Rental Property Loans: Things to consider when it comes to Conforming Mortgages.

When it comes to rental property loans, conforming mortgages are the lowest cost financing option available. Learn about the basic providers of this type of financing, what they will expect from you as a borrower and whether or not this is the right financing option for you.

A "conforming mortgage" is essentially the same thing as a standard home loan. The main difference is that you the borrower use the loan to purchase an Arizona Investment Property instead of a primary residence. Because you are using the loan proceeds to buy an Arizona Investment Property, lenders charge more for this type of loan and expect more from you as a borrower. Simply put, you are going to pay your primary mortgage first and foremost before paying the mortgage on your Arizona Investment Property.

This added risk makes this type of loan a bit more expensive than a standard home loan.

When it comes to conforming mortgage providers, lenders fall into three broad categories, online, businesses investment lenders and traditional banks.

Online providers offer convenience when compared with the other two types of lenders because you don't have to go to a physical location to apply.  With online lenders, you can complete the entire lending process from the comfort of your home. Business investment lenders are ideal for borrowers who are a, businesses and b, looking for greater flexibility. The other two types of mortgage providers don't usually lend for commercial or multifamily purchases. A traditional brick and mortar bank is best if you are looking for a provider with insight into your local market. In addition, one-on-one meetings with your lender in this situation, give you the opportunity to build a relationship, which you could leverage to secure a better deal.

In the case of Rental Property Loans, and specifically conforming mortgages, your eligibility will come down to a specific set criteria.

No matter which type of mortgage provider you choose there are basic standards borrowers should know before approaching any investment lender.

Basically, you can't have a credit score lower than 620. Don't have your debts take up more than 25 percent of your regular income, this is known as Debt to Income Ratio. If your debt to income ratio, it exceeds the 25 percent standard, expect your application to run into difficulties. If your score is lower than 620, or if you have a lot of outstanding debt you are better off considering alternative forms of financing.

When it comes to rental property loans, a standard conforming mortgage may not always the right help for you.

There are many situations where a "conforming mortgage," might not meet your needs.

Conforming mortgages,  conform to the standards set by Fannie  Mae and Freddie Mac. Therefore there are specific situations where no matter how great your credit is, you will not qualify for a conforming mortgage.

The property you aim to purchase may be in deplorable condition. No conforming mortgage lender will be able to approve a loan on a property that falls short of FHA guidelines.If the property you want to invest in is in shambles you should look into a  rehab loan first.

Another situation is where you have 4 or more outstanding mortgages, the more mortgages you have the great scrutiny a lender will have give to your credit profile until you essentially need perfect credit to qualify. If this is your case, look into a blanket mortgage.

However, conforming mortgages are perhaps the most comfortable option for those just getting into the rental business. Before looking into a conforming mortgage, consider which type of lender can meet your needs, know the basic standards of qualification and whether or not a conforming mortgage is really best type of financing for your specific situation.

 Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC 
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701 

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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How to Win in Real Estate: Tips from the Pros to Lower Taxes and More

 

How to Win in Real Estate: Tips from the Pros to Lower Taxes and More

Looking to grow your real estate portfolio wisely, reduce taxes, and increase your financial control? Then you won’t want to miss these tips from husband and wife real estate team Bill Slaughter and Laurie Goettl Slaughter.

Meet Bill and Laurie

Bill and Laurie Slaughter started growing their real estate portfolio 40 years ago when Bill purchased their first rental property. Over time they expanded their portfolio to as many as 49 rental houses and learned the ins and outs of real estate and property management. Today they run Clients First Realty, a team of nearly 150 seasoned real estate agents, most of whom have been in the business for over 18 years.

Bill is an active real estate broker who understands the market from the ground up. Before specializing in real estate Bill spent several years in banking and the auto industry. Never one to sit still, Bill was retired from the auto industry exactly 28 days when boredom kicked in and he dove head-first into real estate. He secured his real estate license in 2002, spent 3 years with HomeSmart, then got his broker’s license and launched Clients First Realty . Along the way he picked up several additional credentials and affiliations including Montclair Publishing’s prestigious Who’s Who in Real Estate Platinum Lifetime Member.

Laurie brings an equally impressive resume to the Clients First Realty team, including 30 years experience in bookkeeping, commercial and residential property management and lease accounting. A graduate of Hennepin Technical College in Minnesota with a degree in Management Accounting, Laurie obtained her real estate license 5 years ago and now serves as Vice President and Associate Broker at Clients First Realty. She handles all property management details for the family’s real estate portfolio along with her corporate responsibilities. Laurie also assists her own clientele in buying and selling real estate.

Tips from the Pros

With their team at Clients First Realty, Bill and Laurie have bought, sold, and managed over $1 billion in real estate, handled over 10,000 transactions and never had any negative claims. They proudly run a simple, clean operation and Bill still personally reviews every contract to ensure his clients receive the very best.

“Real estate is a patient investment gig,” says Bill. “People looking to make a quick buck and thousands of dollars in the first 30, 60, or 90 days are in for some disappointment. There are too many variables outside of your control—the business climate, political changes, buyers versus sellers markets, and more.” Real estate is not a get rich quick strategy, and you need to “be in the middle of it” to understand what’s happening.

Bill recommends the same success strategy he and Laurie have used to grow their portfolio. Buy properties and “glean a little income” for a minimum of 5 years per property. Then you can typically sell each property for a profit. The properties pay for themselves via the rental income generated, and your portfolio continues to grow at the right pace, with low risk.

Save on Taxes

One of the inside real estate tips Bill and Laurie use is leveraging a self-directed solo 401K. Many real estate investors are familiar with self-directed IRAs which allow you to add real estate to a retirement portfolio, but few have heard of the enhanced options available through self-directed solo 401Ks.

Self-directed solo 401Ks offer higher contribution limits, greater flexibility, lower costs, and better creditor protection than self-directed IRAs. Bill and Laurie use and recommend Broad Financial in New York for their solo 401K services, and they also opened a C-corp to get everything properly established. “It’s not that hard,” says Bill, “Just a matter of knowing how to do it.”

Speak to your tax and legal advisors to determine what’s right for your specific situation, but benefits of self-directed solo 401Ks include:

1. Higher annual contribution limits. Solo 401K plans allow for both employee and company contributions. For 2017 you can contribute up to $54,000 and up to $60,000 if you’re 50 years or older. Compare that to a self-directed IRA, which caps out at $5,500 this year, $6,500 if you’re over 50.

2. Choose a pre-tax or after-tax (Roth) format. Traditional self-directed IRA contributions can only be made in pre-tax formats. Solo 401Ks offer much more flexibility and can be established as a pre-tax or post-tax vehicle.

3. Tax-free loan option. You can borrow up to $50,000 or 50% of your 401K account value, whichever is less. The loan can be for any purpose. IRAs do not allow loans of any kind.

4. Use nonrecourse leverage and pay no tax. According to the IRA Financial Group, which was founded by tax attorneys, “With a solo 401K plan you can make a real estate investment using nonrecourse funds without triggering the Unrelated Debt Financed Income Rules and the Unrelated Business Taxable Income (UBTI or UBIT) tax (IRC 514). However, the nonrecourse leverage exception found in IRC 514 is only applicable to 401K qualified retirement plans and does not apply to IRAs.” Translation? Using nonrecourse financing legally avoids taxes when used by a solo 401K.

5. No custodian needed. IRAs require custodians, especially for real estate, and the fees can rack up. A solo 401K is a trust account, and you are the trustee. You open your affiliated bank account at any participating bank, like Wells Fargo or Washington Federal, and you control the funds.

6. No need to spend on an LLC. A solo 401K plan can make real estate purchases and other investments without the need of an LLC. The trustee (owner) of the solo 401K trust can take title to a real estate asset without an LLC. LLC fees can get expensive, so this saves both time and money.

7. Better creditor protection. The 2005 Bankruptcy Act protects all 401K plan assets from creditors during bankruptcy proceedings. Most states offer greater creditor protection for 401ks versus IRAs outside of bankruptcy as well.

Bill and Laurie leverage their solo 401K plans for these benefits, and they also say “it allows us to control [our retirement assets] in an area we know best.” They enjoy the tax benefits of borrowing money against their property portfolio through their 401K, and the tax-free earnings features offered by the Roth option.

Treat Business Relationships like Partnerships

Though their solo 401K is a good way to borrow up to $50,000, Bill and Laurie certainly know the benefits of finding the right partner for the majority of their real estate lending needs. For that, they have been working with Level 4 Funding for the past 2 years, and completed 4 real estate lending transactions with them so far.

Bill heard about Level 4 Funding through an online ad, and was “lucky enough to get connected with Matt.” Bill shares these thoughts:

“Matt is really a great asset—he’s quick, knowledgeable, efficient, and we’ve had nothing but good experiences with him and the Level 4 Funding team. They have made it real easy to go to closings—the money is there as expected with no problems. Professionalism is real important. I’m old-school and don’t change horses in mid-stream. So I don’t go anywhere else. Their servicing company Evergreen is easy to deal with and I can always find someone there to get questions answered.”

“It’s a good relationship and that’s what you look at in any business scenario. Business relationships should be treated like a partnership because we need them and they need us and it’s worked out really well. If you need something done, Level 4 Funding is the place to get it done.”

Bill and Laurie experience great success in real estate by practicing smart buy and hold strategies and looking for business and tax advantages like self-directed solo 401Ks. They are also adamant about finding and keeping the right business partners. “We really enjoy the relationships we have” says Bill, “including Level 4 Funding.” Connect with Bill and Laurie’s team at Clients First Realty for your next property purchase, and benefit from their experience and expertise.

 

 

Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:     (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
 

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years. 

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The Benefits of Using a Private Lender for a Self Employment Home Loan

 If you are self-employed, it can be tricky to qualify for a home loan due to debt to income ratios and business losses. Using a private lender can make the process easier and has many other benefits when it comes to qualifying for a self employment home loan.

For many Americans, owning their own business is a dream come true. If you are self-employed you enjoy many benefits both financial and otherwise. Most likely you are able to set your own schedule and you answer to yourself. You can work from home or whatever environment you may choose. You can set your own dress code and hours and take time off when you need it. You can also take advantage of many tax deductions to write off most of your business expenses. Everything from large equipment purchases to pens for you home office can be tax deductible which can help you save big come April.

While you may enjoy your tax savings most of the time, it can be a double edged sword, especially when it comes to qualifying for a home loan. Many times, people who are self-employed have tax returns that do not accurately reflect their actual income due to deductions. Sometimes it can even make it look like you lost money when you in fact had a good year. Throw in any debt you may have for business or personal purchases and your debt to income ratio can make you look like a huge liability to a bank.

For these reasons, many business owners find it difficult to secure a traditional mortgage from a bank. However, there are many other options to find a self employment home loan that will work for you. One key to finding a loan is to think outside of the traditional bank or mortgage broker and find a private lender like Level 4 Funding to finance your loan.

Pros and Cons of Using a Private Lender for Your Self Employment Home Loan

For many business owners, a private lender is their best chance of securing a self employment home loan. However, like any major financial decision, there are pros and cons that need to be carefully considered before making a decision.

·      

Pro: A private lender often has a very short approval process. Banks and public lenders can take anywhere from 30 to 45 days (and sometimes more) to approve and fund a loan. If you need a quick loan to buy a property, this can be too long. Also, when it comes to a self employment home loan, traditional banks will likely have issues during underwriting and come back to you several times asking for more paper work, more proof of income, more documentation. A private lender can have you funds in as little as 1-2 weeks with significantly less paperwork.

·       Con: Private loans are usually more of a risk for the lender. As such, you can expect to pay a higher interest rate for the loan.

·       Pro: Easy to qualify. A private mortgage lender has more flexibility than a bank in terms of who they lend money to. Borrowers who have bad credit, a high debt to income ratio, or are looking for a self employment home loan will have an easier time qualifying with a private lender than with a bank.

·      

      Pro: Geared towards investments and investment properties. If you are self employed, you know the benefit of having your money work for you to make more money. Private lenders have short term loans that are geared towards investment properties and fix and flip houses.

Once you evaluate the pros and cons, it is easy to see that in many cases, a private lender is the best option for your self employment home loan. Like all brokers, private lenders have to be licensed and they do have guidelines to follow to protect you and your investment. As long as you know that you will be able to make your monthly payments there is relatively low risk and a high reward for the self employed borrower.

Once you are ready to risk less with the best private lender, call us at Level 4 Funding to start your loan process today.

Stop waiting for a bank to give you the home loan you need. Take matters into your own hands and make your dreams come true today!

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

What You Need to Know About Non-Performing Notes for Sale

Non-performing notes

You might have come across non-performing notes for sale recently. These are accounts where collection attempts have been unsuccessful. If you think this sounds like a difficult thing to purchase, that’s where you may be wrong. Buying these non-performing notes for sale is actually easier than you think because many lenders are willing to sell non-performing notes at a loss.

That means profits. You see, non-performing notes for sale are actually secured debts. What does that mean? Good new for you; even if the loan fails to revive its performance, the note owner is still entitled to the property. Overall, investing in notes for sale can be an excellent alternative to high intensity foreclosure auctions.

What can you do to purchase a non-performing notes that’s for sale?

It’s easy if you follow these tips:

1. Contact a trusted loan broker in your area. They will help you find non-performing notes for sale.
2. Review the mortgage agreements of any non-performing notes that you purchase and determine what you need to do after looking at the payment record. A foreclosure might be the easiest thing to do on mortgages that are more than 90 days late on payments.
3. Offer a modified loan repayment plan to the mortgagor. Since you will have paid such a low price for the non-performing notes that’s for sale, there’s a good chance you might be able to lower the minimum monthly payment. Additionally, lowering the price means you will have a higher chance of getting the loan to perform.

Moreover, if your payment plan does fail, as they sometimes do, then unfortunately it is time to go ahead with the foreclosure process. This process is tricky and can take anywhere from six weeks to six month depending on what kind of property is held and what actions the mortgagor takes. While this is of course time consuming and annoying, the sun will appear once the process is over and you get full legal possession of the property.

Big Daddy Dennis Hard Money Lender

Arizona Hard Money
Level 4 Funding LLC
23335 N 18th Drive Suite 120
Phoenix AZ 85027
623-582-4444