Louisville KY Real Estate Blog

Flipping Homes in the Louisville Area

Flipping Houses for Fun and Profit!

During the "down market" of the late 2000s, buyers with large cash troves were able to buy many homes at below market prices, often with cash.  However, there weren't many Buyers in the market then due to tight money and other factors, so improving and "flipping" these homes wasn't really a good option.

Now that home prices are increasing, there is much greater potential to buy, improve and "flip" homes in the Louisville area.  A few things to consider:

  • Be sure that there is a market for improved homes in the area where you're looking.  Sometimes, a home will seem like an exceptional value to an inexperienced Buyer, but in reality, the entire neighborhood or subdivision may be "depressed" in value for a number of reasons. 
  • Improve the home to the point it will be attractive to the type of Buyers looking in that area.  In other words, don't improve a home to a level that might appeal to you -- improve it to the point that it will out-shine other similar homes in the neighborhood where it's located.
  • Work with a Realtor to understand the "velocity" of sales near the home you're considering for a flip.  Before you invest your money, you want to know that the home's "after improvement value" (AIV to experienced flippers) will be high enough for you to make a profit.  More importantly, you need to know what other homes in the condition that your flip will be in are selling for in that neighborhood.
  • Don't over-improve.  You don't want to be the most expensive home in the neighborhood, because that might lead to appraisal problems when you sell your flip.
  • Pick the right home.  For your first few projects, you're smart to pick homes which are cosmetically ugly, but don't require major investments such as structural repairs, roofing, etc.  "Opening...

New FHA Insurance Rates Helping Buyers!

2015 Brings Lower Mortgage Insurance Rates for FHA Loans

Mortgage loans backed by the Federal Housing Administration (FHA) have long been the best bet for many Buyers who want to purchase a home with a relatively low down payment.  In the past, FHA standards allowed a loan to be approved with as little as 3.5% down.  The "Catch"?  The Buyer had to pay private mortgage insurance (PMI) until the Buyer had paid down the mortgage to less than 80% of the home's value.

After the mortgage disaster of 2008-2009, FHA took the brunt of many loans which went into default, and raised the insurance rate to 1.35% (meaning the Buyer has to pay 1.35% of the outstanding loan amount each year, divided by 12 and added to the Buyer's monthly payment).  In addition, the new rules stated that the PMI would remain in force for the LIFE OF the loan -- not just until the Buyer owned 20% of the home.

Better News for 2015

In January of 2015, FHA reduced the PMI rate for most loans by a full 1/2 percent, to .85% annually.  This is great news for FHA borrowers, as it will have a significant effect on monthly loan payments!  See the table below for a look at monthly payments.....

If your down payment amount is low, you may also want to consider VA loans (if you're a veteran -- 0 down with no PMI), Rural Housing loans (same as VA, but only in certain areas) or newer 3% down conventional loans.  Each has different advantages for different people, so ask your Lender for advice in this area.

Before taking a mortgage loan, call me for recommendations and I will send you contact info for high-quality lenders!

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