How To Fight an Eviction During the Coronavirus Pandemic

EvictionPeter Dazeley / Getty Images

Eviction may soon become a reality for millions of American renters.

In March, the Coronavirus Aid, Relief, and Economic Security (CARES) Act prohibited landlords from evicting tenants for nonpayment of rent in homes with federally backed mortgages. But this program ended on July 24.

As a result, an estimated 20% of the 110 million Americans who rent their homes are at risk for eviction by Sept. 30, according to a report by the COVID-19 Eviction Defense Project, a group of economic researchers and legal experts working to better understand the housing, homeless, and community recovery during the pandemic.

“We anticipate a flood of evictions because many tenants won’t be able to pay the back rent, and it will be due,” says Deborah Thrope, deputy director at the National Housing Law Project, a housing and legal advocacy nonprofit.

“The eviction moratorium is simply a pause. It’s not rent cancelation,” Thrope says.

But even if you’re struggling to pay rent, this doesn’t mean an eviction is your only choice. Here’s an overview of some of the steps you can take to fight an eviction.

Talk to your landlord ASAP

“The best advice I can give tenants when their financial situation starts to deteriorate is to communicate with your landlord,” says Marina Vaamonde, a real estate investor in Houston and founder of HouseCashin. “Their willingness to have a discussion is the only way tenants can come to a resolution without going to court.”

According to a recent survey of landlords by the American Apartment Owners Association, 67% said they would be willing to offer tenants a rent deferment if they needed it.

So if you know you can’t make your next rent payment, reach out to your landlord as soon as possible. Waiting until after you get an eviction notice may be too late, and your landlord may be less likely to work with you. Your landlord could also already be in the process of filing the eviction with the court, and have paid fees to do so, which may make him more likely to follow through.

“There are a number of things you can negotiate with your landlord,” Thrope says. Some options to consider include a rent repayment agreement, shortening the terms of your lease, or possibly getting out of your lease altogether.

Learn how COVID-19 moratoriums apply to you

Eviction laws vary drastically across the country at the state and even city level, and the COVID-19 pandemic has made it all even more complicated. Along with the CARES Act eviction moratorium, states and municipalities issued their own mandates to pause evictions. So make sure to read up on the eviction laws in your area specifically to better understand what your landlord is legally allowed and not allowed to do.

“Once you understand your legal rights, you’ll know your options,” Thrope says. “We have this patchwork of policy all across the country right now, so it’s important to know the local law and tenant protections.”

One resource for finding out the statutes of local eviction laws is the Eviction Lab at Princeton University, which created a nationwide database. The group has also developed a state-by-state COVID-19 Housing Policy Scorecard, tracking states’ responses to evictions and during the pandemic.

NHLP also has local and national online resources for renters and homeowners during the pandemic.

Make sure your landlord gives you adequate notice

Landlords usually have the legal right to evict tenants for not paying rent, violating a lease, causing damage to the property, or engaging in illegal activity at the home.

Most states require landlords to give an adequate notice of eviction with a deadline to pay rent or move out and the amount owed. If you don’t meet the deadline, the landlord can file a lawsuit to evict you.

But if landlords don’t provide adequate notice of eviction, Vaamonde says a judge will often throw out the case.

In Texas, for example, landlords must provide an official three-day notice to vacate the property with the reason for the eviction, and can file an eviction hearing with the court if the tenant doesn’t respond or move out.

Landlords are also prohibited from taking extreme actions during the eviction process, like changing the locks or cutting off utilities.

Attend your eviction hearing

After being closed because of the pandemic, eviction courts are beginning to reopen across the country, and are moving cases through quickly to clear up the backlog of evictions.

If your landlord files for an eviction in court, you will receive a notice to appear for the hearing. It’s important to show up, especially if you hope to fight the case. You have the right to examine and present evidence and bring witnesses, Thrope says.

“Showing up to the eviction hearing at the courthouse is the only way to receive some form of leniency,” Vaamonde says. “If the landlord wants you out of his property, the judge is the only one with the authority to defer your eviction.”

Since the pandemic has made showing up to court more difficult and dangerous, many proceedings are being held virtually, with tenants expected to appear by phone or videoconference. This may be easier for some tenants, but Thrope says in other cases, it can interfere with due process for some tenants who may not have access to the technology. It also makes it more difficult to look over evidence or converse with attorneys. Make sure you know when, where, and how you’re supposed to show up in court to make sure you do what you can to present your case.

“We hope that courts understand that this is a public health crisis, and that people sheltering in their homes is one of the remedies,” Thrope says. “To put people on the street right now is only going to exacerbate this crisis, so we hope courts will do the right thing.”

Consult an attorney

Fighting an eviction alone is overwhelming for many tenants since the process is so complex. Thrope urges tenants facing eviction to hire an attorney or contact local legal aid organizations.

“Reach out for legal assistance,” she says. “That’s really important because you need to understand what protections you can avail yourself locally.”

A lawyer can help explain whether you’re protected by the CARES Act or other local mandate, as well as how regular eviction laws apply in your situation and what exactly you need to do to fight an eviction.

A lawyer will also help you gather documentation to use as evidence, such as proof of past rent payments or that you lost your job, and any communication that you had with your landlord.

“Most tenants are not represented,” she says. “Some tenants may be savvy enough to [represent themselves], but it’s a legal process. We have the right to counsel, and it’s really critical here.”

The post How To Fight an Eviction During the Coronavirus Pandemic appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

Remote-Work Boom During Covid-19 Pandemic Draws Real-Estate Startups

Park in San Francisco social distancingDavid Paul Morris/Bloomberg via Getty Images

A group of real-estate startups is aiming to cash in on the remote-work phenomenon.

With many corporate offices closed because of the pandemic, many young professionals have left cities like New York and San Francisco for warmer, cheaper places. A number still plan to return after their offices reopen, leaving them reluctant to buy homes or sign long-term apartment leases.

That situation is creating fresh demand for furnished housing on a short-term basis, a fast-growing niche that many property startups and their venture-capital backers are rushing to fill.

One of them is Landing, which runs a network of furnished apartments across the U.S. When it launched in 2019, the Birmingham, Ala., and San Francisco-based company initially planned to operate in about 30 cities last year. Instead, it expanded to 75, largely because demand grew much faster than expected, said Landing Chief Executive Bill Smith.

“Covid has taken a decade of change that I was thinking was going to happen between now and 2030 and kind of compressed it into a year,” he said.

Legions of remote workers also offer these firms a chance to make up for reduced tourist and corporate business. San Francisco-based Sonder, which rents out furnished apartments by the night, ramped up its marketing of extended stays during the pandemic, according to Chief Executive Francis Davidson. Stays of longer than 14 days now account for about 60% of the company’s business, up from less than a quarter before the pandemic, he said.

Kulveer Taggar, CEO of corporate-housing operator Zeus Living, said his firm experienced a steep drop in demand as companies hit the pause button on employee travel and relocations. But he was able to make up some ground by renting apartments to individuals. People working from home now account for about a quarter of the company’s business, Mr. Taggar said, up from virtually nothing before the pandemic.

Unlike Sonder and Zeus, remote workers were a key part of Landing’s business before the pandemic. Its customers pay an annual membership fee, which gives them the right to rent furnished apartments in any city. The minimum length of stay varies from 30 to 60 days, and the company asks for a month’s notice before a customer moves out.

The company is popular with college-educated young professionals who don’t want to be tied to a single location. Since the start of the pandemic, it has seen a growing number of customers leave New York and San Francisco and move to cities like St. Petersburg, Fla., and Denver, Mr. Smith said.

In November, Landing raised $45 million in venture funding from a group of investors led by Foundry Group and including Greycroft and Maveron, along with $55 million in debt. Mr. Smith said he hopes to expand to 25,000 apartments by the end of this year, up from around 10,000 today.

That growth carries risk if demand from remote workers were to disappear again after the pandemic is over. Still, Chris Moody, a partner at Foundry Group, said the number of furnished apartments available under flexible terms is still so small that he doesn’t worry about a lack of customers.

“Even at the end of 2021, we won’t really have scratched the surface,” he said.

The post Remote-Work Boom During Covid-19 Pandemic Draws Real-Estate Startups appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

Thankful Investor – John Martinez

 

Hey, welcome back for another segment! This is the 3rd and final segment that I wanted to share with you from my recent live event called the Thankful Real Estate Investor. We hosted this live right before Thanksgiving and it was an interactive event. Our 3rd speaker is Mr. John Martinez, the top real estate investor sales trainer! Let’s get started!

If you’re not a member of the FlipNerd Private Facebook group yet, you can join here: www.flipnerd.com/pro-event, and get access to lots of upcoming live and interactive content like this going forward.

Resources and Links from this show:

  • Investor Fuel Real Estate Mastermind
  • FlipNerd Professional Real Estate Investor Network: Join for Free!
  • Investor Machine Real Estate Lead Generation

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

[00:00:00] Mike: [00:00:00] Professional real estate investors are a different breed. We’re not afraid to go all in and take educated risks to build stronger businesses and help our families live better lives.

This is the FlipNerd professional real estate investor show. And I’m your host Mike Hambright each week. I host a new episode live and bring you America’s top real estate investors as guests.

Let’s start today’s show. Hey everybody. Welcome back for another segment. This is the. The third segment of three that I wanted to share with you from my recent live events called the thankful real estate investor. We hosted this live right before Thanksgiving. It was an interactive segment. So, uh, hopefully if you weren’t there, you’ll join us on an upcoming events.

Uh, our third speaker is mr. John Martinez, by the way, I’d love for you to join us at our future live events. We’re going to be doing these several times a month, going forward events like this that are live and interactive, answering your questions in our private. FlipNerd Facebook group. The way you [00:01:00] get access to that group is you go to flipnerd.com/pro event has a hyphen there pro dash event flipnerd.com/pro-event.

Make sure you go there and register. We’ll get you in the group and you can join us if you didn’t this time on our next live and interactive, uh, event. Let’s go ahead and jump in with mr. John Martinez.

I’m going to bring my buddy John Martinez and. John, how are you? You’re a little bit cut off. I think.

John: [00:01:27] Let me adjust the camera here.

Mike: [00:01:30] We want to see your good side.

John: [00:01:34] So you have to just deal with it.

Mike: [00:01:37] Yeah. So how are you? My friend.

John: [00:01:38] I’m good. I’m good. How are you  doing? How are you doing Mike?

Mike: [00:01:41] Good. Good. So as we’re kind of getting started here, I’ll ask a really a couple of things. First is if you guys have questions for John, if you don’t know John.

That’d be kind of unusual. So if you know, John is, and you want to ask some questions about what’s working now from a sales technique standpoint, or an approach of how you handle your leads, start to chat those in I’d love to get to your [00:02:00] questions. In the meantime, John, while we’re waiting on some questions, maybe you can share a little bit about what you’re most thankful about.

We’ve got so much to be thankful for. What would you share that, uh, I know you probably have, might have a long list if we had time to talk about it, but what are one of the things that come to mind that you’re most thankful for?

Uh, my health, uh, man, I turned 40 this year. So it’s funny how I that’s like more and more of a top of mine topic.

Like, uh, every year you get older. So, uh, turning 40 every day. I’m thankful for my health. Uh, thankful for parts of me that don’t hurt when I was picked up. And then, I mean the same with my family. Yeah, me too. My kids and my wife are all healthy. And I think, um, as long as you have that, you can basically basically get through anything else.

So that’s gotta be what I’m most grateful for.

Awesome. Awesome. Well, that’s great. So, so John, while we’re kind of waiting on some more questions, or maybe you could kind of share a little bit about what’s what’s working now, like we’ve been through, I wish we were through the COVID, so I don’t know if we’re through it earlier.

Trevor said we’re kind of. In the middle of this [00:03:00] code. And I’m like, hopefully we’re at the tail end. I don’t know where we’re at, but it’s, it’s changed. The dynamic has a lot of people that are doing stuff virtually now, or certainly vetting more out on the phone than they used to. What are, what are some of the things that are, that are kind of working now that people have had to adapt to over the last six or eight months?

Yeah. So it’s, you know, in sales, what’s worked for forever was having a plan or we call sales process. But I think it’s more important now than ever because we’re not doing as much kind of face to face or belly to belly selling. Um, so a lot of people who could kind of get away with just their wit and their good looks inside of a house and really building rapport that way and going buddy, buddy, and, um, having really good conversations because of, of that ability.

It’s it’s a lot harder to do that on the phone. So you have to start to rely on your plan or your sales process. I think even more now than ever before. Right? Your plan about what I want to accomplish during this call, how do I want it to begin? What do I want to, uh, [00:04:00] what’s the agenda for the middle? How do I want this thing to end?

What will, what will the acceptable outcomes be? Um, you know, if I run up against hidden decision makers, influencers, Pushback resistance. How am I going to deal with that? So I think it’s always, you know, the cornerstone of any good sales organization or sales person is, is process or having a plan. But I just think it’s more important right now than it’s ever been since we’re so disconnected.

Yep. Yep. So we’ve got a question from Matt here. That’s talking about kind of, how are you negotiate remotely? And I think, you know, a lot, like we just talked about a lot of people who have transitioned to doing this over the phone. And you lose some things on the phone, right? You don’t get to see the facial expressions or exactly how they’re living.

You don’t really get any indication of what the house is like by just walking in the front door. Um, maybe, can you maybe share some tips on how to make that transition for those that have had to make that transition that we’re buying at the kitchen table, if you will, to doing more over the phone?

John: [00:04:57] Yeah, I, I can’t so great point.

So usually in [00:05:00] a negotiation, you know, by the time you get there, A negotiation. You’ve got to walk a pretty tight line because you want to negotiate aggressively to get yourself the best deal. But at the same time, you don’t want to put yourself in a position where you, you upset someone or offend them in such a way that you kill your own deal.

Now, when you’re face to face, you can basically just read it. Right. Do you know the body language, the tonality? Um, no one can really hang up on you when they’re face-to-face either. Quit and say, get out of my house now they can, but it’s harder. Right? So in order to do that over the phone, one best practice I found what’s working right now is always assume the worst during the negotiation.

And then I’ll tell you what I mean by that. Um, you’re always safe if you assume the worst, um, uh, in a, in a sales negotiation and when it comes to keeping the conversation going and not offending someone or, or losing rapport. So here’s what I mean by that. Um, if you’re, if you’re making offers, you know, always assume that they’re not going to take it.

So here’s, here’s some examples, [00:06:00] uh, listen, I’d love to offer you a 75,000 for the property, but you know, based on this phone call, I’m guessing that if I offered that and I’m way out of the ballpark. Um, so, so you tell me, am I, am I, am I right? Am I in my way out of there? So just always assuming the worst there, you won’t put your prospect or the seller back on their heels and, and start that kind of confrontational negotiation.

So even as you go through the negotiation and you’re going back and forth, you know, Hey, I think I could offer you more money, but that would require you to, um, help it to clean out a little bit, or certainly shorten the timeframe or commit, uh, you know, within the next 48 hours. And, you know, we haven’t had a chance to think about that.

So I’m not sure if that, you know, the more, the extra money would even be worth, you know, you. Cleaning out a little bit more or painting the living room or getting their old car out of the garage. So I think, um, in order to be safe with negotiations, just err, on the side of caution and what it’ll actually do is it’ll build a, and it’s more amount of rapport.

It’ll [00:07:00] keep the conversation going. It’ll keep you out of that kind of enemy, confrontational battling type of negotiation and extend the conversation. So you can actually get through the negotiation and not end it prematurely.

Mike: [00:07:11] Yep. Good, good. That’s good stuff. So we’ve got another question here. I’m going to, I can’t tell with who the user is, but they’re saying what’s the best way to start a renegotiation or price with sellers.

So I don’t know the context of that, but let’s just say when people are buying virtually more frequently, now that they are, you’re making assumptions on repairs and stuff. And sometimes, you know, you find out that, you know, you told me the kitchen was remodeled, but it turns out is remodeled 20 years ago.

Right. And, uh, that it’s going to cost more. And so I think we all. You know, some people have an approach and I know John believes the same way that I do. You really want to use renegotiate as, as a. As a last defense, like you just really miss something and not this approach of like, well, I’m gonna try to lock it up and then go back and renegotiate.

I think we’re in agreement with how we, how we believe that. Um, but let’s just say we made [00:08:00] our best effort. We put an offer forward, an offer that we thought was good and later we found out we totally missed something or were misled on something. Cause we did it over the phone and we have to renegotiate.

So maybe talk about how to best start to renegotiate a deal with it. Somebody after they’ve agreed to something else.

John: [00:08:17] Yeah. So good question. So it pops up all the time. Um, it just happens. It’s the nature of the business is real estate and buying houses that are in disrepair or, or distressed sellers. Um, it’s going to happen.

So when you do it, you just need to really put yourself in the seller’s shoes when you go into that conversation. So here’s what I mean. We already know. And if you got one with a renegotiation and you’ve agreed to applies, and it might’ve been a tight negotiation to get to the price you originally agreed on.

When you go in and say the deal’s off, or I need even less, you have to understand how they’re going to feel. They’re going to be a little bit shocked. Um, they’re going to probably be a little upset and disappointed. And so as you go into the negotiation, first and foremost, you have to [00:09:00] realize what that will do.

If it’s with a seller it’s going to, they’re going to react the same way as is Mike, or I would react if we got upset or maybe even, you know, in that situation, you might even feel like you’re taking advantage of, or someone trying to pull one over on ya. Um, so you’ve got to realize that that’s going to be met with some type of resistance.

And now resistance in sales really shows itself in two ways. It’s either it’s kind of a fight or flight, right? If you get upset or you feel like you’re being taken advantage of, you’re either going to just shut it down and say fine, it’s off whatever. And I’m sure people have experienced that, right. They go in with the renegotiation and they just say, well, deal’s off.

No. Uh, or if there’s going to be a tremendous amount of pushback aggression, right. Um, get into a, uh, you know, a yelling confrontation or something like that. And that neither of those is going to lead to a smooth negotiation. I think we can agree on that. Right. If they’re shutting it down or, or getting pretty aggressive.

That’s not where you want to start off. So first and foremost, you got to know where your prospect’s mind is going to [00:10:00] be an address mindset first, before you get into the nego renegotiation. So knowing they’re upset, I’m just going to be open and honest and say, listen, I’ve got some bad news. I’m really reluctant to even bring it to you.

I feel like a schmuck because I know I’m going to rain on your parade today. Um, but I’ve, I’ve exhausted every option looking into this, and then we’ve got to have a really tough conversation and I want to let you know, I apologize up front because, um, it’s not going to be a fun one. Right. Uh, so if you see what I saw there, I just, I called the situation what it was.

Um, I took the temperature down using what we call tactical empathy in our sales training. Bye I’m going not okay. Just kind of, you know, going down and, and feeling bad cause you’re about to give bad news and that’s what a normal human being would do. Right. Um, and there’s some science behind it, but anyways, that’s it.

You want to go into it smoothly. And then, uh, I’m going to borrow from the last tip I gave, um, about negotiating over the phone. We want to, we want to come at it from a position where we’re [00:11:00] assuming the worst. So when I renegotiate, I started out just like I said, on the call, and then I’d say, listen, I, there’s no way I can pay 110 grand for the house.

It’s just based on what we found and everything going on. I, I can’t do it and I feel horrible about it, but I assume that if I had to pay even a dollar less, you don’t want to do it. And then just be quiet. Now, the reason why I didn’t say the number that I actually need is we feel tested this quite a bit.

And we found that we just say, you probably don’t want to sell at this point, or I’m not even sure I could buy at this point. Oftentimes sellers renegotiate down lower than, than what you need. Uh, I, I have countless emails and messages from people who said, I need a 10 K off. I went in with that exact read negotiating strategy.

And they said, well, would you take it if I took 20 K off? Right. And then, okay. Uh, so, so that’s it just know their mindsets slide into it, knowing you’re going to upset them and addressing and being real about it. And, and if it doesn’t [00:12:00] feel good to give bad news and don’t hide it, um, and then kind of go negative and assume that.

They’re not going to consider it or not like it, or you might not be able to get the deal done and then just go silent

Mike: [00:12:11] and see what happens. Yep. Yep. And I think some of it too is if you’re, if you shifted your model to bind more virtually, is there some things you can do to pre-frame that upfront? Like here’s our offer.

If part of your processes, we’re going to have an inspector come out and look what I want to try to give you a price. Now you can kind of pre-frame frame that is, uh, like we’re based on what you’ve told me. You know, here’s what we’ve come up with for repairs. And we’re going to have somebody come out and double check this.

And so you can kind of slip in there that in the event that any of that, that I missed anything here, we’ll find out and I’ll let you know, or right. You can kind of pre-frame them.

John: [00:12:44] Absolutely. Um, you know, that, that was kind of the assumption I was running with. No one likes surprises, prizes, especially bad news surprises.

So covering that upfront is definitely a best practice.

Mike: [00:12:56] Yeah. Good. We got a question here from our buddy John Harker, who [00:13:00] says hello?

John: [00:13:00] Hey John,

Mike: [00:13:01] uh, what do you do when a seller just won’t give you a price and just keeps. Saying look online. I don’t know what he means by that. Like,

John: [00:13:10] yeah. Maybe he’s, he’s referring to Zilla or do your research.

Mike: [00:13:13] They’re kind of celebrates online. They just won’t give you a price. And uh, so talk a little bit about what do you do when they just won’t show you their cards and they’re just waiting for you to give an offer.

John: [00:13:23] Yeah. So there’s a lot of strategies to get the number, but I want to come at this question two different ways.

Um, the first way is, okay, how do we get the number again? You’re probably seeing a pattern here. We’re going to pull back a little bit. Um, there there’s two ways to get it. One is I usually just suggest they don’t know the number cause people like to argue and push back. So one way to ask is. Listen, I’m guessing you don’t even know what you’d even what you’d want for the house we contacted.

You probably haven’t had time to do research, to think about it. That’s one way, another way to do it is to ask about a similar property. Oftentimes people don’t want to talk about themselves, but they’ll talk about their neighbors or a member of house in the [00:14:00] neighborhood. So another way you can ask is, Hey, listen, um, Houses in this neighborhood.

Do you know any that have sold recently? What are they going for? Right. And when you have a hundred K 200, 300 and you can kind of whittle it down from there real simply like really were you expecting to get more or less for yours? And now we’re starting to bracket them in and kind of drilling down on.

I was actually expecting a bit more. Well, why is that? Well, it’s a bigger house. It’s a nicer condition we rehab. So you can start to get to it in that round about way now, now that I gave the two ways that you’ll have more success doing it than just asking straight out, um, kind of some caution I want to throw out there.

Um, Oftentimes, unless you’re qualifying, let’s say this makes sense. If you’re qualifying, let’s say you have a bunch of leads and you want to find that, who am I going to work with? Who am I going to send my acquisitions out to? Who am I going to talk to? Where am I going to spend my time? Then you might be asking that price.

You, it’s a, it’s a level of your qualification. Now, if it’s not a level of your qualification, I’ll want to [00:15:00] caution you on asking what their expectations are, because it actually does more harm than it does. Good. Number one, it could get into your head. Um, I’ve worked with plenty of sales reps. Who’ve gone into sales calls gone.

We’re at two 50 for this house. They want 500 why even go, right? And they’re talking themselves out about, out of even showing up. But then when we show up and we run through the sales process and uncover some things, and sometimes those people actually sell for what they need to, right? No, one’s going to.

Call you up and you say, Hey, what would you like to sell for? And they’d say, Oh, 50% of what I think I could sell it for. That’s insane. Right? So sometimes that can kind of get in your head and stop you from even taking the appointment or really going full force at the appointment. The other negative.

About getting their offer is they’re setting expectations. And whenever you come in under it, cause you will come in under whatever they expect, 99 or 999 out of a thousand times. They’re going to be disappointed. [00:16:00] So, because I don’t want to disappoint them. I want to set expectations. I want to come in instead of saying, what would you like?

I’d like a hundred and me saying, I could give you 50 that’s bad. I’d rather go in and say, I’d love to give you 40, but with this, I think if we did it quickly, I could do 50. So then I’m setting, setting expectations. And then, uh, my comparison, it actually sounds a little sweeter. Um, so, so that’s my take on it.

So be careful asking, asking for asking price only do it. If you need it. Because of mindset and the expectations that sets, and then kind of the psychology that goes along with what’s called price anchoring. It could actually have a negative effect. So if you don’t need that information, you might not want to get it.

Mike: [00:16:36] Yep. Good stuff. Good stuff. So, John, we’ve got a really long question. I don’t want to put up on the screen cause I think it’ll block the whole screen, but effectively says, uh, you know, what kind of techniques are working well with speaking to homeowners or landlords? There’s a lot of trouble landlords out there these days because of all the rents, deferments and all this stuff, um, about.

COVID w on the value of their property versus kind of the future. So I think that there’s a couple of ways [00:17:00] I could translate that. I think, um, you know, there’s a, there’s probably a lot more landlords that are hurting now than there were before. COVID. And then on the other side yeah, for home owners and even, I guess for landlords is property values have gone up pretty substantially during, since COVID started because there’s just very little inventory, so prices have shot up.

So we’re, we’re kind of dealing with this whole COVID mess, but at the same time, knowing that prices just feel kind of artificially high right now because of what’s been going on. And so, uh, that’s like a huge loaded question ultimately, but kind of how do you integrate those things into. Talking about value when you’re talking to a seller.

John: [00:17:39] Yeah. So, uh, interesting questions. Um, we can break those

Mike: [00:17:44] down into a couple of smaller questions if

John: [00:17:45] you don’t know. It’s okay. It’s okay. I’m just thinking through it. So, uh, really I think having that conversation unless it needs to happen is kind of a trap. So I’m going into that question with the premise of, we’re [00:18:00] trying to convince someone that their house is worth a, when they’re trying to convince us that it’s worth B.

Yeah. And if you are in the real estate investment business, that’s, that’s not the conversation you want to be having. That’s a retail conversation, right? Um, that conversation is, is not going to do a lot for you as far as increasing your conversion rates. What you want to do is pivot that value conversation, not the price isn’t worth more because of COVID or is it worth less?

Two, what’s it worth to you right now? Uh, here is what I can offer. Let’s have a conversation about, is it worth even considering that offer? So shifting the conversation is where I’d want to take the answer to that question. If you’re having that conversation of, I think it’s worth 50. Well, I think it’s worth 60.

I think if we’re  that’s not a winning strategy and sales, you have to pivot the conversation. To listen, I’m going to give you an offer and I’m not sure it’s going to be more or less than, than what you were expecting, but let’s chat a little bit about what you want to accomplish. [00:19:00] And, um, so I know how to structure it and make sure I can maximize my offer.

And then you can just figure out at the end of this, Hey, with what I want to accomplish does accepting this offer makes sense or not make sense. And that’d be a pretty easy, easy answer for you. And then I’m shifting the conversation to, you know, what even got you started thinking about selling. Is there a, you know, is it, is it kind of a situation you want to get away from, or is there, do you want to use the money for something else?

Do you want to move across the country? What’s going on? And I want to redefine it and read it and just pivot that conversation to what’s your problem? What do you want to accomplish? And, and I’m going to ultimately give you an offer and then your only decision is in order to accomplish that. Is it going, is it worth it?

Is it worth taking the offer? And doing that you can, you can really stroke a tremendous amount of motivation. You can bring a lot of motivations to surface that your prospect may not have been thinking of. You can understand their situation a lot better. You’re going to build a lot more rapport, their urgency to take action.

The more they talk about their situation is going to increase. So I don’t know if I’m giving the right answer, but, but my answer [00:20:00] is that’s probably the wrong conversation to have, and we need to pivot.

Mike: [00:20:03] Yeah. Don’t look at the underlying issue of COVID it’s just the situation of what you think the value is versus what you can pay.

Right, right. Yeah. Yeah. I think there’s a lot of, there’s a lot of landlords that are hurting. Right. And I mean, there’s, let’s be honest. There’s a lot of landlords that didn’t buy, like. For me, all my rentals were bought at wholesale prices. And in fact, most of them were from many, many years ago. So like prices that are inconceivable now, uh, cause I’m actually older than John.

Uh, I was talking about age earlier, but, um, uh, but I think there’s a lot of landlords that, you know, they bought it off the MLS and they, in their mind, you know, or, or they bought a turnkey property at close to retail value and they never. Thought about like, well, what could go wrong? The house is newly renovated and like things go wrong, you know?

And of course, with, with COVID it’s even, uh, kind of unprecedented in terms of. You know, some States saying you don’t have to pay the rent and all that stuff. It’s just crazy. So I think what you really focus on there is that pain of like, you’re not even getting paid right now. When do you think you’re going to get paid again?

Right.

[00:21:00] John: [00:21:00] The reality of the situation is we all overpay for stuff happily because it’s worth it. Right. And we all take massive losses on things that we have when we sell them, because again, it’s worth it. So just think about any time in your life, where you said, you know what? I probably could have gotten more.

But I’m just thankful it’s over. I’m thankful I got rid of it. Yeah. I know. I overpaid for that, but here’s the opportunity it opens up. I’m glad I did. Right. And you’re excited about overpaying for something. So if you start thinking those terms, that’s how your seller’s thinking, right? It’s not always about getting, you know, fair market value to them.

Is what it actually accomplishes to them, not, not what Zillow says or what your, your, your maximum allowable offer is, or whatever you calculate the ARV to be. It’s, it’s going to be what’s it worth to them. So again, just another way to rephrase my answer is you’ve got to figure out what, moving that property is worth to them and get away from the ARV conversation.

Mike: [00:21:54] Yep. Yep. Well, guys, we’ve got time for a couple more questions, so please chat them in here. Uh, John saw this, [00:22:00] I got a question for you. How do you use, or how can you utilize the end of the year? Beginning of the year kind of phenomenon. Uh, and I’ve always kind of explained it as it’s like a health club.

Like people want to, you know, January 1st, there’s this line in the sand, that’s really just in their mind. And now I want to start the year and lose 40 pounds or whatever. There’s also people that have had. Problem rental property or a house they inherited, or a fixer upper of some sort that they’re like, I don’t want to deal with that next year.

I just want to get rid of it. How do you kind of utilize that in the year? Phenomenon of people wanting to start fresh?

John: [00:22:33] Yeah. I mean, you can use it just like you said. I, I typically don’t care. What time of year. It’s a great time to use scarcity. I can use really use scarcity no matter what time of year it is, but it works really well at this time.

Um, I’ll tell you when I was out, uh, training salespeople and kind of men buying houses coast to coast. Whenever we didn’t get one at the kitchen table, we would drive two blocks away and I would call and say, listen, We could give you a little bit more money if we can walk this up in the [00:23:00] next 60 minutes and we would often lock them up then because that’s scarcity.

So having, having a cutoff, and I think it speaks really to the broader, uh, sales strategy of having an offer expiration or having, uh, making a, no one, no right Treme salespeople out there, 20 acquisition agents and real estate investors, I think because there’s a fear of losing a potential deal. They never make their prospects actually make a decision.

Right? Think about it. Think about it. I’ll continue to follow up with you. And there’s never any cutoff where a decision has to be made. So the prospect never feels a fear of loss, a fear of actually losing the deal. So, um, cause the investors

Mike: [00:23:40] is afraid to say, I’m never going to call you again, right?

John: [00:23:43] Yeah, absolutely.

Uh, so sorry, my Alexa just went on and off. I don’t know what happened to you guys

Mike: [00:23:52] are winding it down. Guys, ask the questions. Cause the lights are going

out

John: [00:23:56] probably in the other room it’s like in it, but yeah, no. [00:24:00] And anyways, I want to just, just go back to that and say, Hey, every time you make an offer, you just word of advice.

You need an exploration, whether it’s by the time I, you know, if it’s not a yes. You know, by the time we wrap up our conversation. Totally cool. It’s no, uh, you know, don’t be a jerk about it. Uh, or Hey, you know, offers you a stand for a week. Obviously I can’t make an offer on a property and let it hang out there for a year.

If things change, my situation will change. Number of houses. I need changes the real estate market’s going to change. So I can, I can let this offer stand for three days, seven days, whatever it is. So you’ll do yourself a favor. If you just start giving a cutoff to when your

Mike: [00:24:34] offer expires. Yeah. Yeah. I remember when I first started this a long time ago now.

Um, and I used to sit there like, how good, how good is the offer for? And I was like, Oh, you know, 30 days. But even then I’d still be interested in buying it. And I was like, well, would I in hindsight, you know, so stupid, what would you do? You’d like, you’d go shop at everywhere in town. And like, I’m like plan B if they need it, which they would never need it.

So then we, then we got better. [00:25:00] Yeah. Awesome. Well, John, what do you think differentiates, let me ask you a question. What differentiates you? You, you’re a member of investor fuel as well. You know, you surround yourself with a lot of amazing people, just like I do for Schwartz, I’ve run in some of the same circles.

What do you think differentiates those that are doing really well at crushing it from those that are good, doing some deals, but kind of just getting by and kind of stuck in the grind. What do you think differentiates those two people from a sales perspective,

John: [00:25:26] from a sales perspective, It’s gonna sound funny, but it’s, uh, getting out of the sales role.

Um, I think the, the more successful people in invest a fuel, um, and, uh, you know, just, just investors in general. Um, even if they’re really good at it, uh, sometimes even if they like it pulling themselves out so they can grow, right. If they can have three acquisition agents that are half as good. Uh, the numbers typically work where you can turn up lead flow and, you know, still, uh, grow them at, uh, in the business.

So I think it’s [00:26:00] getting out of the seal rule so you can focus more on actually growing the business. And I, I train sales people, so I love to train an investor. So I don’t want to talk anyone out of, uh, investors buying houses, but at the same time, getting out of the sales role, hiring others to do it.

Even if they can only do it a fraction as well as you will allow you to focus on the actual and pull the levers that will grow your business and then turn everything off because now you’ve got the bandwidth to handle, increase everything else. So that’s when you can do sales. If you’re an investor business owner, entrepreneur is get out of the sales role and get yourself a couple of people who can do it

Mike: [00:26:36] for you.

Yeah, you can even say that about your whole business. Like we’re we’re in our way, right? I, I just, uh, before today’s event here, I did, uh, I recorded an investor fuel show with clay Rockwood. They’re doing a hundred wholesale deals a year and adding a hundred rental doors a year to their business. They’ve been in business for three years.

These guys are crushing it. And that’s what he said. That’s what he said is like, we just. I’m not the best at [00:27:00] anything that our company has to do. And I just had to get out of the way. And so I can focus on, you know, being the visionary or God forbid living your life. Right.

John: [00:27:09] You know, I’ve, I’ve, I, um, we’ve got one client in York, Pennsylvania.

This guy is probably one of the best natural salespeople I’ve met in my life. Like just, just he’s got it right. He was born with it. Um, that being said he doesn’t train the sales team. Um, he outsources that to, to me. Um, and the reason is, is not because he can’t do it. Um, but he knows his, his focus is spent elsewhere.

Now he’s doing 70 deals a month consistently and half for the last year or so last year. So we’re talking about how do you hit that volume? Um, and he’s not involved in the business that much anymore. So I just wanted to kind of throw that out there. He’s probably one of the best sales people I’ve met in my life.

He’s not selling his, he’s not even training his team, let alone selling the deals or buying the houses that are just positioning him because he knows he needs to [00:28:00] keep stepping up and taking kind of a higher level view of what’s going to grow the business instead of just taking that micro view.

Mike: [00:28:08] Yeah.

Awesome. Well, John, appreciate you spending time with us today. Great. To great to see you. My friend.

John: [00:28:12] Yeah. Good to see you, Mike,

Mike: [00:28:13] have a great Thanksgiving and a, well I’m sure we’ll be talking again soon. Okay. Thanks for joining me. On today’s episode, there are three ways I help successful real estate investors take their businesses and their lives to the next level.

First, if you’re in search of a community of successful real estate investors that help one another, take their businesses to the next level and a life changing community of lifelong friends. Please learn more about my investor fuel real estate mastermind. By visiting investor, fuel.com. If you’d like a cutting edge solution for the very best done for you lead generation on the planet where we’re handling the lead-generation for many of America.

Top real estate [00:29:00] investors. Please learn more@theinvestormachine.com. And lastly, if you’re interested in a free online community of professional real estate investors that isn’t full of spam solicitations and newbie questions, please join my free professional real estate investor Facebook group by visiting flipnerd.com/professional.

 

Source: flipnerd.com

Podcast #13: Commercial Lending and Real Estate

podcast 13 commercial lending and real estate
For this podcast about commercial lending I sat down with Angie Hoffman at U.S. Bank.  During the podcast we discussed investing in real estate, commercial lending, and how commerceial mortgages can help investors.  If you want to learn more about commercial loans this is a great pdocast for you.
I hope you enjoy the podcast and find it informative.  Please consider sharing with those who also may benefit. Listen via YouTube: You can connect with Angie on LinkedIn.  You can reach out to Angie for more information on their lending products by emailing her at angela.hoffman@usbank.com.
You can connect with me on Facebook, Pinterest, Twitter, LinkedIn, YouTube and Instagram.
About the author: The above article “Podcast #12:  Hard Money Lending” was provided by Luxury Real Estate Specialist Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you.  Contact me today!
I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.
TRANSCRIPT
Commercial Lending Podcast
 
Paul Sian: Hello everybody. This is Paul Sian, Realtor with United Real Estate Home Connections, licensed in the State of Ohio and Kentucky. With me today is Angie Hoffman with US Bank. Angie how are you today?
Angie Hoffman: I’m doing great Paul. How are you?
Paul Sian:  Great. Thank you for being on my podcast. We’re gonna start off. Today’s topic is ‘Commercial Lending’. Angie is a commercial lender with US Bank, as I mentioned. Angie, why don’t you tell us a little bit by your background. What you do with the US bank, and how did you get started in that field?
Angie Hoffman: Sure. So, I am a Cincinnati resident, have been my entire life. Was previously with a company called the ‘Conner group’, which is located out of Dayton, Ohio. They’re a private investment real estate firm. I was with him for about five plus years, just learned a ton of information, really loved the financing portion of their group. So, that turned me to the banking portion, which I ended up going with US Bank just because of the knowledge and the breadth of what they can do as well. Just the culture within US Bank has been phenomenal. I’ve actually been with us Bank now for five years; in the last three years I’ve been within the commercial real estate side as well as the business banking side.
Paul Sian: Okay. Your primary focus is commercial loans.
Angie Hoffman: Correct. Yes, both investment real estate as well as owner-occupied and small to medium businesses. 
Paul Sian:  Okay. The investment side, I represent a lot of buyers of multifamily. I know with the form below we do, the conventional space generally, and then when you’re in the five units and above. You go into the commercial space, which is your space. I have also heard it being covered with mixed-use buildings, industrial properties, is there something else that commercial loans would cover?
Angie Hoffman: Correct. I mean it can really be quite an array of properties, office is one that we see pretty often, and can tend to be either hot in certain areas, whether it’s office Class B or Office Class A. Retail strip centers, we’ll look at Triple Net properties, and absolute not properties. We are very popular, if you’re looking at diversifying a multi-family portfolio and adding in some triple net properties. We also do, obviously owner-occupied properties too. When you have that small business or medium business owner who wants to own their own real estate. We do that as well, and that’s again part of what my position entails, and then we will also look at portfolios will do single-family homes. 
I’m actually working with somebody now who has a portfolio of several single-family homes, that were looking to kind of restructure and refinance for him. We can even utilize current equity and properties to purchase additional properties to help you grow your portfolio. We do try to have a full understanding of your portfolio or a full understanding of what your strategy is. How partner with you, as you continue to grow that portfolio short- and long-term goals.
Paul Sian: For our listeners, who don’t know. What Triple Net means, do you mind explaining that.
Angie Hoffman:  Sure. So, Triple Net is gonna tend to be your properties that have the tenant itself is paying the taxes, the insurance, you may have some pretty minimal depending upon the property, responsibilities that are usually restricted to the exterior of the building. It may be like a roof or a parking lot. Type of maintenance but generally speaking the great thing about the triple net is that for some clients, it’s a property that you can basically own, and you have to do pretty much nothing with. So, you’re gaining that income without having to do a very minimal type of responsibility or maintenance. 
The downfall of that is that typically they’re gonna be somebody, who is gonna be a longer-term lease, which is great. However, you still have the issue that it’s a bigger square footage generally. So, five, ten, twenty thousand plus square feet. If you lose a tenant obviously, that can be very impactful. It just depends upon your, again your focus of your portfolio, and if you want to add in that. But it can be great opportunity, but tends to again be a little bit less of a return. Because of the minimal responsibilities.
Paul Sian: Going back to single family. That is similar, I am using the same term your bank use but to ‘wrap mortgage’. Is that what you use for single families?
Angie Hoffman:  We do have the ability, from the perspective of what you say wrap mortgage.  We’re typically calling that like an umbrella, if you’re grouping all, let’s call it, if there’s ten single family homes. You’re grouping this all into one, it lies together. We have the ability to do that depending again on the structure that the client is looking for. 
We also have the ability to separate out those facilities, and do a simultaneous closing for each one of them to have them separated out from each other. Obviously, there’s some contingencies but that the properties itself have to be able to cash flow by themselves, things along those lines that we would underwrite to. But we do have ability to look at it from both perspectives.
Paul Sian: Okay. The biggest advantage of that if someone has reached the maximum ten convention mortgage loanlimit. They can step into your space there and you could cover them, and they can either restart that or. With something like that, let’s say somebody does get ten properties, and are they able to finance in additional properties into that same loan or is that has to re-finance each time?
Angie Hoffman: No. We would be able to add in. I mean, if you’re asking like if they want to refinance these properties, and they’re also looking to maybe either use some of the equity in them or they’re also buying at the same time. We can do all of that together, so that’s not an issue at all.
Paul Sian: Let’s say to somebody new coming to investment. What is the typical down payment on commercial loans? That are looking to buy in the mixed-use space or multifamily space?
Angie Hoffman: So, generally speaking. We’ll go up to 80% loan-to-value. The biggest factor within that is gonna be how much the capability of the property to hold that debt. We’re gonna have, we have a pretty. I don’t want to say complex but we do have  multiple factors that go within our cash flow, and net operating, income calculation, that we’re gonna want to see. It balanced to a certain point for it to be able to hold the debt at an 80% loan to value. Again, we tend to partner with our clients. I have several clients who will send me properties on a daily basis, that they’re interested in. We will let them know what the debt capacity would be on that property.
Paul Sian: Okay. Income from the rents per sale, let’s say, something’s got a ten-unit building. Then you’re looking at the rents that are coming in. You’re also considering the buyers income level, income to debt ratio, all that as well.
Angie Hoffman: Yes. When I talk about the capacity, the debt for the property is being the one of the first things we look at is. In order to get to that 80% LTV, if you’re looking at the actual depth, they’re wanting the property to take on. Compared to other rent they’re taking in and the expenses, as well as some vacancy factors, things like that. That’s what we’re looking at to have a certain ratio, then on top of that. When we get to the next step would be look at the client globally, and their personal debt to income, and that factor too.
Paul Sian: Looking at that commercial mortgages, can buyer use the mortgage to upgrade property, to build in some equity in the property. Does the building of the equity get taken into account, and do you have a loan that allows them to do that?
Angie Hoffman: That question is kind of twofold. If you have a property, let’s say, it’s multiple unit, and you’re continuing to kind of do some improvements and renovations. If the property has the equity, we can look at small lines of credit to help with that renovation cost. Then once everything’s complete to be able to wrap that together. If you’re looking at a property that’s completely distressed, and doesn’t have any type of income. Then that’s gonna be something that generally we’re gonna have a harder time with. Because it’s a speculative type of scenario, and we want to typically see the actual income.
Paul Sian: How about converting something, I am interested in buying warehouse, either in retail space or multifamily. Do you offer products for that, or is that a similar situation when you’re looking at the risk as being a little high?
Angie Hoffman: Yes. So, that is gonna be a similar situation. Once the actual project would be completed again from a speculative standpoint, it just it becomes a little bit more difficult from a risk perspective. However, we’ve been in scenarios where we’ve worked with clients and partnered clients, people we know who work in that space more than we do. We can look to, guide them to what we would look at if we wanted to refinance that once it was completed, and there were leases in place.
Paul Sian: Okay. So, that is one of the benefits working with a big bank like US bank, is you can reach across departments there, and tap other resources within your organization.
Angie Hoffman:  Even if it’s within the organization, we have other resources whether it’s our private wealth or wealth group, have some capabilities that are different than what we have as well as from a CUI or network basis. It may be somebody just within my network that I know works within that space to introduce that way and hopefully can get that client taken care of.
Paul Sian: Are you able to comment on the underwriting process of commercial loans compared to residential. Is there a big difference in that process? 
Angie Hoffman: So, yes and no. I know we touch on it already a little bit. One of the biggest differences is obviously we’re gonna look at the actual collateral in a very different way, especially on the investment real estate side. When you’re looking at investment real estate, the factors that the net operating income as well as the cash flow of the property become factors. Whereas, when you’re buying a home, obviously it’s a lot more about the loan to value of the property. However on the other side of that, if we are looking at a property that’s gonna be owner occupied by a small to medium business. It becomes a lot more about the loan-to-value as well. So, it can depend upon the situation.
Paul Sian: Okay. How important is the person’s experience when they come to loan, get a loan for you. If it’s a new first-time investor looking at multi families versus somebody who’s already got five to ten units and then either self-managing or running it for a couple years.
Angie Hoffman: I mean, generally speaking, if you have somebody brand new, one of the biggest things is if you’re not familiar in the scope. You don’t have experience, you gonna be partnering  potentially with a property management company or somebody else who is maybe a partnership within the LLC or the property that you’re buying that has the experience. Just being able to show you may not have previous experience in this but you are partnering with a property management company that has historical success in these properties. You’re partnering with somebody, for instance, who has historical success in the properties.
Paul Sian: So, yeah boils down to your team then. What you’re bringing to the team. What kind of document requirements are there to start a commercial loan process with US bank?
Angie Hoffman: Generally speaking, in every situation is different, every request is different, client is different. But it’s typically going to be two to three years of taxes, personal and business, personal financial statements pretty standard as well. If it’s a purchase, we’re gonna want to see a purchase agreement or understand the purchase agreement as well. As you’re gonna want to have financials whether it’s profit loss or the rent rolls preferably a Schedule E or 8852 from the client. Showing what the historical trends of that property of have been. That’s where we really try and partner with our clients of understanding their portfolios, understanding what purchase they’re trying to make. So, that, does it fit, and is there anything we see because we see them on a very regular basis that. Maybe we need to discuss or let the client know that we are suggesting maybe prying a little bit more information.
Paul Sian: How important is ones credit score when they come to apply for loan with you?
Angie Hoffman: It is a factor, I mean. In any type of just like the traditional mortgage, it is gonna be a factor. But there are so many different factors that, it’s only one of many.
Paul Sian: One of the important things when it comes to purchasing real estate is I always tell the buyers that have a pre-approval letter ready. Is there something similar in the commercial loans place? A pre-approval letter, pre-qualification letter. Just something that says, somebody sat down with you, they started the initial process. They’ve got access to certain amount that they can borrow to purchase this property. Do you have something like that?
Angie Hoffman: We do. So, on the commercial side it’s gonna be called a letter of interest, and it basically lays out that we are working with a client. We have a price range or up to a price range that we’re looking for with the client, and depending upon the collateral. We are looking to work with him on the financing, again depending upon what the collateral is, and then we also have once we’ve actually maybe gone through a more official process of underwriting and submitted an actual financial package. We do have, depending again on what the financing contingency is for that client. 
We do have a letter of commitment, which lays out that there is an approval but it goes through all of the conditions as well like your appraisal certain things like that, that we’re gonna have to clear.
Paul Sian: Okay. How long does that process take? If you are writing an offer today for a client, and then usually you have to write in how many days we’re gonna close in. 30 days, 40 to 45 days. I know conventional, it’s usually a little quicker, a little easier. So, we can do it in 30 days or so. I mean, what would you recommend for a commercial loan?
Angie Hoffman: I think 45 days is very practical. One of the biggest things that I always talk about with my clients is that 45 days really is incumbent of me having a full financial package, meaning those two years of tax returns. The financials, I spoke about from the client that you’re purchasing, and or if you’re refinancing. To me, having that full financial package is really the key and then, again from there it’s gonna be some of the factors of the appraisal as well as the title work that would go along with it. But generally speaking, 45 days to close is pretty.
Paul Sian: Reasonable.
Angie Hoffman: Yes.
Paul Sian: You mentioned the documents that was my blog article documents for the conventional mortgage process. You mentioned W2s, 1040, tax returns, that is pretty similar the document requirements for commercial loans that it is for residential space?
Angie Hoffman: Yes. It’s very similar. With the PFS is gonna be one of the biggest as well as the two years of tax returns. Potentially three years depending upon, again the request size. Like you said, I mean, if they’re a W2 income type of employee, then we may need additional pay stubs. like I said, for any client, it could be very different depending again on what their history is. If they’re a business owner, then we may mean some more details but generally speaking, again it would be two to three years of personal business has returns, personal financial statement, and potentially obviously purchase agreement or additional documentation from that side.
Paul Sian: Okay. When it comes to partnership, people coming together, those documents from everybody. Correct?
Angie Hoffman: Correct. So, depending on what the ownership structure is. Generally, if somebody’s over 20% ownership within the property, then we’re going to need that financial information from them as well.
Paul Sian: Okay. I know with the conventional space. Lending into an LLC is generally impossible. Most lenders will not allow conventional borrowers to use an LLC. How does that work on the commercial side?
Angie Hoffman: The vast majority of the lending that I do is going to be through an LLC in a holding company. The clients are still a personal guarantor but the lending itself in the title is all within the LLC.
Paul Sian: Is it a requirement in LLC or is it an option for the buyer?
Angie Hoffman: It’s an option. I mean, one that again depending from an attorney’s perspective, if you’re talking about liability. It may be a best-case scenario to have an LLC with that property. But we always reference stuff talk to your attorney about what makes sense for you.
Paul Sian: How much, do you have any minimum loan requirements and your maximum loan requirement?  
Angie Hoffman: Up to ten million on the investment real estate side, and then once it’s beyond that, we do have a commercial group that we would work with a real estate group as well as our middle marker group that would potentially be involved. As far as minimum typically, again if it’s under 2,50,000. It’s still something that we would do. It just, we pull in a different partner to work with us on that too, because it kind of goes into a little bit different of a space.
Paul Sian: Is there, under 250,000$ or is there a lower minimum. I know some conventional lenders won’t touch anything fifty thousand and under.
Angie Hoffman: It’s pretty common. Yes, under fifty thousand is gonna be a little bit more difficult. 
Paul Sian: 50,000 to 2,50,000, and above that.
Angie Hoffman: But keep in mind too. I mean, if you have properties itself. It may be again, you see this more with the single-family home portfolios. You may have multiple properties that are under fifty thousand. But we’re looking at the entirety of the portfolio, makes a little bit different of a scenario. I would caution that anything that somebody is looking at from the perspective of either total lending amount or even individual property. We’re happy to take a look at it, have an understanding of what you’re looking to do, and if for some reason it’s not something that is in our world necessarily. Again, from an internal and external standpoint. We typically have somebody who I can contact.
Paul Sian: Discussing interest rates from general perspective, everybody’s situation is different and unique. But in terms of paying more, having a lower LTV, 60% LTV rather than 80%. People get themselves a better interest rate or is it generally, can we same and more just depending on credit and history.
Angie Hoffman: So, from an interest rate standpoint, the commercial side is a little bit different. Then maybe the mortgage or lines of credit side, then you then you generally see. Ours is based off of what banks cost the funds are, and then there is a spread that is on top of that. That’s where you get the percent from. Right now, cost of funds are pretty minimal. So, interest rates are extremely competitive. But from that perspective, it doesn’t necessarily factor in the actual loan it saw or the guarantor itself or the property itself.
Paul Sian: So, there’s some risk-based consideration towards interest rates. I guess a little higher risk project is that something you would price a little higher in the interest rate or generally that it’s not considered as much?
Angie Hoffman: No. That’s not considered as much, generally.
Paul Sian: Okay. Great. That’s all the questions I have for you today Angie. Did you have any final thoughts to share with the group?
Angie Hoffman: Sure. One thing I would say is if anybody has any questions about property specific, cash flow, if this property may fit into their portfolio or something that we would look to land up to 80%.I’m happy to partner with anybody on that side as well, and be resource for them. On top of that, I did want to mention that obviously US Bank is across the country. That gives us the ability even, if I’m your contact in Cincinnati to lend out-of-state borrowers.
I’ve worked with quite a few clients obviously from California that are buying in Cincinnati as well Chicago. So, those are people that I’ve worked with quite frequently as well.
Paul Sian: That is perfect. I’ve got a number of out of state clients to. That is one of the biggest challenges that I’ve faced with some local lenders is that they don’t lend to out of state. That’s a great ability to have.
Angie Hoffman: So, the key with in that too is just as I want to mention too. I mean, anytime that scenario comes up. We are happy to discuss it. One of the biggest factors with out-of-state lenders is that we do look for them to be within US bank footprint. So, we are very much on the west coast and Portland, all of those areas. If they’re somewhere you’re not familiar, if we’re within that area, please reach out. Let me know, and I’m happy to take a look.
Paul Sian: Great. Thank you again. I will leave your contact information on my blog post once it gets published live. Thanks again for being on the podcast.
Angie Hoffman: Thanks for having me. 

Source: cincinkyrealestate.com

Ms. Independent: Top 10 Cities Where Millennials Live Alone

Kelley Libby lives in an apartment with a view of the Richmond, VA skyline from her balcony. She rides her bike downtown regularly for dinner and a show, or sometimes to take a cool dip in the river.

A top-of-the-millennial-pile 34 years old, she is among the 15 percent of millennials who live alone in Richmond, the metro area where a greater share of millennials live solo than anywhere else in the country. Others in the top 10 are Pittsburgh; Buffalo; Columbus, OH; Virginia Beach; Cleveland; New Orleans; Austin; Kansas City and Oklahoma City.

Millennials-Blog

“With home prices and rents rising as fast as they are, it’s a common assumption that young adults in many cases cannot afford to live alone,” said Zillow Chief Economist Svenja Gudell. “Though that may be true in some markets, there’s still a large number of amazing places across the U.S. that are prime for millennials to thrive independently. These are places where young adults can easily find jobs at a competitive salary, and where housing expenses won’t eat up the majority of their income, enabling them to save more.”

Low rents help

Rents are relatively easy on the budget in many of the metros where millennials live alone. In Richmond, people of all ages typically spend 26 percent of their incomes on rent, compared to 30 percent nationally, according to Zillow Research. In a place where millennials living solo make a healthy $49,500 a year (median) and employment is up 3.6 percent since a year ago, that makes for an attractive package.

“It’s a good place for young, single people, because there’s lots to do as far as cultural activities and outdoor stuff,” said Libby, who’s a public media producer working on a national project called Finding America. She pays $960 a month for her 1-bedroom, which is in a new apartment complex and has that sweet balcony.

It’s also a great place to settle down, and many of her friends are snapping up real estate. “I have so much more of a chance to buy a place here than I would in big, popular cities,” she said.

She lived for several years in nearby Charlottesville, where “I couldn’t dream of buying a house.” The median home value there is $232,700, well above Richmond’s $193,200, according to Zillow data.

‘I don’t need 100 channels on cable’

With 21 percent of millennials still living with their mothers, and 32 percent of all working-age adults living with someone else, it can be a big deal when millennials step out on their own.

Often they do it in places where rents are more affordable — areas like Pittsburgh, Kansas City and Oklahoma City, where rents take up around 25 percent of people’s incomes. They also go solo in metros like Virginia Beach where they can afford to buy homes, and places like Austin with strong employment growth.

Malory Berschet has lived on her own in Columbus for a year, following stints with her parents and with a college roommate. She enjoys it, but she’s had to cut back to make her $1,125 monthly rent.

“My biggest thing was spending money like I was made of money,” said Berschet, who’s 25. “I would eat out all the time or buy lunch rather than pack it. And I don’t need 100 channels on cable.”

Millennials living alone make $38,800 a year (median) in Columbus, where people spend 26 percent of their incomes on rent.

Berschet knows coworkers at Cardinal Health, where she’s a market manager, who save money by living in Dublin, the suburb where the company is headquartered. They pay less in rent and have better commutes, Berschet said, but “they’re a good 20 minutes from downtown.” She likes being close in, where she can easily walk or Uber to visit friends and eat out.

Less solo-friendly cities

At the other end of the spectrum, she has a friend who’s moving to San Francisco and said the rent is $3,500 for an apartment smaller than Berschet’s 1-bedroom — which makes her place seem like a steal.

Only 9.4 percent of millennials live alone in the San Francisco area. It’s not the smallest share of independent millennials in the country — that’s Riverside, CA, with 6.1 percent. They make good money — $66,000 for millennials living alone in San Francisco and $72,000 in Riverside (medians) — but people who live in those places spend 46 percent and 36 percent of their incomes, respectively, on rent.

Prices like that can make roommates — and even Mom’s basement — look mighty appealing.

Related:

  • Space for One: Rentals in Cities Where the Most Millennials Live Alone
  • Would You Rather: Rent in the City or the Suburbs?
  • Hip Suburban Living Is a Magnet for Millennials

Source: zillow.com

How COVID-19 is Affecting Mortgages

Coronavirus cases are increasing at a phenomenal rate and sending the economy into free-fall. Every industry will be affected in some way, but the housing market could be one of the hardest hit. Borrowers are struggling to pay their mortgages, lenders are seeing far fewer applications, and we could be just around the corner from a housing crisis akin to the decline of 2008.

So, what’s happening here, how is COVID-19 affecting mortgages and are we likely to see any major issues on the horizon?

How Will COVID-19 Impact Mortgages?

In early March, mortgage rates dropped to an all-time low, hinting at things to come. The rate for a 30-year fixed-term mortgage fell to 3.29%, compared to March of 2019 when rates were 4.14%. That may not seem like much of a difference, but the difference between 3.29% and 4.14% on a $200,000 30-year mortgage is around $35,000.

And this is just the tip of the iceberg; the start of the problem.

Experts predict that rates will continue to fall as we progress through 2020 and COVID-19 continues to wreak havoc on the US economy.

As noted in our recent guide to Coronavirus Mortgage Relief, lenders are already providing lenders with debt relief options to help them manage their mortgage in this difficult time. Foreclosure is expensive and it’s an expense that banks and credit unions can’t afford right now. They want homeowners to pay their bills and keep their homes and they will do everything they can to make that happen.

The federal government is also lending a helping hand by way of the CARES act, and we could see more significant moves on behalf of lenders and the government before the year draws to a close.

In other words, although big moves have been made and huge changes have taken place, all of this could pale in comparison to what happens when the pandemic is eradicated and the rebuilding process begins.

Can You Benefit from this?

If you’re a homeowner tied to a high-interest rate, you could benefit from the current reduced interest rates by refinancing your mortgage. You could do that now and capitalize on the all-time low rates mentioned above or wait to see what happens in the next few months.

In any case, you can get a much lower rate than what you already have and potentially save thousands of dollars over the life of your loan.

It’s not about profiting from a bad situation, it’s about making life easier for yourself so you can navigate through this chaos. If your monthly mortgage payment is reduced, you’ll have more money in your pocket every month, which means you can put more cash towards unsecured debts and your monthly grocery bill.

It also reduces your chances of defaulting and being foreclosed upon in the future.

COVID-19 and the Housing Market

In the spring of 2019, the housing market was booming. It was a good time to invest in bricks and mortar and it seemed like there were some bright years ahead for homeowners and investors. 

In 2020, the shadow of the coronavirus pandemic fell on the country and now, a year on from that boom, the housing market has ground to a screeching halt. No one is selling because no one is buying. The market hasn’t necessarily crashed, but it has paused, and that could cause some huge problems in the near future.

What happens to all the homeowners who were selling their homes before this crisis and wanted to sell during? As soon as the pandemic fades away, they’ll all list their homes at the same time, and they’ll no doubt be joined by countless other homeowners who are selling because of the pandemic.

Once the market reopens, it will be flooded with homes for sale. At the same time, homeowners once ready to buy will now be struggling to deal with the consequences of the pandemic, while others will be hesitant of buying and will want to bide their time. Sellers will get desperate, prices will drop, and it will be a buyer’s market.

It’s hard to predict just how far house prices will fall or even if they will fall at all, but if the last few months are anything to go by, it’s fair to assume that the damage will be considerable.

Could it be a Seller’s Market?

While it seems most likely that post-pandemic USA will be a buyer’s market, it could also go the other way. Millions of Americans could be looking to purchase homes in 2020. If all of them are waiting for the end of the pandemic in the hope that the prices will be lower and the interest rates more favorable, they could overload the market.

Buyers may also be desperate to sink their money into bricks and mortar, believing it to be a safe investment and protection against any future economic issues. After all, when you rent, you’re always at the mercy of the landlord and have few guarantees that your home will still be your home months down the line.

That’s a scary thought in the middle of a pandemic, where it may be difficult, and in some cases impossible, to move into another property on short notice.

To remedy this, renters may be desperate to buy and may jump into the housing market as soon as the chaos dies down. A sudden rush of buyers will send the market in the opposite direction, allowing sellers to jack up their prices. 

COVID-19, Mortgages, and the Future of the Housing Market

Most of which we discussed above is speculation. We can predict the likelihood of it being a buyer’s market and of interest rates falling based on everything that has happened thus far, but we can’t say that it will happen for certain.

COVID-19 has made life very unpredictable. In December 2019, when word of the first Chinese cases began to filter to our shores, few could have guessed that just 3 months later, the world would be in lockdown, everyone would be going crazy for toilet paper, and people would be dying in their droves. 

At the beginning of the outbreak, when Europe was on its knees, President Trump was dismissive of the risks and suggested that everything would be okay, the US would be safe, and the virus would be fleeting. A few weeks later, the United States became the worst affected country and fatalities entered double figures.

It’s a novel pandemic that few predicted, and no one was prepared for, and as things stand it’s less about fighting the disease and more about avoiding it. 

As a result, we can’t be certain that the housing market will decline or that mortgage rates will drop. We just have to wait and see and hope that we all get through this with our lives, properties, and professions intact.

How COVID-19 is Affecting Mortgages is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

A Parent’s Guide to Setting a Successful Budget for a College Student

The post A Parent’s Guide to Setting a Successful Budget for a College Student appeared first on Penny Pinchin' Mom.

 You are getting ready to send your child off to college. Before you start helping them pack their belongings, there is one thing you need to do.

You need to help them create a budget. You need to teach them how to manage their money so they can learn the tools they’ll use long after they graduate.

WHY DO COLLEGE STUDENTS NEED A BUDGET?

The truth is everyone needs a budget. It does not matter your age. If you are dealing with money, a budget is necessary.

  1. Allows you to control your money. Rather than your money telling you what it wants to do, you get to tell your money where it needs to go. You are always in control when you have a budget.
  2. It teaches financial skills. A budget helps ensure that expenses such as rent, tuition, food, insurance, transportation, and housing are paid – before spending money on the fun stuff. (It also helps to make sure you don’t spend more than you make.)
  3. Makes you aware of where your money goes. When you use a budget, you see how you spend. It is very simple to see if too much is going toward dining out when you should be building your savings.
  4. Helps you track your goals. You need to cover expenses but you should also work on building savings at the same time. Your budget allows you to not only see those goals but track them in real time.

DOESN’T A BUDGET MEAN YOU CAN’T HAVE FUN?

Not at all! If anything, your budget will allow you to have guilt-free fun.

For example, the budget may allow you to spend $50 a week dining out. That means you can go to dinner with friends once (possibly twice) a week and enjoy yourself. You won’t be left wondering how you are now going to make rent.

WHAT TYPE OF BUDGET SHOULD YOUR STUDENT USE?

There are various methods of budgeting such as the 50/30/20 and the zero-based budget. For most college students, the zero-based is the simplest and easiest to follow.

The reason is that you track everything. You give every penny a job. That means if you earn $1,500 for the month that you “spend” the entire $1,500.

You will first cover the needs (food, shelter, transportation) and then your wants. If there is money “leftover” after this is done, it can be added to your savings.

You can use other types but if you have never budgeted before, using this method is the simplest.

WHAT SHOULD A COLLEGE STUDENT INCLUDE IN A BUDGET?

The budget will vary for each person, as the income and expense will be different. However, these are the most common categories that need to be included in a budget:

  • Rent
  • Renter’s insurance
  • Car payment
  • Car insurance (also saving for annual renewal fees)
  • Food
  • Clothes
  • Utilities (phone, electricity, gas, water, etc.)
  • Tuition
  • Fees
  • Entertainment (movies, games, concerts)
  • Dining out
  • Emergency fund savings

Again, you may have items that are not included above or see some that you do not need.

However, the most important thing of all is that every penny is given a job. Account for everything you will spend each month so you never have too much month and not enough money.

HOW DO YOU KEEP TRACK OF YOUR BUDGET?

For most college students, apps or digital trackers are the best options.  But, before you rush and sign up, keep the following in mind.

  1. Cost. Many apps are free and they will work perfectly fine. Other apps have a monthly fee attached to them. If you plan to use one of them, make sure you include that as one of your regular expenses. However, do not let the cost alone be a single factor when it comes to clicking the sign-up button.
  2. Security. Your security trumps all else. You need to make sure the app uses encryption as well as two-factor authorization.

Some of the best apps include:

  • Mint
  • You Need a Budget (YNAB)
  • PocketGuard
  • Mvelopes

However, your student may also like the traditional paper and pencil method – and that is OK as well.

Find the right one that works best for your student. That is all that matters.

TEACHING THEM TO BUDGET

Knowing you need a budget and where to track it is just the beginning. You need to teach your child how to budget.

Start by looking at each category that they need on their budget. You may already know the cost for each category but if not, you may need to make phone calls or do research to know.

For example, you know the rent for the apartment is $850 a month but how much are the average utilities? Ask the manager for these costs so you can include them in the budget.

Next, decide how much they want to allow themselves to spend on food. Show them how much a meal costs for a single person at each restaurant you eat at so they can create an average.

You will then have them decide how much “fun money” they want to include as well. You can base this on them wanting to go to the movies two times a month, one concert a month, or attending three events.

Now you can see the expenses for your student. Add their income to the budget and deduct the expenses. They will see if they are operating in the black (money left over) or in the red (spending more than they make).

Show them how to adjust the numbers by increasing their savings or lowering the amount they can spend on clothes – until the budget equals zero. Zero meaning they are spending every penny they earn.

And making them keep track now will help ensure they stay on track well into the future.

 

 

 

The post A Parent’s Guide to Setting a Successful Budget for a College Student appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

The Cost of Off-Campus Rent at Top Colleges

Which university costs more: Harvard, Yale or MIT? It’s relatively easy to compare tuition and even dorm fees — but off-campus housing costs are harder to pin down. They also can make a big difference in the tab for a higher education.

In fact, 80 percent of the towns where elite colleges are located, based on U.S News & World Report’s newly released Best Colleges of 2017, have median rents above the national median of $1,408 a month, according to a new Zillow analysis.

The median rent in Cambridge, MA, where Harvard University and MIT students gravitate for off-campus housing, is $2,594 a month, while Yale University students who live off campus in New Haven, CT, pay just over half that: $1,428 a month.

Those figures don’t account for the size of the rental unit or for roommate situations, but they do reflect the starkly different real estate markets in Cambridge and New Haven.

Although off-campus housing costs might not come into play until sophomore or junior year, they’re worth weighing into the college-cost equation.

InfographicBlogBody

“As students and their parents are filling out applications this fall and are crunching the numbers on financial aid and student loans, they should also factor in cost of housing,” said Jeremy Wacksman, Zillow’s chief marketing officer. “Looking at both on- and off-campus housing prices, and thinking through whether they’ll likely live with roommates or alone, will help them gauge an accurate picture of the student loans and financial aid they will need in order to obtain their degree.”

Beating the Bay Area blues

Housing around Stanford University was the highest among top-ranked colleges. Reflecting the Bay Area’s astronomical housing costs, the median rent in Palo Alto is a whopping $6,139 a month.

However, Stanford houses almost all of its undergraduates in university housing, where they pay about $14,600 for room and board for the school year. Some 60 percent of Stanford’s graduate students live on campus and pay $12,300 for rent plus $5,800 for food.

The university provides a subsidy for the other grad students, so that their cost of living approximates that of students living on campus, according to Lisa Lapin, associate vice president for university communications at Stanford.

Chicago sings a sweeter tune

Most college towns are not as pricey as Palo Alto — and they’re great places to live, according to Peter Cassel. He’s in Hyde Park, the neighborhood adjacent to the University of Chicago, and is director of community development for Mac Properties, the biggest landlord in that neighborhood.

Hyde Park is that rare South Side Chicago neighborhood that’s known for being safe — in part because the university has its own police force.

It also offers a tremendous quality-of-life boost, whether you’re a student or not. “From my perspective, to choose to live in a neighborhood that doesn’t have a large university in it seems crazy,” Cassel said.

He enjoys the people who are attracted to the university. “They create a level of diversity and enthusiasm that is very positive.” And he relishes the amenities that pop up around it. “There’s some sort of music program going on every night of the week. There’s a local neighborhood symphony, a radio station, multiple local theater groups – all of which in some way are supported by the university.”

Mac Properties offers one-bedroom apartments in Hyde Park that start at about $1,200 a month. That’s better than the Chicago median of $1,687 a month — but still higher than South Bend, IN, where the University of Notre Dame is located, and Winston-Salem, NC, which Wake Forest University calls home. Median rents there are $723 and $994, respectively.

Bargains aren’t out of the question

Medians are by definition in the middle, though, which means some students will find deals.

Jessica Dougherty beat the $1,286 median rent in Durham, NC, when she was a graduate student at Duke, No. 8 on the U.S. News and World Report list. She paid just $900 a month for a one-bedroom apartment. It didn’t include Internet or cable, but she did have an in-unit washer and dryer, and was a three-minute bus ride to the building where most of her classes were.

Dougherty graduated last year and moved to a place that costs $1,370 a month. It’s a little farther from work, but the complex has both saltwater and chlorinated pools, plus trash “valets” who pick up garbage at her door at 8 p.m. every night.

Friends are jealous, Dougherty reports, and Durham’s best restaurants and other offerings are just down the street.

Related:

  • Quiz: Can You Match the State With Its Popular Rental Features?
  • Ms. Independent: Top 10 Cities Where Millennials Are Living Alone
  • Leaving the Nest: College Students and Renters Insurance

Source: zillow.com

Paying Off Debt to Buy a House

A brown brick house at sunset

When you buy a house, a big part of a lender’s decision whether to approve your mortgage rests on whether or not you can afford it.If you have a lot of debt, the monthly payments on those obligations chip away at the total amount you can pay each month on a mortgage.

But that doesn’t mean it’s impossible to buy a house if you’re in debt. It’s just a bit more challenging. If you want to stop paying rent and enter the exciting world of homeownership, here’s how you can pay off debt to buy a house.

1. Calculate Your Debt to Income Ratio

Your debt-to-income ratio, often called DTI ratio, is a measurement that compares the amount of debt you have to your income. It helps determine how much you can actually afford when it comes to mortgage payments.

How Much Debt Can You Have and Still Qualify for a Mortgage?

Most lenders won’t approve you if your DTI is higher than around 43%.

For example, let’s say you make $52,000 a year. This means your gross income each month is around $4,333. If half your paycheck is devoted to paying off debts, then about $2,166 of your income goes towards paying off your various debts.

By these numbers, your DTI would be 50%. The bank would probably not approve you for a mortgage since your DTI is higher than the maximum 43%. To fix this problem, you can do one of two things: start making more money and/or lower your monthly recurring debt payments.

2. Find Ways to Decrease Your Debt

Consolidate Loans

Qualifying for a mortgage partially depends on what part of your monthly gross income is paid towards the minimum amount due on recurring bills. These might include credit card bills, student loan payments, car loans and other payments. Consolidating can be a way to reduce that amount.

What does consolidating mean? Consider an example where you have five credit card payments each month. Consolidating them means that instead of making five separate payments to individual lenders, you make onepayment each month.

If your credit is good enough, you may be able to get a consolidation loan with better terms. That means your one consolidated payment may be lower than the five payments combined. You can consolidate student loans, too, and get the same potential benefits.

After you’ve consolidated, you can re-calculate your DTI ratio. If it’s lower, you may fall below the DTI threshold required to be approved for a mortgage.

Pay Off or Pay Down Some Debt

If you make an effort to pay off or pay down some of your existing debt, this can help decrease your DTI ratio and make your financial picture look more favorable to lenders. It may be best to concentrate on paying off recurring debts, such as credit cards, to help your chances.

Is It Best to Pay Off Debt Before Buying a House?

There’s no one right answer to this question. It can depend on your mortgage lender. Your mortgage lender may want you to pay off debt before making a down payment while others may be okay with your DTI and want a larger down payment. If you’re under the 43% DTI and have a good credit history, you might consider working with a mortgage lender to find out what your options are.

Credit Repair

If any debts listed on your credit report aren’t yours, this could be hurting your overall financial health. Make sure to closely examine the details of your credit report and make sure the accounts listed are actually ones you’re responsible for. If you do notice errors on your credit report, you can work to repair your credit by disputing the entries.

3. Find Ways to Increase Your Income

One of the ways to make your DTI more favorable is to increase your income. You can usually do this by either getting a better paying job or by getting a second job if you have the means. If you’re married and are applying for a mortgage with your joint income, perhaps your spouse can get a job to help increase their income. One drawback to this solution is that it’s a long-term solution and not a short-term one. Getting a new job, whether primary or secondary, takes time and effort.

4. Consider Making a Down Payment

Contrary to popular belief, a 20% down payment on a home isn’t required in many cases. FHA loans, for instance, only require 3.5% down, and some mortgage lenders may only ask for 5% down on a conventional loan.

However, keep in mind that the more you put down upfront, the less your monthly payments are and the lower your interest rate is likely to be. If you can put more money down, it makes the mortgage more affordable. If you’re hovering at the higher end of an acceptable DTI ratio, that may make a difference.

Looking at the Big Picture

When you’re ready to buy a house, it’s important to consider your level of debt, how much money you have coming in and your job security. If you’re able to consolidate your debt and get lower monthly payments as a result, your job is well-paying and seems secure and your credit is excellent, you can probably buy a home even if you have other debts.

Assess the Risks

Remember that just because you might qualify for a home loan doesn’t mean you should buy a house. Stretching your limits to meet that 43% DTI ratio can be risky unless you foresee your income continuing to rise oryou know any debt obligations you have are set to be paid off in the future.

Can Paying Off Debt Hurt My Credit Score?

Most of the time, paying off debt has a neutral or positive impact to your credit score. First, you decrease your credit utilization, which accounts for 30% of your credit score. A lower credit utilization can bring up your score. Second, you show the lender that you have the means to pay off debts, which can be a positive factor in whether you’re approved.

However, in a few cases, paying off debt could lower your score. If you pay off old accounts, you could change the age of your credit. How old your accounts are play a role in your score. You could also reduce your credit mix, which also factors into your score.

Neither of these factors plays as large a role as credit utilization, though. And if your mortgage company wants to see you with less outstanding debt, a tiny and temporary hit to your credit score may be worth getting approved for a loan.

To find out more about your credit score and where you stand with financial health, sign up for a free Credit Report Card today. You’ll get feedback about the five major areas that impact your score and how you can improve them before applying for a mortgage.

The post Paying Off Debt to Buy a House appeared first on Credit.com.

Source: credit.com

How to Write a Check (Step by Step Guide to Filling Out a Check)

Writing a check. It’s one of those things you always wanted to know how to do right but were probably too afraid to ask. Well, fear no longer: in this guide, we’ll walk you through the basics of check-writing, from how to fill out the lines you need, to knowing when it’s best to use a check — and when it’s not. We’ve also included a printable practice check at the bottom of the article so you can give it a shot before filling out a real one.

In this article, we’ll cover everything from how to write a check to the best situations to use one. Read through if you want to know everything you need to about writing a check, or click on a link below to jump straight to the section you’re most interested in.

  • What Is a Check?
    • Where Can I Get a Checkbook?
  • How Do You Fill Out a Check?
    • What Do I Do After Writing a Check?
  • Check Writing Security Tips
  • Alternatives to Writing a Check
  • Wrapping up

Before we get into the details of learning how to fill out a check, let’s start with the basics.

What Is a Check?

A check is basically a statement in writing that you agree to pay some amount of money to whomever you’re making the check out to. It lets the bank know that they can withdraw those funds from your financial accounts and direct deposit it into the payee’s account (that’s the person who you’re paying). If you’re unsure about how much to keep in checking for checks you may be writing, check out our post on that for a brief explanation.

When to use a check

Checks are useful in a variety of situations. You can use a check to:

  • Pay your monthly rent
  • Make a large purchase without a card
  • Send money as a gift
  • Pay for groceries
  • Pay for hired work like a housekeeper or gardener

Basically, they’re good for situations where you’re paying large sums of money that wouldn’t be convenient to pay for in cash, and where you’d rather not use a credit or debit card.

Where can I get a checkbook?

You can usually get a checkbook straight from your bank for free or a small fee, and they’re also available from retailers like Costco and Walmart. Custom checks are also available online from sites like Checks.com, but be careful where you order from, as some sites may not be secure — or could even be a scam.

Before you get started making payments with checks, however, you’ll need to know how to fill one out.

How Do You Fill Out a Check?

Knowing how to write a check is pretty easy once you get the hang of it. First, take a look at this graphic that shows the way that all the necessary fields of a check should be filled out.

filling in a check

Next, we’ll walk through each step to make sure you know what goes into filling out each line. We get it — it’s a little nerve racking signing over money to someone on a little piece of paper. Knowing how to fill it out correctly will give you more confidence the next time you have to send a check.

  1. Start with the payee, the person who you’re sending money to. There’s usually text that reads “pay to the order of” beside a line that you’ll fill in. On that line, simply write the first and last name of the person who you’re paying, or the name of the company you’re paying if it’s not an individual person. Be sure that you spell everything correctly, as misspelling a name could result in the check not going through.
  2. Fill in the amount in words that you are paying your payee. This part is a little weird, since you usually write numbers out in numerals, but it’s an important security step. The dollar amount should be written in words, and any cents can be written as a fraction out of 100. For example, if you were paying your landlord $925.50 for rent and utilities, you’d write out “Nine hundred twenty five dollars and 50/100.”
  3. Fill in the amount in numbers in the box on the top right of the check. This is a bit easier. In the case of the example above, you’d just write out $925.50. Often, the dollar sign is already written on the check, so you just have to make sure that the numerals are written out correctly. Important note: be sure that you double-check that the amount you wrote in words matches the amount you wrote in numerals.
  4. The optional memo line is located on the bottom left of the check. Though leaving this blank won’t invalidate the check, it’s usually smart to include a brief description so that your payee knows what the money is for. For example, in the rent check example, including “September rent” on the memo line is a good way for you and your landlord to keep track of your rent payments.
  5. The date is on the top right of the check. Fill in the date of the day you fill out the check — this ensures that you and your recipient can keep track of when the payment occurred.
  6. Sign your check on the line on the bottom right. This line shows that you have officially agreed to pay the listed amount. Be sure that the name you sign matches the one on file with your bank or the check may not be valid. It’s also a good idea to have a consistent signature, that way there’s little doubt you’ve authorized the check.

That’s it! That’s all it takes to know how to fill out a check. If you need a little practice filling out a check before you’re ready to send one, try out our printable practice check.

Note: In addition to the parts that you’ll fill in, a check includes the routing number and account number for the bank account that it’s withdrawing from. You don’t need to worry about those when you learn how to write a check, but when you receive your checkbook, be sure to double check that the number match your bank. You want to know which bank account your check will be drawing from when it’s cashed.

What Do I Do After Writing a Check?

Once you’ve written the check, make sure to note in a check register the amount that you’ve paid. Check registers are often included in the backs of checkbooks, but you can also keep a separate one if that is more convenient for you.

Whether you use a paper register or a digital one, it’s important to record how much you’ve paid because, until your payee cashes the check and it’s processed at your bank, your account will still list those funds as available. Recording the amount that you’ve paid gives you a more accurate picture of the amount that is in your checking account, and will be necessary when it’s time to balance your checkbook.

Note: Making sure to track cash and checks is always an important way to stay on your budget. While you will likely be able to see your credit card purchases online as soon as they happen, checks and cash don’t leave as easy a trail. Maintaining a written log and using an app like Mint are helpful ways to keep an eye on the full picture of your spending as you wait for checks to clear.

Check Writing Security Tips

Because checks are physical pieces of paper, they aren’t password protected and aren’t as easy to track as electronic payments (more on that in the next section). So, there are some security risks that you should keep in mind if you plan on using your checkbook.

Check writing security basics

That said, checks are generally a secure way of paying for things if they’re filled out carefully and properly. Check out these tips before filling out your check to ensure that you aren’t scammed or defrauded.

  • Never leave a check blank. There’s a reason signing your check was the last step listed above. If you sign a check and hand it over without a dollar amount specified, your payee can simply enter whatever quantity they wish and withdraw that from your bank account. The same goes for the payee line. If you had a signed check made out for $500 without a payee, and it slipped out of your bag, anyone could pick it up, enter their name, and pay themselves. Be sure that you always wait until you know the dollar amount and payee before you sign your check.
  • Use a pen. For the same reasons you wouldn’t want to hand anyone a blank check, it’s a good idea to use pen when filling it out. A check written in pencil could be easily tampered with, so be sure your writing is clear and permanent to avoid check fraud.
  • Try out the line method. Following the same reasoning, you wouldn’t want someone to turn your check for $500 into a check for $5500. You can prevent this by drawing a line from the edge of the space where you’ve written the amount to the start of your first letter. Follow this up by filling the entire numerical quantity box with the numerals for your amount.
  • Keep a record. Whether you opt for a checkbook that makes carbon copies of every check you write, or simply record all your transactions in a check register, keeping a handy list of all your paid checks is a good way to make sure you notice if something goes wrong. It’s also just helpful when you’re trying to sort out how much money you’ve spent and what you’ve spent it on.

Checks are generally a secure way to pay for things, but they might not be your best option for every situation.

Alternatives to writing a check

Alternatives to Writing a Check

Writing a check might be a useful way to make a payment in some situations, but in today’s world of tech, card payments and online banking, there’s often an easier and more secure alternative to pay or transfer funds.

Check alternatives

Here are some situations where you might use a check along with some alternatives that could be a better option.

  • Paying rent. There are plenty of landlords who keep things old school and only accept checks. However, many contemporary apartment complexes or apartments owned by property management companies will invest in an online payment portal for their residents. If you have the option to set up a payment portal, this is a much safer way of paying rent — plus, it eliminates the cost and hassle of mailing a check.
  • Making a large purchase. Credit cards are scary, but they often are a much better way of making large purchases. This is because many credit cards offer perks like cash back or airline miles, and consistently paying off your balance can seriously boost your credit. Plus, credit cards have stronger fraud protection than checks.
  • Buying groceries. Credit cards are also a great option here. Many grocery stores, or retailers that also sell groceries, offer credit cards themselves. These can be used to gain points or discounts, lowering your grocery bill monthly.

Wrapping up

Knowing how to write a check can be a handy and secure way to pay for something if you do it correctly. The guidelines in this post should help you start writing checks safely and carefully, and if you need a little extra practice, try out our printable practice check below. It’s a good way to feel confident before you put your pen (never pencil!) on the next check you write.

Blank check

 

The post How to Write a Check (Step by Step Guide to Filling Out a Check) appeared first on MintLife Blog.

Source: mint.intuit.com