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.

3 Ways Real Estate Investors Can Owner Occupy Their Rentals

by Patrick St.Cin

Property investments potentially have excellent returns and can diversify your portfolio to insulate you from recessions and other adverse economic conditions. There’s no single right answer on the best way to invest in real estate. Are you getting started in Real Estate Investing and wonder how to live in your investment property? 

Tip 1:  House Hacking

This can mean a few different things. House hacking is essentially a hybrid of buying a home to use as a primary residence and buying a rental property. In general, the term refers to buying a residential property with two to four units or with a Granny Flat/Additional Dwelling Unit in the backyard and living in one of the units while renting the others out. In theory, if you have the money you could purchase an entire duplex or four-plex and rent out any apartment to tenants. Keep your expenses low so you can keep rent affordable to entice prospective tenants.  You also could purchase property that you live in while renting out other rooms in the property. 

Either way, you’re the landlord. Be a good one, and you’ll be in a much better position to succeed in this investment. Keep the property in great condition, be readily available to your tenants when needed, and if necessary hire someone who can help with repairs.

Let’s say you find a quadruplex (four units) for $200,000. Including taxes and insurance, we’ll say your mortgage payment is $1,500 per month. After you buy the property, you rent out three of the units for $600 each and live in the fourth. Not only do you live for free (the rent covers your entire mortgage payment), but you’re generating a positive cash flow of $300 per month and are building equity in a more valuable property than if you had bought one unit to live in.

House hacking can be an excellent low-cost way to start building a portfolio of rental properties. Because you live in the property, even a multi-unit residential property can qualify for primary residence financing, which comes with lower interest rates and lower down payment requirements than investment property loans. You’re typically required to live in the property for a certain amount of time after you buy it, but once that period expires (usually a year or two), you’re free to repeat the process with another multi-unit property.

The obvious downside is privacy. There’s value in having your own yard, and it can create some awkward situations when you live in the same building as your tenants. Even so, if you’re a new real estate investor and don’t really need your own house, you may want to consider house hacking. This isn’t as much of an investment strategy as it is a side hustle, but it’s still worth mentioning here. With the emergence of platforms like Airbnb, it’s easier than ever to rent out your home when you aren’t around or to rent out a spare room in your home for a few days here and there.  

Tip 2: Tax-Free 2 Weeks Income 

One interesting aspect of this strategy is that if you rent out your home for fewer than 14 days in a year, you don’t pay tax on the money you collect. If you go out of town for the holidays or take a summer vacation, using your home as an occasional short-term rental can offset your travel expenses with tax-free income.

Landlord Tax benefits: 

  1. The mortgage interest deduction for the mortgage interest you pay to buy and/or fix up your properties. 
  2. Deductions: insurance premiums, repairs, utilities (that are not paid for by the tenants)
  3. Depreciation: You are allowed an annual deduction for the wear and tear your property experiences over time, spread out over 27.5 years for residential properties. Land cannot be depreciated.

Living with Tenants is Too Much – What is a Traditional Landlord? 

Owning rental properties is an excellent way to invest in real estate while building wealth and generating income. The return potential is strong thanks to a combination of income, equity appreciation, and the easy use of leverage when buying real estate.

However, owning rental properties isn’t right for everyone, so consider these drawbacks before you start looking:

  • Cost barriers: It can be very expensive to buy your first rental property. Most lenders want at least 25% down for an investment property loan and it’s smart to keep several months’ worth of expenses in reserves.
  • Uncertainty: When it comes to rental properties, vacancies happen and things break. While the overall return potential can be great, rental properties have considerable short-term risk.
  • Time commitment: Even if you hire a property management company, owning a rental can be a time-consuming form of real estate investing.

Tip 3: Vacation or Short-Term Rentals

A vacation rental tends to bring in more income per rented day than a comparable long-term rental property. However, there are some potential drawbacks to owning a vacation rental. Marketing and managing a vacation rental is more involved than a long-term rental. As such, property management is far more expensive — expect to pay a property manager about 25% of the rent on a vacation rental. That’s more than double the 10% industry standard for properties with long-term tenants.  Furthermore, you may need a special license in your preferred locations, which can be very expensive.

On the positive side, you may be able to use the home when it isn’t occupied. It can also be significantly easier to finance a vacation rental, especially if it meets your lender’s definition of a second home and you don’t use the rental income to qualify. There are loans options available for short-term rental funding.

Always buy property for the best possible price. You want to buy those properties that offer specific challenges that match your personal talents so you can use your skills to upgrade and enhance the value of the property and increase the Net Operating Income over time.  Obviously, the higher the rents and the lower your total monthly expenses, the greater your net income from the property will be. Costs that affect cash flow include principal & interest payments; property taxes; insurance; maintenance/repair costs.

Although we’re always quick to advise against borrowing too much and overleveraging your real estate investments, you also don’t want to be too conservative and underestimate your cash needs. The cost of refinancing is such that you may be able to refinance the property no more than once every several years, and if you suddenly need cash to overcome some unanticipated problems, the costs of short-term funds can be high. Borrow extra money or have an untapped line of credit available (which some lenders offer at no carrying cost to their best customers) to allow for reserves.

Joint ventures, wholesaling, fix-and-flip, and property management are just a few of the other ways investors can profit from real estate.   

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/

Rental Concessions

Landlords should not bear all the risk of another government shutdown, but tenants are being more aggressive about demanding pandemic language in new leases, this according to reporter Esther Fung’s article, Retail Landlords Offer Pandemic Clauses in New Leases, August 25, 2020 in WSJ.com.

Covid-19 is persisting in many parts of the country and it is hard to tell what will happen now that schools begin to open and fall and winter approach. When the government ordered nonessential businesses to shut down due to the Covid-19 pandemic, many households lost their income and businesses lost their sales. Rents became hard to pay whether you were paying rent for your home or paying rent for your retail shop or office.

Photo by Gustavo Fring on Pexels.com

Previous force majeure language in lease contracts did not specifically mention “government mandated shutdowns in response to a global pandemic” under what was categorized as an “Act of God.”  Force majeure language in lease paperwork allows tenants to terminate leases or reduce rent in extraordinary circumstances.  However, the WSJ article cited above by Fung points out that “force majeure language in a lease hurts owners’ ability to get financing for the property.”

Landlords of both multifamily units and retail units have had to offer concessions to retain tenants and attract new ones. Philippe Lanier a principal for a property developer managing retail properties in Washington DC told Fung, that as a landlord, “You have to provide the tenant an easy decision. If you make it complicated, you’re not going to get this done.” Philippe Lanier, EastBanc

Percentage Concessions and Shorter Leases

What is a simple concession in a lease agreement? Lanier offered to cut the base rent by 50% if retail stores are forbidden to operate their businesses and this same concession could apply to an apartment tenant loses their job in a mandatory shut down. In Lanier’s agreement, the difference would be repaid in 6 equal installments that begin on the first day a business can reopen, or a tenant returns to work.

In Detroit, Bedrock, offered to waive base rents in return for 7% of gross sales for eligible tenants, which include restaurants and retailers. (WSJ.com) This company was also allowing the use of security deposits for other purposes.

Some investors are signing leases with shorter terms and that are more revocable by either party.

Photo by Bich Tran on Pexels.com

With rents taking a hit in large cities across the country it is hard to tell how long it will take an investor to make a profit on a rental property. Location still seems to matter, but the location may be in smaller towns and the suburbs near large cities rather than in the large metropolitan areas themselves.

Clear, simple language in a lease is best but the concessions themselves can be as creative as you are.

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/

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

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

A Family of Land Websites to Admire

I recently stumbled onto a family of fascinating websites for those of us who love land.   Whether you are interested in a vacation rental or garlic farming, solar farming or raising timber, hunting quail, or building a deer hunting preserve, this family of sites has much to offer those with land on their minds.

agriculture barn clouds cloudy

The first one I discovered was landflip.com because I was thinking about investing in vacant or rural land.  Land Flip lists the best vacant and rural land available.  So, if you  are looking for hunting land with a cabin, 100 acres in Sierra Blanca, or a poultry farm in Arkansas.  This is the site to visit.  And it is a beautiful site with property descriptions and lots of gorgeous land photos in its galleries.

The sibling in the family is lotflip.com.  Here is the site to go to if you are looking for commercial sites and land. Some of the same properties appeared here as on Landflip.com, like the poultry farm and the land in Sierra Blanca, but they were joined by industrial sites in New Jersey and housing sites in Northern Arizona.

The middle child in the family is farmflip.com, a site that features just what it promises, farms, but with much variety. Here you can find that horse farm in Wyoming, hobby farms, a working cattle ranch in Sabine County Texas, and timber tracts in Florida.

Auctionflip.com is the next site, and it features upcoming auctions, including galleries showcasing fenced land in Kansas, residential development land for auction in Indiana, a home on 15 acres in Platte County, Missouri, and a log home and bed & breakfast lodge with 52+ acres in Houston being auctions on April 27th at 10 am. The property includes a barn, a shop, horse stalls, feed room, chicken coop, dog kennels, and 2 ponds. This could be an interesting investment for the right person.

If your dream involves commerce, hard work, and land, and if you are looking for a piece of urban or rural land to perform on, the not-so-little brother in the family of websites is the one to visit, commercialflip.com.  I think this site had my favorite unique commercial opportunity, a trading post with 34 cabins in Gunnison County, Colorado, right in the heart of the Rocky Mountains. As a kid, I always dreamed of my family owning a trading post of bar in the mountains.  This would have been the place.  The site also featured a gallery of other commercial opportunities, like a Lake Michigan vacation home, a river ranch with cabins in Missouri,  and a family restaurant and motel in Michigan.

Finally, the daddy and the mommy site of the family, as far as I am concerned, where you can learn all about land is landthink.com This is where the blogs, articles, facts, and opinions live.  Here you find information to use and admire about topics like

  • the unique gourmet crops that will make money for a farm,
  • when to get into debt for land and when not to,
  • how to get a timber appraisal,
  • how to organize a community garden, and
  • how to clear land.

I am not sure but this might be my last post. I am off to plant garlic and willow trees.

Not really. But, I do recommend studying these websites for information and possible deals for your next investment, maybe a vacation rental.

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
Info@REICapital.cash

 

 

 

 

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

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.

FileStack_retouched

  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)

How to Close Your Visio Loan Fast

Attention. Today, it is hard to focus the laser beam of our mind onto what is pivotal. Our mind certainly can be a laser beam, but too often it flickers, back and forth from one thing to another like a match in a wind storm. If time is money, attention is gold, and a sense of urgency can be your friend when you are interested in borrowing money to start your rental or vacation rental business.

My goal here is to help you sort out what Visio needs to know, what is pivotal in the process of financing an investment property, one that you want to buy and hold onto as an investment. By focusing on these critical areas, you can speed up and simplify the process of getting your loan Visio loan closed.

Pivot 1. Property Value beyond the Appraisal

Talk to your local realtor and do your own research to determine the comparable value of your property. Appraisals provide us with helpful indications of value, but we also rely heavily on our own research and analysis. Please let us know if you’ve made improvements to the home, detailing what has been done and the amounts invested.

Please let us know if you’ve made improvements to the home.

Pivot 2. Property Condition

Appraisers rate property condition using a scale of C1 (New) to C6 (Complete Redevelopment). We only lend on rent-ready properties (C1–C4). ALL repairs and rehab should be completed PRIOR to starting a loan with Visio. While we sometimes finance properties requiring some minor redevelopment, we make these decisions on a case-by-case basis. If you are concerned that your property may need too much work to qualify, send us some current pictures before ordering the appraisal.

We only lend on rent-ready properties (C1–C4).

 

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Pivot 3. Recent Transactions

If the home has changed hands in rapid succession with significant increases in value, we need to know ahead of time. We need to understand the reasons behind the increase in value before making the loan. Finding out late in the transaction almost always causes problems.

We need to understand the reasons behind the increase in value before making the loan.

Pivot 4. Non-Arm-Length Transactions

A non-arms-length transaction involves a buyer and seller that have a pre-existing business, personal, or familial relationship. We will make these loans, but we want to know up front. Visio is not a consumer mortgage lender, and therefore cannot allow family of the borrower to remain in the property.

Visio is not a consumer mortgage lender, and therefore cannot allow family of the borrower to remain in the property.

Pivot 5. Fees

Our Account Executives will provide you with a detailed fee worksheet showing all our fees well in advance of closing. Please read the fee worksheet. It is not in anyone’s interests to have a deal fall apart at the closing table over fees.

Please read the fee worksheet.

Pivot 6. Title

If you are refinancing with Visio please give careful thought to any liens, judgments, or delinquent property taxes on the property. These will come up during the title phase, and they not only take time to clean-up but could also result in disqualification. If you’re buying a property, we require a clean title to close. Items such as releases of old mortgages or the existence of ground rents/land leases, which are common in some areas (MD), can take substantial time and effort to address.

We require a clean title to close.

Pivot 7. Borrower Name(s)

If you are refinancing with Visio, please consider whether there is anyone else on the title with you. That person will need to be available to sign documents. In addition, we will title the property the way it comes to us. If you are attempting to remove anyone from or add anyone to title, please resolve this prior to starting a loan with Visio (see “Borrowing in an Entity” below for exceptions). For purchases, if you are buying from a government agency, such as HUD, execute the purchase contract in the exact name in which you intend to hold the title. They are not very flexible about changing names mid-transaction.

Execute the purchase contract in the exact name in which you intend to hold the title.

Pivot 8. Investor Insurance

Research and choose your insurance product EARLY. It likely will take longer than you think. Consider the cost as well. If your premium is proven to be more expensive than you are estimating, it could potentially change your loan parameters, up to, and including disqualification. Accurate escrow estimation is paramount to an accurate quote from Visio. Please note, we require hazard insurance to have 100% replacement cost. We do not allow actual cash value policies.

We require hazard insurance to have 100% replacement cost.

Pivot 9. Borrowing in an Entity

We lend to entities, such as corporations, LLCs, and partnerships. Please make sure your entity is fully established and is in good standing. We’ll need all the documents to complete your loan. If you are attempting to change the titled entity, we can accommodate if the ownership interest is identical between both entities. (See “Borrower Name” above.) We do NOT lend to trusts nor non-profit corporations.

We do NOT lend to trusts nor non-profit corporations.  

Pivot 10. Sense of Urgency

Time and attention is always of the essence. Thoroughly read emails and respond to communication from your account executive and processor. We are always available to help and provide clarification to ensure a smooth transaction.

Thoroughly read emails and respond.

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

512-213-2271

Austin, Texas

 

Photo reference: Lmatt123 [CC BY 3.0 (https://creativecommons.org/licenses/by/3.0)%5D