Texas Investor Loans

New FinCEN Rules Starting March 1, 2026 when buying in a Legal Entity or Trust

Mon, 23 Feb 2026 20:42:58 GMT

What Realtors, Buyers, and Sellers Need to Know About the New FinCEN Rules Starting March 1, 2026 when buying in a Legal Entity or Trust

Beginning March 1, 2026, FinCEN will require a Real Estate Report to be filed for non‑traditionally financed (“all‑cash”) transfers of residential property when the buyer is a legal entity or a trust . This is a nationwide requirement with no minimum purchase price. FinCEN’s purpose is to increase transparency and deter the use of real estate to hide unlawful funds.

Which Transactions Are Affected ?

A transaction is generally reportable if all three of these are true:

The property is residential real estate (1–4 family homes, condos, townhomes, co‑ops, and certain land intended for such use).

The buyer is an entity or trust (not an individual person).

The transaction is non‑traditionally financed , meaning there is no traditional institutional mortgage from a lender that has federal anti‑money‑laundering requirements. This will include financing by hard money lenders and seller financing.

If all three apply, a federal report filing is usually required unless a specific exemption exists (for example, certain transfers due to death, divorce, or involving government entities).

Who Must File the Report?

FinCEN created a “ reporting cascade ”—a priority order that determines who must file if no party is pre‑designated. In most transactions, if a title company is involved, it will be the reporter because it will serve as the settlement or closing agent.

What Information Must Be Reported?

FinCEN requires specific details about:

The reporting filer (person or entity submitting the report)
The buyer entity LLC, S-Corp, C-Corp, Land Trust, LLD or trust
The beneficial owners (essentially anyone with 25% or more ownership interest or substantial control, senior officers, and persons with signatory authority)
Identifying information for the beneficial owners to include:

SSN or ITIN
Identification, such as a Driver’s License or a Passport
Address and phone number
Occupation

The seller (no BOI analysis for the seller, but still requires identifying information)
The property and closing date
The purchase amount and payment method
Any “hard money” or non‑institutional financing is involved

Reports are not public. They are stored within the government’s Bank Secrecy Act system and accessed only by authorized officials.

What This Means for Realtors

Here’s what you can expect:

More documentation from buyers: if your buyer is purchasing through an LLC, partnership, corporation, or trust, they will need to provide ownership and control information.
Slightly longer prep time before closing collecting federal reporting details may add steps to your transaction timeline.
Increased need for early communication: if your buyer/ seller is using an entity or trust, please flag it as early as possible so our team can help keep the closing on track.

What This Means for Buyers and Sellers

Buyers using an entity or trust: you will be required to disclose information regarding the true beneficial owners of the entity or trust purchasing the home.

Sellers: Your information will also be included in the report, but your required information is less extensive.

All parties: It is important to know that:

This information is not a public report.
Independence Title is only transmitting information required by federal law.

Helpful Links for Realtors, Buyers, and Sellers Can be found in by blog post:

FinCEN Residential Real Estate Rule (Official Site) – https://www.fincen.gov/rre
FAQs – https://www.fincen.gov/rre-faqs
Quick Reference Guides – https://www.fincen.gov/rre-quick-reference-guides
File the Beneficial Ownership Information Report (BOIR) - https://bsaefiling.fincen.gov/
Reference Materials – https://www.fincen.gov/rre-reference-materials

WAYS REAL ESTATE INVESTORS USE CHATGPT

Sat, 15 Nov 2025 20:29:28 GMT

Real Estate Investors Can Use ChatGPT

If you’re in real estate, you already know how many hats we wear—analyst, marketer, landlord, troubleshooter, and sometimes therapist. Tools like ChatGPT won’t replace what investors do, but they can make your day a whole lot easier. Here are seven smart ways to put it to work in your business.

Quick Market “Starter” Analysis

Investors spend a ton of time digging through data—rents on Zillow and Redfin, employment and economic numbers from BLS, Census income trends, local tax info, and more. It’s part of the job.

Because ChatGPT doesn’t pull in real-time data, it’s not a substitute for your own current research. But it is great for getting a quick baseline or comparing markets at a high level.

Give it two cities and ask about rent-to-price ratios, property tax trends, or general market strengths, and it’ll give you a fast overview. It won’t tell you “the best place to invest,” but it will outline the factors you should be weighing—so you can make the final call.

Professional Tenant Communication—Done Fast

If writing polished emails isn’t your happy place, ChatGPT can save hours. With light edits from you, it can produce clear, friendly messages for almost any situation.

Use it for:

Welcome messages for short-term rental guests
Checkout instructions
Local guides for visitors
New-landlord introductions
Rent increase notices
Move-out instructions
Late rent reminders
Utility over-usage notices

You can even have it draft parts of a lease or addendums—just make sure an attorney reviews anything legally binding.

Prioritize Tasks When Everything Is on Fire

If you manage multiple properties, some days feel like juggling three emergencies at once. When that happens, your brain can freeze.

Give ChatGPT your entire to-do list—repairs, tenant issues, administrative work—and ask it to prioritize the tasks. It will organize them based on urgency, safety, and business impact. Sometimes that outside perspective is exactly what you need to move instead of get overwhelmed.

Marketing & Content Ideas on Demand

Need a business name, blog post, or social content? ChatGPT can jump-start your marketing.

It won’t always deliver a ready-to-publish final product, but it will help you brainstorm angles, headlines, topics, and post ideas. For example:

Ask for blog outlines
Request SEO-friendly versions of content you’ve already written
Generate social post ideas specific to your market or niche
Draft 500-word articles you can polish and personalize

Think of it as your idea generator—not your final editor.

Recommendations for Tools, Software & Resources

Trying to pick the “best” CRM, bookkeeping software, or market analysis tool can send you down a research rabbit hole.

Tell ChatGPT what you need:

A low-cost CRM
The most intuitive property management software
Analysis tools for short-term rentals
Marketing automation platforms

It will quickly narrow the field and help you compare options based on the features that matter to you. You might even discover tools you didn’t know existed.

Break Down Local Housing Regulations

Short-term rental rules, occupancy limits, permit requirements—municipal regulations can be dense, confusing, and time-consuming to sort through.

ChatGPT can summarize local ordinances in plain English and highlight the sections that matter most to you as an investor. Before buying in a new area, this alone can save hours of digging through legal documents.

Create Listing Descriptions & Answer Client Questions

Agents are using ChatGPT to save serious time. Give it a handful of property details and it can pump out a listing description in seconds—clean, appealing, and ready for the MLS with minor edits.

It also comes in handy for quick client questions:

Estimated mortgage payments
School district overviews
Neighborhood features
Walkability, amenities, and more

Instead of bouncing between calculators and websites, you get instant talking points.

Bottom Line

The real estate industry hasn’t always been the first to adopt new tech, but tools like ChatGPT are quickly becoming part of the everyday workflow for investors, agents, and property managers.

It’s not perfect—and it won’t replace your expertise—but it can absolutely save you time, streamline communication, and spark better ideas. And since it’s currently free, it’s worth experimenting with these uses to see what works for your business.

The Parham Team believes in educating and engaging our customers throughout the loan process. We look forward to hearing from you to begin that process. Contact us today at 214-679-3396 or schedule a call with a Loan Specialist.

What is Net Operating Income For Investment Properties?

Sun, 09 Nov 2025 02:34:41 GMT

What is Net Operating Income For Investment Properties?

NOI in real estate is one of several metrics used by investors to determine how profitable a property is. Most frequently, net operating income is a benchmark used by investors to determine the amount of cash flow and profitability of a potential deal or income-generating property. NOI is a strong indicator of a property’s ongoing revenue, though it does not account for capital expenditures, taxes or interest payments. Instead, NOI is used to determine how profitable a property is on its own.

By using NOI to evaluate a deal, real estate investors can get a better look at the potential profitability of a property in relation to how much it would cost to operate it. NOI is typically calculated on an annual basis; although, investors can easily adapt the operating costs by dividing expenses by twelve. By excluding financial factors such as mortgage interest and taxes, NOI provides a specific look at the income a property can generate on its own. Because of this, NOI is thought to be less subject to manipulation when compared to other real estate calculations.

The only challenge in predicting NOI is that the potential income will depend entirely on the way the property is being operated. Investors should be careful to use market factors as a reference when estimating potential rental income.

How To Calculate Net Operating Income

NOI for real estate is calculated by using the total income generated from a property and subtracting the operating expenses. Start by adding up rental income and any other revenue generating items on the prospective property. This can include fees for parking, laundry and vending machines, and any service fees.

Next, combine the operating costs of the subject property together. Operating costs refer to any costs associated with running and maintaining the property on a given basis. These will include insurance costs, utilities, property management fees, property taxes and repair costs.

As an example, if the total income of a property was $10,000 and operating expenses averaged around $4,000, the net operating income would be at $6,000. If, on the other hand, the total income was at $4,000 and the operating expenses were at $10,000, the NOI would instead be -$6,000. In cases such as this, with expenses totaling more than the income generated, it would be called a net operating loss (NOL).

NOI & Cap Rate

The net operating income formula is specifically designed to help investors calculate the profitability of an income generating asset, not unlike a rental property. Done correctly, real estate NOI will represent all of an asset’s revenue minus every single operating expense. It is worth noting, however, that an asset’s net operating income can do more than determine its revenue potential; it can help investors determine another important variable: capitalization rate (cap rate). The cap rate of a subject property will simultaneously place an objective value on the home and make it possible for them to compare dissimilar assets. A property’s capitalization rate is expressed as a percentage, and can therefore be used to compare assets that are otherwise different—something that come in particularly handy when trying to decide whether to flip a home or rent it out.

What Expenses Are Included In NOI?

The key to understanding the NOI real estate term is knowing which expenses are included and which are not. As a general rule, operating expense should refer to any day-to-day costs associated with running the property. The following is a list of examples:

Property Management Fees: Property management fees are incurred by investors who choose to invest more passively. For a small percentage of the rent collected from a subject property, landlords may remove themselves from the equation. Nonetheless, transitioning to a primarily passive exit strategy will come at a cost that must be factored into the NOI.
General Maintenance: Every rental property, especially older ones, will require at least some degree of maintenance. Whether it’s groundskeeping, plumbing, or electrical work, any maintenance conducted on the subject property must be accounted for in its NOI.
Legal Fees: Whether ownership of a subject property leads to litigation or a landlord hires an attorney to draft a lease, the money spent on legal fees is no different from any other expense. Likewise, legal fees are an important variable in a traditional net operating income formula.
Utilities Not Paid By Tenants: In the event the owner elects to pay some or all of the utilities, their expense will impact the real estate NOI. For example, any sewage or waste fees paid by the landlord must be deducted from the income generated to identify the property’s NOI.
Property Taxes: Property taxes will vary from municipality to municipality, but they are nonetheless an important variable to factor into the NOI of a rental property.
Insurance Costs: Money spent on insurance to cover the subject property must be included in the NOI, even if it’s only incurred once a year or biannually.

Is Mortgage Included In NOI?

Mortgage payments are not included in the net operating income formula for one simple reason: mortgage payments are not considered an operating expense. Again, net operating income, as its name suggests, accounts for an asset’s total income and subtracts vacancies and operating expenses. Therefore, mortgage payments are not included in the formula. Instead, real estate NOI equations will take ongoing costs required to run the property into consideration.

What Expenses Are Not Included In NOI?

When determining the net operating income, it is important to differentiate between costs that are unique to the property itself and costs that are specific to the investor. For example, when it comes to NOI, mortgage interest expenses will not be factored in. Here are other factors that would not be included when calculating net operating income:

Mortgage Interest
Income Taxes
Debt Service
Property Depreciation
Tenant Improvements
Repair For Wear And Tear

When To Use NOI In Real Estate

Net operating income is primarily used when determining profitability for commercial or residential rental property real estate investments. When considering potential deals, NOI can be utilized by both investors and lenders. By looking at this indicator, lenders can judge whether or not investors will make enough cash flow to make loan payments. It is not uncommon for NOI to be used when approving commercial loans for real estate investors. This is because lenders want to know whether or not investors will be able pay back the loan when considering the potential cash flow.

While NOI is thought to be a reliable indicator when determining the potential income of a property, it is not the only real estate calculation investors should keep handy. Investors should familiarize themselves with a number of formulas in order to analyze deals effectively.

Additionally, NOI can be used as a variable in other calculations designed to evaluate investments. When determining the capitalization rate of a property, investors will need to use the net operating income and the property value in order to determine the potential rate of return.

Pros & Cons Of Using NOI For Investment Properties

The net operating income formula has developed a reputation for serving investors well. However, it is worth noting that even a perfect NOI real estate equation has its flaws. There are both pros and cons to using this evaluation strategy, not the least of which include:

Pros Of Using NOI Formula

The net operating income of a subject property can help investors determine an initial value.
NOI real estate formulas award investors with an overview of what to expect from ongoing revenue.
The real estate NOI value can help lenders determine whether or not the property represents a risky investment.

Cons Of Using NOI Formula

Knowing how to calculate net operating income isn’t universal, and can change from investor to investor.
Depending on how the asset is managed, the NOI may be inconsistent.
If projected rents prove inaccurate, the NOI will be impacted negatively.

Summary

The right real estate calculations can provide investors with the ability to evaluate properties and make informed investment decisions. Now that you can answer the question “what is net operating income in real estate,” you should be more prepared to use the metric as you analyze deals. Remember, NOI real estate formulas can serve as a basis for evaluating potential properties, and can even be used in conjunction with other real estate calculations to help further analyze deals. By understanding NOI, investors will be better equipped to estimate the income of their potential deal and have success in real estate.

THE BRRRR METHOD: THE BEST WAY TO BUILD REAL ESTATE WEALTH

Tue, 21 Oct 2025 00:12:23 GMT

What is the BRRRR Method & How to Use it to Invest in Real Estate

The BRRRR Method — Buy, Rehab, Rent, Refinance, Repeat — is one of the most effective strategies for building long-term wealth through real estate. It allows investors to recycle their capital, scale faster, and create steady cash flow while building equity.

1. Buy

Successful BRRRR deals start with buying undervalued or distressed properties below market value. Always calculate based on the After-Repair Value (ARV) and aim to keep total costs under 70–75% of ARV . This margin protects your capital and ensures profitability once you refinance.

2. Rehab

Focus on renovations that add real value — fixing major issues like roofs, kitchens, or bathrooms — while avoiding unnecessary luxury upgrades. The goal is to make the property safe, functional, and rent-ready at a cost that increases its appraisal value.

3. Rent

Once rehabbed, place quality tenants quickly . Lenders prefer occupied, income-producing properties during refinancing. Use the 1% rule as a quick test — if monthly rent equals about 1% of the purchase price, you’re likely in a good cash-flow range.

4. Refinance

After stabilizing the property, refinance based on the new appraised value. A cash-out refinance lets you recover most or all of your initial investment, freeing up capital to buy your next property. Choose lenders who allow refinancing on the appraised value, not just the purchase price.

5. Repeat

With your capital back, repeat the cycle to build a scalable rental portfolio . Over time, BRRRR investors gain better contractor pricing, stronger banking relationships, and efficient systems that accelerate growth.

Why BRRRR Beats Traditional Investing

Unlike traditional buy-and-hold investing—where your down payment stays locked in the deal—BRRRR allows you to recycle your money . You recover your cash after each refinance and reinvest it into new opportunities, multiplying your portfolio and net worth much faster.

Pros

Minimal money left in deals
High potential ROI and equity growth
Scalable for portfolio expansion
Builds experience and leverage

Cons

Rehab costs and delays can eat profits
Appraisals may come in low
Short-term loans carry higher interest
Managing renovations and tenants takes time

Best For

The BRRRR strategy fits investors with market knowledge, rehab experience, and strong financial discipline . It rewards those willing to put in the work to find deals, manage rehabs, and scale efficiently.

Bottom line:

The BRRRR method turns every dollar into a repeatable investment cycle. When done right, it’s the fastest path to financial freedom and portfolio growth in real estate.

6 Reasons to Invest in Single-Family Homes

Sun, 19 Oct 2025 21:36:55 GMT

6Reasons to Invest in Single-Family Homes

Making investments to build wealth and secure your future is very important, and an excellent way to add to your portfolio is through real estate ownership. When you first get into property investment, though, there’s one big question you’ll need to ask yourself – should you invest in single- or multi-family homes? While both have pros and cons, there 6 primary reasons why we recommend putting your money into single-family properties.

1. Single-family homes are less expensive than multi-family.

The initial cost of a single-family home is usually going to be significantly less than what you’ll pay for a multi-family unit. For most people, this scenario works out much better, because it’s less money upfront, and less money that’s tied up in a property. It also provides a way for the investor to diversify, by putting their money into multiple properties at lower costs, rather than one, large multi-family unit listed at two or three (or more) times that.

2. It’s easier to secure financing on single-family properties.

Because of the lower sale price, it’s also easier to get financing. Banks would much rather lend you $100,000 than $300,000. Plus, if the property has 5 or more units, you’ll need a commercial loan to close the deal. These types of loans usually have higher interest rates that will cost you more in the long run, or they may be set up as a balloon loan with a variable rate or payment structure that may not be ideal.

3. They appreciate faster.

Generally speaking, single-family homes appreciate in value much quicker than multi-family properties. While single-family homes are valued on supply and demand, the value of multi-unit properties is based on the structure’s conditions and the rent that’s coming in, leading to slower appreciation rates.

4. Returns are usually better with single-family homes.

.Cash-on-cash returns are often higher with single-family homes, too. With a smaller amount invested due to the lower sale price (and this is especially true for homes purchased below market value), investors can realize greater returns on tenanted single-family properties than they can with expensive multi-family units that bring in less rent.

5. They’re easier to maintain and manage.

“More units, more problems.” This is an issue that multi-family property owners can find themselves with, as the daily management of these larger properties can be much more complex and time-consuming than dealing with a single-family home. With single-family real estate, you’re working with just one renter, which is far simpler than working with multiple tenants on everything from rent collection to maintenance checks.

6. There is a much wider selection of single-family homes than multi-family.

In most markets, single-family homes greatly outnumber multi-family properties, giving investors much more varied options on where to put their money. With single-family properties, the range of prices, sizes, and styles run the gamut, giving investors a huge selection to choose from and find a property that’s ideally suited for them.

These are just some of the reasons why single-family homes offer the greatest investment opportunity, in terms of real estate. And as if these weren’t enough to sway you, think about this: the housing market is booming, the economy is steadily improving, employment is up, and rent is on the rise. The conditions are perfect right now for making an investment in a single-family property, so what are you waiting for?

5 Things You Should Know Before Investing in a Turnkey Property

Mon, 06 Oct 2025 17:09:00 GMT

What is Turnkey Investing?

At its core, turnkey real estate investing is where you buy already rehabbed, tenant-filled, managed properties that are producing positive cash flow.

A lot of the extra work that goes into real estate investing is cut out with these types of properties. With that comes a different way to approach deals. It’s easy to make mistakes.

No matter what real estate investing strategy you’re into, the most important thing about any deal should be conducting proper due diligence. While not every aspect of a deal can be verified before it’s done, most of the critical items can be. That’s why due diligence is so critical—to help ensure the profitability of your investment.

Turnkey rental properties are no exception. In fact, I would argue that due diligence is even more important with turnkeys than with other strategies.

In this article, we’ll go over what turnkey is and the checklist you need to follow for your investment to be profitable.

The Biggest Mistake Turnkey Investors Make

In my 25 years of working with turnkeys, the biggest mistake I’ve seen investors make is not conducting proper due diligence on the turnkey properties they invest in. I believe this is due to the marketing of turnkey rental properties.

Turnkeys are pitched as being a hands-off investment strategy. Essentially, turnkeys sound as if they’re pre-packaged. When you buy a turnkey from a provider, you’re given a property address, a picture of the property, a pro forma, a tenant (in many cases), property management, and emotional assurance that all of the work is done for you and all you have to do is sign the closing documents and start collecting cash flow.

In a perfect world, this is exactly what happens.

However, we don’t live in a perfect world. And despite what many people assume, turnkey provider companies are made up of imperfect humans.

Because the marketing of turnkeys suggests investors are getting pre-packaged perfection, it’s easy to assume nothing could go wrong, and therefore no stress needs to be exerted over doing due diligence.

The worst thing a turnkey investor can do is to trust the turnkey provider to deliver perfection. I’ve never known a turnkey provider to blatantly mislead an investor or want to scam an investor intentionally, but because everyone’s human, errors happen.

No real estate investor, no matter the strategy, should trust other people to hand them their deal. All investors, including turnkey investors, need to take the reins on what they’re investing in and make an effort to verify everything they can.

1. Property Condition

Major repairs and maintenance on a house can cost upwards of thousands to tens of thousands. With turnkeys, one of the aspects of that “perfect pre-packaged deal” is that the property has been recently rehabbed and CapEx (capital expenditure) items on the house have a significant lifespan remaining on them. The intention is for turnkey investors to not have any major repair items (less those caused by tenant damage) for a long period of time.

While it’s the turnkey provider’s intention to deliver a house in perfect condition to the investor, remember, you should throw the word “perfect” out the window. Your job as the investor is to verify that you are getting a property that is in fully turnkey condition.

There are the two things you need to do to confirm this:

Get a third-party property inspection.
Read the inspection report and ensure those items are fixed by the provider prior to closing.

You might be saying, “Well, #2 seems kind of obvious.” You’d be surprised. Everyone only hears that they need to get an inspection. I can’t tell you how many people either don’t read the inspection report or if they do, they don’t follow up on the repairs.

It’s 100% the responsibility of the investor to ensure everything about the condition of the property is as advertised prior to closing. If you miss something and then close on the property, any repairs that come up after that are your financial responsibility, not the turnkey provider.

Be as picky with a turnkey as you would any property and don’t just assume everything’s good because you’ll be the one to pay for it later.

2. The Numbers

When a turnkey provider gives you a pro forma, they do so to the best of their ability, but that doesn’t mean they don’t make mistakes. And when you’re analyzing a property for cash flow, a major mistake on the pro forma can be the difference between positive and negative cash flow every month. Therefore, you want to ensure that you agree with all of the numbers and the overall financial outlook.

There are very few numbers on a pro forma that can’t be verified; only a couple of them have to be estimated.

Price – Rely on the appraisal to confirm you’re paying an appropriate price for the property. While it would seem optimal to run your own comps sooner in the buying process, most people make the mistake of not comparing like to like when it comes to the quality of the property. I’ve seen very few turnkey investors not get misled by nearby prices of foreclosed properties and non-upgraded properties. For the most part, you shouldn’t make a decision about the value of your property (i.e., if you’re overpaying) until you receive the appraisal. If you’re paying cash instead of financing, and therefore you don’t have a lender heading up the appraisal effort, order one on your own. It will be worth the investment!

Rents – You can run rent reports through various online programs, but oftentimes those programs don’t offer the most accurate estimates. The best thing you can do to confirm the estimated rent on a property is to call at least a couple of third-party property managers in the area and get estimates. Property managers are boots on the ground every single day and will have the best idea of what a property may be able to rent for. If you’re buying a turnkey with tenants already placed, verifying the rent estimate isn’t as critical since it’s already been proven to an extent, given tenants are already paying it. However, it can’t hurt to get a couple of additional estimates just in case the current seller or property manager was able to get a tenant in at a price higher than market rent.

Property Taxes – Go to the tax assessor’s website for the county where the property is located and find the exact tax amount. What most people forget to do, though, is find out how property taxes are assessed in a county. For example, if the property tax changes with a sale, that means the amount is going to change once you buy the property. Make sure you’re aware of what it’s going to change and use that in your analysis. The property tax number used in a pro forma is the current tax amount, not a forecasted number.

Insurance – Call and get an actual quote for property insurance.

Maintenance & Vacancy Estimate s – Estimates for maintenance and vacancy are the only numbers that can’t be known with certainty. The idea is to put some extra expense estimates into your cash flow calculations to help compensate for inevitable costs that every investor will run into. The standard estimates for a turnkey pro forma tend to be 5% of the rent amount for maintenance and 7% for vacancy. It would be wise to increase the maintenance estimate for older, cheaper homes (even if they are turnkey), and vacancy rates can be discussed with property managers as they will have a more accurate idea of current vacancy rates in that area.

Additional Expenses – Confirm with the turnkey provider if a particular property has additional expenses, such as homeowner’s association fees, owner-paid utilities, etc., and ensure those are included in the pro forma.

3. Property management

Many, if not most, turnkey investors don’t do thorough property management vetting! They assume that the property manager who comes with the property will be great. That’s the worst assumption you can make. You should interview a few different property managers just as you would if you were buying a rental property non-turnkey.

4. Rentability

In those conversations with prospective property managers, ask them how rentable the property you’re considering is. Do people want to live there? Is it easy to find tenants for a property in that area? You’d be surprised how many properties aren’t as rentable as you think they are. Not that they can’t rent, but when a property doesn’t have strong rentability, it can cause increased vacancy times (which are expensive), and force you to lower the rent amount.

5. Tenant Information

If your turnkey property comes with tenants, don’t just assume the property manager screened them properly. Confirm that they should be good tenants. Few things are more frustrating than non-payment and evictions early on!

Even with a thorough list of due diligence items, chances are you’re not going to get it 100% right the first time, or maybe even the second time. That’s okay! Real estate investing is very much an on-the-job training industry; the key is continuing to learn as you go and get better each time. Hopefully, though, with help getting started, you can at least cover some of the major items that could be most costly to you down the road and avoid those expenses as best as possible.

Additional Considerations

While it seems rare for turnkey investors to see their property before buying it, there are few better ways to exercise due diligence than putting your eyeballs on the property. You’ll get a feel for the neighborhood, the quality of the rehab, and you can even meet the turnkey provider face-to-face and see how you feel about them, which can go a long way.

Then lastly, one thing that many new turnkey investors don’t understand is the timing of due diligence.
Due diligence on the property needs to happen after the contract is signed.
Due diligence on the market and the provider should happen before the contract is signed.

Many investors lose out on great deals because they try to do all of their due diligence on the property before signing the contract. A turnkey provider won’t wait for you, so it’s likely that another investor will swoop in and get the property before you finish. In the sales contract, there should be a specified timeframe literally called the “due diligence period". During that period is when you should go through your list of verifications. If at any point something doesn’t check out on the property, you can cancel the sales contract with no penalty (although, traditionally, you’ll lose your due diligence deposit.)

At the same time, the due diligence period that starts once under contract is not the time to decide how you feel about the market or the provider. You don’t have time to do that. All of that research should be done prior to signing a sales contract.

What to Expect When Buying a Turnkey Property?

Fri, 03 Oct 2025 15:01:25 GMT

Buying a Turnkey Property?

When investing in real estate, you have to ask yourself “Do you want to be a landlord or do I want to be an investor”? If you say yes to both, then it is time to quit your full-time job and do both. If you thinking you can do both on the weekends, great but why would you want to take that time away from your family. Most prudent investors invest into real estate for return on their money. Some are short-term flippers and others are buy-and-hold for long-term cash flow reasons. You have to ask yourself which one makes sense for you.

I am personally a buy-and-hold investor and do not want to have anything to do with property management. I’ve tried it and failed gracefully. All it takes is one tenant that knows more than you do, especially when you’re in front of a judge trying to evict them. I had to learn the hard way. As far as maintenance and rehabbing property, I’ve also engaged in that on several of my properties over the years and found that the time it took to accomplish these repairs and the cost savings, it still did make sense on paper. I can make more money at my regular full-time job than trying to be a maintenance man.

This is why I like turnkey real estate providers. They do it all. If all you’re looking to do is invest your money into real estate and have somebody do all the work for you, turnkey companies are the best way to do it.

What are Turnkey Properties?

In simple terms, turnkey properties are the easiest way to get started as an investor. All of the hard work that is involved with acquiring properties, fixing them up and finding tenants is already completed. Turnkey property companies have expert staffs that handle every aspect of property investing. If you are new to real estate, working closely with a turnkey property company is a normal first time investment strategy.

Pros of Turnkey Property Investing

One of the biggest resources that are used up when you are involved in real estate is your time. It takes many hours of research to find properties, do title searches, contact attorneys to review real estate documents and have homes inspected. If a property is in a well populated area, many times it will be sold quickly to someone that knows how to expedite the legwork required. Many new investors that have not achieved a smooth workflow miss out on would-be properties due to the time consuming nature of research. Turnkey property companies have already done this research saving you a huge amount of time.
A reputable turn-key company will know where to buy and where not to buy in a particular market. This is especially important for an out-of-state investor that may not have any local knowledge of the real estate market.
A turn-key company can sell a house that has already been fixed up. This is a huge benefit to an investor who doesn’t want to pay for repairs out of pocket.
A larger turn-key company typically has economies of scale when it comes to rehab costs. These savings are typically passed on to the buyer.
Working through a turn-key company eliminates the hassle of trying to manage multiple contractors (ie. Plumber, electrician, roofer, HVAC, handyman, painter, etc.)
Most turn-key companies have relationships with lenders who are familiar with their product and know how to get an investment loan closed. There are very few lenders out there who can consistently get investor loans done. Having a good lender already in place is a huge benefit to an investor.
Turn-key companies almost always have property management in place. With so many fly-by- night property managers out there, having a property manager you can trust to place a quality tenant, collect rent and take care of your property is crucial to an out-of-state investment.
Having a relationship with a turn-key company gives you direct access to a vested party when any sort of need arises with the property. Turn-key companies operate off of referrals from their investors and as such, are very willing to stay involved with any investor throughout the life of their investment.

Cons of Turnkey Property Investing

An investor may pay a slight premium for purchasing through a turn-key company rather than managing the entire process on their own.
If you are a do-it-yourself investor, a turnkey property might not be the right choice for you. You have no say so in the acquisition, property management or previous construction that took place. You buy properties “as is” and might not love the decorations or the interior or exterior. If you prefer to dig in and do things all by yourself, a turnkey property might not satisfy your need to have your hands involved in every aspect of property ownership.

With the vast amount of opportunity in multiple markets throughout the country, the ability to work through a turn-key company can be a great strategy for an investor looking to diversify a real estate portfolio.

What is a Interest-Only Loan?

Wed, 01 Oct 2025 13:28:53 GMT

What is a Interest-Only Loan?

An Interest-Only loan is a loan in which, for a set period of time, the borrower pays only interest on the principal balance, with the principal balance remaining unchanged. A loan may be interest-only for its full term or for just a portion of the term. If interest-only payments are for less than the full term, that portion is referred to as the “interest-only period” and typically occurs at the beginning of the loan term. Once the interest-only period has expired, the loan will begin amortizing and loan payments will increase in order to reduce the principal balance.

For example, a $100,000 loan with a 5.0% interest rate and 10 years of interest-only payments before amortizing on a 20-year schedule would have monthly payments $416.67 for the first 120 months (calculated as $100,000 balance times 5.0% rate divided by 12 months per year). Beginning in month 121, monthly payments would increase to $584.59 to account for amortization. Interest-only payments have the effect of increasing cash-on-cash yields as less cash is dedicated to debt service payments.

However, since the principal balance is not being reduced during the interest-only period, an investor is not benefiting from equity build-up during that time. Additionally, both the investor and lender may be incurring greater risk with an interest-only loan, as the principal balance at maturity will be greater than if the loan were amortizing throughout its term. For this reason, interest-only loans are typically only made in situations where a lender feels comfortable with the loan’s balance at maturity relative to the projected property value at that time or in situations where a property’s cash flow is projected to increase over time and may not be able to meet amortizing debt payments early on.

With a rental interest-only loan, you only pay off the interest each month and initial term, resulting in a lower monthly payment. After the initial interest-only period is over, you will be required to pay the principal and interest for the remainder of the loan term.

Today's interest-only loans do not have balloon payments; they typically aren't even allowed under The Dodd Frank Act for Qualified Mortgages (Fannie Mae and Freddie Mac). Although the Non-Qualified Mortgages do allow for interest only

DSCR loans (Non-QM) offers an interest-only term lasts for 10 years followed by a 20-year amortization period. Loans can be structured as a 30-year fixed or as adjustable-rate mortgages (ARM). If you were to choose a 10/1 I/O ARM, your interest-only period would last for ten years but after the ten years, your interest rate will adjust once a year until you finish repaying the loan.

What the Numbers Say About Housing During a Government Shutdown

Tue, 30 Sep 2025 20:51:58 GMT

What the Numbers Say About Housing During a Government Shutdown

With the current and ongoing federal government shutdown, you may be wondering: “Does this mean the housing market completely stops in its tracks?”

In short, no; the market still keeps working.

Homes continue to be listed, contracts continue to be signed, and closings still happen. But what does change is that certain federal-processes may start to slow down, and this uncertainty can affect timing, decision-making, and opportunity for both buyers and sellers.

What’s Happening Now

When the government is shut down, many federal agencies either reduce operations or pause non-essential activity. In the housing finance world, that means there are a few specific areas may face delays:

· Loans backed by federal programs such as Federal Housing Administration (FHA), Department of Veterans Affairs (VA), or United States Department of Agriculture (USDA) may encounter slower processing. These programs represent a notable portion of overall mortgage origination.

· Insurance and regulatory approvals, such as those tied to the National Flood Insurance Program (NFIP), may pause or backlog. Since many closings in flood-prone areas rely on flood insurance certification, this can stall some transactions.

· Because of the uncertainty, some buyers and sellers may delay moving forward, which can create short-term shifts in activity. Data indicates that when shutdowns occur, mortgage applications and endorsements drop.

Importantly, none of this means the housing market is frozen. It means you might see slight delays, more caution, or short-term adjustments.

What History Suggests, and Why This Time Might Be Different

Looking back at previous shutdowns (e.g. the one at the end of 2018 that lasted 35 days), the housing market proved remarkably resilient.

Data from the National Association of Realtors (NAR) shows that existing home sales slowed slightly for about two months before rebounding quickly once the government reopened.

The dip you see in the orange bars wasn’t due to normal seasonality; it aligned exactly with the shutdown period. Once operations resumed, sales picked back up almost immediately as delayed closings cleared the pipeline.

While no two shutdowns are exactly alike, past patterns suggest any current slowdown is likely temporary: hopefully more of a pause than a problem.

How This Affects You Right Now

No matter where you are in the homeownership journey—be it a purchase or sale, or just starting to think about making a move—here’s what you should keep in mind:

· If you’re closing on your home soon and your transaction involves an FHA/VA/USDA loan or flood insurance, build in extra buffer time. A closing date might shift by a few days (or more) while the shutdown persists.

· If you’re just starting your home search, this could be a strategic moment for you. With many buyers pausing their search activity, there’s less competition in the market, meaning motivated sellers might be more responsive, and you might find more negotiating room.

· If you’re selling, keep in close communication with your agent and lender about deadlines and documentation; prompt action may help smooth potential slowdowns.

· If you’re purely a general buyer or seller (not needing a federally backed loan or special insurance), the market still functions. The impact is more in timing and mindset than market fundamentals.

The Bottom Line

The ongoing government shutdown does not mean the housing market halts; it just means some parts of the process may move a little slower, and the uncertainty adds an element of risk. Historically, markets return to their rhythm once federal services resume.

If you’re wondering how this might impact your timeline, especially at Luminate Bank, we’d love to talk and help you map out your next steps with clarity and confidence.

Debt Service Coverage Loan – Investment Properties

Tue, 30 Sep 2025 19:41:00 GMT

Experienced real estate investors with multiple mortgaged investment properties (Over 10 Loans) and self-employed investors without W2’s often have difficulty meeting conventional loan criteria. Qualified Mortgages (Fannie Mae & Freddie Mac) require the borrowers Credit, Assets, and Income requirements of conventional loans. DSCR lending is only allowed on non-owner occupied investment properties. Lenders use a DSCR to help qualify real estate investors for a loan because it can easily determine the borrower’s ability to repay without verifying traditional income.

The DSCR is calculated by dividing the properties monthly gross income by its total monthly debt (PITIA). A property that has a DSCR of 1.25 or higher is generally considered to have enough income to cover its debt payments, while a company with a DSCR of less than 1.00 may have difficulty making its debt payments on time. The DSCR is an important financial ratio for companies to monitor, as it can have a direct impact on their ability to obtain new financing. DSCR loans can still be made on properties with less than a 1 ratio however they usually are purchase loans with home improvements / upgrades / remodeling to be made to increase the monthly rent or for homes with high equity and potential for higher rents in the future. You also can potentially get the property above a 1.0 ratio with a DSCR interest only loan.

For example, if a business has a net operating income of $100,000 and a total debt service of $65,000, its DSCR would be approximately 1.54. This means that the business has 1.54 times the cash flow available to make its debt payments.

If you are trying to finance the purchase of a rental property with a conventional loan, the payment for the new loan will be included in the debt portion of your debt-to-income calculation. Whether you can offset that new monthly payment with a portion of the expected rent on the new investment property will depend on how well you can document the actual or expected rents from the property with a copy of the current lease or the "Average Market Rent" from the appraisal report.

Benefits of DSCR Loans for real estate investors include:

Potentially quicker closing times
No income or job history verification required
No limit on the number of properties
Loan amounts up to $5,000,000
Can be used for cash outs
Interest-only loan option available (Cash Flow Improvement)
Suited for new and seasoned real estate investors
Both long-term and short-term rentals are eligible (Airbnb, VRBO, etc.*)

Home Equity Line Of Credit (HELOC)

Fri, 26 Sep 2025 21:39:00 GMT

What is a HELOC?

A Home Equity Line of Credit (HELOC) is a type of second mortgage that allows homeowners and investors to borrow money against the equity they have in their property owned and receive that money as a line of credit. Borrowers can use HELOC funds for a variety of purposes, including home improvements, education and the consolidation of high-interest credit card debt. HELOCs offer investors a diversified and attractive risk-adjusted return in today’s market environment. Access high-quality assets via flexible investment opportunities catered to your institution’s financial goals.

How does a HELOC work?

Much like a credit card that allows you to borrow against your spending limit as often as needed, a HELOC gives you the flexibility to borrow against your home equity, repay and repeat. Most HELOCs have adjustable interest rates. This means that as baseline interest rates go up or down, the interest rate on your HELOC will adjust, too. HELOC's rates are determined from an index rate (Typically the Prime Rate) and then add a markup depending on your credit profile. Generally, the higher your credit score, the lower the markup. That markup is called the margin.

Qualifying for a home equity line of credit is a lot like qualifying for a mortgage refinance. You’ll have to meet certain requirements before you can get this type of loan. The exact HELOC requirements will vary from lender to lender, but you typically need:

Reliable income: Many lenders will need proof of income to confirm you’ll be able to pay off your loan payments.
Good credit: A credit score above the mid-600s will likely approve you for a loan. A credit score above 700 is considered ideal.
Qualifying amount of equity in your home: You should have at least 20% home equity.
Responsible payment history: Lenders may evaluate your previous payment history to make sure you haven’t made any late payments in the past.
A low debt-to-income ratio (DTI): The lower your DTI, the better. Discuss with your lender what their qualifying DTI ratios are to potentially receive a loan.

Overall, HELOC requirements are similar to the requirements to refinance a mortgage. Make sure you review each to get the best understanding of the options available to you.

NON-SEASONED CASH-OUT REFINANCE PROGRAM

Wed, 17 Sep 2025 22:07:06 GMT

NON-SEASONED CASH-OUT REFINANCE PROGRAM

FANNIE MAE'S DELAYED FINANCING EXCEPTION

Borrowers who purchased a Primary, Investment Property or Second Home within the past SIX months are eligible for a cash-out refinance. The new loan amount can be no more than the actual documented amount of the borrower’s initial investment (Purchase Price on HUD Settlement Statement) in purchasing the property plus the financing of closing costs, prepaid fees, and points.

The purchase transaction cannot be an arms-length transaction.
The transaction is documented by the CD or HUD-1, which confirms that no mortgage financing was used to obtain the subject property.
The sources of funds for the purchase transaction are documented (such as, bank statements, personal loan documents, H.E.L.O.C. on another property). All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.
Proof of the source of funds are not required after 6 months from the initial purchase transaction date.
1-unit second home or investment: 75% max Loan to Newly Appraised Value
2-4 unit second home or investment: 70% max Loan to Newly Appraised Value
Loan Amount can not exceed the original purchase price for the first 6 months
620 Credit Scores under 6 loans and 720 for the 7 -10 loans required
All US Citizens, Permanent Resident Aliens, and Non-Permanent Resident Aliens –(Social Security Number required, no TIN numbers)
No More Than 10 Loans per Borrower
30, 15 & 10 Year Fixed Rates Available
No Balloon Payment or Pre-Payment Penalties
In-House – Processing, Underwriting, Closing & Funding.
Underwritten In accordance to Fannie Mae Guidelines Only

*The borrower may still complete the funding of the refinance after first 6 months as long as they have no more than 10 financed properties currently.

Note: The preliminary title search or report must not reflect any existing liens on the subject property. If the source of funds to acquire the property was an unsecured loan or H.E.LO.C. (secured by another property), the new Closing Disclosure must reflect that source being paid off with the proceeds of the new refinance transaction. Warrantable Condos and PUD are Eligible for this program.

WHY IS IT IMPORTANT TO HAVE TITLE INSURANCE?

Wed, 17 Sep 2025 21:30:17 GMT

WHY IS IT IMPORTANT TO HAVE TITLE INSURANCE?

Title insurance protects people from losses arising from a real estate purchase. Losses may be caused by things such as unknown liens, defects, or encumbrances on the property that existed before the purchase.

Examples include:

outstanding property taxes not paid by the previous owner;
fraud or forgery of a previous deed; and
a spouse or unknown heir who makes a claim against the property.

Title insurance agents will identify defects in the title that need to be corrected before the owner of the land sells it to you. Agents will check for problems with your title by looking at public records, including deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances, and maps.

A title insurance policy also protects right of access to the property.

What Types of Title Insurance are Available?

Owner’s policy protects the buyer’s interest in the property. The policy protects you from the covered risks listed in the policy. The price of the policy is usually included in your closing costs. An owner’s policy only covers you up to the value of the property at the time you bought the policy. It doesn't cover any increase in your property's value, unless you buy an increased value endorsement.

An owner’s policy remains in effect as long as you or your heirs own the property or are liable for any title warranties made when you sell the property. You should keep your owner’s policy, even if you transfer your title or sell the property.

Lenders policy protects the mortgage holder or lender’s interest. A loan policy covers up to the amount of the principal on your loan. Lender policies are effective until you repay the loan. Lenders will require you to buy a new loan title policy if you refinance your home. When the new loan pays off the existing loan, the old loan policy expires. You will get a premium discount on a new loan policy if you refinance within certain period of time from the original policy. State specific.

Policy Language
Title policy forms are standardized by state. This means most of the policy language is the same regardless of which company sells the policy. Title agents are required to use the standardized forms. The parts of the policy that may be changed are the property description in Schedule A, the exceptions in Schedule B, and the exclusions. You should review those sections carefully. You can request corrections if you see an error. The agent might be able to remove an exception if a title problem is cleared up or if you buy additional coverage.

Check the policy’s legal description of the land against your survey to confirm that what is conveyed in your contract is accurate. Title insurance doesn’t protect against boundary disputes with your neighbor, unless you buy additional coverage.

Where Do I Buy a Title Insurance Policy?

You may choose any title company you want. You don't have to use a company selected by a real estate agent or lender.

Make sure that the company or agent you use is licensed. It's illegal to sell title insurance without a license in that state you are buying the property. If you buy from an unlicensed company, your claims could go unpaid.

How Much Does a Title Policy Cost?

Rates are based on the property’s sale value. The State Department of Insurance sets title insurance premium rates. All title agents charge the same premium for property of the same value.

The basic premium rate includes the price for title insurance, the cost of the title examination, and closing costs. You pay a title policy premium only once, at the closing of the sale.

Title agents add extra charges for things such as tax certificates and escrow fees, recording fees, and delivery expenses. These charges vary between title agents. Review any extra charges carefully. You may negotiate or request documentation of the costs.

What Does a Title Policy Cover?

The owner’s policy protects you against losses from ownership problems from before you bought the property, but that weren’t known at the time you bought the property. For example, you could lose title to your property because of fraud, errors or omissions in previous deeds, or forgery of a previous deed. The owner’s policy protects the buyer from the covered risks listed in the policy.

The lenders policy protects the lender’s interest in the property until the borrower pays off the mortgage.

The covered risks in your policy depend on whether you buy a loan policy or an owner’s policy. The loan policy and the owner’s policy will cover if:

someone else owns an interest in your land;
there’s no right of access to and from the land; and
there are liens on your title for labor and material from before the policy date (this doesn’t cover liens for labor and material that you agreed to pay for, however).

What Doesn’t a Title Policy Cover?

Title insurance doesn't insure against fire, flood, theft, or any other type of property damage or loss. Title insurance doesn’t protect against boundary disputes with your neighbor, unless you buy an endorsement adding additional coverage.

A title policy generally won’t cover mistakes or defects, financial issues, or rights issues such as:

defects that are created after the policy is issued;
defects that you create, or that you had knowledge of;
problems that arise because of your failure to pay your mortgage or to obey applicable laws or restrictive covenants that were disclosed to you;
certain taxes and assessments;
losses resulting from rights claimed by someone else occupying the land (the title company might need to inspect the property and may charge for the inspection); and
homestead, community property, or survivorship rights of a policyholder’s spouse. Texas homestead laws address the rights of a spouse or survivors of a property owner.

If you think you need additional coverage, talk to your title agent about adding endorsements to your policy.

Things You Need to Know About a 1031 Tax Exchange

Mon, 15 Sep 2025 13:31:20 GMT

THINKS YOUR NEED TO KNOW ABOUT A 1031 TAX EXCHANGE

In a written document signed by the taxpayer;
Hand-delivered, mailed, telecopied, or otherwise sent;
Before the end of the identification period (within 45 calendar days);
To either the person obligated to transfer the replacement property to the taxpayer (generally the qualified intermediary) or any other person involved in the exchange other than the taxpayer or a disqualified person.

The replacement property must be unambiguously described (i.e. legal description, street address or distinguishable name). In a personal property exchange the type of property should be described.

45/180 DAY EXCHANGE

The time requirements in a 1031 exchange are very specific. From closing on the sale of the relinquished (sale) property, a taxpayer must:

Properly identify potential replacement properties within 45 calendar days (the "Identification Period”)
Close on the replacement properties within 180 calendar days of the relinquished property sale – OR – the due date (including extensions) for the taxpayer’s tax return for the taxable year in which the relinquished property was transferred, whichever is earlier (the “Exchange Period”)

ADDITIONAL ISSUES

Taxpayers acquiring property which is being constructed must identify the property and the improvements in as much detail as is practical at the time the identification is made. Taxpayers who intend to acquire less than a 100% ownership interest in the replacement property should specify the specific percentage of interest. Taxpayers should always consult with their tax and/or legal advisors about the specific identification rules and restrictions.

Any properties acquired by the taxpayer within the 45-day identification period are considered properly identified. A taxpayer has the ability to substitute a new replacement property or properties by revoking a previous identification in the same manner as originally identifying and subsequently identifying new replacement properties as long as this is done, in writing, within the 45-day identification period. Although taxpayers can identify more than one replacement property, they must adhere to one of the three rules of identification listed below:

Three replacement properties without regard to their fair market value (“3 Property Rule”);
Any number of replacement properties so long as their aggregate fair market value of all replacement property does not exceed 200% of the aggregate fair market value of all relinquished properties (“200% Rule”);
Any number of replacement properties without regard to the combined fair market value, as long the replacement properties acquired amount to at least ninety-five percent of the fair market value of all identified properties (“95% Rule”).

WHAT COSTS CAN BE DEDUCTED?

A frequently asked question is “What expenses can be deducted from the exchange proceeds without resulting in a tax consequence?” Although the IRS has not published a complete list of qualifying expenses, there are some rulings that provide general parameters. Brokerage commissions can be deducted from the exchange proceeds (Revenue Ruling 72-456). Other transactional costs may also be able to be deducted if they are paid in connection with the exchange. (Letter Ruling 8328011).

WHAT ARE “EXCHANGE EXPENSES?”

Transaction costs that are referred to as “exchange expenses” on Form 8824 are not specifically listed but should generally include costs that are:

A direct cost of selling real property, which typically include:

Real estate commissions.
Title insurance premiums.
Closing or escrow fees.
Legal fees.
Transfer taxes.
Notary fees.
Recording fees.

Costs specifically related to the fact the transaction is an exchange such as the Qualified Intermediary fees

ITEMS THAT ARE NOT “EXCHANGE EXPENSES”

Although not a complete list, the costs related to obtaining the loan should not be deducted from the proceeds.

THESE “NON-EXCHANGE EXPENSES” INCLUDE:

Mortgage points and assumption fees
Credit reports
Lender’s title insurance
Prorated mortgage insurance
Loan fees and loan application fees

OTHER “NON-EXCHANGE EXPENSES” CAN INCLUDE:

Property taxes
Utility charges
Association fees
Hazard insurance
Credits for lease deposits
Prepaid rents and security deposits

These rough guidelines do not address every potential cost. Exchangers should review their specific transaction and closing costs with their tax and/or legal advisors.

What is TRID and how will it affect you when getting a Conventional Fannie Mae or Freddie Mac Loan?

Mon, 15 Sep 2025 03:44:00 GMT

WHAT IS TRID?

TRID , which stands for TILA RESPA Integrated Disclosure, is the culmination of several years of discussions between CFPB and members of the banking and title industries. TRID consolidates the existing disclosures required under TILA and RESPA for closed-end credit transactions secured by real property into two forms: a Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and a Closing Disclosure that must be provided to the consumer at least three business days prior to consummation.

First , the Good Faith Estimate (GFE) and the initial Truth-in-Lending disclosure (initial TIL) have been combined into a new form, the Loan Estimate. Similar to those forms, the new Loan Estimate form is designed to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage loan for which they are applying, and must be provided to consumers no later than the third business day after they submit a loan application.

Second , the HUD-1 and final Truth-in-Lending disclosure (final TIL together with the initial TIL, the Truth-in-Lending forms) have been combined into another new form, the Closing Disclosure , which is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction.

How will this affect the consumer? Since October 1st, 2015 these new forms have been a part our life in the conventional lending world. “ TRID ” gives borrowers three days to think about whether they want to proceed with the mortgage or not. Are the “Know Before You Owe”, TILA-RESPA reform changes impacting consumers?

Lenders must provide the Loan Estimate form to consumers within three business days of applying for a loan – which means three business days after the consumer provided the lender with their name, income, Social Security number, property address, property value estimate and mortgage loan amount sought.

The Closing Disclosure (CD) form must be provided at least three business days before loan consummation (the time the consumer becomes contractually obligated to the mortgage, which is usually at closing).

Any significant changes to the loan terms (the annual percentage rate (APR) becomes inaccurate, the loan product changes or a prepayment penalty is added) will restart a new three-business-day waiting period.

Both the Loan Estimate and Closing Disclosure forms can be delivered in person, by mail or electronic delivery. Additionally, this new process will NOT impact cash sales, private money, commercial loans or those financed using HELOCs, so the current processes will still exist as well.

Before TRID , once the lender had “Clear-to-Close’, their closing department would send closing instructions to the title company so they could prepared the “HUD”. Once the HUD was approved, the borrowers could close on their loan that same day. Now with the three day waiting period, the consumers have to wait before they consummate the transaction. Needless to say this can cause many delays for buyer and sellers.

The smart lenders take advantage of the TRID guidelines and prepare and deliver the Closing Disclosure to the borrower themselves even before closing instructions are sent to the title companies. This helps shorten the closing process verses waiting on the title company to prepare the CD and deliver it to the consumer.

Our attitude at LUMINATE BANK is continuing education and focusing on providing consistent and timely communications to all parties to help ensure the client receives maximum value, and that is what it’s all about.

Single Member or Joint Member LLC?

Fri, 12 Sep 2025 18:40:00 GMT

SINGLE MEMBER OR JOINT MEMBER LLC?

A Limited Liability Company (LLC) is an entity created by state statute. Depending on elections made by the LLC and the number of members, the IRS will treat an LLC either as a corporation, partnership, or as part of the owner’s tax return (a “disregarded entity”). A domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and elects to be treated as a corporation. For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and affirmatively elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity.

Owner of Single-Member LLC

If a single-member LLC does not elect to be treated as a corporation, the LLC is a "disregarded entity," and the LLC's activities should be reflected on its owner's federal tax return. If the owner is an individual, the activities of the LLC will generally be reflected on:

Form 1040 Schedule C, Profit or Loss from Business (Sole Proprietorship)
Form 1040 Schedule E, Supplemental Income or Loss
Form 1040 Schedule F, Profit or Loss from Farming

An individual owner of a single-member LLC that operates a trade or business is subject to the tax on net earnings from self employment in the same manner as a sole proprietorship.

If the single-member LLC is owned by a corporation or partnership, the LLC should be reflected on its owner's federal tax return as a division of the corporation or partnership.

Taxpayer Identification Number

For federal income tax purposes, a single-member LLC classified as a disregarded entity generally must use the owner's social security number (SSN) or employer identification number (EIN) for all information returns and reporting related to income tax. For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, the W-9 should provide the owner’s SSN or EIN, not the LLC’s EIN.

For certain Employment Tax and Excise Tax requirements discussed below, the EIN of the LLC must be used. An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN. An LLC applies for an EIN by filing Form SS-4, Application for Employer Identification Number. See Form SS-4 for information on applying for an EIN.

A single-member LLC that is a disregarded entity that does not have employees and does not have an excise tax liability does not need an EIN. It should use the name and TIN of the single member owner for federal tax purposes. However, if a single-member LLC, whose taxable income and loss will be reported by the single member owner needs an EIN to open a bank account or if state tax law requires the single-member LLC to have a federal EIN, then the LLC can apply for and obtain an EIN.

Employment Tax and Certain Excise Tax Requirements

In August, 2007, final regulations (T.D. 9356 ) were issued requiring disregarded LLCs to be treated as the taxpayer for certain excise taxes accruing on or after January 1, 2008 and employment taxes accruing on or after January 1, 2009. Single-member disregarded LLCs will continue to be disregarded for other federal tax purposes.

A single-member LLC that is classified as a disregarded entity for income tax purposes is treated as a separate entity for purposes of employment tax and certain excise taxes. For wages paid after January 1, 2009, the single-member LLC is required to use its name and employer identification number (EIN) for reporting and payment of employment taxes. A single-member LLC is also required to use its name and EIN to register for excise tax activities on Form 637; pay and report excise taxes reported on Forms 720, 730, 2290, and 11-C; and claim any refunds, credits and payments on Form 8849. See employment and excise tax returns for more information.

Joint Ownership of LLC by Spouse in Community Property States

Rev. Proc. 2002-69 addressed the issue of classification for an entity that is solely owned by husband and wife as community property under laws of a state, a foreign country or possession of the United States.

If there is a qualified entity owned by a husband and wife as community property owners, and they treat the entity as a:

Disregarded entity for federal tax purposes, the Internal Revenue Service will accept the position that the entity is disregarded for federal tax purposes.
Partnership for federal tax purposes, the Internal Revenue Service will accept the position that the entity is partnership for federal tax purposes.

A change in the reporting position will be treated for federal tax purposes as a conversion of the entity.

A business entity is a qualified entity if;

The business entity is wholly owned by a husband and wife as community property under the laws of a state, a foreign country, or possession of the United States;
No person other than one or both spouses would be considered an owner for federal tax purposes; and
The business entity is not treated as a corporation under IRC §310.7701-2.

Note: If an LLC is owned by husband and wife in a non-community property state, the LLC should file as a partnership. LLCs owned by a husband and wife are not eligible to be "qualified joint ventures" (which can elect not be treated as partnerships) because they are state law entities.

Purchase Money Second Mortgage

Wed, 10 Sep 2025 12:09:22 GMT

What is a Purchase Money Second?

When buying a $300,000 home, the first lien position loan generally has the larger loan amount. As an example, the first lien would be $240,000 or 80% LTV. The second is in a less superior position on title, you might have $30,000 or 10% LTV. The first and second-lien positions now add up to 90% LTV, which means you need to make up the difference of the remaining $30,000 or 10% LTV. Meaning by not borrowing over 80% LTV for your first, you avoid PMI.

How Does it Work?

If you were to ever default on the property, the first lien position holds the superior position on title. This means if the bank were to sell your property, the first lien position would have the ability to recoup their losses. The second-lien position would have to wait to see if the sale of the property will have enough excess funds to satisfy the first lien position in order for it to be paid. This second position inherits risk, they may not recoup any money if the property went into default. There are certain items that could leapfrog all lien positions, including the first, such as past due taxes.

The Rule of Thumb

There are several options, but two of the most common are purchase money seconds, and standard second loans. What is the difference? Purchase money seconds comes from the seller. However, the lending institution finances the standard seconds.

For a standard second, if you secure funding from the same lender as your first loan, there’s very little you must do. After you apply for the loan, the lender has most of everything else they need. They’ll process your application using the same income, asset, and credit information you provided for the first loan.

At the closing, you’ll close on two loans rather than one. This just means signing two sets of closing documents and agreeing to take two liens on your home rather than one. If you sell the home, you must pay off both loans in order to release the liens on your property and transfer homeownership.

What are the Terms?

Like your first, the purchase money second has varying terms depending on the lender. Lenders may offer various terms, but usually they are shorter than the first loan. Seconds often offer a secure fixed interest rate and most don’t have a prepayment penalty so you’re free to pay off the loan whenever you want.

Utilizing a second might free up your cash initially, but keep in mind that second generally hold a higher note rate. Make sure to set a plan to either consolidate the loan or pay it off by making extra payments throughout its term. Penalties or fees associated with your loan may occur, make sure to be prudent and do your due diligence.

Is It Too Soon to Refinance My Mortgage Loan?

Fri, 05 Sep 2025 15:39:00 GMT

Run The Numbers Before You Refinance You Loan

Mortgage rates have fallen a great deal this year and millions of homeowners as well as investors might benefit by refinancing even if they bought a home just last year. Mortgage rates moved lower last week even though the broader bond market suggested they should have remained flat or higher. In several of this week’s previous articles, we’ve discussed the volatility that’s been wreaking havoc on the world of mortgage rate settings for lenders. Simply put, when the moves get bigger and when the direction changes more frequently, mortgage rates take extra damage relative to Treasury yields (a risk-free benchmark for most any other rate in the US).

Many Mortgage holders have received many solicitations from mortgage companies reminding them it is time to lower their interest rate. Many homeowners and investors might be unaware that mortgage rates have declined so dramatically that they could save money by refinancing.

"Rates are Important, but Dollars and Cents is still the Most Important thing to Consider when Refinancing your home loan."

The average size of a refinanced mortgage was $324,500 in the week ending of July and the beginning of August, according to the Mortgage Bankers Association. On a loan of that amount the difference between a 4.75% rate and a 4% rate is $143.53 a month ($1,722.40 a year) in principal and interest.

To find out how much you could save:

Look at your monthly mortgage statement to see what interest rate and how much you’re paying in principle and interest only. Your Escrow payments will remain the same. The only this an improved interest rate will lower your P & I payment only

Calculate you new payment buy using our mortgage calculator . Just plug in the information about your current and and then enter the new interest rate. This will give you a new lower P & I Payment. Determine what the difference would be on Dollars.

Compile all the costs to refinance your mortgage

Bank fees : Such as origination or application fees, as well as any points that the bank may charge.
Title costs : Including a title search and insurance.
Third-party costs : Such as an appraisal or attorney’s fees or the cost of a credit report ordered by the lender.

Calculating your break-even point

Now, it’s time to calculate your savings. Let’s consider an example.

Say you’re five years into a 30-year mortgage and your refinancing goal is to lower your monthly payment. If your new rate lowers your P & I payment by at least $100 per month and the cost of the refinance is $3,000, it will take you 30 months to recoup that cost. There’s your break-even point. Everything beyond that 30-month break-even point will be cost savings.

However, there is some small print attached to this savings celebration: Your savings may vary if you extend the term of the loan.

"Best Rule of Thumb Would Be With a Payment Savings Between $100 - $150 to Keep Your Break-even point under 5 years"

Big savings beyond breaking even

If you want to pay off your home loan in fewer years by refinancing to a shorter term, then your savings can multiply beyond the break-even point. When you refinance to a shorter term, it’s not about having a lower monthly payment, but about saving big money in total interest.

If you took out a 30-year loan and started out with a rate of 4.5% and you’re now five years into that loan, it’s very possible that you could refinance to a 15-year term or perhaps a 20-year term, at the very same rate. The monthly payment could go up a little bit … but you would literally save not only the time, but tens of thousands of dollars, in those instances, in interest paid to the bank.

Real estate investors should consider both their cash flow and breaking even savings. It's all math!!!

Putting Your Rental Properties into an LLC.

Wed, 27 Aug 2025 20:13:00 GMT

The Advantages and Disadvantages of titling your Rental Properties into an LLC.

Advantages

The main reason investors prefer to have their rental properties in an LLC is for asset protection. For many years, lawyers, financial advisors, and tax accountants have been teaching asset protection to rental property owners. The more novice investors are worried about losing everything if a tenant or someone gets injured on their rental property. Other investors like to think of their rental properties as a business, therefore putting it into an LLC legitimizes a business entity. In most cases rental properties do create a passive income. This income can be funneled through to your 1040 tax returns on schedule E as personal investment properties or through the LLC that set up. Both ways have tax advantages.

Legal Benefits – The primary reason to form an LLC is for legal protection. Legal counsel generally has a tough time breaking through the LLC wall. Should any tenets, their guest or anyone on the property to sustain any injuries and the property is owned in the investors name only, their personal assets are at risk.

Tax Benefits – From a tax perspective, any LLC formed with two or more members is classified as a “Pass-Through Company”. A “Pass-through” means its income is passed through to its owners and claimed on those owners’ individual tax returns. The LLC is subject only to capital gain rates on the ownership shares of the member, and not to the corporate capital gains taxes, therefore is no double taxation. LLC’s with just one owned-member, however, are taxed as a sole proprietor and no separate tax return is required. Actually tax dollars say’s from holding real estate in an LLC opposed to personal holding the properties is zero. As of 2011, if you own income property and actively participate in the management of the property in your adjusted gross is less than $150,000, you can write off up to $25,000 of rent losses. The amount of the rent losses that you can write off is proportionately phased out between 100,000 and 150,000. Also remember that although the loss is disallowed for that particular tax year it is not completely lost. When you sell your income property, you can write-off any unused rental losses that have accumulated while you have owned the property.

Disadvantages

Expense – when setting up an LLC there are costs involved that are generally charged by an attorney or tax accountant for the preparation of your LLC business. Those fees can vary depending on the source but is highly recommended versus doing it yourself online. Depending on which state you live in even if your LLC is set up in Texas, there could potentially be an annual fee that are paid to the state. Another fee would be the cost of filing separate tax returns for the LLC if you use an account, which I absolutely recommend if you’re dealing with rental properties. In addition, the state franchise fees would also be another cost incurred depending on the gross profit of the LLC. The IRS has certain thresholds that they use for these franchise fees. Many investors starting off, don’t realize the reality of the impact of any fees against their bottom line until it’s too late.

Financing – To me, this is the biggest hurdle for most lenders to overcome. Many investors “Miss the Forest for the Trees” and don’t realize that owning properties in an LLC can create problems for future financing. Most 1 to 4 residential loans are delivered to Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac’s guidelines does not support “Entity Vesting”. Entity vesting is when the rental property is titled in anything other than the individual borrower’s names i.e. LLC’s, S-Corps, or Partnership. First-time investors that have been educated to set up an LLC for their new real estate business don’t realize that this can be a problem. In addition, the same investors will set up individual asset accounts in their LLC names to support future purchase transactions. These funds cannot be honored as personal assets because they are in a business. There are special circumstances that these funds can be honored, but requires a complete 2 year analysis of the LLC’s profit and loss. This is totally an underwriter discretion.

I highly encourage any investor that’s looking real estate investing to keep the bulk of their assets in their personal account for underwriting purposes.

Due on Sale Clause – Most every Fannie Mae and Freddie Mac loans originated today will have a “Due on Sale Clause”. Most due on sale clauses prohibit the note holder to change the entitlement of the real estate property. What does that mean to the investor? It means that if the loan servicer has knowledge of the property being retitled into an LLC, they could potentially call the note do which means you would have to pay the remainder of the loan immediately. Many investors will take the risk of retitling their properties into an LLC. The chances of the servers are finding this information out is quite small but still possible. Please consider this before retitling your property into your personal LLC.

What are my choices if I don’t establish an LLC for my rental properties?

This will strictly depend on your situation and what you want accomplished by forming an LLC. Some investors will title their rental properties into their family trust. This is totally acceptable by all Fannie Mae and Freddie Mac lenders as long as the trust is a revocable trust. Typically the trust will have to be reviewed by each lender and their legal counsel to be able to finance the loan into a family trust. In addition to the normal hazard insurance on the property in addition to the liability insurance, many investors that choose not to put their properties into an LLC will simply protect their assets by getting an umbrella insurance policy. These policies are very inexpensive and have a great coverage in case of any occurrences happen on your property.

Questions to Ask Before Hiring a Property Manager

Wed, 20 Aug 2025 17:41:00 GMT

Are you thinking of hiring a property management company?

Here are some general questions to ask a property manager before hiring them.

What areas do you cover, and do you have people on the ground in those markets?
How many properties do you currently manage?
What is your tenant placement fee for an SFR?
What is your monthly % you charge to manage?
What is your renew fee on current tenant?
How do you market the property for a new tenant besides MLS and there filtering sites?
How do you do properties showing?
What types of properties do you manage?
What are your normal deposits?
Do you have a pet deposit required?
Do you have a money back guarantee for tenant placements?
When are your landlords’ payments made during the month?
Do you keep a property reserve?
Who holds the tenants deposits?
How long a lease do you normally do?
Will I have a designated person managing my properties as an account manager?
Is you firm availability around the clock for the owner and the tenants?
What is you screening process for new tenants and what is the minimum credit requirements?
How do you determine the monthly rents, and do you clear that with the owner before presenting to the prospective tenant?
What is your timeline for evictions?
On average, what’s your occupancy length for renters?
Do you keep all late fees?
How often do you look you do property inspections in-side and out?
If you make the payment to the HOA each month, is there a fee for that?
Does you firm have a relationship with the HOA?
Once the tenant moves out and the utilities need to be turned on. Is there a fee for that?
Do you require renters to have renter’s insurance?
Is there an upcharge on you make ready expense from the contractors?
Do you show the contractors invoices on the portal?
Are there any accounting fees to prepare year end statements, 1099, YTD Cash-flow statements, Etc.?
What software do you use for you client portal?
What are you typical time from on evictions?
Once evicted explain how your firm collected repairs that were not covered by the deposits?
When do you issue notices and how long to you require before requesting a rit from the courts?
Do you promote section 8?
Can you give a few References?
How well-versed are you with the Federal Fair Housing Rules?

For More information or if you have any questions, call me anytime at 214-679-3396 or schedule a call with a Loan Specialist.

WHAT IS THE PURPOSE OF PROPERTY APPRAISAL?

Tue, 12 Aug 2025 23:29:24 GMT

WHAT IS THE PURPOSE OF PROPERTY APPRAISAL?

The Purpose of a Property Appraisal?

A home appraisal is generally required by the lender in order to establish that the value of the home will be sufficient collateral for the amount of the loan. The appraisal fee is generally paid by the buyer, sometimes required at the time of the loan application but typically paid at the loan closing.

A home appraisal is done by an independent appraiser who will generally visit your home and inspect the interior and exterior. However, the appraiser is not performing the same service as a home inspection and many appraisals are only drive-by appraisals. Generally, home improvements or the cleanliness of the interior will not add to or diminish the appraisal value. The appraiser considers many other factors, beyond the inspection, to establish the fair market value, such as comparable values, historic sales and market demand for that area.

Market values fluctuate over time and also vary from neighborhood to neighborhood, causing appraisals to become outdated. Most lenders will require a new appraisal if any refinancing is done, and tax assessors generally re-assess property annually. The value established for the lenders loan appraisal will not change the assessment set for property taxes as county tax assessors do their own property evaluations.

In either case, the home buyer should monitor the appraisals for fair treatment in relation to similar houses in the surrounding area and in view of the standards set for appraisers by state licensing boards. For tax purposes, there is often a protest deadline.

In the case of a loan, the buyer should be comfortable with the appraisal before committing to a firm offer and before the loan closes. Any concerns or complaints should be brought to the attention of the appraiser, the lender or the state regulatory board. Although the appraisal primarily protects the lender, it can also benefit the buyer or home owner by:

Providing assurances that the home is not over-valued
Justifying the amount of the loan
Qualifying you for certain terms Evaluating equity to remove
Private Mortgage Insurance (PMI)
Protecting against negative home equity
Aiding tax and estate planning
Helping determine insurance valuations
Determining the feasibility of home improvements, refinancing or additional financing

WHAT DOES IT MEAN WHEN YOUR MORTGAGE GETS SOLD?

Mon, 11 Aug 2025 22:38:14 GMT

WHAT DOES IT MEAN WHEN YOUR MORTGAGE GETS SOLD?

One day, you might open your mailbox and find a letter saying your mortgage has been sold. Don’t panic — you haven’t done anything wrong. This is actually a common part of how the mortgage industry works. Still, there are a few things you should know when this happens.

Why Lenders Sell Mortgages

To your lender, your mortgage is basically an investment — a financial asset. Selling it doesn’t mean you missed a payment or did something wrong. Lenders will often sell mortgages in order to free up capital for future lending. So, when your loan changes hands, it’s simply a business move, not a reflection on you.

What Happens Next

When your mortgage is sold, the law requires that you be notified within 15 days. You’ll get two letters — one from your current lender and one from the new one.

These letters should clearly explain:

Who your new lender is
Where to send your payments
How to contact them if you have questions

It’s important to start sending payments to the new address as soon as possible. But don’t worry — your loan terms (interest rate, payment amount, and due date) can’t change just because the loan was sold.

The 60-Day Grace Period

If you accidentally send your payment to the old lender after the transfer, there’s good news. Under the Real Estate Settlement Procedures Act (RESPA), you’re protected by a 60-day grace period.

During this time:

You can’t be charged a late fee if your payment went to the old lender by mistake.
The new lender can’t report it as late to the credit bureaus.
Your loan can’t be marked delinquent because of the mix-up.

This window gives you a little breathing room in case the transfer causes any confusion.

Double-Check for Mistakes

Although most transfers go smoothly, it’s still smart to check your first mortgage statement from the new lender. Compare it to your last one and make sure everything — balance, payment, escrow, interest — looks the same.

If something doesn’t add up, write to your new lender and explain the issue. The U.S. Department of Housing and Urban Development (HUD) even provides a sample letter you can use.

By law, the lender must:

Acknowledge your letter within 20 business days
Fix or explain the issue within 60 business days

If you’re not getting a response, reach out to your previous lender, or file a complaint with the Consumer Financial Protection Bureau (CFPB) — they’ll make sure your concern gets addressed.

The Bottom Line

It’s normal for a mortgage to be sold — sometimes more than once — during the life of your loan. Other times, it may never happen. Either way, there’s no reason to worry.

As long as you keep making your payments on time (to the correct lender), your mortgage and credit will stay in good standing.

HOME INSPECTION FOR TURNKEY RENTALS — 3 TIPS TO BUY WITH CONFIDENCE

Fri, 01 Aug 2025 16:09:09 GMT

It bears repeating (because most people find it remarkable) — most of our clients buy turnkey rentals from us sight unseen. How can they do it? They get a profession complete a home inspection for Turnkey Rentals.

This gives many homeowners and real estate investors heart palpitations — especially those that like to crawl into crawl spaces and scrape every eave with a screwdriver in search of rot before they even think of making an offer.

For those who have better things to do than crawl into crawl spaces and scrape eaves, however, that means a lot is riding on the home inspection report.

That sheaf of paper, prepared by a professional home inspector based on a multi-hour visit to the property, is your best glimpse into the bones of the house … and your best indication of whether or not, from a physical and structural standpoint, you’re buying a tank or a lemon.

Here are three tips for the inspection stage of your turnkey rental purchase, so you can feel confident about your investment.

1. SCREEN THE INSPECTOR

If you live far away from the prospective rental property, you probably don’t know any local home inspectors.

We can recommend some to you, but it’s important to remember — the home inspector is your guy, not ours. The buyer hires the home inspector, because the buyer is the one with more to lose if the home turns out to be riddled with defects.

So take the time to call the inspector and do some due diligence. Make sure (s)he is licensed and has positive reviews online. You don’t have to use our recommendations. If you find someone you like better and the schedules line up, by all means go with the inspector with whom you feel most comfortable.

2. DON’T BE ALARMED BY A LONG LIST OF DEFECTS

Home inspectors are thorough. Inspection reports, especially those for older homes like the ones we acquire and renovate, tend to identify dozens of defects. You are paying someone to go through your property with a fine tooth comb.

If you have ever bought a home or investment property in the past, you have probably encountered this. That long list can be scary.

Take heart. It’s nearly impossible to make an older home “perfect.” Even brand-new homes have defects. Most of them have little or nothing to do with the economic function of the property, or even yours or the tenant’s ability to enjoy the property. They are just bases the inspector is required to cover. See something really concerning? A phone call with the inspector can clarify the findings.

3. COMPARE THE SCOPE OF WORK WITH THE REPORT

We rehab every property that we acquire and bring to market as a turnkey rental. That rehab leaves behind a paper trail — specifically the scope of work, an official agreement with contractors and subcontractors as to what work must be done.

We provide a summary of the scope of work for every turnkey rental. When you get your inspection report back, compare it to the SOW. If something seems to be askew, ask about it.

In other words, the inspection becomes an opportunity to keep things honest — to verify that we actually did the work we told you we did. Isn’t that a good feeling?

Advice For Investing Out Of State

Sat, 26 Jul 2025 19:58:00 GMT

Investing Out Of State

One of the great debates among investors is whether or not to invest out of state. Each side can give pretty compelling arguments for and against. Like most everything in investing and business, it comes down to personal preference and risk tolerance. Some investors would never invest in a property they could not make a short drive to while others will look solely on the numbers and returns. Those investors feel that the investment is the same whether the property is 800 miles away or 8 minutes. There are compelling sides to each argument and cases to be made for either way of doing business.

If you are considering investing out of state or out of your local area, you will be largely reliant on others. Obviously, this takes a degree of trust that not every investor is comfortable with. You will need to spend time building a team of local realtors, contractors, attorneys and project managers. The strength of this team will be as important as the quality of your property. You can find a great property, but if your tenants have to wait days to repair the toilet, you can expect the rent to come in slower, if at all.

The main reason why you would even entertain investing out of your area is because you feel the returns are worth the risk. It is because of these returns that you will spend the time doing the work to find a team and the property. Once you have everyone is place the reality is that investing in another state is really no different than investing in the next town over. If you have a property manager that handles issues that come up, it doesn’t make much of a difference where those problems occur. Your business can run on autopilot while you reap the benefits of a higher return and let your team take care of the property.

The flip-side to this is that it is not that easy to surround yourself with quality people you can trust. Finding a property manager is not the same as finding someone to fix your door handle on a local property. You have to fully vet these people. Because of the distance, this will have to be done either over the phone or online. The out of state detractors will also tell you that comparable properties may be right under your nose if you just look. Why invest out of area if you don’t have to?

It is true that a good investor can find deals anywhere if you know where to look. That being said, there are times when a good out of state deal falls on your lap that may be too good to pass up. Before you quickly dismiss the property based only on location, do your homework and figure out if you are comfortable with it. There are plenty of opinions on the topic, but the best answer is usually found after doing your own homework and determine if it is right for you.

SHORT TERM VERSES LONG TERM REAL ESTATE INVESTING

Thu, 24 Jul 2025 23:05:31 GMT

SHORT TERM VERSES LONG TERM REAL ESTATE INVESTING

Short Term Property Investment

You can make money from buying property and holding it for the short term, but this will normally involve at least one of the following conditions:

Buying the property at less than market value (eg. a distressed sale, foreclosure or deceased estate)
Buying a property, renovating and then re-selling (commonly known as ‘flipping’)
Buying in a rapidly rising market and selling at the peak of the market (usually involves some luck or extraordinary market insights)

Short term property investment is a strategy that can make lots of money in a short period of time, but usually requires a higher appetite for risk and a solid implementation plan. Even then, “short term” in the property market is usually a period of at least 6 to 12 months.

Long Term Property Investment

Holding property for the long term is a less risky way of growing your wealth, but it is also no guarantee that you will do well.

It is not unheard of for someone to buy an investment property and after 5 or more years it is still worth the same, or worse, dropped in value. To someone who has taken a blind stab at buying this property, they will most likely be very nervous and want to cut their losses and sell.

But for someone who has done their research and can read the indicators that show the market is due for an upturn, then they will be confident of holding longer in anticipation of that fantastic gain that will make it all worth while.

Long term property investing usually involves some of the following conditions:

Choosing an area where demand is expected to exceed supply (e.g.. more jobs are being created in the area and therefore more people want to live close by)

Holding and maintaining the property for at least 5 to 10 years
Keeping the property rented with reliable tenants to help cover expenses
Sometimes taking a net cash loss now, in return for potential capital gains in the future
So the strategy that you use for your property investing should be chosen based on your own investing personality.

If you see yourself as a “passive” investor, that is someone who is willing to sit back and watch their wealth grow without too much effort, then long term investing is better for you.

However, if you are more an “active” investor and have the extra time to renovate, develop or analyze the market closely, then the short term strategy may be more suited to you.

Having said that, some people will use both strategies and some will use one or the other. The important thing is to decide which strategy you want to use upfront and try and follow it through for best results.

BENEFITS OF HYBRID E-CLOSING

Mon, 15 May 2023 17:48:00 GMT

Take a closer look at the benefits of using a hybrid digital mortgage closing and how it can make your investment property loan process easier and more convenient. As more and more industries move towards digital solutions, the mortgage industry is no exception. One of the latest trends in the mortgage industry is the hybrid digital mortgage closing, which allows borrowers to sign most of their documents digitally from the comfort of their own home.

In this blog post, we’ll take a closer look at the benefits of using a hybrid digital mortgage closing and how it can make your home loan process easier and more convenient.

Benefits of a Hybrid Digital Mortgage Closing:

Faster process: With a hybrid digital mortgage closing, you can digitally sign the majority of your closing documents. This is a quick and easy process that takes a few minutes at most!

Increased convenience: You can complete your digital portion of the closing documents online or even on your mobile device – anywhere – on the day you are scheduled to close.

Improved accuracy : An added benefit to completing your paperwork online is that you will often receive a review packet of the documents days prior to your scheduled closing. This will give you time to read through, confirm information, and ask questions leading up to the day of signing. Along with reducing the likelihood of errors and mistakes, it gives you confidence that your closing day will go smoothly!

Security: Digital mortgage closings are often more secure than traditional paper-based closings. Your documents are protected by encryption and other security measures, which can help prevent identity theft and other types of fraud.

Environmentally friendly: By completing most of the paperwork digitally, you can help reduce paper waste and lessen your impact on the environment.

Overall, we really can’t think of any reason NOT to leverage a hybrid digital mortgage closing! It is easy, fast, and can be a great option for those who want to streamline the home loan process and make it more convenient. If you’re interested in the hybrid digital closing option, let The Parham Team know! There is no cost to you as the borrower, and it truly does make your closing experience quick and easy!

Why Consider A 1031 Tax Exchange?

Sat, 14 Jan 2023 20:59:00 GMT

When you are selling an investment property can be subject to taxation. Those taxes can add up quickly depending on the type of property, how long it was owned, state taxes, capital gains, depreciation and the owner’s tax bracket. As a property seller, you may be liable for taxes that add up to 40% or more. As a investment property owner, the 1031 Exchange is a powerful investment tool.

A 1031 Exchange gives the Exchanger the ability to keep all of the property’s equity for re-investment, allowing the Exchanger the opportunity to acquire a replacement property with better cash flow, less management, a more desirable location and other such investment goals.

We believe it is important for our investors to understand the process they are about to go through before they actually begin. For this reason, we talk about a series of exchange basics on this Webinar.

A 1031 Exchange is an IRS-authorized process where like-kind business or investment property is exchanged without immediate tax liability to the property owner (Exchanger).

The IRS requires a neutral third party, known as a facilitator, qualified intermediary (QI) or accommodator to be used for facilitating the 1031 Exchange. Equity Advantage is a qualified intermediary in facilitating 1031 Exchanges.

Fannie Mae Reserve Requirements for Investors with Multiple Properties Owned

Wed, 24 Aug 2022 18:19:00 GMT

What are the Reserve Requirement For Fannie Mae Loans?

Reserves are liquid or near liquid assets that are available to a borrower after the mortgage closes. On every loan transaction, reserves are required to be verified as part of the approval process. Acceptable sources or reserves include:

Checking or savings accounts
Investments in stocks, bonds, mutual funds, COD, money market funds, and trust accounts
the amount vested in a retirement savings account
the cash value of a vested life insurance policy

How much is needed for reserves?

For an investment property, 6 months of subject property monthly payment is required.

If the borrower owns other financed properties, additional reserves must be calculated and documented for financed properties other than the subject property and the borrower’s principal residence.

2% of the UPB if the borrower has one to four financed properties,
4% of the UPB if the borrower has five to six financed properties, or
6% of the UPB if the borrower has seven to ten financed properties.

The aggregate UPB calculation does not include the mortgages and HELOCs that are on

the subject property,
the borrower’s principal residence,
properties that are sold or pending sale, and
accounts that will be paid by closing (or omitted in DU on the online loan application).

The subject property will still have monthly reserve requirements based on the total mortgage payment (PITI). Reserves are funds that you have access to liquid or non-liquid. Reserves are funds you need to have after the closing your transaction. Funds for reserves cannot be your funds for down payment or closing cost.

Fannie Mae now will allow for 100% of the Non-Liquid funds, not 60%

Non-Liquid funds can be used for reserve requirements.”

IRA’s
401K’s
SEP Funds

Gifts are NOT allowed on an investment property.

5 Steps To Refinancing A Rental Property

Thu, 06 Dec 2018 00:30:00 GMT

Steps To Refinancing A Rental Property

With property values on the rise in many markets it is a good time to consider pulling equity out via a cash out refinance . Taking equity doesn’t work in every situation, but for some it is the ideal option to help grow their business. The cash out can be used to pay down debt, start a marketing campaign or buy additional assets.

There is a huge difference in the loan process and approval for a rental property as opposed to a primary residence. If you haven’t taken a traditional bank loan in some time you may be surprised at just how much paperwork and red tape are involved. However, if you have the credit scores, income and equity a refinance may be the best option for you. Here are five steps to refinancing a rental property.

Run the numbers. Before you do anything, it is essential that you run the numbers and make sure the deal works for you. There are times based on the loan amount that reducing your interest rate may not lower your payment. With a refinance you need to account for the establishment of the escrow account, closing costs and higher loan amount. When you factor in everything you may very end up paying more per month. This can still make sense depending on what you intend on doing with the money, but you need to know exactly what you are getting into. There are plenty of places to find a simple mortgage calculator online where you can play around with the numbers. When doing this you should know that interest rates for investment property loans are on average a point higher than non-owner-occupied loans. Only if you are confident that the numbers work, and you have a set plan with any cash out received should you move forward.

Find the right lender. As we mentioned there is a big difference in a loan for a primary residence as opposed to one for an investor. Almost every local bank or lender can do an owner-occupied loan, but not everyone will entertain an investment loan. It is important that you work with someone that has access to the right program for you. Start by reaching out to a local mortgage broker. Mortgage brokers often deal with dozens of lenders, each with specific guidelines and qualifications. They can pull your credit report once and use that with every lender they work with. Investment loans require higher credit scores and increased equity. Depending on the number of units you may need a 720 score with 20% equity, or an 80% loan to value. The right lender knows exactly what to look for and can tell you pretty quickly whether they can do the deal, or not. The last thing you want to do is waste money on an appraisal, and weeks of time, on a deal you can’t do.

Get docs in order. Most real estate investors have tax returns thicker than some novels. Perhaps the biggest hurdle in any investment loan is verifying income and collecting paperwork. Once you finish running the numbers and are ready to explore your options you should start getting everything in order. At a minimum you will need two years of tax returns, two pay stubs, bank statements and a current mortgage statement. If you are self employed, you will need a business license and possibly an accountant’s letter. Your loan officer will give you a detailed list of items needed but you should get a jump on these items if possible. The more items you can accumulate the easier it will be for your broker. Let them figure out what is needed and what isn’t. The longer you wait to get everything together the longer before you can lock your rate and the higher your payment may be.

Minor updates for appraisal. Credit score and equity are the two biggest components in an investment property refinance. Sometimes, just a few thousand dollars can make or break the deal. It is a good idea to look at the property and look for any minor repairs before the appraisal is ordered. It is unrealistic to give the house a complete facelift, but you should do any minor updates. If the gutter is hanging off, you should fix it. If the stairs of the deck are broken you should look to fix them. These won’t sway the value too much either way, but they may influence the appraiser or a lender that is on the fence. If the lender sees debris around the house or broken windows on the appraisal report they may not be as inclined to give you the benefit of doubt on the value.

Accept the process. If you have closed a lender financed deal in the past few years you know how difficult things can be. Lenders will scrutinize every large deposit in your account, every item on your tax return and everything on title. This is just the way it is and there is no use fighting it. Instead of protesting every time your lender asks you for an additional document you are better off getting it asap. Whether you agree with it they lender won’t move forward unless they have everything they want. The process is going to be a lot more difficult than you remember. Instead of fighting everything, you should accept the process.

What is a Property Survey and Do I need It?

Wed, 08 Nov 2017 03:47:00 GMT

Reasons for Obtaining a Survey

. Reasons for Obtaining a Survey

.Surveys are a part of nearly all modern real estate transactions. Many institutional lenders require a survey as a condition before making a loan secured by a mortgage encumbering real estate. An accurate survey, coupled with a physical inspection of the property, is by far the best way to determine the location of the boundaries of the property and the location of improvements on the property. It will also show whether the location of the property on the ground is the same as the written legal description.

The survey also adds value to your transactions by providing an additional level of protection coverable through title insurance. Most real estate transactions in the United States are covered by title insurance because of the protections it provides.

A current survey provides information that will allow a title insurance company to delete the exception for matters of survey in the title insurance policy, such as boundary lines, encroachments and parcel area.

A wise buyer will always obtain a survey to be certain that, among other things, the property is in fact located where the buyer thinks it is located. Nothing is more frustrating than discovering that the fence line is NOT the true property line, and your buyers just ‘lost’ twenty feet of property to their new neighbor.

A seller will generally be less concerned about a survey than will a buyer, unless the survey reveals problems or defects which the seller is obligated to remedy or unless the purchase price is based on the quantity of property (normally in terms of acreage or square feet) as determined by a survey.

What is survey coverage and why do you need it?

Survey coverage is additional title insurance coverage which protects the Buyer against errors on the survey. In accordance with the terms of the policy, benefits to the Buyer may include coverage and payment of loss arising out of the following, unless exception to such matters is taken in the policy:

Dispute with adjoining landowners over location of boundary lines,
Forced removal of improvements located across boundary lines,
Forced removal of driveways encroaching onto adjoining property,
Encroachment of improvements into easements or building setback lines.

A Buyer who does not obtain a new survey but relies on a previous survey would be well advised to purchase this coverage.

What if you have an existing survey?

You may have an older survey in your possession, perhaps given to you by the seller’s agent. There are advantages and disadvantages to using an existing survey instead of commissioning a new one:

Advantages:

Useful to conceptualize property’s shape and size
Inexpensive, often free
Typically available from seller, county or title company in a short amount of time

Disadvantages:

Not a current survey, reflects information available only up to the date the survey
was completed
May not include all of the information that is pertinent to your transaction. Often, there have been changes to easements, encroachments or other issues affecting the property that are not shown on an outdated survey. Here are some examples of potential problems:
Utility company installation of new or updated transmission lines may result in changes to the existing easement, which may not be shown on an older survey.
Existing survey may not show the existence or location of underground utilities that could affect the buyer’s plans for the property, such as installation of a sport court or expansion of the house. A new survey will disclose all of this information.
May not have been intended for use in property transfer. For example, the survey may have been prepared only to locate one property line for installation of a fence or other appurtenance, or for construction of the house, and may not accurately reflect all the encumbrances or other features on the property.
If the existing survey reveals problems such as evidence of unrecorded easements or encroachments, the time to face those problems and deal with them is before the contract is signed. Even if the seller’s agent does not have a survey, he or she might know about survey problems. For example, a neighbor may have built a fence or other structure that appears to cross over the boundary line.

Lender Requirements

The lender will sometimes impose requirements for the survey that are more onerous than (or at least different than) those you have imposed on behalf of your buyer client. This is more likely to be the case in a large commercial transaction. The best approach in that situation is to initiate communication between you, the surveyor and the lender’s attorney as early as possible so all parties understand the scope of the surveyor’s work and are satisfied with it. As a buyer’s representative anticipate a typical lender may be involved in the transaction at some point, so you should try to anticipate a typical lender’s requirements when you order the survey.

Why Do I need a Survey?

Mortgage lenders normally require a property survey before they will loan money for a mortgage, and many title insurers require this as well. Even if a survey has been done in the past, lenders will often times require a recent survey, generally one done within six months of the closing date. In Texas, many buyers will elect to use the previous survey from the sellers, but there are risks involved accepting an older survey. The surveyor is only liable to the original homeowner to whom that survey was first issued.

Due to various issues that may arise from using pre-existing surveys, our office devised a “Risk Management Form” which all buyers were required to sign should they decide to use an existing survey from the sellers. It basically states, “In the Texas Real Estate Commission(TREC) contract form #20-7, One to Four Family Residential Contract, and form # 25-5 Farm and Ranch Contract. Written in Paragraph 6, Title and Survey, the title insurance policy lists standard printed exceptions as to discrepancies, conflicts, and shortages in area or boundary lines, etc. Buyer, at Buyer’s expense, may have the exception amended to read “shortages in area”. Accepting a Survey from the Seller(s) to use in the closing of your home purchase may leave you liable.

What is a Good Cap Rate for Real Estate Investors?

Sat, 28 Oct 2017 15:45:00 GMT

The post What is a Good Cap Rate for Real Estate Investors? appeared first on Texas Investor Loans .

How Many Loans Will the Fannie Mae and Freddie Mac Lend to Investors?

Fri, 21 Oct 2016 19:44:00 GMT

In 2009, Fannie Mae and Freddie Mac rolled back the mortgage rule that prevented real estate investors from financing more than 4 properties per borrower. At the time, investors were limited to 4 properties financed, which included their primary residence.

A few months later in 2009, Fannie Mae changed their mind and rolled back their mortgage rule that prevented real estate investors from financing more than 4 properties back to 10. Today, the maximum number of allowable, financed properties is 10. You wouldn't know it, though -- few banks actually offer the 5 – 10 loan program. The main reason is the big banks want to be able to deliver their loans to both Fannie Mae and Freddie Mac. Having Freddie Mac stop at four, many of the larger lending institutions chose to go the conservative route and limit their exposure only to four.

Fannie Mae has always been more aggressive in my opinion than Freddie Mac. After the knee-jerk reaction that both GSE’s took during the mortgage meltdown, Fannie Mae recognized that it only made sense to return to the original 10 limit. When they did relaunch the 5 – 10 multi loan program, they changed their program guidelines to be more restrictive, i.e. down payment requirements, credit score requirements and cash reserve requirements.

`Good News is October 26, 2015 Freddie Mac issued changes which positively affected real estate investors. Freddie Mac increased their number of allowed financed properties from 4 to 6 when financing an investment property or second home. In addition, Fannie Mae followed Freddie’s move in September 25, 2016 and increased the tolerance for risk to allow investors to purchase up to 6 loan SFR’s at 20% down. With these new changes investors now can put 20% down on a SFR up to 6 loans. In addition, they can also do a cash out loans on properties 5 and 6 without any timing constraints. Another great advantage is borrowers with less than 720 FICO scores can also do an additional two loans as long as Fannie Mae’s and Freddie Mac’s underwriting engine approves the loan.

The next major change with Freddie Mac was the removal of the two year landlord history experience requirement which affected the utilization of rental income. Now that this has been removed, borrowers will be able to utilize 75% of the gross rental income with a lease agreement or 75% of the average market rent analysis provided on the Fannie Mae appraisal report.

What is HVCC and How Does this Affect The Lenders, Borrowers, Sellers and Real Estate Agents?

Wed, 01 Jun 2016 21:40:00 GMT

Home Valuation Code of Conduct (HVCC)

The HVCC is a set of federal guidelines designed to enhance the integrity of the home appraisal process to be more reliable and restrict the interaction between mortgage lenders and appraisers. Since the HVCC went into effect, lenders can no longer work directly with appraisers. Instead, lenders must schedule appraisals through third-party appraisal management company. This adds a buffer between the lender and appraiser. The Code applies to borrowers with conventional conforming loans backed by Fannie Mae and Freddie Mac. It doesn’t apply to borrowers with FHA loans or VA loans insured by the Federal Housing Agency.

New York State Attorney General Andrew M. Cuomo, Fannie Mae and Freddie Mac (government sponsored enterprises) announced the final agreement of the Home Valuation Code of Conduct (HVCC) on December 23, 2009, to change appraiser selection criteria that will help eliminate conflicts of interest on mortgage appraisals. The agreement has the support of the Federal Housing Finance Administration (FHFA). The requirements will have a significant impact on appraisal practices by lenders as they will have to comply with the new requirements agreed-to by the government sponsored enterprises (GSE) if the lenders sell mortgages to the GSEs. The GSEs have agreed to implement the HVCC beginning May 1, 2009. During 2008, the GSEs received comments from market participants. The HVCC will be implemented establishing standards on solicitation, selection, compensation, conflicts of interest and appraiser independence. Mortgage brokers and real estate agents are prohibited from selecting appraisers. Lenders are permitted to use “in house” staff appraisers to conduct appraisals.

However, the loan production staff is prohibited from (1) selecting, retaining, recommending, or influencing the selection of an appraiser for an appraisal assignment or for inclusion on an appraisal roster and (2) having any substantive conversation with an appraiser or appraisal management company regarding valuation, including ordering or managing an appraisal assignment. The code entitles the borrower to one copy of an appraisal report, free of charge, within 3 days of the closing of the loan.

CAN AGENTS COMMUNICATE WITH APPRAISERS AND MAINTAIN APPRAISER INDEPENDENCE REQUIREMENTS?

Agents may talk with appraisers and provide additional property information, including a copy of the sales contract for purchase transactions. An agent may not intimidate or bribe an appraiser and an appraiser may not disclose confidential information at any time. The language from Dodd-Frank Act is as follows:

“The requirements of subsection (b) shall not be construed as prohibiting a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, employee of an appraisal management company, consumer, or any other person with an interest in a real estate transaction from asking an appraiser to undertake 1 or more of the following:

Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support and appraisal.
Provide further detail, substantiation, or explanation for the appraiser’s value conclusion.
Correct errors in the appraisal report.” According to Freddie Mac’s appraiser independence guidelines, if an appraiser chooses to consider additional information from anyone with a financial interest in the sale or financing of the property, the information must be verified by disinterested third-party sources such as public records, MLSs or other real estate professionals who do not have an interest in the property.

CAN AGENTS TALK TO APPRAISERS ONCE THE REPORT HAS BEEN SENT TO THE CLIENT?

Once an appraisal assignment is completed and sent to the client, Uniform Standards of Professional Appraisal Practice (USPAP) prohibits an appraiser from discussing the results of the report to anyone but the lender who ordered the appraisal, or parties designated by the lender. In order to ask an appraiser to correct errors in the appraisal report, an agent must use the lender, typically the lender, as an intermediary. The lender may choose to provide additional data to the appraiser for consideration.

The language from USPAP’s Ethics Rule is as follows:

“An appraiser must not disclose 1) confidential information; or 2) assignment [appraisal] results to anyone other than:

the lender;
persons specifically authorized by the lender;
state appraiser regulatory agencies;
third parties as may be authorized by due process of law; or
a duly authorized professional peer review committee except when such disclosure to a committee would violate applicable law or regulation.

5 Fundamental Rules For Buying An Investment Property

Mon, 18 Jan 2016 01:56:00 GMT

The real estate market is, for the most part, starting to heat up again. Over the past few years there has been an increase in both interest and activity. All you need to do is turn on the TV and you are bound to find a show about real estate investing. However, while anyone can buy a property, it doesn’t necessarily mean they will be successful. You can’t just buy any property, do a little work, and turn a quick profit. There are a couple of rules and guidelines that you should follow. To that end, here are what I believe to be the 5 fundamental rules for buying an investment property :

Start with the end in mind: What do you want out of the transaction? Sounds like a simple enough question, but too many investors get started without knowing their end game. Are you looking at the purchase as a short term flip, or do you want to hold it for the long term? How quickly do you want to resell the property? Do you have an idea of what your budget is? There are dozens of questions you should answer before you begin your property search. Things will change with the more properties you look at, but you should have a basic understanding of what you want. If you don’t have a clear vision, it is easy to get pulled in many different directions.

2. Know the market: Before you make an offer, you need to know everything about the market. Buying a good investment property typically requires a lot more work than you may think. Not only should you understand everything about the individual property, but you need to know your market. The market usually indicates how successful the property will be. Even the best properties will be dragged down by a poor market. Conversely, some of the best deals are gained by buying at the bottom in a growing market. Understanding the market means looking at sales price history, demographics, unemployment numbers, tax rate changes, population figures and new housing permits. Read the local publications and see if there are new shopping or entertainment options coming to the area. You can also read if a major area employer is closing or moving out of town. This part of the process is too important to just gloss over, or to assume you have everything you need. To make the best possible decisions, you need to know as much as you can about the market you are buying in.

3. Obtain property records: When you watch rehab shows on TV, it may appear that the buyers are in the property for just a few minutes before making a decision. For starters, these are seasoned investors who know what to look for. Secondly, the power of editing has certainly improved entertainment value. Truth be told, almost every investor spends plenty of time researching the property they are buying. You never want to find something out after you take ownership. Not only should you mind due diligence, but don’t be afraid to take it one step further: look at the recent transaction history and read the listing sheets. This may tell you if there was work done. Go to the local town hall and see if there were any permits pulled for work to be done. It is also a good idea to take a contractor or someone you trust to offer a second opinion with what you have in mind.

4. Understand the numbers: There are many numbers associated with an investment purchase. For starters, you need to know about how you plan on financing the property. This will have a direct impact on the bottom line of the property. The numbers for a hard money loan will be far different than a lender financed property. It is important to know all of the costs and expenses on the acquisition side. If you are rehabbing, you need to be completely comfortable with the expenses and work you want done. If you purchased to buy and hold, you have to know the market rent and where you may be able to increase your bottom line. You also need to know where the market is on the resale side. There are dozens of different numbers, formulas and expenses; To get the best deals, you need to understand all of them.

5. Negotiate: S ecuring the deal is the final step. You can identify a property you want; but if you don’t close it will go to someone else. Negotiation means more than just making an offer and waiting for the seller to accept. You need to back up your offer with supporting documentation. Making a lowball offer is OK if the property needs thousands of dollars in work. Understanding the numbers behind any deal will only strengthen your negotiations. Negotiation also means knowing when to walk away. It is important not to get so caught up with winning the property that you lose focus on the big picture. It takes discipline to walk away from a property you have had your eyes on for weeks, but is an important part of the investing business.

Strictly following these five rules will not only help you get close more real estate deals, but close the ones that you really want.

What is a Credit Score?

Mon, 28 Sep 2015 19:27:00 GMT

What is Your Credit Score?

Before deciding on what terms lenders will offer you on a loan (which they base on the risk to them), they want to know two things about you: your ability to pay back the loan, and your willingness to pay back the loan. For the first, they look at your income-to-debt obligation ratio. For your willingness to pay back the loan, they consult your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. (and they’re named after their inventor!). Your FICO score is between 350 (high risk) and 850 (low risk).

Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. In fact, the fact they don’t consider demographic factors is why they were invented in the first place. Profiling was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed as a way to consider only what was relevant to somebody’s willingness to repay a loan.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Different portions of your credit history are given different weights. Thirty-five percent of your FICO score is based on your specific payment history. Thirty percent is your current level of indebtedness. Fifteen percent each is the time your open credit has been in use (ten year old accounts are good, six months old ones aren’t as good) and types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards). Finally, five percent is pursuit of new credit credit scores requested.

Your credit report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.

Equifax (800) 685-1111
Experian (888) 397-3742
TransUnion (800) 916-8800

Since the credit score is derived from a credit history, there must be a minimum history in order to get an accurate score. Before a credit report can be obtained, you must have a minimum of one account that has been open for at least six months, and current activity within the most recent six months.

Texas Investor Loans

New FinCEN Rules Starting March 1, 2026 when buying in a Legal Entity or Trust

What Realtors, Buyers, and Sellers Need to Know About the New FinCEN Rules Starting March 1, 2026 when buying in a Legal Entity or Trust

WAYS REAL ESTATE INVESTORS USE CHATGPT

Real Estate Investors Can Use ChatGPT

Quick Market “Starter” Analysis

Professional Tenant Communication—Done Fast

Prioritize Tasks When Everything Is on Fire

Marketing & Content Ideas on Demand

Recommendations for Tools, Software & Resources

Break Down Local Housing Regulations

Create Listing Descriptions & Answer Client Questions

Bottom Line

What is Net Operating Income For Investment Properties?

What is Net Operating Income For Investment Properties? ﻿

How To Calculate Net Operating Income

NOI & Cap Rate

What Expenses Are Included In NOI?

Is Mortgage Included In NOI?

What Expenses Are Not Included In NOI?

When To Use NOI In Real Estate

Pros & Cons Of Using NOI For Investment Properties

Summary

THE BRRRR METHOD: THE BEST WAY TO BUILD REAL ESTATE WEALTH

1. Buy

2. Rehab

3. Rent

4. Refinance

5. Repeat

Why BRRRR Beats Traditional Investing

Pros

Cons

Best For

6 Reasons to Invest in Single-Family Homes

6Reasons to Invest in Single-Family Homes

5 Things You Should Know Before Investing in a Turnkey Property

What is Turnkey Investing?

The Biggest Mistake Turnkey Investors Make

1. Property Condition

2. The Numbers

3. Property management

4. Rentability

5. Tenant Information

Additional Considerations

What to Expect When Buying a Turnkey Property?

What is a Interest-Only Loan?

What the Numbers Say About Housing During a Government Shutdown

What the Numbers Say About Housing During a Government Shutdown

What’s Happening Now

What History Suggests, and Why This Time Might Be Different

How This Affects You Right Now

The Bottom Line

Debt Service Coverage Loan – Investment Properties

Home Equity Line Of Credit (HELOC)

NON-SEASONED CASH-OUT REFINANCE PROGRAM

NON-SEASONED CASH-OUT REFINANCE PROGRAM

WHY IS IT IMPORTANT TO HAVE TITLE INSURANCE?

WHY IS IT IMPORTANT TO HAVE TITLE INSURANCE?

Things You Need to Know About a 1031 Tax Exchange

45/180 DAY EXCHANGE

ADDITIONAL ISSUES

What is TRID and how will it affect you when getting a Conventional Fannie Mae or Freddie Mac Loan?

Single Member or Joint Member LLC?

Owner of Single-Member LLC

Taxpayer Identification Number

Employment Tax and Certain Excise Tax Requirements

Joint Ownership of LLC by Spouse in Community Property States

Purchase Money Second Mortgage

What is a Purchase Money Second?

How Does it Work?

The Rule of Thumb

What are the Terms?

Is It Too Soon to Refinance My Mortgage Loan?

Calculating your break-even point

Big savings beyond breaking even

Putting Your Rental Properties into an LLC.

Questions to Ask Before Hiring a Property Manager

Are you thinking of hiring a property management company?

WHAT IS THE PURPOSE OF PROPERTY APPRAISAL?

WHAT IS THE PURPOSE OF PROPERTY APPRAISAL?

What is Net Operating Income For Investment Properties?