My office gets hundreds of calls per day. And, if you ever stop in for a visit, I probably sound like a broken record because I am constantly asking my colleagues about their daily conversations.
As your fearless leader, it’s critical I know what you people need and deliver the information while it’s piping hot. That said, grab your oven mitts, we need to talk about investing in real estate and where I suggest you get the cash for these “projects.”
VA, FHA & Conventional loans are great BUT….
Many veterans take a very primitive approach to buying their investment properties by using VA, Conventional, or FHA financing. While these options are viable and do work, there will be some difficulties.
Qualifying is always going to be a problem. VA, FHA and Conventional loan programs are going to go over your application with a fine tooth comb. That means your credit, debt to income ratio, and just about everything else will be put to the test.
Your Debt to income ratio is a huge obstacle. The more properties you own, the higher your debt. And, because banks will automatically take a 25% vacancy factor (even if your property is 100% occupied), most properties cannot sustain positive cash flow using the 25% variable. That means your property could technically be making money, but fall short under these guidelines. This is why as your portfolio grows your debt will too; and getting loans becomes more and more difficult.
Personal Guarantees- Think about this people, every time you close a mortgage you have basically taken a blood oath to pay the mortgage back. Why would anyone want to ADD risk to a risky proposition? This especially holds true in rehab situations where there is no rental income and mortgage payments need to be made. Scary indeed.
Reason for the purchase- Ahh yes, the golden rule that makes everything more complicated. These days when you buy a property, there is a little box on page 4 of the application requiring the “status” of your purchase. With this box, the banks want to know if your buying a primary residence, 2nd home, or investment property. And if your honest, buying anything other than a primary residence is going to cost you more money down and higher interest rates.
The ultimate solution is HARD MONEY!
If you are looking to be an investor, I suggest you start by using the right tools. Hard money in my opinion, is the single best way to buy property for beginner and intermediate investors.
Hard money is normally sourced through private individuals or small corporations made of investors just like you. These people are normally very experienced, and understand the game, so be prepared and do some research.
Why is hard money so great?
NO personal guarantee- Hard money is secured against the property your purchasing. You are not responsible to pay back the loan come hell or high water. If you fail and make a bad buying decision, the investors take back the property.
NO credit check, NO employment, NO out of pocket – That’s right, you won’t have much paperwork to worry about here. The transaction is based on the property and only the property.
How much can you get?
Transactions typically range from 55 to 60% of the AFTER REPAIRED VALUE. NOT the appraised value. This is very important!!! After repaired value or (ARV) is the true market value of the home AFTER the repairs and fix up are done. That means your getting a loan for what the property WILL BE WORTH. NOT what it is. HUGE.
Rates typically range between 10-15% depending on your relationship with the capital investors. Become a proven investor, and you can probably get much better deals. It’s really all about your experience and who you know. And, don’t tell me 15% is expensive, I can show you 100 people that have made MILLIONS using hard money. On the other hand, signing your life away on a conventional transaction… now that’s expensive!
The best place to find hard money is by attending local investor meetings. I suggest you Google “real estate investor clubs” followed by “your town” to get started. You can also try Craigslist or the local paper classifieds for hard money sources.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=4ee56b50-df37-4e68-9c3f-8d6868a11516)
Related posts:
