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Flipping Haunted Homes – The Next Big Money-Maker

The paranormal, ghost hunting and spiritual activities are very popular and fashionable right now. Yet, in all of this country, there is just one recognized haunted house. It is in Nyack, NY, and is legally recognized as being haunted.

“As a matter of law, the house is haunted.” This sentence in a ruling by the New York Supreme Court in July, 1991 generated international headlines for a real estate dispute surrounding the sale of 1 La Veta Place.

This is of significance because according to law people cannot just describe their house as being haunted when they want to. This, in turn, makes it an important issue for real estate professionals, who must make sure that they represent their properties properly.

Meanwhile, every year, thousands of people travel to Salem, MA, during Halloween in the hopes of being able to witness some spooky goings-on. There is a real appetite for the paranormal, such as for things that make noises in the dark. And that includes haunted properties.

Are Ghosts an Investment Risk – Or the Opposite?

Trulia has completed a piece of research that indicated that a haunting was not good for house prices.

We found that most Americans consider both deaths and hauntings when finding their next home. Millennial men are the exception, with some possibly dying to live in a haunted home, according to Trulia’s September survey, conducted online by Harris Poll among 2,098 U.S. adults ages 18 and older.

What this research showed more than anything, however, is that it presents a very interesting possibility for investors. On average, 43% of us will not buy a haunted property, rising to 50% among those who did not complete high school. What this means, in conjunction with the fact that there are legalities involved with whether or not a house is haunted, is that people have the opportunity to snap up properties at reduced prices because of suspected hauntings.

Fix and Flip – Seance and Flip?

It seems that there is a real market for haunted properties. Indeed, the haunted house in New York was sold and is now worth quite a bit money. Men who are between the ages of 18 and 34, meanwhile, are also a target demographic as they would like to purchase haunted properties. Meanwhile, those with a graduate degree and those over the age of 65 don’t care about ghosts, so they are also a purchase demographic.

But then, there are those properties that you could snap up because of the worry that there are ghosts, and hold a seance or other event to “evict” the ghosts, only to then sell it at a profit. This is perhaps the easiest, as well as quickest and cheapest, way to fix and flip a loan, and you are guaranteed that hard money lenders will be interested in it.

Paranormal Disclosures

Hard money lenders want to see a quick profit. They will happily lend you money to purchase a property if they believe you will be able to sell it within no more than three to five years and at a profit. This is easily achieved with a haunted home. However, you do have to be aware of the paranormal disclosure laws, which lead us back to the property in New York.

Essentially, some states require homeowners to disclose certain events. Those events include hauntings and also recent deaths, or any criminal activity that took place in the home. Hence, you need to make sure that you remain within the law, and that you find out how long after those events you no longer have to disclose them. Buy cheap because of a ghost, sell expensive because it is probably gone. It is the perfect way to flip real estate.

Real Estate Assets Are Interesting Investments For Private Hard Money Lenders

The standards for mortgage qualifications are becoming increasingly tight. While this makes life difficult for some, it also means there are new opportunities for private hard money lenders out there. Indeed, anyone who has some money could consider becoming involved in this, particularly because they are backed by the security of always having a buffer of between 25% and 30% since that is the maximum loan to value. Naturally, it is important to exert due diligence in this.

Crowdfunding and Self-Directed Investment Opportunities

Numerous experts agree that there are more and more opportunities out there for private hard money lenders. They are there to fill the gap left by the institutional lenders stepping away from mortgages as a result of the Dodd Frank Wall Street Reform and Consumer Protection Act.

The Dodd-Frank Wall Street Reform Act is a law that regulates the financial markets and protects consumers. Its eight components help prevent a repeat of the 2008 financial crisis.

Traditionally, private investors would opt for an IRA or 401k with a focus on real estate investments. Doing this conservatively means that no more than 20% of the retirement account is invested in this, which means another 80% can be invested in a range of other assets, including crowdfunding. The added benefit is that crowdfunding investing can be done outside of the retirement accounts as well. Indeed, again and again, this has been shown to be very secure.

Over the last several years, there has been extraordinary interest in private lending, as it has proven to be both profitable and—on a risk-adjusted basis with proper underwriting and due diligence—secure.

Property Valuations Are Conservative

One of the things that set private hard money lenders apart from banks is that they use a very different underwriting process. Traditional mortgages are limited to 90% for 30-year mortgages. Hard money lenders don’t focus on an applicant’s credit history, instead of looking at the value of the property. They then provide a loan for no more than two years. Additionally, hard money lenders offer much higher interest rates than traditional lenders. Lastly, hard money focuses strongly on distressed properties, rather than traditional homes.

The security of a hard money loan lies in the property itself. This means the valuation methods used have to be more conservative. The professional appraisal is important, but other tools are used as well. This is because appraisals are geared towards traditional mortgages, are based on the opinion of just one individual, are often wholly different to the agreed purchase price, and don’t consider the potential in distressed properties.

Hard money lenders take all the information available to them and make a decision based on that. They simply want to know whether they can get their money back and whether they can make a profit, even if this means taking the property back. This is also why they will only offer a 75% loan to value as a maximum, which gives them that protection. Additionally, they look at properties as if they are the fixer and flipper themselves.

With their singular focus on turning a quick profit, real estate investors are often regarded about as warmly as used-car salesmen. But experts say they’ve played a major role in spurring the housing market’s recovery. By targeting distressed properties, they’ve reduced neighborhood blight and increased the supply of homes in a region where inventory has been very tight.

Clearly, those who have money to invest, and who have at least a baseline of understanding of the housing market, should consider becoming hard money lenders. In so doing, they not only help themselves, but they also help assure economic recovery.