Lending for the Real Estate Investor During the Pandemic
6 min read
An In-Depth Discussion of Lending For the Real Estate Investor During the Pandemic
Lending Tools Available in the Lifestyles Unlimited Vendor Program
Private/Hard Money Lending
Portfolio Lending
Conventional Lending
Real Estate Investor
Sure, in general, 80% of Lifestyles Unlimited members take advantage of hard money lenders that will lend up to 75% of after repair value. Typically, for a conventional loan if you’re going to buy a property you put 20% down plus closing costs and repairs out of pocket. This product, the hard money loan, allows you to lend on future value. At 75% of after repair value, in many cases, you’re only spending 5-10 thousand dollars out of pocket to acquire a $200,000 property and fix it up. So, if you come to us to get pre-approved, we can set you up with a hard money lender and will facilitate the conventional loan on the back end. It’s easier this way because you’ll only need one pre-approval.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
Real Estate Investor
We are looking at your credit score and income, specifically your debt to income ratio. We are also looking to see if you have enough money in the bank for the purchase/refinance, as well as your reserves left over. Basically, you need to have enough money for the actual project, plus a little bit extra.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
Real Estate Investor
This is a great time to dispel common myths right now. You only need a 660. One of our changes since the Covid-19 crisis is that we did bump up our minimum score from 640 to 660. But, that’s a far cry from the 740+ scores people believe is necessary.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
Real Estate Investor
Every lender has their own overlays, or financing conditions they put on top of what Fannie Mae requires for their own underwriting needs. These overlays differ from bank to bank. For example, big banks have a lot of their own overlays. Basically, this means if you’re told no from one lender, keep trying.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
Real Estate Investor
With us, you can have up to 10 loans in your name. If both spouses are creating income and possibly qualify individually, then it’s better to apply separately, in which case you can get 20 loans instead of 10.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
Real Estate Investor
OK. Good question. We’ll talk about benefits and LLC in terms of lending. When it comes to Fannie Mae lending, we do not lend to LLC’s directly. What I do in many cases is if someone did buy the property with an LLC, and they want to do a refinance through me, we can bring that title from the LLC into their personal names and then get them approved.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
I want to shift gears now and talk about some of the impacts of the coronavirus. The big myth out there that I’ve heard is that lenders are not lending. Clearly you still are, right?
Real Estate Investor
Correct, we still are, but there are many lenders who are not. Luckily for us, we are looking at the bright side and we see this as a blip, so the changes to our lending requirements have been very minimal.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
Real Estate Investor
That’s not true, what people are probably referring to is that because of the coronavirus, Fannie Mae has allowed us to accept exterior-only appraisals more often than they did before. But, I do want to point out that our appraisers are typically going into the property for these investment deals, and we have a system for this, because that is helping your property’s value. This is important because it can help you reduce your out of pocket costs or possibly get more money out in a refinance.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
Real Estate Investor
I’m hearing everything from no impact at all to maybe a 15 % decline. Of course, that’s going to be many, many months down the road because appraisals are based on looking at the last six months. I would say, plan for values to be fairly stable, maybe a little bit of a dip. I think there will be a lot of great opportunities to really pick up some steals.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
If you are concerned about values, I do want to stress that good landlords held on straight through the Great Recession. Values might have dipped, but they came back and renters kept renting right on through.
I’m curious, what are your thoughts on longer term rates or inflation?
Real Estate Investor
Before all of this happened, we were already heading towards a recession. I still believe we’re heading that way. I predict very aggressive, low rates for a while. Get ready, this should be a very, very good year for investing.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
If you’re already an investor and you have some rental properties, look at your equity.
What about personal residences? Is it advisable to tap into the equity there? “
Real Estate Investor
Most definitely. That should be a first resource that you have. For primary residents, we can go up to 80% loan to value for cash out. If you have the equity there, that should be your first thing to pull from. Rates for your primary residence are around 3% on a 30-year fixed right now and below 3% in a 15 year. It’s almost free money.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
Real Estate Investor
For us, it’s about three weeks, so you should plan for about a month between calling me and getting that money in your pocket. A lot of people are trying to minimize their debt right now, but it’s important to understand that income-producing debt is a different beast entirely.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
Real Estate Investor
They’re awesome because the resources you get through your membership, you can’t get anywhere else.
First Imperial Mortgage
Official Lifestyles Unlimited Vendor
