Flip a distressed property through FHA 203k

Did you know that the FHA now allows flipping? Simply put, an FHA investment transaction is when a property is resold within 90 days of acquisition. It is true! They have waived the no flipping regulation 24 CFR 203.37. (b)(2)! Due to high foreclosures/REO (real estate ownership) and distressed properties on the market, the FHA finally sees a need to help stimulate real estate sales in the US of A. This is a Great news for investors and first-time homebuyers alike. . Mortgage rates and property values ​​are at a sweet spot, making distressed or abandoned properties truly affordable. The affordability factor of REO or distressed properties makes these types of transactions more feasible, because most of these properties will require renovation and rehabilitation.

To give you a better perspective on real estate opportunities within Miami, I did some research and it’s clearly a buyer’s market. According to January 2011 figures from the Miami-Dade County Economic Indicators, the median sales price for a single-family home in December 2010 was $173,600. The Miami-Dade County Clerk of Courts reported that there were more than 34,000 foreclosure applications in 2010 alone. Finally, as of today, trulia.com reports more than 8,500 single-family residences for sale. These statistics, coupled with historically low interest rates, point to a unique opportunity for those looking to buy. Think you can’t play the flip game due to less-than-stellar credit or limited funds for a down payment? FHA may be able to accommodate your needs. They have less stringent requirements to help homebuyers get the financing they need.

If you want to play the flip game, here are some of the rules you must follow to meet the Urban Housing Development (HUD) requirements:

1. The mortgage must justify and document any sales price that exceeds the seller’s acquisition costs by 20% or more

2. All transactions must be conducted at arm’s length, with no identity interests between the buyer or the seller.

3. The seller has title to the property

4. Limited liability companies or corporations have been established and are operating within applicable state and federal laws.

5. There is no pattern of prior investment activity in the subject property, as evidenced by multiple title transfers within the previous 12 months (chain of title can be found on appraisal report)

6. Property must be openly and fairly marketed through a multiple listing service, for sale by owner; no assignment of sales contract could constitute a red flag

Some of the rules above don’t sound too bad, just play fair and stay away from the fun stuff and you’ll be fine. In the worst case scenario, if you are an investor looking to turn around a distressed property and find a buyer who is a first time home buyer, just keep all records showing the renovation/rehabilitation work completed on the property. in question to justify the completed work if its sales price is more than 20% above the purchase price.

And here is the best part! Through an FHA 203K program, you can buy that blighted property you’ve been searching for, renovate it with minimal out-of-pocket costs, and turn it around, hopefully at a nice profit. Your flip will sell because you’ll be able to make it look great and also market it as a green and energy efficient home.

Real estate profits in your pocket + Revitalize part of a neighborhood + Reduced carbon footprint = Win!!!