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How To Weather Real Estate Investing Challenges
By: Simon Macharia |
| word count: 455 comments(0) views: 65 |
| A few years ago, the real estate investing was a wide open playing field where you could do any type of deals. |
A few years ago, the real estate investing was a wide open playing field where you could do any type of deals. Things have changed with the real estate bubble forcing real estate investors to re-discover themselves to succeed.
Here are a few things that affect real estate investing business.
1) Taking over mortgage payments
This is one of the most favorable real estate investing business models with most investors. Deals with lease options, rent to own, owner financing, form a big part of most real estate investors income.
Lots of states are now requiring that you disclose and get permission to the lender before you can take over payments.
They also require you to disclose to the buyer. Some states do not allow you to do a lease option more than 180 days. You must therefore be ready to do a lot of paperwork.
2) No stated income loans
If you are self employed, you are unlikely to get a loan. It used to be you just provided proof of your current assets, state what you make per year and you could get funded for a mortgage.
This is no longer possible, so if you are self employed, you must have an alternative way of buying properties.
3) Hard money credit based?
Some hard money lenders are now lending based on income and credit scores and the property.
The rules are more relaxed, but you have to shop for good hard money lenders.
4) Limit on number of properties you can finance
Today, if you have a credit score of 720 or more and your income is fully documented, you can only finance up to 10 properties.
You must also show cash reserves of at least 6 months your monthly payment for each property.
Of course if you are self employed you cannot document your income!
5) Seasoning rules
You cannot refinance a property to cash out until you keep it for 12 months even if you bought it with cash. In other words you cannot just move on to the next deal when you want!
If you buy rental properties, you have to take this into account.
If you are self employed, can you refinance if you cannot document your income?
6) No refinancing properties held in an LLC
In order to refinance, you must hold a property in your personal name. If they are held in an LLC, you must transfer them to your personal name for 6 months before you can refinance.
So what do these new limitations mean? Is it the end of real estate investing as we knew it?
The answer is no. Real estate investors know how to re-discover themselves and are flexible enough to adapt to changing market forces. |
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