Forum Replies Created
-
Gustan
AdministratorJuly 17, 2024 at 6:05 pm in reply to: What Are The Biggest Reasons People Are Moving Out of CaliforniaYou’re asking about a big problem in California – housing affordability. Here’s the breakdown:
Are most people in California being priced out of the housing market?
- Yes, most Californians indeed have difficulty affording homes in this state.
- As of 2024, just about a quarter (25%) of all California households can afford a median-priced single-family house much lower than the national average.
Home affordability in Los Angeles and Orange County:
- These two counties are some of California’s most expensive places to live.
- So, let’s take into consideration what we know about them:
Median home prices (as of 2024):
- Los Angeles County: ~$800,000
- Orange County: ~$950,000
Income required: If we assume a 20% down payment on these median-priced houses and that one would spend no more than 30% of their income towards housing (as recommended), then you would need to make approximately this much annually :
- Los Angeles County: $150k – $200k per year
- Orange County: $180k – $230k per year
Remember, these numbers are rough estimates based on current interest rates current interest rates, as well as property taxes and insurance costs.
Down payment:
For a down payment on a house at its median price point, which is about 20%, you would pay:
- Los Angeles County: ~$160k
- Orange County: ~$190k
Saving up for this amount can be very difficult for many individuals who already live here.
Comparison to median incomes: As of 2024, the Median household income for those living in –
- Los Angeles County was around $80,000
- Orange County was around $100,000
This large gap between what typical households make and how much they should earn according to lenders before being able to purchase shows why homeownership rates are so low among most people.
Alternative options: Another consideration is that residents may choose condos or townhouses instead of homes in more affordable areas further from city centers. Some might even enter into co-ownership arrangements or rely heavily on family assistance when it comes time for down payments.
First-time homebuyer programs:
California offers a few programs to help first-time buyers, but the market is tough with or without them.
So, given all of this information, yes, becoming a homeowner in these parts of California can prove extremely difficult for many people-especially those who are single-income or early on in their careers – often pitting them against having to rent for life or move elsewhere where they can buy instead.
-
Gustan
AdministratorJuly 17, 2024 at 3:03 am in reply to: What Classifies As an Investment Property?I will provide you with all the details about investment property financing. We can divide this into different sections, which are as follows:
Guidelines and Requirements for Investment Property Financing
Credit Score:
- Conventional loans: Normally 620+ minimum, better terms for 700+.
- FHA loans (for multi-family): Minimum 580 for 3.5% down, 500-579 for 10% down.
- Commercial loans: Often 660+ minimum
Down Payment:
- Conventional: 20-30% for single-family, 25-35% for multi-family.
- FHA (owner-occupied multi-family): As low as 3.5%.
- Commercial: Often 25-35%.
Debt-to-Income Ratio (DTI):
- Conventional: Typically below 45%.
- Commercial: Less emphasis on DTI, more on property income.
Cash Reserves:
- Often, 6+ months of mortgage payments.
- This may increase for multiple properties.
Income Verification:
- Last two years’ tax returns.
- Recent pay stubs and W-2s.
- For self-employed people, Profit and loss statements.
Property Appraisal:
- Required for all types of investment property loans.
- Must support the purchase price or loan amount.
Insurance:
- Property insurance is required.
- Flood insurance if in a flood zone.
Investment Property Mortgage Process
Qualification:
- Review credit score, income, assets, debts, etc…
- Preliminary eligibility assessment of different loan programs.
Pre-Approval:
- More detailed review of financial documents.
- The approval letter states how much the lender will lend goods when making property offers.
Processing:
- Gather and organize all necessary documents.
- Order property appraisal and title search.
- Verify employment and income.
Underwriting:
- Detailed analysis of all financial information and property details.
- They are assessing the risk associated with loaning money secured by investment properties.
- Documentation may be requested from the borrower.
Conditional Approval:
- The loan is approved subject to certain conditions being met.
- Conditions might include additional documentation or explanations.
Clear to Close:
- All conditions have been met.
- The underwriter and processor give final loan approval after reviewing.
Closing:
- Review and signing of all loan documents.
- Payment of closing costs and down payment.
- Transfer of property ownership.
- Specific Aspects of Investment Property Financing
Rental Income:
- It can often be used to help qualify for the loan.
- Typically, we need to show lease agreements.
- Lenders may only count a portion (often 75%) of rental income.
Vacancy Rate:
- Banks will take into account how long a unit can remain empty in a year
Property Management:
- Some lenders require professional property managers for inexperienced investors.
Seasoning Requirements:
- Some lenders require that you’ve owned a property for a certain period before using its equity or rental income to qualify for another investment property loan.
Portfolio Lenders:
- May offer more flexible terms for investors with multiple properties.
- Often, they have a higher tolerance for non-traditional income situations.
Cross-Collateralization:
- Some lenders allow using equity in one property to secure a loan on another.
- It can be useful when expanding a real estate portfolio.
Balloon Payments:
- Common in commercial and some residential investment property loans.
- Lower payments during the loan term, but large payments are due at the end of the term.
Prepayment Penalties:
- More commonly used in commercial and portfolio loans, it can affect refinancing or selling strategies.
Interest-Only Periods:
- Some loans offer initial interest-only payment periods that can improve cash flow but don’t build equity.
Debt Service Coverage Ratio (DSCR):
- Critical for commercial loans Measure’s ability to cover debt payments from its income.
Recourse vs. Non-Recourse:
- In Recourse loans, borrowers are personally liable for any default.
- Non-recourse does not hold the borrower personally liable for defaults.
Non Recourse:
- Recourse loans let creditors seek after a borrower’s additional assets when a loan defaults.
- Non-recourse confines them to the property only.
- This is more frequent in big commercial credits.
- However, remember that these features can change depending on who you borrow from and what kind of program they offer.
Therefore, investors must always shop around while comparing various deals and considering which structures best suit their investment strategies, given the different levels of risk involved.
-
Gustan
AdministratorJuly 17, 2024 at 2:42 am in reply to: What Classifies As an Investment Property?I can provide more information about different investment property financing options in today’s market, their general requirements, and other important considerations regarding their terms.
Traditional Mortgages on Investment Properties
Down Payment
20-30% is usually required for single-family homes, while 25-35% is needed for multi-family properties (2-4 units).
Experience of the Real Estate Investor
This is not mandatory but can affect approval and terms.
Recourse
Mostly, recourse loans are used. Recourse loans are when the borrower personally guarantees the mortgage loan.
Rates and Terms
Interest rates are 0.5-0.75% higher than those for owner-occupied houses.
15 or 30-year fixed-rate options are common.
Adjustable-rate mortgages (ARMs) are also available.
Qualifications of Investment Property Loans
Credit score: Typically, a minimum of 620; better terms for scores above 700.
Debt-to-Income Ratio (DTI): Typically below 45%.
Cash reserves: Often 6+ months of mortgage payments.
FHA Loans for Multi-Family Properties
Down Payment
It can be as low as 3.5% for owner-occupied multi-family properties (up to 4 units).
Experience
Not typically required.
Recourse
Uses recourse loans. Recourse loans are investment property loans where the borrowers personally guarantee the commercial loan.
Rates and Terms
Competitive rates are often lower than conventional loans.
30-year fixed rate terms are common.
Qualifications:
Credit score:
- Minimum of 580 with at least a 3.5% down payment.
- Between a credit score of 500-579 with at least a 10% down payment.
- Must occupy one unit as a primary residence.
Commercial Investment Property Loans:
Down Payment:
Often between twenty-five and thirty-five percent, it may go higher on larger properties.
Experience:
They are often preferred or required, especially on larger properties.
Recourse :
Options include both recourse and non-recourse loans.
Rates and Terms :
The rate can vary widely based on property type, borrower experience, market conditions, etc.…
The term is usually five to ten years with twenty to twenty-five-year amortization.
Qualifications:
Credit score: Often 660+ minimum
Focus on the property’s income potential and Debt Service Coverage Ratio (DSCR)
Hard Money Loans
Down Payment
It can be as low as 10% but often 20-30%.
Experience
It is optional, but it may affect terms.
Recourse
Uses recourse loans.
Rates and Terms
- Higher interest rates, often between eight to fifteen percent.
- Short-term, typically six to twenty-four months.
Qualifications
- More focused on property value than borrower’s financials.
- Quick approval process.
Qualifications:
- Typically, more than $2 million.
- Considers property’s income and DSCR.
General Notes:
Recourse vs. non-recourse:
- Recourse loans allow lenders to pursue borrowers’ assets if they fail to pay back the debt, whereas non-recourse loans restrict recoveries to only the involved property after default.
Experience Requirements: Although not mandatory, experience,e can greatly influence approval rates across all loan programs, as well as the terms offered and interest charged by different lenders.
Market Conditions: Over time, economic drivers such as rates or changes in demand could affect prevailing or risk appetite levels for various financing options.
Property Types: Different qualification standards apply for residential (1-4 units) versus commercial (5+ units or non-residential) investment properties. Keep in mind that these are just some basic rules, and each lender may have its own set of guidelines. It is also a good idea to shop around with several lenders to find the one that best suits your investment strategy and financial situation.
Lending Network, Inc. are experts in financing investment property loans.
- This reply was modified 2 months, 1 week ago by Gustan.
-
Gustan
AdministratorJuly 17, 2024 at 2:05 am in reply to: What Classifies As an Investment Property?You understand investment property correctly, and now I will answer your questions in more detail.
What is Considered an Investment Property?
An investment property is typically defined as a property that is:
- Not your primary residence.
- They were purchased to earn rental income, capital appreciation over time, or both.
- It could be residential or commercial.
Types of investment properties include:
- Single-family homes for rent.
- Multi-unit buildings (duplexes, triplexes, apartment complexes).
- Commercial properties (office buildings, retail spaces).
- Vacation rentals.
- Fix-and-flip projects.
How to Get a Real Estate Loan for an Investment Property: Qualifying for an investment property loan can be more difficult than qualifying for a loan on a primary residence. Here’s what you need to know:
Credit Score: Typically 620-640 minimum, but often higher (700+ for best rates)
Down Payment: Usually requires more money down than for a primary home
Debt-to-Income Ratio (DTI): Often needs to be less than 45%
Cash Reserves: Some lenders require six months or more of mortgage payments in the bank on top of other reserves like personal savings and retirement funds; others have no reserve requirements.
Rental Income: If you’re already renting out the property you want to finance, some lenders may allow you to use this rental income when qualifying for a loan.
Property Appraisal: The lender will order an appraisal to ensure the property is worth at least the purchase price.
Experience: Some lenders may require investment experience.
Steps in Getting an Investment Property Mortgage
Here are some steps involved in applying for and closing on an investment property loan:
Preparation:
- Check your credit score.
- Save up cash for down payments and reserves.
- Gather necessary financial documents.
Pre-Approval: Compare interest rates, terms, and qualification requirements from various reputable lenders offering mortgages to real estate investors.
Get pre-approved on your loan amount to know how much you can afford.
Property Search:
Find a property that meets your investment goals and criteria.
Offer and Contract:
Make an offer on the property, negotiate the terms of a purchase agreement with a seller or listing agent representing the seller, and sign the contract for the sale of real estate.
Loan Application: Complete the full mortgage application. Provide all required documentation to the lender for the underwriting process.
Property Appraisal and Inspection:
The lender orders property appraisal to determine market value before approving the requested financing amount. You may also want to get a property inspection, although this is usually optional unless it’s required by state law or local building codes.
Underwriting:
The lender reviews all loan documents submitted by the borrower during the application process. If needed, you may request additional information from the borrower or third parties involved in the transaction, such as the title company, appraiser, insurance agent, etc., for the underwriter to decide on the approved mortgage loan’s approval status.
Loan Approval:
The borrower receives official written notice that his/her mortgage loan has been approved by the lender, subject only to a few conditions (if any) being met within the specified time frame stated in the approval letter sent to the borrower by the lender’s underwriting department.
Review and sign loan documents provided at the closing table. The title company representative acts as the closing agent, coordinating signing activities between buyer(s), seller(s), and real estate agents involved in the transaction.
Closing:
Conduct the final walk-through inspection of the property before the closing date/time agreed upon between the buyer(s) and seller(s) in the sales contract.
Attend scheduled settlement meetings where the buyer(s), the seller(s), their respective attorneys, or real estate agents meet with a title company representative acting as closing agent overseeing execution delivery recording filing legal documents necessary to effectuate transfer ownership rights from the current owner(s) seller(s)) new owner (buyer). Sign closing documents presented for review signature acceptance acknowledgment satisfaction of all terms and conditions contained therein, including payment funds due at the time of consummation transaction (down payment, closing costs, etc.)
Post-Closing:
Receive keys take possession control over the investment property. Begin managing investment property (collecting rental income, paying bills, maintaining property, etc.) as agreed upon between buyer(s) and seller(s) in the sales contract.
Lending Network, Inc. is a full-service commercial lending financial institution with hundreds of wholesale commercial lending investors who can help real estate investors finance investment properties. For more information, visit us at https://lendingnetwork.org/long-term-real-estate-loans/
lendingnetwork.org
Long Term Real Estate Loans - Lending Network, LLC
Long Term Real Estate Loans - Lending Network, LLC
-
Listen to Phophet Derrick Grayson podcast. I love this man. Mr. Derrick Grayson makes all the sense in the world and this man don’t give a F#CK what the opposition thinks. He says it the way it is. Thank you sir 🙏.
https://www.youtube.com/live/sAkal72q-WA?si=_VQOCYL4TMXqC-Q2
-
Gustan
AdministratorJuly 17, 2024 at 12:23 am in reply to: Derrick Grayson- The Man Who Says It The Way It IsMr. Derrick Grayson talks: We all listen….
https://www.youtube.com/live/kpuaAe01Ymo?si=yZzjidaBuFk2rtJF
-
Gustan
AdministratorJuly 16, 2024 at 6:54 pm in reply to: Does Lending Network Offer Fix-and-Flip LoansGreat question, Sammy. I would be delighted to elaborate on the different aspects of fix-and-flip loans and how they compare with other types of real estate financing.
What Are Fix-and-Flip Loans?
Fix-and-flip loans are usually short-term loans targeting investors who buy properties to renovate and sell them off quickly at a profit.
Duration:
They are typically repaid within 6-18 months.
Loan-to-Value (LTV) Ratio:
They are often based on the property’s after-repair value (ARV). It can range between 65% and 90% of the ARV, depending on the lender’slender’s policy and the borrower’sborrower’s experience.
Interest Rates:
Higher than traditional mortgages due to increased risks
Usually ranging from 7% upwards, depending on various factors.
Fees:
Origination fees often apply (1%-3% of the total amount borrowed). Underwriting, appraisal, and exit fees may also be charged.
Funding Structure:
Draw a schedule used where money is released in stages as the renovation progresses. Inspection might be required before each draw is released.
Repayment:
Normally, only interest payments during the loan term
The full principal is due at the end of the term (balloon payment).
Approval Timeframe:
Usually faster than traditional mortgages. It can take days instead of weeks for approval.
Comparing it with Other Types of Real Estate Financing:
Traditional Mortgages:
Fix-and-Flip: Short-term; higher interest rates; focus on potential property value.
Traditional: Long-term(15-30 years), lower interest rate, and focused on the borrower’s repayability.
Home Equity Loans:
Fix-and-Flip: Separate loan based on the potential value of the property.
Home Equity: Equity is used in a borrower’sborrower’s primary residence; it often lowers interest rates.
Hard Money Loans:
Fix-and-Flip: A specific type of hard money loan mainly for renovation and resale purposes.
General Hard Money: It can be used for anything but usually attracts higher interest rates.
Construction Loans:
Fix-and-Flip: For existing properties in need of renovation.
Construction: For building new properties from scratch.
Commercial Real Estate Loans:
Fix-and-Flip: Short-term; residential properties
Commercial: Longer-term, income-producing properties
FHA 203(k) Loans:
Fix-and-Flip: For investors, higher rates, shorter terms.
203(k): For owner-occupants, government-backed, longer terms, lower rates.
Key Differences:
Risk Assessment:
Fix-and-Flip: Places more emphasis on the property’s-property’s potential value.
Traditional: Focuses more on borrower’sborrower’s creditworthiness and income.
Loan Duration:
Fix-and-Flip: Short-term (months to a year).
Most others: Long-term (years to decades).
Interest Rates:
Fix-and-Flip: Higher due to increased risk and short-term.
Traditional financing: Generally lower, especially for well-qualified borrowers.
Approval Process:
Fix-and-Flip: Often faster with less strict credit requirements.
Traditional: More thorough underwriting, longer approval process.
Use of Funds:
Fix-and-Flip: Purchase and renovation with intent to sell
Others: Varies widely (purchase, long-term investment, construction, etc.).
Property Types:
Fix-and-Flip: Typically, residential properties are in need of repairs or upgrades.
Others: Can include a wide range depending on loan type and purpose, e.g., commercial buildings.
Borrower Profile:
Fix-and-Flip: Usually, real estate investors who may have some experience already.
Others: May apply to first-time homebuyers as well as seasoned investors.
A fix-and-flip loan is a type of real estate financing that serves the needs of buyers looking for immediate renovations before reselling their newly acquired assets. They are fast but costly, so choosing this option over other types depends on the borrower’s intention, project specifics, and financial capability, among other factors.
-
Gustan
AdministratorJuly 16, 2024 at 6:26 pm in reply to: Does Lending Network Offer Fix-and-Flip LoansI will discuss the Guidelines and Requirements for Fix-and-Flip Loans at Lending Network, Inc. Lending Network has a network of wholesale investors and financial institutions on fix-and-flip loans. Therefore, there is no one set of guidelines on fix-and-flix loans. We will discuss the general lending requirements for fix-and-flip loans for investment and commercial properties.
Requirements for Down Payments:
Down Payment: In most cases, the buyer must make a down payment of 10% to 20% of the purchase price. The exact amount depends on the borrower’s credit history, experience, and other project-specific factors.
Qualification Requirements:
Credit Score: Usually, a minimum credit score of 600 or higher is required. Those with higher scores may receive better terms.
Experience: While it can be helpful to have done one or more fix-and-flips in the past, it is only sometimes required. A beginner might still qualify; however, they could face less favorable conditions or higher rates than someone who has already completed several projects successfully.
Financial Documentation: This includes providing bank statements, proof of income, and a detailed budget for the project, among other things.
Property Information: The details needed are extensive, including purchase price, estimated repair costs, and after-repair value (ARV).
Exit Strategy: A clear plan for selling or refinancing once repairs are complete must be presented.
Steps in Fix-and-Flip Loans:
Pre-Qualification: Initial assessment of borrower’s financials and feasibility of the project.
Property Evaluation is an appraisal process in which an inspector determines what the house is worth now and its value if certain renovations were made.
Loan Application: Submitting a detailed application covering everything from finances to plans for renovation work, along with specific information about your property
Underwriting: Lender reviews loan applications, verifies numbers, etc., before approving them – checks whether proposed improvements are feasible given current market conditions, etc.).
Loan Approval: Once the underwriting department approves, the lender issues a commitment letter outlining the terms and conditions agreed upon between themselves and the borrowers.
Closing: This is when you sign the final paperwork that makes the deal official, pay the money necessary to buy the property, and fund any needed repairs.
Rehabilitation is when the renovation plan is executed, sometimes with additional inspections at certain intervals to ensure the agreed budget makes progress, etc.
Sale or Refinance: Once all work has been completed on-site, it can either be sold as is or refinanced so that the new loan repays the original one.
-
Gustan
AdministratorJuly 16, 2024 at 5:31 pm in reply to: Derrick Grayson- The Man Who Says It The Way It IsUnbelieveable the narrative of Derrick Grayson. No a single journalist, politician, nor American citizen wants to say anything Mr. Derrick Grayson said on his podcast. One amazing HERO.
Social Media Links