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Monthly Archives: August 2018

Benefits of Fix and Flip Loans

There are many advantages to fix and flip loans and the demand for this source of funding is steadily increasing in the real estate investment industry.

Four key benefits include:

    • Quick Approval: Getting approved for a fix and flip loan is a far quicker process when compared against the traditional banking system. If the borrower has submitted the requested documents, a private lender can approve the loan within a couple of days whereas a traditional financial institution can take at least a month. In addition to the significant longer wait time for bank loan approvals, the borrower will be required to submit numerous documents and clear multiple conditions as part of the process.
    • Any Property: Properties in varying states of the condition can qualify for a fix and flip loans. Whether the property is bank owned, a short sale, a foreclosure, or in a dilapidated state, a borrower is still likely to find a hard money lender willing to fund the deal. Once again, a borrower may not have the option of funding these types of real estate opportunities with a bank. Banks are very risk averse and have strict rules in place as to what type of property they can accept as part of their loan portfolio.
    • Zero Prepayment Penalties: If you take out a loan from an established bank, you may be hit with penalties should you have the opportunity to pay the loan off before the maturation date. This is called a prepayment penalty. Most fix and flip lenders will not subject you to this fee.
  • Repairs Covered: When you buy a property with the intention to flip it, a significant portion of your budget will be spent on construction and renovation costs. A fix and flip lender will usually set up a loan reserve which will cover repair costs of the property in addition to interest. This can alleviate a lot of stress and pressure for builders and developers since they don’t have to worry about spending money out of pocket for repairs or payments.

Teaming up with a solid lender who understands your property, the local real estate market, and is willing to help you throughout the acquisition, construction and selling process is vital. When choosing a hard money lender, keep the following in mind:

    • The lender must have sufficient experience in the industry. A private lender that has deep roots in the real estate investment market will not only be able to offer you a better deal but will also have numerous contacts that will prove helpful along the way – from recommended settlement companies, to permit expeditors and other preferred vendors. This can prove to be a great asset as speed, quality and efficiency is the name of the game in the fix and flip world. The less time you need to spend vetting companies and contractors is more money in your pocket.
    • Check the history of the lenders to ensure that they are genuine and have a good track record. It may be worth taking a closer look at lenders that tempt borrowers with “teaser rates” or a “no documents” underwriting process. As with most things in life, if it seems too good to be true – it usually is.
  • Finally, you should check out what previous or current customers have to say. Is the lender responsive and knowledgeable? How many loans do they have on the street? Do they have good ratings on Google or the BBB? Just as the lender performs due diligence on their borrowers, the borrowers should, in turn, conduct due diligence on the hard money lender. It’s a partnership and both parties need to be solid and committed to the process in order to ensure success.

 

Risks Of Trying To Market

1. This past year or so: In the past year, or so, we’ve witnessed, the price of real estate, in many markets, escalate, exponentially, in a short – period of time. For example, one of the houses, I listed, and represented, not only sold, at nearly 15% over asking price, but there were 22 qualified offers, by the end of the first weekend. We all remember, that, often, in the years before, having to re – price, and adjust listing prices, to get a house sold. Up – markets, often, arise, because of a confluence of factors, such as supply, and demand, low mortgage rates, and the perceptions of improving overall economic and employment conditions. However, prices rose, so quickly, now that mortgage rates have risen slightly, and more houses are listed, we are now, in a somewhat, normal, real estate market. Those who were represented by knowledgable real estate agents, were prepared for the eventualities, and, avoided the danger, of pricing a house, too high. In normal, or weaker markets (e.g. buyer markets), home sellers get the best results, when they price, their houses, properly, from the start!

2. Knowing and understanding the different types of real estate markets: There are three, basic types, of real estate markets: (1) sellers; (2) buyers; and; (3) normal. A sellers’ market is when there are more buyers than sellers, a buyers market is when there are considerably more houses, available, than sellers, and a normal market is when, conditions are somewhat, in – between. Low mortgage interest rates, and optimistic perceptions (regarding the overall economy), often introduce higher prices, and a sellers’ market. When the market becomes over – heated, and prices rise, too quickly, eventually, it cools and dampens enthusiasm, and brings forth a different mindset, and set of conditions. Of course, there’s often, many gradations, in – between.

3. Potential dangers: Buyers who believe, they know – it – all, often offer too low, offers, which not only are refused, but the seller, often considers the offer, insulting, and won’t negotiate. Greedy home sellers, often, over – price their houses, and lose their opportunities of selling their homes.

Reasons Some Rent

1. Down – payment: There might be several reasons, certain individuals, lack the necessary down – payment, needed, to put down, in order to purchase a house. Some lack the necessary discipline, while others might not have the financial necessities, or have experienced major obstacles (economic/ financial, etc), which have made it challenging, to put together the funds. Others are afraid, to proceed, because they lack the self – confidence, etc, which makes them, ready, willing, and able, to handle the stress, etc.

2. Reserves: In addition to having the needed, up – front, funds, there are many other financial obligations. and preparations, needed and necessary! Wise individuals put together, at least 6 to 9 months, equivalence, in case of any interruption in earnings, etc. In addition, there should be separate reserves, for initial changes, or modifications, most new homeowners, perform. Then, money should be put aside, for regular repairs, upgrades, modifications, renovations, and unforeseen issues.

3. How much do you want it?: Are you prepared for home ownership? When you rent, your landlord is responsible for necessary repairs and maintenance, but when you own, you not only have to pay for it, but be responsible for either, performing the task (if you are capable) yourself, or bringing in a professional, to take care of it. This includes: electricians; plumbers; painters; concrete workers/ masons, etc.

4. Confidence: Do you have the necessary degree of self – confidence, to trust yourself, and your abilities, to handle the stresses and tensions, involved, in owning, a home, of your own? If the stresses and tensions, are things, you don’t want to get involved in, and/ or, handle, then, owning a house, may not be, for you.

Getting New Clients As a Realtor

Create your own circle of offline connections and influences. As much as the online world is essential to widen your connections, the offline connections and influences is equally essential. Start with your family and friends. Then add your past classmates even those from your elementary days whom you still remember. Your teachers can be great additions. Move on to those whom you are tapping services as professionals such as your doctors, dentists, hair stylists, pet groomers and fitness coaches. The parents of your children’s classmates and friends can also expand your offline connections. If you have business contacts, add them as well. Don’t forget your neighbors. They can be great sources of referrals.

Build a better online network of friends. Through social media, you, as a real estate agent is bestowed greater power to enhance online connections. Your network can be a greater web of interconnected persons starting with your family members down to their own friends, acquaintances, friend of friends, and so on. Before you notice it, your network has expanded to include professionals of diverse titles not only in your locality but also in adjacent towns and nearby cities. If you think they are not relevant, you may be wrong with the impression. Anyone in your online network of friends can always be a great source of referral even those who you seldom see to be adding activities in their social media accounts.

Send mailers, both online and offline. Now that you have established both your online and offline connections, it is time to introduce yourself as the rookie real estate agent. For offline mailers, be sure to have a formal tone. Give your full name, license number, the firm you are connected too, its address, and contact numbers of you and the firm. Inform them of the services you are offering.