Q & A Saturday – What is NOI for Rentals?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about  selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “What is NOI for Rentals?

In this video Shaun talks about what the Net Operating Income (NOI) for rental properties.

 

Some of the main points covered in this video are:

1)      What is NOI? = Net Operating Income.

2)      But what exactly does that mean?

3)      Why is it important to know this?

4)      What should you shoot for with your NOI?

 

The Net Operating Income (NOI) for a rental is basically the Net income after taking into account all expenses other than financing costs.  By financing costs this would be the principle and interest payment part of your mortgage payment, not taxes and insurance if those are included in the mortgage payment.  Those two items would be included when calculating the NOI.  For a quick synopsis you take the Gross Rental Income less vacancy and credit losses (i.e. non-payment of an occupied unit) less all of the non finance expenses such as property taxes, home insurance, maintenance and repairs, management, owner paid utilities, other municipal fees, any kind of rental registration fees and then any other expenses that you need to pay for your rental.

Why is this number important?  For commercial sized rentals (Apartment buildings with 5 or more units and any non-residential or mix use building) this number is directly used to determine the value of the property for resale and bank financing.  Obviously in those cases it is a vitally important number since the “Sold Comps” appraisal method used for small properties is not used.

For smaller rentals like condos, single family houses, duplexes, as well as 3-4 unit places.  In these cases the familiar appraisal methods are used so they are not directly used for financing.  However for selling the property to investors the income and expenses will be of paramount importance.  For single unit properties many of the potential buyers will be resident owners and this will not be important but if the property is in a heavy rental area it will be an issue.  It also will be important for anything over 1 unit the person will be at least a partial investor, even an owner occupant in a duplex. 

 

 

Do you need to sell a rental house in Massachusetts or New Hampshire and don’t know what your NOI is?  If you would like to sell your home  fast and hassle free  schedule a consultation  with us today.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Some useful resources:

          Our Video on using The 50% Rule for Rentals.

          All of our posts on Land Lording Topics.

          If you want to sell a house in Massachusetts or in New Hampshire we can help.

 

 

 

 

 

(Image credit: Net Operating Income via Property Metrics)

 

Q & A Saturday – What is an Assumable Mortgage?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “What is an Assumable Mortgage?

Assumable Mortgages - Creative Real Estate

In this video Shaun talks about what is an Assumable Mortgage and how they work.

 

Some of the main points covered in this video are:

1)      What is an Assumable Mortgage.

2)      What are the advantages.

3)      What are some of the drawbacks.

4)      What types of mortgages are most likely to be assumable.

 

An assumable mortgage used to be a pretty common way to purchase a house until the early 1980’s.  Sellers would offer their houses up with possible financing in place and there was not much to taking over a mortgage and the seller no longer being obligated to paying the loan, the new owner would be.  However at that time banks realized they were losing a lot of potential income as rates were in the double digits for home mortgages and the loans being assumed were far less than this.  At this time the “Due on sale” Clause started being very common and soon would be found in all conventional mortgage loans.  Typically today the only loans that can potentially be assumed are FHA and VA loans.  Even with those the new borrower will have to go through a qualifying process that is not much different than the one needed to get a new loan.

There are definitely some advantages to the seller if the loan is assumed vs. being taken “subject to”, which essentially is the same result except that the sellers name is still on the loan and they are ultimately still responsible if the new buyer does not pay it.  Therefore, MUCH less risk for the seller in this scenario.  On the opposite side it will be more risky for the buyer since in this case they are responsible for the loan when in a Sub To deal they can walk away unscathed (The ethics of this is a different story…).

The only real reason to want to take on as assumed mortgage would be if the terms are much better than the ones available to the new borrower.  Unlike a Subject To situation the borrower needs to qualify so the only reason to assume is if the rates and terms are very good.  Currently with the very low interest rates on mortgages there is not likely to be a big spread here.

In summary while assumable mortgages used to be very common they no longer are.  Only a small subset of mortgages generally have the possibility of being assumable and with the more stringent qualifying process needed (unlike back in the 70s and 80s) the advantages of the process is limited as well for the buyer.  So while still possible it is not a very useful method to sell a house and not a particularly advantageous method to buy one either.

 

 

Do you need to sell a house in Massachusetts or New Hampshire and not sure if you can sel with an assumable mortgage?  If you would like to sell your home fast and hassle free schedule a consultation with us today.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Some useful resources:

–          Our Video on Selling a House with Seller Financing

–          Our Video on Selling a House with Subject Too Financing

–          Our Video on The Due On Sale Clause

–          Our Video on Selling a House with a Wrap Mortgage

–         Our Video on What are the Different Types of Seller Financing

–          Guest post on 3 Reason to Sell with a Lease Option

–         Our Video on Selling a House with a Lease Option

–          All our articles/videos on Financing and Lease Options

–          If you want to sell a house in Massachusetts or in New Hampshire we can help.

 

 

 

 

 

 

(Image credit: Assumable Mortgages via PRMI)

 

Q & A Saturday – Can I Cash Out Refinance My Rental?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “Can I Cash Out Refinance My Rental?

 Buying a House with Cash - Doing a Cash Out Refinance on a Rental Property

In this video Shaun some of the requirements usually needed if you want to do a cash out refinance of a rental property.

 

Some of the main points covered in this video are:

1)      The typical seasoning requirements

2)      Commercial vs. Residential loans

3)      What if I own it in my businesses name?

4)      Oh by the way you still have to do all the typical stuff to qualify for the loan as well!

 

A strategy many investors hope to use when building a rental portfolio is to refinance properties to get more cash to help purchase more properties.  In the past this was an easier proposition than it generally is these days.  While these loans can be done there are many restrictions on them, in the most common places to get them, which makes it difficult.

If you are getting a typical non-owner occupied residential loan (these are your 30 year fixed rate ones with good rates) you generally have to own the property in your personal name and cannot have more than 5 mortgages in your name already.  Beyond that you have a seasoning requirement that means you have to own the property for more than 6 months to be eligible, and many banks want closer to 12.  Even at that they will often only give you around 70% of your purchase price for that kind of loan.  That might be fine unless you bought something at a good price because it needed work and you spent a lot of the repairs.

For example you buy a house for $100K cash then put $50K in to it to get it in great shape and it then appraises for $200K.  In this case you would hope to get 70% (or more!) of that appraised value so you can get most of your capital our, and still have a lot of equity.  However often at the 6 month mark you might only get 70% of the initial $100K which means you have $80K still tied up in the property.  The issue there is if the exact same deal presented itself again the investor now needs to find an additional $80K beyond what they started with to be able to do it.

 

Do you want to sell a rental house with equity?  Do you need to sell a house in Massachusetts or New Hampshire and can’t get the money out of it you need?  If you would like to sell your home fast and hassle free schedule a consultation with us today.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Some useful resources:

–          Fannie Mae Cash Out Refinance requirements.

–           Freddie Mac Cash Out Refinance requirements.

–          Our Video on How Many Mortgages you can have.

–          Our Video on the Costs to Rehab a House.

–          If you want to sell a house in Massachusetts or in New Hampshire we can help.

 

 

 

 

(Image credit: Buying A House Cash via 702homebuyers.com)

 

Q & A Saturday – What are Closing Costs?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your housebuying a house, real estate investor questionsland lording questions,  local market questions and many others things are all fair game. 

Today’s question is “What are Closing Costs?

Closing Disclosure Image - What Are Real Estate Closing Costs?

In this video Shaun discusses the many transaction costs to buy and sell real estate.

Some of the main points covered in this video are:

1)      What “Closing Costs” are

2)      What are some of the costs associated with buying a house

3)      What are some of the costs associated with selling a house

4)      Ballpark range a seller can expect to pay in closing costs for a normal transaction

5)      Shaun forgetting it is already the 2nd weekend of the new year :) 

 

If you have never bought or sold a piece of real estate the costs associated with the transaction can be pretty jarring when you first see them.  When buying a place all the costs associated with your mortgage loan can add up to a lot and this is on top of your attorney fees and recording fees, and any other things people stick on there for you.  When selling, especially when using an agent (like the vast majority of transactions) the costs can seem ridiculously high.  Starting with those real estate commissions that can easily add up to 5-7% of the selling price of your house, while these fees are not set and can be negotiated this is a pretty typical range.  Beyond that there will be recording fees, attorney fees and usually some number of other garbage fees that people will charge you.  Aside from that it is very common to be asked to pay some closing costs for the buyer.  This can add 3-4% to your fees if you agree to do it.  Now often the buyer will pay a little higher price, but not always and sometimes if you do not agree they just will not have enough cash on hand to buy the house.  All told it is not odd to see a seller lose 8-12% of the sale price of the house to closing costs.  For an investor running their numbers it is tough as we need to account for both sides of the transaction while running our number.  Last week we talked about the true cost of rehabbing a house and various closing costs can add up to 15-20% of the final sale price in costs so this is not some incidental number that does not have to be accounted for.  This accounting did not even account for a typical situation where we offer to pay most, or all, of our sellers closing costs so there is little mystery about how much money they will make.

 

Do you want to sell a house with little or no closing costs?  Do you need to sell a house in Massachusetts or New Hampshire?  If you would like to sell your home fast and hassle free schedule a consultation with us today.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our  Facebook page or Twitter account.

 

Some useful resources:

–          Last week’s video on all the costs needed to Rehab a house.

–          All our articles/videos on Financing and Lease Options

–          If you want to sell a house in Massachusetts or in New Hampshire we can help.

 

 

 

 

(Image credit: Closing Disclosure Image via entitledirect.com)

 

Q & A Saturday – What are the Different Types of Seller Financing?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “What are the Different Types of Seller Financing?

Guy Confused about Seller Financing - Massachusetts and New Hampshire Real Estate

In this video Shaun gives a high level overview of all the various types of seller financing.

 

Some of the main points covered in this video are:

1)      What is Seller Financing

2)      The two main questions to define what type of financing is appropriate

3)      Types when Seller holds the Deed

4)      Types when Deed transfers immediately

5)      Types when there is existing financing on the property

6)      More detail  we have discussed in previous articles/videos

 

Seller Financing, or selling on terms, is a very extensive topic.  However it can be broken down to a couple of basic questions with pretty much everything else being an offshoot of one of these basic situations.  The first big question is will the seller transfer the deed at the time of the agreement?  If not you are talking about some kind of Lease Option or Installment Sale (As it is usually called in MA, different places have other names like Contract For Deed or Land Contracts).  If the deed does transfer with an immediate sale the 2nd question is if there is existing financing on the property.  If not then that is the best situation as it will just be a situation where the two parties can decide on any terms that work out best for both sides without having to consider any 3rd party claims to the property.  If there is financing that does not make it impossible to do Seller Financing but it adds another level of consideration that has to be worked with.  The simplest situation is a Subject Too financed deal where the buyer agrees to by the house for the same amount that is still owed on the property and just takes over the payments on the mortgage.  In the scenario where the seller has additional equity that they will finance the property can be bought Subject Too then the seller can take a 2nd mortgage for their equity or a new note can be created for a Wrap Mortgage or similar instrument.  There are advantages and disadvantages to each scenario.  Once you establish the basic path to follow there is pretty much infinite ways to setup the deal so it works out best for both the buyer and the seller.  Please see the resources below for much more detail on most of these topics.

 

Do you want to sell a house with Seller Financing?  Do you need to sell a house in Massachusetts or New Hampshire?  If you would like to sell your home fast and hassle free schedule a consultation with us today.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Resources mentioned in the video and some other useful resources and good articles:

–          Our Video on Selling a House with Seller Financing

–          Our Video on Selling a House with Subject Too Financing

–          Our Video on The Due On Sale Clause

–          Our Video on Selling a House with a Wrap Mortgage

–          Our Video on Selling a House with a Lease Option

–          Guest post on 3 Reason to Sell with a Lease Option

–          All our articles/videos on Financing and Lease Options

–          If you want to sell a house in Massachusetts or in New Hampshire we can help.

 

 

 

(Image Credit: Confused Guy via cliparts.co)

 

Q & A Saturday – What is the Due On Sale Clause?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “What is the Due On Sale Clause?

Due On Sale Clause Mortgage - Massachusetts and New Hampshire Real Estate

In this video Shaun discusses what a “Due on Sale Clause” is in a mortgage.

 

Some of the main points covered in this video are:

1)      What is the “Due On Sale Clause”

2)      How it relates to Seller financed real estate transactions

3)      What is “Subject To” and how it is related

4)      Dangers of the Due On Sale Clause

5)      Ways to avoid triggering it

6)      How is gives the bank the right, but not the obligation, to call the loan

 

The “Due On Sale Clause” is standard language you find in pretty much any mortgage and note written by a bank over the last 30+ years.  Prior to that time it was very common to sell a house “Subject To” the existing mortgage.  At that time interest rates were well into double digits for mortgages and banks did not want to miss out on originating much higher interest notes. 

This clause gives the bank the right, but not the obligation, to call the note due if there is a title transfer of any sort.  The one exception is it is transferred into a trust for estate planning purposes (This is also a work around that some investors will use to make it less likely for a due on sale issue to come up).  The most common time for an issue to arise is when an investor buys a property Subject To or with a Wrap Mortgage.  When doing these things the new owner continues to pay the existing mortgage.  If the bank becomes aware of the title transfer they can call the note due.  If this happens the new owner will need to pay off the loan, refinance the loan, sell the house to pay off the loan, transfer the property back to the original owner or let it to foreclosure.  This last part is the risk in a sub-to or wrap situation since while the new owner loses the property and anything they put into it the original owner will have the foreclosure on their credit.  Ethical investors will not let that happen and in the worst of cases will deed the property back to original owner.  It is fairly rare for a bank to invoke the due on sale clause if the loan is being paid as it is a difficult and expensive task to do a foreclosure and they have enough non-performing notes to worry about.  However it DOES happen and it is a risk.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Resources mentioned in the video and some other useful resources and good articles:

–          Our Video on Seller Financing

–          Our Video on Subject To Financing

–          Our Video on What a Wrap Mortgage is

 

 

 

 

(Image Credit: Adaptation of lowest mortgage rate via blog.credit.com)

 

 

Q & A Saturday – What is a Wrap Mortgage?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, land lording questions, local market questions and many others things are all fair game. 

Today’s question is “What is a Wrap Mortgage?”

Wrap Mortgage - Creative Real Estate

In this video Shaun gives a quick overview of what a wrap around mortgage is and how it relates to other types of financing:

 

Some of the main points covered in this video are:

1)      What is the basic definition of a Wrap Mortgage

2)      How it differs from Subject To purchases

3)      Some of the advantages of this strategy

 

I hope enjoyed this video and it clarifies what a Wrap Mortgage is and how it is used.  The paperwork and logistics are a little more complicated and should be set up with an attorney that understands the concept of taking mortgages subject to and how to structure a wrap around mortgage.  This is a great strategy to protect both the buyer and seller and get a seller paid more when they have a lot of equity in a property that still has an existing mortgage on it.  Please note that everyone’s situation is unique and to know the specific impact these will have on you consult your attorney, accountant and mortgage specialist.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Some of the articles mentioned in the video:

–          All of our articles and videos on Financing

–          Q&A Saturday #1 – What is Seller Financing?

–          Q&A Saturday #2 – What is Subject to Financing?

 

 

 

(Image Credit: adaptation of “Wrapped-Up-House“)

 

 

Q & A Saturday – What is a Hard Money Loan?

 

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, landlording questions, local market questions and many others things are all fair game. 

Today’s question is “What is a Hard Money Loan?

What is a Hard Money Loan? - Real Estate Questions

In this video Shaun gives a quick overview of the definition and characteristics of a Hard Money Loan:

 

Some of the main points covered in this video are:

1)      Defining what a Hard Money Loan is

2)      Differences between a Hard Money Loan and a Residential Mortgage

3)      The costs and terms of a Hard Money Loan

4)      When to use a Hard Money Loan

5)      The Dodd-Frank Act and some of reasons Hard Money Lenders make you have a business

 

I hope this gives you an idea of what a Hard Money Loan is and how one of these loans work.  If you have questions I did not answer in the video put them in the comments and I will elaborate on those points.  If you are an investor in the MA or NH area we can help connect you with local Hard Money Lenders that work in our area.

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

 

 

(Image Credit: Hand Holding Dollars courtesy of jannoon028 via freedigitalphotos.net)

 

 

 

3 Reasons To Sell A House On A Lease Option

 

Today I’m pleased to have Mike Otranto join us to do a guest post. 

Mike Otranto is an active real estate investor in North Carolina and has extensive experience working with people with all forms of seller financing.  Today Mike will be discussing a few of the advantages of selling a house with a Lease Option.  For more information on what exactly a lease option is check out our last Q & A Saturday Video where we discussed what they are.

3 Reasons To Sell A House On A Lease Option

There many reasons why a home may sit on the market unsold.  Sometimes when you need to sell a house fast you need to explore other options if things don’t go as planned;  Below are some common situations where selling a home on a lease option is a great way to sell faster and for more money.

 Lease Agreement for Lease Option - MA and NH Real Estate

Little or No equity

When a home has a high mortgage balance relative to its market value it can be very difficult to sell.  As an investor, I always assume at least 10% of the gross sales price as the cost-of-sale.  These costs include agent fees, attorney fees, buyers closing costs, recording fees etc.  So, let’s say you own a home that has a fair market value of $350,000 and your mortgage balance is $335,000.  This would mean that you may have to pay up to $35,000 in closing costs.  Are you prepared to come to the closing table with a check?  By selling your home on a lease option you can have a tenant buyer in place paying your mortgage and reducing your principle balance every month.

Moving Away

Many times a job transfer, divorce, illness in the family, or loss of income can make an owner have to relocate abruptly.  Sometimes this relocation occurs to another state.  Many times this leads to a vacant house which can have serious consequences.  Increased insurance costs, having 2 house payments, theft and vandalism, landscaping and other maintenance costs can wear away at a person’s income and savings.  It is much easier to have a high quality tenant buyer in place to take care of the homes and help pay your mortgage every month. 

Too Much Repair

Often times when a property falls into disrepair it becomes unmarketable to the general public.  Buyers have difficulty seeing past the outdated kitchen, worn and stained carpeting, scuffed walls, old bathroom fixtures, etc.  If you can offer the home for sale on good terms you can get a high quality tenant in place that will upgrade the home for you. 

These are just some of the ways that a lease option can help sell your home fast.  Remember that the worst thing to do if you are in a tough situation is to do nothing.  Contact a trusted real estate company in your local area like Mass Home Sale.  Empower yourself with knowledge and then take action!

 

 

Mike Otranto has been an active real estate investor in the Raleigh N.C. area since 2005. He began with 2 – 6 unit multi-family properties in downtown Raleigh and has since moved is focus toward single family residential properties.  Always up for a challenge he shuns the long term mortgages offered by commercial banks in favor of creative financing strategies such as subject-to transactions, owner financing with purchase money mortgages, long term leases with option to buy, equity options and more. He also holds a NC Brokers License. Visit Mike’s webpage at http://MikeOtranto.com or catch Mike on YouTube.

 

 

(Image credit: Lease Agreement via rentpost.com)

 

 

Q & A Saturday – What is a Lease Option?

Welcome to our Q & A Saturday video.

In these Q & A Videos we will answer your questions about real estate.  Any real estate related topic from questions about selling your house, buying a house, real estate investor questions, landlording questions and many others things are all fair game.  

Today’s question is “What is a Lease Option?

 Lease Option Sign - MA and NH Real Estate

In this video Shaun gives a quick overview on what a Lease Option is:

 

Hope you enjoyed the video and leave any other questions you have about the topic below or any other topics you would like to see covered in future videos.  I encourage anyone that has things they would like to talk about to let me know what they are.  You can always fill out a contact us form here and put Q & A in the subject, just leave a comment with your questions below here, send an email to info@masshomesale.com, or post it on our Facebook page or Twitter account.

 

Here is the “3 Reasons to Sell with a Lease Option” post mentioned in the video.

 

 

 

(Image Credit: Adaptation of “sign-on-a-post_blank“)