Ryan McFarland

With the rates for mortgages dropping drastically, i wonder if it is a good time to consider dabbling in flipping homes. The sub-prime mortgage “crisis” must be putting homes onto the market at a decent discount from their appraised value. Kevin and i have been talking about this. Let’s say you can get a house for $100,000 less than its $300,000 appraisal. You pay $200,000 for the house and then take a loan out against the equity. That’s usually at about 80%. So you have $80,000 to work with. In one year about $30,000 would have to go toward the loan payments, insurance and taxes. You then have $50,000 to put toward improvements. If you do landscaping, paint, and minor improvements yourself you can easily give a major makeover for $30,000. In one year it would be simple to work away at projects on evenings and weekends. Sell the house for the appraised value and you’ve made $20,000 in a year. There are too many variables to make something like this a sure-fire deal though. Capital gains taxes are one thing to consider. The downturn in the housing market could very well stick around making selling the property more difficult.

I’d love to use Commercial Mortgages to take an old building in an urban area and turn it around.  I think it would be a neat reality and HGTV type show… take an old building and renovate it so the bottom floor is retail space, the second floor is office space for a deserving non-profit and the higher floors are apartments.  At the end of the project the building is turned over to the non-profit.  Then they have a nice base for operations along with rental income to continue providing services.  The show could follow a few such projects as the builders work with the non-profit to make the building suit their needs.