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Short-Term Rentals and DSCR Loans

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By Rick Tobin

Over the past several years, most short-term and long-term rental property owners created the bulk of their wealth from the annual equity gains related to buying and holding their properties as values increased anywhere between 10% to 40% per year. In California alone back in 2021, it was reported that the average home statewide increased in value $11,000 per month or $132,000 for the entire year. If so, I doubt that many Airbnb or VRBO hosts collected more than $132,000 in gross or net rent profits.

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Did you know that San Diego, California was ranked as the #1 for having the highest gross revenues of any Airbnb region in the world in 2021? Please see the complete Top 10 list of the highest grossing rentals in the world later in this article.

Let’s look next at just some of the short-term rental listing companies which assist vacation rental property owners with the leasing of their properties:

  • Airbnb
  • VRBO (Vacation Rental By Owner)
  • Booking.com
  • TripAdvisor
  • Expedia
  • HomeToGo
  • Tripping
  • Homestay.com
  • Atraveo
  • OneFineStay

The prominent travel booking company named Expedia purchased VRBO back in December 2015. As a result, Expedia continues to be one of the most dominant short-term rental companies in the world.

As per published Airbnb data, here are the Top 10 states for average annual host or property owners earnings for 2021:

  1. Hawaii: $73,247
  2. Tennessee: $67,510
  3. Arizona: $60,448
  4. Colorado: $58,108
  5. California: $54,461
  6. Florida: $53,209
  7. South Carolina: $49,641
  8. Utah: $48,568
  9. Oregon: $42,964
  10. Alabama: $41,937

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If a rental property owner confides in you that he or she collected $50,000+ in gross income from Airbnb last year, this number may only represent a small percentage of their overall total revenue collected from both short-term and long-term tenants (30 days+) because they may have multiple income stream options by way of VRBO, Booking.com, or other companies that help supply them with consistent tenants. This is especially true when the property is located in a populous metropolitan region or a prime vacation getaway area like those found in San Diego, Santa Barbara, or Miami.

No Income Verification Loans for Rentals

Most real estate investors usually need third-party mortgage financing to purchase one or more rental properties even if they are very wealthy themselves. Many years ago, it was quite challenging to qualify for a rental property because you were asked to provide two years’ worth of tax returns, a detailed profit-and-loss statement, and the mortgage underwriters would only give you credit for 75% of your gross monthly rents when attempting to qualify or deny your loan request. This 75% number was due to the fact that lenders assumed that you had property management fees, vacancy rates above 0% throughout the year, and operating expenses for repairs.

As a result, that $2,000 gross rent turned into just $1,500 (75%) and many investors were later denied because few lenders wanted to lend on a rental property with negative monthly cash flow if the proposed monthly mortgage payment (principal, interest, property taxes, insurance, and homeowners association fees, if applicable) was $1,501 or higher.

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Today, many investors are qualifying to purchase short-term and long-term rentals by way of non-QM or DSCR (Debt Service Coverage Ratio) programs which don’t require borrower applicants’ tax returns, W-2s, or other formal income documents to qualify. Now, some lending programs take the closest look at the subject property before determining if the rental property can at least break-even at a 1.0 DSCR number where 100% of the gross monthly rents are at least equal to the proposed mortgage payment. In these underwriting scenarios, 100% of the gross rents are used to qualify instead of just 75% like was more the norm in years past.

For a DSCR loan, it allows borrower applicants to use the market rent (actual or future, in some cases) of the property to qualify rather than the borrower’s business income. This is especially beneficial for self-employed business owners or investors who have a lot of tax write-offs and minimal net income shown on their tax returns.

Some of these DSCR program highlights include:

  • 640+ FICO
  • Up to 80% LTV
  • Available on investment properties only
  • Finance up to 20 properties
  • Loan amounts up to $2M per property

Some of my other lender programs allow negative cash-flow for rental properties up to 70% LTV for cash-out or purchase transactions while not requiring any additional income from the borrower applicant.

Airbnb Statistic

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Because Airbnb is the biggest name in the short-term rental business sector, let’s review some of these shocking numbers that confirm how successful this investment property model has been for Airbnb corporate and for individual hosts or property owners.

Airbnb History

  • An average of six guests every single second check into an Airbnb listing.
  • Airbnb listings represent 19% of the total demand for lodging in the US.
  • Over 150 million people have booked over one billion nightly stays.
  • The average US Airbnb occupancy rate is 48%.
  • The average stay is 4.3 nights.

2021 Data

  • The global Average Daily Rate (ADR) was $137 per night in 2021 as compared to $110/night in 2020.
  • California properties had a much higher nightly average of $258 per night.
  • In December 2021, there were 12.7 million listings worldwide.
  • There were 2,249,434 listings in the US in 2021.
  • 356.9 million nights were booked on Airbnb in 2021.

Highest Gross Revenues Worldwide for Airbnb Properties

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Surprisingly, these populous metropolitan regions such as Los Angeles, San Francisco, New York City, Paris, London, or Hong Kong weren’t ranked #1 for being the most profitable Airbnb region in the world with the highest gross revenues. No, the honor for the most profitable Airbnb region in the world in 2021 was San Diego, California.

In 2020, seven of the Top 10 highest gross revenues for Airbnb properties were all in the US. One region that stands out is Big Bear, California, which is the best-known mountain resort community in Southern California. Listed below are the 2020 gross revenue numbers for the Top 10 regions in the world:

Compounding Wealth With Equity Gains

There are many individual or family investors across the nation who have acquired 5, 10, 15, or 20+ short-term rental properties. The bulk of their family’s net worth doesn’t usually come from the net annual rental income. No, the family’s net worth is compounding each year with double-digit appreciation rates like we’ve all seen for several years now.

To better understand how the acquisition of multiple rental properties is more likely to create the bulk of your net worth, let’s take a look at a fictional California property owner who saw each of his rental homes appreciate $11,000 per month or $132,000 for the entire year in 2021:

Investors can apply any excess net rental income each year to paying off their mortgage faster. With consistent annual rents, a 30-year mortgage or a shorter-term 5-year or 7-year interest-only mortgage with much lower monthly payments than the best 30-year fully amortizing rates can be paid off much faster as more principal is paid off with extra payments.

The sooner that your homes are free and clear, the earlier you can retire and live off of the monthly cash flow while not touching your equity gains. A fairly consistent plan of buying and holding short-term and/or long-term rental properties is a prime example of letting your money work hard for you instead of the other way around.

Rick Tobin

Rick Tobin has a diversified background in both the real estate and securities fields for the past 30+ years. He has held seven (7) different real estate and securities brokerage licenses to date, and is a graduate of the University of Southern California. Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), equity funds, and foreign money sources. You can visit Rick Tobin at RealLoans.com for more details.

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How Much a Home Equity Loan Can be Useful to Pay Off Credit Card Debts?

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By Catherine Burke

You are not alone if you have recently faced financial challenges, such as a loss of employment, significant medical bills, or a tragic incident. The majority of the world’s population is affected by the COVID scenario. Over 57% of American adults, for example, are unable to pay medical costs, which are the leading cause of personal bankruptcy.

Some people may attribute their financial difficulties to illogical spending or bad saving practices. If you’re one of them, and you have a significant outstanding balance on one or even more credit cards, you might be finding it difficult to get out of debt. If you can only afford to make minimum monthly payments, paying off your credit cards might take several years, if not decades.

If you own a home, you might apply for a home equity loan and use the funds to pay off your credit card debt. You might be able to handle high-interest unsecured debts like credit card debt or payday loans using a home equity loan. Let’s look at the best ways to do that through a home equity loan.

But before going further, let’s know a bit more about Home Equity loans.

What is a home equity loan?

A home equity loan helps you borrow against the value of your home that has grown over time. If your home is currently worth $500000, but you owe $200,000 on your home loan, you have $300,000 in equity.

A financial institution, credit union, or other lenders might be willing to give you a home equity loan equivalent to a percentage of your equity, depending on this information. Other criteria, such as your credit score, will influence how much you may borrow and if you can get a loan at all.

Requirements to borrow from home equity

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Analyze your requirements, how they would fit into your finances and style of living before taking out a home equity loan. The criteria differ depending on the lender, but in general, you’ll need:

  • A specific amount of equity in the house (15 percent to 20 percent)
  • Creditworthiness
  • Low debt-to-income ratio (DTI)
  • Having enough income
  • A decent payment history

The balance between the amount you owe on your home loan and the home’s market value is known as equity. Lenders use this number to compute the loan-to-value ratio, or LTV, which determines whether you meet a home equity loan criteria.

How can you qualify for a home equity loan?

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You would be able to qualify for a home equity loan too easily before the COVID-19 issue. It was simple to obtain one if you had a consistent salary, a good credit score, and a home with sufficient equity. It’s now more difficult but not unachievable.

Building on sustained gains since the conclusion of the Great Recession a decade earlier, U.S. homeowners increased their equity share by $590 billion to a record $19.7 trillion during the first qtr of 2020, up 6.5 percent from a year ago.

While lenders’ criteria and risk appetite vary, their authorization processes are based on fundamentally the same factors.

Borrowers must typically maintain 20% ownership interests in their homes after taking out a loan, with few exceptions. Only $60,000 will be accessible for borrowing in the given scenario (if the house value is $200,000, with $100,000 equity).

This minimizes the risks for lending institutions. A borrower who has engaged at least $40,000 in a property is unlikely to abandon it. Homeowners would also be prohibited from renting their property to someone who would damage the property. This $40,000 also protects lenders from losing money if the borrower surrenders the assets during a market slump.

When evaluating applicants with substantial collateral, Lenders have more flexibility, but they still rely significantly on credit ratings when determining the loan’s interest rate. A credit score of less than 600 is considered bad, and obtaining a home equity loan will be challenging.

Are you worried about your credit score? Consider seeking credit counseling from a non-profit credit counseling organization for advice on how to improve your score before applying for the home equity loan.

Information you’ll need to apply for a home equity loan

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Collect all of your financial records and essential papers ahead of time to make the home equity loan application as simple as possible.

The following is the list of information that you may need to submit with your home equity loan application properly:

  • The number given by the Social Security Administration
  • The alimony and child support documents
  • Proof of your previous work experience (at least two years), as well as the contact details for your last employer
  • Proof of your income for the last two years
  • Proof of ownership and house insurance declarations
  • A copy of your most recent pay stub
  • Statement of the current mortgage
  • W-2 statements from the previous two years
  • An appraisal or valuation of your home
  • Existing debts and liens on your home

You’ll also need to produce various signed paperwork that your lender would want. It’s time to approach a lender about filling out a loan application once you’ve gathered all of the necessary information. You’ll be on your way to closing once your banker has submitted your home equity loan application.

This period, however, varies from one homeowner to the next. The money will be yours as soon as all documents are finalized and closed.

How to pay off credit card debt with a home equity loan

To use a home equity loan to pay off credit card debt, you must be first eligible for a home equity loan. A home equity loan, often known as a second mortgage, will allow you to take a lump-sum payment on a portion of your $100,000. You can spend the money as you wish and repay it over up to 30 years.

The long payback period and fixed, lower interest rate can help you get out of debt quickly. Furthermore, if you stop taking new credit card debt, your home equity loan can assist you in making steady progress toward debt elimination.

If you get a home equity loan to pay off your debts, remove your credit cards from your wallet and put them away. This way you won’t be tempted to use them for impulse purchases.

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Many experts recommend cutting them up at this point so that they can’t be used. However, you should have at least one in case of an emergency, such as a significant medical expense or home repair or a backup while traveling. However, keep it hidden most of the time to avoid temptation.

The benefits of paying off debt with a home equity loan

The main benefit of getting a home equity loan and repaying high-interest debts such as credit card debt or payday loan is that you’ll typically get a lower interest rate than you would on those debts.

Unsecured personal loans have rates that range from little under 6% to 36%, based on factors like your credit score, yearly income, and debt balances. Consider an interest rate of roughly 20-25 percent if you have an issue in any of these areas. So, getting a personal loan to pay off debts like credit cards or payday loans will be difficult.

With the Federal Reserve’s 10-year-bond yield hovering around 0.6%, Jan 2022 home equity loans are available starting as low as 4%. The average interest rate on a home equity loan is just 5.96%, whereas the typical credit card is 19%, and the average interest rate on a payday loan is 391%.

When you utilize a home equity loan to pay off several credit cards, you’ll be able to consolidate your multiple credit cards through only one monthly payment on the home equity loan. On the other hand, you may also use that money to settle your credit card bills and pay them off with significant savings. If you similarly deal with your high-interest payday loans, you may get rid of them by choosing the payday loan consolidation method or payday loan settlement option. You can use money taken from your home equity loan in both cases.

But you should remember one important thing. The interest on a home equity loan a borrower paid to the lender was once tax-deductible. But this significant benefit of home equity loans has been stopped until 2026. Interest on home equity loans is now deductible only if a borrower uses the loan to “purchase, build, or substantially renovate” the home, according to the Tax Cuts and Jobs Act of 2017.

Author Bio: Catherine Burke is a financial writer for online payday loan consolidation. She provides information on successful cash loans and payday loan consolidation to help people get over a difficult patch. She lives in Kansas and has earned a frame in the matter of payday loans.

Pros and Cons: Short-Term Loans vs. Long-Term Loans

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By Michael Mikhail, CEO Stratton Equities

Real estate investment loans can be tricky and it can be unclear at times which ones are the best. While there are many versions of loans, let’s go to the basics. There’s a time frame that you need to pay for your loan.

It can be on the shorter side ranging from months to a couple of years and long-term loans can take more than a decade to pay off. Now, there are pros and cons to each of these and one of them may be a better fit depending on your loan scenario.

Types of Short-Term Real Estate Investment Loans:

● Bridge Loans
● Hard Money Loans
● Fix and Flip Loans
● Foreclosure Bailout Loans

Types of Long-Term Real Estate Investment Loans:

● Soft Money Loans
● Rental Loans
● NO-DOC Loans
● Stated Income Loans
● No Income Verification Loans

The Differences between Short Term Loans and Long-Term Loans

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1) The Approval Process

Generally, short-term loans have a quicker application and approval process. Since they are a shorter commitment, lenders may be more willing to approve a short-term loan than one they would be stuck in for close to a decade. For both types of loans, the lender wants to make sure that the borrower can pay them back but it is less risky when the loan is only for several months. Due to the quick approval process, short-term loans tend to be better if you need money sooner rather than later. Also, thanks to the shorter time commitment, short-term loans tend to require less documentation to prove you will pay the loan back.

While long-term loans require more documentation to prove to the lender they want to be in a long-term agreement with you. Having to look through more documentation and having to do more research into whether you are a responsible borrower will make the approval process take a lot longer.

Finally, short-term real estate investment loans tend to have much higher approval ratings. Since it’s a shorter commitment, people are much more likely to approve a borrower who has a bad credit history or not too much of one. They may instead ask for collateral but regardless the approval process is easier. Conversely, a long-term loan is a longer and harder approval process. The lender tends to really look at all the details and thus has a much lower approval rate.

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2) Interest Rates

For a short-term loan, borrowers will be more likely offered high-interest loans. Due to the short application process and the fact that it tends to be more lenient and flexible, private lenders tend to offer short-term loans with significantly higher interest rates. This is why for short-term loans you want to shorten the repayment period as much as possible. You don’t want to spend 2 years repaying a loan with high-interest rates. Think more about paying it off in months rather than years.

With long-term loans, you are more likely to receive a lower interest rate. The lender has done a lot more research on you, they think they know you will pay off the debt so they are more likely to offer you a lower interest rate. However, make sure to calculate the math, you may end up spending a lot more money over many years with a small interest rate than a much higher interest rate over a few months. For long-term loans, the lower interest rate with a much longer repayment timeline can cost you in interest rates as much as your initial loan was. So with interest rates you want to be careful and to do the math.

3) Loan Payment Schedule

Due to the nature of short-term loans, which are over a much shorter time period, payments may be needed much more frequently. If the loan is only for a few months, then the repayment may be biweekly or more frequently. On the other hand, if it’s a long-term loan, you may not be paying monthly but every few months or every quarter. Thus, if you don’t have a steady income at your company, it may not be a good idea to do a short-term loan because you can’t make all the frequent payments.

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4) Amount of Money

With a short-term loan, you are more likely to be only able to borrow a smaller amount of money for your loan scenario. Since the real estate investor needs to repay the amount of money in a short period of time, it is unlikely that a lender would be willing to lend a large amount of money. Since a larger amount of money carries a larger risk, a private mortgage lender will be hesitant to offer you more than a smaller amount. While with long-term loans, lenders know more information about you and so would be more likely to increase the risk and lend you more money.

What’s better for your investment property? Long Term Loans or Short Term Loans?

There is so much to know when it comes to loans so it’s important to educate yourself on all the pros and cons before making any decisions. Make sure to be cautious before you agree to anything.

Each loan scenario is different based upon the borrower’s credit score, investment experience, liquid assets, and reserves. The loan will always be structured or calculated based upon those results.

The best way to discover which is better for your investment property is to contact a direct private money lender to assist you with the purchase of your investment property.

Michael Mikhail, CEO Stratton Equities

Michael Mikhail is the Founder and CEO of Stratton Equities, the nation’s leading hard money-lender to national real estate investors, with the largest variety of mortgage loans and programs nationwide.

Having launched Stratton Equities in early 2017, Michael has always been an entrepreneur and innovator in the real estate market, purchasing his first home at 19.

A serial entrepreneur with a foresight for business opportunities, Michael had a slew of small businesses prior to launching Stratton Equities. One of his most prolific ventures was a car wash connected to a gym he was affiliated with in Florida during 2001-2002 while attending college.

It wasn’t until he graduated from Florida State University with a degree in Business, that he officially joined the mortgage industry in 2003 and decided to travel to explore his options globally.

After travelling to 19 countries in 5 years, Michael knew two things; he wanted to start his own business and launch it in the United States. He knew that moving back to the states was the best place he could start something small and grow it into something infinite.

In 2017, Michael noticed how the mortgage industry had transformed after the regulations presented from 2008-2012, and knew it was time to set out something on his own, thus creating Stratton Equities.

Under Michael’s leadership, Stratton Equities has grown into one of the biggest leaders in the Mortgage and Real Estate industry across genres and platforms.

Are You a Candidate for a NO-DOC Loan?

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By Stratton Equities

You might be a candidate for a NO-DOC loan, or No documentation mortgage loan, if you do not meet the strict Consumer Financial Protection Bureau’s (CFPB) mortgage loan conditions. This type of loan is a NON-QM loan and is designed for some rental property investors, borrowers that are self-employed, and those who do not meet conventional loan standards. private lenders can also fit self-employed borrowers into the QM space.

It is also an option for borrowers who have had challenges qualifying for a NO-DOC loan due to credit issues (such as bankruptcy, foreclosures, late payments, or other isolated credit issues) in the past or have an unconventional source of income.

Unlike the traditional income verification mandated for most loans, this type of mortgage loan allows you to be eligible based on alternative methods. NO-DOC loans create real estate investment opportunities for a wider array of people due to their more versatile qualification criteria.

A qualified mortgage loan is an “agency” mortgage-backed security. On the other hand, a No documentation mortgage loan is considered “non-agency” or “private-label”–is suitable for borrowers with exceptional circumstances or those whose incomes differ from month to month.

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Many individuals, including hospitality employees, self-employed business owners, and retirees have fluctuating earnings. This is where NO-DOC loans fill the void by offering dynamic underwriting measures for prudent borrowers with special income conditions.

A prevalent belief is that NO-DOC loans are “bad loans” in disguise, and therefore not recommended. The reality is that these kinds of loans have their own set of rules related to QM loans to ensure that private money lenders and borrowers are protected from a high-risk loan. The process of lending NO-DOC and NON-QM loans are very similar to that of QM loans, only with a different collection of documents during application.

What is the Difference between a QM and NON-QM Mortgage?

The biggest difference between a QM (Qualified mortgage) and NON-QM Mortgage, is that a QM Mortgage loan tends to be traditional government-backed loans and conventional loans.

Because a conventional loan (QM) is usually processed through a bank or traditional financial institution on an owner occupied property, a NON-QM with a private lender is the best solution for a real estate entrepreneur looking to purchase an investment property.

A NON-QM or NON-Qualified mortgage loan is typically portfolio loans for real estate investors that do not conform to the strict government or conventional mortgage guidelines.

Why Should Borrowers Choose NON-QM Loans on their Real Estate Investment?

Unlike conventional investment property loans that max out at 70% LTV, a NON-QM Mortgage Program maxes at 85% LTV and with no PMI with rates starting at 4.375%. This allows the borrower to put less money down on their purchase, typically loan amounts range between $100,000 and $5,000,000.

How can a Real Estate Investor Qualify for a NON-QM Loan?

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If you are a real estate investor that has an investment property and are looking for a quick turnaround without stringent guidelines, NON-QM loans may be better for you — NON-QM loans do not need to abide by these strict guidelines! Bottom line = This means that NON-QM lenders can provide faster service and approval to more types of real estate investment opportunities.

Private lenders who utilize QM loans must first qualify a mortgage borrower’s income, liabilities, and monthly debt payments to determine whether the borrower can successfully pay back the loan in the future. To successfully qualify for a QM loan, real estate investors must fit the strict requirements set by the Consumer Financial Protection Bureau. This approval process requires borrowers to submit extensive documentation concerning their credit history, income, assets, and monthly debt payments, which usually takes well over a month to complete.

NON-QM and Private Money lenders understand that everyone’s situation is different and that to a traditional financial institution (like a bank) some borrowers may not present like a qualified candidate for a loan. This restriction could be due to the borrower’s employment status, income, credit history, and liquid asset requirements – however with a non-qualified mortgage, private lenders focus on; high credit score, investing experience, and liquid assets.

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As a result, NON-QM loans’ lax restrictions make them ideal for these types of real estate investors:

Self-Employed Investors: Especially in light of the unprecedented year, with COVID-19, we completely understand how difficult it is to find steady income. These type of loan programs are based on the value of the property itself or the borrower’s credit score and liquid assets.

Foreign Nationals: Government backed loans typically require proof of a US Social Security number or a W2 (which is a US tax form). Because NON-QM loans don’t have such requirements, they are ideal for foreign nationals who are in the States on a visa and are looking to invest.

NON-QM Loans: The Benefits For Borrowers

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The key benefit of NON-QM loans is that they offer opportunities to borrowers who would not otherwise meet the mortgage requirement. Non-Qualified Mortgage Loans provide much-needed loan financing for millions of hard-working Americans, including self-employed people and small-business owners who have worked hard to achieve success but are not eligible for QM loans.

Below are some of the benefits NON-QM loans for borrowers:

  • Looser, more versatile underwriting and guidelines
  • Ability to close faster than a QM loan
  • Ideal for 1-4 family investment properties
  • NO-DOC Mortgage Loan: Does not require income verification or tax returns
  • Self-employed people are top candidates for NON-QM loans

For specific borrowers with unique income sources or a high DTI, a NON-QM loan will enable them to obtain the money they need. NON-QM lenders also set standards for Non-Qualified Mortgage Loan borrowers and need to determine their potential to repay.

This type of mortgage loan is ideal for a wide variety of potential borrowers and can be used to buy commercial and investment assets. It is advisable to contact a certified loan officer to determine your qualification for a NON-QM loan, so they can review your profile to ascertain if this product is perfect for you.

How to Benefit from a Private Money Loan

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By Stratton Equities

Banks used to be the only option for real estate investors trying to take out loans. Nowadays, private money lenders are allowing investors to borrow money under more flexible conditions. Banks and traditional financial institutions can reject your loan application for multiple reasons—your credit score, your debt-to-income ratio, employment status, etc.— What private money lenders do is implement a framework that makes it easier and more conducive to be a real estate investor.

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The real estate market moves fast, and it is often crucial to act quickly. But the process of getting a traditional loan through a bank can often be lengthy and complicated. Many of the solutions and loan programs from private money lenders are easier and quicker to get than through banks, which is why private money loans are often better options for real estate investors.

Making investing easier

What private money lenders like Stratton Equities do is accommodate real estate investors.

“Real estate investors, as we all know, don’t have the greatest of tax returns,” Stratton Equities’ CEO Michael Mikhail said. “They move money around, have different trusts, and have different accounts. Banks absolutely frown upon that and they actually hate it. Good luck getting a loan through a bank or mortgage company if you’re a hardcore real estate investor.”

The programs offered by private money lenders are designed for investors, who oftentimes can’t show their income and make a lot of monetary transactions. Companies like Stratton Equities have put in place certain standards that make it easier to take out a real estate investment property mortgage. These include no tax returns, no upfront fees, and no junk fees.

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The closing time for loans from private money lenders is much faster. This element can be crucial for investors, as sometimes the faster you close, the better chance you have at securing a transaction. Also, the LTV (loan to value) ratio is higher with private money lenders. Loans from traditional institutions on investment properties usually max out at 70% LTV, while those from private money lender Stratton Equities can go up to 85%. You’ll likely be spending less through private money lenders too. “If you go to a bank, you’re going to have PMI (private mortgage insurance) with those loans, a few extra hundred dollars per month,” Mikhail explained.

The Loan Process

The first thing you’ll want to do to get a private money or NON-QM loan, for example a hard money loan is to contact a private money lender. As the borrower, you should be ready to provide the lender with information like the location of the property, purchase price, and estimated appraised value.

The lender will ask questions to get to know you and your borrowing history. After this, the lender will appraise the property and come up with a loan offer for you. The lender will review the documentation and complete the underwriting process for the loan. This process is usually speedy, but it varies from lender to lender.

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After the loan is completed with underwriting it gets moved to the closing department. As a borrower, you’ll have to sign a variety of documents during this phase, but it is relatively straightforward. The lender will then send the funds to the title company so the deal can be completed.

Many real estate investors have found that getting loans from private money lenders is their best option for achieving their investment goals. Be it a hard money or a soft money loan, private money lenders are faster, more understanding, and more lenient than mortgage companies and banks. You have to consider that these companies’ sole purpose is to give loans to real estate investors, so naturally, they’ve found ways to make the process smoother. If you’re thinking of getting into real estate investing, you should definitely take these factors into account.

Contact Stratton Equities, the leading hard money and NON-QM lender, to speak with one of their talented and experienced loan officers at 800-962-6613, email us, or apply for loan pre-qualification today!

Why Are Bridge Loans A Great Choice For Real Estate Investors?

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By Stratton Equities

In the world of private lending, real estate entrepreneurs are building strong careers investing in real estate utilizing asset-based loans.

An asset-based loan product is based on the value of the available equity in the property, it closes faster than a traditional mortgage, and requires less paperwork.

One of the most common asset-based loan products are bridge loans and they are quickly becoming a perfect solution for real estate investors who are looking to grow their investment portfolio.

What are bridge loans?

A bridge loan is defined as a short-term (12-24 months) real estate loan that closes faster than term loans or conventional loans. Real Estate Investors work with lenders who offer bridge loans, because not only do they close quickly, the guidelines are more lax, therefore there is less underwriting and documentation needed.

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​Real Estate Bridge loans are temporary loans, secured by the asset (real estate), the typical property bridge loan has a term of 12-24 months, although many bridge loan lenders will grant the owner the option to extend his loan for six months to one year.

Why should you get a bridge loan?

There are more benefits than you can count for with bridge loans. The greatest benefit is the speedy approval process. As a real estate investor, with a simplified approval process, it becomes quick, which is key to getting a great real estate property before someone else does. However, as a result of the faster process, they have higher interest rates.

If you are a real estate investor that does not have a stable cash flow or if you are self-employed, this is perfect for you. The private lender does not look at your salary or tax returns so you don’t need to worry if you do not have a stable income. Another benefit is how the loan is utilized. It doesn’t need to be solely purchasing a specific property but can be used for a variety of purposes. For example, it can be used for Cashout or Rate & Term programs.

Since it’s a bridge loan, it can give you the flexibility you need to stay afloat and let your real estate business thrive.

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Why Should You Use a Bridge Loan?

  • It’s Straightforward & Easy : This type of loan has short-term financing (12-24 months) for real estate investors, who prefer to finance the purchase and/or rehab of their investment property, with a Fix and Flip loan (also a Bridge Loan) or a Cash Out Refinance loan.
  • ​Quick Access to Funds: With conventional loans, there are qualifications that restrict you from getting access to those funds. With a Bridge Loan, there are less guidelines, underwriting, and restrictions that will provide you with quick access to financing.
  • ​For Every Type of Real Estate Investor: A Bridge Loan is a great solution for any real estate investor – at all experience levels.
  • ​Options for all types of Properties: At Stratton Equities, we have Bridge Loans that are tailored to your investment needs. Here are some of our Bridge Loan options for Real Estate Investors; Fix and Flip, Cash Out Refinance, or Purchase Money.

​BRIDGE Loan Summary

  • ​​Investment Properties Only: Single-Family, Condos, Townhomes, Multi-Family, Commercial, Mixed Use, Office, Retail, Industrial, Warehouse
  • Rates Starting at 7.25%
  • $100K – $5M
  • Up to 75% LTV
  • Blanket Loan Options Available
  • Fixed rates/Adjustable
  • 9-24 Month Terms
  • Interest Only Payments
  • Purchase, Refinance, or Cash Out
  • Foreign Nationals Eligible
  • No Prepayment Penalty Option Available

How do you apply for a bridge loan?

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If you need a quick streamlined process with a repayment phase of 12-24 months, with less underwriting and documentation, these loans can be approved quickly and even extended if you wish. There is also no minimum FICO requirement. These are great loans for real estate investors with any experience level. They also work for the majority of investment properties.

Call us at 800-962-6613 or contact us at info@strattonequities.com and apply now at https://www.strattonequities.com/loan-pre-qualification to find out whether you are eligible for loan pre-qualification!