Real Estate Investor FAQ

 
Frequently Asked Questions:

 
Why should we use your Services?  
You are welcome to use others to accomplish the same thing. But, consider this for a moment before doing so. We do not charge you a large fee for what we do and others may charge a application fee and require a large deposit, and that is even before there is a commitment from and Lender/Investor. 
 
We, on the other hand do not charge you an application fee along with other ridiculous fees involved with loan submission and funding. We only work with Lenders/Investors that do not charge upfront fees and look at the investment as a whole and not just a means of collecting undue fees and causing more undue stress and hardship for the borrower.
 
We do, however get a referral fee from the Lender/Investor for providing a submission to them and introducing them to the borrower as well as a small success fee from the borrower. This works well for the Lender/Investor, as they do not have to pay a loan officer, along with the benefits that an employee expects from an employer, thus reducing their cost-of-doing-business considerably. As a result of this, they are able to pay us a referral fee for the introduction, which is much less than they would pay a loan officer and advertising to get business in the door. This works well for you in that you will be working directly with the Lender/Investor, along with our assistance to get the loan funded, thus reducing your cost as well.
 
 
Please  Note:
The Lender/Investor will have due diligence fees that will pay the costs of an appraisal, property inspections, etc, which will all be explained in their letter of interest (LOI).
 
Conclusion:
The same results, with less expense to you.
 
What is the Catch?
There is no catch.
We are, in most cases, paid on a referral basis from the investor or lender, or private lender funding the loan. We refer the loan submission request and introduce you to the investor or lender, you then, will be dealing directly with the investor or lender and their staff during the whole process and we will be there for updates for you as well as assisting you and the investor or lender funding the loan as needed.
 
It’s that simple.
  
 
   Go to our About Us  Page for more information
 
 
Note:
Keep in mind that the FAQ’s you see listed below was compiled from several Lender/Investors that we represent, as many offer nearly the same products.
 
 
What is a Real Estate Investor?
An Investor is someone who purchases real estate for business purposes.
 
 
Do you represent Rental Property Loans?
Yes. If this is your exit strategy, then we will need to know that you can get approved for long term financing and/or may have additional requirements.
 

Credit Lines offered?
Entrepreneurial Lines sized between $300,000 to $3 million and Institutional Lines ranging from $3 to $50+ million.

 
 
What is the difference between a Real Estate Investment Loan (Hard Money) and traditional bank loans?
Traditional banks generally have many more guidelines and lending criteria that make it nearly impossible to borrow money from them for the purpose of buying, rehabbing and reselling residential properties. Hard Money lenders specialize in Loans against these types of distressed properties. Hard money loans are usually short term and have somewhat higher interest rates.
 
 
What types of rental properties qualify?
Single-family residences, 2-4 family units, condos (subject to approval), and townhomes. The property must also be "rental-ready" to qualify, meaning that any major rehabilitation has been completed and there is no material deferred maintenance on the property.
 
 
What kinds of properties make for good rental investments?
While the ideal rental property will depend on your investment strategy, there are a few general guidelines to consider when choosing a rental property:
 
Whether the property is in an area with a stable or growing population.
 
Rental rates that are comparable to others in the area and that can support long term growth.
 
Whether the property is in lease-ready condition.
 
 
What if I've never owned or managed an investment property before?
Some Lender/Investors require that borrowers have at least two years' experience owning investment properties or that a property management company professionally manage the property. In the event that a borrower would like to personally manage his or her investment property, but does not have two years' experience, he or she can also qualify by successfully completing an online property management certification course.
 
 
What types of products are offered?
Short-term bridge and long term portfolio term rental property financing, as well as rehab financing is available, Nationwide.
 
 
Property Types?
A wide range of residential rental property types, including single-family properties, 2-4 unit properties, town homes, condominiums, and small multi-family assets.For Portfolio Loans, the average value of the portfolio must be $50,000 per property. All properties are subject to appraisals and underwriting requirements.
 
 
How much money can I borrow?
Currently, investors can borrow anywhere between $50,000 and $50 million, with up to 75% loan-to -value on portfolios of at least three units that maintain a 1.15x debt service coverage ratio. 
 
 
Are ground leases OK?
No, a ground lease is not allowed.
 
 
Can I close in the name of an LLC or a Trust?
Some, but not all, Lender/Investors require that all properties be owned by a corporate entity, such as a limited liability company, that only owns the properties that will be financed and no other assets.
 
 
Does the property need to be rented at the time of closing?
It depends on the purpose of the loan.  If you’re refinancing, the property must either be (a) currently leased or (b) have been leased and occupied within the 60 day period prior to close.  In both instances, we require verification of the lease and recent rent payments. If you’re purchasing a property that is not currently leased, you will be allowed 180 days to install a tenant and verify occupancy
 
 
Loan product for first time investors?
Loans are designed to help current and aspiring rental property investors grow wealth through acquiring or refinancing single-family rental or rehab properties.
 
 
What kind of real estate experience is needed to qualify?
Our borrowers range from those who have fixed/flipped a couple homes to those who manage hundreds of rental properties. We have loans tailored to different borrower experience levels and funding needs.
 
 
Can I hire a professional property manager to manage my portfolio?
Yes, most Lenders/Investors encourages the use of professional property management. Borrowers who wish to self-manage their properties must meet certain criteria.
 
 
Can I manage my own properties?
Yes.  Borrowers may self-manage their properties with pre-approval in doing so. Approval in most cases, is based on the experience and background of the property manager.  Generally, a minimum of two years property management experience managing at least the number of homes that the Lenders/Investor is financing is required.  Borrowers can also complete an approved property management course in order to self-manage their properties.
 
 
What does Yield Maintenance mean and how does it work?
Yield maintenance is a form of prepayment penalty that only applies if the borrower pays off the loan before a predetermined date. If applicable, the payment due is the present value of remaining future interest payments over the balance of the loan term. Most full term loans amortize based on a 30-year schedule. We also have Interest Only options available.
 
 
What is Debt Service Coverage Ratio (DSCR)?
The Debt Service Coverage Ratio (DSCR) helps to determine if an investment property (or a portfolio of investment properties) are generating enough income to make its loan payment obligations.
 
DSCR is calculated as property rent less property expenses and capital expenditures, divided by scheduled principal and interest payments on the loan.  
 
What is Loan-to-Value (LTV) and how is it used to determine the proceeds of my loan?
Loan-to-Value (LTV) is the relationship of the size of the loan to the current value of the properties supporting the loan. LTV is used to determine the size of a Term Loan and the advance proceeds for Credit Lines.
 
 
Can I use my line of credit to purchase in multiple states?
Yes. Many of our borrowers take advantage of this feature.
 
 
Non-recourse loans offered?
Yes, both recourse and non-recourse term loans are offered. Recourse loans are guaranteed by the individual or operator. Non-recourse loans are secured only by the underlying real estate of the borrower, with certain exceptions such as such as fraud and bankruptcy.
 
 
Do I need a Special Purpose Entity for my loan?
Yes. Because we deal with commercial lenders/Investors, you will need a Special Purpose Entity (typically a Limited Liability Corporation, or LLC) for your loan. If you don’t have one, no need to worry—it is typically a very straightforward process and our team can assist you.
 
 
Can I obtain a full term loan for properties that are not currently leased?
Full term loans are for stabilized rental portfolios with leased homes. Typically this means that nearly all homes are leased or in the process of being leased when the loan closes. Several of our borrowers take advantage of available Credit Lines to purchase properties until they are mostly leased and can be financed with a full term loan.
 
 
 



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