Discover your Steps to Freedom here! Using property investing techniques along with financing methods that benefit you, you can gain financial freedom in your life.
Loan to Value Ratio - What Is It & How Can It Help You?
Simply put loan to value ratio(LVR) is a ratio that the banks and financial institutions use to assess the level of debt that a certain asset should have.
What does it mean if a bank will give you a HIGH loan value ratio when you are applying for a loan on a particular investment property?
What does it mean if a bank will only give you a LOW loan value ratio when making a morgtage application.
What Does A High LVR Mean To You?
If you can get a high LVR then that means that the bank or financial institution is willing to loan you more of the purchase price of your property.
For example, the loan to value ratio for property is higher than the LVR that banks will give for say shares.
So for example say you wanted to purchase a $100,000 investment.
A bank will be happy to lend you $80,000 on a $100,000 property giving an LVR of 80%
If you were investing in shares the margin loan (LVR) they would give you is usually about 50% and some times less. This would give you an LVR of 50% or less! So that means they would only loan you $50,000 of the $100,000 worth of shares you wanted to buy.
Lenders Mortgage Insurance - Overcome a Low LVR?
If you are given a low LVR by the bank when applying for a loan, then they are giving you a measure of what the level of debt or risk on that property that they are willing to support.
In the case of property, this means that you will either need to fund the difference out of your available cash or find further finance to purchase.
The alternate method to overcoming the situation where you are given a low LVR is to use lenders mortgage insurance.
The Differences between Financial Institutions
There are differences between financial institutions.
Different banks and other mortgage originators will use different valuers and have different methods of assigning or determining value.
Some will be more keen to get your business and so be willing to offer you a higher LVR. This is better for you.
So shop around when looking for a loan and find the lender that will give you the best loan to value ratio that you can get and preserve your available capital reserves.
Use These Finance Techniques To Increase Your Net Worth
The area of Real Estate Investment Financing, is one that can have a huge impact on your progress as a property investor.
Starting from approaching a lending institution for a loan for your first REAL ESTATE INVESTMENT PROPERTY to building your property portfolio, the plan I recommend HERE is one that will see your net worth increase considerably and within a short time the banks will be treating you with the utmost respect.
Of course the way in which you obtain and use Property Investment Finance will have a bearing on how fast you progress and just how soon you can retire!?!
These real estateinvestment financing ideas and concepts will take you from uncertain initial contact with the bank to a seasoned property investment finance pro.
Be Prepared
This is an important step towards obtaining the best terms & conditions for your your real estate investment financing.
Right from your very first approach to any bank or lending institution you should be armed with a document that clearly shows your current assets and liabilities and your income and expenses.
So transform yourself from an hopeful applicant into a knowledgeable long term cliant. This is what banks love.
This has proved to be an extremely positive factor for me on numerous occasions in negotions with various loan officers. For our first two investment properties, we didn't have one and we were treated like amatuers.For the next time we approached the banks to apply for a loan, we went equipped with a document I had produced that gave a clear Statement of Financial Positionand showed our income and expenditure.
Avoid Cross Collateralisation
What is cross collateralization and why should I avoid it?
Cross Collateralizationoccurs when the bank uses the security for one loan to secure another loan. The advantage of doing this is that you can borrow a greater percentage of the purchase price of the next property, perhaps even 100%.
The disadvantage of cross collateralization is that it can bring your real estate investment financing strategy to a standstill.
You may find that because of cross collateralization you are restricted or unable to purchase another investment property.
For example it is usually mandatory that the properties being cross collateralized be in the same state. If you want to be free of restrictive banks Cross Collateralization rules then use a line of credit to borrow the funds you need instead.
Refinancing Real Estate Investment
This is one of the best ways to begin real estate investing and to keep your real estate investment financing moving freely. The best thing is that you can arrainge things so that any one property is not held ransom by a bank or financier (which can really put a dent in your property investing plans).
Refinancing real estate investment provides the perfect method for any property investor to extract capital from the increased value of a property without selling it.
This is a great way to move forward with your property investing plans and keep your real estate investment financing options open.
If you were to sell sell an investment property you immediately lose the future capital gains, income stream and taxation benefits that property would bring.
This is where a bank values your home and determines the available equity you have in your home and then makes funds available up to a perentage of that amount. This is the most flexible and effilcient way to get started with your real estate investment financing!
How can a home equity line of credit help you with your real estate investment financing you ask?
Once you have established a line of credit you can use it to fund any shortfall that you may have when purchasing an investment property, that includes deposit amount and purchase costs.
This is by far the most preferable way to purchase your first and successive investment properties.
Investment Property Mortgage Rates
Should you be concerned with investment property mortgage rates?
Many "property experts" say that INVESTMENT PROPERTY MORTGAGE RATES should not be of primary concern when looking for a PROPERTY INVESTMENT LOAN. This is only true if you are not concerned with your immediate cash flow situation. Read a more detailed analysis HERE.
No Down Payment Investment Property
This is tied in to the previous tips on refinancing and use of a line of credit.
The general ides is that you purchase a no down payment investment property using the equity you have in another asset, usually your home.
Real Estate Investment Trusts
If you prefer a hands off approach you can invest in a REAL ESTATE INVESTMENT TRUST. You can find more details HERE.
However, in my opinion, there are many more advantages to INVESTING IN REAL ESTATE directly.
A Home Equity Line of Credit (often called HELOC, pronounced HEE-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period ...
When it comes to real estate investing, there are plenty of reliable resources that provide some creative financing options:
Get A Seller's Concession
In a slow market, such as we have today, a motivated seller may readily concede a portion of the closing costs to offset the buyer's financial burden at the closing. For example, if you, as the buyer, are purchasing a property for $100K, ask for a seller's concession of 3 to 5 percent, which is within the guidelines that most banks allow, depending on the amount financed. If you ask for a 3 per cent concession, which in this case is $3,000, the seller is agreeing to receive $97,000 at closing. Once you have this agreement in place, be sure to include it in the contract.
Get 100% Financing
Because of the slow market we are in today, you will find many in the lending industry tightening up their practices. However, there are still plenty of mortgage products to meet most buyers' needs. As an example, there is an 80/20 mortgage that allows for the entire cost of the property to be financed by the bank. This is especially beneficial if you do not have a down payment. Here's how it works: The primary loan (i.e. the first mortgage) represents 80% of the mortgage and the secondary loan (i.e. second mortgage) represents the remaining 20%. It's best to try to get a fixed rate on the first mortgage because more than likely you may have to pay a higher adjustable rate on the second mortgage. Go to banks who have been in business for a long time or mortgage brokers who have access to a wide number of lenders and ask them what type of mortgage products they offer. Recognize that although this will be 100% financing, you still may need to pay closing costs for the loan, so ask, at the very beginning, what fees are involved with the funding.
Find A Program Or Organization
National programs abound for first time homeowners and investors also. There are programs that offer down payment assistance to first time home buyers with low to moderate income. Look up the Neighborhood Assistance Corp of America (naca.com) which offers its members counseling, low interest mortgages with no down payment or closing costs and also renovation assistance. There may be rules and restrictions, so be sure to do your due diligence before making a decision.
Use OPM
That's right...buyers can use other people's money by partnering with investors, friends, colleagues and even family as well as your traditional bankers and mortgage brokers. Your agreement with your partner should specify the loan amount, the interest rate, the payback period and any other stipulations you might make. It's best to set up the proper paperwork through a real estate attorney.
Peg, owner and CEO of Paragon Enrichment Group, a consulting firm for home based internet businesses, has been involved with network marketing for several years.
Prior to that she had held corporate managerial positions where her financial skills were used daily as she forecasted various new business opportunities.
Also, Peg had previously been a licensed Realtor, hence her continued interest in the Real Estate/Mortgage Industry. http://www.6figuresasap.info
Many people are talking about a home equity loan, at work, weekends and even at the dinner table. Why is it the flavor of the month and what should you know about a home equity loan to ensure you stay out of strife if you decide to enter this realm.
Owning your home is a valuable asset for anyone in a lifetime. If you agree to a home equity loan, you are in fact putting this great asset at risk. Home equity loans are appealing due to the low interest rates and (in some cases) the tax deductibility of interest, but they also represent a risky business.
It sometimes has to be faced, if things don’t work out. Consider a significant expense and not to having the necessary cash to cover it. Examples of such expenses are medical bills, major house repairs or a child’s college education. A home equity loan could be the solution to your financial problems, at least for a short term. By using the equity you’ve built in your home over time you can borrow a significant amount of money. You have to repay the amount borrowed plus a (usually) low interest over a fixed period of time. If you fail to do this, you may lose your house.
Usually, in order to pay off the entire loan until the fixed time, you are required to make equal monthly payments. The lenders are obliged to disclose all important facts of their home equity plan, all terms and costs, such as the APR, different charges, and payment terms. After you have received this information, lenders do not normally charge any other fee that has not been specified in the plan. When you take on a home equity loan, you have normally had a few days from the day the account was opened to cancel it.
There are some basic although important things you should consider when you’re considering a home equity loan, in order to avoid a life changing mistake sometimes.
Firstly, if you have money problems, you must consider other options too, before using the equity in your home. Talk to your creditors or contact a budget counseling organization. A plan that would consolidate or reduce your payments might be enough to get you out-of-trouble. Also ask the opinion of someone other than the lender offering the home equity loan. someone you trust and who is reasonably knowledgeable.
If you decide a home equity loan is what you want, you should research the offers of several lenders, including banks or a credit union.
There are many lenders who make use of abusive lending practices and you must be aware of these practices if you want to minimize your risks. Here are some scenarios of such practices.
• Equity stripping. You have built up equity in your home but you don’t have much income coming each month and you need money. A lender encourages you to make a home equity loan, even if you explain that your income is not enough to keep up with it. Of course, the lender doesn’t care if you are not able to pay, he has nothing to lose, on the contrary, he wins a lot. If you are not cerebral enough to get a realistic view of things and let yourself be easily persuaded you will probably lose your home.
• The balloon payment. You’ve already made a home equity loan and, fail to pay the mortgages and you’re very close to losing your home. Another lender offers to save you by refinancing and lowering your monthly payment. You have to be very attentive regarding the loan terms. The reason why the payments are lower may be that he asks you to repay only the interest rate each month. At the end of the term, you may find you still have to pay the entire amount that you borrowed. This sum is called a balloon payment.
• The home improvement loan. A contractor offers to remodel your kitchen, or install a new roof at a low price. You explain you can’t afford this, but he offers to arrange finance through a lender he knows. You agree and he begins work. At some point, you are being asked to sign a lot of papers without having enough time to read them and you sign them. Later, you realize you’ve signed a home equity loan, and even one with aberrant terms and interest rates.
By using the equity in your home, you can benefit by receiving a significant fixed amount of money, repayable over a fixed period, available for any kind of use and at a low interest rate. You may also be allowed to deduct the interest, under the tax law. At a first glance, the home equity loan sounds appealing. But, on the other hand, if you fail to repay, for one reason or another, you may lose your home. Bottom line is that a home equity loan is a good thing if managed and used carefully. If you are considering a home equity loan, you should carefully balance costs vs. benefits, before charging ahead.
There are highly informative eye opening articles and up-to-date loans news as well, see it here at home equity loan or if the previous link is not working, you can paste this link in your browser - http://loans-only.com
Did you know that you're being deceived? Right now, everywhere. On TV. In the newspaper. On the radio. In magazines. You're getting the same message over and over again: "buy now, pay later"; "consolidate your debt into one easy monthly payment"; "get a secure line of credit". Or the perennial favorite, "don't worry, it's good debt".
The truth is, there is no such thing as good debt. Debt is debt. It's money you owe someone, money that needs to be paid back at some point in the future. "Good debt" is a misnomer. There's better debt, sure, because there's also really bad debt. But debt is never good. Not really.
We Live In A Debt-Ridden Society
We're encouraged to buy things on credit all the time. Why? Because it's a profitable business for lenders. They're not doing it out of the goodness of their hearts. They're in it to make money, and their target is you.
Of course, it's hard to live entirely without debt. To buy a home these days you almost always need some kind of mortgage, this is true -- few people can afford a house outright, especially at the beginning of their careers and families. But you don't have to be in debt for the rest of your life. A mortgage is meant to be a temporary debt, one backed by the (normally) stable value of the property you purchased with it. It should be for a reasonable, affordable amount that can be paid back within 10 to 20 years of the purchase. And you should have some of your own equity in the house right from the start. But that's not what people do anymore. They get mortgages for 100% of the appraised value of the house. Worse yet, they get interest-only mortgages that leave the principal -- the amount you borrowed -- untouched. Is it no wonder that these people eventually find themselves drowning in debt?
It Goes Beyond Mortgages
But it goes beyond mortgages. A debt mentality pervades our society. Once you have equity in your home, for example, the banks urge you to "free up" the money with home equityloans and secured credit lines. Use the money to better your life, they say, by renovating the house, taking that big vacation you've always wanted, or -- here it comes -- consolidating your other debt.
Your Other Debt?
Your other debt? Sure. You think the only debt people have is mortgage debt? No, they have plenty of other debt. It's a banker's wet dream out there today... Credit lines. Cash advances. Overdraft coverage. Automatic credit card limit increases. Pay nothing now. If you're not careful, you can build up a lot of debt very quickly.
That's The Problem
And that's the problem: those debts have to be repaid sometime. Rack up too much debt and soon you'll be worrying about the monthly payments. Your peace of mind will suffer, and possibly other things like your marriage and your job. Is that the kind of price you're willing to pay in order to have things you couldn't otherwise afford?
The Solution
The solution isn't debt relief or debt consolidation. It's debt avoidance. You should do everything in your power to avoid debt. Because too much debt will tear you down, physically and mentally.
What if you already have a lot of debt? There are things you can do. Yes, you can consider consolidating the debt, but that will only work if you're able to stop accumulating more debt once your current payments are lowered. Otherwise, you need to attack your debt using a step-by-step plan that involves paying off the highest-interest debt as quickly as possible, then using the money you free from that debt payment to pay the next-highest debt, and so on. It's the snowball debt reduction method, and it works.
The key to all of this is willpower. Make the commitment today to be debt free as soon as possible. The peace of mind it gives you will make it all worthwhile in the end.
Knowing how a home equity loan works will help you determine whether a fixed-rate loan or a home equity line of credit is the best for your financial situation. With a little research you can get the best type of loan available.
Home equity loans are sometimes referred to as home improvement loans and equity loans. They are generally used for large purchased.
4 Important Aspects To Consider Before You Apply
When you apply for a home equity loan, it is wise to know how a home equity loan works in order for you not to put your home at risk. The difference will now be the amount of equity you have in your home, or the home equity. The lender will now use the value of your home equity to determine the potential amount you can borrow for a home equity loan.
Normally, a lender will base your allowable home equity loan on a percentage of your home’s equity. Traditional lenders will limit your home equity loan to 80 % of your home equity. However, more aggressive lenders allow borrowers a home equity loan which is more than the home’s appraised value.
If you are considering getting a home equity loan, you can either get a fixed rate loan or a home equity line of credit. Lenders usually base the rates on their home equity loans on their Prime Interest Rate, the interest rate they charge their most qualified clients or borrowers.
Lenders will then either subtract of add a percentage, usually 1-2 %, from their Prime Rate to determine the interest rate you will be charged. This percentage will, therefore, depend on your credit and the amount of money you wish to borrow.
Researching The Best Home Equity Loan Companies
The best way to get a good home equity loan deal is by choosing the right lender among lots and lots of home equity loan companies. There are lots of home equity loan companies to choose from.
Some home equity loan companies have variable interest rates. These interest rates are adjusted by the home equity loan companies depending on the interest rates changes in the market. Some home equity loan companies offers home equity loan deals that has flexible terms but always make sure that you understand fully what they are offering. Compare the rates of the home equity loan companies that have the same home equity loan terms.
Some home equity loan companies offer hybrid loans. A hybrid loan is another type of home equity loan that offers a fixed interest rate. Hybrid loans often have lower interest rates than most 15 to 30 year fixed rate loans. This type of home equity loan is ideal for a borrower who wants to have short term loans. These types of home equity loans have no prepayment fees.
Home equity loan companies are constantly looking for homeowners who want to refinance their home equity. The interest rates that these home equity loan companies offer are very low. If you want to shop for a home equity loan, there are lots of home equity loan companies found on the internet.
Several websites offer their services to homeowners who are looking for an ideal home equity loan deal. You can get many loan quotes within just a few hours in most cases.
Dean Shainin is a consultant specializing in home loans, strategies for loan financing, home equity loans, and consolidation loan information. To see a list of recommended loan companies, tools, resources, free quotes and articles, visit this site:Best Home Mortgage Loans
Get free valuable online tips for saving money from his: Best Home Equity Loans website.
Perhaps a loan officer mentioned it in passing during your borrowing capacity assessment interview.
You should always have your finance capacity assessed prior to looking for property. This will do several things for you when looking and evaluating properties.
Firstly it will help you to home in on the right property type and price range of property to look at and avoid wasting your time.
Secondly when you do find a property that fits your property investment criteria then you are in a more powerful position. Both in terms of bargaining for the price you will pay negotiiating the terms that suit you best.
Lenders Mortgage Insurance is a Tool
Do not view LMI as an expense to be avoided.
LMI is a very useful tool that will improve your real rate of return or return on equity invested. I will outline the way that this works below.
Because you can borrow more, with your existing financial resources, LMI will also help you progress faster toward acheiving the property investing nirvana that you are seeking. Whether that be total financial independance, extra money to give to the worthy cause of your choice or the knowledge that you have total financial security.
For now just say that if you want to buy a property worth $100,000 then the bank would normally ask you to come up with $20,000 for the deposit. Which is a standard requirement of many banks.
This is where lenders mortgage insurance (LMI) comes into play. Using LMI you can reduce the amount required for the deposit to as low as 5 percent, perhaps less, depending on your financial institution.
LMI is Your Greatest Ally
Many new investors see a request from the bank to use of lenders mortgage insurance as an added expense. An additional cost barrier imposed by the banks to stop you from acheiving your investment goals.
Do not look at it this way. LMI is your friend. Professional investors (this means people like you) see the use of LMI as their greatest ally when it comes to obtaining the finance they need.
As I will show you below LMI is a very useful tool for real estate investors
LMI is a Capitalizable Expense
The great thing about using lenders mortgage insurance is that you can generally add the amount that LMI will cost you on to the amount being financed.
Why is this so beneficial to you?
Because it saves you using your precious available capital or equity. This can make an substantialf difference when you want to move on to your next investment property.
Is LMI a Tax Deduction
Lenders mortgage insurance can be viewed as a cost of doing business.
As such it can be deducted from your gross income when it comes to tax time.*
Your gross income is the rental income from your investment property and any other income you may have to declare in a tax year.
LMI Improves Your Return on Equity Invested
Quite simply put lenders mortgage insurance will improve your return on equity invested by allowing you to invest less equity in each property you buy.
So from the example above, using the standard requirement of the need for a 20% deposit with a $100,000 property. This would give a loan to value ratio of 80% and then your capital requirement would be $20,000. ($100,000 x 20%).
If the value of your property were to go up by 10% in one year to be valued at $110,000 then your net increase would be $10,000.
This equates to a 50% return on equity invested. ($10,000 / $20,000 x 100)
If by the use of lenders mortgage insurance you were able to reduce the deposit requirement ot 5% or $5,000 ($100,000 x 5%) and your property rose in value by the same 10% then ou would have a 200% return on equity invested. ($10,000 / $5,000 x 100) of 80%.
If you had $20,000 to invest you may think great, I'll just pay my $20,000 deposit and get my investment property. But if you used LMI you could lower the capital requirement to just $5,000.
In this case you culd then afford to purchase 4 properties instead of just your original one.
For now it is enough to say that banks use your loan to value ratio (LVR) to calculate the level of debt (risk from the banks point of view) that they would be acceptable for a particular asset.
Some banks and financial institutions are more strict on this criteria than others, especially in the light of the sub-prime mortgage crisis that has caused a stir with less than optimally financed properties.
However that will not be you. You are aiming to obtain premium quality financing at terms favourable to you, not the banks.
And this is very acheivable, thousands of people have done it before you and millions more will do it in the future.
The Benefits of LMI - A Summary
In summary, lenders mortgage insurance can reduce your capital outlay requirements, enable you to progress faster with your property investment ambitions and improve your return on investment for any property.
Knowing how a home equity loan works will help you determine whether a fixed-rate loan or a home equity line of credit is the best for your financial situation. With a little research you can get the best type of loan available
Home equity loans are sometimes referred to as home improvement loans and equity loans. They are generally used for large purchased.
4 Important Aspects To Consider Before You Apply
When you apply for a home equity loan, it is wise to know how a home equity loan works in order for you not to put your home at risk. The difference will now be the amount of equity you have in your home, or the home equity. The lender will now use the value of your home equity to determine the potential amount you can borrow for a home equity loan.
Normally, a lender will base your allowable home equity loan on a percentage of your home’s equity. Traditional lenders will limit your home equity loan to 80 % of your home equity. However, more aggressive lenders allow borrowers a home equity loan which is more than the home’s appraised value.
If you are considering getting a home equity loan, you can either get a fixed rate loan or a home equity line of credit. Lenders usually base the rates on their home equity loans on their Prime Interest Rate, the interest rate they charge their most qualified clients or borrowers.
Lenders will then either subtract of add a percentage, usually 1-2 %, from their Prime Rate to determine the interest rate you will be charged. This percentage will, therefore, depend on your credit and the amount of money you wish to borrow.
Researching The Best Home Equity Loan Companies
The best way to get a good home equity loan deal is by choosing the right lender among lots and lots of home equity loan companies. There are lots of home equity loan companies to choose from.
Some home equity loan companies have variable interest rates. These interest rates are adjusted by the home equity loan companies depending on the interest rates changes in the market. Some home equity loan companies offers home equity loan deals that has flexible terms but always make sure that you understand fully what they are offering. Compare the rates of the home equity loan companies that have the same home equity loan terms.
Some home equity loan companies offer hybrid loans. A hybrid loan is another type of home equity loan that offers a fixed interest rate. Hybrid loans often have lower interest rates than most 15 to 30 year fixed rate loans. This type of home equity loan is ideal for a borrower who wants to have short term loans. These types of home equity loans have no prepayment fees.
Home equity loan companies are constantly looking for homeowners who want to refinance their home equity. The interest rates that these home equity loan companies offer are very low. If you want to shop for a home equity loan, there are lots of home equity loan companies found on the internet.
Several websites offer their services to homeowners who are looking for an ideal home equity loan deal. You can get many loan quotes within just a few hours in most cases.
Dean Shainin is a consultant specializing in home loans, strategies for loan financing, home equity loans, and consolidation loan information. To see a list of recommended loan companies, tools, resources, free quotes and articles, visit this site:Best Home Mortgage Loans
Get free valuable online tips for saving money from his: Best Home Equity Loans website.
Flipping Property: What's it About & How can I Do It?
Your Quick Guide to Making Money Flipping Real Estate in 7 Simple Steps...
Every time you turn your head, someone else is talking about flipping property. What are they really talking about and is it something that YOU can do and make money doing?
First, let's define the two types of "flipping real estate".
Assignment Of Contract
This is ofter referred to as
Flipping The Contract. You find a property for "pennies on the dollar", put it under contract and then "flip" that contract to, most likely, someone that is going to do the rehab, or renovation on the property. Another term used to refer to this type of property transaction is
wholesale real estate investing.
Flipping Real Estate
Buy a property, fix it up, and resell it to an "end buyer". This is known as "flipping real estate", "rehabbing", or "retailing" to name a few.
OK, now that we've gotten the terminology out of the way, I want to first start by telling you that real estate is simple, but not easy, so if you're looking for a get rich quick scheme, you're probably going to get yourself into trouble.
Now... on to how YOU can make money flipping real estate.
This article focuses on the second definition of flipping real estate: buying, fixing and reselling.
Step #1 - Find the Right Deal
If I made a dollar every time someone told me there were no more deals, I'd be a multi-zillionaire by now! Here's the thing and I want you to get it through your head! There are PLENTY of deals - even where you live! Make a consistent effort to really look for houses that are overgrown, in need of paint, possibly boarded up, etc.
These are going to be your best bet for flipping real estate.
Step #2 - Estimate the Repairs
You can either go ahead and bring a contractor or handyman with you or you can get a simple calculator that will figure out the "rough" numbers - like the one found at www.fixingandflipping.com or you can read more about the costs involved when making real estate flip at
Calculating Profits when Flipping Real Estate
Understand, however, that more often than not - like 99.99% of the time - your budget will come in lower than your actual costs! You may also want to have a home inspection to check out the major items: foundation, roof, plumbing, electric, HVAC, etc.
This is where many people run away from real estate. "Contract" is not a four letter word! In fact, it is your best ally when you are negotiating!
Use your contract negotiations to pay for the repairs by getting seller contributions and repair credits. This will keep you from having to dip into your own pockets for repairs!
Make sure that you have a way out in case the deal isn't going to work for you. Some "escape" clauses that you can handwrite in are:
- "Subject to satisfactory appraisal"
-"Subject to partner's approval"
- "Subject to satisfactory inspection"
You can use private lenders or hard money lenders if your credit's a little shaky, or in some cases, you may even be able to use a regular mortgage company to get the deal done! Just make sure it all makes sense financially!
Step #5 - Get Your Contractors in Place
You should have your workers ready to go before you even close the property. Think about this: what if your monthly payment on the property is $1500/month? That's $50 each and every day out of your pocket while the property is just sitting there...
Be ready to start the moment you close!
Step #6 - Manage the Renovation
Unfortunately, you MUST stay on top of your workers! Use a solid contractor agreement that protects you and follow up on them daily. Stop by every couple days minimum and push, push, push until the job is done!
Step #7 - Market and Sell the Property
Put a For Sale By Owner sign in the front yard immediately to start building a buyers' list.
Once the job is complete, call all the interested parties back and invite them to an open house and accept offers! Make sure you've kept all of your receipts so you can prove any repairs to the buyer's mortgage person and/or the appraiser.
You can read more about house flipping, see the article
Heather is the co-creator of Fixing and Flipping software, takes the guesswork out of estimating repairs. Learn how to estimate repairs and calculate profits in seconds.
Go to: www.fixingandflipping.com for your free video and mini-course.
If you have owned a home for some time, you probably have amassed a nice nest egg of equity, particularly if you owned it through the recent price run up. So, how do you use it for practical needs?
The equity in a home simply refers to the difference between the value of a home and the amount you owe on it. An example always helps, so let’s use a simple one. Assume you purchased a home for $150,000 in 1990 and put $15,000 on it. As the years passed, the home appreciated in value and you paid down the mortgage. Today, the home is worth $200,000 and you owe $100,000 on it. Your equity is $100,000, the value minus the remaining amount you owe.
Equity in a home is a beautiful thing.
Why? Well you can use it to fund those things in life that you just have to do. If you want to improve your home, you can use the equity to do it. Most people seem to want three types of improvements – a new kitchen, new bathrooms or a new bedroom or two. All of these can be paid for using your home equity. The real beauty of taking this step is the improvements also add to the value of your home.
How Can You Access Your Equity
So, how do you access the equity in a home? There are a number of ways, but many people choose to use a home equity line of credit. That is a mouthful, so most refer to it as a “HELOC”. As the name suggests, it is a line of credit based on the value in your home. Using our example above, a lender would verify you have $100,000 in equity and give you a credit line for a percentage of the equity.
The percentage of equity that can be used depends on the lender. It tends to be capped at 80 percent of the total value of your home. In the example above, the credit line would be for $60,000 since 80 percent of $200,000 is this amount. That being said, lenders have all types of programs.
You can expect to pay a bit more in interest on your credit line. The loan is a second on your home, meaning that it is more risky than the original loan. With risk comes increased borrowing costs, in this case a higher interest rate. You should expect rates to be a point or two higher than what first mortgages are going for.
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