Finance

by Tim Herriage Tim Herriage No Comments

Timing your investment property refinance

Leverage is one of those things that can make or break your real estate investment portfolio.  The proper use of leverage can minimize your tax burden, fuel portfolio growth and accelerate returns.  The improper use of leverage can wipe away gains and bankrupt a company.  We believe the US economy has cooled, home prices are peaking, and interest rates will continue to rise.  These factors coupled together have formed our conclusion that now could be the best time in the market cycle to leverage your assets utilizing fixed debt.

Many real estate investors have enjoyed growth in the last five years fueled by loose purse strings at local banks and regional lenders.  Even the GSEs have dipped their toes in the water.  Large national firms like Blackstone’s B2R Finance (Now Finance of America Commercial) and Colony American Finance (Now CoreVest) offered five and ten year balloon notes on portfolios beginning in late 2013.  Now, we find ourselves five years later, and what does the next five years look like?

Below are our forecasts and recommendations with regards to leverage and your real estate investment portfolio:

  • Identify dates:  Many of the “community bank” loans have renewal and adjustment provisions.  Most real estate investors we talk to have no idea that most of these loans can be called due in full at the same time as they are supposed to “reset”.  If you have any loans that are due to reset, adjust, mature, or renew in the next five years, now is the time to address those loans.
  • Lock in rates:  Many real estate investor simply cannot remember when a 9% interest rate on rental property from a bank was a good deal.  Rates are still very low throughout the industry.  We believe the best choice for most real estate investors right now is to lock in as much 10 year or longer sub 7% money they can get.  The next five to seven years should see interest rates rise and fall several times.  We are still in a very low comparative rate environment, so it is best to make sure any debt that might need to be addressed within the next decade be done so now.
  • Cash Out:  Many investors aspire to pay off their rental portfolio.  While this is a noble idea, most real estate billionaires believe in the opposite.  The ability to responsibly borrow tax free money (that your tenants will pay back) which you can use as reserve funds or even growth capital is something that powers real estate investing at all levels.  We have clients that live virtually tax free by refinancing their rental portfolios routinely.  With the introduction of cash flow based cash, out refinances; investors now have an avenue to systematically re leverage their portfolios.

In short, we think:

  • Property Values are high (which helps LTV limits on loans)
  • Rates are still low (historically)
  • There are market shifts coming (which is why you don’t want exposure to adjustments, renewals, and loan maturity)

These factors make use believe now may be the perfect time to stabilize the debt on your rental portfolio.  Reach out to our team of real estate investment loan specialists today to have a conversation about your needs.

Want to call us?  Call 972-737-1850

Want to email?  Click Here

Have questions or comments?  Let have a conversation below.  Find this article helpful or thought provoking?  Share it please.

by Tim Herriage Tim Herriage No Comments

Numbers Count. Do you Care? Succeed with Real Estate Partners (Part 2.)

TURN KEY REAL ESTATE INVESTMENT DEFINED
Many people interested in the returns real estate offers feel they are not qualified to do the work. They recognize succeeding with just a weekend education course is remote but a viable alternative is to work with turnkey fix and flip or buy-to-rent companies that populate this country. In this case understanding a property financial analysis is indispensible.
HANDS-OFF – BRAIN-ON
Before you begin don’t make the assumption that turnkey investment provider does all the work, and the investor sits back and collects the checks. The issue is you should understand how things work, especially the financials. This is because the market does not adhere to the standards or regulatory oversight of stocks, bonds and funds.
Real estate investing is not “armchair investing.” It may be “hands-off” investing in that you are not swinging hammers or cleaning up after tenants, but it is very definitely “brains-on” as far as understanding the strategy, financials and exit plan, otherwise how do you know you are not being taken for a ride. This is why basic real estate financial literacy is vital.
TURNKEY ALTERNATIVES
Before you jump at this opportunity understand the variations on turn key process. The most complete arrangement is where you do business with one company who helps you buy, renovate, sell or turn into a rental, property manage, account and report. There are a number of companies that do all of this, however they do subcontract things like renovation and maybe property management. The key is a singular point of contact and responsibility to you as an investment client.
Other companies will contract with you, using your money to buy the house, fix it up, and help you find a tenant – then assign management to an associated or third property manager. The advantage often is the property can be purchased more inexpensively, but the investor offsets time and uncertainty for income. This is not what we define as turn key experience as the different contractors are driven by different goals that are not necessarily those of the investor. This further complicates any financial analysis because of disconnect physical and financial processes.
STRAIGHTFORWARD MODEL
Some turnkey vendors provide the investor with a leased-up property already generating income. This removes many of the uncertainties of price and contingencies of unknown costs, delays and time it may take to renovate, sell or find a tenant. Experienced turnkey vendors are going present you with a pretty detailed spreadsheet prior to acquisition of a particular property. If they are not willing to do this, walk away. You also need to understand the numbers you are looking at.
Ask your turnkey vendor these questions: Can I buy the house you are showing me as the typical investment house? Do you own it as principal or acting as agent? Is it renovated and habitable by a renter? If not what will it take to bring it to market ready condition? Is the property leased to a rent-paying tenant paying market rent? (check rents at www.rentrange.com.) If any answers are in the negative get more inquisitive.
2020 REI Companies Consulting Services is happy to offer a second opinion on any analysis on a property you may be considering.
STANDARDS NEEDED
Current real estate accounting standards are quite sufficient for any analysis, but using them requires understanding. The information we are going to present is here to help.
These analyses and explanations follow standard real estate accounting rules and will be broken out with examples. Where appropriate we will also provide you with some baseline rules related to industry insights that have served and real estate investors well over the years. 2020 REI invests using these same rules.
It is the intention of this blog to update this data and provide on-going education to those involved in the investment in real estate. The blogs will provide building blocks related to real estate analysis and progressively work towards more complex financial return metrics. It is important to have a basic understanding of cash flow analysis before you begin any real estate investment or buy real estate as an investment. Investors can avoid pain if they use and implement the analysis and decision tools we will present going forward.
If you want a second opinion on any investment you are about to make, 2020 REI Consulting is happy to provide a second opinion.
DO YOU CARE ENOUGH TO MAKE MONEY? Succeed with Sound Real Estate Analysis (Part 1.)

by Tim Herriage Tim Herriage No Comments

Need To Sell Your Occupied Rental Fast, Without a Deep Discount?

Real Estate FinancingYou know how this works. An investor needs money and wants to sell their investment property right now! There is urgency. Maybe it is an opportunity to upgrade a portfolio or a pressing family need, but more importantly this investor needs the money fast.
The property is occupied and cash flowing but it is assumed it needs a refresh to bring the best price. Do you ditch the tenant, end the cash flow and destroy the financial advantage to the buyer of an in-place tenant while the seller spends money on a light renovation?
NEED FOR SPEED IS A DISADVANTAGE 
Zul Budhwani leads SFR investment sales at Investable Realty, a 2020 REI Company, says “this is not an unusual circumstance. If you go about this incorrectly however, the need for an early sale and cash-out can lead to unreasonable discounts off the ARV or market value. You can avoid this.”
TENANTED OR NOT?
“Second, there is the in-place tenant. A seasoned investor and a professionals in SFR sales know a performing rental with an in-place tenant is an advantage to an investor buyer,” says Zul. “We are dealing with current and not speculative pro forma numbers. The current income and expenses are actual numbers, versus a spreadsheet forecast of how a property will perform in the future, once a tenant(s) is in-place. This is good.”
ON-MARKET, OFF-MARKET?
“Third,” says Zul, “ we do not put the property “on-market” and the MLS. This typically attracts new investors who begin with unrealistically discounted offers. Often they also do not appreciate the value of the existing cash flow and a real cap-rate. By promoting to a known investor customer list and selling off-market, we reduce unqualified buyers from the start. Using these strategies, Investable Realty has been able to keep discounts to a minimum. In this recent case Investable Realty was able to close this two house $250,000 transaction in 30 days at close to asking price,” says Zul.”
Investable Realty is investment specific brokerage that provides full service to buyers and sellers at reasonable fees. If a buyer needs financing Investable Realty can also work with sister company, 3L Finance to help provide this.
If you have investment properties to sell, especially sell fast, or are looking for sound investment properties contact Investable Realty.

by Tim Herriage Tim Herriage No Comments

MAKING INVESTOR BORROWING EASIER

Most borrowers (especially investors) loathe having to find money. “Their experience going for a loan has been painful” says Mike Burkett, Investment Finance Advisor at 3L Finance. “This is because many loan officers are not that sure of what they are doing and may misjudge their ability to help.” We know how to change this.
In a current case a husband and wife team in Dallas had determined they could not expand their portfolio as they had run out of cash. They owned 15 rental homes free and clear and were reluctant to go through the borrowing process based on previous experiences.  They then met Burkett at 3L Finance.
INVESTOR TAILORED LENDING EXPERIENCE
3L Finance is positioned as lending advisors to investors. As a result they are able to work with borrowers to make quick assessments, streamline paperwork and smoothing the path when they can seen a loan solution.
Many loan officers in the investor space come out of conventional lending so are cautious based on their compliance background that does not apply to investor business lending. Even though they are aware of this, caution and inexperience falls out on the investor borrower in the form of delay and documentation hoops that often lead to a dead end. Inevitably investors find this painful and frustrating.
POSITIVE OUTCOMES
The 3L Mission arose out of 3L founder Tim Herriage’s experience trying to bridge individual investor needs with institutional lender requirements. “3L Finance,” says Herriage “is about reducing barriers to investor funding by simplifying process and actively advocating for the investor. Knowing the right question to ask a borrower, or answer to provide a lender, 3L can quickly help dismiss what would otherwise be an objection.”
In the case of the equity rich/cash poor Dallas landlords, it was the strategy and process of identifying five of the properties that best met borrower needs while staying within lender underwriting criteria. This allowed a $250,000 loan secured by these five rentals.  This new found cash-out liquidity plus the ability to leverage newly bought properties has already allowed the borrowers to identify and contract for a new property.  3L will finance 90% the purchase and all the renovation. The borrowers have already put 10% down on a $260,000 SFR purchase, with a $375,000 After Repaired Value (ARV), following a projected $50,000 to $60,000 renovation.
By enabling this family with added liquidity they can now expand their rental portfolio with some cash generating flips, they have learned two lessons by working with Burkett and 3L Finance:
First, borrowing does not have to be painful, even with less than perfect credit scores.
Second, an investor savvy loan advisor can make the borrowing process easier, quicker, more transparent, and probably far more successful than most borrowers have typically experienced.
If you are in need of funding for your project call 3L Finance and see if Mike can help. Go here…….

by Tim Herriage Tim Herriage 2 Comments

NEED FIX & FLIP CASH? Apply Now, Close Next Week!

A continuing issue for real estate investors, especially when fixing & flipping, is adequate funding. We can help!
2020 REI Companies decided that if we are to be a dependable loan source for real estate investors we needed to establish financial relationships that will ensure clients constant and credible sources of funding.
2020 REI and 3L Finance has been working with one of our new capital partners since May and after closing enough deals to feel good about the company and our respective processes; we want to make these same lending facilities available to more of our fix & flip, buy-to-rent and portfolio customers.
If you are looking for financing complete this online application, and lets see if we can close next week.
Fix-n-Flip Loans as low as 8.25%*
Up to 90% of Purchase & Repairs
12-Month Term
No prepayment penalty
Loans from $50K – $2.5M
*Range: 8.25% to 13.99%
Call us now at 972-737-1850; or simply apply on line
http://3lfinance.com/apply-online/
At your service! The 3L Finance Team

by Tim Herriage Tim Herriage No Comments

Financing Investments in 2016

Real Estate FinancingDo you want to grow your personal rental portfolio or scale your fix and flip business?  Are all of the options out there too difficult to understand?  Wish you had one place to call for any and every product?  Now you do!  2020 REI is launching a new finance division on February 1st, geared towards helping the individual investor cut through the red tape that is getting a loan for investment property.  For the last two years, I have been on the leading edge of introducing institutional capital to individual investors.  As many of you know, I left my position at B2R Finance six months ago.
I have been working diligently in the shadows to create a new type of real estate investor finance company.  Imagine one person, one phone number, one relationship for all of your financing needs!

  • $40,000 rental loan?  CHECK!
  • $40,000 hard money loan?  CHECK!
  • Fix and Flip line of credit?  CHECK!
  • Financing a non-preforming loan?  CHECK!
  • $50,000,000 portfolio loan?  CHECK!

Beginning February 1, 2016; 2020 REI will be able to finance virtually ANY, and every real estate investment transaction you can find.  We will be creating relationships and partnerships with you; and focused on helping you achieve your goals.
Join me for a webinar on Wed, Jan 27, 2016 1:00 PM – 2:30 PM CST to learn more about how we can help you.
CLICK HERE NOW to register for the webinar.
More news soon!
2020 Real Estate Investment Group
This is not a commitment to lend.  2020 REI Group, LLC underwrites and brokers loans for other companies.  2020 REI Group, LLC (and its subsidiaries) makes commercial, business purpose loans to investors for non-owner occupied housing. We do not make residential mortgage loans. Loans are for investment purposes only and not for personal, family, or household use. Loan product availability may be limited in certain states. All loans are subject to borrower underwriting and credit approval.  Other restrictions apply

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