Tools of the Trade: Blanket Loan

A blanket loan is a loan or mortgage used to fund the purchase of 2 or more pieces of real estate (Wikipedia, Investopedia). The real estate is held as collateral for the mortgage, but the individual pieces of property may be sold without retiring the entire mortgage. Builders and developers, investors in multiple apartment communities, or investors in more than on single family rental property use blanket loans to buy a large tract of land to subdivide or multiple properties to manage as a business. The rental investor may sell one property without redoing the mortgage on the other properties. The developer can create many individual parcels to be sold one at a time without securing a new mortgage each time the sale of a parcel is made.

The blanket loan has a release clause that allows the owner to sell a portion of the secured property and make a corresponding payment on the loan. The outstanding balance on the loan is adjusted accordingly without being completely redone or retired. Most single-house traditional mortgages contain a “due-on-sale clause,” which means the entire outstanding debt is due when the securing property is sold. If this is the type of mortgage a developer or an investor with multiple rental properties has, then each time they sell a property they have to redo all the paperwork to remake the mortgage.

Benefits

The financial benefits for an investor include

  • Only have to pay the fees and costs of one loan rather than applying for and closing multiple mortgages.
  • Negotiated terms, such as the monthly payment may be better under the blanket mortgage, freeing up capital for further investment.
  • Acquiring more than one house to fix-n-flip under one loan when several come on the market at the same time would allow a flipper to take advantage of the opportunity to buy multiple properties all at once (saving time and fees) while still being able to sell them one at a time after they are refurbished.

Danger

The danger to the owner is that if he or she defaults on the mortgage, the lender may seek control of all the properties secured by the loan.

Give me a call or send an e-mail and I will help you to move quickly, get the best deal, and start making money sooner. Patrick@InvestorsLendingSource.com

512-214-2271 Austin, Texas

References:

Kagan, Julia, Investopedia, Defining a Blanket Mortgage, March 8, 2018. https://www.investopedia.com/terms/b/blanket_mortgage.asp

Wikipedia, Blanket Loan. https://en.wikipedia.org/wiki/Blanket_loan

Photo by Dimitry Anikin on Pexels.comPhoto by Frans Van Heerden on Pexels.com

Partners in Private Funding

I know a banker and his partner who recently purchased and remodeled a building that was once a doctor’s office. They turned the space into 7 small suites, a conference room and a kitchenette. They advertised for occupants with an ad looking for entrepreneurs with ideas for a business who needed some space in which to grow and offered seed loans for the startups.  His motive is multifaceted, to rebuild the downtown business section of the town he lives in and to put some of his money to work for his community. He also wants his hometown to be vibrant and is offended when someone says, there is nothing going on in that downtown. Like all good investors, the partners are also interested in putting their money to work to make more money in the form of income.

These partners specialize in fix-n-rent business investments. Most recently the duo closed on a property that they will remodel from a Victorian house on the corner of a small downtown into a used bookstore, bar, and coffee shop with an outdoor patio area. The purchaser? A publisher who still loves physical books more than online articles.

What else has these small town fix-n-flip investors been up to? They remodeled a ballet studio into a financial investment office with a family psychologist renting a back office with a separate entrance, turned an insurance office into a yoga studio, turned a paint store into a gift and DIY furniture rehab shop, and helped a daughter purchase her mother’s restaurant business lock, stock, and liquor license.

If you are interested in putting your money to good work in your community, become a private lender and work with me. I am focused on funding success, both yours, and the buyers.

Competition for good rental properties is stiff, and in order to buy a property in a climate of competition a buyer need funds fast. As a broker, I help people find funds for their fix-n-flip and fix-n-rent project. Be a private lender with me and put your money to work for you.

Call me and let’s set up a meeting.

Patrick StCin, 512-213-2271

e-mail: patrick@REICapital.cash

Multi-Family News on multihousingnews.com

The multi-family housing market is a viable market segment in many metro areas as people move in from the suburbs to be closer to work and to entertainment. I scanned many articles and blogs on multihousingnews.com and am here sharing with you some of the statistics I found for our Texas market.

Austin

According to the “Austin Multi-family Report – Spring 2019 and an article on the “Top Multi-family Completions in Austin,” both by Anca Gagluc in the Multi-Housing News, the Austin multi-family market had a strong year in 2018 with rent growth of 4.5% despite 11,000 units coming online. The 11,000 units that were constructed and rented in 2018 were in the upscale lifestyle segment and the 20,500 units underway in 2019 are also targeted for that same segment of the market. 

The largest multi-family projects delivered through the end of May 2019 included

  • Bexley Round Rock, 330 Units, Round Rock
  • Hillstone at Wolf Ranch, 332 Units, Georgetown
  • Latitude at Presidio, 337 Units, Cedar Park
  • Crestview Commons, 353 Units, Austin
  • Terra, 372 Units, Austin

Multi-family housing can come in several classifications, affordable, lifestyle, senior, student, or worker housing. Most of the inventory discussed here is in the Lifestyle segment. A multi-family unit in the lifestyle segment is one that offers amenities that improve your daily life. These may be as simple as open areas and great walking trails or more expensive shared amenities like a stable, fitness center, or sauna and pool. The lifestyle property is supposed to enhance your life. It is in effect a neighborhood, or a community. Lifestyle communities are generally upscale in price, can even be luxurious, and often do not meet the need for affordable housing.

Austin added 36,800 jobs in 2018, up 3.5 % from the previous year.  Occupancy rates for Austin multi-family housing rose to 94.4% as of March 2019 and rent growth was 3.7% percent through April 2019.

Dallas-Fort Worth

According to the “Dallas Multi-family Report – Spring 2019” from Anca Gagiuc in Multi-Housing News, the Texas multi-family market continued to show plenty of supply, dampening rent growth, which was 2.8% year-over-year through March, slightly below the U.S. average.

More than 26,800 units were delivered in 2018 with an additional 44,700 underway as of March 2019.  The metro remained a nation leader in job creation last year, adding 102,500 positions for 2.6 percent expansion. Last year’s multi-family transaction volume was $5 billion.  Investors have already traded nearly $900 million in multi-family assets in the first quarter of 2019 at a per-unit-price of $105,032. The average Dallas-Fort Worth rent is expected to rise 4.3% in 2019.

Houston

According to the “Houston Multi-family Report – Spring 2019” from Laura Calugar in Multi-Housing News, the Houston multi-family market showed rent growth on a downward slide, but the market was still strong, underpinned by employment gains and economic expansion. Houston’s occupancy rate was 92.4%, down 140 basis points from the previous year, fueling fears of overbuilding.

Houston added 72,600 jobs in the 12 months ending February 2019. Last year’s transaction volume was $5 billion.  Roughly 14,000 units were under construction as of March 2019, most of that geared to high-income residents. The average Houston metro rent is expected to rise 2.2% in 2019.

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.

REI Capital Resources Long-Term Rental Program

We offer asset-based and experience-based loans for long-term rental projects, including multi-family projects with the following terms: min FICO 650, BPO required, Up to 85% of purchase price, Cashout/Refinance up to 65% LTV (BPO), Max of 80% ARV, Interest rates starting at 6.5%, and points as low as 2.25%.

Give me a call or send an e-mail.

Patrick StCin, 512-213-2271,

e-mail: patrick@REICapital.cash 00000000 00

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

Vacation Rental Investment Property: Income

Summer is here and our heads are full of vacation plans. Some of us rent summer vacation homes to stay in and some of us rent vacation homes out to others for income.

As a real estate investor, you may be considering buying a property to rent out for income or to remodel and resell. There are four points about income taxes that apply to rental properties that you should know about.

1.  If you rent the dwelling for fewer than 15 days a year, you do not have to report any of the rental income and cannot deduct any expenses as rental expenses.

2. If you receive income from renting property for use as a dwelling, such as a house or apartment, you will most likely need to report the income, and you may be able to deduct certain expenses.

3. The accounting method you choose to follow determines when you count income and deduct expenses.

4. Whether you use the property personally for vacations with your family and friends makes a big difference.

Accounting Method:

The accounting method you use determines when you claim income and deductible expenses.

Types of Rental Income:

Monthly rent is only one kind of income you may receive.  You may also receive rent in advance. You report monthly rent when you receive it. A tenant may pay you to cancel a lease. This income you report when you receive it. A tenant may pay some the expenses attributed to the rental dwelling (for example utilities). You declare the expenses paid as income. You can then deduct the expense if they are deductible rental expenses. A tenant may pay you with services (for example painting) or property (for example they construct a built-in grill). In this case you report the fair market value of the service or property as rental income.

Security deposits are not included in your income if you intend to return them to your tenant at the end of the lease. But, if you keep part or all of the deposit, include it as rental income in the year you receive it.  If a security deposit is used as the final month’s rent, include it as advanced rental income when you receive it.

Personal Use

According to the IRS, If you use the property for personal use 10% of the time or 14 days a year (whichever is greater) and rent it out at the fair market value for income, limitations apply on the rental expenses you can deduct. You will need to divide the expenses between the personal use and the rental income use based on the number of days of each. Of course for personal use, you will not receive income so there is nothing to report on the personal taxes. 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, reals estate taxes, casualty losses from federally declared disasters for the rented part, realtor’s fees, and advertising costs.

One thing to note about personal use is that if you rent to a relative or friend for a token amount, less than the fair market value of a dwelling just like yours, you have to count this use as personal use, not as investment rental income use.

I have a long-term rental loan program that can provide funds for your real estate investment for the purpose of renting for income.

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

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

Vacation rental Image in Florida. Jan Lieberman [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)%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

 

 

 

 

 

 

Out-of-Doors Real Estate Investing

By 2024, the US Bureau of Labor Statistics employment projections program projects that there will be over 15,000,000 outdoor jobs in leisure and hospitality and almost 7,000 jobs in construction by the same year.

This statistic does not include the self-employed real estate investor, but it does tell us that there will continue to be a market for leisure and hospitality in the coming years. By that I mean vacation rentals and resort investments. If you crave fresh air, sunshine, and open spaces? Then the best thing to do is to craft your own job outdoors using your skills in investing, real estate, marketing, and hospitality.

Logically, the first outdoor work that comes to mind is the construction work required when you buy a property to fix-n-flip or fix-n-rent. You think of the remodeling, painting, deck building, landscaping, and the lifting, digging, and tugging that is required.

However, as a real estate investor, you can be a passive investor or an active investor, as active as you want to be. You can buy and operate a resort as an investment and as an occupation, one where you have rooms or cabins to rent out after they are remodeled, providing yourself with social opportunities and occasions to play out of doors.

Resort Ownership on the Water
Resort ownership on the ocean or a lake would give you opportunities rent property out for days or weeks and to spend time outdoors with your guests:
take your guest out on the water in a boat as a fishing guide
take your guests on a picture-taking tour around the lake shore
visit with guests around the community fire pit telling stories in the evening
rent out canoes, bikes, and games
teach guests to swim, kayak, water ski, or snorkel
be a life guard at your own pool
keep the grounds clean and mowed
provide your own landscape service.

Resort Ownership in the Woods
Resort ownership in the woods comes with the opportunity to rent cabins or rooms by the day or the week with time to spend outdoors with your guests:
guide trips for your guests fishing on nearby lakes or streams
lead float trips
lead hikes
teach conservation or outdoor cooking or snow skiing
prune trees
maintain trails
repair cabins

Dude Ranch or Hunting Resort Ownership
Dude ranch or hunting resort ownership would provide a different set of opportunities for the combination of vacation rental ownership and outdoor work:
take care of the animals on the ranch, horses and cows
breeding animals for sale or to increase your own herd
teach horseback riding,
guiding hunts or fishing trips
guiding horseback trips
building blinds and fences
build ponds
restore habitat in streams or forests
socialize with guests
being the grill master for guests’ meals.

An outdoor career has its pros and cons, among the pros are lots of fresh air and exercise that will keep you in shape. Among the cons are weather, schedules, and dangers. Many outdoor and leisure and hospitality workers are on the job early and work weekends and holidays. They may work all summer and be off most of the winter or work all winter and be off in the summer. You will most likely have to perform your tasks in heat, cold, rain, and wind. And, many outdoor jobs are physically demanding, requiring lifting, digging, and bending.

close up photo of man cooking meat

I am still focused on funding your success and I have more tools to work with. ILS built its reputation on finding private funding for investors for quick turn purchases and difficult situations. This is still true for REI Capital Resources.

Contact me at
Patrick@REICapital.cash
512-213-2271

Commercial Real Estate: Warehouses & Fulfillment

Malls on our Minds

Although the malls built in the 1970s are no longer thriving, they still have locations that can be reformed for commercial use. According to a Wall Street Journal video on May 6, 2019, Amazon is buying up malls because they are located in good commercial locations with access to massive spaces for building and parking, population centers for labor, and highways for shipping. In addition, the infrastructure is already in place. Amazon has bought Randall Park Mall in Cleveland, OH and Euclid Mall in Euclid, OH for fulfillment centers.

Although online purchasing is taking a toll on brick and mortar establishments and causing mall closures, many creative uses for the buildings and parking have been devised: data centers, microlofts (in providence Rhode Island), office space, film studios, charter schools, resorts, medical centers, and self-storage units.

With online purchasing comes the need for warehouses. Take a lesson from Amazon and when you are looking at commercial real estate to purchase, fix and flip or fix and rent, look for these 4 features of the location:

  1. Big space, massive space
  2. Residential areas nearby for the people who will work in the building
  3. Nearby highways with good access on and off
  4. Infrastructure already in place.

Let me know if you have found any deals this month that you know you can turn around and resell with enthusiasm. I hope that I can be of help to you this month.

I can be reached at
Patrick@REICapital.cash
512-213-2271
Austin, Texas

References

WSJ.com, commercial real estate, video.

Mall image: Alina Zienowicz Ala z [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0/)%5D

Multi-Family Rentals Are Real

As the stock market dips and dives and quivers and stock market investors peer into the fog of the future trying to see where tariffs will take the economy, real estate stands firm, on a block, in a neighborhood, around the corner from this school or that office park, providing shelter to human beings.

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An investment is not safe though if you do not do your research and match the facts of the property and area situation with your needs, expectations, and goals. You might end up holding on to a property you would like to fix and sell quickly or find yourself with a rental that is more outgo than income. When considering investing in multi-family properties, be sure to pay close attention to these things:

  • the parking situation,
  • the safety of the neighborhood,
  • the quality of property management,
  • and to the location.

Multi – Family Property Class A
Properties are above average in terms of design, construction and finish; command the highest rental rates; have a superior location, in terms of desirability and / or accessibility; generally are professionally managed by national or large regional management companies.

You will pay more up front and have less to fix, but have income potential right away.

Multi – Family Property Class B
Properties that do not possess design and finish reflective of current standards and preferences; construction is adequate; commands average rental rates; generally are well maintained by national or regional management companies; unit sizes are usually larger than current standards.

Be prepared to make some repairs, do some remodeling and updating as tenants move out to keep the apartments occupied.

Multi – Family Property Class C
Properties that provide functional housing; exhibit some level of deferred maintenance; commands below average rental rates; usually located in less desirable areas; generally managed by smaller, local property management companies; tenants provide a less stable income stream to property owners than Class A and B tenants.

You will have to do more hands-on work with this class of property to handle the repairs and tenant turnover; but if you like hands-on involvement, there will be plenty of opportunities to employ your carpentry, plumbing, electrical, social, and bookkeeping skills. You might find some great deals.

Let me know if you have found any deals this month that you know you can turn around and resell or rent. I hope that I can be of help to you this month.
I can be reached at

Patrick@REICapital.cash
512-213-2271
Austin, Texas

 

4 Most Common Mistakes that Slow Down the Loan Process

Getting a property financed can be an overwhelming process. Sometimes borrowers don’t recognize the bumps in the road that will derail their project plans and loan schedule. Here is a list to help you see and remember the small, but important, details involved in getting a loan. These are the most common time sucking land mines that drag the loan process out (or even cause disqualification) along with tips to avoid them.

  1. Scheduling & Anticipating the Appraisal

Loans officially start when they are put into processing, which does not happen until appraisal reports are turned in or the application fee is paid. A loan will be delayed if there is an issue getting the appraisal. Sometimes a borrower will schedule an appraisal when the property is not available or repairs/rehab are incomplete. For example, someone may live in or on the property and will not allow the appraiser access to the property. The loan will be delayed if this happens. If the appraiser arrives and finds the home in the midst of rehab, the loan will also be delayed.

Another bump in the road related to the appraisal occurs when the value of the property is based on too little research. This usually leads to an inflated initial value. If the appraisal comes in lower than what the borrower expected, this will delay the loan process and can even halt it altogether.

Key: Be ready, careful, and deliberate about scheduling the appraisal. Coordinate with the current occupants and your contractor.

Key: Be really accurate from the start about the value of the property.

  1. Documentation

Procrastination, my favorite strategy, does not help when it comes to loan documentation; like taxes and even more than hearing protection, documentation is required. It is a terrible idea to wait to start gathering the documents necessary to move the loan process along until the appraisal comes in. Start by making a list of the documents you need as soon as you come up with your project and begin immediately, while the idea is hot, to gather them and check them off your list. Your goal is to have them ready as soon as your loan goes into processing.

Key: Gather the necessary documents when your idea is hot.

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  1. Hazard: Wrong Policy Type or Amount

You might not think of hazard insurance in connection with your loan but obtaining hazard insurance is a very important component to securing a loan. Carefully study the types of coverage available and don’t just buy a policy to say you have it. Buy hazard insurance that covers 100% of the replacement cost of the property and calculate the premium carefully. Often the wrong type or amount of coverage is purchased, which will not only slow the loan down but can also potentially change your loan parameters (up to and including disqualification).

Key: Know your numbers. Buy hazard insurance that covers 100% of the replacement cost of your property

  1. Title Clouds

Liens, judgments, delinquent taxes, and mortgage releases are all common things that show up on a title. These things take time to clean up and drag the loan process out. Be sure to check your title for these attachments before you start your loan. If you have any clouds on the title, you’ll want to clean them up asap to keep your loan on schedule.

Key: Start early, Clean up the title ASAP.

Patience may be a virtue, but it is one that is often tested when you are eager to close a loan and get on with your project. To save your dream and your nerves, follow these tips: coordinate the appraisal, be accurate on the value, gather the necessary documents, buy the right insurance, and clean up that title.

I would be pleased to give you a hand, and I have funds available for lending.

Patrick@InvestorsLendingSource.com

512-213-2271

Austin, Texas

 

Photo credit: Niklas Bildhauer CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)