Once again, it’s happening. You would think people would have learned in the so-called easy-money days prior to the mortgage meltdown. Even then, buying and selling a house quickly was never easy if the buyer had to bring in a new bank with all their requirements and stipulations. But now in the age of tight money? You’ve got to be kidding. It’s still the bank’s way or the highway, just like it always was. And just like then, this “flip” thing isn’t gonna happen quickly unless you find a CASH buyer.

And yet every day of the week we hear about a supposedly simple purchase of a house, the cursory clean-up, and a quick, painless sale which yields the “investor” a healthy profit. But upon closer inspection it’s never really that simple. We ask “which bank will do the financing” and they act like it’s a trick question. In fact, it often never happens and the person simply doesn’t sell the house. Just like with Elvis sightings, it’s the next few questions that are hardest to answer.

Lot’s of attention is being paid to the price. People have even gotten smart about location. Not too tough to estimate construction costs, either. There are even comps out there now, albeit low ones. But the fly in the ointment—that thing which will prevent the flip from happening—is the new buyer’s bank.

It’s a simple thing called title seasoning. It’s a restriction that banks and Fannie Mae place on financing of properties whereby the current owner hasn’t been an owner more than six months (90 days in the case of FHA loans). In other words, if you buy the house, do a cursory clean-up to it, and then try to sell the house immediately even for a small amount more than you paid, you’re going to run into trouble with the buyer’s bank. They probably will refuse to approve the loan or even accept the application.

It’s supposedly a little easier if you do a full re-model of the home. In such cases, it is said that banks may waive the seasoning requirements, because you can justify the higher value of the home with receipts showing how much money you invested into it. But what if you’re doing some of the work yourself—will they allow you to price your own labor? And what if the house really doesn’t need that much work? And even if you completely transform the house, you may have to sit on it for many months before a bank will even look at a buyer’s mortgage application.

With the kinds of mark-ups traditionally expecting with wholesaling, it’s gonna be pretty tough to justify sitting on a house for 6 to 12 months longer than you have to. That adds a whole bunch to your cost basis and kills most of your potential profit.

So once again, there is no magic bullet called “wholesale” or “flipping”. Once again, despite all the romance and drama given to the idea of flipping houses, it is still not the one-size-fits-all solution. If you plan on buying houses and cashing out within the first year, at least for the time being, you should be looking for CASH buyers.

Great Lakes Secured Investments holds and manages property for long-term cash flow. By eliminating the unknowns of flipping, we share in the cash flow with investors. Because the cash flow of the property far exceeds the interest cost and operating costs, the investment feeds itself. The income can always pay the investor up to 10.0% fixed!

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