You buy a home that needs a lot of work. Your goal is to flip the house and make a profit. You know how to do a lot of the work and you’re willing to hire people to do what you can’t. As you see it, you can get a great deal now because of the state of the home, but you know that the same home in pristine condition will show a lot better and sell for a lot more.
So, how long do you need to wait? If you buy it and do all of the work in a month, can you put it right back on the market?
It depends on how you bought it. If you purchased it with cash, you have a lot more freedom. Many companies that invest in homes for the purpose of flipping them — even if you haven’t done this, you’ve probably seen the popular TV shows about the practice — will use cash upfront. They take the proceeds from one sale to buy the next house.
If you use a mortgage, though, and if it is the very common FHA mortgage, then you have to wait 90 days. If the value of the house doubles — or even increases by more than 100% — between 90 days and 180 days, then you may have to take extra steps to show why and how the value increased. This is so that you’re not just claiming a value increase without updating the home to that level.
House flipping can be profitable, but you can see that it’s very important that you understand the legal ins and outs of the process to avoid any issues.
