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Mobile Home Investing – A Profitable Niche

If you are looking for a niche in real estate investing, then mobile home investing could be it. Many real estate investors may be turning their backs on mobile home sellers because they may not know that they can make money from mobile homes using similar techniques applied for investing in other types of properties. Consider the following ways on how you can profit from it.

5 Ways To Make Money From Mobile Home Investing

Buy-Fix-Resell. The same formula applied for single-family homes, and other properties, can also be applied in mobile home investing. Owing to the simple structure of mobile homes, they are typically easy and less costly to fix as compared to traditional properties. You can buy undervalued used mobile homes at deep discounts, leaving generous room for profit, that is, if you are able to sell it. One of your markets would be well-sought tourist destinations where it is possible to sell it for cash. However, if you sell it to a buyer who need financing, this may be difficult. So be prepared to offer seller financing in order to profit from your deal; the ROI is outstanding.  Otherwise, you would be better off opting for newer mobiles attached to real property that can help to be eligible for a traditional loan.

Wholesaling. Just like wholesaling traditional properties, you can sell contracts for promising mobile home bargains you find. You look for mobile homes offered at great bargain, put a mobile home under contract from the seller, then you market it to an end buyer or another investor interested in it and assign the contract to that person for a higher price. In this way, you profit from the assignment fee.

Buy and Hold and Become A Landlord. You can also buy home mobiles at bargain prices, fix them up and rent them out. As with renting out traditional real estate, you need to choose your tenants well to ensure that the mobile home is maintained in good order and you will not have any problems in collecting rental fees each month.  Make sure to account for the park fees in your profit calculation.

Lease with the Option to Purchase. Another way to profit in mobile home investing is by offering your tenant an option to buy the mobile home the mobile home at an agreed amount of money in the near future, usually one to three years. Your tenant gains this option by paying consideration, option money, which needs to be based on the value of the mobile home. Here you earn from the consideration that the tenant/buyer pays you, the monthly rental you collect, plus the agreed purchase price for the property once the tenant decides to buy it. Another variation of this could be rent-to-own.

Although the lump sum profits may not be as substantial as when investing in single family home properties, you can still make a great ROI on your money in mobile home investing. Hence, the next time you receive a call from a mobile home seller, do not immediately dismiss it because it can potentially bring you profit.

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Probate Real Estate – A Gold Mine of Great Deals!

One of the open secrets of seasoned real estate investors is to “make money with real estate when you buy, not when you sell.” New entrants in this business are taught to look for highly motivated sellers who are, for some reasons, ready to sell for a very low price. If you are already doing this, by now you may have found out that many other investors are also on the lookout for such great steals. But if you stretch your neck and look beyond, somewhere in the Great Divide, you will find a rich source of great bargains – probate real estate – with very little competition.

What is Probate Real Estate

Probate generally refers to the process of administering and processing a person’s estate – all his belongings (including real estate) – through the legal system after he passes away. The judge in the probate court commissions an executor to be in charge of the administration. The executor is responsible for ensuring that the possessions of the deceased are fairly divided in accordance to what the deceased wished. The executor may be bestowed various levels of power by the judge, depending on the state.

Why is Probate Real Estate a Great Deal?

As mentioned earlier, you can obtain a probate property at deep discount because heirs are motivated to sell.  Inheriting a property is not a bed of roses where the heir simply becomes the owner of the real estate. Inheritance is accompanied by responsibilities, such as paying taxes, repairing the property, or in some instances, taking care of mortgage or second mortgage. However, since the heirs also have their own lives to live, they may not have enough time, energy and inclination to assume this additional role and would rather dispose the property to obtain ready cash.

What more, there is usually more than one heir who lives separately or can’t possibly live together in the property. This makes selling the property the best option so that all of them get to enjoy their fair share of the inheritance. Hence, they are often motivated to sell.

Ways To Locate Probate Real Estate

Regularly visit your local courthouse to research a list of wills submitted for probate. In your research, pay attention to three vital information: the deceased, the beneficiaries and the executor. Then dig up on records of deeds to properties held in their name. If this sounds like a lot of tedious work, you’re right.  This is similar to the kind of legwork an investor would have to do when looking for pre-foreclosure leads at the courthouse. Just like there are pre-foreclosure lists for sale, there are prepackaged probate lists organized by county that provide all the contact information you need to start mailing out your postcards. Google “probate lists” and go with some of the big players instead of spending all your time at the courthouse weeding through files.

Ways To Get In Touch With Beneficiaries

Investors who are into this niche often send postcards or letters and contact the new owners by phone to let them know of their interest in the property. Some even pay them a visit, but I have heard varying rates of success with door knocking. Stick with letters and post cards trying various copy writing to get their attention to take action with you. When you reach out to them through these means, always remember that they may still be mourning so a show of sympathy will be in order. They may not have thought of your offer of ready cash as a solution, but once they get to see the beauty of it, they may be willing to accept an offer for as low as 75 percent of the market value of the property. There are even services out there that will send out the postcards for you, just provide them your addresses and message.

The Legality of Selling Probate Real Estate

The executor has the authority to decide to sell provided that the heirs are in agreement. In certain instances, the permission of the court may be necessary. But do not worry, since it usually only takes the agreement of the heirs for the judge to allow the sale. To be sure, get to know the laws in your particular state for other requirements since some states necessitate the listing of the house through a licensed real estate broker.

Although not everyone knows this, probate real estate can be a gold mine of great bargains because the heirs are often motivated sellers and not many investors are even aware of this niche. A little legwork and research could lead you to great bargains and handsome profits. It’s all about consistency in your efforts.

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Finding The Right Residential Investment Property

When looking for the right residential investment property to acquire, the location is one important factor. You may want to research for an area’s capital growth history especially if your strategy is buy-and-hold. Seek for properties that are in areas that are low in crime rate and robust in economic activity. Good schools and a stable local industry are indicators of a neighborhood with great potential for your real estate investment. Consider locations with low vacancy rates.

Determine the needs of your particular market – parhaps a 3-bedroom, 2-bathroom house – and look for a property that suits these needs.

Although buying a property at a good price is great, beware of residential properties that are offered at rock bottom prices; they may have their reasons for being cheap. Properties that are ready for occupancy are great so that you can start renting it out and receiving a steady monthly rental income. However, if rehabbing is part of your strategy, then looking for handyman specials may allow you a discounted purchase.

Inspecting The Residential Investment Property

Thoroughly inspect the property before you ink the contract. You may have to shell out some amount for building and pest inspections but this expense may save you from a possible more costly expense later if you fail to determine a structural defect or pest infestation in the property you would have purchased. Visit the property you are interested in at different times of the day and week so that you can evaluate the traffic and noise levels. Visiting it on a rainy day would also be a great time to find out if there are are leaks. Keep your eyes peeled for cracked walls, deteriorated floorboards under the carpet, mold growth and related problems, plumbing problems and other signs of additional expenses.

Determining The Right Loan For Your Residential Investment Property

You can choose from three types of loans to fund your investment: fixed interest rate, variable interest rate and line of credit. Some investors opt for interest only repayments so that they can reduce their interest repayments. If your investment property is well-founded and you can demonstrate to your lender the potential of the investment, getting an investment loan will not be a problem.

Working Out The Cash Flow of Your Residential Investment Property

Determine the going rental rate in the area where your candidate property is located by asking other real estate investors, real estate agents or by just by browsing the rental listing of the local newspaper. Also sum up the expenses which you forecast to incur when running the property, such as maintenance, property management expense, mortgage, taxes, insurance and vacancy. Deduct this amount from the rental to get your cash flow. Make sure that this is positive or else you may be putting your money where you may just lose it.

Acquiring a residential investment property requires thorough research, due diligence and some math to ensure that you make a considerable profit out of it.

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Cash Flow-Protective Investment Property Advice

Always remember that there are two parts in the equation of making money in real estate: the rental income and the expenses. One will fill your cup, the other can possibly bleed you dry if you are not careful. The key then to a profitable real estate investing is to find ways to increase rental income while curbing expenses. However, you can only do so much to increase rental income. So it makes sense to focus some energy on keeping expenses in check. Besides, no matter how sizable your rental income is but your expenses are also over the top, then it could eat away at your cash flow and you could still end up in the red. To help you maintain a profitable balance between the two, heed the following investment property advice.

Investment Property Advice When Buying:

Acquire Low-maintenance Properties

When buying an investment property, always keep in mind that your tenant, not you, will be staying in the property so skip curb appeal and other features that can only add to your maintenance costs. Do not also be easily swayed by a bargain price if the structure looks like it needs maintenance that could just eat away at the savings you get from the cheap acquisition. Instead choose to buy properties that are built with materials and fixtures that entail minimal maintenance. Opt for properties that are durable and needing very little upkeep. This includes lawns, landscaping, hedges and the like.

Investment Property Advice On Maintenance

Hire Mr. Fixit

As a newbie real estate investor, you may have intended to perform some of the tasks yourself. However, it pays to have a reliable handyman around to handle everyday maintenance and repairs to free up some of your time to search for additional properties and minimize maintenance costs. By having someone to immediately address property concerns needing repair, you can avoid the exacerbation of problems that can incur you large expenses. This will also be much appreciated by your tenants. You will be glad you hired a handyman for your first property especially if you acquire another rental property.

Make Your Motto “Prevention is better than cure.”

Make it a point to repair leaky faucets, roof, or toilet or damaged floors as soon as you can. That is what Mr. Fixit is for. Otherwise, the damage can compound and so will your expenses. Seek advice from your maintenance guys on how to anticipate repairs and ask for suggestions on how to substitute items needing high maintenance with low-maintenance components.

Investment Property Advice When Renting Out

Tighten Tenant Screening Process

If there are high or low maintenance rental properties, there are also high or low maintenance tenants. As with your preference on rental properties, go for low maintenance tenants. Do background checks and prepare legal contracts that can protect your property. Avoid renters who incessantly complain and who cannot keep their homes tidy. Selecting responsible tenants can substantially do a lot in minimizing maintenance, repair and depreciation costs, not to mention your headache. This adds to your profitability.

Enforce Rigid Repair Clauses

To prod tenants to be responsible in taking care of their rented homes, make it an agreement that they bear the first $100 of repair expenses. You can also ask for steep security deposits to ensure that they do not vandalize your property. Just make sure to properly explain to them why you are setting these conditions so that you do not turn off good renters.

Heed these pieces of investment property advice and you can be sure that you can protect your cash flow and profitability by minimizing maintenance costs and other expenses.

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Buy Income Property During The Bargain Season

Like some consumers looking forward to end of season sale, Black Friday sale and other sale events, savvy real estate investors also lick their lips over rock-bottom prices of homes and cut-rate interest rates. These are two indicators that led many real estate experts to say that now is the best time to buy income property. Owing to the overall ailing economy and stringent loan qualifications, demand for mortgage has slackened. This pushed prices of real estate and money to nosedive. For real estate investors, this is the season buy.

4 Seasons of The Real Estate Market

To maximize your profits when investing in real estate, you must have a good grasp of the phases of the real estate market. It cyclically goes through Phases 1 to 4. The Buyer’s Market spans Phases 1 and 2, while the last two phases involve the Seller’s Market. The different interplay of market forces in each phase gives real estate investors clues on what appropriate strategies to implement during certain stages to rake in more profits and avoid calamitous actions.

Buyer’s Market: The Best Time To Buy Income Property

Phase 1 of the Buyer’s Market is characterized by plummeting home values. Despite their low prices, demand falls, that is why, homes remain unsold and linger in the market for prolonged periods of time. The market is crammed with unsold properties. Today’s glut of foreclosed properties is an indication that we are in the buyer’s market. Most people today hesitate to buy income property or even a primary home because maybe they just lost their homes or they do not qualify for a mortgage loan. Even if they can get a loan, newbie investors may still dither to buy income property for fear of seeing their properties inherit the fate of homes which are worth less than their mortgage.

But for savvy investors, this is the time to stake out and wait for the market to hit bottom. Of course, there is no definite way of exactly determining this but when prices show signs of leveling off, it is a signal for you to pounce and buy income property. Prices may still go down but learn to determine when the market is about to shift. Your game plan here is to acquire while prices are low and hold on to your properties until the Seller’s Market comes when prices go up.

During the Phase 2 of the Buyer’s Market, prices of properties stop declining and a some start to increase at faster rates. The market sets out for a complete upturn. Properties that have remained in the market start selling. Inexperienced sellers are happy to sell their properties that has been stuck in the market for so long. You can make offers to sellers that are almost within their asking price. Just make sure that you have done the numbers and research of the market to determine value of the property.

Seller’s Market: The Riskiest Time To Buy Income Property

During the Phase 1 of the Seller’s Market, prices of properties are increasing and homes are selling at an escalating rate. The demand for properties has also begun to rise. This is the time for you to sell the bargain property you cheaply bought during the Buyer’s Market. You can still buy income property if you can get it at the right price but be fully aware of the worth of properties. Drop overpriced properties from you shopping list. This phase is great for flipping properties.

However, when Phase 2 of the Seller’s Market sets in, it may be time for you to rest from buying. This phase is considered the most dangerous period to buy income property since it can instantly raze you to the ground. The rate of selling properties declines as market demand goes down while sellers’ asking prices still remain exorbitant, hence, inventory starts to accumulate. With the inventory build up, stubborn sellers figure out the shifting of the market cycle, they start lowering their asking prices. Buyers wait for the market to reach the lowest point before they re-enter the market. This could take six months to one year to happen. And the market cycles back to Phase 1 of the Buyer’s Market.

To help you determine the best time to buy income property, understand the real estate market cycle as this has been going round for the last 150 years and is showing no indication to stop anytime soon.

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Location precedes structure or the building. That should be the emphasis to consider when deciding on where to buy investment property. A respectable real estate investor once said that if you have to choose between a property in a good location but with an inferior building and a property in a lousy location with an impressive building, pick the former. This is because location is constant while structures can be renovated, remodeled or demolished. Of course, you do not have to settle for any of these if you can find an investment property with a fabulous structure located in a fantastic area offered at a reasonable price that fits your budget. So how do you determine a great location?

Pointers On Where To Buy Investment Property

Locations With Sustained Capital Growth. Look for places that are registering capital growth. This could be a promising suburb with an exceptional attraction or located near the city. This may also be a local town with a thriving industry. Most often, these places bustle with a robust economic activity. Properties that are near schools, workplaces, malls, parks, beaches and other important establishments and attractions and are accessible to public transportation would most likely make a good investment. You can target families with kids studying or adults working in these institutions as tenants. An area with a healthy economy also means that the population there can pay for rental. Ten to 20 years down the road, properties in capital growth areas will also allow you to earn not just from monthly rental, but also from capital gains once you eventually decide to sell the property.

Properties In The Buyer’s Market. When deciding on where to buy investment property, another important consideration is the real estate market cycle. Go for areas that are in the Buyer’s Market. This phase is characterized by a decline in home values and properties remain in the market for extended periods. This is the time when you can buy cheap and wait for the next Seller’s Market, during which housing prices go up, before you sell. If you want, you may also buy investment properties during the early phase of the Seller’s Market for flipping since selling goes at a quicker rate at this point.

Properties With Good Rental History. It would be great if the property you are eyeing already has existing tenants so that you can fill in the landlord shoes and start receiving monthly rental income right away. However, for your protection, check on rental history record; how the tenants are, if there were extended periods of vacancy and reasons for such.

Properties Away From The War Zone. Avoid properties in neighborhoods that have the potential for strife, violence and have high crime rates. Although you will not live there, you may have a hard time attracting tenants or you may not be able to find an interested buyer when you decide to sell it. Also think twice about locations that are prone to calamities such as flooding and earthquake.

To help you decide on where to buy investment property, consider locations that are in the Buyer’s Market, peaceful, indicate capital growth and that have great potential for occupancy.

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Property Investment Loans Come In Handy In A Buyers Market

Dirt cheap properties left in a jumble of foreclosures and short sales by the crash of the economy and the real estate industry is an indication for savvy investors, like you, that the time to buy property investments is ripe. With so much bargain available in the market, you need all the capitalization you can get. You can stretch out your buying capacity by leveraging on property investment loans. Besides expanding your buying power, let us see how property investment loans can benefit your investing exploit.

Property Investment Loans Magnify Your Buying Power

Investing in a property requires a substantial amount of funds that is why many people cannot really afford it. Property investment loans can magnify your buying power allowing you to acquire more properties than what your current bank account could afford you. Buying investment properties like this  props you up in building your net worth. Just make sure to work out the numbers on how to pay off the loan. Stabilizing your financial standing is the best way to prepare for a buyers’ market. Bolster your financial affairs so that you can easily qualify for property investment loans. Getting a pre-approved loan makes you all geared up for the killing.

Property Investment Loans Let You Leverage on OPM

The most significant benefit you get from property investment loans is that you  can leverage on other people’s money (OPM). You make money by using OPM. Property investment loans allow you to own entire properties even if the payment you have paid is only a certain percentage of their worth. You can profit from the properties through rental income or appreciation, even if you have not paid off their entire value yet. With property investment loans, you do not need to use your own funds, thus, making them available for other investments, such as the stock market. Even with 20% down payment requirements on rental properties, that is much more leverage than anything available when investing in the stock market.

Property Investment Loans Offer Affordable Interest Rates

As earlier mentioned, stabilizing your finances primes you for the buying season. A passing FICO score allows you to avail of property investment loans with reasonable interest rates. A rickety credit standing will most likely get your loan application disapproved and your next option would be to approach private lenders who are lenient with credit scores but charge hefty interest rates.

Approval For Property Investment Loans Is Easy As Pie

Majority of creditors have clear-cut criteria when approving applications for property investment loans. You can easily tell if you get approved or not. The importance of financial stability is again stressed here. Lenders will rubber-stamp your application for property investment loans if your finances are well anchored.

Property investment loans are a beneficial facility for real estate investors to stretch their buying capacity and leverage on other people’s money and they can easily be availed at reasonable interest rates provided you have a good credit standing.

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Buying an investment property is not as simple as going to a shopping mall, window shopping and trying out which ones on display fit you and swiping plastic to pay for the purchase. There are important things to consider such as funding the investment, searching for the right property at the right price and your exit strategy. The following serves as a guide for you when buying an investment property.

Setting The Financial Stage For Buying An Investment Property

Applying For Loan Before Buying An Investment Property. Many people search for a property to invest in first before they work out their finances. However, since applying for a typical loan can take some time, getting a pre-approved loan can also be a great move. In this way, you will not be put in a situation wherein the property you are eying has already been sold while you are still waiting for the approval of your loan.

Obtaining a loan beforehand helps you objectively get a clear picture of your financial state. The process will help you  to take stock of your income versus your expenses and your other financial commitments. The creditor will also look at at your credit history and current savings. By weighing all these things, you will get an idea of how much loan you can afford to repay and for how long. Knowing this will guide you in looking for an investment property according to price range as it gives you a specific budget already. Additionally, agents and sellers will regard you as an earnest buyer by obtaining a pre-approved loan.

Securing a loan in advance also gives you time to study the different types of loans and decide on the right one that suits your needs. The choices include a fixed rate loan, variable rate loan and interest only loan.

Sorting Out Other Costs. When buying an investment property, you must realize that besides the selling price, you also have to pay for other fees, including taxes, legal fees, local government transfer fees and insurance fees that accompany buying an investment property. You also have to prepare to pay for the downpayment which is nowadays often at 20 percent of the selling price.

Searching For The Property

An agent can help you look for the investment property that suits you. You can also register in online sites that help you find the property to invest in. Attend local real estate investment club meetings and network with wholesalers. Leverage  social media and online classified ads in broadcasting your search for a specific kind of property. Your family, friends and social network may also be the link to the property you are looking for. Just make sure to be clear on the kind of property you will invest in.

When deciding on the property to invest in, an important factor to consider is your strategy for the specific property. Are you going to keep it for some time and rent it out?  Are you retailing it? Is it residential or commercial? These considerations may affect the type and location of the property that you choose. Some savvy investors say that it would be better to have a so-so building in a great location, rather than own a great building in an undesirable location.  This usually boils down to how much headache are you willing to put up with for higher cash flows.  Buying a $5,000 fixer upper to hold as a rental does you no good when the tenants stop paying after 4 months.

Buying An Investment Property – The Real Deal

Making An Offer. So comes the big day for you when you make your actual purchase. Buying an investment property typically starts with you making an offer for the property. You need have your earnest deposit money ready, usually $500 – $2000 for smaller deals and up to to 10 percent sometimes for larger deals.  When participating in an auction, such as a sheriff’s sale or bank auction, 20 percent of the purchase price will be required upfront before you can bid. When buying from a private individual try to keep the amount as low as possible, so as not to tie up your money for an extended period of time while sale process works its course.

You may also need to brush up on your negotiation skills. You also must study and understand the terms before inking any contract or agreement.

Sealing The Deal. Once you have agreed with the seller, you may now call your lender for the loan so that you can finalize the purchase. With your pre-approved loan, you can breeze through the process. Once you satisfy all the conditions stated in the contract, the sale pushes through and you now own the property, with the help of your title and escrow specialists.

The process of buying an investment property must be clear in your head before getting involved in one so that you can chew over important factors such as funding and your exit strategy.

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How To Buy Investment Property – Taking The First Step In Real Estate Investing

The rising popularity of real estate investing makes many people interested to learn how to buy investment property. Acquiring a property is the first major task that a real estate investor has to perform, preceding rehabbing, renting out or selling. Acquisition is not a simple task because you need to painstakingly research and analyze the property by weighing numerous factors. Due diligence is necessary to ensure that your bottom line will not bleed red with deficits.

How To Buy Investment Property – Knowing What You Want

Acquiring a property starts with knowing your preferences for the type of property you want to invest in. You may prefer renting out a 3BR, 2 bath house, an apartment, a multi-unit building, a condominium, mobile homes, a commercial complex, store fronts, among others. If you already have a vision, this is the easiest part in the research phase. All you need to do is replay that vision in your mind, daydream. People curious on finding out how to buy investment property may already be dreaming of owning a multi-door apartment, passively receiving rental income every month and making a hefty profit when selling the property years later due to appreciation.

How To Buy Investment Property – Locating What You Want

Having known what you want, the next logical thing to do is look for that kind of property. This is not limited to the type of building, it also includes the particular area or location of the property. A real estate investor pro said that it is better to buy an inferior building in a great location than buying a sensational building in a poor location. A great location means an area that hosts a diverse economic bustle that bespeaks of work and entrepreneurial opportunities for tenants. This good area must also harbor good schools, transportation and shopping malls to cater to the needs of the tenants. It is not just their needs you think of when you choose an area. Consider areas that are in close proximity to your residence so that you can regularly check your property.

Another important thing about location that affects your game plan on how to buy investment property is that it has an influence over the price of your investment, both in terms of rental fees, your acquisition cost and eventually your selling price should you decide to sell it later. The location even has a say on the marketability of the property and the kind of tenants you will be letting in. Avoid areas with high crime rate.

How To Buy Investment Property – Obtaining An Investment Property Loan

While still searching for the property to buy, start researching about financing options. It would be a great idea to apply for a pre-approved mortgage loan so that when you find the property, financing is ready. A pre-approved loan also helps you asses your finances and gives you an idea of how much you can afford.

How To Buy Investment Property – Evaluating The Property and Doing The Numbers

Once you have a candidate property to invest in, check out the condition of the property. Note any repairs needed and the corresponding repair costs. Find out why the seller is selling it, check for any outstanding liens, how much the going rental rate is, and if there are current tenants still in the premises. Also ask about other expenses such as closing costs and agree on who is paying what.

Using the data you have gathered, do the numbers. Factoring in the costs and expenses, compute for your monthly cash flow. Also work out the maximum offer you can give to the seller, given all the data to ensure that you do not buy it overpriced.

How To Buy Investment Property – Negotiating An Offer

Having done all the research, evaluation and financing preparations, you are now ready to put your negotiating skills to the test. Be guided with your computed maximum offer. Beyond that amount, drop the deal and start looking for another one.

The best way to learn how to buy investment property is to do the actual thing, so start researching and securing a pre-approved loan immediately; after all, the scariest part is when you ink the contract that stamps finality.

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These days, getting funding for your handyman specials from hard money lenders are getting harder as their requirements become more rigid. Traditionally, getting funding from these private lenders was almost as swift as their speed of driving by the property involved in the deal for inspection.  At the present real estate climate, however, many of these lenders may check on the tax returns, bank statements and current pay slips of borrowers. For this reason, some REI’s may be seeking for other financial fountainheads to fund their deals. Usually in their search for alternative source, they give Federal Housing Administration’s 203K loans the brush-off.

Giving 203K Loans A Second Thought

Ever since the Department of Housing and Urban Development set down the moratorium on investor involvement in the 203k Rehabilitation Program, ethical REI’s avoid this loan program lest they be charged of mortgage fraud. But hold your horses! There can be some ways you can benefit from this financial reservoir.

3 Ways on How REI’s Can Dip Into The Financial Reservoir of 203K Loans

Despite the exclusion of investors to avail of 203k loans, it does not necessarily mean that you cannot use it to your advantage. It just takes a matter of expanding your context and thinking outside the box. Below are some ideas. You may be able to think of more.

1. This will not apply to all but will serve well for REI’s who are looking into buying and doing up their own homes. Well, this scenario is obvious. This is also applicable to REI’s who just recently bought their place of residence. It is expressed in the program that homebuyers who bought their property with cash within six months may refinance the house by availing of the 203k loan. It is as if the homebuyer bought the house through the said loan. If you are a recent homebuyer, you can claim a cash refund which is net of down payment and the closing cost that goes with obtaining a 203k loan. And presto! You can use the cash-back to fund one of your rehab projects.

2. Some resourceful REI’s also suggest to work around the provision that says that the loan can be utilized to refashion a single-family home into a double-, triple, or quadruple-family building. It is not clear whether these newly converted units can be rented out to tenants or not. A residential property which is also secondarily used for commercial purposes is also eligible for this loan. However, the commercial purposes seem to imply an office or store. In this case, it was not clear whether the owner must be the one occupying the commercial space or it can be rented out to other businesses. Probably, this may only apply to non-profit institutions which are also eligible for 203k loans. It is best to clarify these issues to avoid trouble.

3. This is applicable to any REI and is more of a “selling”, rather than a “buying”, strategy. You do not directly apply for a 203k loan so that you can buy and rehab the property, but you can help your buyer to avail of the government financing. As a consequence, you get to sell your property and you are freed from the trouble of rehabbing the property. It is akin to the ethical house flipping. Just make sure that you do not overprice and your buyer really has the wherewithal to pay back the mortgage. Your buyer gets to choose the color of the carpet and the paint and all other personal preferences he may have for his new dwelling. This means that you satisfy your buyer and with this, you could possibly get a referral to another homebuyer for your other fixer-uppers.

The Hurdles of 203K Loans

As with other government and bank loans, leveraging on this loan will encumber you with the red tape that rarely exist when dealing with private lenders, although it charges lower interest rates. The extra paperwork can snatch your time and speed in doing things so it would be great if you do not source financing from 203k loans often.

If you are running low on funds but have plenty of time to allocate for the processing of 203k loans, then you can consider the ways mentioned above on how you can use it for your REI business.