# 20% cap on profit?

**URL:** <https://community.propertyradar.com/t/20-cap-on-profit/1442>\
**Category:** Foreclosure Investing\
**Created:** [May 27, 2011, 12:31am UTC](https://community.propertyradar.com/t/20-cap-on-profit/1442 "2011-05-27T00:31:45Z")\
**Posts on this page:** 3\
**Page:** 1

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**Author:** ![yl1](https://avatars.discourse-cdn.com/v4/letter/y/f08c70/32.png) [@yl1](https://community.propertyradar.com/u/yl1)\
**Post date:** [May 27, 2011, 12:31am UTC](https://community.propertyradar.com/t/20-cap-on-profit/1442/1 "2011-05-27T00:31:45Z")

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someone mentioned to me there is a legal requirement that the profit from flipping a property from trustee’s sale cannot exceed 20%.  
have you heard of this? any references?

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**Author:** ![tom2](https://avatars.discourse-cdn.com/v4/letter/t/97f17d/32.png) [@tom2](https://community.propertyradar.com/u/tom2)\
**Post date:** [May 30, 2011, 5:06pm UTC](https://community.propertyradar.com/t/20-cap-on-profit/1442/2 "2011-05-30T17:06:42Z")

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That is nonsense. However a friend bought a Freddie Mac/Homepath foreclosure recently, and they stipulated in the sale conditions that he could not sell it for more than 20% above his purchase price for 90 days. There are no such restrictions if you buy from a bank at a county foreclosure auction. Also, FHA financing is not available to buyers if the seller has owned the property for fewer than 90 days. Otherwise there are no restrictions I am aware of if you are flipping a foreclosure.

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**Author:** ![miket](https://avatars.discourse-cdn.com/v4/letter/m/9de053/32.png) [@miket](https://community.propertyradar.com/u/miket)\
**Post date:** [June 10, 2011, 8:26pm UTC](https://community.propertyradar.com/t/20-cap-on-profit/1442/3 "2011-06-10T20:26:32Z")

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As Tom mentioned, that “90 day” thing only comes into play if your buyer is obtaining certain kinds of financing. The “rules” have changed quite often in the past year. For a while, most lenders would not close a loan within 90 days of a sale. Now, I think, only FHA --but other lenders may still follow that.  
As for profit - THAT “rule” fluctuates wildly. Some lenders will let a profit of less than 20% slide thru w.o. much red tape. Some few lenders won’t get involved if there is a large profit. Many will ask you to provide proof of work and improvements done to justify a large “profit”. And a majority will ask for 2 appraisals. One friend had one where 3 appraisals were required.  
There are many cases where a property is sold for more than the appraisal comes in for.