How I Accidentally Landed My First Seller-Financed Deal

I’ve been working on diversifying my real estate investment strategy. The house being small wasn’t a issue. The rural area was not the complete issue either. We acquired the property, subsidies were awarded to us to complete the majority of the rehab, and of course we had county approval. Here’s the problem: During this time, there were county elections, and politics got in the way. We had a property with a $20,000 note. I knew the tenant pool would be small, and most likely they’d have some credit issues, but we had to take a shot. We agreed to decrease the purchase price of the house rather than replacing the garage (part of the money from the fire to pay off the note and repair the vinyl siding). Although the seller financing was completely accidental, I was not closed minded when it came to finding solutions to turn the acquisition around. Free eBook from BiggerPockets!

5 Ways to Land Financing After the Traditional Bank Cuts You Off

Maybe you’ve attained several mortgages from them already, and you’ve been buying up real estate left and right, building your portfolio. You might not see it coming, but once you own a set number of mortgages in your own name, the traditional bank will likely cut you off, refusing to lend you another cent. Find an investor-friendly bank or mortgage broker. Little did I know that there were investor-friendly private lenders out there looking for deals. Personally, I’m not a huge fan of commercial loans that require me to personally sign or that are eligible to recast in, say, five, seven, or 10 years, since now my other assets are at risk in a default (not just the property loaned against) or I may not qualify for the loan to continue if there was a dramatic change in property value or in my personal income or credit. There are also ways to get the deal without the bank. Better yet, you could find a money partner who would either put up all the money for the deal or sign on the loan. Become the bank. At some point, possibly after you’ve grown your real estate portfolio, you may start thinking about becoming the lender, as opposed to the borrower. If so, what are some of your favorite, creative strategies for financing your deals?

The Best Way To Profit From REITs In 2018

I’ve spoken to a lot of investors who are still scared of real estate after the housing bubble burst in 2008. Note how RWR outperformed SPY both before and after the financial crisis? Look at FFO. When you look at the last four quarters of FFO, you can compare it to a REIT’s annual dividend payouts to get its dividend coverage ratio. Since Realty Income pays out $2.54 a share in dividends per year, its dividend coverage ratio is 119.7% (3.04 ÷ 2.54 = 119.68). This tells us that the REIT is earning more in rental income than it’s paying out in dividends—the dividend is safe. Rule #2: Look at the Portfolio The other neat thing about REITs is that they’re easy to understand. Realty Income even breaks down its top 20 tenants and how many properties those tenants are renting: Knowing the quality of tenants and their occupancy rate is key; these are the two factors that will predict future cash flow and stock price. Rule #3: Look at the Price The final step is something a lot of REIT investors overlook. By carefully looking not only at how much FFO a REIT is producing but also at how much you’re paying for a piece of that FFO, you can save yourself from big price drops like the one Realty Income suffered last year.

As 2017 Ended, Rents Rose

The median national rent rose toward the end of 2017, contrary to the predominant trend for the year, according to the November Zillow® Real Estate Market Report. “After about a two-year slowdown, rent growth is starting to pick back up across the nation,” says Aaron Terrazas, senior economist at Zillow. “The slowdown in rental appreciation, combined with consistent income growth, gave renters some reprieve from worsening rental affordability over the past few years.” However, “As rental growth begins to catch up with income growth, affordability will deteriorate, placing a squeeze on budget-constrained renters,” Terrazas says. At the time, Zillow expected a 1 percent rise for the year. The challenge is intensified in markets with rapid rent raises, according to the report: Sacramento, Calif., where the median has gone up 7.5 percent year-over-year ($1,829); and Riverside, Calif., where the median has gone up 6.2 percent ($1,847). The cost could prod renters, says Terrazas. “More widespread rent growth could mean home-buying demands stay high, as renters who can afford it move away from the unpredictability of rising rents toward the relative stability of a monthly mortgage payment instead.” For more information, please visit www.zillow.com. Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

Deedcoin launches private virtual token sale

Deedcoin, a digital currency startup that wants to disrupt real estate commissions by paying agents partly in digital currency tokens, last night began a private pre-sale of its tokens priced between $1.50 to $3.00. The company says these tokens, based on the Ethereum cryptocurrency standard–a popular alternative to Bitcoin with some extra features–can be used by prospective property buyers and sellers to hire real estate agents across the country. Deedcoin says in a document on its website that the private sale will “conclude on either June 30, 2018 or when 40 million tokens have been sold, whichever comes first.” The company claims that it has partnered with registered real estate agents in 28 states who have agreed to accept Deedcoin tokens as part of their payment, in addition to drastically reduced commissions paid in U.S. dollars—as low as 1 percent, according to the company’s launch website. Inman has asked Deedcoin for names of specific participated agents and will update when we receive a response. According to Deedcoin, buyers and sellers will be able to log into its website and list or find properties for sale where agents would accept Deedcoin. Participants in the private sale were instructed to visit the portal site, agree to the terms, enter the amount of Deedcoin they want to order, and click “pay now” to pay with a credit card or digital currencies ether, bitcoin or litecoin. Buyers could expect their purchased Deedcoin to arrive in one business day to their Ether Wallet address, the message said. The company plans to hold an Initial Coin Offering (ICO) on January 25, when it will open its tokens for sale to all members of the public. Deedcoin specifically says it’s complaint with U.S. securities law, noting in its email announcing the private sale: In compliance with SEC regulation, U.S. Deedcoin purchasers are limited to 1,500 Deedcoin ($2,250) plus bonuses, UNLESS you are an accredited investor. Deedcoin is just one of a growing number of real-estate themed ICOs planned for the month and year ahead.

Number of US renters declines for first time in 13 years

The nation’s population of renters, a third of American households, decreased modestly for the first time in 13 years as declining foreclosure rates and steadily rising rent helped reduce the number to 43 million in the first half of 2017, down by about 500,000, according to a report by apartment listing service Abodo. The decline, ushered in by first-time homebuyers and historically low mortgage rates, comes as the national median rent for a one-bedroom apartment increased by 2.4 percent in 2017, to $1,040, according to an Adobo. Two-bedroom apartments, similarly, increased by 3 percent, to $1,252, according to the report. Overall, rent spiked in 28 states, with New Orleans, Reno, Honolulu and Seattle all experiencing increases of more than 2 percent, and New Orleans, in particular, seeing a 4-percent bump. “Two-bedroom rents exhibited similar stability through the first quarter before more sharp increases in the second,” according to the authors of the Abodo report, released on Wednesday. “After a pause in the late summer and early autumn, two-bedroom rents, like one-bedroom rents, saw their greatest hikes in the last three months of the year.” Foreclosure rates, meanwhile, hit an 11-year low in the third quarter of 2017, an indication that fewer homeowners were moving — reluctantly, perhaps — to rental units upon losing property. Despite rising rental rates, the decline in renters in 2017 may be an anomaly, according to a separate report issued Tuesday by the Joint Center for Housing Studies of Harvard University. Rental households are projected to grow by 13.6 million between 2015 and 2025 as aging baby boomers and millennials drive new growth in the market, according to the Harvard study. “Over the next 10 years, the younger half of the millennial generation — the largest generation in U.S. history — will move into their 20s and 30s, the age groups most likely to rent,” wrote the authors of the study. “In addition, minority households are expected to account for nearly three-quarters of household growth in 2015–2025 and fully 90 percent in 2025–2035.” Email Jotham Sederstrom.

8 Steps to Take Before Listing Your Investment Property for Sale

From assessing the state of the property and cleaning it up and getting it ready to list to speaking to your tenants so they aren’t blindsided by the sale and gathering up all the pertinent information about the property and any tenants, the work you do before the sale directly impacts how much money you make at closing. Know what’s going on in your property ahead of time so you can make the repairs you’ll be asked to make anyway. If your home inspection report turns up little or nothing, you can present it to potential buyers as a “pre-inspected home,” further providing proof that the property is a solid investment. Addressing the big issues before the buyers even see the home can help bring in a higher selling price because the property presents itself as solid, so buyers aren’t asking for larger-than-necessary repair concessions—or worse, canceling the contract because they have no confidence in the property! So does the inside of the property, but if you’ve got tenants, you’ll need to coordinate with—and probably incentivize—them to clean it and keep it clean. A clean property sells faster (and for more money) than one that is less-than-tidy. You can even contract with them to clean the home after it’s sold and the new owners have moved in. If you don’t already have a great investor-minded agent, start looking for one right now. Again, if you’re selling a rental, you’ll need to coordinate with your tenants to have pictures taken of the property. In her new book How to Sell Your Home, agent and investor Mindy Jensen takes you step by step through the process, from preparing your house to sell and choosing an agent that’s right for you, all the way through the closing procedures and beyond.

Experts: 2018 set to be best economic year since housing crisis

Although December’s job report numbers disappointed experts’ expectations, many explained that the end-of-year increase in construction jobs is just what the housing market needed. This is down from November’s upwardly revised increase of 252,000 jobs. “Wage growth remains low, but did tick up slightly to 2.5%,” Long said. “December’s increase in construction labor is a hopeful reminder that things will eventually get better for our severely depleted housing market,” realtor.com Senior Economist Joseph Kirchner said. “Jobs drive housing demand and with the unemployment rate remaining at its lowest level of the millennium, it's only going to pick up.” Another expert agreed, saying the increase in construction jobs was the one bright spot in Friday’s employment report. One expert explained this increase marked the highest point in construction jobs in seven years. “Construction employment increased by 210,000 in 2017, compared with a gain of 155,000 in 2016.” And while one expert said it’s important not to read too much into economic activity in December, the construction jobs increase, she said, is worth highlighting. “However, the late-year surge in construction jobs is worth highlighting.” “Construction jobs increased by 30,000 last month, ending 2017 with a total of 35% more jobs added than in the year before,” Richardson said. “As to the supply of homes, construction workers are needed,” said Lawrence Yun, National Association of Realtors chief economist. “In 2017, a net 190,000 new workers were employed in the construction industry, and that also marks a decelerating trend, as the prior three years averaged 284,000 annual additions.” “With the unemployment rate in the construction industry having fallen from over 20% in 2010 to 5.9% at the year-end of 2017, there could be a little growth to home construction despite the on-going housing shortage,” Yun said.

How To Make Money From Other People’s Mortgages

As interest rates likely rise over the next five years, lending rates are expected to increase as well. Unlike equity REITs, mortgage REITs generally don’t own properties. Instead, they invest in debt by originating or buying mortgage securities that they manage in a loan portfolio. Almost 90% of the 56 loans in the $3.6 billion loan portfolio are at floating rates, positioning the company for higher interest rates. Estimated earnings of $2.54 per share in 2017 give a 98% payout ratio. If we see a volatile equity market, their portfolio of mortgage-backed securities should provide steady income to support the $1.20 dividend that is covered by earnings. True, the company must continue to navigate a more volatile interest rate environment that could include an even flatter yield curve, but management generally has proven adept thus far, supporting the dividend, while buying back stock at favorable times — such as when it trades below book value. Mortgage guarantee losses typically peak 3-6 years into the mortgage and Essent’s rapid growth means its average mortgage has been in force for only 18 months. Essent has a broadly diversified, low-risk investment portfolio, which is 99.6% investment grade. Essent Group’s growth should be augmented by its rising market share.

What the Heck is Mortgage “Note” Investing? The Start of a Journey

Have you ever heard of people talking about note investing? Probably not! It is not a topic that you are discussing over coffee or at a social event.  Would you be...

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How to Buy a House in Your 20s—and Why You Really...

Most financial planners recommend that home buyers make a down payment amounting to 20% of the price of the home. If you don’t have a ton of money in savings, one way to afford the down payment is to ask Mom and Dad for financial help. Depending on your income and other factors, you could qualify for one of over 2,200 down payment assistance programs nationwide, which help out home buyers with low-interest loans, grants, and tax credits. Well, one study found that buyers who use down payment assistance programs save an average of $17,766. So, someone making $6,000 a month and paying $500 a month in student debt would be able to afford a maximum monthly mortgage payment of $1,680—in many markets, that's plenty to buy a house. You can meet with a mortgage lender to find out if you qualify for one of these programs. Check your credit score Unlike older generations, home buyers in their 20s tend to have shorter credit histories. Mortgage lenders usually require borrowers to have a minimum credit score of 660; they also look at your credit utilization ratio—your current debts, divided by the credit limit on the sum of your accounts. Purchase a starter home As a young home buyer, you don’t have to find your “forever home” right now. First, your mortgage payments will probably be more affordable, since you’ll likely be buying a cheaper house.