FHA 90 Day Flip Rule Hacks: Ugly to Amazing Profits

FHA 90 Day Flip Rule Hacks: Ugly to Amazing Profits

April 4, 2024
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Venturing into real estate investment, you’re likely to encounter certain regulations that might feel restrictive. Among these is the FHA 90-day flip rule. Depending on your grasp of it, this regulation can either hinder your progress or serve as a catalyst for success in the property flipping arena.

At first glance, flipping houses seems straightforward enough – buy low, sell high, rinse and repeat. But sprinkle in some FHA guidelines, and suddenly there’s more to think about than just wallpaper and kitchen tiles.

Great news: mastering this rule for your flipping strategy isn’t as daunting as it seems. Stay with us as we simplify what this means and how it impacts your game plan.

Key takeaway

  • To master the FHA 90-Day Flip Rule, remember that you can’t sell a property to an FHA buyer within 90 days of purchase, and sales between 91-180 days require extra documentation if the price increase exceeds 100%; understand the exceptions, meticulously document renovations, and strategize your flips to ensure profits.

What is the FHA 90 Day Flip Rule?

The FHA 90 day flip rule is a real estate investing guideline that can trip up even the most seasoned investor if they’re not careful.

But what exactly is house flipping? It’s when an investor buys a property, fixes it up (usually pretty quickly), and then sells it for a profit.

The FHA flipping rule is designed to protect buyers from artificially inflated home prices due to rapid resales. It places restrictions on FHA loans used to purchase properties that have been recently sold or “flipped.”

Under the 90 day flip rule, a property is not eligible for an FHA-insured mortgage if it was purchased by the seller within the last 90 days. That means an FHA buyer can’t buy a home from a seller who’s owned it for less than 90 days, with a few exceptions we’ll get into later.

The FHA 90-Day Flip Rule Explained

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Let’s break down the FHA flipping rule into two parts so it’s crystal clear.

Part 1 is the 90-day flip rule. This prohibits FHA loans on properties that have transferred ownership within the past 90 days. The clock starts ticking from the date the seller acquires the property, usually the closing date.

It applies to all single-family homes, including detached houses, townhouses, condos and multi-unit properties up to 4 units. So if you’re a house flipper looking to sell to an FHA buyer, you’ve got to wait out those 90 days.

Part 2 is the 91-180 day flip rule. For properties resold between 91-180 days after the seller’s original purchase date, the FHA requires extra documentation for loan approval.

This includes a second appraisal if the resale price is 100% or more above the seller’s acquisition cost. The lender must also document any renovations and repairs made that justify the price increase.

As real estate investors, these FHA flipping rules can present challenges when trying to sell a flipped house quickly. But there are some exceptions and strategies we can use to navigate them profitably.

Exceptions to the FHA Flip Rule

While the 90 day rule can be a headache, there are some exceptions that give us a bit more flexibility as house flippers.

One key exception is the second appraisal rule. If the sales price exceeds the seller’s acquisition cost by 100% or more, a second appraisal is required to support the increased value.

This second appraisal must be from a different appraiser than the first and include detailed commentary and analysis of the property and comparable sales.

Another exception is the cost breakdown. For resales between 91-180 days, the lender must obtain a detailed breakdown of the costs and repairs made by the seller.

This cost breakdown, along with supporting documentation like receipts and before/after photos, is used to justify the increase in the property value and the new sales price.

Some other exceptions to the FHA flip rule include:

  • Properties acquired by an employer or relocation agency in connection with employee relocation
  • Resales by HUD, other government agencies, nonprofits, or state/federally-chartered financial institutions
  • Sales by local/state government agencies of properties acquired through foreclosure, tax sales or seizures
  • Inherited properties being sold by the heir
  • Properties in Presidentially-Declared Major Disaster Areas

As investors, it’s crucial to understand these exceptions and how to leverage them. With the right documentation and approach, we can still sell our flips to FHA buyers without being hamstrung by the 90 day rule.

I’m not going to sugarcoat it – using FHA mortgages to flip houses can be tricky for real estate investors.

The 90-day rule often means tying up our capital longer than we’d like. It can slow down our flipping process and limit our buyer pool during that initial 90 day period.

But here’s the thing. FHA loans are intended for owner-occupied primary residences, not investment properties. So while we can still use them to buy a multi-unit property (2-4 units) and live in one unit while renting out the others, it’s not a total cakewalk.

The key to making our flips profitable despite the FHA flipping guidelines is to get strategic:

  • Target non-FHA buyers and conventional loan programs during the 90-day period
  • If possible, hold properties for at least 91 days before reselling
  • Document all renovations, repairs and improvements extensively
  • Price based on fair market value and the cost of renovations, not an unreasonable markup

By adjusting our approach and being smart about our timelines and documentation, we can still make good money flipping houses even with the FHA rules in place. All it really takes is a bit of smart planning and getting things done the right way.

Selling to FHA Buyers as a Flipper

On the flip side, selling our flipped properties to FHA buyers comes with its own set of challenges.

Many of these buyers are using FHA loans because they have lower credit scores or smaller down payments. That often means more hoops to jump through to get the loan approved and the deal closed.

As house flippers, we need to go into these sales with eyes wide open. The properties need to be in tip-top shape to pass the FHA appraisal and inspection process.

We also need to be prepared for the deal to take a bit longer and require more paperwork and patience on our part. But the payoff can be worth it, especially in starter home markets where FHA buyers are common.

Some tips for working with FHA buyers:

  • Make sure the 90-day rule is satisfied before accepting the offer
  • Be upfront about any recent renovations and have all documentation ready
  • Work with buyers’ lenders to provide any additional paperwork needed
  • Be prepared for appraisal contingencies and to potentially adjust price
  • Allow extra time in escrow for the FHA loan process

By being proactive and transparent, we can successfully sell our flips to FHA buyers and tap into a wider market, even with the extra regulations involved.

Understanding the FHA Self-Sufficiency Test

Here’s a curveball for you. Even if we’re not using FHA loans to flip houses, we still need to be aware of the FHA self-sufficiency test.

So, this test is basically the golden ticket for checking whether a property lines up with HUD’s checklist for being an awesome, stand-alone home. It takes into account things like the property’s condition, location, and marketability.

If a property fails the self-sufficiency test, it may not be eligible for FHA financing at all, even if it meets all other guidelines. That means we could be limiting our buyer pool without even realizing it.

As house flippers, it’s our job to make sure the homes we touch ace this test with room to spare. That means focusing on:

  • Making smart renovations that add real value
  • Ensuring the property is safe, structurally sound, and up to code
  • Choosing desirable locations with strong market demand
  • Pricing the property realistically based on market comps

By keeping the self-sufficiency test in mind from the start, we can avoid nasty surprises down the line and make our flips as marketable as possible to all buyers, including those using FHA loans.

The Impact of FHA Flipping Rules on Your Investment Plans

At the end of the day, the FHA flipping rules are just one piece of the puzzle when it comes to our real estate investing plans.

Yes, they can be frustrating and limit our short-term flipping options. But they don’t have to be a deal breaker.

One approach is to simply focus on non-FHA buyers and financing for our flips. This could mean conventional loans, cash buyers, or hard money lenders.

Another strategy is to adjust our timelines and hold periods to work within the FHA guidelines. By waiting 90+ days to resell, we can open up our buyer pool considerably.

We can also use the 70% rule to make sure we’re buying properties at a deep enough discount to turn a profit even with the FHA rules in place. This rule says we should pay no more than 70% of the property’s ARV (after repair value), minus repair costs.

By being strategic and adaptable, we can find ways to make the FHA flipping rules work for us, not against us. It may require some tweaks to our original plans, but the profits are still there for the taking.

So, the trick is to always be learning and adaptable while never losing sight of our financial goals. With the right approach, we can flip houses successfully and profitably, FHA rules and all.

FAQs in Relation to Fha 90 Day Flip Rule

What are the exceptions to the FHA anti flip rule?

Sellers who are banks, government agencies, or nonprofits approved by HUD are not subject to this rule. Additionally, inherited properties are exempt.

How do I get around the FHA flip rule?

While it’s not possible to completely bypass this rule, selling after 90 days or focusing on non-FHA buyers can be effective strategies. It’s important to understand your market and adjust accordingly.

What is the FHA 4000.1 rule for flipping?

This guideline outlines all property eligibility for FHA loans, including flipped properties. The rule is designed to ensure that homes meet safety and quality standards before they are sold.

What is the 90 day rule on conventional loans?

Unlike FHA loans, conventional loans do not have a strict 90-day limit. Conventional lenders may have their own policies, but they are generally more flexible.


So here we are at the end of our journey through the twists and turns of understanding the fha 90 day flip rule. It’s not so much a blockade but rather a guidepost helping ensure that when you do dive into house flipping under an FHA loan umbrella – you’re doing it right.

This rule isn’t here to spoil your fun; it’s actually set up to keep things fair in housing markets where people truly want homes they can afford without getting caught up in inflated prices due to quick flips with no substantial improvements.

In essence? It makes sure every player plays nice – giving folks buying their dream home via an FHA loan peace-of-mind while allowing investors like yourself room to move within clear boundaries.Your take-home message? Knowledge is power – especially when it comes to playing by rules designed not just for fairness but also for success in real estate investments involving flipped properties using FHA loans.Luckily now, armed with insights about this particular guideline…you’re ready!

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