Challenges Facing Real Estate Investors In Todays Market

Until recently, real estate investing was so unrestricted that real estate investors could do most types of transactions with no restrictions.  Real estate investors have been forced to re-discover themselves with the real estate and economic bubble.

Here are a few things that affect real estate investing business.

1)    Taking over mortgage payments

 This business model earns real estate investors lots of money.   Deals with lease options, rent to own, owner financing, form a big part of most real estate investors income.

 Lots of states are now requiring that you disclose and get permission to the lender before you can take over payments.

They also require you to disclose to the buyer. Some states do not allow you to do a lease option more than 180 days.    You must therefore be ready to do a lot of paperwork.

2)    No stated income loans
 If you are self employed, you are unlikely to get a loan.  It used to be you just provided proof of your current assets, state what you make per year and you could get funded for a mortgage.

You can no longer do this, so if you are self employed you have to re-think how to acquire your properties.

3)    Hard money credit based?
 Surprising, even hard money lenders are lending based on credit and income.

Even though their rules are more relaxed, you have to shop more carefully to find a real hard money lender for your deals.

4)    Limit on number of properties you can finance
Currently you can finance up to 10 properties if your  income is fully documented and have a credit score of 720 or more.

 It is also necessary to have at least 6 months worth of monthly payments in cash reserves.

 Of course if you are self employed you cannot document your income!

5)    Seasoning rules
 You cannot refinance a property to cash out until you keep it for 12 months even if you bought it with cash.  In other words you cannot just move on to the next deal when you want!

If you buy rental properties, you have to take this into account.

 If you are self employed, can you refinance if you cannot document your income?

6)    No refinancing properties held in an LLC
This means you have to hold properties in your personal name if you want to refinance.  If they are held in an LLC, you have to hold them in your personal name for six months to refinance them.

So what do these new limitations mean?  Does this spell the end of real estate investing?

The answer is no. Real estate investors know how to re-discover themselves and are flexible enough to adapt to changing market forces.

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