Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
I hope everyone had a wonderful Pesach regardless of where you were celebrating. Amongst the many things that I enjoyed about this year’s holiday, in particular, was seeing the many students who came back to the U.S. from Israel to celebrate with their families. It fascinates me to see so many “kids” who have matured so much, in often a short period of time. The developments that these students can accomplish one-or-two years out of high school is inspirational. The concept of “flipping out” is often associated with these students who make such remarkable transformations. It is our hope and prayers that they too remain inspired with their growth and achievements.
Along the same vein, there is an Emmy award-winning reality television show that debuted in 2007, titled “Flipping Out” that centers around a real estate designer/investor as he renovates homes and re-sells them for a profit with short-term “flip” projects. The concept isn’t and wasn’t unique – and the myriad of personalities that preceded and followed speaks volumes about this “niche” real estate field.
Indeed, the “Flipping” business is alive, well, and booming in fact! (Note to self: Didn’t I see and experience this “show” in real life already?!) Research from Attom Data Solutions, a premier provider of real estate and property data revealed that the Fix-and-Flip industry reached almost $20 billion in 2018, which an average profit of over $60,000 per home flipped.
According to these reports, “flip mortgage financing” rose to an 11-year high in 2018. Despite the popularity of house flipping, the biggest barrier to entry and success in this space continues to be “cash.” In spite of those record-breaking statistics, many local real estate investors do not have access to “the best” fix and flip financing options that are available in the marketplace. For example, our uniquely tailored approach to this market affords experienced industry veterans, as well as newly aspiring entrepreneurs, to sensibly tap-into loan programs that maximize their experiences and tactics.
There are many often-confusing financial components for these types of loans. New entries into this business assume they have to buy these homes “all cash.” Similarly, experienced “flippers” continue to use costly “hard money” loans to sustain their home purchases. Today, funding is available both for the acquisition of the properties and for construction and renovation of the project. With unclear industry jargon such as LTV, LTC, ARV, to name a few, it is difficult to truly get a clear scope of available options proactively and transparently.
With the abundance of highly-acclaimed and promoted TV-shows, YouTube channels, Social Media influencers, and blogs hailing the success of “Fix and Flip” ventures, everyone thinks that they too can tap into the same ventures to achieve success. The truth of the matter is, they can, but at what expense …literally. What I mean is that due to the overwhelming complexity and scope of the financing options now available, less-than-reputable financiers are out there promoting financing options without disclosing important caveats and fine print that are not required for these “business-purpose” loans. In fact, many of these creditors are not required to have licensing or certifications whatsoever.
The reason these financing methods have exploded over the past few years is that regulations do not fully extend to non-primary residence “investment properties” that are being made to corporations and LLCs. These entities are not provided the same protection that consumers are in the conventional world of finance. For anyone actively participating, dabbling, or even contemplating entering this niche market – you too can truly “Flip Out.”
The takeaway is that for those fortunate enough to work with an honest and reputable lender, you can have the relationship to obtain generous leverages, competitive rates and terms, and consistent turn-times to help you establish your “Flip Out” business. For those not keen enough to reach out to us, you might simply “Flip Out” when you find out how you were taken advantage of with less-than-favorable rates and terms. By then, however, it’s too late. Shout out and happy birthday to Eric Orgen, Aryeh Sheinbein, and Ben Turin.
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