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.
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.
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%.
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.
Even in the coronavirus pandemic crisis investing in rental apartment property can still be a good way to add thousands of dollars to your income in the long term. If you buy apartment real estate that is in a good location with growth potential, but that is not too expensive, this real estate investment will likely recover after the crisis passes according to (Brad Hunter, Forbes.com). However, the investment takes funds and commitment over the long haul.
There are two way to make money from rental real estate. The first, appreciation, is a rise in value over time. This profit can only be realized by reselling the property after some time has passed or after you have made upgrades that add to the value. Generally, real estate appreciates in value over time if you are in the right location. Be sure to study employment and home buying trends in your local area before purchasing rental property.
Cash Flow & Coronavirus
You can also make money in the form of cash flow by collecting rents as income. The coronavirus pandemic is affecting the apartment rental real estate industry because many people, more people than we have ever seen before, have lost their income in only a few weeks, unemployment claims are up all over America, and tenants may not be able to pay their rents for the next couple of months. This will impact the ability of landlords to make money. Either the landlord forgives the rent and eats the loss for a while to keep the tenant, or the renter is evicted, and the property becomes vacant. In either case, the landlord is not receiving income on the property and may have to seek forbearance from their own lenders.
If a landlord has paid off his or her own mortgage on the property or if he or she has established an emergency fund as Dave Ramsey suggest (daveramsey.com), they will be able to weather the storm caused by the jobs lost in the pandemic shutdown.
Jobs and Renting
Either the jobs come back after the danger from the virus is past and businesses reopen, and the renters stay, or a new set of renters materialize because those people who are no longer able to afford their own homes move to apartments and construction of new homes slows because of coronavirus-driven delays caused by labor shortages, and supply shortages. More people may need to rent. In this case. It is likely the landlord’s income will return after some shaky months.
Because the income potential should rebound, rental apartment property should not lose its value overtime as an asset. If the building itself remains sound, there is no reason why the property value will not increase as other investments tank and real estate once again looks solid and reliable compared to stocks. Also, if interest rates remain low, investors will be willing to take on more debt and are not restrained from purchasing property at higher prices. This will help investors who plan to sell their rental properties make a profit.
Investments in single-family rental homes may also benefit in the long run as more people work from home and need more room than apartments afford. Brad Hunter also suggests in his article on Forbes.com that the single-family-built-to rent-industry may benefit as people need that specially designed home office space with its own door and bathroom.
Investment in rental real estate should remain attractive but be sure to do your due diligence.
Study everything from location, jobs, virus hotspots, distancing trends, supply chains, virus rebounds as they occur, and what the kids are doing now.
REI Capital Resources is in accordance with the Federal Equal Credit Opportunity Act, REI Capital Resources employs business practices that promote fair lending and will not tolerate discrimination relative to borrower race, color, religion, sex, handicap, familial status, age, national origin or ancestry. REI Capital Resources fully supports the letter and spirit of these laws and does not condone discrimination in any mortgage credit transaction.
To help the government fight the funding of terrorism and money laundering activities, Federal law requires us to obtain, verify, and record information that identifies each person who cashes checks, wire funds or engages in other financial services with this establishment. We will ask for your name, address and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.
I have had to really watch myself with this social distancing thing. I am a toucher. I lean into hugs, always shake hands, pat shoulders. I soak up touch. When I’m talking, I find myself creeping closer to the person I am talking to as if I can’t see them or hear them well enough at a distance.
I am certain this economy will recover. People still need homes and loans, but we still may not be able to shake hands for a long time.
In some American states, selling real estate is still an essential occupation as is banking. When we are selling homes or signing loan papers, we are working with others in small groups, but we may be working with people from other states or countries and need to keep ourselves and our families safe during this Covid-19 pandemic.
FIRST & IN THE FUTURE
Use only appointment-only open house formats this way you know who is coming when and you are not surprised. But advertise this new situation on the door so people don’t come in unannounced. This will help you assure that only one group is walking through a house at a time.
Use social media to make virtual tours, even if people will want to see a property before they buy. They can spend more time exploring the house online and visit the website multiple times without having to worry about personal protection equipment.
Prepare business cards and signs to reflect appointment-only restriction.
Place a separate set of clothes and shoes for home just inside the door to your home or in your mudroom if you have one.
Remove your wedding ring.
Stop using a purse or briefcase and instead use a plastic or washable cloth bag for business cards, open- house guest books and pens.
Place a fresh set of business cards and other items in 6 or 7 bags and label them for each day. Take a fresh bag of supplies with you to an open house or to the office every day.
Equip yourself with gloves, face mask, face shield, and booties for your shoes (For open house).
AT THE OPEN HOUSE
Spend time cleaning doorknobs and surfaces before and after a showing, A glossy kitchen counter can be a magnet for a tactile person. They just have to run their hands over the surface. Windowsills might also need some disinfectant. If your store is out of prepared disinfectant use original unflavored Listerine in a spray bottle.
Wash your hands before and after a showing.
Invite your potential buyer to wash their hands before and after touring the house. And, provide a hand sanitizer.
Remind everyone to be aware of where they set down their mobile phone so they don’t set it down on counters or in the bathroom or on other shared surfaces.
Stay alert to what is touched during a showing so you can be sure to clean these surfaces with extra attention after the showing.
You can wear gloves but know how to take them off and dispose of them correctly without contaminating your hands and everything around you when you take them off. Peel them off before you touch your car, turn them inside out and place them in a plastic bag and tie it shut. Put the plastic bag in the trunk of your car for later disposal if there is no trashcan nearby.
Keep your distance from each other. This is the best way to prevent the spread of a respiratory disease.
Wearing a mask will protect you and your client. While wearing a mask, smile more, wink and speak so you are sure to acknowledge people even if you keep your distance and do not touch.
Hang up the bag of supplies you return with near the door, spray it with disinfectant and Let the bags hang unused for a week to 9 days so the virus will have time to die out before you use the bag again.
Strip out of your outside or work clothes and shoes near the doorway or in the mudroom.
Wash your hands.
If you are wearing gloves, dispose of them before touching your clean clothes. If you want to reuse them, place them in a plastic bag so you can disinfect them later.
Dress in your indoor clothes.
With gloves on, bag us your work clothes and wash them immediately.
Let jackets and hard items rest for a week or 9 days at room temperature before using them again to give the virus time to die out.
An open house is not as dangerous as a concert or a basketball game. Usually there are 3 people involved and they are usually adults. Perhaps sometimes parents bring their children, but that is something that can be avoided right now.
Unlike a family, the 3 people involved in the showing usually do not know each other intimately. The buyer does not know where the realtor had been recently and neither know where the homeowner has been recently if they are still living in the home being shown. Precautions need to be taken so you don’t catch the coronavirus or bring it home to your family.
I hope that I can be of help to you this month. I can be reached at
Although many states are exempting building, utility, road, and bridge construction from “stay-at-home” work shutdowns carried out to prevent the spread of the coronavirus, some states are calling for a cessation of all residential construction because it is not defined as “life sustaining” work or “construction of essential infrastructure.” If you read the recent Dallas County Shelter in Place order, you will see that Dallas County has not shut down residential construction. However, some states and counties across the country have. A fix-n-flipper needs to pay attention to the exemptions and inclusions in the work-stoppages orders that are being issued by state or county governments because it may affect your schedule and costs in ways you cannot predict.
Dallas county residents are being ordered to stay in their homes except for crucial work and errands, beginning 11:59P.M. Monday. All businesses that aren’t deemed essential also must stop operating.
Dallas Morning News, Updated 3/22/2020
Your construction loan has or will have terms and limits, usually 24 months for a fix-n-flip loan that will pay 100% of your estimated rehab costs. In an epidemic, you may find that you cannot finish construction in 24 months or within the costs you estimated months ago. If you are faced with a situation like the coronavirus pandemic, something you could neither foresee or prevent, you need to review your contracts for “Force Majeure” and price escalation clauses to understand who bears the risk in the case of work stoppages or rising material costs and shortages that are due to situations that cannot be predicted or avoided.
Be proactive. Start working this out with the organization or lender that lent you the money. Be sure to understand that if the project needs to be stopped and the contract rewritten who calls the stoppage and who and how everyone involved must be informed.
Delays often ripple through a project and can cause you to miss the deadline for your loan to be paid back, increasing your interest and penalties. Perhaps you can’t get a plumbing fixture delivered or a critical subcontractor is quarantined, and the next trades scheduled to work cannot proceed. Jump in and be aggressive about finding local alternative materials and even workers.
Louisiana becomes the ninth state to announce a statewide shelter-in-place order since California did so on Thursday night. Residents in Connecticut, Illinois, New Jersey, New York, Ohio, Oregon and Pennsylvania have begun or are about to begin staying at home for at least two weeks.
The Advocate, March 22, 2020
Below is a list of ways the coronavirus pandemic might affect your fix-n-flip project:
Sick workers who must quarantine for 14 days
Exposed workers who must quarantine for 14 days
Workers required to take off work to care for children when schools close
You have to take off work to care for your children when schools close
Subcontractors or specialty contractors who do not show up
Government permitting offices shutdown
Material shortages caused by epidemic in China or elsewhere
Shipping delays due to port-of-entry quarantines
Construction work stoppages in your area ordered by government to slow the spread of disease.
Material shortages cause prices to rise
Shipping costs rise owing to transportation shutdowns
If you are in the process of negotiating your loan and calculating your expenses, you need to be very careful in estimating your materials. Right now, in the middle of this epidemic, it is for me, or might be for you, impossible to tell how long impacts to business will last. Review your contracts to include appropriate “Force Majeure” and price acceleration provision clauses in your contracts. Look for local alternative suppliers.
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.
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.
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.
There are several reasons why a fix-n-flip investor might want to secure a fast loan to cover a gap. A gap loan, as the name implies, is a loan that bridges a span of time. It helps you gain control of a property quickly even if you are still scrambling to get all your paperwork done for a full rehabilitation loan.
A Buyer in a Hurry
At some time or other, you might face a seller in a hurry. One situation that puts a seller in a hurry is foreclosure. Many property owners in this situation are in denial so they wait until the last week or so, or even days, before the foreclosure sale to act on saving their credit. To save their credit, they must pay the bank all they owe on the mortgage right now. The house might actually be worth much more than what they owe if they have been paying on the loan a long time or put a large payment down on it. But, a foreclosure on their record will ruin their credit. So, for them, it is better to sell at a discount and survive to buy another house another day.
In this scenario, an owner in foreclosure has agreed to sell the property to you at a steep discount, but they need to close the deal quickly. You, the investor, want to buy this property and you make an offer. However, the competition is extremely stiff, and another investor is sitting in the wings waiting to obtain the property. Your offer locks up control of the property temporarily. You need to move quickly to secure a loan. Normally the loan process takes a minimum of 7 working days and typically takes 10-15 working days.
A Nonrefundable Deposit
Another reason you might need funding in a hurry is that you have stumbled upon a wholesale purchase with a tight deadline to close, perhaps 2 to 5 days. The property is ideal for your purposes and you want to make an offer. However, if you don’t get the deal closed by the deadline, you will lose the nonrefundable deposit you are required to put down and control of the property you are seeking.
Getting Control of the Property
Here is where obtaining a gap loan is useful. A gap loan allows you to purchase the property as is while you are in the process of obtaining a rehab loan. The gap loan can be secured in 2 to 3 days typically. Your strategy is to obtain control of the property through this gap loan, begin paperwork to refinance the loan immediately and eventually complete the rehab and offer the property for sale.
REI Capital Resources has funds available for fix-n-flip loans with terms up to 6 to 9 months with a minimum of 3 months.
E-mail or call for more information on minimum and maximum loan amounts, interest rates, terms, and fees for specific project. I can help you with first liens only and these loans are limited to the Austin, DFW, Houston, and San Antonio Metro areas.
In June, unemployment rates were lower in
6 states and stable in 44 states and the District of Columbia. Nonfarm payroll
employment increased in 4 states and was essentially unchanged in 46 states and
Vermont had the lowest unemployment rate in June 2019, 2.1 percent. The rates in Alabama (3.5 percent), Arkansas (3.5 percent), New Jersey (3.5 percent), and Texas (3.4 percent) set new series lows. (All state series begin in 1976.) For Texas, the unemployment rate went down from 3.5% in May 2019 to 3.4% in June 2019. Statistically, this was a significant decrease. Housing sales go the way of jobs. When there are more jobs and higher salaries, more families are looking for homes to buy near where they work.
Nonfarm Payroll Employment
Twenty-eight states had over-the-year increases in
nonfarm payroll employment in June. The largest job gains occurred in Texas
(+315,600), California (+296,100), and Florida (+218,800). The largest
percentage gain occurred in Nevada (+3.3 percent), followed by Arizona (+2.8
percent) and Utah and Washington (+2.7 percent each).
Falls, Slips, and Trips
55% of the injuries reported by education, training,
and library workers 55 and older were injured in falls, slips, and trips. 36%
of the injuries reported by healthcare support personnel 55 and older were
injured by falls, slips, and trips. 46.7% of the injuries reported by sales and
related workers 55 and older were injured by falls, slips, and trips. 34.7% of
the injuries reported by farming, fishing, and forestry workers 55 and older
were injured by falls, slips, and trips.
Overexertion and Bodily Reaction
43.2% of injuries reported by installation, maintenance, and repair workers 55 and older were injured by overexertion and bodily reaction. 38.5% of injuries reported by production workers 55 and older were injured by overexertion and bodily reaction.
The Metropolitan Area Employment and Unemployment news release for June is scheduled to be released on Thursday, August 1, 2019, at 10:00 a.m. (EDT). The State Employment and Unemployment news release for July is scheduled to be released on Friday, August 16, 2019, at 10:00 a.m. (EDT). I’m looking forward to seeing how our Texas large metropolitan areas did this quarter.
REI Capital Resources is “focused on funding your success.”
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.
Like an old tin roof and gingerbread trim, hard money loans have a beauty all there own in the right hands. Hard money loans are short-term loans secured by real estate and used by fix-n-flippers to purchase and renovate property. They have high interest rates but only for a short time. These loans usually finance the purchase of the property and the renovations.
Secured by Real Estate
REI Capital Resources hard money loans finance up to 90 percent of the purchase price of the home, up to 100% of the renovation costs, and a maximum of 70% of the after-repair value (ARV). An appraisal is required.
High Interest Rates but for a Short Term
Hard money loans are intended to be paid back quickly (in 24 months) so the high interest rate does not hurt for long and is included in your budget calculations. Hard money loans usually do not have a prepayment penalty. REI Capital Resources interest rates start at 9.5%.
Lender fees, permit costs, property assessment fees, loan originating fees, loan processing fees, inspection fees, points, interest, closing costs are taken out of the loan. REI Capital Resources points are as low as 2.5%.
Monthly interest-only payments are made during the loan and
the principal repayment is made at the end of the loan term when the renovated
REI Capital Resources hard money loans carry minimum qualifications of a credit score of a minimum of 600, debt to income ratio of 35% – 45%, and experience that includes two to three past renovation projects or a licensed contractor budgeted to help.
More is Better
More experience and higher credit scores may qualify for
lower rates and fees and higher borrowing limits.
REI Capital Resources
REI Capital Resources is a hard money lender and is able to help you fund your project based on your
experience, the value of the property, and its after renovation value. We have
money to lend, and you need money quickly. A perfect fit is out there.
A cloud on title is something odd about a deed for real property that has been recorded that might invalidate or impair the title. It usually stems from unresolved issues with the property. Buyers should proceed with caution because there is something about the deed that requires closer attention.
Some examples of a cloud on a title include:
A wrong spelling of the property’s address in a deed conveying title.
Foreclosure proceedings underway by mortgager in response to a borrower defaulting on payment.
Failure to transfer certain property rights to the former owner, such as mineral rights.
A mortgage lien whose repayment has not been officially recorded with a local record office.
Covenants are rules, conditions, or restrictions place on a property by a subdivider or other landowner to create uniformity of building and uses within tracts of land or groups of lots.
Probate matters that involve estates and inheritance can create a cloud on title. If a property owner dies without a will defining who gains control of their estate, the property title may become in doubt as heirs challenge each other in court.
A fraudulent title recorded would create legal confusion and a cloud on the title.
An encumbrance is a claim or right held by some party other than the owner or a claim that is not a lien that limits the ownership of the property such as conditions, restrictions, easements, reservations, etc.
A mechanics lien placed on the property for construction work contracted. The lien remains on the property and does not follow the owner, forcing a buyer to assume responsibility for repayment.
Any pending lawsuit before a court of law over ownership of the property.
Title insurance protects the insured and their heirs from loss or damage due to defects, liens, or encumbrances in the title or actual ownership of the property as of the date of the policy.
A Clear Title
A clear title is one without any kind of impairment, lien, or levy from other parties and poses no question of legal ownership.
In most cases problems with a title
can be cleared up when proper documents are submitted to the local record
office. This lifts the cloud on the
title. This is not complete legal advice.
Please be sure to consult your real estate agent and attorney.
One thing is sure: a cloud on the title will slow down the paperwork associated with buying and selling property.
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, Clean up the title ASAP.
REI Capital Resources
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
a hand an