Financing Sources for Real Estate Investors - ForSaleByOwner.com ...

Posted: 02 Jul 2014 06:25 AM PDT

Seasoned real estate investors are well versed on the traditional sources of funds available for buying property. But if you're new to real estate investing or have only purchased property as your primary residence, the landscape looks a little different. Unless you're prepared to pay all cash — which more and more investors are, and which some properties require — you'll need a mortgage to finance your investment, just as you would your own home. Let's take a look at some of your choices when it comes to financing investment property and the advantages of each.

First, A Word About Loans
The most common forms of investment financing in today's mortgage market are "conventional" loans underwritten to guidelines issued by Fannie Mae and Freddie Mac. Lenders use the same set of guidelines to approve these loans, which can be used to buy any type of residential property from one to four units. In contrast, government-backed loans, such as VA and FHA programs, can only be used to finance a primary residence. You can't use them to buy rental property.

The abundance and uniformity of conventional loans creates a very competitive mortgage market for rental properties because more lenders are competing with the same mortgage product. Mortgage rates from one conventional loan to another will always be very close, if not the same.

Commercial Banks
You may not end up here, but your own bank is a good place to start your search to finance an investment property. Commercial banks issue more mortgage loans than any other source. But don't assume your bank is going to give you a special deal simply because you have a debit card from them. Its rates might in fact be higher.

However, a bank does have the ability to issue a portfolio loan, so called because the bank intends to keep the loan in its "portfolio" rather than selling it later on the secondary market. With a portfolio loan, the bank doesn't have to conform to the guidelines for most conventional loans, so it can make exceptions and approve a loan for someone who might not otherwise qualify. For example, conventional guidelines require a borrower to be self-employed for at least two years, whereas a portfolio loan may not have that requirement.

Mortgage Bankers
Mortgage banks only do one thing — originate mortgage loans, using their own funds or funds borrowed from a warehouse lender. A mortgage banker handles the entire mortgage transaction, including accepting the initial application, approving the loan and providing the funds for the mortgage. This can be advantageous for the investor because the loan doesn't have to be sent to a third-party for review.

A loan application sent to a mortgage banker will almost always be sold to another lender, or even to Fannie or Freddie directly, on the secondary market. In fact, while your mortgage application is being processed and approved, the mortgage banker may have already committed to sell your loan to other investors. Each secondary investor may offer a different rate, allowing the mortgage bank to choose the most competitive one.

Mortgage Brokers
Mortgage brokers usually offer the same programs as a mortgage banker or a commercial bank. They originate mortgage loans, and then send the application to a wholesale lender for approval. Brokers don't approve the loan, nor do they use their own funds to provide financing. A broker can be approved with multiple wholesale lenders, so he or she can shop around for the best rate or send the loan to a lender who can approve a loan that another can't.

Brokers keep lists of lenders with whom they do business; each lender may have unique loan guidelines when it comes to credit scores or other requirements. Brokers can also send loans to lenders who are offering better rates or lower closing costs. However, the broker loses control of the loan application once it's forwarded to a lender for approval. That's something to consider if your loan needs some sort of special attention or waiver.

Private Funds
Often referred to as "hard money" lenders, private lenders are useful if you can't get approved for a conventional loan to buy a specific property. This can happen if the subject property is in such disrepair that the lender won't make a loan until the property is rehabilitated.

Private loans typically have higher rates and fees and larger down-payment requirements than other mortgage choices. The loan will only be good for the time it takes to acquire, rehabilitate and sell the investment, and it will balloon at the end of the loan term, which can be as short as three months or extend up to three years. Once you've renovated the home to where it meets the conventional loan guidelines, you can refinance the private loan into any type of traditional mortgage.

The best way to find a private lender is by getting referrals from real estate agents or mortgage brokers. Active real estate investors often have several private lenders in their database and use them when an unconventional property comes to market.

What Financing Source Should You Choose?
Each financing source has its advantages, but other than a private lender, they offer the same range of financing options. Here are the basic benefits of each:

Source Benefits

Retail Bank Trusted relationship, portfolio lending

Mortgage Banker Decision maker, one-stop shop

Mortgage Broker Additional choices, rate shoppers

Take your individual circumstances into account. If you have a competitive rate, the most important thing is that you feel comfortable with your loan officer, get your questions answered promptly and thoroughly and maintain open lines of communication throughout the process.

This information was originally published on Auction.com, LLC, the nation's leading online real estate marketplace. Founded in 2008, the company has sold nearly $20 billion in assets since 2010. Auction.com has more than 900 employees and offices in Irvine and Silicon Valley, California as well as offices in Atlanta, Austin, Denver, Miami and Newport Beach. Visit us at www.auction.com, or on Twitter, Facebook and LinkedIn.

LAP18: Jilliene Helman of Realty Mogul on Real Estate Investing

Posted: 27 Jun 2014 09:28 AM PDT

by Peter Renton on June 27, 2014

Without question real estate is one of the hottest sectors in marketplace lending right now. We have gone from just a couple of platforms two years ago to nearly 100 today. And more seem to be launching every week.

At the forefront of this movement is Realty Mogul. It was co-founded by Jilliene Helman less than two years ago but it has already become one of the leaders in this burgeoning new industry. Jilliene came on the Lend Academy Podcast to give investors a deeper understanding of not just her business but how and why real estate crowdfunding is becoming so popular. In this podcast you will learn:

How a real estate platform like Realty Mogul works.
The real benefit provided by the JOBS Act for platforms like Realty Mogul.
A complete explanation of both debt and equity investing in real estate.
The average loan size right now at Realty Mogul and why that will be increasing.
How they decide what kinds of properties to bring to investors.
Why Realty Mogul will have a diversified mix of properties , both geographically and type of property, on their platform.
The competitive advantage that Realty Mogul has over the rest of the industry.
What qualifies as a deal that will be approved for investors on their platform.
How the security interest works for the both the debt and equity investments.
How Realty Mogul's portfolio of loans has been performing.
The key to working with borrowers who become delinquent.
Who the typical investor is at Realty Mogul.
Why it doesn't make sense for Realty Mogul to be open to non-accredited investors under current laws.
The actual returns to investors from loans that have been fully paid.
The projected returns for equity investors.
Why they chose Canaan Partners as their venture capital partner.
Jilliene's vision for Realty Mogul.

Jilliene also appeared on the real estate investing panel at LendIt 2014 – you can watch a video of that panel here. If you are serious about investing in real estate through a platform like Realty Mogul that video will give you an excellent background.

You can subscribe to the Lend Academy Podcast via iTunes or Stitcher. There is an audio player directly below or you can download the MP3 file here.

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Real Estate Investing

Wednesday, 2 July 2014

Financing Sources for Real Estate Investors - ForSaleByOwner.com ... | Real Estate Investing

Financing Sources for <b>Real Estate Investors</b> - ForSaleByOwner.com <b>...</b> | Real Estate Investing

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