Unless you have obtained a loan in the past 3 years, you will be in for a major surprise. Loan requirements have stiffened a lot! Many investors have flown all the to Las Vegas only to discover their 800 credit rating is worthless. Even if you have a great credit rating and a large pool of assets, you wonâ€™t be able to get a low interest loan unless you meet these general conditions.
You must be a US citizen. Unfortunately, getting a loan from a foreign country is very difficult unless you want a hard money loan.
You must receive a W-2 or have tax returns that show you make money. The days of â€œstated incomeâ€ are way over.
Your credit must be spectacular. Since you are in investor, credit standards a much higher than an owner occupied property.
You canâ€™t be leveraged to your teeth. Lenders will look at your debt obligations and compare that to your net worth.Note: Some folks play the â€œSecond Homeâ€ or â€œVacation Homeâ€ card which gives you better rates than an investor. There is some risk involved because if you get caught, there is a chance the lender will â€œcall the noteâ€ on you.
Qualifying for a hard money loan to purchase properties in Las Vegas
Expect to pay $3k up front and 12% interest. Since you are paying through the nose to get a hard money loan, the conditions are a little looser. Their lending process is still a little vague to me but generally you need to put 40% down, have a large net worth and the property needs to be appraised at or below market. They also quiz you to find out if you have a clue about investing. They generally donâ€™t play with amateurs.
As for a "cash buy"...
Major reasons why you should leverage your money and get a mortgage.
Better returns on cash. You will get better returns on cash if you get a mortgage. The average minimum required to put down is 30%. If you split your money into 3 properties, you will eek out about 50% more on your cash. Rents in Las Vegas support great returns and here are actual case studies showing cash verses loans.
You can hedge against a bad real estate agent. To get a loan, the property must be appraised by your lending institution. If your agent doesnâ€™t do a good job finding you a property at or below market, you can cancel a typical deal as there is usually a contingency for the property to be appraised above the loan amount. Contact me if you want a list of pre-screened agents who wonâ€™t waste your time showing you houses above market.
Cash is NOT king. Many banks want the loans more than they want to unload the property. Even if you are the highest bidder with cash, a bank would rather take a lower offer if they can get the loan. Johnny Lunchbucket with a loan from Bank of America can cut you down if the property is owned by Bank of America. Smart agents will know which properties are owned by which banks. Investors go insane when they discover they lost an offer even though they were the highest bidder. Conversely, if you have a loan with a national lender, you can beat other cash offers.
Hard money loans are not the end of the world. Does anyone remember the days when mortgages were at 14%? Hard money loans are generally at 12% â€“ stiff but not unreasonable. Even if you factor in a 12% loan, you will still get a better return on cash. This page has a list of Las Vegas hard money lenders.
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