Until recently, real estate investing was so unrestricted that real estate investors could do most types of transactions with no restrictions. Things have changed with the real estate bubble forcing real estate investors to re-discover themselves to succeed.
Here are a few things that affect real estate investing business.
1) Taking over mortgage payments
This is one of the most profitable real estate investing business models. 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 force you to less than 180 days for lease options. You must therefore be ready to do a lot of paperwork.
2) No stated income loans
Gone are the days when self employed people could easily get loans. Previously you just needed to provide proof of assets like bank statements 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?
This comes as a surprise that some hard money lenders need you to fully disclose your income and lend based on your credit.
They have more relaxed rules, but you still have to shop for hard money lenders who lend based only on property.
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.
You must also show cash reserves of at least 6 months your monthly payment for each property.
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. This means you cannot just move on to your 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 must transfer them to your personal name for 6 months before you can refinance.
So what do these new limitations mean? Is it the end of real estate investing as we knew it?
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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