Sep
11
What Is Your Goal?
September 11, 2007 | Leave a Comment
It’s become clear to me this past month while working with real estate investors, that most don’t have a clear investment goal. One of the questions I always ask when designing an investment strategy for a property is “what is your exit strategy and profit goal?” Usually there is just silence, sometimes a “What?” and occasionally I hear something like “Well, I plan to keep the property for 4 years because my projected cash flow is $300 a month and there’s a significant equity chunk that will increase my net worth. After 4 years I think will sell and use the 1031 exchange proceeds to leverage myself into a property with double the cash flow.”
I love it when I hear something like that. I immediately know that I have a qualified investor and I should start looking for minimum 5-year fixed rate products with features that will protect and improve monthly cash flow like 40-year amortization and interest only.
I had a long discussion with my business coach about the guy last month that accused me of not being willing or creative enough to help him with his deal. The reality was that his deal didn’t make sense at 85+ ARV and seemed like just a plain bad deal. I asked my coach what I could have done differently to make it a better experience for both my potential client and me. I was expecting the usual, “Susan you need to have more patience” or “Susan, sometimes you are too blunt so you should work on coming across nicer.” His answer completely surprised me. He said, “Susan, your problem is that you are an ethical mortgage broker.” (So, that’s my problem!J)
He went on to explain that there are so many unethical or just plain clueless brokers out there that will tell the client anything just to get the business that the honest ones are always accused of being unwilling or unable to do the deal. When the reality is that the deal is not doable.
Obviously, his answer made me feel better, but I still think that there is a lot more I can do to educate real estate investors. Saying I’m a mortgage broker just doesn’t cover it anymore. I am a real estate investment advisor and it is my job to help you achieve your goal. In fact, one of my affirmations is “I succeed because I help others succeed.” If you do not have a clear investment goal, it makes it tough for either of us to succeed. So, to ensure that we are both successful, give some serious thought to your entry, exit and profit objectives to help me help you. I can absolutely help you develop and enhance these goals, but you have to have some semblance of one for us to get started in the right direction.
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Sep
4
What’s Liquidity Got to Do With Me?
September 4, 2007 | Leave a Comment
You may have heard people talk about the liquidity problem in the market. Liquidity is the driving force in the mortgage business. Let’s talk about this to get an understanding of how it affects the loan products and rates available today.
Liquidity in its simplest definition is the ability to turn assets into cash. For example, money in a bank account is extremely liquid because you can turn it into cash by simply making a withdrawal. On the other hand, assets like antiques or real estate are not very liquid because it takes time to turn them into cash.
Liquidity in the mortgage industry refers to the ability of the originators to sell off their newly created loans to investors (mortgage investors, not investors like you and me). This is done to free up cash so they can make more loans.
Many loans are pooled together to create a security called a mortgage backed security (MBS). These are sold to investors in the form of bonds. The largest investors in these types of bonds are insurance companies and hedge funds. Because of the rising default rates, losses, and the consistent MBS downgrades from companies like Fitch, it is nearly impossible to sell certain types of mortgages. In an effort to make MBS’ more attractive, originators like Countywide and Wells Fargo have tightened guidelines and increased rates.
Several weeks ago, we could still find 100% non-owner occupied loans. Today the highest LTV that we have found is 90%. OUCH.
As investors, this obviously has a huge impact on our business. The same business model that was successful last year may not be relevant today. We need to be more creative and find better deals. Lassiter Mortgage Group stays on top of the market and understands the needs of our clients. We are still doing investor loans and still loaning up to 100% for rehabs. We also have loans available to refinance recently listed homes or to refinance with no title seasoning, including cash out!
I have noticed a higher percentage of questions about non-traditional buying strategies and I agree that this may be an alternative for many investors. For a nominal fee, we would be happy to take the time to create a non-traditional investment plan or any real estate financing plan for your specific situation. Times are tough which is why it is more important today than before to have solid advisors. Lassiter Mortgage is happy to be part of your team.
Kevin Amolsch is the residential go-to guy here at Lassiter Mortgage Group. He can be reached at Kevin@lassitermortgage.com or 866-569-1110 ext. 101.
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