How to Add Curb Appeal

You only get one chance to make a first impression. Having good curb appeal is one of the most important factors in attracting buyers to sell your fix and flip homes quickly. If your curb appeal is lacking, the right buyers may never even set foot in your home.

Walk around your home and look for any neglected areas that might seem like “red flags” to buyers, such as missing roof shingles or rotted siding. Trim trees and shrubs if needed, and make sure your lawn and flower beds are well maintained. Add some colorful flowers to your front beds and/or flower boxes to brighten up your landscaping.

To  bring your house to the next level and really make it stand out from the rest, you want to create some sort of focal piece. Some houses have pre-existing outdoor focal pieces that you can enhance and highlight. For example, a porch on its own is great, but you can make it amazing with some simple improvements like patio furniture or seating. Adding some Adirondack chairs on the front lawn can create a conversational space that buyers will be sure to remember.

Make sure the exterior of your home is as clean as the interior. This can often be accomplished with a simple garden hose. You may even want to rent a pressure washer if the siding, walkway or driveway is stained or dingy.

Thoroughly wash windows and screens, and remove and dark solar screens if you have them. Open shutters, curtains and blinds, to make your house look more inviting from the outside – it will also brighten the inside of the home as well.

Consider a fresh coat of paint on your front door, trim and shutters. Personalizing the home will make your home stand out. Try small, cosmetic improvements like new house numbers, a colorful wreath and a clean front doormat. These minor inexpensive changes can pay off in a big way and help you sell your flip quickly for top dollar.

Looking to buy a new fix and flip? Let Investor Loan Source help with your financing needs.

A Letter from Our CEO, Tom Berry

As I write this letter, I can’t help but think that this will probably be the craziest, most unpredictable experience of my lifetime. First, I hope you and your family members are well and are in good spirits and optimistic about the future. I read in a “good book” one time that “without vision, the people will parish”. I think it is important to always look to the future with vision and wisdom. Fear is crippling and debilitating. It is born of uncertainty and a lack of understanding. Today is certainly ripe for that, isn’t it? So much is unknown right now that I wanted to focus on what we do know and share with you what we at Investor Loan Source have done and what we continue to do, to ensure that we remain strong and secure for our families, investors, lenders and partners.

We have always taken what we have considered a conservative approach to lending and investing. We have never swung for the fences. We keep our pricing at reasonable, sustainable levels, and we have limited exposure as much as possible. When our competitors slashed their margins and raised their LTV maximums, we didn’t chase them. We let borrowers go to them and we focused on diversifying our product lines, so we didn’t have to compete with craziness. It turns out that our strategy worked out well, as many of those competitors are now unable to lend or have closed their doors all together. As a result, we have had record numbers of loan applications in the last 30 days. With this THREE-FOLD increase in applications, we have been able to make changes that will only serve to make us and our loans even stronger.

  1. We raised the credit score requirements of borrowers to get into our A&B loan programs. This results in higher percentage rates on most of our loans without us really raising rates.
  2. We lowered LTV maximums on certain loans. This means they need to bring more of their own money to close.
  3. We have lowered the maximum loan amount for residential fix and flip loans. Now we will generally lend only up to $250,000 in most of our markets, as we believe that the higher priced houses may take a value hit in the next 12 months. As an investor over the last 13 years, I know that the blue collar “affordable housing” is always in short supply and demand increases during rough financial times. This leads to smaller price drops as a percentage on lower priced homes compared to higher priced homes. It creates more work for us since we get paid based on the loan amount and a $500,000 loan takes the same amount of time as a $50,000 loan, while paying only one tenth as much. At this time, we are fine with that to keep the integrity of our loan portfolio as high as possible.
  4. We have diversified into commercial bridge loans that have higher loan amounts in asset classes not effected as greatly by the downturn (if it hits real estate). This has given us the ability to diversify geographically, by asset class and by industry. Our approach is to not have huge exposure in any one place.

While we have taken a cautious attitude through all this turmoil, we are very optimistic about the future. Our borrower payment rates have been outstanding. We have not seen much of a difference, if any, from our normal collection rate. Our Private Equity Funds have been posting phenomenal returns and I expect that to get a little higher, given our ability to charge more interest in the current market. With less competitors, we are able to cherry pick the best loans out there and let the rest lay. While the future is uncertain, with the wisdom of the past and steady patience, opportunities will abound. I will remain diligent and seek to bring in the very best business I can. Donald and I look forward to many more years of our families working with you and your families.

Best Regards,

How Hard Money Loans Can Help Close Deals Quickly

Person Handing Money

Hard money loans are an excellent choice for purchasing a property that you intend to flip or use as a rental. They can be easier to obtain than other loans, especially for borrowers that don’t have a high credit score or are looking for faster funding than traditional loans provide. If you’re purchasing real estate investment propertyyou’ll benefit from a hard money loan because they are faster to obtain and can help you close the deal more quickly. Here’s how that’s possible.

Flexible Loan Structuring

One reason hard money loans are great for real estate financing in Texas is that the structure of the loan is more flexible than other types of loans. Private lenders that provide hard money loans are more interested in providing financing than traditional lenders that seem to look for any way to keep borrowers from obtaining financing. That means that the private lender is less interested in credit scores or using a traditional loan structure. This makes it easier for borrowers to pay back the loan in a way that’s individualized to the project instead of making the project fit into the timeline of a loan. Since the lenders are more accustomed to making these accommodations, you can get financing more quickly than when trying to get these accommodations built into a traditional loan, which may end up being impossible anyway.

Fast Underwriting Process

Hard money loans have a faster underwriting process, which means you can get the property purchased more quickly so that you can get to work rehabilitating the property for another sell or for renting or leasing. If you’re able to provide the documentation to the lender quickly, you’ll be able to close the loan quickly as well. As long as you have all the information ready for the lender when you make a loan request, you’ll be able to receive a response very quickly. In fact, many private lenders are able to respond to hard money loan requests in one day, and the loan itself can close in just a few weeks. This makes your offer on a property look far more attractive to a seller when you can finish the financing quickly.

Clear Terms

Another reason hard money loans can speed up a deal is that the terms of the loan are made clear during the application process. You’ll avoid surprises that often crop up in the midst of a traditional loan because you’ll know what’s expected before the application is even submitted. You’ll know exactly what will happen to the collateral you offer if you default on the loan so that there aren’t any surprises at closing.

House Model Sitting on Pile of Money

Direct Relationship

Another reason a hard money loan can help you get a deal closed more quickly is that there’s no middleman to work through. Private lenders typically work more closely with the borrower instead of with a broker so that communication is more frequent and succinct. This helps avoid misunderstandings and allows the borrower to work directly with the decision-maker rather than with a group of people, which is almost always the case with a traditional lender.

Important Consideration

When you’re considering a hard money loan for commercial real estate loans, you’ll probably notice a higher interest rate. It’s important to note that the reason for this is to help investors make a better profit. These are short-term loans to provide funding for an investment opportunity, and in most cases obtaining the loan quickly results in a higher return. To learn more, contact Investor Loan Source today.

Why Choose a Hard Money Loan for Distressed Property Deals?

Hard Money Loan and Key

A distressed property is a property that’s being sold by the lender or is in foreclosure. There are a few different reasons a property may be in this situation, but regardless of the cause, a distressed property offers a great opportunity for investors to get a great purchase price and significant profit. If you’re considering purchasing a distressed property but don’t have the cash to do that right now, there are a few reasons you should consider hard money lending to get the money you need. Here’s what you need to know.

Benefits of Purchasing Distressed Property

Before you obtain a loan, it’s important to recognize the overall benefits of purchasing a distressed property. When a lender repossesses a property, they want to get rid of it quickly and recoup their investment. That means that the price is usually far lower than you might otherwise be able to afford in a certain location. Another benefit is that you’ll usually be able to make a good profit on a distressed property by adding some repairs and updates to make the property more attractive to other buyers. The sale can potentially go through quickly, and if you’re able to upgrade the property quickly, you can repay your hard money loan quickly as well. Here are some reasons to consider a hard money loan for financing the purchase of a distressed property.

Fast Approval

One of the best things about these loans is that they’re faster than other types of loans. Your credit score isn’t weighed very heavily; instead, the property is used as collateral. You can have the loan underwritten in a week or two rather than a few months.

More Attractive Buyer

This type of loan gives you cash to offer to the seller, which can be extremely helpful if the property is a hot commodity with many offers. Cash gives you some leverage in negotiations, and your whole loan process can be done very quickly. This can give you a leg up in investment opportunities in up-and-coming neighborhoods that other investors are starting to catch onto.

Foreclosure House Sale

Different Loan-to-Value Ratios

Another benefit of hard money loans is that the way these lenders determine loan-to-value (LTV) ratios differs from that of conventional loans. That means you can potentially receive more funds than you would from another lender, even though the LTV ratio may look lower at face value. Conventional lenders have to abide by federal regulations by calculating loan amounts from the purchase price or appraised value. However, hard money lenders have more freedom to choose the value they want to use for the LTV because they’re not bound by those federal regulations. That means that private lenders use a higher property value, and, in some cases, they’ll even consider the value of the property after upgrades are made instead of the as-is value. The result of this different LTV calculation is often the funds to not only purchase the property outright, but to pay for rehabilitation costs or loan payments as well until the property is sold again.

Loan Structuring Possibilities

Another benefit of hard money loans is how they’re structured. Many lenders are willing to loan additional funds that exceed the property’s purchase price into the overall loan for loan payments or renovation costs. More creative restructuring may require the borrower to compile estimates of rehabilitation costs and to disclose potential issues so that the lender is able to structure the loan to take these factors into account.

To talk to a lender about money for a distressed property, contact Investor Loan Source today.

The Perks of Investing in Commercial Property

Commercial building

When it comes to smart investments, real estate is usually a safe bet. Though both commercial and residential properties can be excellent opportunities, commercial properties tend to offer a bigger financial payoff than single-family homes and rental apartments do. But that’s not the only advantage they have over residential properties. Before you begin looking for real estate lenders, read more about the benefits of investing in commercial property.

What Qualifies as a Commercial Property?

There are many different types of commercial properties. They include:

  • Retail buildings
  • Offices
  • Warehouses
  • Industrial buildings
  • Mixed-use buildings, which have a mix of retail, office, and apartment space.
  • Apartment buildings
  • Self-Storage Complexes

Each of these properties comes with its own unique needs and management techniques. Keep reading to learn about some of the benefits you may experience if you invest in any of the above types of commercial property.

Higher Income Potential

One of the biggest reasons to invest in commercial real estate over residential is the higher earning potential. Typically, commercial properties have between a 6 and 12 percent annual return on the purchase price. Compare this to the annual return for single-family homes, which is usually between 1 and 4 percent. The exact ROI you can expect will largely depend on where your property is located and what kind of business you rent it out to.

More Professional Relationship Between Landlord and Tenant

Commercial properties aren’t usually owned by individual people, but instead are often owned by LLCs. Because of this, they typically operate their property as a business. Their spaces are also rented out by businesses who take pride in their work and want to do what’s best for their company. The relationship between the landlord and tenant, in this case, is a business-to-business relationship. This ensures that all interactions courteous and professional.

Better Maintenance

Business owners have a unique interest in keeping their places of business clean and maintained, both inside and out. If they don’t, it would negatively affect their business. As a landlord, it’s good to have a tenant who is as invested in maintaining the quality of the property as you are. Your interests are aligned with your tenants, which makes securing the property and your investment in it much simpler.

Property for sale

Set Hours of Operation

In general, businesses are only open for a set period of time during the day. Their hours of operation match your own. This means that you won’t have to worry about calls in the middle of the night from tenants who lost their keys or need a repair. The only calls you may receive during off-hours will be few and may only happen during an emergency, such as a break-in or fire.

Triple Net Leases

This is a common type of lease used for commercial properties. With a triple net lease, the property owner doesn’t pay any expenses on the property, aside from the mortgage. Instead, the lessee handles all expenses directly, including the real estate taxes. Large businesses usually use this type of lease in order to maintain the look and feel that their brand is known for. This type of low-maintenance contract is only applicable to commercial properties; you can’t use them with a residential property.

To learn more about investing in commercial property, contact us at Investor Loan Source today!

Hard Money Lending vs. Crowdfunding: A Realty Test

Crowdfunding

Real estate investing can turn a substantial return when investors understand market trends and demographics and have a good understanding of what will make a good investment property. Investing in real estate requires capital, which is not always readily available, especially when you’re beginning the investment process.

Fortunately, there are different ways you can obtain this capital. Two popular methods for obtaining investment funds are with crowdfunding and hard money loans. Here’s what you need to know about these two methods of obtaining capital.

Basics of Crowdfunding

Crowdfunding requires the investor to raise money in different amounts from a number of people. This can include funds from family and friends, but for real estate investing it usually involves soliciting funds from numerous accredited investors on the internet. These accredited investors are dedicated to the real estate world and understand property values.

To be accredited, they meet certain income requirements and have a minimum net worth value, depending on the crowdfunding campaign. The funds raised in the campaign are used like any other capital to purchase and build value in real estate. The loan from crowdfunding may or may not be secured.

Basics of Hard Money Lending

Hard money lending is a short-term loan that’s secured by the purchaser’s real estate. This type of loan differs from loans typically offered by banks because it’s quicker to obtain than a typical loan and has fewer qualification criteria as well. Since property is used as collateral, the value will help determine how much capital you can obtain as well as the interest rate that’s charge for the life of the loan. Only a certain percentage of the property’s value can be given out as a loan. Hard money loans are easier to obtain because credit history typically doesn’t factor into the lending process.

Hard money loans

Pros and Cons of Crowdfunding

One of the most obvious benefits of crowdfunding is the ability to contact numerous investors online. That means you’ll get a lot of feedback and the potential for funds if they agree with your concept and feel like it has the potential for a big return. You can save time pitching your idea to numerous investors at the same time instead of approaching lenders individually. You’ll also have the ability to promote your campaign on social media when using crowdfunding sites.

The downside of crowdfunding is that there may be a large minimum to participate on the platform, so it may be difficult to raise money for smaller projects. In addition, it may take a good portion of the year to find funding for your project, or you may not end up securing funding at all.

Pros and Cons of Hard Money Loans

Hard money loans are beneficial because you can obtain loans of differing values, whether you’re a first-time investor looking for a small loan or are experienced and looking to finance a large-scale project. Unlike the impersonal nature of crowdfunding, hard money loans make it possible for you to build a relationship with a lender so that you can get loans quickly later on. Hard money loans are also a fast way to get capital.

It’s important to note that hard money loans carry a higher interest rate because they’re short-term (usually only a year or two) with the assumption that you’ll be selling your investment for a profit rather quickly. For more information about hard money loans, contact Investor Loan Source today.

Top Considerations before Investing in a Real Estate Project

House cutouts near stacked coins

Investing in real estate is an attractive option for new and old investors alike. However, no matter where you fall experience-wise in investing, it’s crucial that you go into real estate investment understanding a few important factors. If you’ve been presented with a new opportunity for real estate investing, here are some things you should be sure to consider first.

Timeline

An important thing to remember in real estate investing is that the process can sometimes take some time, so be realistic about when to expect a return. The purpose of your investment is to build your portfolio and increase your cash flow, so if you need to do that quickly make sure you’re not investing in a property that will take too long to see a return.

The due-diligence phase itself can take months rather than days, and if renovation is involved, you’ll need to factor in the time to do that properly as well. It can take months or even years to get specific building permits, so when you’re considering your investment be aware of time frames for city and other government approvals that may be needed.

Location

The location of a real estate investment property is another crucial factor. No matter how incredible the property ends up being, if the location is undesirable it will be extremely difficult to make a good return. Areas with high crime rates or no commercial prospects will be difficult to sell or lease.

It’s also important to consider the trends and demographics of the area where the property is located. Do your homework about the area and talk to local agencies to make sure you understand the civil engineering and environmental limitations or requirements of the area.

Market Trends

A good investor knows the market trends and takes advantage of them accordingly. Make sure you understand fundamentals like vacancy, rent, competition for home sales, and more to make sure you’ll get a high return on your investment. Understanding the market makes it easier for you to diversify your portfolio and quickly identify good potential investments.

Pay attention to indications of recession or other economic downturn, because this substantially impacts how quickly you’ll be able to make a return on your investment, whether you plan to lease your property or flip it and sell. Make sure the properties you consider will be able to survive downturns so that you can recover more quickly.

House cutouts with bag labeled Investments

Property Value and Type

It’s important to remember that even after considering the market trends and demographics of an area, not all properties will be valued the same in an area simply because of the type of property. Some areas may be hotter for residential sales while others will be better for commercial. Make sure the property you’re considering isn’t overpriced and that risks are low for that type of property.

Current Financial Health

Very few real estate investments have a guaranteed return, so it’s important to be cautious financially and take into account your current financial health. Don’t stake everything you have or take out loans that you’re not certain you can recoup or pay back. If you are short on capital and want to take out a loan, make sure you understand all the terms and find a lender who specializes in the type of loan you need. Contact Investor Loan Source today to learn about the different loan options available for your investment.

Top Hard Money Loan Exit Strategies

Loan approval

Hard money loans are a great way to get into the world of real estate investments. These loans don’t have as stringent of income or credit score requirements, so they’re a great option for many borrowers. However, the duration term is much shorter than conventional loans and hard money loans usually have higher interest rates as well. That’s why it’s important that you have exit strategies in mind to pay off the loan when necessary before you take out a hard money loan. Here are some hard money loan exit strategies you may want to consider.

Sell the Property

One of the most common exit strategies for hard money loans is to sell the property. This is a common option because many borrowers using hard money loans in Texas do so with the purpose of purchasing a property, improving it, and selling it for a profit. Most borrowers are able to use the loan for costs associated with renovating or rehabilitating the property, so it’s generally not too difficult to pay off the loan this way. This strategy is only successful if the borrower has planned and has the investment knowledge and expertise to know which properties can maximize profit. Some lenders may offer an extension of the loan if the renovations aren’t complete before the property needs to be sold.

Refinance

If the investor’s plan wasn’t to flip a property but to use it for a rental property, refinancing is a good option. Since this strategy will provide a longer-term stream of income rather than one lump sum, refinancing with a traditional lender can ensure the original loan is paid off. Hard money loans can also be used as a bridge between applying for and being approved for another loan that you intend to use for a longer period of time.

Get New Loan

You may also be able to get an additional hard money loan, but this is usually only recommended when all other options have been exhausted. This is simply because using another hard money loan diverts it from the purpose that it was originally intended for, but it can help you buy some time or avoid foreclosure.

Traditional Mortgage

If your plan is to stay in the property purchased with a hard money loan, a great exit strategy is to secure a traditional mortgage. A hard money loan can allow you time to build up credit or pay down debts to lower your debt-to-income ratio. You can use the 1-3 year time period of a hard money loan to raise your chances of getting a traditional mortgage.

Businesspeople shaking hands

Subprime Mortgage

If you’re unable to qualify for a traditional mortgage, you can consider a subprime mortgage. Although the terms aren’t as favorable as a traditional mortgage, it can provide the funds to exit the hard money loan and provide long-term financing for the property, whether you’re planning to use it yourself or rent it out.

Use Business Capital

Finally, consider using business capital to exit your hard money loan. This can be income from other properties, other investors you have, or your business. A hard money loan can help you buy time to find this capital or to locate other investors.

Whatever exit strategy you intend to use, make sure you have backup plans to prevent defaulting on your loan. To learn more about hard money loans and exit strategies, contact Investor Loan Source today.

The Five C’s of Securing a Commercial Real Estate Loan

Exterior of commercial building

There’s no doubt that commercial lending practices have become more regimented since 2008, since lenders must take additional steps to protect themselves from losses by evaluating the credit worthiness of commercial borrowers. This enhanced focus on the credit worthiness of borrowers and their loan requests has in some ways restricted lending, but it represents a necessary means of stabilizing the lending landscape.

Commercial real estate loans have not been immune to these more rigorous standards for commercial lending. When it comes to commercial financing, real estate in Texas can still be financed so long as borrowers make sure to keep the 5 C’s of commercial credit in order. While many reference the 5 C’s when speaking of credit in general, they also apply to the narrower field of commercial real estate lending, since the premises are sound regardless of the context. Keep reading to learn more about the 5 C’s of commercial real estate lending and how they may impact your future requests for financing.

Character

Character is a somewhat subjective consideration, as it refers to the character of the borrower as discerned by the lender. The criteria for credit-worthy character can vary from lender to lender, but there are a few waypoints that lenders may use to assess the character of a potential borrower. Those criteria include credit history, employment or business history, past interactions with other lenders, reputation, references, and credentials.

This first C makes a good case for always meeting the terms of your financial transactions and contracts while also paying special attention to business relationships and personal interactions with others.

Capacity

Capacity is sometimes referred to with another C, cash flow. It refers to your ability to repay the loan. Lenders want to see that you have not only a plan for making the numbers add up so that your debt is repaid, but that you also have the income to realistically pay back the loan.

In the case of real estate lending, there may be some documentation required that demonstrates your net assets, your monthly and annual income, debt and liquidity statements, and other property assets that indicate you have the ability to pay the loan back in the required timeframe.

Capital

Many lenders feel more confident about lending to borrowers who are willing to put some “skin in the game,” so to speak. In other words, lenders will often require that borrowers make a significant capital investment in the venture they wish to finance. In the case of real estate transactions, you may be required to invest at least 20% of the appraised value of the property through capital. That capital can come from personal savings, profits generated from previous real estate transactions, or other business revenues.

Paperwork and keys overlaid with office buildings

Condition

The condition of your business or the property to be purchased is another C that lenders weigh into the decision regarding your loan request. In terms of a business loan, lenders will want to see revenue sheets, market conditions, and competitor success rates. In a real estate transaction, the condition of the property will be assessed.

For example, in a hard money loan evaluation, the property to be purchased is the collateral for the transaction. Therefore, the lender will physically inspect the property to determine its condition and attach a reasonable value to it.

Collateral

Collateral is particularly important in lending for real estate purchases because the amounts borrowed can be significant. Collateral is the physical property or assets that the borrower offers as a guarantee that the borrowed funds will be repaid. If the borrower can’t pay back the loan, the collateral can be offered as a form of repayment to the lender. In many real estate transactions, the purchased property can act as collateral, so that if the loan can’t be repaid the real estate serves as a guarantee.

If you are planning to finance your next commercial real estate purchase, make sure that you’ve considered the 5 C’s of commercial lending and how you match up against them. To learn more about the 5 C’s, contact Investor Loan Source at (409) 735-6267.