So back in January 2010 we reported (and rejoiced) that the FHA had decided to suspend the 90-day anti-flipping rule for 1 year.

The now-infamous rule was originally intended to prevent shady speculators from defrauding the government, but it also stifled the purchase and renovation of foreclosed homes by legitimate investors like you and me.  Yep, dumber than a bag of hammers.

But the 90 day flip rule waiver in January 2010 effectively enabled qualified buyers to once again get FHA mortgages on properties that were acquired by rehabbers less than 90 days before. Great for them, great for us, great for the economy – thanks for the bone FHA.

And now, in an effort to keep up the momentum gained by the housing market, they’ve just decided to extend “anti-flipping rules” suspension for at least another year to increase FHA lending.

Yay for Sound Logic and Good Reason!

Yep, this is (again) great news for investors trying to flip properties to FHA Buyers. But (again) keep in mind the same caveats and important nuances apply…and you really need to be aware of them if you aren’t already…

• The seller must hold title (no back-to-back, same day closings)
• You still need short-term funding
• The 20% Rule still applies
• The property still can’t demonstrate a “Flipping Pattern”

If you want to read the original waiver from HUD, here it is.  Or for a rather exceptional executive summary of these must-knows, you can read this FHA property flipping waiver post I put together with the first waiver.

So 2 Questions…

It’s nice to finally have something nice to say again about the FHA, isnt’ it?

My question to you is…

1. How much or how little effect do you think this will have on the real estate market and/or economy?
2. Also, how will/won’t this decision effect you personally?

Please post your comments below…

…jp

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For those who have previously released their homes through short sale or a “deed in lieu of foreclosure”, there has always been a waiting period required before you could apply for another Fannie Mae backed loan.

In 2008, the waiting period was reduced from five years to four. But effective July 1, 2010, this waiting period has been reduced to only 2 years.

The “Catch”?

Now to qualify after that two year period, the new regs state that a minimum 20% down payment will be required — unless there are “extenuating circumstances” such as job loss, health problems, divorce, etc…

But I’m thinking, doesn’t pretty much any short sale by default involve “extenuating circumstances”? I mean, just show them the hardship letter you submitted with your short sale docs. Case closed. At least that’s what I think – only time will tell.

Why This Matters to Investors

So why does this matter, and how should we, as investors, USE this information?

Well for starters, if you couple this with the Obama administration’s new Short Sale assistance program (where mortgage servicing companies are paid $1,000 to handle successful short sales and mortgage holders get $1,500 for signing over their property), you’ve now got more compelling reasons than ever for distressed homeowners and lenders alike to pursue a short sale rather than just throwing up their hands and “letting things go”.

And from the investor’s perspective, this is information you can now use when negotiating with a distressed seller, to help enlighten them to the benefits of working with you to pursue a short sale versus foreclosure.

(In case you didn’t know, the typical “it’ll do less damage to your credit than a foreclosure” argument doesn’t really hold water anymore.)

The new 2 year rule could also come into play for you if you’re retailing houses. My bet is that most folks who “lose their house” through short sale or deed-in-lieu will have no clue they can qualify again in as few as 2 years. Anyone smell an opportunity there? What about for 2 year lease options?

So just keeping you in the loop, guys.

Oh and just so you know, Fannie’s rival Freddie Mac remains unchanged in their waiting period. But historically whatever one entity does successfully, the other tends to emulate shortly thereafter. So it’ll be surprising if they don’t follow suit.

If you want to read more about this, here are a couple of good articles from Housing Predictor and The Washington Post.

What are your thoughts on this? I’d love to hear them…

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No, not your local REIA or Meetup group.  I mean the ones we see advertised all the time in newspapers, late night TV or now even Facebook actually:

“Free Home Buyer Seminar!”
“Real Estate Secrets Revealed!”…

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BEHIND CLOSED DOORS: “Real Estate Secrets Revealed!” (…Really???)

So Vena Jones-Cox recently pointed me to this video from CBC (Canada) – a hidden camera expose’ on Robert Kiyosaki’s traveling Rich Dad seminars.  And while I’ve had longstanding respect for the book Rich Dad, Poor Dad – mostly due to its key place in my early REI career – this scathing video actually pulls the curtain back on a number of alarming shenanigans apparently going on behind closed doors.  Things like…

• RK’s seminars are not actually his own – they’re run by Russ Whitney’s organization, which just licenses and leverages RK’s name brand…
• During the interview RK ends up seeming rather embarrassed himself at what he hears is going on…but also doesn’t seem willing to take responsibility for what’s being done under his name…
• People are consistently being seduced into raising their credit card limits right there at the seminar, then systematically enticed to “invest” their new credit on even more training…to the tune of multi-multi-thousands of dollars…training that sadly has a reputation for being questionable at best…
• We see people belittled and humiliated if they raise objections…and even thrown out by security…

I actually watched the whole shebang this afternoon, mouth wide open. And frankly I found myself feeling simultaneously disgusted and kind of sorry for RK.  Weird mix, I know.

Whether or not you have the 22 minutes available to watch the video, I’m betting you still have an opinion on this – maybe even some experience of your own you can share.

And I’d really love to hear how you feel about this one…

Why Rich Dad Still Has a Warm Place in My Heart…

The fact is I first got started in real estate investing because of the book, Rich Dad, Poor Dad.  I feel I owe much of who I am today to the invaluable lessons I learned from reading that book – and I still recommend it to people.

But I now recommend it with two caveats:

1. I know believe his sacred cow “good debt vs bad debt” philosophy is a complete myth
2. And watch out for the seminars.

While starting and running our local REIA group for 6 years, I came across more than a few bruised and battered newbie investors, fresh off having wasted tens of thousands of dollars on training that was basically crap.  There’s just no other way to say it.

And I quickly learned that, while RK’s first book (and maybe his second…maybe even his third) were great eye-openers and thought stimulators, the seminars that follow are apparently little more than machines designed to suck as much money out of attendees as possible…for as long as they can dupe them into it.

Now I don’t say this lightly.  This comes from literally years of hearing this from investors who’ve been through their program to some level.  I know a couple folks who “invested” upwards of $30,000 with them on “training”, only to come to one of our Saturday Workshops and proclaim through teary eyes they just learned more from us than their entire $30,000 bought them from Rich Dad and/or Whitney.

How to NOT Get Taken in by Real Estate Seminars

Now let me be clear: I’m not saying all real estate seminars are bad.  Far from it.  Nor am I suggesting everything that’s “Free” is a scam.  After all, I give tons of free stuff away here…and last time I checked I wasn’t scamming anyone with it. 

But some of these things are just plain bad… downright sleazy in fact…and telling the difference honestly can be really hard sometimes for hungry folks new to the REI biz.

Some quick tips to help you discern…

• Search the interwebs for the seminar instructor and/or company hosting the event beforehand. Now of course you can’t believe everything you see on the net – good or bad – about a company or guru.  You gotta keep in mind that some folks are just hateful and/or chronic grumblers and will concoct complaints about even some of the best out there just because they can.  But it’s a place to start, and if you find more than a couple of red flags out there, then be very cautious.

• Be wary of “free” seminars. Often they serve as forums to sell you more stuff. Which isn’t necessarily a bad thing, mind you.  Remember, we’re all in the business of selling, and there’s nothing immoral with offering some base level training, then higher levels of training and coaching for some people to elect.  But if they overpromise and under-deliver at the event you attend…then want you to pay even more for the “real secrets” you thought you were promised already…that’s a big warning sign, Kemosabe.

• If you’re ever invited to go raise your credit card limits – RUN! There’s a big, BIG pitch headed your way and they want you primed and ready to go when the time comes.

• Always ask other respected investors for their opinion first… before you go and spend a Fajillion Dollars on any “soup to nuts training”.  Just get another respected real estate entrepreneur’s advice – preferably someone with a clear head and a little more experience under his/her belt already.  And don’t look for ways to justify an emotional decision you’ve really already made anyway.

• ____________________________ (Insert your own tip – in comments below )

So how do you feel about all this  Ever been to one of these things?  Ever known (or been) someone sorely duped by them?  Thoughts on the “expose’” video – was it balanced/fair?  Looking forward to hearing what you think…

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Have you heard about the “sweetheart deal” One West Bank got when they purchased Indymac’s junk from the FDIC?

They were basically spoon fed a no-lose situation…but one that’s absolutely costing mom and pop taxpayers (i.e. you and me) more than a few arms and legs here…

Click below to watch the expose’ below, then sound off in the comments with how you feel about this slap-in-the-face deal…

Holy Smokes, Indy!…

• Thanks to One West Bank’s “sweetheart” deal with the FDIC, they will actually earn BIG BANK for any Indymac loans that go to short sale or foreclosure.
• Any “losses” taken for any short sale or foreclosure is calculated in such a way that One West Bank just CAN’T LOSE.  Like a reverse Kobayashi Maru.
• Now it makes sense why loan mods are so darn hard to work out! They have an big incentive to NOT work them out!
• And now the FDIC needs to start borrowing money from the Treasury (i.e. taxpayers) to make it all work?? Talk about a double whammy!! How many ways can they rob us??

Whoever said it’s good to have friends in high places wasn’t kidding around! Seriously, it’s just this kind of tom foolery that makes us want to scream, “Does the freaking government really want to clean up this mess??”

If this one doesn’t make your blood boil, either you don’t get it or you’re one of the bad guys.  So I’m eager to hear your thoughts below.  And remember…

“The significant problems we face cannot be solved at the same level of thinking we were at when we created them.”

–Einstein

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On Friday January 15, 2010 we posted the FHA’s announcement to suspend their now infamous 90-day anti-flipping rule for 1 year, effective February 1, 2010.

Yes, this is great news for investors trying to flip properties to FHA Buyers!  But after reading carefully through it myself, I see there are also some caveats and important nuances you should absolutely be aware of.

So I created the video above to share with you what I feel are some of the most important and crucial takeaways for real estate investors.  And for those of you who don’t prefer video, I’ve also posted the basic summary below.

IMPORTANT DISCLAIMER: But please be advised that I’m not an attorney nor am I rendering any legal advice.  These are my opinions after having reviewed HUD’s actual 3 page flipping waiver, which I advise you and any savvy investor to do for yourself as well.  You can find a link to it on HUD’s website, and I’ve also linked to it from the blog post on REItips.com

First, exactly why is this such good news for investors?

Because for quite some time now investors’ endeavors to earn an honest profit flipping great houses to qualified FHA buyers have been stymied by the FHA’s “No Flip 90-Day Seasoning Rule”.  This basically has meant that you couldn’t resell to a buyer using an FHA loan until after you’ve been “seasoned” on title for at least 90 days.  In fact, the rule has actually been that you can’t even go to contract until day 91 – which put your closing typically another 30-45 days beyond that at minimum.

So this waiver essentially pushes the pause button on this rule.  For at least the next year, starting Feb 1, 2010, investors won’t have to sit on your laurels waiting for 90 days on title before you can sign a contract to sell that beautifully rehabbed house to an FHA buyer.

In an effort to help stimulate sales, the FHA is essentially recognizing that people can buy properties, substantially rehab them and improve the value of them in less than 90 days.  And also that, “…the 90-day resale restriction often hinders community stabilization and revitalization.”  But only time will tell if they elect to extend this waiver, repeal the rule entirely, or simply go back to the way things were after February 2011.

Crucial Takeaway #1: Seller Must Hold Title

One thing you’ll notice upon reading the waiver yourself is that the “seller” must hold title to the property.  In other words, they may very well expect to see you (the investor/seller) as the owner of record as of the date your contract to sell to the FHA buyer is executed. So you can theoretically close on your purchase Monday, go into contract with your FHA buyer on Tuesday, and hopefully close with them in 30 days.

While this is a vast improvement over 91-140 days, it does NOT appear that you will be able to do back to back, same day closes to an FHA end buyer. (A-B, B-C).  So you can continue counting A-B, B-C simultaneous closings and 1-day transactional funding out in your FHA flips.

Crucial Takeaway #2: You Still Need Short Term Funding

That’s right, realize that to capitalize on this FHA policy change, you should still be prepared to come up with the short term funding you need for acquisition (especially 30-60 day funding) and to hold the property for a period of time.

Said another way, you will still have to buy and fund your deal, then go through the process of selling to the FHA end buyer. But thankfully, it’s a heck of a lot easier to find 30-60 day money than 90-120 day money.

Crucial Takeaway #3: The 20% Rule

Basically the waiver states that if your resale is 20% higher than your acquisition price, you’ll have to pony up some extra proof to an independent appraiser that renovations and repairs justify the higher price. So keep good records during your fixer projects!  You can probably expect to be asked for your receipts, before/after photos and other records as proof of what you have done to enhance the value.

Also, realize that because of the higher scrutiny you’ll likely face in underwriting, you might have a real challenge flipping houses where you just happen to get a smoking deal, and want to sell to an FHA buyer with little or no rehab involved.  This may be a red flag.  But if (for example) buy a property for $200,000, resell it for less than $240,000, you should be fine.

Criucial Takeaway #4: Is There a Flipping Pattern?

Basically the subject property should not display a pattern of previous flipping activity.  While this seems a little subjective, it could mean that if the property has been previously wholesaled in the last 12 months, the FHA may flag it and disapprove.

So you would be wise to check the last year’s title and see if it’ s changed hands much at all – hopefully not at all.

Other Important Points:

• All transactions must be arm’s length.  In other words, no family member, business colleagues and basically no shenanigans.

• Assignments of a contract for sale will likely trigger a red flag.  Keep it clean and straightforward on your FHA flips.

• Entities such as LLCs, corporations, and trust must be properly established and operating in accordance with applicable state and Federal law.  Again, watch the fancy stuff.

The Bottom Line is This:

The FHA “no flip” waiver is great news and will open up many opportunities for investors in 2010.  There’s a lot of money to be made in the FHA buyer arena, and now our nation’s “housing authority” has taken one small step to try to address the illiquidity in the residential real estate market.  No, it’s not a perfect step – but it’s a step nonetheless, and a positive one.

Again, you should read the waiver for yourself, understand what it is and what it isn’t, and how to apply it to your own real estate investing endeavors.

Was this helpful to you?  Please share it with someone!
Questions? Comments?  Please share your thoughts below…

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Friday, January 15, 2010

So I just got back from a late night donut run, and found some titillating news for investors awaiting my return…

Apparently today the FHA has suspended the 90-day anti-flipping rule for 1 year, effective February 1, 2010. So for at least the next dozen months, FHA buyers can obtain loans on properties that have been recently purchased by investors.

This is great news for investors trying to flip properties to FHA Buyers! For the next year at least, you wont’ have to sit on your laurels waiting for 90 days on title before you can even GO TO CONTRACT with a buyer.

• Here’s the first article I read about it: “HOUSING: Feds suspend anti-flipping rule”

• And here’s the actual PDF from HUD that makes it official and takes you through the grueling details…if you like that sort of thing.

So with this, maybe the FHA just got a little less sucky.  For now.  And just a little.

Apparently there are a few details to be aware of, such as if the resale is 20% higher than the investor’s purchase, you’ll have to pony up some proof to an independent appraiser that renovations and repairs justify the higher price. But that’s just good standard practice to have handy as a flipper these days anyway.

UPDATE: After reading carefully through the 3 page waiver myself, I put together an Executive Summary of “must knows” every investor should be aware of…

So tell me…how do you expect this will effect your own real estate dealmaking for 2010?

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But here we are, about a month and a half and a few hundred bucks later  (gladly investing in a website security expert who brought us back to life) .  And not only are we back to life again, but I’m backlogged on stuff to post!

So…having said that, here’s a few tasty links to articles and blog posts I’ve found useful, helpful,  or enjoyable in one way or another within the last few days.

CNBC: Big Banks Accused of Short Sale Fraud

“Just as regulators, lawmakers and all forms of financial oversight boards are talking about new regulations to guard against mortgage fraud and another mortgage meltdown, there appears to be yet a new mortgage fraud out there today, allegedly perpetuated by agents of, yes, the big banks…”

The Real Estate Bloggers: HUD Subpeonas 15 FHA Lenders Over Mortgage Defaults

“We aren’t making any accusations at this time, we have no evidence of wrongdoing, but we will aggressively pursue any indicators of fraud,” HUD Inspector General Kenneth Donohue said. “The fact that there are 15 institutions on this list today does not in any way suggest that there aren’t other institutions that we will not look at later.”

Reuters: Fannie Mae to Bend Rules for Some Florida Condos

“Fannie Mae, the largest funder of U.S. home mortgages, on Thursday said it is making it easier for some Florida condo buyers to qualify for loans in a bid to stabilize one of the worst-hit real estate markets.

The housing finance giant said it is reassessing hundreds of Florida condo projects to see if they are “sufficiently stable” enough to qualify for funding, even if they don’t meet current requirements, Fannie Mae said in a statement.”

Inman: Fannie Mae Expedites REO sales

“Fannie Mae has adopted a new policy in which it may accept offers to purchase homes it has repossesed without notifying loan servicers.

Loan servicers may be required to reimburse Fannie Mae for a loss if it turns out the original mortgage on the home did not meet its eligibility or underwriting requirements.”

Build Bankroll: Steve the Landlord

“I’ve been a landlord for almost 5 months now.  I have learned a lot of different things along the way, but so far it has been easier than I thought it would be.  The main part is, since we have a crew of workers, we can easily get stuff fixed for tenants when it is our responsibility to fix…Some of the things I have learned:…” (interesting tips follow)

RevNyou: A Broad Rant About Guru Real Estate Investing Courses

“…At this point one of the new real estate investors in the room raised her hand. She said “I just took a real estate investing course that told us to go out and get as many credit cards as possible. They said that having all that credit was a good thing.”

Hey, got any other articles or blog posts that have turned you on recently?  Share it!  Post ‘em in a comment below…

Take care,

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My buddy Patrick invited me to duke it out among the top 11 real estate investing bloggers on the interwebs (what an honor!).  And the ultimate victor will be whoever’s blog is #1 in the eyes of our readers based solely on votes.

Patrick’s also dangling some killer prizes to bribe…eh…entice the winning blogger. And here’s where the contest gets really cool FOR YOU…

The winning blogger (ahem…hopefully yours truly ) gets to award 5 of their voters (could be YOU) a FREE Private Money Blueprint Home Study System (Valued at $697 a piece)!

In other words, if I win, I’ll have 5 full-blown private money courses (very well done, I can attest) to flat out give away to 5 lucky subscribers (maybe…you?)

Click Here to Go Vote for REI Tips Please!

I’ll make no bones about it: I want to win! But to win … I need lot’s of votes   AND ESPECIALLY YOUR VOTE!

The main contest page is over on Patrick’s blog.  When you get there, you’ll see the profiles of each participating blogger.  Admittedly I’m up against some other pretty good REI bloggers, and a few of them have MUCH larger subscriber bases than I do.  So I need your vote please!

The “carrot” is that it could mean a FREE step by step detailed system that shows you exactly how to get your hands on the cash needed to thrive in today’s market. The Private Money Blueprint Home Study System is the real deal (I’ve checked it out for myself) … and it could be yours FREE simply by voting!

But the bottom line is this: I’m pretty darn passionate about giving honest-to-goodness value on this here blog.  So if I’ve succeeded in any way in your eyes, then your honest vote on behalf on REItips.com would be a true honor.

Please Go Vote for REI Tips!

Thanks in advance!

PS…Yes, please cast your vote for REItips.com in this here fancy blog battle thingy!  I want to win!

Oh, and my daughter has a message for you…

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Want to know what landlords are asking for rents in the areas where you invest?  Maybe you’re a landlord and want to spy efficiently on your competition?  Or a virtual investor trying to quickly ascertain rents from afar?

Enter PadMapper.com…

Their tagline is “Making Apartment Hunting Suck Less.” And that just makes me smile. 

At it’s core, PadMapper keeps near realtime track of the rents landlords are advertising in a myriad of national sources like Craigslist, Apartments.com, Oodle, etc.

When you search a city, zip or address, what you get back is a big ole interactive Google map showing where the apartments are.  And using filters you can eliminate listings you’re not interested in for whatever reason, and hone in on the ones that you are.

Whenever I’m wholesaling deals to landlords, rents are of course always a key factor in their assessment.  So I’ve always found it important to have my mind wrapped around market rents (seeing the market through your buyer’s eyes) and PadMapper just made that even easier.

Some Handy Tips:

• Zooming in will cause areas to fill in more.
• PadMapper runs MUCH better in Google Chrome, Firefox 3, and Safari than it does in Internet Explorer 6 or 7.  (Cause IE stinks.  Yeah, I said it.)
• Keep in mind the results are far from exhaustive…but still very useful.  And the number of markers that can be displayed onscreen at once is limited to roughly 100, since it becomes choppy in some browsers (Internet Explorer) with more.
• The filtering does it’s best to reserve those 100 spots for apartments you’re more likely to like.
• You can setup cool email alerts (really useful if you’re actually apartment hunting)
• As a landlord, you can also submit your own “pad” to be listed among their results if you don’t see it there already.
• If there’s a big area that’s empty that probably shouldn’t be, zoom in on that area. If that doesn’t help, try easing up on your filters. Also, try moving any large clusters of apartments you’re not interested in offscreen by dragging the map or zooming.
• Zooming in very close shows some cool local attractions around apartments (not available everywhere)

So pretty cool, yeah?  I thought so.  And a hat tip to Darren Dicke for the referral.

UPDATE: Reader and Kiss Flipper Tracey Rosenberg just emailed me about another similar resource: Rentometer.com.  It’s a little different approach…first you indicate whether you’re a landlord or tenant, then enter an address or zip and the rent you currently pay…and Rentometer will give you an indicator of whether your rent is above, below or right on spot compared to other market rents.  Another one to bookmark – thanks, Tracy!

What do you think?  Leave a comment and let’s hear it!

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