I'm in IN. On the subject of flipping, I understand that one way to defer capital gains taxes is through a 1031 exchange or you can avoid them all together by making the property your primary residence for two years, correct? What would be legally required for a home to be considered a primary residence? In other words, could I "occupy" it without actually occupying it? Outstanding site and thanks in advance for any advice offered.

No. That is called fraud. Many lenders are cracking down on people buying homes and claiming it will be their primary residence. Don't be surprised if you get a knock on your door by a private investigator doing quality control to check if you live there. The other problem is your insurance policy will say renters insurance. You are asking for your loan to be called due.

Underwriters will also look at where you currently live in relation to the new property and see if it makes sense.

If it is an investment property and you can't afford to pay investor rates or down payments, then you are not ready to be an investment property owner. That simple.

Although I do own a duplex in which I rent half and live in the other half, I'm not an investment property owner of the ilk I'd eventually like to be. What may seem blatantly obvious to someone "in the know" isn't quite as obvious to someone who's in the infancy stage, hence the reason for questions. I have capital, so whether I can afford it or not isn't an issue, but it's always nice to know what you can and can't do. Thanks for the education.

If you are planning to flip a property you should not beven be considering living in the property for the required 2 years to avoid cap gains. Flips are short term properties with the objective of paying the lowest carrying costs possible and turning the property in the shortest possible time.

Your best bet is doing a small rehab project. Do your research before you buy. Start checking contractors and suppliers for the most reasonable prices and times to complete specific projects.

Try applying for a Commercial Revolving Charge at area building suppliers. Remember to put appropiate grade materials for the neighborhood. Avoid over improving the property and spend your dollars where you will get the most return on your money.

Find a good Realtor in your area that specializes in Residential Investment Properties. Get him or her onboard as part of your team cause he or she will already have the rest of the needed team for a sucessful transaction. The Realtor should also be a good source for contractors.

There are some people who do this say they don't own any property they just have there mail sent to there new address and thre name recorded on the title,people do this with hud's too so they can bid as a homeowner and not wait out the intitial bid period.

The problem is what you are doing is playing with fire,they give you the better rate based on the fact you are living in the home because it has a less default rate than investor owned properties.You are committing fraud by getting a government backed or secured loan on the premise that you are the primary homeowner and yes like they said above you could get into big trouble and possible jail time for doing this.As you are a new investor you will run into people doing all kinds of things they tell you about investing,it DOES NOT however make it illegal or ok to participate in such activities.Really if you are doing them for flips the rate is not going to matter that much as you don't make a payment the first month.Where it could matter is say on a primary residence you could get a 100 percent stated income loan on a middle 600 score,if it was investment you would need a 660 to 680 middle score big difference.

My best advice to you is start out small and do some flips build some cash before you hold rentals.If you hold for cash flow and you haven't done flips for equity your options are limited when you get in a bind.

If you want to take the equity you gained from the flip with no capital gains on it just refi the property out and take the cash so when you sell you are not realizing much of a gain on the property.

I now fund my rehab/flip properties with a 65-75% LTV loan with a local lender. They know it's short-term and even waive the pre-payment penalty. They also let me take title inside my LLC! They're the only non-hard-money source I've found that will do that.

The downpayment and rehab costs are paid from my personal home equity line of credit. So they are true "none of my own money" deals, but it took a long time to get to a point where I have $150k in equity to use for this purpose. It's also tough to keep a lot of deals going simultaneously. I realize I'm one bad deal from disaster, until I lose my reliance on the HELOC.

The advice about the revolving charge is excellent. Home Depot will often give you 12-months interest-free financing on big-ticket items. And always watch for kitchen, window, carpet, heating, and siding companies offering 12 months' no interest/payments. You can get the work done and pay them from proceeds at closing. It's great!

That's true, and some of them have been caught.

::starts poking::

wow. how did you find this lender? especially when they'll let the LLC take title? do you have corporate credit established for the lender to allow that?

also can they lend on the ARV(after repair value)?
also why dont you buy 2-3 properties off one FICO. just use 3 different lenders.

do you buy your rehabs off the MLS? how much do you negotiate off the FMV?

::stops poking::

Lot's of Qs. Let's see.

The lender is Washington Mutual, of all places. The woman at their Concord, NH office is excellent. I emailed her tonight and she said she can write loans in all 50 states (but I won't post her info here, sorry).

The property is titled in my LLC, but I did have to sign a personal guarantee. The LLC has no credit at all. It's 3-years old, and I think they required 2-years' worth of history. Other than a couple of extra documents to sign, it was very straightforward. They will do a 65% cash-out refi on as-is value. This works well when I use my HELOC to purchase a rehab property "subject-to," and then refi after I've finished the work.

I could probably buy more, but I prefer to do things a little slowly right now. As a general rule, I try to pay less than 80% of FMV less repairs. So far, I've bought all my houses as pre-foreclosures directly from the seller. I am starting to look on the MLS, now that I've found a Realtor who understands what I'm looking for.

I appreciate all the great info. Hey Mike, I'd like to pick your brain at some point in the near future if you don't mind

Ricky, I'm easy to find. Just send me an email (click the website and then "Contact Us"). Or you can probably do it from here by sending a PM.

The mention of signing the personal guarentee just makes me wonder if there would be issues with having multiple layers of title (e.g., LLCs with land trusts) when doing these LLC loans. That may be pushing the risk envelope for the lender.