Homeowners who are delinquent on their mortgage provide an opportunity for investors

Homeowners are delinquent on their mortgage provide an opportunity for investors!

There are still 1.5 million borrowers who are seriously delinquent or have late-stage delinquencies at 90 days or more past due on their home loans, according to the June Mortgage Monitor report from Black Knight.

While the national delinquency rate is at its lowest level since the beginning of the pandemic, about 1 million homeowners are expected to be in serious delinquency as September’s wave of mortgage forbearance program expirations begin, the report showed.

The economic recovery is expected to slow down even more as more Americans fall behind on their mortgage payments, and fewer can afford to purchase homes. The housing recovery will be delayed as banks tighten their lending standards. 

What is the difference between default and delinquency?

Delinquency means that you are behind on payments. Once you are delinquent for a certain period of time (usually nine months for federal loans), your lender will declare the loan to be in default. The entire loan balance will become due at that time.

How did we get here?

One of the most difficult things about owning a home is taking care of your financial obligations. If you’re not making your monthly mortgage payments, you’re considered delinquent. In the past decade, this has been a problem for a lot of homeowners. In total, about 1.5 million homeowners are delinquent on their mortgage payments. This is a problem for the investors, as the value of these homes goes down because the homeowners can’t afford to pay their mortgage. It’s a frustrating situation for everyone involved.

The 90–day delinquency rate is a measure of serious delinquencies. It captures borrowers that have missed three or more payments. This rate measures more severe economic distress. View this link to learn more and view interactive charts:  https://www.consumerfinance.gov/data-research/mortgage-performance-trends/mortgages-90-or-more-days-delinquent/

What you need to know as an investor

Per MarketWatch (https://www.marketwatch.com/story/one-subset-of-homeowners-could-be-in-trouble-here-are-the-real-estate-markets-most-at-risk-11625591292):

Any homeowner who isn’t able to sell their home or modify their loan is likely to face foreclosure or other financially challenging options, such as a short sale, the researchers warned. Whether a homeowner leaves their home by choice or through foreclosure at the end of all this, it will have the effect of adding supply to the market they live in.

“As a result, a buyer’s market could develop in ZIP Codes with heavy exposure to such borrowers,” the researchers wrote, noting that these would be areas with a high concentration of FHA loans in delinquency. So which markets are most at risk?

Atlanta tops the list, with 17.4% of the city’s mortgages in delinquency as of May. The city also has a large share of FHA loans overall, with those loans representing over a fifth of all mortgages in the city.

Many of the metro areas most threatened by such a scenario were located in Texas, including Houston (No. 2), Dallas (No. 4), San Antonio (No. 8) and Ft. Worth (No. 9).

Should you buy a distressed property now?

If you’re planning to buy a distressed property, now may be a good time to buy. Just make sure you’re aware of the risks and understand what you’re getting into.  Distressed homes offer a unique buying opportunity for real investors, but the average home buyer should probably look elsewhere. 

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

Patrick St. Cin

W – 512-213-2271

Patrick@REICapitalResources.com

http://www.reicapital.cash/

Photo by Public Domain Pictures on Pexels.com

Diamonds are not forever but Real Estate Is … Make Wise Investing Choices!

Would you ever think to compare diamonds and real estate? At first glance, they seem like two completely different things.  However, they are both hard assets that are cost-prohibitive to acquire for the average US worker.  However, you can sell both “assets” quickly and not realize their full value in the marketplace.    Let’s first compare the similarities and then differences from an investment perspective.

Real Estate is a better long term investment than diamonds

Similarities

Hard Assets:

  • Both Diamonds and Real Estate are Hard Assets similar to other commodities
  • Negatively correlated with bonds and stocks, so when stocks crash both appreciate in value

Long Term Investments

  • Suitable for investors who are not looking for fast returns on their investment
  • Risk losing money if you try to “flip” your investment too early or didn’t acquire at the right price below market value

Additional Utility

  • Provide the investor with enjoyment and value
    • Diamonds are pretty to look at and make the person or people associated with the diamond have better social value 
    • Real Estate provides rental income and in the case of short-term rentals – owners can enjoy the property and generate revenue when not in use.

Differences

As investors, we all know that not all hard assets, such as real estate or diamonds, have the same return on investment.  In fact, ROI performance varies greatly even among real estate classes:  residential property, commercial real estate, agricultural property, etc.  Financial crises prove time and again that real estate is a highly volatile asset.   Diamonds are a closed market that is stable and less risky.  However, there are still differences among the rate of returns on diamonds such as the colored diamonds are less risky.

  • Maintenance Fees
    • Diamonds don’t have a maintenance fee … you’re ROI is based on the price you paid upfront for the diamond
    • Real Estate requires maintenance and repairs and possibly property management fees.  All these factors need to be carefully considered before acquiring property and affect your return on investment.
  • Portability
    • Several millions of dollars can fit in your fist and transport in a pocket … the irony for not being the rarest stone they have the highest size to value ratio of the natural resource category.   This is how historically (since the silk road trail) wealth was transported long distances and across borders.
    • Real estate can’t be moved. Real estate is not physically portable and the value does not transfer easily either.  However, 1031 exchanges are a great way to transfer appreciation as you sell your property.

At REI Capital Resources, we prefer real estate investing to diamonds.  In fact, diamond prices are extremely volatile – shooting up 249% from 1978 to 1980 before falling 77% by early 1986 – but the value of diamonds has also long been propped up by a number of artificial sources.   Real estate can be utilized and provide rental income.  As the number of cloud and work from home startups rise, commercial real estate is increasingly valuable to investors to provide “server farms” to meet bandwidth demands.

We are not saying diamonds aren’t valuable or important – especially as emergency currency and making your future or current spouse a little happier this valentine’s day.  We’re saying don’t buy a diamond as an investment with the idea of retained value.  If you look at diamond prices since the 1970s, there has been “Too Much Price Volatility & Demand Uncertainty To Be Considered Investable” by numerous sources.  Also, the use of diamonds as a symbol of a woman to be married is only about a 100-year-old custom.  There are numerous other stones considered rarer.  Thank you, Madison Avenue for making weddings a thing to save money for and cause the intelligent investor to consider generating a new stream of revenue.

We love this quote by Milton Friedman, “The speculator is looking for hidden weak spots in the market,” and acts as “the advance agent of the investor, seeking always to bring market prices into line with investment values.”   Diamonds don’t provide an adequate hedge against inflation, and most people would be better off with more practical financial planning, than investing for catastrophe purposes.  The diamond while a modern symbol of one’s love and commitment to another is expensive and ranks low when compared to value stability.

Diamonds vs. Gold vs. S&P 500

YearGold ROI  %Diamond ROI  %S&P500 ROI  %
2004000
200536-110
200657323
200797291
200811911-22
200917619-7
2010254507
20112763915
20122182437
20131852061
2014172873

*Data courtesy of the Rappaport Diamond Index, Kitco, the World Gold Council and Yahoo Finance. Diamond prices reflect monthly averages based on a 1-carat diamond. Gold prices are based on average annual London PM fixed prices. S&P 500 prices reflect average monthly adjusted closing prices. ROIs are cumulative.

The chart shows when the stock market suffered historic losses, diamonds at best served as a short-term hedge and very quickly fell behind the returns of alternative investments.

Therefore, I would recommend a 3 bedroom house that generates a positive return on investment that you can set aside the money after a year to buy your sweetie her diamond.  If she loves you, she’ll wait a year knowing a diamond is coming.

Rent Payments 😶

The National Multifamily Housing Council’s rent payment tracker found that 92.1 percent of apartment households made a full or partial rent payment by August 27. The survey included 11.4 million units of professionally managed apartments across the country.

This is 210,458 households down from last August and compares to 93.3 percent of households paying last month (July 27, 2020).

When the economy collapsed because of coronavirus shutdowns, the federal government helped with additional unemployment benefits, stimulus checks, and a moratorium on evictions and foreclosures. Those who did not lose their jobs cut back on costs, paid off debts, and made home improvements 🔨🔧(WSJ.com). Those who did lose their jobs made it through the crisis but, according to Ben Eisen’s WSJ article, now are not sure they can pay their next month’s rent (WSJ.com).  

People are uncertain about the economy. Gasparro & Kang report in their WSJ article that one indicator of this anxiety is that spending on groceries 🍗🍺🧀🍦dropped sharply in mid-August particularly in states with high unemployment.  

The federal government’s $600 per week additional unemployment benefits ended July 31. People who got those benefits and the $1200 economic stimulus payment from the federal government spent that money. Another round of stimulus has been discussed in Congress, but no agreement has been reached so far.

Doug Bibby, the President of the National Multifamily Housing Council (NMHC) (nmhc.org), said “Lawmakers in Congress and the Administration need to come back to the table and work together on comprehensive legislation that protects and supports tens of millions of American renters by extending unemployment benefits and providing desperately needed rental assistance.”

Photo by Kelly Lacy on Pexels.com

“The [multifamily housing] industry remains encouraged by the degree residents have prioritized their housing obligations 🔑🏡so far, but each passing day means more distress for individuals and families, and greater risk for the nations housing sector. If policymakers want to prevent a health and economic crisis from quickly evolving into a house crisis, they should act quickly to extend financial assistance to renters.”

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.

Give me a call or send an e-mail.

Patrick StCin, 512-213-2271,

e-mail: patrick@REICapital.cash

References

https://www.nmhc.org/research-insight/nmhc-rent-payment-tracker/

Ben Eisen, “How’s the Coronavirus Economy? Great or Awful, Depending on Whom You Ask.” WSJ.com. September 2, 2020. Available at https://www.wsj.com/articles/hows-the-coronavirus-economy-great-or-awful-depending-on-whom-you-ask-11599039003?mod=hp_lista_pos4

Annie Gasparro and Jaewon Kang, With Second Stimulus Checks on Hold, Americans Spend Less at the Grocery Store.” WSJ.com August 27, 2020. Available online at https://www.wsj.com/articles/with-stimulus-checks-on-hold-americans-are-spending-less-at-the-grocery-store-11598526249

Migration Boom

People are moving. Single-family houses in the suburbs are opportunities real estate investors should consider.

According to an article in Mansion Global, apartment living in densely populated urban areas is already losing its appeal to Americans as they process their experiences during the coronavirus pandemic. Many people are eyeing options for relocating to the suburbs and a single-family home after facing the challenges of coming into contact with infected individuals in apartment building common areas and restrictions on their use of outdoor spaces like pools and game rooms.

Buyers crave —ROOM— living space, outdoor space, privacy, flexibility, and safety.

When you are researching a purchase of a rental property, evaluate:

  1. Is there room for an office in the house?
  2. Does the house have a good-sized yard?
  3. Is there a pool in the backyard?
  4. Is there a deck or porch that offers a sheltered option to living indoors?
  5. Is the neighborhood safe to walk around in at night?
  6. Is there a neighborhood association and is it restrictive?
  7. Did local authorities try to restrict people’s use of their yard during the pandemic?
  8. Consider taxes. People are richer in states where taxes are lower.
  9. Big or tiny, single family homes in suburbs near major cities offer good opportunities for people to escape living in densely populated apartment buildings where entrances and recreation space is shared and access is restricted. 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/

graphic:tsca / CC BY-SA (http://creativecommons.org/licenses/by-sa/3.0/)

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

Waking Up

Real Estate is waking up. U.S. mortgage applications to purchase a home 🏠 rose 9% last week from the previous week and from a year earlier, according to the Mortgage Bankers Association’s seasonally adjusted index. It was the sixth straight week of gains and a 54% recovery since early April. Investopedia.com.

Photo by Pixabay on Pexels.com

This is despite the sobering news from the Labor Dept. Weekly pay fell 11% in April from the prior month. That was the biggest drop on record, but it will likely be broken in May. Investopedia.com This, plus historically high unemployment, will be immense hurdles for people buying homes but might be incentive to start a business fixing and flipping homes to add to your own income and to provide homes, maybe small homes, to young and old consumers alike. Both want to get out of community living and out of big mortgages. I have the funds to help you fill this void in housing.

Real estate agents are using more virtual tours to showcase their homes. You might be able to use a video 🎥 to showcase your remodeling experience on a loan application for a private money loan for your next project.

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 my 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

Fixing Up Houses for Seniors

The coronavirus pandemic has cast a shadow of mortal danger over senior community-living and assisted-living options, nursing home options, and the option of living fulltime on a cruise ship grazing the buffets and watching people, waves, and whales.  Instead of looking forward to being safe with others our own age, with staff to care for us, and convenient medical care, we find that living in community might expose us to a virus we have no immunity to and a particular susceptibility for.

Even if one eyes being sick alone with anxiety, aging in place, at home has become even more attractive in recent months, and it has also become more possible. Advances in electronic technology have given many seniors more tools to use to assist them in staying at home while they age. Online shopping and delivery of even groceries and the surge in telemedicine are a couple of the technologies that have taken off during the pandemic. According to the Wall Street Journal article by Peter Grant, Senior-Housing Communities Face Higher Vacancy Rates Amid Coronavirus, virtual “doctor visits through American Well, also known as Amwell, increased 1000% during a six-week period (1).”

While senior community investors are taking a beating right now, a fix-n-flip real estate investor might be able to turn a profit on small rundown houses by remodeling them into the perfect haven for a senior citizen who wants to avoid community living. The task will mean focusing on details that seniors would be looking for and then marketing those amenities when you sell the home. I’ve scoured several articles for ideas about what to remodel in a fix-n-flip for seniors.

The first Advice I found was “buy a single-story home.” (3)

ENTRANCE

Make a no-rise entry by adding a ramp instead of steps. (3)

Repair uneven or cracked walkways outside and add nonslip surfaces. (3)

If stairs must stay, add 1 ½-inch diameter rails on both sides. (3)

Add reflective strips to top and bottom of stairs. (3)

Create doorways that are wide enough for a wheelchair.

Add benches and hooks for packages both inside and outside an entrance. (3)

Make a cleanup station or mud room near the door so guests can wash hands, remove shoes, discard coats, and pick up a face mask at the entrance and not expose inhabitant to pathogens.

Put a roof over at least one entryway. (3)

KITCHEN

Install appliances with easy-to-read controls and push buttons. (3)

Install a wall oven. (3)

Make a microwave drawer. (3)

Use lazy Susan’s, rollout drawers, glass doors, and open shelving in cabinets and pantries. (3)

Install a single lever kitchen faucet. (3)(4)

LIVING AREA

Removing small step ups and down between rooms and replacing them with ramps.

Install flooring that is nonslip even when wet in bath and kitchen. (2) (3) (4)

Install outlets where they will be most useful, such as on walls where a flat screen would be used so cords don’t show and a little above desk height on walls and in the corners for charging devices or plugging in computers.

BATHROOMS

Install u-shaped and vertical grab bars in the shower and near the bathtub (2) (3) and add back bracing to the walls in these areas. (3)

A walk-in tub.

Install a curb-less entrance to the shower. (4)

Give shower floors a non-slip coating. (4)

Install shower seating, some are fold down. (2) (3)

Install adjustable handheld shower sprayers. (2) (3) (4)

Add extra lightening to shower area. (3) (4)

Install tall or comfort-height toilets and bars to grip when one is lowering and lifting themselves off the toilet. (4)

Add lever faucets to bathroom sinks. (3) (4)

OUTSIDE

Install new decks with handrails and no splinters.

Add Raised garden beds to the landscaping.

I can have private funding for your project. Let’s get our economy going again.

Fill out the BLN application at   http://reicapital.blnsoftware.com/send me an e-mail or

give me a call.

patrick@reicapital.cash

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

http://www.REICapital.cash

References:

Keep Moving

I am sharing with you a blog from a science writer that contains information about respiratory coronavirus transmission. The blog, The Risks – Know Them- Avoid Them, by Erin Bromage, offers information that we laymen and women might not have processed yet. The information is biological and physical and spelled out very clearly. We need to reopen for business, but we need to do so safely, and in order to do that, we need to know the risks and how to avoid them. I was most impressed by how the article, highlights how being in an enclosed space, sharing the same air for a prolonged period increases your chances of exposure and infection. Our guidelines for reopening our economy tend to emphasize distance but have not mentioned much about exposure to the virus over time.

“Infection could occur, through 1000 infectious viral particles you receive in one breath or from one eye-rub, or 100 viral particles inhaled with each breath over 10 breaths, or 10 viral particles with 100 breaths. Each of these situations can lead to an infection (Bromage Blog).”

Although we have not determined just what the infectious load is for COVID-19, for other coronaviruses the number is 1000 virus particles. It is this principle that is behind why grocery stores can open and bars and restaurants must close. It is this principle that should concern you if you share a small office or work in an open space with a lot of people, or work 8 hours on an assembly line 6 feet from another human being who is potentially infected. In the grocery store you pass through quickly, shelves break up the aisles, and you typically don’t talk much as you shop. In bars and restaurants, you linger and talk. At work, you talk and breathe for hours near or in the same room with others.

Photo by Pixabay on Pexels.com

Taking this to heart, I would suggest that real estate buyers, agents, and lenders pass through homes that you are viewing quickly. Don’t linger too long. Don’t carry on discussions face to face in small rooms or cars.  If you must discuss things, do it outside the home and stand more than 10 feet apart with the wind behind both of you.

Keep greater than 6 feet of distance between you and another person, especially if that person is talking, yelling, or singing and is upwind of you. In an Indoor situation, up wind means between you and an open window, the air conditioner blower, or a fan.

This image has an empty alt attribute; its file name is pexels-photo-3775132-e1589563961957.jpeg

Don’t drive in the same car to a property.

If you are showing a house, make sure it has been vacant for several hours before showing it, so all airborne virus particles have had time to fall out of the air. This doesn’t address surface contamination, but at least your clients won’t breath in an infectious dose as they move from room to room. You should wipe down counters, door handles, and surfaces that will be touched.

Do in-person showings and meetings by appointment only. This way you can judge how many people are around you.

Always pay attention to the physical situation when you are moving about the community. Ask yourself, how many people are here? How big is this room? Is there ventilation and enough of it?

Be sure to read this great article by Erin S. Bromage and apply the knowledge you gain to your work and play.

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 my an e-mail or give me a call.

patrick@reicapital.cash

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

www.REICapital.cash

Reference:

Vote Your Numbers

There is one thing that we can all be sure of: no one knows what will happen next.

The coronavirus has thrown all the cards into the wind and the stock market goes up even along with virus infections and deaths while main street eyes reopening a percentage of their business capacity keeping their distance and wearing masks. Forecasting is impossible.

REI Capital Resources would like to know your plans so we can put funding strategies together and find private lenders that will fit your plans and goals as you forge ahead into the murky future. Please take this brief pole for us.

Funding the BUY

Many jobs have been lost, at least temporarily. Texas has lost 50,900 jobs in the month of March. Louisiana had lost 21,000, Georgia, 7,000, and Florida 36,600. Nevertheless, homes are still selling. Realtors are advising home sellers to be flexible and willing to negotiate if they want to sell their home right now in the middle of the coronavirus pandemic (Forbes.com). Many people may not be comfortable committing a lot of money on a property when they are unemployed.

Photo by Nathan Cowley on Pexels.com

However, if you are in the business of real estate investing, such as fix-n-flip house buy and selling or buying for rental income, this may be a good time to buy. With fewer houses on the market, competition will be even more intense than usual, but sellers might be more amiable to negotiating.

I can help you get private funding for a real estate purchase for an investment. The terms would be 6 to 9 months. No appraisal is required, you can fund up to 90% of the purchase price and up to 100% of the rehab cost. Interest rates would start at 12% with points as low as 3.0%.

Photo by Gustavo Fring on Pexels.com

When you go to see a house, make an appointment and take safety precautions, such as wearing gloves and a mask when you see the home and discarding the gloves as you leave before you touch your car handle or steering wheel. Limit close contact with the real estate agent, seller, or lender. Complete as much paperwork electronically as you can. Wash your hands often. Avoid touching your face.

Let’s get our economy started again but be safe about it.

Fill out the BLN application at   http://reicapital.blnsoftware.com/ or send my an e-mail or give me a call.

patrick@reicapital.cash

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

www.REICapital.cash