by Herndon Davis | Commercial/Residential Mortgage Broker | 832-457-8951 | herndon@MortgageRealEstatServices.com
#1-Stop writing off all of your rental income!!
Yes, I know it’s tempting to use all the legal tax advantages afforded you by owning rental property but it comes at a cost. If you write off your rental income, it can’t be used to qualify to buy more rental property. You and your tax accountant should be able to find a happy balance between reducing your tax liability and preparing yourself to qualify for future financing to buy more rental property.
#2 - Stop running to Conventional lenders/mortgages for your growing real estate needs!!
It’s finally time to grow up and grow your real estate business. If you plan on building a comprehensive portfolio of rental property with residential or commercial tenants then you should quit trying to qualify for Conventional Fannie Mae/Freddie Mac type mortgages. You’re capped at 10 rental properties and its harder to qualify the more properties you own because your personal DTI (Debt-to-Income). Finally, you don’t have limited liability protection because these type mortgages can only be made to the individual borrower, not a legal entity.
In order to grow your real estate investment business you need to enter the Non-QM (Non-Qualified Mortgage) market. By doing so it allows you to legally incorporate and shield your personal finances and family from liability should injury, damage or death occur at your rental property, something you can’t do under Conventional loan standards outside the usual limits of an insurance policy. In addition, Non-QM loans tend to be more asset based versus basing approval upon your personal income and tax returns, which in many cases aren’t even required in the Non-QM arena. But everything comes at a cost though. You will pay more for the flexibility and creativity of Non-QM loans both upfront and throughout the duration of the loan. However, if you’re a savvy real estate investor, you will know how to spot a deal that will work under the Non-QM umbrella.
#3-Stop avoiding commercial property
You don’t need deep money pockets or super-intelligence to buy a commercial building and rent it out to business tenants. In fact, you have far greater revenue potential in the commercial market than the residential market while using many of the same principals of residential investing. And when I speak of commercial property I don’t necessarily mean buying a 50-story skyscraper either. Instead try a neighborhood strip mall, corner store building, a large home that can be converted into small offices for accounting or law firms or perhaps a 5-15 unit apartment building. Whatever it is don’t be afraid to step into the commercial market!
#4-Be realistic on Fix-N-Flip projects put in quality work and material.
Don’t’ let greed blind you on Fix-N-Flip projects. If you think you can buy a distressed property, slap a few coats of paint over it and replace a few wall sockets and then resell it for a fortune 6 weeks later, then you’re sadly mistaken. Yes, you can make a handsome profit flipping houses, but only if you buy at the right price point and then put in quality workmanship and materials bringing the property up to full market value. Anything less than that is called crap and real estate agents and buyers alike can spot it a mile away. Don’t underestimate your target audience or else you’ll earn a reputation and a financial return that stinks!
#5-Stop being unorganized!!
Finally, if you’re going to be a successful real estate investor stop being surprised at the amount of paperwork being asked of you. You should have it already collected, organized and ready to submit to me upon contact. I shouldn’t have to beg, plead and wait two weeks for you to find time in your busy schedule to send it over. If you’ve found a hot deal and need to close on it quickly, you may actually lose the deal because of your lack of immediate follow-through. Here’s an exhaustive list of what you already need to have collected, executed and calculated BEFORE you come knocking on my door asking for financing!
Have questions?? Call, text or email me, Herndon Davis at: 832-457-8951, herndon@MortgageRealEstateServices.com