discount will not leave you bleeding.
All the best, Lyal