Real Estate investing / flipping house

**malm42** · 07-30-2007 12:56 PM

I know that it is not hte greatest time to flip houses but I just have a general question. Would it be a huge advantage or mistake to buy a $27,000 house funding 70% of it with college student loans. They're low interest ect, ect ect.

**jasaunders** · 07-30-2007 01:38 PM

I can't imagine what kind of house would only cost $27,000. I assume that your students loans are from the government (private loans don't have that low of interest rates) and it is illegal to use federal students loans for anything other than your school expenses. In addition, if you were to go ahead and do this, it is risky because if it wasn't to work out and you end up having to declare bankruptcy, students loans are not discharged. Instead, I would suggest trying to get an introductory credit card offer with a low interest rate.

**NeoSoulBrotha** · 07-30-2007 02:55 PM

It really depends on many variables... the market that you're buying in, the condition of the property, what the comps in the surrounding area are, etc.

Is $27k your downpayment or the asking price? Assuming that it is the asking price, the property either requires very significant repairs or is in a low-end market, neither of which would be attractive for a new investor especially if you're looking for quick appreciation and return.

Before you make any investment decision, I'd recommend that you get to know some established real estate investors. Find your local REIA (google search for your area) and attend a few meetings. It's imperative that you make sure the numbers work before making a deal otherwise you could potentially lose money every month you own the property.

I would strongly advise against financing with credit card debt. That's best for when you're doing a VERY quick rehab in a strong market and selling within 6-12 months. Otherwise if the property hasn't sold when the promo APR expires, you'll be stuck with huge interest payments and a property that may take a while to liquidate, especially in this market. Just my $0.02.

**jasaunders** · 07-30-2007 02:58 PM

Per the above message, to clarify, I am suggesting using low APR credit cards only when you anticipate the flip will happen quickly and well before (at least 3-6 months) the promo APR ends. But of course this is also risky.

**Gaulkin** · 07-30-2007 03:01 PM

If you really want to invest your money in real estate you will hold on to that money long enough to make something of it. Right now is a horrible time to flip a house. If you want to invest in real estate you need to start by doing some wholesaling (assigning contracts to buyers) this is a good way to learn the business without using much money. For flipping the best thing to do is way a few months till the banks get over run with foreclosures, at this point they will hand out properties at almost nothing.

Ps. Most of the people on this forum have no idea what they are talking about when it comes to real estate so i would suggest signing up on the forums at www.reiclub.com and talk to the real pro's.

**redliine** · 08-01-2007 09:10 PM

^ Its a great time to flip a house where I live. There are different real estate markets all over the world. YE is read my people from everywhere, not just the US.

**Gaulkin** · 08-01-2007 09:55 PM

Thats great but not practical for a newbie.

**richkid** · 08-01-2007 10:02 PM

I think if you find a property that you think is worth more than you are paying for it, then who cares what time it is.

I bought a house out in the outback here in QLD, australia, for $40,000 at the beginning of the year, and it is just about to settle again for $55,000. But when everyone saw the pictures of the house, and heard the area, they told me not to purchase it, but now they are asking me where they can find one like it.

If you think it is a good deal, then do the due diligence, and if it stacks up, then go for it!

**ltressel** · 08-02-2007 04:20 PM

Hi,

I am a real estate investor. I will tell you that flipping houses these days isn't a very good idea. You have plenty of variables that can affect your business. I will tell you a few:

1) Location-this can be where you buy it these days. Some states are already a bloodbath for foreclosures and overheated markets.
2) Slim number of qualified buyers-with lenders tightening up their practices they are making it harder for anyone to qualify for a loan.
3) Pricing-there are hardly any houses in overheated markets where you have room to make a profit post rehab costs, commissions, and closing costs.
4) Experience-too many inexperienced investors flocked to make what they thought was a quick buck in real estate and speculated. END RESULT-got stuck with a house they can't afford to keep.

My suggestion:

My real estate business is currently flourishing due to the fact that I am not in the heated markets. I do business in Ohio where I get houses through rehab loans. The rehab loan helps me acquire these houses literally with no downpayment plus they give me money to fix them. What they loan me is purchase plus rehab. The house is appraised at full market value and they loan me 80% of that.

Now, if I purchase the house for 13k and my fix up cost is 15K, and the full market value is 70K. They will loan me the 80% of that. That's 56K. I sell the houses or rent them whichever comes first. At the moment, houses are staying longer in the market. I am renting more than I am selling. I have purchased 20 properties with this method.

As long as your rent is covering your mortgage you're in good hands to hold the property until the market recovers.

Now, given that you are a newbie at this, would I suggest that you do it? No.
Not without a thorough real estate education. Not without an established team of people that you will work with. Who are these people? Agents, Loan Brokers, Contractors and Property Managers You would want to work with people who are seasoned and trustworthy.

What I gave you is a blueprint of one method to make money in real estate. It is up to you to research in your area if such rehab loans exist there and who can help you get them.

This is just an elaboration of what NeoSoul was talking about. In essence, I am showing you that you don't need to use you student loan to buy this house.

I'll be glad to help you look at the overall study of this house you want to buy whether it's a good buy or not if you are willing. Let's call it a crash course tutoring.

LT