Home
Six things to know about investment properties by Shikma Rubin
I
nterested in an investment property this year? Before diving into the process, it is important to understand several important pieces of information. Here are six topics to consider about investment properties: 1. You can’t obtain a residential mortgage under an LLC When the housing market crashed in 2008 and 2009, most banks and lenders stopped financing mortgages under an LLC or limited liability company. That’s because during the crash, many people with LLCs walked away from their investment properties, which caused foreclosures. Although the real estate market has
improved since the crash, banks have not loosened regulations on LLCs. If you plan to secure financing for your investment property under an LLC, it will be financed as a commercial loan. 2. How much have you already financed? Many banks have limits on the number of financed properties you can have, including primary and second homes. That’s because banks care about properties that currently have a mortgage. With every mortgage you take on, the bank considers you a higher risk. 3. Down payment and rates To receive financing for an investment property, you must provide a 20% down
Consider the New Reverse Line of Credit as a Retirement Tool
Did you know? A Reverse Mortgage line of credit has a guaranteed growth rate and no payments.
Call today for details. Chris Fanney ((NMLS 144509) Reverse Division Regional Manager 757-581-8067 Mobile 757-217-3309 Office cfanney@southerntrust.com Southern Trust Mortgage, LLC is proud to be an Equal Housing Lender - NMLS 2921. Not provided or approved by HUD, FHA or other government agencies.
24 | Jewish News | April 6, 2015 | jewishnewsva.org
payment. If you put down more than 20%, interest rates tend to be more favorable. 4. House flipping Before purchasing a property, do your research on how long the property has been titled. Most lenders will not accept a property titled less than 91 days. If you plan to buy a property so you can flip, the title may also impact the financing a buyer can receive. For example, the Federal Housing Administration (FHA) loan has strict rules for financing a recently-flipped property. The FHA will only finance a property titled more than 90 days. You will also need a second appraisal to confirm additional value. 5. Let’s talk condos Condominiums have their own set of regulations because lenders view them as a higher risk. Why? As an owner, you rely on other unit owners to maintain their own places and pay condo association fees. If you plan to finance an investment condominium, you need to know if the condo project/building is considered warrantable (follows guidelines for Fannie Mae, Freddie Mac, FHA, VA, etc.). If a property is not warrantable, you will have a tougher time with financing. Examples that make a condo warrantable include: • 51% of all units in the entire development have owner occupants; • No more than 15% of the current unit owners are delinquent in payment of homeowners dues; and • No one individuals/entity may own 10% or more of the units in the condo development. Lenders will require the property manager to complete a condo questionnaire to determine if a condo is warrantable. 6. Renovation Loans “If you have the funds to remodel, you could receive a discount on the purchase and improve the property for less than if it was bought move-in-ready,” says
Emily Nied, a realtor with Berkshire Hathaway Home Services Towne Realty. “Then, there is an opportunity to resell for a profit or hold the property and rent it out for Shikma Rubin a higher price.” If you do not have the cash-on-hand, but want to do the renovations on investment properties and second homes, you could purchase and finance renovation costs into a loan. You may also refinance and remodel an existing property. The loan program may cover up to 50% of the completed value of the home. It’s a great option if you want to buy an investment property that needs repairs and remodeling. Shikma Rubin is a loan officer at Tidewater Home Funding in Chesapeake, Va. (NMLS #1114873). Visit shikmarubin.com for weekly mortgage tips. She can be reached at 757-4904726 or srubin@tidewaterhomefunding.com.