Despite the excitement of closing a real estate deal, the process isn’t always simple and straightforward. In fact, there are a large number of investors who are eager to close a deal for the first time but don’t quite know how to. In the video below Tom Berry, Co-founder and CEO of Investor Loan Source, shares tips that may help new investors close their first deal.
Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.
Homeowners usually buy houses based on the price-per-square-foot, but real estate investors think a little differently. When it comes to purchasing property, real estate investors are interested in the potential cash flow a property may generate. A popular tool used to evaluate profitability is called a rent roll.
A rent roll is a consolidated report that tells an investor who the tenants are and how much they pay in rent. A rent roll also discloses which tenants have paid their rent, and when the last rent payment was received.
Additional information on a rent roll includes if a unit or home is occupied (important for multifamily investors or single-family home investors with a large portfolio of rental properties). A rent roll details tenant occupancy length, lease expiration data, tenant payment history, and the amount of refundable security deposit.
Rent rolls can be created for any type of income-producing property – such as a single-family home, a multifamily property, or a short-term rental. A consolidated rent roll report may also be used for groups of rental properties at the portfolio level.
Benefits of Having a Rent Roll
Real estate investors interact with property managers, lenders, and prospective buyers when the time comes to sell. Each party uses the rent roll report to see the current rental income a property is generating. The rent roll also may be used to understand whether current rental income might increase or decrease.
1. Benefits for Investors
The rent roll helps owners and investors maximize cash flow by revealing if a tenant is past due on the rent and if late fees should be assessed. If a tenant has a history of paying the rent late, it may be an early warning sign that it’s time to start looking for a new tenant. A rent roll will also show which leases are coming up for renewal in the next few months so that the tenant may be signed to a new lease well before the expiration date.
2. Benefits for Property Managers
Property managers handle the day-to-day details of rental property ownership, such as rent collection, tenant communications, and making sure the property is well maintained to help value increase over the long term. By using a rent roll, property managers can see if rent is paid in full and on time.
3. Benefits for Lenders
Lenders use the rent roll to help calculate the debt service coverage ratio (DSCR) when a borrower applies for a rental property loan or when the current owner wants to refinance. The DSCR tells the lender how much additional cash is left over after the operating expenses and mortgage payments have been paid.
DSCR is calculated by dividing the net operating income (NOI) by the mortgage debt service payment. A lender determines the NOI by taking the gross rental income reported on the rent roll and subtracting the property operating expenses reported on the income statement.
4. Benefits for Buyers
Buyers also benefit from an accurate and up-to-date rent roll. When a rent roll is properly prepared, it is easier for a buyer to predict if future rental income will change based on the payment history of the tenants. Buyers can also use the rent roll when conducting due diligence and analyzing possible real estate investments.
Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.
Private lending is a financing solution for real estate investors to use for rental properties, rehab financing, fix and flips and even commercial bridge loans. Finding the right lender to meet your needs is not always easy. Here are 10 questions to ask when searching for the right lender for your real estate investment business.
1. What loan products Do You Offer?
Many investors have different types of properties in their real estate investment portfolio. It’s essential to find a lender that has unique products to fit your unique needs. At Investor Loan Source, we offer a wide variety of loans – fix and flip, rental, and commercial loans to help grow your business.
2. What are your interest rates and how many points do you charge?
Points and interest rates vary across regions and by lender. The type of loan is an important determining factor. For instance, fix and flip loan interest rates are often higher than rates for purchasing a rental property to buy and hold. The riskiness of the project also affects the interest rate. In general, hard money loan rates are higher than traditional mortgage loans due to the risk involved. In both traditional loans and hard money loans, interest rates and points charged vary based on a borrower’s credit history.
3. What loan to value of the after repair value are you able to offer?
Hard money lenders make loans based on the after repair value (ARV) of the property. The loan to value ratio (LTV) of the (ARV) is the loan amount the lender will allow based on the renovated value of the property. This ratio can vary from lender to lender. The LTV/ARV percentage will also vary based on the property type and age. It’s essential that you find out the answer to this question early to avoid having to find a different lender or rule out a property.
4. Do you work with customers with less than perfect credit?
Many investors worry they may not qualify for a loan if they don’t have a high credit score. The good news is that many hard money lenders usually lend based on the project and property itself vs. the buyer’s creditworthiness. This is a great resource for buyers who have had some issues on their credit history. However, it’s important for you to ask if the lender requires a minimum credit score. Your rate and points charged may be affected by this, but hard money lenders most likely will not turn you down based on your credit score alone.
5. How long will it take to fund my loan after my application is complete?
Time is money in the real estate investment business. Hard money lenders should be able to approve and fund a loan within 2 weeks. Some lenders may fund deals within 3-5 days. Lenders may be able to fund a project more quickly if the real estate investor stays on top of the application process. It may be helpful to use the same lender for multiple deals, especially if they offer technology and resources like a user loan portal to make the loan process more efficient for repeat investors.
6. Is there a prepayment penalty if I pay my loan off before the full term is up?
It’s common for many lenders to have a small prepayment penalty when a minimum amount of interest must be paid on the loan. In many situations the prepayment penalty will not affect the borrower in any way. Ask potential lenders if pre-payment penalties may be applied if the loan is paid off early and make sure it works for your proposed timeline.
7. Will you provide a pre-approval letter I can use to submit with my offers?
Finding good deals for fix and flip properties can be competitive. Real estate investors may have a greater chance of having their offers accepted if they submit a pre-approval from an experienced hard money or private money lender. It’s important to ask your potential lender if they provide pre-approval letters so you don’t miss out on a good property.
8. Do you offer loan extensions?
It’s important to understand if an extension would be available for your loan due to unforeseen circumstances. Establishing this with a lender before you need an extension can be less costly than needing to ask for one once you’ve taken out the loan.
9. Will I work with someone who is knowledgeable about my business and real estate projects?
Not all lenders have experience and knowledge when it comes to real estate investing. Choosing a lender that has first-hand experience in the business of flipping homes and investing in real estate may impact the success of your project. Investor Loan Source was created by real estate investors who know your unique needs and understand the market.
10. Do you have any references?
A good, reliable hard money lender will be able to offer references from other real estate investors who borrowed from them in the past. If the lender is unable to provide any positive references, it might be a good idea to reconsider doing business with them.
To be successful in real estate investing, it’s important to find a lender that is right for you and your business. If you’d like to learn more about Investor Loan Source or our products, visit www.ils.cash, call us at 409-735-6267, or reach us via email at [email protected].
Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.
The real estate market is changing rapidly. While we can never be sure which direction the economy is heading, investors can make smart decisions to navigate uncertain times. In the video below, Tom Berry discusses ideas real estate investors should consider in this changing market.
Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.
Tom Berry, Co-founder and CEO of Investor Loan Source, is an experienced real estate investor. He shared his thoughts on how to diversify your real estate investment portfolio. One way you can diversify your real estate investment is by asset type. Some investors may have a dozen single-family homes; a good recommendation may be adding a small commercial asset. Check out the video below as Tom Berry goes into more details on diversification of real estate investments.
Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.
Real estate investors know that a great property could yield great benefits. However, for new real estate investors, finding the perfect property may be a challenge. This guide focuses on ways new investors may be able to find their first investment property.
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Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.
Tom Berry, Co-founder and CEO of Investor Loan Source, appeared on the Real Estate Power Play Podcast. He shared his thoughts on the current market and gave advice to real estate investors.
Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.
When evaluating a real estate deal, you should always start with the end in mind. For example, with a single-family Fix and Flip, the end goal is selling that house. When you’re looking at a single-family deal you want to flip, always ask yourself, “What can I get out of this house and what is the end value going to be?” This is where real estate investors may make a mistake. Some investors will look at comps in the general area of the subject property. However, they are usually comparing their house to houses that are at a different level. You want to use comps that are of similar size and similar nature to determine what your house is going to sell for when it’s done.
Additionally, some investors use comps with a high-end fit and finish, but use their rehab budget or a very low-end fit and finish to calculate the value. You can’t put vinyl laminate floors in a house and expect to get the same ARV as a house down the street that has travertine or expensive wood floors. This also goes for kitchen countertops, appliances, etc. Use houses that are similar to how you’re going to make yours.
House Construction Framing Gradating Into Finished Kitchen Build.
The next step is evaluating the rehab budget. A huge challenge I see often when real estate investors look at their deal is that they calculate the ARV and then look at their rehab budget to find that the numbers don’t work. At this point, they don’t want to walk away from the deal, which they could do, and they don’t want to go back to the seller and try to renegotiate a better price on the house. Instead, they just cut the rehab budget and try to make the deal work. If you cut your rehab budget, you’re never going to reach your expected ARV. Cutting the budget just to try to make the numbers work on paper, might work on paper but it is not going to work in practice. Understand that the rehab will need to reach a certain level to hit your expected ARV.
After evaluating the price of the home and the rehab budget, most people think we’re done with an evaluation. The truth is that we are not done! There are other costs that we call hidden costs. A great example of hidden costs would be the holding cost. The holding cost includes the cost for an investor to own this project until it is sold. These hidden costs include interest, property taxes, property insurance, utilities, and lawn care. As a real estate investor, you must pay those bills the whole time you hold that property. All these costs add up. Before buying a house, it is important to calculate the monthly holding cost. This is done by adding up the monthly cost and dividing by 30 to get the daily cost of holding a property.
What does this do? It puts a sense of urgency on the investor to get in and out as quickly as possible.
Lastly, it is important to ask yourself the following questions:
Are you going to need permits?
Are you going to need plans?
When can contractors start?
When will you be ready for contractors?
It is important to realistically evaluate how long it will take to rehab, market, and close on the project. There are a lot of steps to take, and those steps take time and money.
Hopefully, this gives you greater insight into what it takes to evaluate a single-family fix and flip deal. As always, if you have a project and you’d like for us to help you with your hard money and private money needs, reach out to us today at 409-735-6267.
Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.
A buy box is a tool real estate investors use to determine the types of properties they want to purchase. The buy box is usually broken down into columns and details the criteria a property must meet to be considered for purchase. This tool helps real estate investors focus on their goals when analyzing potential real estate deals.
The buy box can consist of standards that are important to the investor. Common criteria may include, but is not limited to location, prices, property type, size of the property, or age of the property. This simple tool helps real estate investors focus on certain properties. If a property does not meet the criteria in a buy box, the investor knows to move on to another project.
The buy box is used as a filter to focus on properties that a real estate investor is truly interested in. Defining the criteria of a buy box also helps investors avoid being overwhelmed by an abundance of real estate opportunities.
The image above shows an example of a buy box. In this example, the real estate investor wants to focus on acquiring small apartment complexes in Houston, TX or Galveston, TX. If a deal presents itself for a property in Dallas, TX our investor may pass on the opportunity because it does not fit the criteria in the buy box.
While a buy box is a useful tool, it can be changed as the investor maneuvers the real estate market. It can be adjusted to redefine goals as a business or investment portfolio grows. Creating a buy box is a great way to stay focused and possibly achieve real estate investing success.
Need help creating a buy box? Download your buy box template HERE!
Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.
Investor Loan Source offers short-term purchase loans to real estate investors. Finding a lender that understands the value of a fix & flip property is very important. A fix & flip loan can provide the cash you need to grow your real estate portfolio.
Click the video below to hear Tom Berry explain how valuable fix and flip loans are for real estate investors.
Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance.
