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Originally posted by techweenie
The backup plan is to be able to profitably rent the house if the flip doesn't work. In SoCal, virtually every qualifiable buyer has bought a house, so you're renting to people who are pretty far down the scale in terms of credit scores... and that can spell trouble. I've also seen rents soften as the market chases the available renters.
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You can say that again. 2005 has been absolutely horrible for finding qualified renters. I may go through 15 applications to find an applicant with a credit score above 600. It's tough because I've seen ads for mortgages for credit scores as low as 500. Incredible! I have not reduced my rents, but vacancy times have increased from 3 weeks to 5-6 weeks.
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There's a show I was recently tipped off to (on TLC?) called "Property Ladder." Along with having some pretty attractive women flipping & advising, it shows what can happen when a 12-week 'flip' turns into a 6-1/2 month project. A rising market masks all mistakes. But no market can rise forever.
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Saw this show for the first time a few nights ago. It's pure comedy!