Investment Mortgage Common Snags
Today is a pretty big day here at BBQ Capital. Our first guest speaker. Let me introduce to you Steve Tremaine of the Bank of Blue Valley. There are three mortgage guys I recommend and trust and Steve is certainly one of them! He’s a straight shooter and easy to talk to. When something comes up I go straight to him and he gets it fixed. No last minute changes. No extra fees. No bull. Now, this is his first blog…so treat him nice on your comments.
Solving the financing puzzle for your investment properties can be quite a hurtle to say the least, it helps to work with a loan officer who knows the common snags and has outlets and resources to solve problems and save you thousands. Be sure to ask your loan officer how much experience they have in financing non owner occupied properties.
Common snags include:
Seasoning:
Seasoning is the time period for the previous 12 months prior to your transaction and specifically deals with any other transactions on the subject property. If the property you have purchased 2 months ago for 150,000 and rehabbed is now appraising for 225,000, seasoning requirements say that if the house has sold or been listed 12 months prior to your refinance or sale transaction you must use the lower of the values, either the appraisal or the previous sales price. This can really throw you a curve ball if you are trying to sell the house and your buyers’ lender can’t get them a loan on it because of the seasoning issue. It can also be tough if you are trying to refinance the property to hold it as a long term rental property. The solution is to use a lender that does not have a seasoning requirement or buy a house that was never listed.
Higher investment rates:
Rates are always higher on investment property but there are ways to soften the blow. Many lenders do not have steep rate hits if your loan to value (LTV) is below 75%. “What if I don’t have 25% to put down” you may ask, just put down 10% and then do a second mortgage for the remaining 15%. This is known as a 75/15 combo; both loans can be 30 yr fixed rates with no balloons. Your second mortgage rate will be higher but the bulk of your loan will be at a much lower rate saving you thousands of dollars over the years. The other way to save money on interest rates is to buy down your rate but be sure to do the math; your break even point may be more than five years out so you want to make sure you are holding the property long term if you go this route.
No landlord history:
Filed under Kansas City Real Estate, Preferred Vendors
Web 2.0 … The Machine is Us/ing Us
I originally saw this at Rain City Guide. (See link to side.)
Filed under Cool Sites
Social Serve – Affordable Housing Connection
It’s a snowy day here in the Heartland. (Come to think of it, I cannot think of a single day since January 7th that I haven’t had snow on my front lawn. That’s not common here.) So I’m thinking of a couple of properties that I manage that will come vacant this spring. Both are owned by landlords that do not mind Section 8 tenants so long as they are properly screened and have money for security deposits.
Social Serve is a .com that I have used previously with pretty good results. If you are a landlord or a property manager you can use them to list your vacant rentals and people who have qualified for housing assistance can cruise the net looking for a place to live and find yours! The last time I used them (fall of ’06) I probably received a call a day through the service for the first week the home was listed and about a call every three days after that till we selected a suitable tenant.
Social Serve does not screen the tenants. That’s your job. They don’t pay the rent. They really don’t do anything except provide one more place for you to get the word out so that you can get that income property bringing in income, again. Give them a try. They are in many states across the country. I’ve been pleased.
Filed under Property Management
BBQ Capital…a shorter URL
Earlier this morning I registered the domain name bbqcapital.com. It just seemed that circulating the name http://kansascityrealestateblog.blogspot.com/ was entirely too long and was being mistyped by folks…including myself. So now you can find us either way. If you have already linked to this blog, thank you. The link should still be in operation as I have simply forwarded the new domain to this site. RSS should work, as well. Let me know, however, if you discover a problem. Thanks!
Now for those of you uninitiated to Kansas City the reason for the name is quite simple. Kansas City has the best bar-b-q in the world! Oh, I can hear it now. The Memphis, Carolina and Texas contingents screaming at the top of their lungs “foul!”. But truth is truth.
It was once said that Memphis has it’s style of BBQ. As does Carolina and yet Texas another. But Kansas City is the Constantinople of BBQ. All the styles, including Kansas City’s own, are here. You should plan a vacation to dine at them all. You’ll need a few months to accomplish that. Followed by about 6 months of recuperative exercise training! Occasionally I’ll feature the different BBQs of Kansas City. So look forward to that!
Filed under Misc. Real Estate
Where Is This Real Estate Market Going?
There is an article in Sunday’s Dallas Morning News talking about the inventory overhang that is going on in much of the country causing appreciation of current home values to remain stagnant and new home starts to drop sharply. And then there is the article by an economist published on the National Association of REALTOR’s website pretty much saying the same thing but with a smiley face.
I’ve also seen articles talking about how we bottomed out in 2006 or will bottom out in the first quarter of 2007. Or maybe the second quarter. The point is…who can know?
In my opinion, and I’m going to go opposite of most of my glass is half full breathren, I think 2007’s selling seasons (Spring, Summer & Fall) will bring more of the same that 2006 brought. Sellers are going to have to be realistic about the condition of their property relative to what else can be purchased. Price, condition, location are primary with a limited pool of buyers. Buyers are still not going to be able to “steal” homes because many sellers have refinanced and refinanced to the point they cannot discount their homes because there is no equity.
The elephant in the corner is foreclosures. We are already at record levels here in Johnson County and Kansas City in general. If they continue to increase rapidly over the next six months it could really begin to affect appraisal values in many, many neighborhoods. When appraisal values cease meeting sales prices (a situation that happened in an upper middle class neighborhood recently that an associate of mine is working with) we are going to be standing on the edge of a slippery slope.
The unspoken benefit of this could be that housing becomes more affordable. Take for instance the investor. Being able to purchase a slightly depressed property (SFH or multi…doesn’t matter) allows the owner to rent for less or to pocket a few extra dollars. If it rents quickly, the latter is probably the case. But if it takes a month or two to rent then the landlord might be a little more willing to drop his rate a little bit (staying within his cash flow parameters because he bought it cheaper than his fellow landlords) and causing a situation where the tenant now has a more affordable home.
Here in the Heartland I do not believe we are in for a “thump” or a crash. Nor do I believe the hype that we’ve weathered the storm and that this spring will bring green grass and roses. I do believe we will remain stagnant with the possiblity of moderate growth. In other words, partly cloudy with a breeze from the south that has a 10% chance of bringing rain with it.
Filed under Kansas City Real Estate
Income Property Pricing: Work with the Experienced
Let’s get a few things straight about my real estate services. If you are looking to sell a large parcel of land, I am not your agent. I can refer you to the best agent in town for that, however. Luxury home buy or sell? Again, I’m not your man. My office does have probably the best REALTOR in town when it comes to luxury homes, though.
I am a Residential Investment Property Specialist. In 2006 75.4% of my business was working with folks like you looking to purchase or liquidate or exchange an investment property. (The other 24.6% was with “regular” home buyers and sellers. Fist time buyers are a blast to work with!)
It just drives me crazy to see some of the pricing of income properties here in the Kansas City area. Invariably when I’m speaking to the listing agent I will find out that the pricing is based on “comparables“. Well, that’s all well and good, but what does it have to do with whether or not a property will cash flow at the area’s going rate? What are the vacancies? Expenses? What is the landlord responsible for versus the tenants responsibilities? These are questions I’ll need to know in order to determine the Net Operating Income. (Will the property “pencil”?) And not just me, any experienced investor will want these numbers.
The long and the short of this post is to say this…If you are an income property owner looking to adjust your position in the market please interview your agent carefully. Figure out his/her expertise and base your decision on that. Not how cool their website it. Price is the single biggest factor in determining how and when a property will sell. And you know that. But what is the realistic price?
If you are an agent with someone asking you to list their rental property or help them find some either learn the numbers or refer the client to me and I’ll pay you a referral fee. After all, it would be in the best interest of your client, wouldn’t it?
Filed under Kansas City Real Estate, Real Estate Investing
BBQ Capital | Kansas City Real Estate Investing 