All Forum Posts by: Joe Splitrock

@Celia Moore it depends on what you mean? The Fed prime rate affects the rate that lenders set for for their loan products, such as credit cards and business loans, but not directly mortgage rates. Mortgage rates are affected more by the mortgage bond market. When a bank or mortgage company issues a loan, they generally sell that loan on the secondary market. This is where Fannie Mae and Freddie Mac come into play. The pseudo government corporations set the standards for conforming loans. If the loan is conforming, it is can be purchased and bundled with other mortgages and sold as a mortgage backed security. These bonds that are backed by mortgages. During the COVID crisis, the Fed was purchasing virtually every mortgage backed security as a way to buy and hold down rates. The Fed has now started pulling out of buying these mortgage backed securities, which means the commercial market needs to buy them. They are bought by insurance companies, retirement funds and other organizations that are looking for a safe place to store money. Without Fed demand, the interest rates in the commercial market will creep higher and they have. I have seen people recently quoted 4.5% to 4.8% for 30 fixed rate on investment loans. Last year I refinanced at 2.875% with cash out at 30 year fixed. 

Most banks and mortgage companies prefer conforming loans, because they make quick money originating the loan, have no servicing cost and have no risk once they sell the loan. Some banks will hold mortgages in house or selectively hold mortgages in house. They still may want the loan to be conforming, so they have flexibility to sell at a later date.

The Fed not buying mortgage backed securities doesn't mean that rates will skyrocket, but it is more based on demand, which increases as yield increases. 

Prepaid rent is not your money and you can't spend it until the monthly rent is due. So basically the only advantage is you get "guaranteed rent", but with good screening, you will be guaranteed rent anyways. As others mentioned, eviction can be harder when you have accepted prepaid rent. If you evict the tenant or the tenant dies, unused rent must be returned. If you sell the property, unused rent transfers with the sale. 

Four pieces of advice if you decide to take prepaid rent:
1. Screen the tenant as you would any other tenant. Prepaid rent should never substitute for qualification standards.
2. Have the payment made with cash, cashiers check or money orders. You want guaranteed funds, so someone doesn't later try to pull the money back. You can cancel a check months later or even a year later if fraud is involved. 
3. Don't offer any rent discount. 
4. Check state laws, because some prohibit advance rent and others require you to pay the tenant interest.

@Tou V. you misunderstood how subject to works. Title does transfer, but the mortgage doesn't. Failing to transfer title puts you at risk of loosing your property. If the property sold today, the title company would not give you a check since recorded ownership is in someone else's name. For future reference, pay an attorney when writing contracts to help make sure you do things legally and are properly protected.

Also be aware at the time of sale you are responsible for depreciation recapture and capital gains. Hopefully you have a tax professional, so you don't make DIY mistakes on that too.

Quote from @Gloria C.:

I’m considering getting a Heloc on my primary but am curious if I do will I be jeopardizing my possibilities to get future loans dow the road?

Appreciate any feedback…

Probably not a big issue, although it could play into to DTI. Investment properties add income along with debt, so generally adding investment loans is not an issue. 

Depends on portfolio size. I would say start with a spreadsheet, move up to QB and hire someone when you scale bigger. 

Quote from @Nicole W.:

Hello,

I bought a fixer upper, and found out that the cast iron will have to be replaced. Has anyone had any experience with the trenchless repiping and lining? pros and cons? If you have any recommendations on companies in the Tampa area that would also be helpful.

 In a warm climate where pipes are shallow, I would dig and replace. At a minimum get a quote on both options. I have used trenchless in my state, but the pipes were 12 feet under ground. It still cost me $6000 to have them lined. Lining works fine as long as the pipe is not rusted shut or collapsed. They need a good size opening for the liner. They will clean out roots or debris, but the pipe itself can't be compromised.

Quote from @Yvonne H.:

I get a lot of applicants, escpecially from Zillow, that for any number of reasons--be it income, background, credit, whatever--they don't qualify. What do you tell your applicants when they don't qualify? I don't want to give reasons that are too specific and set myself up for engaging in dialogue. I don't want them responding back (why that is wrong, they've changed, they're working on improving their credit, that was their roommate...whatever, I don't care) 
How do you inform applicants when their application is denied?

TIA

 There is no response you can send to guarantee they won't respond. Just don't engage with people. We provide a reason for denial via email, but keep it very general. 

"Your application cannot be approved at this time due to one or more factors including credit history, income, references, bankruptcy, background, etc."

If they respond back, just tell them the decision is final and that is all the information you can provide. 

Some people just respond with, "We have chosen another applicant." type of response, which you should only use if you actually have chosen another applicant. Keep your conversations truthful and brief. Also be respectful of the fact that someone paid money to apply at your property. You owe the the courtesy of a response for their effort. 

Whatever distressed property you find on Google street view has already been flipped most likely. Driver around in the summer and look for lawns that are not mowed or in the winter look for snow that is not cleared. 

That fee is market dependent. They changed it from $10 down to $5 in my market and now changed it to FREE listing as long as you accept Zillow applications. I liked it better when they changed $10 because there were less listings. It is definitely worth listing on Zillow. That is where we find the highest quality leads and usually where we end up renting our houses.

Stop looking at cost in business and consider value. Business is about return on investment. If a house rents for $1500 a month, that is $50 per day. If listing on Zillow costs you $10-20 and you get the property rented even one day faster, you come out ahead financially.

It is total spam and it is against the law. I have tried calling the phone numbers and they don't even take phone calls because they use spoof numbers. I have even started texting back, "yes I am interested in selling" and I rarely get a response. I have concluded that these mass text are coming from inexperienced people that are new to the business. 

I love the postcards too. I got ten postcards on the same day, each for different properties. They didn't even bother to filter their list for duplicate owners, haha.