by Investmark Mortgage | Feb 6, 2019 | Blog
There’s an old saying that my friend’s father used to say, “Believe half of what you read and none of what you hear.” If you watch the news each day and/or read the newspaper, you may have heard or read that real estate prices are going to continue to rise. You may have also heard or read that real estate prices are going to decline. So which is it?
Here are a couple of things to keep in mind: First, no one has a crystal ball where they can accurately predict the future. However, it is important to understand where you are in your market cycle so you can adjust your investment strategy accordingly. Second, nothing will prevent you from investing in real estate more than worrying about things you cannot control.
With that said, here’s what I consider the top three factors that CAN affect the value of a real estate in your market:
- Specific economic conditions in your local real estate market like the availability of housing and the corresponding demand (basic supply and demand) are the most important considerations. Your local economy (i.e., jobs and other economic activity) has the biggest impact on the real estate cycle in your market. How do you determine what the market is doing in your investing area? Talk to some active real estate agents and/or brokers that consistently work a given market. They will know the days on market and months supply of inventory. Those are key indicators that can drive values up or down. Also, if you know some good appraisers, they will have similar information, and probably on a broader level.
- The forces behind mortgage financing can play a tremendous role on a macro scale that impacts every market in the country. Most mortgage financing is provided by federally backed loans from Fannie Mae, Freddie Mac, FHA (Federal Housing Administration), or VA (Veterans Administration). These lenders have specific guidelines that change over time and impact a borrower’s qualifications. The stricter the guidelines, the fewer the eligible borrowers. Mortgage lenders who underwrite these products will have the answer here, as they know the requirements as they change.
- Mortgage interest rates play a major role in the real estate market cycle and change, sometimes multiple times, each day. As mortgage rates increase, while housing prices remain flat or increase, mortgage payments will also increase, making it more difficult for someone to qualify for the same priced house as when rates were lower.
I encourage you to talk to your local real estate experts such as your trusted agent/broker and or appraiser. Ask them what the status is of your investing area. Also, talk to an experienced mortgage broker that works with both homeowners and real estate investors. They will typically have multiple lenders they use for underwriting and can give you a snapshot of the latest rates for both the retail side and rental property side. Knowing this information will help you make an informed decision and help answer the question of where values may be headed.
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by Investmark Mortgage | Jan 30, 2019 | Blog
One of the hardest things to do in life is to get started. Whether it’s a new job, a new business, or a new relationship. All of these involve challenges because of the unknown, the unforeseen, and a general lack of knowledge and experience. This can create anxiety and fear, which prevents you from moving forward on a path to success. The same is also true for getting started in real estate investing.
I want to help anyone struggling with those first steps, so they can get started in real estate investing. I have outlined what I believe are four keys for putting you on a path to success. So let’s dive into them.
KEY #1: KNOW YOUR REAL ESTATE INVESTING STRATEGIES
In the single-family real estate investing world, there are basically three investing strategies: wholesaling property, flipping property and owning rental property. Your job is to consider which one(s) you want to focus on, and put a plan together to execute on them. For example, if you want immediate income, wholesaling is the way to go. If you are looking to make large profits, consider finding a deal with enough equity where you can rehab and flip it. If you are looking to build long-term wealth and generate passive income, then you need to buy rental properties.
KEY #2: GET A SPECIFIC GOAL DOWN ON PAPER
The biggest key to getting started is setting a goal and writing it down on paper. I know I’m preaching to the choir with some of you, however, others might be thinking, “I just don’t need to do that.” Really? How will you be able to measure if you are reaching your target if you don’t really have one? Do you really want to leave it up to chance? Wouldn’t it be better to take charge and have a plan? Write your goals down.
KEY #3: NETWORK WITH OTHER REAL ESTATE INVESTORS
Other real estate investors are going to be your best resource for networking, creating a mastermind group, and building the rest of your team. You want to reach out to them, learn from them, and discuss your ideas with them. If you want to get to the next level with your real estate investing, networking is a must-do.
KEY #4: TAKE ACTION!
All that is left at this point is for you to take action. How do you do this? Go find a pen and paper and write down your action plan.
If you are still struggling with this, go to YouTube and watch “How to Take Action” by Tony Robbins. That will help put things in perspective for you and help you get started.
Now get moving! Identify the next steps and TAKE ACTION! Want to wholesale properties? Find a wholesaling group on Meetup.com and attend their next meeting. Want to buy a flip or rental property? Contact a wholesaler, talk to them about what you’re looking for, and get on their buyer’s list. Need financing for your deal? Give us a call!
by Investmark Mortgage | Feb 1, 2018 | Blog
When it comes to investing in real estate, there are just some deals you are not going to be able to acquire. Best to know this from the start and get over it quickly. Someone else is going to get the deal instead of you, either because they were focused on solving the seller’s problem, beat you to getting it under contract, or more often than not, offered more money than you. Whatever the case may be, you didn’t get it. Also, it certainly won’t be the last time either, unless of course, you completely stop making offers.
Hey, it happens to everyone. I hear investors all the time say they lost a deal to another investor who was willing to pay more for it. And if that’s why you didn’t get the deal, stop thinking you “lost” it. You didn’t lose it. If you did your due diligence, and offered the right purchase price (i.e., one where you can make the profit you want), get over it and move on to the next deal.
Are you questioning whether you offered the correct purchase price? If so, that is totally normal, and you need to ask yourself the following questions:
- Did I determine the correct ARV?
- Did I do enough due diligence to determine the complete scope of work?
- Did I offer the right price based on these factors along with the profit I wanted to make?
If you answered “YES” to all of these, then you should feel good about your offering price, and not confuse losing a deal with someone else making a mistake that’s going to cost them money. However, if you low-balled the seller, then we are talking about a completely different situation. In this market, there’s no room for being too greedy. Whatever the case, don’t beat yourself up over it.
Most of what we are seeing right now is investors paying too much just to get a deal. Why are they doing this? They are very new and don’t have enough experience yet. Emotions are taking over their decision making, especially when pressured from a wholesaler to buy the deal before someone else does.
If this sounds like you, don’t get sucked in. No matter what your deal flow looks like, it’s a dynamic market. This means that deals are happening all the time. Real estate deals happen every day and that’s not going to change. Be patient and find the one that works for you.
You have a Real Estate deal in Texas and looking for someone to help you with hard money loans? We can help! We have a three-time award-winning hard money lender, with offices in North, Central Texas, and South Texas
by Investmark Mortgage | Sep 28, 2017 | Blog
You may have heard of the over-under in sports gambling. That’s where you bet on whether the combined score of both teams will be either higher or lower than that number. But did you know there is an over-under in real estate investing? That’s where an investor overestimates the ARV, underestimates the scope of work required, and basically pays too much for the property.
You might be asking what’s the similarity here? The answer: Whether you are gambling on football or gambling on your deal, you can lose money doing both. And with real estate, the losses can be much greater than some insignificant football wager. Still, many investors don’t even realize they are doing this, let alone think they are gambling. Let’s break down how this happens so we can understand how to avoid it.
Overestimating the ARV
Here are the most common things that contribute to inaccurate ARV’s:
- Taking the wholesaler’s word for the value without doing any due diligence.
- Looking at the comps and picking the highest one.
- Using the tax assessed value for the ARV.
- Thinking the appraisal is “too conservative” and this deal will actually sell for more.
If these sound familiar, beware that there are huge risks associated with these approaches that involve losing money.
Underestimating the Scope of Work
Even more than ARV, the scope of work required often falls short due to the following three reasons:
- Prior to purchase, major items were overlooked or unforeseen due to improper assessments. Things such as foundation work, roofing, HVAC, and plumbing, are the most common and have the most significant impact on increasing the overall costs.
- The investor believes they can get the work done for a much lower cost than is actually possible.
- Believing the wholesaler’s rehab estimate without doing your own due diligence.
Avoiding These Pitfalls
An accurate assessment of the value of the property starts with getting an appraisal. Using any other approach will only lead to problems. If you have been on the I.M. Blog section of our website, you know that this is something that has been emphasized since the beginning. The appraisers we use are experienced with investor deals and know how to evaluate a property that needs to be rehabbed. Also, they are never told to be conservative with their assessments.
If you are not experienced in determining the overall scope of work required to reach the ARV needed, get with an experienced contractor to help you understand the true cost of the project, so there are no expensive surprises. There’s always going to be something that pops up unexpectedly, but missing major items can be avoided. Be realistic and don’t gamble with your investment.
Have a Real Estate deal and want a hard money loan to flip? We are a 3-time award-winning hard money lender, with offices in Dallas, Austin, San Antonio, and Houston.
by Investmark Mortgage | Jun 1, 2017 | Blog
New (and even some experienced) real estate investors often think there is more money in a deal than there actually is because they are focusing on gross profit and incorrectly calculating their net profit.
For example, a house with a $100,000 ARV that needs $20,000 in repairs and purchased at $50,000, yields an average net profit of around $13,500. While the net profit may appear to be higher, as it looks like there is much more equity in the deal, let’s discuss why this is not the case.
There are five costs incurred at the sale of a property that goes into a formula we will use to calculate the net profit. These costs are:
- Seller’s Closing Costs: This includes the title company escrow fees, title insurance, recording fees, and any other title company costs.
- Carrying Costs: This would include utility expenses such as water, gas, and electric, as well as any interest expense if you borrowed money to purchase the property.
- Seller Concessions: If your buyer doesn’t have enough money to bring to closing, they can ask you, the seller, for some assistance. This assistance means they want you to pay for some of their closing costs and/or lender costs. Many lending products allow for up to six percent in seller concessions. Although a buyer will seldom ask for this high of an amount, just know that they can.
- Commissions: If you are listing the house on the MLS (which you should be doing), you are going to have to pay your agent or broker a commission. In most markets, six percent is the norm.
- Pro-rated Property Taxes: As a seller, you will have to credit the property taxes to the buyer for the current year up to the date of closing on the sale. So if you sold the property on May 31, you would have to credit exactly five months’ worth of property taxes to the buyer at the sale closing.
Keep these costs in mind when you are making your decision to buy a deal you are planning on flipping, and use them to determine what you are going to net at closing. Remember, your costs will vary based on the value of your deal, as well as how long you own it before it sells.
If you have Real Estate deal in mind and looking for an experienced hard money lender in Dallas, TX, contact us today or call us at 214.219.0360.
by Investmark Mortgage | May 24, 2017 | Blog
A realtor friend of mine once told me, “As soon as a house is listed on the MLS, it’s the belle of the ball.” If it looks good online, agents in the area will want to show it to their prospective buyers. As the saying goes, “you never get a second chance to make a first impression.”
To make sure your house is ready to go, be sure to consider the following Dos and Don’ts to get your house sold as fast as possible:
- Do make sure that there are no punch list items remaining, the property has been cleaned and staged if necessary, and all of the landscaping looks great. Don’t list it early or ahead of it is 100% complete.
- Do a thorough review of the comps with an appraiser or experienced broker that knows the area, to determine what the property can be sold for based on the current market value with the improvements you have made. Don’t overprice the property! Doing this can have a negative impact on activity.
- Do hire an experienced agent that understands the market in your area, and meets the following criteria stated in this blog here.
- Do make sure your agent uses CSS (Centralized Showing Service) so the showings can be automated and tracked. This makes your property easy to show. Don’t hire an agent that has to be called directly to set up a showing at a specific time. This makes it difficult to show the property and receive offers.
- Do follow up with your agent within a few days after your house goes live on the MLS to see how many showings you received. Showings indicate that you are priced correctly. If you have no showings, you are probably priced too high.
- Do follow up with your agent to hear what the feedback is from the showings (i.e., everyone liked the house and said they were submitting offers, bedrooms were too small, etc.).
- Don’t drop the price by a large percentage of you are not getting showings or offers. Large price drops can give the impression that something is wrong with the property, and not just that you are priced too high. You and your agent should determine the process ahead of time regarding price reductions. Use an experienced agent to help you with this.
- Do try to make that first offer work.
If you follow these steps, rest assured that you’re bound to get the highest possible offer in the shortest possible time in your market.
If you are in Texas looking for an experience Hard Money Lender Near You, contact us today!
Mike Hanna is a real estate investor, mentor, author, and public speaker. He has been an active real estate investor since 2002 in both single family and multi-family properties, and has been in the hard money business since 2005.