Deferment Fog

Although real estate agents are seeing increases in inquiries about homes in the suburbs compared to the same period last year and house sales are up slightly in the second-home market, consumers are not applying for as many loans and banks are not lending as much.

Millions of Americans, 29 million, filed for unemployment last week for the first time according to Investopedia.com, slightly more people than expected, but less than the previous week.

As they lost their jobs or were forced to close their businesses, homeowners who could not make their mortgage payments asked their mortgage servicers for permission to pause their payments. Once a rare occurrence, the number of accounts in deferment, forbearance, or some other form of relief rose to 100 million between March 1 and the end of May according to today’s Wall Street Journal article by Anna Maria Andriotis.

For lenders and borrowers, these are difficult times because the coronavirus stimulus package includes a provision that says lenders that allow borrowers to defer their debt payments cannot report these payments as late to the credit reporting companies, making credit scores an unreliable marker of how a borrower is doing paying their loans back.

Banks are pulling back on credit because lenders are having a difficult time determining if applicants’ credit scores and credit reports reflect their true levels of risk. Not only do they not know who to lend to, but they cannot tell how much their loan losses will be if the economy remains a mess.

Across the board, lending standards have been tightened. Even mailed credit card solicitations fell from 316 million in February to 74 million in May. (Wsj.com)

It takes more work to find borrowers who will pay their loans back. A lender will have to sort through more data. Some lenders are asking borrowers for permission to look at their payment history on accounts not appearing in their credit report and to analyze their banking accounts.

If you need funding, apply now. I am working online with the rest of you.

Patrick St. Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

http://www.reicapital.cash/

References

Andriotis, June 29, 2020, Flying Blind Into a Credit Storm’: Widespread Deferrals Mean Banks Can’t Tell Who is Creditworthy, available online at https://www.wsj.com/articles/flying-blind-into-a-credit-storm-widespread-deferrals-mean-banks-cant-tell-whos-creditworthy-11593423001?mod=hp_lead_pos5

Fluctuating LTV

The loan-to-value (LTV) ratio is the amount a borrower can borrow from a lender compared to the appraised value of the property that he or she wants to buy. The LTV determines the amount of a down payment a borrower has to supply from his own pocket to invest in the property.

Loan-to-Value ratio = Mortgage amount ∕Appraised value of the property.

For example, if the lender offers a loan at a 90% loan-to-value ratio, the borrower must supply 10% of the total cost of the purchase. In a fix-n-flip loan the same is true, the lender that supplies up to 90% (for example) of the home purchase price, requires the borrower to provide the other 10% of the price.

The Coronavirus pandemic has changed things rapidly including the market value of homes, thus affecting the LTV ratios lenders depend on. Please call for the most up-to-date loan-to-value ratios on our loans for your upcoming projects. 512-213-2271

Photo by Pixabay on Pexels.com

Default

If a borrower defaults on a home loan, which is more likely to happen if they do not have much of their own money in the home, the lender takes back the home and sells it to get back the money they lent. Market fluctuations can cause lenders to lose money if the value of a house goes down and the borrower defaults on the loan. The value of the home may be less the amount of the loan. The coronavirus pandemic may make home prices goes down, but that is not certain and may not be true in all locations.

Equity

If the borrower had equity in the home and defaults, then the borrower loses the equity they have in the home because the lender takes the property and sells it to recoup their investment and expenses as quickly as possible.

Equity is the amount of money that would be returned to homeowner if the asset is liquidated (sold) and all debts are paid off. It is in a home owner’s best interest to sell a home before they default on a loan and pay the loan off if possible both so they can get their equity out of the home and so that they can keep their credit history in good shape.

FICO Score Requirements

The FICO score required on loans relates to the buyer’s credit history. It reflects how often they have been late or defaulted on loans in the past. Before the coronavirus pandemic set our lives, marketplace, and economy into a spin, REI Capital Resources required a FICO score of 650 on a hard money loan with a term of up to 24 months. Many people have lost their jobs and their credit scores have suffered. Watching the unemployment rate go up, lenders across the country have tightened up their FICO requirements and these requirements are changing daily. Please call me for our latest FICO requirements. 512-213-2271.

Selling to Avoid Foreclosure

Owners in default or facing default will sometimes take less than the market value for a house to avoid foreclosure. They may settle for only getting part of their equity back, reasoning that some is better than none. None is what they will get if they go into foreclosure and the lender takes back the property and sells it for the balance owed on the loan. The borrower may even give up all their equity to sell the house before defaulting to keep their credit history intact and their FICO scores high.

Buying Opportunity

The distressed homeowner’s situation becomes the buyer’s opportunity. The homeowner needs help to retain their high FICO score and some equity, and the fix-n-flip buyer needs to purchase a property for the lowest price. It can be a win-win deal.

As a direct lender, it is my job to help you get a purchase and rehab loan as quickly and as easily as possible. The perfect fit is still out there. Call me though for the most up-to-date information.

I am working online with the rest of you. If you need funding, fill out the BLN application at   http://reicapital.blnsoftware.com/ or send me an e-mail or give me a call.

Patrick St.Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

www.REICapital.cash

Have You Hired an Uber Driver Today?

House flipping has made it to the Wall Street Journal. In a recent article (May 28, 2019), Uber Drivers Seek Extra Cash Working for House Flippers,” I read about a new way house flippers are finding houses to buy in today’s competitive market. They are maximizing their chances of locating houses to fix-n-flip by paying Uber drivers to identify homes on their routes that are ripe for flipping. This cuts down on the amount of driving and scouting the real estate investor has to do to find potential homes to buy, and the Uber driver makes some extra cash.

Uber drivers take a picture of a property using an app developed by DealMachine, LLC. The app uses GPS and county online property records to identify property owners. The DealMachine website in the Google app store says that the app “is the fastest growing solution for investors and agents who want to build their own marketing list and find local deals.” It advertises that you can “See a run-down house, find the owner, and flip it for a profit.” Their app gets in touch with the property owner via direct mail or e-mail. The app user instantly sees the owner’s name, phone number, and e-mail address to contact them on the spot.

Driving for Dollars

Homes that have owners that might be eager to sell include houses that appear vacant and those that have newspapers piled up and a “for sale” or “for rent by owner” sign in their un-mowed front yards. Uber drivers take pictures of the houses and submit the referrals when they are not driving a client.

Some real estate investment companies pay the Uber driver a hefty commission if a lead pans out and others pay some for each good lead and more if a referral leads to a deal closing. One Uber driver interviewed by the WSJ writer has sent in 400 photos and has not had any of her leads close yet, but she says, “I understand real estate is a numbers game. What do I have to lose? I’m driving around anyway.”

REI Capital Resources is a direct lender as well as a broker of funding solutions. We offer short and long-term financing options for real estate.

Please give me a call when you find that perfect real estate investment and know how much money you need.

Patrick St.Cin
512-213-2271
Patrick@REICapital.cash 

References

Parker, Will and McWhirter, Cameron, Uber Drivers Seek Extra Cash Working for House Flippers,

WSJ May 28, 2019

https://www.wsj.com/articles/uber-drivers-seek-extra-cash-working-for-house-flippers-11559035802?mod=trending_now_2

https://play.google.com/store/apps/details?id=com.dealmachine&hl=en_US 0feffffff0

Vacation Rental Investment Property: Expenses

Summer is here and vacations are in the air.  Perhaps, it is also time to think about how we can pay for our vacation with income from an investment property purchased to rent. As we discussed yesterday, if you receive income from renting property for use as a dwelling, such as a house or apartment, you may need to report the income, and you may be able to deduct certain expenses. 

To make your tax life easier and less confusing for you, your tax preparer, and the tax authorities, be clear about your goals for the rental property.  Are you using the property partly for your own use and renting it out when you aren’t using it or are you operating it solely for a profit?  If you are using the property yourself and renting it, divide the portions of expenses between your investment and your personal tax forms based on days used or percentage used, and you will not run into tax trouble.

Types of Rental Expenses

In most cases expenses related to renting your property are deductible. These deductions can be applied against the income you receive from rent to lower the amount of the rental income that is subject to tax. These would general be reported on a form 1040.  According to the IRS, if you use the investment property to rent for a profit and do not use the dwelling as a residence, or for personal use, then your deductible rental expense may add up to more than your gross rental income. When you use the property for both personal and rental use, you will not be able to deduct rental expenses in excess of the gross rental income minus the rental portion of the mortgage interest, real estate taxes, casualty losses from federally declared disasters for the rented part, realtor’s fees, and advertising costs.

Deductible expenses include:

  • Advertising
  • Auto and travel expenses (if the primary purpose of the trip is to collect rent or to manage, conserve, and maintain your rental property)
  • Cleaning and maintenance
  • Realtor and Online Commissions
  • Depreciation: This expense begins when the property is rented or placed in service. It is taken over the lifetime of the property to cover the cost of the original purchase.
  • Insurance
  • Interest on loans other than the mortgage
  • Legal and other professional fees
  • Local transportation expenses (those incurred collecting rents, managing, conserving, or maintaining your property)
  • Management fees
  • Mortgage interest paid to banks, etc.
  • Mortgage expenses, including mortgage commissions, abstract fees, recording fees, are not deducted as expenses, but are considered part of the basis of your property as capital expenses and are depreciated.
  • Points. Points are prepaid interest and are deducted over the life of the loan and not all in the year the loan was made.
  • Pre-rental expenses: Expenses incurred maintaining your property from the time you make it available to rent
  • Rental payments for equipment
  • Rental payments for the property you lease
  • Repairs
  • Taxes
  • Utilities

Vacant Property

You can deduct expenses incurred maintaining and preserving your property when it is vacant, or vacant while listed for sale.

Uncollected Rent – Not Deductible

Don’t deduct uncollected rents. It is not included in your income, so it cannot be deducted.

Renting to Your Employer

If you rent part of your home to your employer and provide services for your employer in that rented space, report the rental income.  Claim the income and deduct the expense for that portion of the house. You can deduct mortgage interest, real estate taxes, casualty losses from federally declared disasters for the rented part of your home.

I would like to help you with funding for an investment rental property or vacation rental.  I have a long-term rental loan program that can help you get into an income-producing vacation rental investment property.

Please give me a call when you find that perfect real estate investment and know how much money you need.

Patrick St.Cin
512-213-2271
Patrick@REICapital.cash 

References

IRS Publication 527 (2018) Residential Rental Property

IRS Tax topic 415 Renting Residential and Vacation Property

Image Credit, vacation rental, Seattle. Fred Ueckert, FJU Photography [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)%5D

Numbers: Prices, Percentages, Points

Despite the volatility of the stock markets and the Texas weather, no matter if it is raining, blowing, or baking, even if I have to walk uphill both coming and going, in a “snownado,” I am here to help you find ways to put your money and your time to good use making more money in big or small, short-term or long term, real estate investment adventures.

I have several loan programs to offer.

 

 

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Patrick@reicapital.cash

512-213-2271

 

 

 

 

 

 

Cash Out Refinancing Ratios

Cash out refinancing rests on your credit score and two important ratios: the Loan to Value (LTV) ratio and the Debt to Income (DTI) ratio.

pexels-photo-164527.jpeg

First, cash-out refinancing means you want to take out part of the equity of your home or rental property as cash and make a new loan with a higher balance on your home. Equity is the difference between the amount owed on the loan and the current purchase price of the home or property.  An appraisal will give you the current fair market price of your home, how much you could sell it for.  There has to be a positive difference between the value of your home and the amount you own on it. You have to have equity in order to have any cash to take out and then you can take out only part of the amount, depending on the type of loan you have.

LTV

The LTV is the ratio between the principal amount of the mortgage balance, at origination or thereafter, to the current value of the underlying real estate collateral. The ratio is commonly expressed to a potential borrower as the percentage of value a lending institution is willing to finance. The ratio is dynamic, and varies by lending institution, property type, geographic location, property size, etc.

Current loan ÷ approximate value = LTV

DTI

The DTI is one of several financial calculations performed by your lender to determine if you can afford a particular monthly payment. The debt ratio (also known as the obligations ratio) is the sum of all your monthly debt payments including your total monthly mortgage payment divided by your total monthly income. Typical acceptable debt ratios for conventional loans are 36 – 38%, FHA loans are 41 – 43%, and VA loans are 41%.

Total Debt Payments per month ÷ monthly income = DTI

 

I can help you with cash out refinancing.  Just give me a call or send an e-mail and I’ll call you.

REI Capital Resources is a loan originator for select investor single-family residential projects. Our goal is to provide fast closing loans to fund your investment projects so you don’t lose a good deal.

Patrick St.Cin
W – 512-213-2271
Patrick@REICapital.cash

REI Bridge Loan

Although a bridge loan can be used in any business to raise operating capital or buy out partners, for our purposes, it is most often funds lent to cover an interval between two transactions, typically the buying of one single-family dwelling and the selling of another. Buyers (individuals or businesses) take out a bridge loan so they can buy another home before they sell an old one. The loan is secured by the houses.

Fast Financing
The main benefit of a bridge loan is that it is a way to get financing fast. Like a gap loan, it is useful if you have a seller that is in a hurry for some reason or if a buyer places an offer on a new house with a contingent for selling his or her old house and another buyer comes along and makes an offer on the property, requiring the first buyer to come up with the funds to purchase the property and remove the contingency or lose the opportunity to purchase the home to the new buyer.

In a sellers’ market, some sellers will not accept a contingent offer because they have so many offers, they don’t need to. In a seller’s market or in a auction situation having a bridge loan in place before you offer will make your offer more attractive.

Higher Interest Rates Over a Short Term
The main drawbacks to a bridge loan are interest rates, fees, and the risk of having to maintain a loan on two homes if your old house does not sell quickly. The expense of a bridge loan can be acceptable when you know you can pay it off quickly with a lower interest loan. Even though a bridge loan may carry no payments for a few months, interest will accrue and be due when the loan is paid on the sale of the old property. Fees on a bridge loan typically include:

  • Loan administration fee
  • Appraisal fee
  • Escrow fee
  • Title policy fee
  • Wiring fees
  • Notary fee
  • Loan origination fee

A home equity loan is cheaper than a bridge loan, but if your old house, the one with the equity, is on the market, some lenders will not lend on it. The interest rate is lowest for borrowers with excellent credit ratings and lots of equity. The borrower must be able to qualify for owning both houses. Both mortgages are rolled into one for a short time at a high interest rate.

Research Potential Time on the Market
In a seller’s market, buyers are plentiful so the home you are trying to sell might sell quickly unless it is in a totally different market. The answer here is to do plenty of research so you can estimate how long it might take your old home to sell and negotiate that term with the lender with an option for extending the bridge loan. You also want to be aware of any prepayment penalties in the case your property sells quickly.

If the housing market cools and homes are for sale on the market a long time, the number of bridge loans needed may increase to cover this gap between buying new and selling old. If there is a chance your old house will not sell quickly, and depending on your circumstances, it might be safer to wait for the house to sell before you make an offer on a new house or you could be stuck making two home loans.

white metal bridge under the blue sky

Photo by Tino Schmidt on Pexels.com

REI Capital Resources is a loan originator for select investor single-family residential projects. Our goal is to provide fast closing loans to fund your investment projects, so you don’t lose a great deal. This includes bridge loans for the acquisition of property.

Give me a call or send an e-mail for assistance funding your project.

Patrick St.Cin
512-213-2271
Patrick@REICapital.cash

 

References

The balance.com What exactly are Bridge Loans by Elizabeth Weintraub, January 2019.
https://www.thebalance.com/what-are-bridge-loans-1798410

Investopedia, Bridge Loan Definition, by Julia Kagan, April 9, 2019. https://www.investopedia.com/terms/b/bridgeloan.asp

Bridge Loan. https://www.thetruthaboutmortgage.com/bridge-loan/

ILS is Now REI Capital Resources

“Focused on Funding Your Success”

Formerly Investor’s Lending Source. New name, new products, same management

Hard Money Lending

REI Capital Resources is a funding source for SFR Fix-n-Flip, Fix-to-Rent, and Refinance projects as well as larger commercial projects such as office buildings, 5-40 door multi-family buildings, and many others.  These programs vary wide and far throughout the gamut of lending. Call or e-mail for more information.

Long-Term Rental Financing

REI Capital Resources is instrumental in finding conventional non-conforming lenders for investors using their business entities and, also non-entity, personal holdings, as a method to purchase, refinance, and cash-out of rental properties.  These loans are geared toward single-family residence properties with up to 4 doors for a given property.  Portfolio loans are also available. Earn money continually from your rental property. You can get there from here with a fix-to-rent loan.

Short-Term Rental (Vacation or AirBnB) Lending

As the lending industry adapts to the market place, REI Capital Resources is adapting too and is now able to provide funding for the short-term vacation rental market.

You Can Get There From Here

REI Capital Resources built its reputation on finding private funding for investors for quick turn purchases and difficult situations.  This is still true today.

Give me a call or send an e-mail and share with me your plans and needs, and I’ll see what lending solution I can generate for you.

Patrick St.Cin

W – 512-213-2271
Patrick@REICapital.cash

REI Capital Resources: Your Funding Solution

“Focused on Funding Your Success”

Formerly Investor’s Lending Source. New name, new products, same management.

REI Capital Resources is a direct lender as well as a broker of funding solutions. We offer funding solutions in the following areas:

  • Direct Lending
  • Private Money Lending
  • Hard Money Lending
  • Long-Term Rental Financing
  • Short-Term Rental (Vacation properties) Financing

Direct Lender

REI Capital Resources is a loan originator for select investor single-family residential projects. Our goal is to provide fast closing loans to fund your investment projects so you don’t lose a good deal.

Acquisition of Property

  • Bridge Loans
  • Buy-to-Rent
  • Fix-n-Flip
  • Fix-to-Rent

Cash Out Refinancing

  • Buy-to-Rent
  • Fix-n-Flip
  • Fix-to-Rent
  • Refinancing

Private Money Lending
REI Capital Resources built its reputation when it was ILS on finding private funding for investors for quick turn purchases and difficult situations.  This is still true today. Private money loans are primarily for single-family residential projects:

Acquisition of Property

  • Bridge Loans
  • Buy-to-Rent
  • Fix-n-Flip
  • Fix-to-Rent

These are REI Capital Resources more standard real estate project funding solutions. If your situation is unusual or commercial, stay tuned for information on our non-standard real estate programs, those that run the gamut of lending solutions.

Give me a call or send an e-mail for assistance.

Formerly Investor’s Lending Source. New name, new products, same management.

Patrick St.Cin
512-213-2271
Patrick@REICapital.cash  or info@REICapital.cash