All Forum Posts by: Erica Ricketts

My business partners and I are in the middle of a big transition in our real estate portfolio. I am looking for the best companies for umbrella policies-- multiple properties in multiple states: OH, FL, TN, TX, SD, CA, and OR. 

1) What insurance companies have you used and what did you love or hate about them? 
2) Any specific items that you recommend being added to the policy? 
3) Have you ever had a claim filed against your policy? What was the experience? 

I want, no, NEED better coverage and would love your help!

Hello there!

I am looking for a personal assistant to represent me in the Sioux Falls area. Most months, I only need my assistant to drive past the property to inspect and make sure that there is no junk or anything wrong with the exterior when I am unavailable to accomplish this myself. Essentially I would like to have someone available as a backup if I am not there. 

If you or anyone that you know has someone available, please let me know!

Another thing to consider is how your mortgage lender will view your purchase and what calculations they will use for your debt to income ratio. As a mortgage lender myself, the way that we calculate investment properties that are rented out has to do with if you have a primary housing expense which then lets us "offset" the future mortgage with the future rental income. In most cases, we are able to offset the future mortgage with 75% of the current rental income (the other 25% is a mandatory "vacancy factor"). 

Let's say your future mortgage payment was going to be $1500, and rental income every month was $2500, we would calculate the amount we could offset by multiplying the rental income by 75% and then using that $1875 to completely offset the future mortgage. 

However, if you do not have a primary housing expense (i.e. a mortgage on your primary residence), then we cannot offset the future mortgage payment, therefore causing an issue in the debt-to-income ratio of some borrowers. 

Therefore, I am a huge advocate of buying your primary residence and getting into a comfortable mortgage before getting into real estate investing. Buying your primary residence allows you to gain experience in the regular ins and outs of owning a home. Then, when you are comfortable with that, purchase your investment property close by! By staying in your local market (or within an hour or so), you will be able to control a lot of the expenses by doing basic maintenance, property management, and bookkeeping yourself. This will allow you to become familiar with how to be a good landlord instead of having to build up an entire team of trusted individuals (realtor, handyman, contractor, property manager etc.), AND do investment bookkeeping and records, AND try to minimize expenses in an unfamiliar market. Get down the basics first so that you do not squander your hard earned money because you were unprepared for it! 

If you need any help with the property management portion in Ohio (I have 6 properties in Cleveland and just outside of Cincinnati), or have any questions regarding mortgages (I am also a mortgage lender), let me know! I'm happy to help. 

Minutes ago I got off the phone with Martin Maguire of Brown and Maguire CPAs in Columbia and Brentwood. He is PHENOMENAL. 

Quote from @Jorge A Recio Jr:

Hello , My name is Jorge A Recio I currently just finished high school and have wanted to become a real estate wholesaler I would love to attend any meeting in the dallas area , but also i would love to hear a word back from you guys and to get in touch with Some people i want to be successful but not sure where to start my journey so some help would be appreciated 🙏🏼

Hey there, Jorge!!! 
I am a mortgage lender that works with a couple excellent real estate agents in the DFW area that specialize in investing. 
Since you are starting out, there are so many things to learn— not just regarding finances, but also in terms of the market and how to analyze good deals. 
I would be more than happy to put you in touch with some patient bull-dog agents that will work with you to accomplish your goals!

Hey Santiago, 

As a mortgage lender, I see lots of title and legal documents all the time. When you purchased the home, did you purchase it as a single-family residence with an ADU or a two unit? What work have you done to the secondary unit? Do you know how it is already deeded with the county and if the zoning in the area allows for multi-units? Due to it's large square footage, it sounds like we are working with a 2-unit property instead of a SFR with an ADU, so please correct me if I am wrong. How it is deeded will make a huge difference in the route to take, as well as what groundwork the previous owners laid.

Hey there! 

I am with Nikhil all the way. There is a reason why there are different loan products, and each have their advantages and disadvantages. ARMs have gained popularity in the past few months because of the rapid interest rate hikes that have left less options for home buyers, including investors. Some are looking to gain back their capital from fix-and-flips, others are looking for ways to purchase properties to protect their investment as the home appreciates. Although every investment is a risk, with good research and planning real estate investing is one of the safest forms as evidenced by the past year of roller-coaster stock market. 

Take into consideration your reason for taking out a mortgage. Is it for a purchase on your primary? An investment property? A cash-out refinance to continue the cycle of investing? Now that you have your goal in mind, consider the Fed's raising of interest rates. Credit card spending just got much more expensive, so having a 5- or 10-year ARM at an introductory fixed rate can provide the liquidity needed to finish other products and recoup the capital that you put into them. Even in favorable markets, some investors doing fix-and-flips prefer ARMs since they typically offer lower interest rates and therefore save precious capital used for bigger and better purposes month by month.

Therefore, doing an ARM for short term and either selling or refinancing before the fixed term expires is not as horrifying as many people would lead you to believe, BUT you have to be comfortable with the risk, have a backup plan, and have a clear knowledge of your financial situation to ensure that you have an "escape plan" should the worst appear. And it doesn't hurt to have a really good lender in your corner that is comfortable working with investors and various loan products. ;)

@Wesley A Showalter
As a mortgage lender, I typically prioritize cash flow over appreciation for first time investors. The reason being is due to the metrics that I use to calculate good investments, as well as what the banks use to ensure that you have investment experience and are able to differentiate a good investment from a bad one. Appreciation is a fickle thing-- especially since many markets are starting to balance back out over the past two years of mayhem. Cash flow is a more concrete and allows you to grow your savings while getting accustomed to the accounting associated with owning investment properties. Accurate bookkeeping is essential to your investing success!

Of course, you should also prioritize your own safety and happiness since investing is a marathon and not a sprint. You don't want to be replacing your family heirlooms just to save some money now (think of the insurance premiums too!). Plus, your rate of appreciation is also tied to the neighborhood and demand therein; do you think that high crime neighborhoods will increase in value and demand rapidly? Work with your real estate agent to find a good area that you feel safe in and ask them the questions that you listed above-- they'll be sure to help!

Is there a reason why you are hesitant to reach out to a lender? 

It sounds like you are ready and rearing to go!

Especially since you are coming from a 9% interest rate, 6% is still a pretty solid upgrade. However, depending on how much you purchased the house for, make sure that the numbers make sense for your monthly mortgage payment. 

In addition, make sure that you work with a lender that knows how to refi you out of owner financing -- I recently closed a loan with this same scenario from another bank that could not figure out how to do it. Note: it's not overly difficult but working with the wrong lender could delay or even ruin your refi. :)