Finance Guide

Are you looking for finance? One possible solution is refinancing a mortgage, and in this article, we will look into refinancing. So, whether you are beginner or advanced in finance, read this guide! There are all different forms of finance, but sometimes you need more than what they can provide. Standard credit cards are great at being able to actually go forward and get financing that you need to do shopping, but this is small for big needs.

Home loans are great, but again, they generally don’t provide the financing that can reach the hundred thousand dollar mark or more. Refinance is the best solution when you need multiple ten thousand dollars or hundred thousand dollars or more. This financing works like your mortgage, with one slight difference.

For example, there is the aspect that it is mainly based on what you have accumulated as equity. This is the amount of the home that you actually own. Each month you pay your mortgage, and you are both paying for the interest, as well as increasing how much of the home you own.

Refinancing allows you to make use of that. But, realize that it will put you in a position where you need to pay for your mortgage and the refinance (if you still are paying for your mortgage), as such, it is essential to make sure that you take action when you know you can afford this. The lenders will also do the usual checks. With many lenders out there offering this form of finance, you can be sure to get financing fast!

Chet Holcomb asked:




Flipping property is a real estate venture and just like any other business may requires financing when making offers and buying property to flip. What you need to know is where you are going to get money to finance your flip. There are a variety of ways of financing a flip house and you will want to learn what way does works the best for you.

1. Private Money lenders are everyplace and are people who are professional in lending money for a worthwhile venture. Money Lenders loan money on a short-term basis with a high interest rate of return. A loan of this type is perfect for flipping real estate as long as you repay the loan in a timely fashion. The downside of this type of financing is that you cannot wait too long for disposing off the house. If a house dose not sell within the time specified, normally 2 months and sometimes longer depending on the specifics of your lender, will cause you a extreme financial burden.

2. Bank loans are loans given by the banking institution that use your past good credit history into consideration. These loans are also available on the internet. With this type loan you will only be acquiring an 80% portion of the total amount of the requested loan, which would put you in a situation of finding further assistance in securing the other 20 percent of the money required.

3. A seller that will offer you a land contract sale is the best possible way and depends upon the circumstances. The seller in this type situation would finance the house to you the buyer and turn over the title of the house to you only when the payment have been paid in full and any other agreements, or obligations met.
I would advice you to fully disclose your intention to the holder of the land contract in case of any ramifications in the future when you flip the property. Most sellers will not mind because you are investing in there property and will forfeit any moneys, or improvements to the property you have made in the event you default.
You and the seller can also set up a escrow account where you pay back the loan to the seller using a third party. A Escrow account can be to your advantage, because it will reflect on your credit rating with credit bureaus, whereas financed with the owner will not.

4. Charge, or credit cards are the easiest and you will find this as the perfect way to finance your house flip project. You can use credit cards to finance your flip from $10,000 to $25,000 per each card. You can buy and do repairs to the house and pay the credit cards off within 6 months, paying interest on the principal. However, you should try and flip your property sooner to free up your credit card liability to create more cash flow on deals that come along as an unexpected opportunity. I always recommend that you keep your credit cards purchases for buying property and repairs separate to calculate any profit and loss easily.

5. Property loans on your own home is a easy way to finance your property flip because you will more than likely have some equity to borrow against and lenders will be more than happy to loan you money because of the collateral you offer. Another option would be to refinance your home and use the money to profit from a flip house.

6. Find a partner for larger projects where the partnership involves one or more partners to front the money while you make offers and-flip the property. You will not only be sharing the profits, but also the expense acquired for the project, which in most cases is a winning situation for all partners involved.

7. You may have family members and friends that are willing to lend you the money to get you started for a portion of the profits upon completion. Sometimes loans from members can be arranged to pay back at a much later date and lower interest rate than with a financial institution.

These are just some of the ways to acquire money for flipping property. The most important piece of information I can convey is to always pay back your loans when they are due and payable to secure positive business relations in the future, because credit is a privilege and good credit will allow you to borrow much more than you could come up with on your own.

Kansieo.com

So now that you know what your basic plan is, it’s time to start getting a little serious and put some structure into your actions. The first thing you need to do is to get ‘pre approval’ for a loan. In other words you need to find a lender that suits your needs and get them to agree ‘in writing’ to lend you a certain amount of money to buy a Property. I remember when I bought my first property feeling completely over my head when it came to getting my finance into place. I had so many questions – most of which I managed to answer by trial and error. I will try to give you a detailed overview of all the question, problems and answers that I have encountered with getting finance.

Q. Why do I need to get ‘pre approval’ of a loan?

A. You don’t NEED to get pre approval but I highly recommend you DO for a number of reasons.

- Pre-approval will let you to know EXACTLY how much your budget is and therefore allow you to exclude properties that are out of your price range. This can save you valuable time.

- If you are competing against other buyers then having ‘pre-approval’ will definitely give you a big head start and allow you to take advantage of Vendors who are looking for a quick sale. Think about it – If you were the vendor and two people both offered you $350k for your house BUT one of them had ‘pre-approval’ whilst the other didn’t. Who would you choose? It’s a no brainer, there are even times when you offer $1k -$30k less than somebody else and they still choose you. Why? Because for one reason or another the vendor needs to sell straight away and they can’t wait to find out if the other offer will be approved.

- Keep STRESS to an absolute Minimum. There is nothing worse than having your offer accepted and then having to wait for the bank to make their decision. This is especially the case if you haven’t got a home loan before or are self employed.

Q. Should I use a Mortgage Broker?

A. Yes, a good mortgage broker should save you thousands of dollars and help you get a loan easily. If you are buying your first property then you will appreciate as much help as you can get. Mortgage brokers deal with banks every single day and they should know how to get you a loan and more importantly WHAT loan to get. Have you noticed that there are a million different loan options these days? A good mortgage broker will know which one suits your situation and save you lots of time and money. Always do your own research but if you find someone who you trust you should have no problems. Best of all you don’t even have to pay them; the bank will do that on your behalf. So really there is no reason NOT to use one. Just remember find a Broker who you trust and get along with.

Q. What sort of loan should I get, and what does Interest only mean?

A. The best person to advise you on this is your broker but generally speaking Investors only ever use Interest only loans. What this means is that they will never own the house outright, instead they make smaller repayments that only cover the interest bill. This can be a crazy idea to get your ‘head around’ at first but the reason is quite simple. The lower your repayments are on your property the less restricted your cash flow is, therefore you have more excess money to help finance your next investment property. The logical question is – but if you never pay off the house how can you make any money? As we learnt in Chapter 1, you can still access the equity in your property without selling or completely paying off the house (see chapter 8 for more details). It’s also worth mentioning that the Interest component of an Investment loan IS tax deductible whilst the principle repayments are NOT, just another reason why Professional investors always use Interest only loans.

Q. Should I fix my Interest rate or leave it variable?

A. I have a basic rule or recommendation when it comes to this question. When you first see banks raise their long term fixed rates you know it is time fix your loan. Using this rule and some common sense you should be able to work out what’s best for you.

Q. How much do I need to save for a deposit?

A. Once again it depends on your situation and circumstances. A ‘normal’ property loan would include a 20% deposit but professional investors will always try and pay as little deposit as possible. So, would I recommend getting a 95% loan? With caution and common sense, yes I would – BUT every situation is different and I obviously wouldn’t recommend for someone who is earning $20,000 a year to get a 100% loan for a $500,000 property. Use your common sense whilst doing everything possible to make it happen for you. The worst feeling in the world is when you have saved a decent deposit but decide to wait another 6 months to save that extra little bit only to find out that house prices have risen and your deposit is now effectively worth less than it was 6 months ago.

1. Leverage (Other People’s Money). Leveraging will make every dollar count. You do this by pooling you money with other people’s money. It’s simple: If you have $50,000 and pool with three other people with $50,000 each, together you have $200,000 to invest. This makes is it easier and more profitable for all of you. And because you organized this deal and worked to make the investment property profitable, you will keep the majority of that profit. The investors didn’t have to do anything but put up their money, but they made a profit as well.

In order to gain the trust of other investors is by having a strong credit history, good character (ethical), and have good references. They need to know that they are doing the right thing by putting their money into your hands. This is a trust situation. They are trusting you to be who you say you are and do what you said you would do – turn a profit.

2. Pre-approval with an equity line of credit. If you’re a property own now, and have a good credit history, you may be able to get and equity line of credit for the quick purchase of your investment property. This line of credit is drawn against the equity of your current home. You have a check book and a line of credit that you can draw funds from with little restriction. The interest is charged only on the current balance from this credit line. If you don’t use it, you don’t pay interest on it. But, when a property comes up that meets your criteria and passes all of your tests, you will be able to purchase it immediately with this line of credit.

3. Pledged Account Programs. This is a very short term line of credit, used to get the purchase of your investment property finished. It is a no down payment loan. This is also an adjustable rate mortgage plan, so selling quickly is extremely important. If you can’t sell quickly, then refinance at a fixed rate to keep payments under control. Then you can use the property for rental purposes, with the tenant making the mortgage payment, until you can sell.

In a pledged account, the borrower or his/her relatives pledge certificates of deposit to a lender for security on the no down payment program. The principal and interest earned continue to belong to the borrower or their relatives. But, the CD secures the no down payment loan and lowers the lender risk.

There are other creative ways to finance the purchase of foreclosure property. Check with your local banks, credit union, or savings and loans.

I was on a conference call earlier today and wanted to see if my first impressions and thus conclusions were sound. Please advise me on your take. I will attempt to be as open as possible on talking from the other side of the conversations.

I was contacted on a real estate investment opportunity. Maybe some of you have heard of this even though I am not going to mention any names.

For mere $34,900 I can invest into a company where they would find me a home (usually in the mid-west) and rehab it for me. I would then be the owner of the home. The ARV market prices of these homes are in the mid to upper $50,000s. They would then provide up to a year of payments at $400 per month while they find a buyer for my home. I would then carry financing on that home for the end buyer on a 30 year PITI note. There is no balloon payment thus you have strong cash flows. Mortgage payments are based on a 9.9% interest rate and the market RENTS. Thus, the end buyer is paying based upon the market rents. Their down payment is about 2% of the value of the home, normally around $1000.

The Cash-On-Cash Return on these in the first year is approximately 16 to 18%, plus the equity difference of your buying the home and the actual value.

Here is my dilemma. I believe in the speed of money. Thus, when you are investing how quickly do you get your money back. These are all cash deals. At a 18% cash-on-cash this would mean you are cashed out in about 6 years. A little slow for my tastes, but ok.

Another issue is I am in the profession of lease options in Las Vegas, NV. Thus, for an option the tenant/buyer (not the actual end buyer at the time the contract is signed) is putting down at least $2000. I would ask the same on an option in the mid-west even though the price point of the home is lower. This would mean a larger percentage of a down payment. Thus, someone putting down $1000 to buy a home is not as productive as a lease option. And you lose control of the home.

Third issue is these are all done through a separately owned LLC holding the note (and originally the property). If you have to foreclose this is a bit more costly than an eviction — in most cities and municipalities.

In conclusion, I did not see the advantage of doing a program like this unless you are doing this as a small part of your investing portfolio (maybe 20% of your real estate investing) over simply doing a rental or a rent-to-own. I understand the humanitarian and philanthropy benefits, but the math to me doesn’t make sense.

Please give me your input on this. The numbers and returns are higher than most stock or commodity markets and I wouldn’t mind promoting this to certain investors. I just need to know if your initial reaction is similar to mine or am I missing something.

Thanks for your feedback and Happy Investing!