Funding has dried up for residential venture property (1-4 family), but it's plentiful for large multi house projects.
1. Funds are ready for large multi house properties, but not for residential venture homes.
Miami Dade Personal Property Tax
President Obama said during his Economic saving Act Speech, "there is no money ready for you speculators" and he meant it. Try to get a loan for a residential (1-4 family) non-owner occupied property and see the results for yourself. There are no more stated wage loans ready for residential investors. If you have been in the residential venture game for a while, you already know it, if you are just beginning out; you will feel this question on your first residential venture deal. Its cash, hard money at 12% and a 65% Ltv or you're done.
The good news is that government backed funds are plentiful for larger, multi-family properties. This presents large opportunities for those who know how to passage the funding sources.
2. You don't have to personally qualify for the loan the properties qualify.
Imagine that! whatever who has ever attempted to buy a residential venture property (1-4 family) has encountered the issue of personally qualifying. Sure the rents may cover part or the entire mortgage, but the lender only considers a percentage of that wage toward your capability to pay the new mortgage. You need, tax returns, financial statements, proof of funds for down payment, etc. Not only that, but of policy your Fico score becomes a big factor. Get straight through all of this and every time you buy another residential property your Fico score drops and you are viewed as more of a risk to the lenders. The more victorious you become in this arena, the harder it gets......
With commercial financing, the properties qualify for the loan, not you. The loan is not reported to the credit bureau's. The more victorious you become, the easier it gets.....
3. Most loans on large multi house properties are fully assumable.
Ever try to assume a residential loan without having to qualify for it? Not happening, at least not since the early 80's when Fha and Va loans went from "fully assumable" to "qualifying assumable". It's the same as having to get a new buy money mortgage, so unless the interest rate is very attractive, it's never done. The first home I ever purchased was a puny bungalow for ,000. It was 1980, I was 20 years old and didn't qualify for a 0 limit MasterCard, but I assumed a ,000 Va loan, no questions asked. The same criteria hold true to this date for large multi house projects, but very few know about it.
The financing on many large multi house buildings are fully assumable. Remember, the properties qualify not the buyer. You can buy 100 + unit apartment complexes without qualifying, no verification of funds, no credit report, no tax returns, just knowledge.
4. You Are Not personally obligated to repay the loan.
Try getting a residential mortgage and tell the lender that you don't want to personally warrant the loan. Not happening! We are accustomed to all loans carrying personal guarantees. It's incorporated into every residential mortgage, by every lender in the country. Of policy they want recourse if you default, they get the property and then have the right to a default judgment for any equilibrium that may be due after they liquidate the property. Residential loans carry "Full Recourse" to the mortgagee.
Larger commercial loans are "Non Recourse" to the borrower. The property and its capability to originate cash flow is the lenders security, not you personally.
5. Multi house Properties are built to Cash Flow, singular house homes are not.
Single house homes are designed, built and price for owner occupants, not for cash flow. Study the numbers on roughly any singular house home and you will observe that after you pay the mortgage, taxes. Insurance, utilities, maintenance, etc, you will lose money every month. singular house homes are terrible for cash flow despite what the residential guru's on Tv tell you.
Multi house properties are designed, built and priced to do one thing and one thing only, "make money". Lenders lend based on the fact that there are sufficient funds to cover the debt obligations, not on what your credit score is, or what the house down the block sold for or what your personal wage was last year, etc.....
6. Professionals carry on the property- No tenants and toilets to deal with.
With residential venture property You commonly have to carry on it. The property has negative cash flow to begin with; there probably is no budget to hire a supervision company to run it. You go from watching the guru on Tv sitting by the pool telling you how great your new lifestyle is going to be once you buy a concentrate of homes, to fielding leaking roof calls and clogged drain problems on Saturday nights.
With the larger properties a pro supervision company handles all of that for you. It's budgeted in just like taxes and maintenance. The lenders want a pro supervision ageement be in place at closing. They handle all the problems; they are staffed for it and deal with repairs, collecting rents, renting vacant units, etc. They send the funds to you. You never have to deal with a singular tenant, yet you reap the rewards. Now you have a lifestyle.
There are many more reasons to move from residential to large multi house along with dramatically addition the property's value by simple rent increases, etc. I encourage whatever investing in residential property to take a good look at spellbinding up to larger properties. It's easier than you think when you get the knowledge.
Copyright (c) 2009 Joe Florentine
It's Easier to Finance a ,000,000 Apartment construction Than a particular family speculation asset
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