If you’re in the real estate investing business, understanding the loan products available to you is crucial. In a recent episode of the Real Estate Business Mastery Show, experts Debbie Camacho Franco and Elizabeth Navarre sat down with Brandi Wittmeyer, known as the Mortgage Master, to break down these options for investors. Brandi brings 19 years of experience in the lending industry and has a wealth of knowledge about loan products for investors. Let’s dive into the key takeaways from their conversation.
Understanding Investor Loan Options
Many investors typically think of hard money or private money lending when financing properties. However, there are several other avenues to explore. Brandi highlights some of these different financing options that could be more beneficial depending on your situation.
Hard Money Loans
Hard money loans are often used by investors who don’t have enough liquid cash. These loans are based on the After Repair Value (ARV) of the property. For example, if you can buy a home for $50,000, invest $25,000 in repairs, and then the house is worth $100,000, a hard money lender might approve your loan. The drawback is higher fees and interest rates.
Conventional and Renovation Loans
If you have some liquid assets, consider conventional loans or even renovation loans, which usually have better terms than hard money loans. Fannie Mae’s renovation loan allows investors to incorporate the cost of repairs into their mortgage. With as little as 20% down, you can finance properties even if they require significant rehabilitation.
Commercial Loans
For more experienced investors, commercial lending might be an option. Commercial loans for one-to-four family residential properties are less restrictive than conventional loans. This could be particularly useful for investors looking to scale their businesses without getting bogged down by the constraints of traditional mortgage guidelines.
Moving Beyond the Traditional: Non-Standard Loans
Asset-Based Lending
If you’re an investor who doesn’t fit the traditional borrower profile, asset-based lending can be a lifesaver. These loans focus more on the asset you’re acquiring and less on your personal financials. This is incredibly useful for self-employed individuals, freelancers, or those with non-traditional income streams.
Mortgage Broker Advantage
Brandi’s company can broker out loans to over 35 different lenders, providing a wide range of options. This is in contrast to big banks that offer a limited array of in-house products. By leveraging multiple lending sources, investors can find more competitive and flexible loan options tailored to their unique circumstances.
The Burr Method: A Strategy for Long-Term Success
Brandi also touches on the popular Burr Method (Buy, Rehab, Rent, Refinance, Repeat). This strategy involves buying a property, rehabilitating it, renting it out, and then refinancing to pull out cash for the next investment. This method allows you to scale your investment portfolio more rapidly by continuously recycling your capital.
Buy and Rehab
Start by purchasing a property at a discount, performing necessary repairs, and adding value to increase the property’s overall worth.
Rent and Refinance
After the property is rehabbed, rent it out to create an income stream. Then, refinance to tap into the increased equity. For seasoned investors, refinancing through conventional, Fannie Mae, or even commercial products can be an effective way to pull out capital.
Repeat
With more cash in hand, you can acquire more properties and repeat the process, ultimately growing your property portfolio at an accelerated pace.
Specialty Loans: VA Loans and ITIN Loans
VA Loans
Brandi encourages veterans to take advantage of VA loans. VA loans enable qualifying veterans to obtain mortgages with zero percent down payment and no private mortgage insurance. These loans are generally considered lower risk and easier to qualify for.
ITIN Loans
For investors without a Social Security number, ITIN loans and foreign national loans are particularly useful. These loans allow non-residents to invest in U.S. real estate, often with down payments as low as 20-30%.
Final Thoughts
In conclusion, understanding the diverse range of loan products available is essential for real estate investors aiming to maximize their investment strategies. Brandi Wittmeyer’s insights provide a comprehensive guide to various financing options, from hard money and conventional loans to more specialized products like asset-based lending and ITIN loans.
By leveraging these different avenues, investors can tailor their financing to fit their unique situations and goals. Whether you’re a seasoned investor or just starting, exploring these loan products can offer significant advantages and help scale your real estate portfolio efficiently.
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