Question from Francisco: "After I find a fixer, I make an offer, get it under contract and then find a hard money lender? Is this in the right order? I don't have any cash and went thru a real estate investing disaster already, so I'm leery as to how to go. Have credit cards and a HELOC, but afraid of putting my own home in danger. My credit score is good; should I get prequalified first? Any advice welcome. Thank you."
Answer by Jeanette Joy Fisher
ALWAYS arrange your loan first and then find the fixer. This way you are ready to close fast and that's the key to getting a bargain sales price. You want a seller highly motivated to close.
Talk to three loan officers and do it at the same time--within a few days. That way you won't get extra deductions on your credit score because the CRA's (credit reporting agencies) know you're loan shopping. Although the loan shopping cushion is supposed to be fourteen days, loan rates may change and you won't get an accurate comparison.
An inquiry buffer is added to your credit file when you apply for an auto loan or a mortgage. This "de-duplication" of auto or mortgage loan applications in any 14 day period makes these inquiries count as one inquiry. This means you can shop around for an auto or a mortgage loan.
All other credit application inquiries that are not mortgage or auto related count separately, even if they are for the same type of service. So be wary of applying for cell phones or services.
Ask about rehab loans if you're concerned about using your own money. These loans cost more, but you won't jeopardize your home.
Compare rates and costs to your specific needs--using other people's money, down payment, rehab loan, etc.
Use this Loan Shopping Worksheet.
Many investors learn from a "real estate investing disaster."
It really depends on your investing location economy and market. If people need housing and have jobs that pay for rent and to buy houses, that's good. If people are losing their jobs and there are too many houses for rent for less than the typical mortgage, that's not so good. If there are too many houses for sale and sellers keep dropping prices, that's bad.
Another mistake that loses money for beginning investors is underestimating repair costs and time. You must know how much it will cost to fix the house and how long it will take to do the work. Delays cost extra money in holding costs and eat away profit.
You must know what repairs will pay you back and how to select building materials, colors, features, and upgrades that attract your specific buyer.
More about today's market and flips: Real Estate Investing Articles
More about using interior design psychology to fix houses for sale: Home Staging Information
Copyright © 2006 Jeanette J. Fisher
Lake Elsinore Real Estate