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Invest in real estate

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"It's amazing what 10 years of good hard work will do."

Source: How to start investing in real estate - Business Insider

A mortgage loan professional starting in 1997 and a licensed real estate broker today, it should come as no surprise I am a huge proponent of real estate. Using lease options, land contracts and traditional financing, I have personally experienced the joys of home ownership, building (and losing) equity and, in inaugurating many into the club, have also shared this joy with others.

For many others, getting started is no easy undertaking, starting with financing, especially when it comes to using conventional, FHA/VA or similar institutional financing. The three C's of credit (character, capital and capacity, not necessarily in that order) requires would be home owners (investors) submit to an increasingly thorough examination of DTI, employment history, credit use...that read like lions, tigers and bears, right? Yes, not only can it be brutal, but also an exercise in futility for many, especially the non-owner occupied type.

Enter hard (and private) money, which mostly and sometimes only cares about the property...what it is or will be worth in the future in comparison to how much it's selling for today, that is. They don't call it hard money for nothing, as the cost and fees (double-digit interest rates when owner-occupied is in the low single digits, 4% of the loan amount, application fees) associated with this strategy can hurt yet, so can a vaccine when you tense up in anticipation. Right? But when in the hands of a learned professional, look away and, not only do you barely feel a thing, it's all better in no time, except for when you get sick from it, but I digress.

Take the median home, $240k in the Colorado Springs market. Being short-term financing (3 - 12 months, max), held for 12 months the total interest at 14% is $33,600. Add 4% in points and 10% in holding costs, and the cost is an admittedly hurtful $100,800 AKA a real kick in the pants. You might ask, what logical investor would want to pay $100,800 in fees and costs to acquire a $240,000 asset? One who understands the time value of money, that's who.

You'll need to look at this differently to understand. But first, let me take this opportunity to mention the most important factor here is the need to be working with a motivated (unemployed, bank, divorced, estate, probate) seller because it won't work otherwise. What hasn't been mentioned is this asset was purchased for say, 70 cents on the dollar ($156k) or less. I also left out the part that factors a shorter holding time, say 3 months or just enough time to rehab the property at a cost of about 10% of purchase price say, $16k. Effectively cutting time and fees by 75%, we now have a cost of funds equal to roughly $41,200 including rehab. Get the picture? We "just purchased" a $240,ooo asset for $156,000, added $41,200 in costs and fees and came up with an "investment" of $197k, theoretically netting $43,000 in three months. What's so hard about that? By the way, and where the intrinsic value is different from that of a non-owner occupied investor, any home owner who has looked at a truth in lending statement as they were called will say, "what a deal" as they look at the total interest paid during the life of a 30 year loan, even at 4%!

Of course, the process, including costs and fees has been simplified tremendously but the scenario is real and it works.

Interested in getting started? With our experience and relationship with lenders at every spectrum, including hard money financing at up to 100% of ARV (after repaired value), we are uniquely qualified to you invest in real estate. Just use the contact form in the lower right to get started.


FHA Eliminates Loophole

The added clarity provided by the Federal Housing Administration s revised single-family handbook comes at the expense of lender flexibility to get loans qualified, including a popular workaround for borrowers with deferred student loan debt.

Source: National Mortgage News - FHA Closes Loophole for Student Debt in Revamped Lender Handbook

The government giveth, the government taketh away.

FHA just closed the loophole that allowed borrowers to not count deferred student loan payments in their debt to income (DTI) ratio,  meaning borrowers will qualify for less than they were able to before.  However, consumers with pending tax lien payments couldn't get a FHA loan, new rules allow borrowers with a payment plan and three months of on-time payments to qualify.

So...that's a wash, right? Wrong. "It tightens certain underwriting guidelines that were on the 'why people love FHA' list," according to a source named in the article.

 


Delinquent Mortgages Decline

Politics aside, what better indicator of an improved economy than a decrease in mortgages delinquent 90 days or more, meaning homeowners are better able to pay for their homes than they were...dare I say it, 8 years ago?

Source: Calculated Risk: Fannie Mae: Mortgage Serious Delinquency rate declined in September, Lowest since August 2008


Buying A Home – Fall 2015

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Buying a home at any time of year is a wonderful, exciting venture but only if you do it right. Download our guide to buying a home and get the inside track on:

  • Why you SHOULD hire a professional to help
  • Pricing trends and statistics
  • Mortgage rates
  • Why there's more to consider than just price
  • And more!

 


Buying A Home SCARY

Mortgage Rates at 6-Month Lows

PartnershipMortgage rates continued lower today, largely getting caught up with yesterday's underlying market movements. Lenders were likely being cautious due to prospects for volatility in today's trading, not to mention the increased volatility seen on Tuesday and Wednesday. All things being equal, rates will

Source: Mortgage Rates Back Down to 6-Month Lows

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