Aug. 24, 2021

Finding the Best Mentor in Real Estate Investing

Forums like BiggerPockets and social media sites like Instagram can be vital for finding driven individuals whose message resonates with you, before reaching out to them to see if they would be willing to give you guidance within the industry. It is important that you not think of yourself as ‘looking for a mentor’ in the most general sense, but looking for someone whose work and passion meshes with your own.

Before you contact them, however, be sure you do an inventory of what skills you have and what you can bring to or give to the mentor. The time of these big players is incredibly valuable, and so there is a need for reciprocity when they donate it to your education. If you find that you do not have the skills they need, go get those skills or otherwise plug those holes in your education before finding a mentor. In fact, it’s best to come to a mentor with an offer of how you can help them, rather than asking what they need.

 

Aug. 24, 2021

Guide to Adding Value to Industrial and Commercial Real Estate Properties

Value-add plays in industrial real estate are one of the most profitable strategies in the industrial niche. Buildings that have low rents can often be bought for a low price before adding value and boosting rents by 30% or more.

Value-add plays can involve bringing dilapidated buildings back up to code, such as fixing ADA issues, sprinkler systems, and HVAC issues. However, they can also be about maximizing the available space -- limiting common areas, providing lofted structures for office spaces, or ensuring that the maximum vertical height can be used by tenants looking to engage in warehousing.

Aug. 24, 2021

Who Owns Most of the Properties in the Industrial Real Estate Market?

Most of the industrial square footage in the United States are owned by large corporations and huge firms working with buildings greater than 1 million square feet. However, in terms of quantity, especially at the smaller scale of 10,000 square feet or below, the vast majority of the market inventory is owned by mom and pop outfits, many of whom are beginning to age out of the business and looking for an exit sale.

Fortunately, these two distinct sub-niches of the industrial real estate market rarely interact. In general, there are large real estate firms doing cash deals for huge spaces -- and competing only with other firms of their size -- and then smaller actors operating in the 10,000 square foot or less space along more traditional real estate investing lines, which will be the kinds of properties sought out by those looking to get into industrial real estate investing.  

 

Aug. 24, 2021

What are the Benefits of Industrial & Commercial Real Estate Investing?

Though industrial real estate investing has, on average, single-digit returns on investment, its main benefit is that it has very strong fundamentals. Not only is the demand for industrial real estate rather recession-resistant (and first to recover when it is not), but the pricing by square foot rather neatly matches local supply and demand curves, unlike habitation real estate that can be pulled away from real prices by wild speculation.

Also, the current industrial real estate market -- especially for smaller properties less than 10,000 square feet -- is ripe for investment as older mom and pop owners look to sell off the properties they bought in the 1980s and 1990s, most of which have significant value-add opportunities, having seen little capital improvement since their original purchase. 

 

Aug. 24, 2021

How do I Qualify for a Bridge Loan?

Bridge loans are geared toward buyers with great FICO scores, with lenders generally preferring to see a score of 740 or above. You also need to have significant equity in your current home, as a bridge loan can only go as high as 75% of that equity. This means that you can’t expect your current home equity of $200,000 to get you a loan higher than $150,000.

Once you qualify for a bridge loan, the whole process should be done in 30-days or less. Because it is a non-traditional loan product, lenders have an incentive to move faster because they do not see the volume of traditional FHA lenders.

 

Aug. 24, 2021

What is a Bridge Loan? A Nontraditional Real Estate Loan Service

For someone who has lived in their home for a long time and built up significant equity in it, but wants to move into a new home, a bridge loan can be an excellent choice to simplify the process of receiving a mortgage loan to finance the new property.

With a bridge loan, you can take equity out of your existing home -- up to 75% -- and use it on a downpayment for a new home. This acts as a non-contingent offer, being executed at the same time as the new mortgage, so that if you don’t wind up closing on the new home you aren’t stuck holding a ton of cash.

A bridge loan includes a stipulation that your old home goes on the market, and you do not make any payments on that old mortgage for 12 months, giving your home plenty of time to be sold such that the old mortgage can be paid off (though there is a ‘bloom rate’ at the end of those 12 months).

Bridge loans are a great choice for anyone who is looking for a new home and doesn’t want to potentially get stuck owing payments on two mortgages.

Aug. 24, 2021

What is the Minimum Credit Score for an ITIN Home Mortgage Loan?

While an FHA loan likes to see a FICO credit score of 580+, preferring credit scores in the range of 620-640, ITIN loans do not go quite so low. 640 is the preferred minimum, with the occasional lender being willing to go as low as a FICO score of 600. However, top-tier clients have a 720+ FICO score, and they get the lowest interest rates and the lowest downpayment requirements.

However, if you are seeking an ITIN home loan and have not yet established credit, an ITIN loan is still possible. The only thing is, your interest rate will be high -- around 7% -- and you will need to put down 25% of the total value as a downpayment.

 

Aug. 24, 2021

How Do You Apply For An ITIN Home Loan?

Applying for an ITIN home loan is as simple as calling a loan officer. They are well trained in non-traditional loan products and can walk you through the process step by step.

As with a normal mortgage loan, an ITIN loan will require that the lender review your tax information, pay stubs, and bank account information in order to make you a series of competitive offers at the usual timescales of 10-30 years at both fixed and adjustable rates. It is important that you have two consecutive years of tax returns under the same ITIN number, ensuring that it has not changed due to job changes or previous filings under a corporate tax ID number, which doesn’t work for this loan program. 

The number one piece of advice for getting an ITIN loan is to be honest and transparent with your loan officer. If you try to hide anything that might complicate your loan -- a previous bankruptcy or owed child support -- the lender will still find out and you risk them revoking their offer or hiking the interest rate due to your lack of honesty. If you are honest, your loan officer can help you work around and explain away any potential issues. If you are dishonest, your loan is in jeopardy.

Aug. 24, 2021

What are ITIN Mortgage Loans? A Nontraditional Home Loan Credit Program

An ITIN loan is a typical loan like a normal buyer would receive, only for people who have an Individual Taxpayer Identification Number (ITIN) rather than a Social Security Number. These people are generally greencard holders or guest workers who have permits to work in the United States legally, while not being citizens or permanent residents.

This loan product works almost exactly the same as a traditional mortgage loan, allowing a whole class of people excluded from FHA loans to achieve home ownership. However, because they do not have access to traditional FHA loans, they will need to put down more than the 3.5% that the FHA offers to first-time home buyers -- generally 15% or more.

As well, the interest rate can be a bit higher for ITIN loans, generally by around 3%. With today’s low rates, however, that puts the interest rate of an ITIN loan at around 6%, which is still good for a non-traditional loan product.

Aug. 24, 2021

What is the Turnaround Time on a Home Construction Loan?

Once you have a lot loan for property that you plan to build on, you can apply for a construction loan. For a half-a-million dollar lot and half-a-million dollars in construction costs, you can get a loan for up to 80% of that total value, or $800,000. If there is a pre-existing mortgage, that is paid off first, with the remaining sum going toward the construction.

In terms of time from receiving the lot-loan to receiving the construction loan, it can be much longer than people imagine. Some clients think that after receiving a lot loan they’ll be building in weeks. However, local permitting processes add a significant amount of time -- generally from 8 months to 2 years, depending on how much housing developing is going on in that area and how streamlined the local processes. However, in the absolute worst-case it can be six years! To get a better estimate, talk to developers who are already working in the city and ask them for their honest opinion on the local timeline.

However, if you want to avoid these huge timelines, you can do what is called a ‘purchase construction’ that involves purchasing a lot that already has plans developed, permits pulled, and contractors ready to go, to reduce this timescale down to around 4 months. However, this requires that the seller has the floorplan already designed and approved, rather than allowing the buyer to design it from the ground up. However, minor changes are still able to be made by the buyer.

Though new-build construction can be a lengthy process, a good loan officer can help you expedite the process and find a good loan that fits your needs.