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How To Use Private Money To Secure & Grow Your Real Estate Investing

September 23, 2022 by Realty411 Team

By Tim Houghten

We are certainly in exciting times for real estate investing. A lot may feel like it is changing from our 12-year bull run. But if you’ve been through a cycle or two in the past, then this may feel a lot more familiar and predictable.

Success in the months and years ahead is going to largely depend on investors’ financial position and access to capital.

Critical questions all investors should be asking themselves right now include: If their debt has been optimized to survive, what’s next? And, will they be able to secure new funding to keep thriving and growing as more opportunities arise?

Meet Joe

We caught up with Joseph V. Scorese to gain insight on the lending landscape, including what we can expect from lenders and what types of funding is still available for investors.

Joe is Regional Development Manager, Northeast, for Lending One. A national private lender focused on providing loans for real estate investors, LendingOne has funded over $1B in loans.

He has personally been investing in this space since 1992. So, he certainly knows a thing or two about the market, how it works and how to make the most of it.

One of the things that Joseph is most passionate about is educating others on the availability of private money and how it can be used to grow their real estate investing.

What Exactly Are Private Real Estate Lenders?

Joseph specifically wants investors to understand that there are alternatives to the credit sources that they used to be limited to.

In his opinion, traditional banks and mortgage lenders really let investors down in the wake of the Great Recession. He doesn’t see them stepping up to be competitive or provide the backing that real estate investors need now or will need in the next phase.

At the other end of the mortgage market spectrum have been hard-money lenders. They have certainly had their place in the market, although their high-interest rates and limited scope of underwriting hasn’t made them the optimal solution for many.

Today, LendingOne is a private real-estate lender. A distinctly different industry to the others. LendingOne is backed by Blackstone and its deep pockets of private capital.

They are an asset-based lender. Though in contrast to hard money, they also look at DSCR (Debt Service Coverage Ratio), plus the strength of the borrower and their experience. This allows them to make more aggressive loans — with better rates and terms than hard money lenders — while providing loans that traditional mortgage lenders wouldn’t consider due to their rigid underwriting criteria.

The Current & Evolving Landscape

We picked Joe’s brain for his insights on the current market and what’s ahead.

While no one knows exactly how things will play out, with enduring inflation — the highest in 40 years — he acknowledges that we could probably use some cooling in the housing market. Not that we need a crash, but more sustainable growth would be wise.

We have already seen a significant reset in the past 90 days. Joe says that in addition to the extra inventory we’ve seen coming along over the past couple of months, there are a lot of foreclosures in the works. It could be another 12 or 18 months before they hit the market. Together these factors suggest that there is going to be a lot more negotiability for acquisitions coming and hopefully more discounts to be found.

So far the only obvious changes in the lending space have been in interest rates. Most of today’s investors weren’t around when rates were at 20% or even 14%. Joe says that while they might not get that high, they are indeed rising. He predicts they will likely hit the 8% to 9% range.

This should definitely be creating a sense of urgency among investors to do two things:

Optimize current debt structures to make it through this phase of the market.
Lock in great long-term fixed rates on new acquisitions while rates are low.

Additionally, investors need to be really getting in tune with their numbers, evaluating their assumptions and bids, and planning for new dynamics in the market.

Loan Programs To Fuel Your REI Business

Joseph V. Scorese says that LendingOne has $3B already committed to lend next year. He expects that to be consistent over the next several years.

LendingOne offers a variety of real estate financing options, including the following.

Fix & Flip Loans

Up to 90% of purchase and repair costs, and closing in as little as one week. BRRR-friendly, and interest-only payment options.

Rental Property Loans

Loans for individual rental properties, with 30-year fixed-rate options, no personal tax returns needed, and corporate borrowers allowed.

New Construction Loans

Ground-up construction loans with interest-only payments for up to 24 months.

Multifamily Property Loans

Multifamily bridge loans for value-add apartment building projects with loan amounts up to $15M, and no DSCR requirement at closing.

Portfolio Rental Loans & Blanket Mortgages

These loans are ideal for those with five or more rental units, with 30-year fixed-rate loans, and loan amounts up to $50M.

Smart Money Moves To Make Now

With the insights we gained from Joseph in our interview, it seems there are some obvious moves most investors should be making.

Recalibrate your buying criteria to demand better deals
Refinance now avoid rate shock on loans maturing in the next couple of years
Lock in long term fixed rate loan terms on new acquisitions now
Be sure you are staying on top of market changes on a daily basis

Find out more about LendingOne and their financing options at LendingOne.com.

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411Expo.com or our Eventbrite landing page, CLICK HERE.

Four Foreclosure Investor Precautions

September 20, 2022 by Realty411 Team

By Tod Snodgrass

The number of NOD pre-foreclosures notices are on the rise. Fortune magazine reports they are up triple digits in 2022 compared to 2021. There are several factors causing the uptick: COVID mortgage forbearance overhang, the current recession, rapidly rising interest rates this year, etc. The increase in the number of homeowners and landlords in trouble is causing a lot of (both note and property) investors to start taking a hard look at how they can profit from these changes in the market. Precautions include:

1. Depreciating prices. For those who came into the investor market after the last downturn, you may not be aware that residential property prices in many markets dropped by 40%, from peak (2008) to trough (2012). Some areas/types of real estate dropped by even more. The cautionary tale is to be sure to build in enough equity in foreclosure properties you seek to acquire. In an up market, where prices are appreciating double digits every year, how much equity you initially acquire is usually not the first box you check as an investor. However, as the old saying goes: That was then, and this is now. Assuming the recession worsens, you need to build in more of an “equity buffer” into each deal to protect yourself from making no profit (or actually losing money) when you go to sell the property or note.

2. Judicial vs. non-judicial states. The number of virtual wholesale note and property deals are increasing nationwide; wholesalers need to be knowledge about what laws apply in the state in which the investment is being made. About half the states in the nation are what is referred to as non-judicial. That means they typically employ what are known as trust deeds and trust deed notes. The foreclosure is undertaken without using lawyers and judges. Judicial states usually require you to go through the court system to adjudicate your claim. Non-judicial states usually cost less and take less time to foreclose.

See https://retipster.com/judicial-non-judicial-foreclosure-states-list-map/ for a map, as well as details on the specifics for each state.

3. Beware of Land Contracts (LCs). An LC is an agreement in which the owner/seller of a property agrees to act as the bank and personally finance the sale for the buyer instead of going through a 3^rd party, such as a bank or credit union. The buyer makes monthly payments to the owner, but does NOT receive actual title to the property until the last payment is made; and the last one is often a “balloon” payment, i.e. for a very large amount (that the buyer perhaps cannot afford to make).

As an investor (of a property or a note secured by a property) who is about to step into this breach, you must give careful consideration to the LC contract that the owner has/had with the LC buyer. What you want to avoid is getting subsequently sued by the buyer after you bought out the interest of the seller.

For example, does the seller own the property outright, or is he still making payments to a lending institution? If the owner himself did not make regular payments for any reason, the property can be foreclosed upon, leaving the buyer with a worthless contract and no home. Land contracts also leave the new owner (you) tied to the property. If the buyer stops making their payments, you become responsible for the land—which means you could lose the property altogether if the buyer fails to insure it properly or pay their property taxes.

All of these tricky issues must be taken into account when you are considering an acquisition that includes a land contract. You need to have a very clear understanding of everyone’s rights and responsibilities beforehand. To play it safe, retain legal counsel to look everything over first.

4. Watch out for Super Liens in 20 states. There are approximately 370,000 homeowner associations (HOAs) in the United States. Collectively, this represents more than 40 million households (or about 53% of the owner-occupied households in America). Statistically, about 26% of all Americans live in HOA communities. Typical HOA/association dues & fees run from $200-$300 per month—many charge more, some charge a LOT more.

In most states, when a lender forecloses on a property in a HOA, and the property owner has also defaulted on their association fees, odds are the condo association won’t get paid for those debts. That is because a successful foreclosure action by the holder of the first position mortgage typically wipes out all junior notes and many liens. However, in about 20 states (see the list below), “super lien” laws have been passed that protect the association from being wiped out completely.

A foreclosure by a bank or credit union can take many months. During that time the HOA is not receiving the monthly payments due to them. When the bank finally forecloses and sells the property, and surplus funds are left over, the HOA (in a Super Lien state) can typically petition the court to channel that money to the association, assuming the association has properly recorded a lien.

So, if you are a note or property investor, be sure to check carefully if the state in which you are investing (and where you could potentially foreclose on a property) is a super lien state. If so, you need to take that information into account, and build those costs into your bid price for the note or property.

To reiterate, about 20 states allow for some form of super lien. Each of the states has differing laws when it comes to how an HOA lien becomes a super lien. You can learn more about super lien states and their individual laws regarding super liens by looking up your state statutes which can usually be found online. The following states allow for super liens, or some version of priority liens for community associations: Alabama, Alaska, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Vermont, Washington, West Virginia.

What We Do: Provide 100% Joint Venture Funding, nationwide, to real estate note and property wholesalers. Contact info: Tod Snodgrass, [email protected], 310-408-7015

Linda Pliagas Interviews Sunil Tulsiani

September 16, 2022 by Realty411 Team

Gain investment knowledge with our latest interview featuring Mr. Sunil Tulsiani. Sunil is a former police officer turned real estate investor. He also leads Canada’s most elite investment group, Private Investment Club (PIC). Sunil has collaborated with renowned leaders in the REI industry, such as: Robert Allen, Grant Cardone, Robert Kiyosaki, Kevin Harrington, among others. Be sure to watch this fascinating interview today.

You’re Invited to the 3rd Annual Los Angeles Real Estate Grand Expo

September 14, 2022 by Realty411 Team

3rd Annual Los Angeles Real Estate Grand Expo

We are very excited to announce our 3rd Annual Los Angeles Real Estate Grand Expo. The Grand Expo returns on Saturday, October 22, 2022, 9:00 am to 6:00 pm. We’re taking over the entire Iman Cultural Center for the day – it’s all ours! The North Hall (vendor hall), the South Hall (workshops), and the middle parking lot (loaded with tents and food trucks). The theme of this year’s Grand Expo will be “How to Invest in a Pre-Recession Market.”

Last year, the Grand Expo was the largest real estate event in Southern California! We had over 600 investors, 64 vendors, and 10 national speakers! This year will be even BIGGER! An entire day celebrating real estate investing and you can be involved. Best of all, the Grand Expo will be FREE to attend. This Expo is going to be big, really BIG!

SPEAKERS. There will be national guest speakers (in three breakout rooms). Here is a partial list of speakers:

1. Brent Kessler

2. Rusty Tweed

3. Shawn Tiberio

4. David Tedder

5. Merrill Chandler

6. Cliff Gager

7. Joe Arias

8. Tony Watson

9. Abbas Mohammed

10. Rick Sharga (Keynote)

INVESTMENT EDUCATION. Just think of it! An all-day in-depth educational extravaganza celebrating real estate investing. More importantly, this will NOT be a sales pitch. Each of the speakers have contractually agreed to educate and teach us successful real estate investing strategies. So regardless of whether you are a new investor, already own properties, or are very experienced, our Grand Expo is for you!

COMPLIMENTARY PRIVATE CONSULTATIONS. As a special unique feature of our Grand Expo, you can sign-up for private half-hour consultations with your favorite guest speakers. Registration will occur Saturday morning, starting promptly at 8:00 am. First come – first serve. So come early and schedule your private consultations. A once in a lifetime opportunity to get free advice from national real estate experts!

VENDOR EXPO: Don’t miss our “Vendor Expo,” which will occur throughout the day in the North Hall. We’ll have 70+ vendors where you can “meet and greet” real estate professionals with services and products that you’ll want to utilize in your real estate investing. (If you have a product or service that would be valuable to real estate investors and would like to be a vendor, please contact us directly.)

DATE: Saturday, October 22, 2022

TIME: 9:00 am to 6:00 pm.

LOCATION: Iman Cultural Center, 3376 Motor Avenue (between Palms and National), Los Angeles, 90034.

FREE PARKING: There will be plenty of street parking (metered and free) on side streets around the Iman. Plus valet parking ($15) will also be available.

FREE ADMISSION: Admission to our Grand Expo will be COMPLIMENTARY (free!), but reservations are recommended.

RSVP: Make your reservations now! (Last year, we sold out and people were turned away at the Skirball!) So don’t wait! RSVP at our special website: www.LAGrandExpo.com.

PRODUCERS. The Grand Expo is joint presentation of the Los Angeles County Real Estate Investors Association, Sam’s Real Estate Club, Ventura Real Estate Investors Association, and Realty411.com.

The Reality of SB-1079 Foreclosures

September 13, 2022 by Realty411 Team

By Edward Brown

Attempting to curtail foreclosed houses being turned into rentals, California passed SB-1079 in 2021. This law effectively, for 45 days, suspended any activity after the foreclosure. Prior to this law, houses that were foreclosed on could be purchased at the foreclosure sale by investors and immediately turned into rental property. When this happened, houses were taken off the inventory for home ownership.

California was desiring to promote homeownership, and reduced inventory pushed prices higher as well as increased renters vs homeowners. The theory behind SB-1079 was that it would discourage investors from bidding at the foreclosure because, for the next 45 days, an “eligible bidder” could match the winning bid. The effect of this would be that the investor would tie up his money for 45 days and not know if he would end up with the property. Thus, investors would most likely not show up and bid at the foreclosure and wait out the 45 days to see if any eligible bidders came forward. If nobody outbid the lender at the foreclosure sale, the investor
could approach the lender to purchase the property. With SB-1079 in place, there is no incentive for an investor to outbid at the auction.

One of the main problems with this law is that the party being foreclosed on has almost no chance of any over-bidding at the foreclosure. Prior to SB-1079, it was possible for the borrower who was being foreclosed on to potentially recoup some equity in the property if the house was bid up. For example, if the 1st mortgage was owed $100,000 and was the foreclosing party, and the house was worth $300,000, the lender would most likely credit bid their entire $100,000 loan. If another party bid $140,000, the lender would get paid their $100,000 and the owner of the house who was getting foreclosed on would walk away with $40,000. SB-1079 effectively shuts the door on that scenario, as the chances of someone outbidding the lender at the foreclosure are slim due to the uncertainty of the bidder acquiring the property at the sale. For the following 45 days, an “eligible bidder” has the opportunity to bid the same $100,000 as the lender and end up with the property. Although there are eight definitions of an eligible bidder, the primary ones include an occupant of the property as his primary residence [not the borrower or a family member of the borrower, however], effectively, a rental, a prospective owner-occupant, and a California nonprofit whose primary activity is the development of affordable housing. If the house is owner occupied, that eliminates the potential tenant purchase option.

The main problem is that the homeowner will almost certainly lose 100% of any potential equity due to nobody outbidding at the foreclosure auction. At this writing, there are not many non-profits who are set up for development of affordable housing; thus, the only realistic way for the lender to be taken out after 45 days [after the foreclosure] will be those houses that were rented out to tenants or those who desire to own and occupy the house as their primary residence. This last potential is slim, as most buyers want to make offers on houses they can inspect and not wait 45 days to find out whether or not they will be allowed to buy the house.

Due to these new foreclosure laws in California, lenders will have to factor into their underwriting the potential added costs of holding a [potential] foreclosed property at the time they make their loan to the borrower, as the lender is precluded from selling or renting out the property for 45 days after the foreclosure. The lender may have additional costs during this period, such as securing the property against vandalism, vagrants, weed abatement, and the like.

It is still too early to tell if the statistics show if tenants come up with the needed funding options in order to secure the house for their own benefit, as the program is still in its infancy. Only time will tell if this experiment works out for potential would-be homeowners or if it was just a sure-fire way to make sure foreclosed homeowners recoup nothing.

ABOUT EDWARD BROWN

Edward Brown currently hosts two radio shows, The Best of Investing and Sports Econ 101. He is also in the Investor Relations department for Pacific Private Money, a private real estate lending company.

Additionally, Edward has published many articles in various financial magazines as well as been an expert on CNN, in addition to appearing as an expert witness and consultant in cases involving investments and analysis of financial statements and tax returns.

Edward Brown, Host
The Best of Investing on KTRB 860AM
The Answer on Saturdays at 8pm
and Sports Econ 101 on Saturdays
at 1pm on SiriusXM channel 217
21 Pepper Way
San Rafael, CA 94901
[email protected]

Insider Knowledge from Leading Experts

September 12, 2022 by Realty411 Team

Get ready for Realty411’s informational two-day online Investor Summit. Regardless of your level of expertise as a real estate investor, be sure to join us for incredible insight at this event.

Guests will not only learn in real time, but they will be able to engage directly with educators via chat. This is the place to ask your most difficult real estate and business questions.

Be sure to pencil in this life-changing virtual seminar designed to bring you up close and personal with leading experts. Make connections with top industry leaders and gain insider knowledge to skyrocket your net worth.

For this two-day online webinar guests will learn information about the following topics:

* Cities Where Top Investors are Buying In
* How to Profit with Long-Distance Rehabbing
* How Private Capital Can Help Investors Leverage
* Steps to Creating a Game Plan to Win as an Investor
* Developing Relationships with Leaders of Influence
* The Latest News on Finance and Mortgage Lending
* How Your Mindset Determines Your Investment ROI
* Identity Theft Protection Safety Education
* Information about Business Lines of Credit
* How to Structure & Profit from Short-Term Rentals
* Learn How Technology Can 100X Your Business
* Discover How to Own a RAL (Residential Assisted Living) Home
* And so much more – top experts – great insight!

Realty411’s virtual Investor Summit is sponsored by MAG Capital Partners

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