Posted by Ed SWVA on May 07, 2000 at 08:54:45:
After having a fews deals almost fly apart at closing, I thought it would be a good idea for everyone doing flips to share some of their horror stories with the rest of us in hopes that others can learn from our mistakes and knowledge. I’ll start it off with one of mine.
I recently ran into an issue on a couple of deals I done in Va. that cost me thousands in lost profit. Virginia only allows private individuals to charge a maximum of 12% interest on a mortgage unless you are exempt from the usuary laws. (Banks, Lenders, etc.)
That meant I had to lower my interest rate about 3/4 of a percent. Not a big deal, I still got the deals closed. But the buy rate was lowered on the note which cost me thousands in profit. I still made a few dollars but not what I should have. These deals were handled by two different attorneys. As a matter of fact, one attorney told me that if the deal would have went through at the higher rate, it could have made the entire interest on the note Null & Void. Meaning someone, either me or the note buyer would have to refund all interest paid by the buyer when they refinanced the property.
Now that I know about these laws I can structure this knowledge into my deals. Either get more towards the discount points and closing from the buyer or get more room in the deal to start with. But having this happen the day before close was an eye opener.
I know a lot of Newbies are wanting to get started in flipping. Lets share our horror stories and any other things that we’ve learned about flipping in hopes that we can help each other make better deals for everyone.
Well thanks in advance for sharing the knowledge.