Conventional vs. Portfolio

Are you a full-time real estate professional? Do you have income from multiple sources or multiple businesses? Do you do non-traditional leasing, for example month-to-month rather than 12-months?

If you answered yes, then you may have a difficult time getting conventional financing to purchase new property or to refinance an existing property - even one that cash flows over $2500/month. Ask me how I know.

Here are the comments from a conventional mortgage lender regarding my personal situation:

there are so many different aspects to your loan file, that it’s going to take a really long time to process and underwrite your loan file.  We can do it, but I want you to know that’s going to be no easy task.  As far as I know right now, we need to document two businesses, self-employment income, 3 rental properties, pension income, 10+ lease agreements, unconventional private mortgage, and misc odds and ends...I cannot guarantee anything at this point since your income has so many determining factors now that only when an underwriter is able to fully process your loan will we even know what we can work with. 

 And here are the comments from the portfolio lender to whom he referred me:

If you want to submit your application(s) for purchase and refinance, I will need to have your completed loans application(s), signed disclosures (2 sets if you apply for 2 loans), and application deposit of $32.33 (only 1) as requested last week.  I would also want to see a letter from you summarizing your business plan of month-to-month room rentals, including how your Oklahoma rentals are managed, etc.  This is a complex request, and while I am happy to take it on, I need your full commitment to  the process if you want a decision.  There are just too many facets and our UW will want to see the full picture. This isn't a 'quick' let me run this by you question.  We are a portfolio lender, which allows us to review requests that are out of conforming guidelines, but that sometimes means borrowers have to provide more information to support their request to help our UW's  understand their business or situation in order to take on additional/different risks.

While [your previous conventional lender] provided me with information, I cannot move forward until I have completed information from you.  We have 'lost' 5 days since I sent our application, disclosures, etc. to you. I spent part of my weekend reviewing your information and determined that this is not one that I can just 'run by' underwriting.  If you want my full attention, you will have to commit to providing everything needed to move forward.  I will be happy to do my part with a complete sense of urgency, but I need your help.

Keep asking around for other lenders. I have found a great portfolio lender at Sound Credit Bank who is happy to do my loans for me, without the hassle described above. And I am sure there are others out there. So dear readers, if you have a Seattle-area lender who has worked miracles for you, be sure to leave a comment and recommend them here.

Happy Investing!

Finding Private Lenders

My blog continues with tips from real estate investor Chris McClatchy on how to find private money. A lot of private money comes from sellers doing owner financing, or investors looking for a better return on their money than what they can get in the bank, or from people wanting to invest for higher returns in a self-directed IRA.

Other than sellers, how does a borrower find these folks with private money?

Again, speak up within your network and sphere of influence! Let people know what you need, by reaching out through various social media and "touches."

Touches may be coffee, lunch with a friend, phone calls, email, newsletter, blog, social media/websites.

McClatchy's lenders have included a friends mom, business owners, coworkers, other real estate investors, a banker referral to clients wanting more interest, even an NBA player and a bank employee.Tell everyone!
 

Borrowing private money is not about you, as much as it is about the lenders.  What are their goals and timelines?  Their financial situation.?  Do they want to increase their monthly income? Get a   return they can't find elsewhere?  

Real estate investors are creating jobs, supporting the local economy, building community and improving neighborhoods.  Give people the opportunity to invest in something that does so much good for their city. 

Private lenders want to avoid the Enrons, Bernie Madoffs and losses.  One way to prevent abuse is to be sure that a lender's funding is secured by property.  

It is up to the borrower to build relationships, educate potential lenders to get the appointment to sit down and discuss private money.  Send thank you notes and appreciate those who believe in you.  

Make prospective lenders curious with your elevator speech, e.g. "I rob banks legally."

Be excited! Use simple language, not so much real estate terms.  For example, "The rent more than covers the loan I need;"  "I buy real estate with people tired of getting low returns and tired of the stock market gamble;"  " I share real estate deals with people looking to put money to work...private lenders"   

Be credible, be on time.  You must be sure about your deal and project confidence.  If you're not, why would they be?  

Protect their investment by sending money directly to the escrow company.  Ask if they have any questions?

Chris McClatchy usually asks for a 5 year term on a private loan.  But he adds that the lender could call the loan with 6 months notice.

Ask for and provide testimonials and referrals- "would you be comfortable telling people that we met your needs? and paid as promised or better."  

Pay your private lenders a week early,  and they usually re-up on your next real estate deal.  Send cards and notes with payments, letting your private lenders know how much you value their support, or keeping them posted on your progress.

So start searching for your private money today!

Happy New Year!
Happy Investing!

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Private Reverse Mortgages

The Virtues of Private Reverse Mortgages

Banks have been touting the advantages of so-called "reverse" mortgages for many years as a way for cash-strapped seniors to tap into the equity in their homes to meet their expenses, whether simply for day-to-day living or to pay for the increased costs of home care.

The basic concept of a reverse mortgage is that the bank will make payments to the homeowner, rather than the other way around. The payments can be a single lump-sum, a line of credit, or a stream of monthly payments. The bank does not have to be paid back until the homeowner moves out or passes away.

See the entire article .here.

Happy Investing!

Rent to Own

From Craigslist:

Hi, I am seeking seller financing for a home in West Seattle. Currently rent, tired of renting, newly divorced, so I won't have the 3.5% down saved for a long time! Desperately want to own a home again. Looking for someone who can offer me rent to buy option. Looking for payments no more than $1200.00 a month. My lease is due in Spring, I can put some funds down, but probably about $2000 if that works. Willing to sign a recorded contract and forfeit any deposit and all paid rent towards purchase in event of default (won't happen). Rent is very expensive so that is also why I want to buy. I'll even pay (finance $5,000) above your homes asking price in order to obtain financing, then can use down payment of rent in order to refinance home in my name (purchase is done as a refi if recorded and owned for a few years and contract needs to be added to title). I'm a mortgage professional, so that's why I know how to do this and am asking. Maybe you are a landlord and want to sell one of your properties, or just need to rent out your home and can sell it later. Anyways, serious offers only, I'll provide my personal info for credit check through an attorney of your choosing, or other professional who can write contract (real estate agent). Not a joke-just a desperate buyer who can't afford damn down payment banks want, tired of flushing my money in toilet with rent. Hope to hear from someone soon. Thank you.

Seller financing used to be more common than it is today, and it was a way to help buyers like this one prepare to buy a home and for sellers to sell quickly and easily for more money.

Rents are going up in Seattle, and tenant/buyers like this one are tired of wasting their precious resources on renting. Seattle is a great appreciation market, and housing prices have appreciated rapidly in this city since 2008. Now prices to purchase even modest homes outstrip most people's ability to purchase a home, even a small one.

I have no idea whether this particular buyer was successful in his efforts to secure seller financing. I am always on the search for seller financing, both for myself and for my investor clients. Seller financing gives buyers the opportunity to get into a property at a reasonable fair market price with affordable monthly payments. 

For the seller, it means they can often negotiate a higher price, avoid many of the costs and hassles of listing with an agent on the NWMLS, have a larger pool of potential buyers, and ultimately make more money.

Seller financing, rent to own, lease to own and other options are examples of owner financing, without going through an institutional lender.

If you are interested in learning more about seller financing, please message me privately at HomeLandInvestment@gmail.com or leave a message on this blog post.

Happy Investing!

 

Seller Financing Q&A

Q: What is seller financing?
A: It is pretty much like bank financing except you are making your mortgage payments to the seller of the house instead of to a bank or money lender.

Q: Why should I be interested in seller financing instead of a conventional mortgage?
A: Seller financing has distinct advantages for both buyer and seller, a win-win situation for both parties.

Q: What are those advantages?
A: For the Buyer:

• It is less expensive and easier to qualify, saving thousands of dollars over the life of the loan
• There are no loan origination fees (typically 1% of the loan amount)
• There are no loan discount fees
• There are no loan interest rate lock-in fees
• There is no PMI (mortagage payment insurance for the bank)
• The seller doesn't care where or if you borrow some of the down payment
• There is no required appraisal fee
• There are no required inspection or certification fees
• The seller typically does not want to misrepresent the property, and have you, the buyer, stop making payments or sue the seller, whereas the bank doesn't care if you have a problem with the house.
• There are no miscellaneous fees for things like document preparation, tax registration, courier fees or other "junk" fees for you to pay.
• Loan qualification is decided by the Seller who is motivated to sell his house, not a bank corporate committee with no personal interest in your qualification
• Loan docuentation is minimal - no tax retruns, no letters to write about why you were late on a payment seven years ago, no disclosing all your personal information
• Closing and possession can be in as quick as a week
• The only real concern is whether the buyer has the income to support the monthly payments and is reasonably credit-worthy

For the Seller:

• The Seller gets the interest on the loan balance, instead of the bank. Savings account interest is pitiful these days and the stock market is too volatile for senior citizens to feel secure
• Closing and possession can be in as little as one week
• There are tax advantages to spreading the income stream over a period of years
• The Seller may be able to defer some or all capital gains taxes
• The Seller may retain eligibility for Medicaid without having to put up the cash otherwise due for medical costs, if it were received in a lump sum 

Happy Investing!

Structuring Private Money

Daniil Kleyman, full-time real estate investor,
is featured on this 40+ minute all-content video called: 
"Private Money Structuring – How to Get Lenders to Chase You".

In this video,  he shows you:
-          Breakdown of typical financing avenues for real estate deals
-          3 Ways to structure private money deals, with examples
-          A slick way to borrow money from people who don't have money to lend
-          A way to structure private money deals that will have lenders chasing you
-          And much more
         
Just click on the link below to go directly to the video:

Click here to watch the video 
This is the kind of info everyone else is trying to sell you.  You get it at
absolutely no charge so go watch it now!

Watch the video and leave your comments and questions at the bottom!

Or cut and paste the link below:

https://tvallc.infusionsoft.com/go/RehabLite/WendyC/

Happy Investing!