Financing Tips for Real Estate Investors

Do you want a real estate portfolio that contains multiple properties and provides you with a full-time income?

In that case, you need to understand rental home financing. You can’t hope to build that kind of portfolio using the same approach required to buy just one or two homes.

Fortunately, there are only four rental home financing tips you really need to implement in order to get started with building a robust portfolio that can act as your only source of income.

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A lot goes into becoming a successful real estate investor, especially if you hope to build a robust portfolio of numerous properties.

Obviously, it’s important you know what to look for in a property, which includes several different variables on its own. You also need to think about how you’ll attract and screen potential tenants. Then there’s the long-term plans required to ensure you maintain your investment for years to come.

However, none of this will help you build a profitable portfolio if you don’t understand the ins and outs of financing. If you never advance past the basic mortgages traditional lenders offer, your portfolio’s potential will be limited.

One example of the type of financing you should eventually consider is asset-based lending for real estate.

Like most real estate investors, you’re probably very interested in the prospect of adding a blanket mortgage to your portfolio. Your goal may even involve eventually owning a dozen properties or more.

The path to that level of success is going to involve a lot of financing, which is why you’ve probably considered the potential of a blanket mortgage.

Before you do, be sure you understand the most important aspects of this kind of financing.

What You Need to Know Before Applying for a Blanket Mortgage

While a blanket mortgage probably seems straightforward enough, there are six factors every real estate investor needs to consider before applying for this type of loan.

Stated Income Commercial Mortgage

For the vast majority of people, applying for a mortgage follows the exact same list of steps. Almost everyone will go to a traditional lender and pick one of the typical home mortgages, most likely backed by FNMA.

This isn’t always an option, though.

Loans with No Proof of Income

If you don’t have the kind of consistent monthly income that traditional lenders like to see, it’s going to be nearly impossible to convince them to loan you money for a home.

The same goes for investors who want a mortgage to purchase another rental property but already own a well-stocked portfolio. Unfortunately, owning all those homes can actually hurt your chance of buying another, even if you don’t have any missed payments in your history.

Though both groups are very different, both often end up choosing the same solution: a stated income commercial mortgage.

If you’re in the market for a mortgage, your first stop may be the local bank or a national lender whose commercials you’ve seen on TV.

This may be the case even if you’re a veteran of rental property investing who has already been through the mortgage process more than once.

While these lenders may offer the kinds of mortgages you want, it would be wise to consider all of your other options, too. Specifically, non-bank loans have been exploding in popularity for the past decade.

That’s for good reason, too – several of them, actually.

So, don’t accept a mortgage until you’ve reviewed them.

 

Seasoned real estate investors will tell you that it takes a lot of work to build a successful portfolio.

As the old saying goes, real estate is all about, “location, location, location.”

Of course, the actual homes themselves are an equally important factor that must be considered. Even when the investor intends to flip the property, they must first think through all the work and money involved before deciding it will be worth it to proceed.

Then there’s one of the most overlooked factors: investor financing.

While money is always a part of the equation, how that money is acquired doesn’t always get its due.

LLC for Single Family Rental Properties

Single family rental properties offer a number of advantages to the owner.

Generally, the time between when you acquire one and when you can begin renting is minimal – meaning cashflow begins ASAP.

Nonetheless, many provide great returns with low overhead and the promise of tremendous resale values.

However, the means by which you own one of these properties will have just as big an impact on your portfolio as the actual home itself.

That’s why most investors choose to use an LLC for single family rental properties.

The Secret of Investors is Opportunity Zones

How to use Opportunity Zones to Break Barriars

• Would you love to add another rental property to your portfolio?
  

• Are you having trouble with financing because you’re already stretched a bit thin?

• Have traditional lenders decided you’ve reached your lending limit?
  
  

If this sounds familiar, it’s vital that you learn about Opportunity Zones right away. The aptly named legislation could be the best opportunity you have to add new, promising properties to your portfolio and enjoy an incredible tax break.

What Are Opportunity Zones?

All over the country, there are communities suffering from severe economic limitations. To make matters worse, these areas have very little hope of ever making much of a comeback – at least not on their own.

This is why many of them have been designated as Opportunity Zones. Anyone who invests in their economic revitalization may be qualified for preferential tax treatment.

Opportunity Zones were created by the Tax Cuts and Jobs Act on December 22, 2017. They were largely seen as an attempt to provide relief to those populations that depend on community development programs and affordable housing – people who may not have otherwise benefited greatly from the tax cuts.

One reason to be especially hopeful that this new legislation will reach its desired goal is because it lacks an authorized cap on how much capital may be made available through these investments.

This means an estimated $2.2 trillion worth of unrealized capital gains derived from stocks and mutual funds could be funneled into community revitalization.

Instead of individuals and corporations bearing the full brunt of their federal tax liability, they can defer or reduce it based on the sale of appreciative assets. All they need to do is reinvest those gains into an Opportunity Fund, which leverages its pooled capital for the sake of real estate and small businesses in distressed communities.

Better still, each Opportunity Zone retains their designation for 10 years. So, investors have until December 31^st, 2026.

Furthermore, any investors who hold onto their investments in Opportunity Zones for a minimum of 10 years will be eligible for an increase in the Opportunity Fund’s basis equal to the investment’s fair market value based on the date it has been sold.

Therefore, in short, the government will ease an investor’s tax burden on any stocks or mutual funds they sell if they put the money into Opportunity Zones.

Where Are Opportunity Zones Located?

Opportunity Zones exist in 18 different states, though some of these offer more locations than others.

These states are:

• Virgin Islands
• Vermont
• South Dakota
• South Carolina
• Puerto Rico
• Oklahoma
• New Jersey
• Nebraska
• Mississippi
• Michigan
• Kentucky
• Idaho
• Georgia
• Colorado
• California
• Arizona
• American Samoa
• Wisconsin

If you want to locate where the specific locations are in a state, check out this very handy map of opportunity zones.

 

Rental Property Tax Breaks Using Opportunity Zones

Opportunity Zones live up to their name for any investor who has stocks or mutual funds they’d like to offload without suffering the normal taxes for doing so.

In fact, many will most likely part with investments they had no intention of leaving simply so they can take advantage of a first-of-its kind opportunity.

One of the best examples of just how promising Opportunity Zones could prove for investors is rental properties. The legislation doesn’t put any limitations on using capital gains to fund investments in affordable rental housing.

Opportunity Zone Stipulations

As long as the residential real estate is located within an Opportunity Zone, it is fair game for investors. The only stipulations are that the property is:

• New or Acquired after December 31^st, 2017
• Improved substantially
• Meets the statute’s active conduct standard

Each of these is basically a given for any rental property inside of an Opportunity Zone, meaning savvy investors are facing a multitude of options at the moment.

Will You Take Advantage of Opportunity Zones While These Opportunities Still Exist?

Opportunity Zones are truly a unique opening for investors who want to own rental properties. There hasn’t been an opportunity remotely similar to this one since the New Market Tax Credit (NMTC) was crated back in 2000.

So, if you let this one pass you by, it could be another 20 years before you get another chance. Keep in mind, too, that the NMTC is limited by an annual allocation amount, which has been $3.5 billion per round of allocations in recent years.

Again, Opportunity Zones don’t have these kinds of limits. That’s why now is the time to take full advantage of this legislation.

Investment Property Refinance Lenders

If you’d like to transfer your gains directly into new rental properties, act now. Contact us today and we’ll walk you through the entire process. We can help you qualify with potential rental income instead of using your W2. Since you are a seasoned investor then you should be aware that we are investment property refinance lenders ready to help you expand your empire.

 

 

 

Yield maintenance can be a new and unfamiliar term to newer real estate investors. What is it? How does it work?

Essentially, yield maintenance helps ensure the lender and their investors achieve a minimum yield on the loans they make. They need to ensure they stay profitable, and deliver on their guarantees to others.

Yield maintenance typically shows up as a prepayment premium or penalty in mortgage loan documents.This is a standard feature in many commercial real estate loans. How much it is can depend on a combination of interest rate, points, pre-payment penalties, and interest rate trends.

How Yield Maintenance Works

There are no absolute rules when it comes to applying this factor. Each lender can apply their own calculations, and desired minimum yield.