Real Estate Investing 101 At: Visionone Real Estate Investment Group
Strategies For Wealth Building.
Build Your Team
Real estate is a team sport, and you are the leader of your team. You don’t necessarily need employees, but you will need independent contractors and advisors who can help you in their areas of expertise. If the idea of running this team turns you off, then perhaps a different type of investing suits you better.
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I describe my approach to choosing and building my real estate team in Your Team: The Main Ingredient of Stardom. But to summarize, below is a list of some of the important team members you’ll need. I picked up the categories for these team members in the awesome book The Millionaire Real Estate Investor:
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“Inner Circle” – your personal, closest team members
Spouse - Business partner - Mentors/personal advisers
“Support Circle” – your fiduciary or critical relationships who help you with important, ongoing tasks / Property manager (if applicable)
Attorney specializing in real estate and/or business
Certified Public Accountant (CPA) Lender(s)
Mortgage lender – for long-term financing
Hard money lender – for short-term financing
Private money lender – for flexible, short or long-term financing
“Service Circle” – functional relationships for tasks you’ll need for your investments. http://
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Closing agent/title company - Home inspector
Electrician - Plumber - HVAC technician - Handyman
Painter - Yard service - Pest & Moisture control
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General contractor (for bigger remodels and pulling permits)
You will have the best chance of finding your key team members by networking with other like-minded real estate investors. http://
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I do this locally at my Real Estate Investor Association (REIA) or at other business groups like the Chamber of Commerce.
I find like-minded investors online at with its local meetups and special forums organized by local markets.
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FINANCCE - FINANCING
FHA (Federal Housing Administration) Loans – Insured by the Federal government and easier to qualify for than most programs. Terms include a small down payment, a fixed interest rate, and a long-term (length) loan
VA (Veterans Administration) Loans – You must be a veteran to qualify. Terms include a 0% down payment, a fixed interest rate, and a long-term loan.
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Conforming Loans – Loans conform to guidelines of mortgage giants Fannie Mae and Freddie Mac. Terms may include a 5% – 20% down payment, a fixed interest rate, and a long-term loan.
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Portfolio Loans – These are kept by banks or lending institutions instead of being sold off on the mortgage market. Terms vary, but they usually have a shorter term (5-10 years) and interest rates are competitive.
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Hard Money Loans – These lenders are most interested in the collateral (i.e. a hard asset) instead of the detailed lending regulations of other sources.
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The loan costs are much higher, so these are often used for short-term remodeling projects.
Private Lenders – The type of private lender varies widely, from self-directed IRAs & 401ks to wealthy individuals.
The flexibility and the long-term relationship you get from these lenders make them extremely valuable. I also include money partners in this category.
Seller Financing –
This is my favorite type of financing. A seller with equity can allow you to pay the purchase price over time with installments or by using more creative contracts like leases and options.
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It’s not as easy to find seller financing as walking into a bank, but the flexibility of terms make seller financing worth the effort.
The type of financing you choose will depend upon your financial situations (Step #1), your strategy (Step #2), and your personal preference.
You will want to rely heavily on your mentors and your lending team members (Step #5) to help you line up the best fit for you.
Once you have a solid plan for financing, you can proceed to Step #7 to raise cash for your down payment & reserves.
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strategy to explore)
Instead of simply renting or stretching to buy a home, master lease a residence and rent out bedrooms or units to reduce your payment http://
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Bird dog for other real estate investors to “sniff out” good deals for them & learn the investment acquisition business in the process (this is how I got started)
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Become a buyer’s agent, help buyers find houses to purchase, & learn the retail housing market in the process http://
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Become a leasing agent, match tenants to properties for landlords or property managers, & learn the landlord business in the process
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Manage/supervise remodeling projects for other investors & learn the remodeling business in the process http://
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#.2 Do a Live-In Flip (aka flip your residence) in order to build big, tax-free savings
Do a Live-In-Then-Rent by living in an affordable house for 1-2 years and then keeping it as a rental
Start wholesaling real estate for quicker, smaller chunks of cash (usually requires investments of time and money in marketing and strong sales skills)
Start a non-real estate side-hustle that matches your skills and passions with a need in the marketplace http://
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Strategies For Wealth Stage #
Build & grow an income property portfolio using one of these plans:
The All-Cash Plan – no debt, pay 100% cash for each property
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The Debt Snowball Plan – borrow on a small number of properties, then accelerate debt pay down one property at a time
The Buy 3-Sell 2-Keep 1 Plan – buy 3 rentals, hold, then sell 2 and pay off debt on the third...
The Trade-Up Plan – use 1031 tax-free exchanges to build a portfolio with strong equity and income
Self-Directed Retirement Account Plan – use a self-directed IRA or 401k to invest tax-free in private loans (my favorite), rentals, or flips
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Strategies For Wealth Stage #5 –
Income
Strategy Goal: Turn existing equity into investments that produce maximum income with minimal hassle and risk
With existing real estate portfolio:
Pay off debt to decrease overall debt levels (0% to 33% loan-to-value), reduce risk, and increase income
Sell low-quality properties and replace them with better ones
(using 1031-exchanges, if needed)
Refinance any remaining debts that are not optimal with fixed, low-interest, long-term debts
With no existing portfolio or with an insufficient number of properties: http://
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Buy more passive assets like higher-quality residential rentals, net-lease commercial rentals, and/or shares in limited partnerships.
Keep overall debt levels low (0 to 33% loan-to-value)
Make loans to other investors with funds inside and/or outside of self-directed retirement accounts
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Diversify into other asset classes (at my age of 37, index funds are my diversification alternative of choice.
An early retiree in his 50s named Darrow Kirkpatrick, on the other hand, also diversifies into other asset classes like bonds. http://
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Decide Your Investment Property Criteria
Your investment property criteria tell you and others what it means to have a good investment. I actually recommend creating a written investment profile that you can share with potential partners, investors, and sources of leads like real estate agents.
Your written investment profile should include descriptions of two major categories:
Target property
Target terms (aka the numbers)
Your target property will become clearer when you choose a niche within your overall market. A niche means you focus on one smaller segment of the entire market. I discussed that some in Step #3, but you can also explore your choice of a niche with my in-depth article The 35 Best Niches for Investing in Real Estate (& How to Choose Yours).
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When you’ve chosen a niche (or niches), your basic target property description may look something like this:
Single family houses with 3 bedrooms and 2 baths in the zip codes. Target full market price range is between Ideal properties are on quiet, safe streets convenient to schools and shopping. Ideal properties also include a garage or other storage and a useable yard.
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Mortgage, rate and term option....
A rate and term refinance is a type of mortgage refinancing that allows you to change the terms of your current loan and replace them with terms that are more favorable for you. You get a new loan, pay off your old mortgage and then make payments toward your new loan when you refinance.
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Are you having trouble making your mortgage payments? Have you been wanting to take advantage of rate changes since you originally obtained your loan? You may want to consider a rate and term refinance. This can allow you to pay less in interest or reduce your monthly payment. WWW.VISIONONEREALESTATE.
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Rate And Term Refinance: The Basics
A rate and term refinance is a type of mortgage refinancing that allows you to change the terms of your current loan and replace them with terms that are more favorable for you. You get a new loan, pay off your old mortgage and then make payments toward your new loan when you refinance. A rate and term refinance can give you more or less time to pay off your loan, a lower interest rate or a different monthly payment.
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Reasons To Do A Rate And Term Refinance
Homeowners can take advantage of a number of benefits when they refinance. These include:
Lowering your rate: Are current interest rates lower than when you got your loan? You may be able to get a lower rate. You might also qualify for a lower interest rate if you have a better credit score or less debt now than when you took your original mortgage. Taking an interest rate that’s even a fraction of a percentage lower can help you save thousands of dollars over the course of your loan. This means that it’s often beneficial to refinance whenever you can get a lower interest rate than what you’re paying currently.
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Reducing your payment: Your monthly payment goes down when you refinance a mortgage loan to a longer term. This is because you give yourself more time to pay off your loan and make more overall payments. Refinancing to a longer term and reducing your monthly payment can help you avoid foreclosure if you’re having trouble making your payments. Keep in mind that refinancing to reduce your payment means you’ll end up paying more in interest over time.
Changing your term length: You can also refinance your mortgage loan to a shorter term.
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Doing so increases your monthly payment, but you end up paying less in interest over the course of your loan. This can mean thousands (or even tens of thousands) of dollars saved by the time your loan matures. Are you now earning more in income now than when you got your loan? Refinancing to a shorter term can help you own your home sooner.
Rate And Term Refinance Requirements
Just like when you applied for your initial loan, you’ll need to meet your lender’s standards before you qualify for a refinance.
Let’s take a look at some of the requirements to refinance your mortgage loan’s rate or term:
Credit score: Refinances have minimum credit requirements that vary by loan type.
You’ll need a credit score of at least 620 to qualify for a refinance for most types of loans. Do you have an FHA loan? If so, you may be able to refinance with a credit score as low as 580.
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You may want to consider a VA Streamline Refinance or FHA Streamline Refinance if your credit score is lower. These loan options allow you to refinance without a credit check.
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Home equity: Your home equity is the percentage of the loan principal you’ve paid off. It’s a good idea to wait to refinance until you have at least 20% equity in your home. It’s possible to refinance with a lower equity percentage, but you won’t have access to the most favorable interest rates.
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I'm Anthony,
Real estate is my business!
I'm a Realtor working in the south florida area.
Home Sellers - Home Buyers - Leasing Property
Contact Anthony @ 305-784-6554
First Class Real Estate!
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Debt-to-income ratio (DTI): Lenders also consider your debt-to-income (DTI) ratio when they consider your refinance application. Aim for a DTI of 50% or lower before you apply.
Closing costs: You’ll need to account for closing costs when you refinance. Closing costs for a refinance usually equal between 2% – 5% of the principal balance on your loan.
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Can’t cover closing costs up front when you refinance? You may be able to roll them into your new loan with a no-closing-cost refinance if you have enough equity.
How To Get A Rate And Term Refinance
Applying for a refinance is similar to applying for a first mortgage loan. You’ll submit an application to your lender along with some financial documentation. Your lender will then schedule underwriting, an appraisal and your closing meeting.
Do you think a rate and term refinance might be right for you? Here’s more information on what you can expect to do when you get your new loan.
Apply For A Refinance
The first step in any refinance is to apply with your lender of choice. Research lenders in your area and consider current mortgage interest rates. Submit an application to your lender and specify that you want to refinance your rate or term.
Your lender will ask you for a few important financial documents when you apply for your refinance, including your:
Two most recent pay stubs
Two most recent bank statements
Two most recent W-2s
You may need to provide more documentation if you’re self-employed. Have your paperwork in order before you apply for a faster refinance.
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Your lender will begin the underwriting process once you submit your application. Your lender verifies your income during underwriting and makes sure that you qualify for a refinance. Respond to all lender inquiries during this time to help keep your refinance on track.
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Lock In Your New Rate
Your lender will give you a document called a Loan Estimate after you apply for your refinance. Your Loan Estimate gives you an estimate of the fees and costs of your loan. Hang onto this document – you’ll need to compare it to your Closing Disclosure later on.
You’ll also have the option to lock in your mortgage rate. Interest rates change on a daily basis. When you lock in your rate, you protect yourself from interest rate changes that occur between your refinance application to closing. Most lenders allow you to lock your rate for 30 – 60 days.
Want to extend your rate lock? You may need to pay an additional fee.
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Get An Appraisal
Your lender will also schedule an appraisal to determine your home’s value. Appraisals are important because they assure your lender that they aren’t giving you more money than your home is worth. You’re free to attend your appraisal. Make sure your property is in the best condition possible before the appraiser arrives.
Opting for a certain type of refinance like a VA or FHA Streamline? You may be able to skip the appraisal requirement.
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Review Your Closing Disclosure
Your lender will issue you a document called a Closing Disclosure before you attend your closing. Your Closing Disclosure contains important details about your new loan. You'll find your principal balance, interest rate and monthly payment. Read through this document carefully and make sure the terms match up with the refinance you want.
Be sure your monthly payment is lower than your current payment if you want to refinance to a longer term. Taking a lower interest rate? Your monthly payment should be lower as well. Compare your new Closing Disclosure with the terms of your current loan and make sure things match up.
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Close On Your Loan
It’s time to close on your loan once your lender finishes underwriting. After you’ve read your Closing Disclosure and make sure the terms are correct, contact your lender and acknowledge that you’ve received the Closing Disclosure. Your lender will then schedule your closing meeting.
At closing you’ll ask any last-minute questions you have about your new loan and sign all the necessary paperwork. Bring along your photo ID, your Closing Disclosure and a proof of transfer or a cashier’s check for closing costs. Your lender will appoint a neutral third party to conduct the closing and finalize your refinance.
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Let’s take a look at some of the similarities and differences between rate and term refinances and cash-out refinances.
Similarities
Some of the similarities between rate and term refinances and cash-out refinances include:
You take out a new loan. Both cash-out refinances and rate and term refinances involve paying off your current mortgage loan as well as taking on a new loan with different terms.
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You can work with a new lender. Whether you take a rate and term refinance or a cash-out refinance, you have the option of working with a new lender. You don’t need to refinance with the lender that gave you your current loan.
You can change your rate or term. In addition to adjusting your principal, it’s possible to change both your interest rate and loan term when you take a cash-out refinance. This is in addition to taking cash out of your equity.
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Differences
There are also a few important differences between rate and term refinances and cash-out refinances.
Your principal balance might not change. No matter how you change your term or interest rate with a rate and term refinance, your principal balance could remain the same if you didn’t roll your closing costs into your loan. When you get a cash-out refinance, you accept a higher principal balance and take the remainder out in cash.
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You take cash after closing. You’ll receive cash a few days after closing when you get a cash-out refinance. You don’t receive any cash from your lender when you get a rate and term refinance.
There are home equity requirements. You must have a minimum amount of equity in your home before you qualify for a cash-out refinance.
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For example, you may want to take $50,000 out of your home equity and have at least $60,000 in equity to draw from. This requirement doesn’t apply to rate and term refinances.
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Rate and term refinances and cash-out refinances are for different types of borrowers. If you’re unsatisfied with your current monthly payment or interest rate, a rate and term refinance might be right for you. Do you want to consolidate debt or cover a major expense? You might want to consider a cash-out refinance.
Real Estate is a road-map to riches, it’s one of the best way to build wealth. http://
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There is no better investment than real estate despites the ups and downs, it outperformed all other investments.
Real Estate is nothing but a passport to wealth.
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