Real Estate Investing Program

Ever heard the expression, “Money makes the world go round?” It is certainly true in real estate. Your ability to make money investing in real estate is directly related to your ability to get financing for your deals. The first thing our clients must do to invest in real estate is to go through a pre-approval process with our approved lenders. It is a simple process and can usually be done over the phone. In about ten minutes our lenders can get all the information they need to run an application and determine if you are eligible for financing. If they give you the green light, we move on to the next step. If yellow, we spend some time talking with the lender to find out what we need to do to get you ready. Every once in a while we run into a red light. Bad credit history, insufficient income or undocumented income are the main reasons for red lights. We cannot move forward with red light issues until they are resolved. Often times this is just not possible and this client is unable to continue on our program.

Once a client is pre-approved with our lenders they are ready to begin reviewing properties from our inventory for their first purchase. It is important that you understand what approval you received from the lender because it can affect what deals work for you. Some clients get approved for higher priced houses or for a higher loan % in relation to the appraisal. This is very important because it will affect how Streetvestor’s inventory can work for you. For example, client A and client B are both looking at the same property on 123 Main St. Client A is approved for 80% of the appraisal, while client B is approved for 75%. If the sales price is around 70% client B may only have enough loan to pay for the property and his closing costs. Client A, since they are eligible for an extra 5% more loan on the same property, may be able to pull out 5% in cash. If you have any questions you can always ask you Investment Property Specialist to help you evaluate deals to determine which properties are the best fit for your situation.

In order to purchase properties from our lenders you must set up a company. This process is as simple as filling out a form with the Secretary of State and obtaining a Tax ID number from the IRS. Your investment property specialist will help walk you through this process. Although many of our clients agonize over what to name their company, it really doesn’t matter too much. In the real estate investment business keeping a low profile is a good idea, so boring names like Jones Investments or AFJ Properties are just fine.

Once you have found the property that you would like to acquire, there will be some paperwork for you to fill out with your Property Specialist. The contract will be your agreement with Streetvestor about how much you will pay for the property and when you will close. With your contract, you will need to send Streetvestor one thousand dollars earnest money for each investment property that you are acquiring.

Select an Investment Property – Summary of Step 1:

1. Client obtains pre-approval for permanent financing from Streetvestor Approved lender.

2. Evaluate Deals with Investment Property Specialist

3. Setup company with Secretary of State

4. Put property under contract along with earnest money.

You will need to fill out a loan request form from the hard money lender that you will use to finance the rehab. Hard money lenders loan money to investors for the purchase and rehab of a property. Because banks usually will not lend on these properties until the rehab is finished, we must use hard money lenders to help us get there. They typically charge a high interest rate or some sort of fees on the loan. All of these costs are considered when you are purchasing an investment property through Streetvestor. Although there money is expensive, we use it for a very short amount of time and quickly pay off the hard money loan with a bank loan as soon as the rehab is finished.

Once a loan request has been submitted to the hard money lender, your Investment Property Specialist will order title work and help you get ready for your first closing. You will need insurance for your closing which can be obtained with a simple phone call to a Streetvestor approved insurance agent. Your Property Specialist will make sure all of the documents get to the closing attorney and ultimately to you in order for everything to close. You do not need to worry about coordinating all of the necessary pieces. We take care of that for you. It will usually take about 7-14 days after signing a contract for your closing to be ready. At this point we will meet at the attorney’s office or if you are out of state, he will send you the paperwork to fill out and return to him. As soon as your paperwork is complete and in the attorney’s hands, we will begin the next step, Rehabbing your Investment Property.

Finance your initial purchase – Summary of Step 2:

1. Fill out loan request form for hard money lender

2. Get insurance lined up

3. Order title work

4. Set time for closing

5. Fill out paperwork and return to attorney

You probably will not be actively involved in the renovation of your property, but that does not excuse you from knowing what is going on. It is very important that your rehab is done properly and that the major systems of your house are safe, functional, and without impending maintenance. The systems that are the most important to you as an investor are

1. Roof: A leaky roof can cause all sorts of problems.

2. Plumbing: Leaking pipes can cause wood rot and mildew.

3. Electrical: Not only will you clients appreciate a house that is electrically sound they will be safe which keeps you safe.

4. Heating and AC: Try keeping a tenant through the summer with bad air conditioning.

I have never heard of a tenant moving out of a property because it just was not pretty enough, but I have heard of plenty who left because of problems with the systems listed above. Although fresh paint and carpet are much easier to see, at Streetvestor, we focus on what really matters to the tenant and ultimately to our customers. Make sure that whoever is doing your rehab has thoroughly checked these systems.

Whether Streetvestor is managing your rehab or you are using a contractor, this process should be pushed along as quickly as possible. The refinance cannot take place until the rehab is completed and the hard money loan is very expensive if it goes past schedule. Your goal should be to have the rehab done in thirty days and the refinance done thirty days after that. We have had some go as quickly as thirty five days total. The faster the rehab the more money you save when you refinance.

During the renovations you may be asked to approval draws from the hard money company. Usually hard money lenders will hold the rehab money until some work has been completed. They will then release enough to pay contractors and for materials. This protects you as an investor by keeping contractors from walking away from jobs with all of the rehab money. You will typically receive a request for approval of a rehab draw on Thursday. It is very important that you call or email to the lender to approve the draw by noon on Friday. If you have any questions you must call your Investment Property Specialist immediately. Many of our contractors depend on their paychecks each Friday to feed and provide for their families over the weekend. If you wait to approve the draw or ask questions late on Friday, your contractor may not get paid and we will have a very difficult time keeping them on the job. It is fine to question work, but if you think there might be a problem please ask early.

Construction loans are helpful in getting your property rehabbed and tenanted, but they are too expensive to carry indefinitely. Once your property has been completed the long term lender will order an appraisal to determine the new value of the property and finish the loan documents. Your file will already be started with the lender so that we can refinance as quickly as possible once the renovations are done. The sooner you payoff the construction loan the more money you save in interest. Your long term lender will set up another closing and you will sign new loan documents locking in low rates on your new investment property for several years. These loans typically have an escrow payment added into the loan payment so that your taxes and insurance are paid each year automatically. All you have to worry about is your monthly payment.

It is very important to “buy right” when getting into rental properties. It is equally important to have good property management in place. Bad property management can sour a great buy, but good property management can make even a mediocre property perform well. Since many of our clients live out of state or have time commitments that make it difficult to self manage their properties, they will need the help of a professional property management firm. Property managers are responsible for watching over your investment and insuring timely collection of rents. You want a property manager that is fair but firm. Many times the best property managers will not come across as the most professional or best dressed. It’s much more important that your property manager has street smarts and a no BS attitude towards late paying tenants than what their office looks like. One thing to look for is attention to detail. Sloppy property managers tend to let small problems become so big that tenants cannot recover from them. Stay on top of your property managers and make sure they stay on top of your properties. They will send you a monthly report that will itemize the money collected and spent on each property. Do not be afraid to ask questions if you think something may be incorrect in your statement. Your property manager will have documentation of any expenses and should be able to explain them.

You can speed up the investment process by taking a Streetvestor Shortcut! Simply select an investment property from our inventory that is already complete and ready for the property management phase.