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9 Creative Ways to Mortgage a Real Estate Investment: Real Estate Investing for Beginners - YouTube
Channel: Mashvisor
[1]
in this video we will talk about how to
[3]
mortgage your real estate investments
[4]
and what to do if a bank says no
[6]
sometimes you got to get creative
[8]
[Music]
[12]
in this video we'll discuss
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what is a mortgage traditional mortgages
[16]
versus investment mortgages we'll talk
[18]
about the process of obtaining a
[20]
mortgage
[21]
why real estate investors have trouble
[23]
attaining financing and we'll go over
[25]
nine creative mortgage hacks to finance
[27]
a real estate investment
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navigate the video using the chapters in
[31]
the timeline below
[33]
let's start with the basics a mortgage
[34]
is a loan that is secured by a property
[37]
the borrower makes periodic payments to
[39]
the lender and the lender records a lien
[42]
on the property as security for the loan
[45]
if the borrower defaults on a loan the
[48]
lender can foreclose on the property and
[50]
sell it to repay the amount owed when do
[53]
you need a mortgage
[55]
you typically need a mortgage when you
[57]
want to buy a property but you don't
[59]
have the full amount of the purchase
[61]
price in cash
[63]
mortgages can also be used to finance
[64]
other aspects of real estate investments
[66]
as well such as renovations or repairs
[69]
on a property there are two types of
[71]
avenues mortgages can travel traditional
[73]
mortgages and investment mortgages
[76]
traditional mortgages are for primary
[78]
residences while investment mortgages
[80]
are for properties that will be used as
[83]
rental properties or for other
[84]
commercial purposes
[86]
the process of obtaining a traditional
[88]
mortgage versus an investment mortgage
[90]
is often similar
[92]
the first step in the process is to get
[94]
pre-qualified for a loan this can be
[96]
done by meeting with a lender and
[98]
providing them with information about
[100]
your income debts and credit history
[103]
based on this information the lender
[105]
will be able to give you an estimate on
[107]
how much they're willing to lend you
[109]
number two find a property
[111]
once you have been pre-qualified for a
[113]
loan you can start shopping for a
[115]
property it's important to remember that
[117]
you will need to find a property that's
[119]
within your budget and that meets all of
[121]
the guidelines set forth by the lender
[123]
number three make an offer on the
[125]
property the offer can be up to the full
[127]
amount of the loan that you have been
[128]
pre-qualified for hopefully if all goes
[130]
well the seller will accept your offer
[132]
and the sale will move forward
[135]
number four apply for a mortgage
[137]
after the offer has been accepted then
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you'll need to begin the application
[141]
process for the mortgage the application
[144]
process will vary depending on the
[146]
lender but an appraisal of the property
[148]
will also be required in order to
[150]
determine official value to base the
[152]
loan upon five close the property this
[155]
will involve the signing of the purchase
[158]
agreement and paying any necessary fees
[160]
once the closing is complete then you
[162]
will be the official owner of the home
[164]
or property
[166]
some quick differences between
[167]
investment and traditional mortgages are
[169]
that the terms are usually shorter for
[172]
investment than for traditional sales
[174]
and the interest rates are often higher
[176]
additionally the way your taxes will be
[178]
handled and deducted will differ as well
[181]
so i always advise that you have a tax
[184]
or financial professional handle such
[187]
affairs
[189]
do real estate investors have trouble
[191]
attaining financing
[193]
yes real estate investors can have
[195]
trouble obtaining financing for their
[197]
investment properties for a variety of
[199]
reasons
[200]
some lenders will see investments as
[202]
risky if you are buying through a
[204]
company or an llc instead of in your own
[207]
name banks know that llc members can't
[210]
become personally liable for debts so in
[213]
this case many lenders will only extend
[215]
a mortgage loan to a small llc or
[218]
corporation if the business owner
[220]
volunteers their own personal assets to
[223]
back the debt
[224]
if one does lend to investors they may
[227]
charge higher interest rates and fees
[230]
and ask for a higher down payment what
[232]
are some traditional mortgage options
[234]
number one a fixed rate mortgage a fixed
[237]
rate mortgage is the most common type of
[239]
mortgage
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the interest rate remains the same for
[242]
the lifespan of the loan so the monthly
[244]
payments will stay the same as well and
[247]
this makes it easier to budget for your
[249]
mortgage payments long term
[251]
number two adjustable rate mortgage or
[253]
arm
[254]
an adjustable rate mortgage has an
[256]
interest rate that can change over time
[258]
the monthly payment may go up or down as
[260]
interest rates change arms are most
[263]
often used by people who expect to move
[265]
or refinance before the interest rate
[267]
goes up
[268]
number three conventional mortgage a
[270]
conventional mortgage is a traditional
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mortgage that is not backed by the
[274]
government conventional mortgages are
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available from private lenders such as
[279]
banks and credit unions number four fha
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loan an fha loan is a mortgage that is
[284]
insured by the federal housing
[286]
administration or the fha
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the fha does not lend money to borrowers
[291]
directly instead it insures loans made
[294]
by private lenders and this protects the
[296]
lender from loss if the borrower
[298]
defaults on the loan a va loan
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a va loan is a mortgage that is
[304]
guaranteed by the department of veterans
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affairs the va
[308]
the va does not lend money to borrowers
[311]
instead it guarantees loans again made
[314]
by private lenders similar to how an fha
[316]
works
[318]
va loans are only available to veterans
[320]
active duty service members certain
[322]
reservists and national card members
[325]
can you use a traditional loan to pay
[328]
for an investment property
[330]
yes you can use a traditional loan for
[332]
an investment property as i said you may
[334]
have
[335]
a higher interest rate and more
[337]
significant fees in addition the lender
[339]
may require a higher down payment
[342]
investment properties are considered
[343]
riskier than primary residences so
[346]
lenders often charge those higher rates
[348]
we spoke of to compensate
[352]
what happens if you finally find that
[354]
investment property of your dreams and
[356]
you can't make a traditional loan work
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here are nine creative mortgage hacks to
[361]
finance a real estate investment
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number one seller financing
[369]
when you are buying a property from a
[370]
seller who is willing to finance the
[372]
purchase you can avoid going through the
[375]
traditional lender the terms of the loan
[377]
will be determined by the seller and
[379]
they may be more flexible than a bank
[380]
would be
[381]
there are a few things to keep in mind
[383]
when considering seller financing
[386]
first
[387]
the seller's financial situation
[389]
if the seller is in a good financial
[391]
position they may be more likely to
[393]
offer financing to make a deal happen
[396]
however if the seller is in a difficult
[398]
financial situation or
[400]
say they go bankrupt or they die it
[402]
could negatively impact you as the buyer
[405]
which sounds terrible because they died
[407]
as you have lesser protections than you
[409]
would in a traditional sale
[412]
something else to consider are your own
[414]
goals and objectives are you looking for
[416]
a short-term investment or a long-term
[418]
rental property
[419]
what are your repayment terms are you
[422]
willing to take on the risk of a
[424]
foreclosure
[426]
next hard money loan a hard money loan
[429]
is a specific type of asset based loan
[431]
financing through which a borrower
[433]
receives funds secured by real property
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hard money loans are typically issued by
[438]
private investors or companies interest
[441]
rates are typically higher than
[442]
conventional property loans starting
[445]
often around eight percent because of
[448]
the higher risk and shorter duration of
[450]
the loan it's usually
[452]
within the span of about 12 months or
[454]
less
[456]
who uses hard money loans
[458]
hard money loans are commonly used by
[460]
real estate investors for fix and flip
[462]
projects renovations and short-term
[464]
financing
[466]
for experienced investors who have a
[468]
solid track record hard money loans can
[470]
be a great option because they are
[471]
typically easier to qualify for than
[473]
traditional bank financing
[476]
how do hard money loans work
[479]
hard money loans are asset based loans
[481]
which means the the loan is secured by
[484]
the value of the property being
[485]
purchased
[486]
the lender will appraise the property
[488]
and loan a percentage of the purchase
[490]
price usually around 70 to 80 percent
[494]
the borrower then uses the remaining
[495]
cash to complete the purchase
[498]
once the property is finished and sold
[500]
the borrower then repays the loan plus
[502]
interest and fees
[504]
number three cash or financed
[506]
partnerships
[507]
if you have trouble qualifying for a
[509]
loan on your own you can sometimes
[511]
partner with an investor or several
[514]
investors who have access to cash or
[516]
they have good credit
[518]
two or more of you can purchase the
[519]
property together and you can share in
[522]
the profits or losses
[524]
from the investment
[526]
what are these kinds of partnerships
[529]
in a cash or financed partnership two or
[532]
more investors pool their money together
[533]
to purchase a property the group then
[535]
elects one member to act as a managing
[538]
partner who is responsible for
[540]
overseeing the property and making sure
[542]
that it's well maintained
[545]
there are a number of benefits to
[547]
investing in this kind of situation
[550]
first you have access to capital you
[552]
have shared risk as you are sharing the
[555]
risk with other investors
[558]
another benefit of partnerships is that
[560]
they offer diversification by investing
[562]
in a partnership you have greater
[564]
capital you can spread the risk out
[565]
amongst different properties
[568]
which can therefore help protect you and
[570]
your portfolio overall
[573]
and a final logical question when
[575]
considering a partnership is where to
[577]
find them there are a number of online
[579]
directories such as real estate
[580]
investors network that list cash or
[583]
financed partnerships
[585]
check out places like meetup.com or even
[587]
facebook groups of local investors they
[590]
set up events and they can be a great
[591]
way to meet others in the business and
[593]
learn about potential opportunities
[595]
don't forget to ask your friends family
[598]
and colleagues if they know of any cash
[600]
or financed partnerships
[602]
you never know who might have a great
[604]
lead on an opportunity
[607]
number four crowdfunding crowdfunding is
[609]
a way to raise money with a large group
[611]
of people
[612]
there are many crowdfunding platforms
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that allow investors to pool their money
[616]
and invest in real estate projects
[619]
crowdfunding can be a great option for
[621]
investors who don't have a lot of money
[622]
to invest up front one typically creates
[625]
a profile on a crowdfunding platform and
[628]
sets a target amount of money that they
[630]
want to raise investors can then see
[633]
your profile and decide whether or not
[634]
they want to invest in your project if
[637]
you reach your target amount the money
[638]
is then transferred to you and you can
[640]
use it to fund your investment
[642]
if you don't reach your target the money
[644]
is then returned to investors
[647]
number five wraparound mortgage
[650]
a wraparound mortgage is a type of
[651]
financing that can be used to purchase
[653]
an investment property
[655]
this type of mortgage allows the buyer
[657]
to wrap the remaining balance of their
[659]
primary mortgage around a new loan for
[661]
an investment property
[663]
the advantage of this type of mortgage
[665]
is that it can often help to save money
[668]
on interest payments
[670]
it's important to note however that
[672]
wraparound mortgages can also be rather
[674]
risky
[675]
if the investment property is sold or
[677]
foreclosed upon the lender could come
[679]
after the property used as collateral
[681]
meaning the borrower's primary residence
[685]
for this reason it's important to speak
[686]
with a financial advisor or a mortgage
[688]
professional before taking out a
[690]
wraparound mortgage
[692]
number six personal loan
[695]
a personal loan can be a way to finance
[697]
an investment property you can use the
[700]
loan for down payment closing costs and
[702]
other expenses associated with buying an
[704]
investment property
[706]
there are a few things to consider when
[707]
getting a personal loan for an
[709]
investment property though they will
[710]
check your credit history income and
[713]
employment history and many other
[715]
personal things
[717]
if you have good credit you may be able
[719]
to get a personal loan with a low
[721]
interest rate however if you have less
[723]
than stellar credit you may have to pay
[725]
a higher interest rate or provide
[727]
collateral for the loan
[729]
when you are looking for a personal loan
[731]
it's important to compare offers from
[732]
different lenders make sure you
[734]
understand the terms and conditions of
[736]
the loan before you agree to it number
[738]
seven a bridge loan
[740]
a bridge loan is a short-term loan
[742]
that's used to purchase a property
[743]
before you have the money to do so
[746]
bridge loans are
[747]
often used by investors because they can
[749]
be funded quickly and they have flexible
[752]
terms however bridge loans typically
[754]
have higher interest rates and fees a
[756]
bridge loan is a short-term loan used in
[759]
real estate transactions that bridges
[761]
the gap between the buyers down payment
[764]
and the funds necessary to pay for the
[766]
property
[767]
bridge loans are popular in today's
[768]
market because they allow investors to
[770]
purchase a property without having all
[772]
of the traditional financing in place
[775]
for example if the buyer is interested
[777]
in a fix and flip property they may not
[779]
have all the money necessary to purchase
[781]
the property
[783]
just outright and so they may seek out a
[785]
bridge loan to
[786]
fill in that gap so how do they work
[789]
bridge loans are typically repaid within
[790]
a short period of time usually six
[793]
months to three years
[795]
the loan is paid back when the property
[797]
is sold or refinanced
[800]
in some cases the borrower may be
[802]
required to make interest-only payments
[804]
during the life of the loan
[807]
401k and 403b using a 401k or 403b can
[812]
be a great way to invest in an income
[814]
property in essence you withdraw from
[816]
your 401k or 403b and you use that money
[820]
to purchase a property to make
[821]
improvements or to rent out a property
[824]
there are a few reasons why this might
[825]
not be the best idea first when you
[828]
borrow from your retirement account you
[830]
are taking money out of something that's
[832]
meant to be used for your retirement and
[835]
this can put a strain on your future
[837]
finances
[838]
second the interest rates on a 401k and
[841]
403b are often higher than interest
[844]
rates would be from a more traditional
[846]
borrowing situation this can cost you
[848]
more money in the long run and
[850]
therefore it might not be the first
[853]
go-to option on my list to get money for
[856]
a piece of real estate
[859]
additionally if you default on the loan
[860]
for any reason you will owe taxes on the
[863]
money that you borrowed and this can
[864]
leave you in a very difficult financial
[866]
situation number nine cash out refinance
[870]
cash out refinance occurs when the
[872]
borrower refinances their mortgage for
[874]
more than the amount they owe and they
[878]
take the difference in cash
[880]
this can be an attractive option for
[882]
borrowers who have built up equity in
[884]
their investment property and are
[885]
looking to take out
[887]
some of that equity to use for other
[888]
purposes
[890]
there are a few things to keep in mind
[891]
if you're considering a cash out
[893]
refinance on your investment property
[896]
first you'll need to have built up
[898]
equity as we said in your property for
[900]
example it is most commonly seen in
[903]
primary residences
[904]
if you've only owned your investment
[906]
property for a short time you may not
[908]
have the equity to play with at this
[910]
time two you'll need to be sure that you
[912]
can afford the higher monthly payments
[914]
that will come with a refinance
[917]
when you refinance you'll be taking out
[919]
a new mortgage loan that will have its
[921]
own monthly payment so be sure that this
[923]
payment fits into your budget before
[925]
moving forward three you'll need to
[927]
factor in the costs of refinancing which
[929]
can certainly add up
[931]
these costs include things like
[932]
appraisal fees title insurance and loan
[934]
origination fees it's also not commonly
[937]
thought of but that refinance may
[939]
trigger your local municipality to
[941]
reassess your property and therefore
[943]
your taxes may raise as well four you'll
[945]
need to have a good credit score in
[948]
order to qualify for refinance in the
[949]
first place
[951]
lenders will be looking at your credit
[952]
history and your credit score
[954]
when considering a loan so it's
[956]
important to make sure your credit is in
[957]
good shape before you apply
[961]
you'll also need to be prepared to
[962]
provide documentation to the lender in
[964]
order to prove that the investment
[966]
property is a good investment
[968]
this may include things like tax returns
[970]
rental agreements and other financial
[972]
documents
[974]
if you're considering a cash out
[975]
refinance on your investment property
[977]
make sure to weigh all of the
[978]
contributing factors before making a
[980]
decision this type of refinance can be a
[983]
great way to access equity in your
[984]
property but it's important to
[986]
understand the pros and cons before
[988]
moving forward so there you go i hope
[990]
that was helpful
[991]
if you're a new investor check out
[993]
mashvisor.com we help beginner and
[994]
seasoned investors find and analyze
[997]
investment properties across the country
[999]
and you can get a free trial by using
[1000]
the link in the description below have a
[1003]
wonderful day my name is michael thank
[1004]
you so much for watching and i will see
[1006]
you next week
[1009]
[Music]
[1022]
you
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