I would like to thak Equity trust for all of their hard work with Cynergy Partners. We are proud of our relationship with them. To day, Equity Trust has been the facilitator on all of our IRA investors in Cynergy Real Fund 1.
We started our newest project this week. I had four guys there Monday through Friday doing demo, patch work, and prep for the texture.
I also started finalizing all of my bids for the subcontractors.
1. Electrical: We new we had to replace the panel (it was one of the old fuse boxes), so I had the electrician run the wires for some new can lights, the water heater, and the furnace. We are relocating the furnace and water heater in order to move the laundry room from the kitchen to the hall closet. Jessie Kinney was by far the best bid on the electrical repairs.
2. Plumbing: We relocated a couple of gas lines, and had the plumber relocate the laundry drains as well. We are saving a lot of money on this, because the demo on the walls was already done, so the plumbers can do their job, and leave!
3. HVAC: We had the HVAC Company come in and reduct the house. This was a house that had the heat running through the floor, and the AC through the walls. When we relocated the furnace, we decided to just reduct the house. David Perry was by far the best bid, and was able to use the same furnace in the attic, by purchasing a converter kit. This was necessary because the furnace was originally a vertical furnace, and will now be horizontal in the attic.
4. Foundation: We had the piers dug this week, and will lift no later than Wednesday morning, depending on the rain. I got a foundation company to do it for about 20% less than my best bid, because they had a cancellation, and needed somewhere to put their crew the next day. I really wanted to use MetroTex, but couldn't pass on the price. This is one of those times it pays to get multiple bids, even when you want to go with your preferred vendor. My estimate on the foundation was WAY off, because the house is not a pier and beam, like I had thought. It is actually a “Hollywood” foundation. This type of foundation looks and feels like a pier and beam, but is actually a slab with 2×4 floor joists under the sub floor. We had to make some adjustments because of the overages, but the project will still come in on budget!
5. Flooring: We are going to be able to save the original hardwoods! It looked as if we weren't going to be able to, but with careful pier placement (digging in the closets) the floors remained in tact.
6. Granite and Cabinets: We were able to maintain our planned custom cabinets, and granite throughout the house. This will make the house sell, VERY quickly!
All in all it has been a busy week planning, organizing, and managing this rehab. We started on Friday, and will be done no later than March 11th. This will enable Jennifer to stage the property, and have it on the market by March 12th! If you would like to see the house, let me know!
If you need help with one of your projects, give me a call. I rehab houses for investors all the time. If you just need a referral, I can do that too!
If you want to look at pictures, check out the photo album.
I also have my preconstruction video uploaded.
See you online!
Our black book is now online! Check out the new menu bar at the top of the page. We think it makes it easier to get around. Under Resources, you will see Black Book. This is where we hope you can find everything, and anything you need to be successful. Please post yourself in a category that you can help with. If you are a wholesaler, club owner, rehabber, or whatever, there is a place for your listing.
Unless you have been hiding in a cave without WiFi you have probably noticed that the rules of the lending game have changed. Just 2 ½ years ago, any borrower with a pulse that could find a property to purchase for 70% of the After Repaired Value (ARV) including the cost of repairs. They could easily find financing with a Hard Money Lender (HML). Money was pretty easy to find.
As all of us well know that is no longer the case.
HMLs are now looking at the strength of the borrower as well as the viability of the deal. Why has this come to pass? What does it mean to borrower? And how will this impact the market? Let’s find out.
So why have HMLs basically become “full doc” lenders? Necessity! When the markets were hot and any buyer with a pulse and a 550 mid score could get 100% financing from a “stated” sub-prime loan program, HMLs did not care what their borrowers looked like on paper because every deal flew off the books. Every borrower was making moneyon their Fix-&-Flips even with shoddy finish-out. Most importantly, HML’s were not worrying about foreclosing on their borrowers. In the rare occasions that they did have to foreclose the property was sold almost as-soon-as they got it back on the court house steps.
Then it happened. The credit markets tightened up and almost overnight the financing for retail buyers disappeared. Suddenly the borrowers were holding onto their loans longer and, as the realities sunk in that they might not be able to sell their investment property some began to default on their loans.
All of a sudden HMLs were faced with borrowers who were not making their loan payments. Due to their credit and finances, these borrowers were unable to refinance, the loan with a traditional lender. Some borrowers even went as far as removing new appliances and HVAC from the houses which were paid for by the HML as part of the rehab process. This meant the HML would have to foreclose if he/she wanted to protect the collateral. No longer was the deal alone sufficient underwriting criteria.
So what does this mean for borrowers now? Well, it means that we HMLs are going to look at your borrowers instead of just the property itself. As a borrower they will have to prove that they can support this loan as well as have some “skin in the game” in the form of actual cash in the deal. Equity is no longer enough. What will this look like?
After talking with most of my fellow local HMLs and discussing their current underwriting guidelines I have come-up with the following range of underwriting criteria:
Minimum Credit Score: 620 – 650 Mid Score
50% – 65% of ARV
Cash on Hand: 15% – 20% of loan amount
2 – 4 Months Banks statement showing cash on hand and few if any NSFs
Last 2 months Pay-stubs if employed. Last Years W-2 and Tax Returns if self employed
Finally the HML will make sure the property is not on a busy street and does not have any other location issues.
Bottom line: HMLs are now “cherry picking” the best deals to do each month. Volume is no longer the name of the game. Finding borrowers who will not default on their loans IS the new name of the game.
So what does all this mean for you?
If your borrower has “bad” credit, find a co-borrower that has “Good” credit.
Your borrowers need to have sufficient cash reserves on-hand. If your borrower doesn’t have the cash find a co-borrower that does.
Look closely for deals that are “no brainers”. Make sure that your borrowers have a solid “bulletproof” exit strategy.
Your Borrowers will need to know their comps and find and buy only houses that will sell fast and are located in areas that are holding value.
Money is still out there is still money out there for borrowers looking for deals on investment property. There are still ways for borrowers with marginal credit to buy and rehab houses. There are still “direct” HMLs making loans to qualified investors on qualified deals. However the deals need to be rock solid and so too must the borrowers.
Don’t think for a moment that your local HMLs are not funding deals everyday. We all are! We are all seeing better deals and better borrowers each and every day. There is capital available for your borrower's deals if they make sense and your borrowers or your co-borrowers qualify for the loan.
With all of the desperate homeowners losing their homes and banks with tons of REOs that are looking to deal, now is the time for your borrowers to find their “perfect” next deal. When you find it give your favorite HML a call. If they cannot help you call me.
Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act)
- The SAFE Act improves the accountability and tracking of residential mortgage loan originators (MLOs), enhances consumer protection, reduces fraud, and provides consumers with easily accessible information regarding the professional background of MLOs.
- The rule will implement the requirements of Section 1507 of the SAFE Act and will apply to insured state nonmember banks (including state-licensed insured branches of foreign banks), their subsidiaries and employees of such banks or subsidiaries who act as MLOs.
- The rule:
- tracks the SAFE Act definition of an MLO and provides examples of when a person is or is not acting as an MLO;
- requires employees of insured state nonmember banks and their subsidiaries who act as MLOs to register with the Nationwide Mortgage Licensing System and Registry (NMLSR);
- requires institutions and MLOs to provide certain information to the NMLSR, including MLO fingerprints (to run a criminal background check);
- allows de minimis exceptions to the registration requirements for low-volume MLOs;
- requires appropriate written policies and procedures for ensuring compliance with the rule and establishes minimum standards for such policies and procedures; and
- explains how an MLO's unique identifier must be disclosed.
- The draft final rule is publicly available and has been posted on the FDIC's Web site at http://www.fdic.gov/news/board/2009nov12no8.pdf. When finalized, this rule will be added as a new subpart B to Part 365 of the FDIC's Rules and Regulations (12 C.F.R. Part 365).
TOMORROW, Wednesday February 17 at 12:00 noon CST hear Bryan Dunklin discuss the new HUD policies live.
This call is free to all DFWInvestors.com members. Membership is free, secure, and only takes about a minute to complete. Once a member, you will have access to the most powerful real estate investor site in North Texas!
Instructions for conference call:
Login to your account on DFWInvestors.com
In the left hand column, click on Teleconferencing
The Teleconferencing page will provide the access code and dial in number
This call will be recorded, and available later to the members
There will be a question and answer period
Entrust Retirement Services is conducting a live Webinar tonight, TUESDAY at 6:00 PM, CST. The webinar is FREE to all DFWInvestors.com members. The topic of the webinar is “Either a Lender or Borrower Be: Private/Hard Money Lending Out of Your IRA “. This webinar is crucial to solving the problems of financing in today's real estate market.
Instructions for the Webinar:
Login to your account on DFWInvestors.com
In the left hand column, click on Live Broadcast
The Live Broadcast page will have a portal for you to join in on LIVE!
This webinar will be recorded, and available later to the members
There will be a question and answer period
If you are not able to attend via the web, but would like to listen in:
Please visit the Teleconferencing page for an access code for the Webinar.
Again, Your most serious buyers come at the beginning of a listing.
If you have priced yourself out of the market, you will not get as many showings. Go ahead and be at the top of the market, but don’t be outside of the market. It doesn’t make sense to buyers and you will waste time, money and serious buyers when you over price.
Do not price the house based on your goals, price the house based on REALITY!
I can't tell you many investors I have had to watch lose months of interest expense in order to finally come to the conclusion that I was right from the beginning.
I like to live by the saying, “It is, what it is”. I house is only worth, what it is worth.
Just so you know, I have made these mistakes myself! Not only am I a REALTOR, I am also an investor!
Jennifer Raney Herriage
Ebby Halliday Realtors