Flipping New Construsction
hi all!
i'm new to the flip way of making money. i have come across an opportunity to purchase a home for about $750k. its in a neighborhood that have appreciated to 850k and higher. i feel this is a solid investment , its in a small project of 17 homes in a cultisac. the home will not be done until june. i feel i can sell the home for 830-850k. my question is i plan to start marketing the house in january to line up a buyer. how do i go about getting a buyer BEFORE i go to closing? i don't want to go to closing if i can help it. if i have an agreement of sale with the buyer, do we settle at the same time? any and all help would be greatly appreciated! thanks! jon :-?
Jon,
When you sign the contract with the seller to you, it needs to say that you or any assignee will close on such and such date. You can also go to the title company that is closing the deal for you and tell them that you have a buyer and want a simultaneous closing. As far advertising goes. You should wait until the home is far enough along so that the new buyer can walk thru and see the outline. it isn't a good idea to try to sell a blue print. Most buyers want to walk in a decide if the like the home and move in about 45 days later not wait for 6 months. That is why we can make money flipping this way. Also if you or the new buyer are using FHA or VA financing you will have to own the home for a minimum of 90 to 180 days before you can flip it. You might convince them that you have owned the home from the time that the contract was signed but they are wise to that avenue already.
Good Luck to you. 8-)
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jon66epi,
Have you seen this builders' contract? Do they allow to assign, because, in order for you to avoid going to closing, you need to have an assignable contract.
what if builder doesn't want to assign? should i just have a simultanious closing? :-?
jon66epi
make sure you understand the contract.
Some developers not only disallow assignment, they also force the buyer to live in the house for 12 months before reselling.
Others only allow renting it twice within 12 months or not at all. Which means, worst case you'd have to close and carry the house for a year. It'll likely appreciate further but the cost of carry (closing, mgage, tax) will add up.
Some other developers yet are very liberal (from the view of an investor) and just expect 5% down (single family home, not condo)
What contingencies are in the contract?
Can you back out in case of anything falling through?
thank you all for your posts! should i just schedule a simultanious closing and not tell the builder that i'm assigning this. it sounds like they will not let me assign it at all. if i go to closing, i'm going to have to come up with closing costs that will eat into my profit. right? your expertise is appreciated! jon :-?
I am starting to see some builders contract saying that if you sell the property within a year that they are entilled to all profits
karen, thanks. i don't see anything else prohibitive in the contract. if you like, i could fax you a copy, thanks.
One risk that I am not sure you are planning to address is if your buyer fails to complete on time. It could be that you will be in default of the contract and either have to complete yourself or lose you deposit.
Deals do fall apart at the last minute. Can you afford to close on the deal if the buyer backs out?
John
PS. It is best if you deal with builders who allow assignments.
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If this is new construction which it sounds like it is, then get cozy with the construction superintendent. He/she might allow you to take your prospects into the house during construction. Wait until the house is substantially complete so it shows well. Try to schedule the showings all at the same time so you do not become a burden to the superintendent In addition, it creates urgency on the part of the potential buyer when they see other interested parties. I did a flip like this recently and the superintedent even let me put up a info box on the property. I got a buyer lined up and settled within two weeks of my settlement. I doubt many builders will allow you to assign the contract. Good luck
Hello,
I have dealt with this situation, many times. The biggest decison is making the first move, seriously.
Read the builders contract thoroughly. I've seen a contract down here in SW Fla. that the builder, the builder retains air and mineral rights to the property. Why? Who knows, who cares, but it killed the deals, I didn't like it
Get the home appraised for a true value, spend the extra few hundred bucks to know for a fact what the property is worth, then factor inthe appreciation until it's completed. Know appreciation values when you invest in new construction.
Cover your bases with the builder and get the property appraised.. It's pretty simple.
As for assigning the contract, I would be prepared to close on the house if you couldn't find an end buyer. However, if you can't find an end buyer, then you are asking too much or not marketing properly. Do a search on "flat fee mls services", there are some r.e. brokerages that list you house on your locla MLS for like a few hundred bucks, you have to offer some type of commission to a realtor if they bring their buyer, but it's worth it.
GL,
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