What Are the Rules on Flipping a House in Florida?

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Flipping a house means buying a house, usually in pre-foreclosure or foreclosure, and making renovations to the property. The property is then resold, usually at a higher price. This earns money on the initial investment. In order for property bought in Florida to generate a profit, investors need to follow certain rules.

Florida

Florida is one of the states hit hard during the economic downturn of 2008. Prior to the recession, real estate in Florida sold at a premium. When the depth of the problems with bad mortgage practices became known, Florida, along with states such as Nevada and California, suffered a downturn in the real estate market, with homes going into foreclosure. Understanding market conditions is one rule when looking at flipping houses. An investor who knows the market in Florida is “soft,” meaning there are not many interested buyers, can negotiate a lower price than if the market was solid.

Finances

Naturally, having solid finances is necessary when flipping a house in Florida. A good rule of thumb is having 20 percent of the purchase price for a down payment and at least a year and a half of backup mortgage payments available. This gives the investor breathing room to make any necessary repairs and renovations before putting the house on the market for the new buyers.

Seminars

Seminars explaining how to flip houses for profit exist. However, potential investors should approach these seminars with a wary eye. Some of the seminars emphasize only the positive aspects of flipping a house and downplay any negative problems, such as having a property remain on the investor’s financial books for too long, eating into potential profits. When attending one of the seminars, if the seminar leader attempts to get the investor to immediately sign up for a seminar program, it might not be a good idea. After all, if the person conducting the seminar makes as much money as he claims from flipping houses, it does not make sense for him to make less money by doing seminars.

Availability

Investors looking to find properties in Florida to flip have several avenues available. One of these is finding pre-foreclosed properties and making an offer to buy it from the current owners before the property goes into foreclosure. This lets the current owners avoid a bankruptcy on their credit report, while providing the investor with a chance to get the property for a price lower than the selling price. Investors can also purchase foreclosed properties when the properties sell at public auction. The investors can even purchase the foreclosed properties directly from the lending institution that foreclosed on the property.

Federal Housing Administration

At one time, the Federal Housing Administration would not insure mortgages for properties owned by the seller for fewer than 90 days. This prevented people from using government money to “flip” houses. However, the rules have changed, and through the end of 2011, the FHA has waived the 90-day rule, allowing more individuals to get mortgages to buy homes that can be turned around and flipped.

References

Photo Credits

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