Quotations by Brandon Turner

Portfolio loans may be slightly higher in rate and shorter in term, or they may involve a balloon payment (most likely through a refinance). None of the "big banks" will do portfolio lending. Instead, you'll want to focus your search on small, local community banks. Look for banks that have a maximum of 20 different branches. Credit unions might also be a good source of portfolio lending. Portfolio lenders will not be labeled as such. You'll simply need to call them up and find out. Ask to speak with the loan officer, because the teller will likely have no idea how to help you. [2015] - Brandon Turner

Hard money lenders are professionals who lend out their own money, or other peoples' money, for a living. They have a set way of doing things, a predefined interest rate, a predefined set of fees (points), and a very short term (usually less than one year). Private lenders are lending their own money but don't typically do so for a living. The rates, fees, and terms are usually lower and much more negotiable. The most common private money rates I see fall between 6% and 12%, depending on the relationship. [2015] - Brandon Turner

A home equity loan and a home equity line of credit are similar but have a few major differences. The loan is typically taken out all at one time and paid back in installments until it is paid off, much like a typical mortgage or car loan. The interest rate and payment are generally fixed for the life of the loan (but they don't have to be). A home equity line of credit is a revolving account that works much like a credit card. You can borrow as much as you want, up to the limit, pay it back, and then borrow again These lines of credit generally have lower interest rates than home equity loans, but those rates are generally variable and so can rise or fall. [2015] - Brandon Turner

Front-end DTI (Debt-to-Income Ratio) is the relationship between how much your total housing payment will be and how much income you have each month. Back-end DTI is the relationship between how much total debt you have and how much income you make. Typically, you probably want your front-end DTI to be less than 28% and your back-end DTI to be less than 36%. When checking with a lender on their DTI requirements, you will typically see these numbers in the following format: (28,36). [2015] - Brandon Turner

LTV (Loan-to-Value Ratio) = Total Loan Amount(s)/Fair Market Value. Lenders typically have different requirements for maximum LTV based on the property type. For example, for an owner-occupied property with an FHA loan, the lender will go up to 96.5% LTV. However, on a commercial property, a lender may not want to lend above 50% LTV. If you are an investor, you are likely to find 70%-80% LTV the norm for investment properties. [2015] - Brandon Turner

If your credit score is below 600, understand that obtaining any kind of loan could be difficult. To check your credit score, I recommend visiting CreditKarma.com, which allows you to see your score for free. [2015] - Brandon Turner

If you are a property investor, the lender will also look at your rental income and may be able to use that income to offset your debt. However, most lenders will not give you any credit for this rental income unless you have been a landlord for more than two years. In addition, no matter how long you've been a landlord, you likely will never get 100% of the rental income counted toward you. They will likely give you 70%-80% just to be safe on their end. [2015] - Brandon Turner

A lender wants to know that not only is the property going to be stable but that you will also be, especially with regard to your credit decisions. For this reason, it's important not to do anything crazy with your credit while you're trying to obtain a loan, such as opening up new credit accounts or adding on new debt. [2015] - Brandon Turner

Other documents can get recorded on the chain of title in addition to the deed and that give people certain rights to the property. The most common examples would be easements, covenants, or liens. Easements (a legal right given by the property owner to another party to allow them to use or cross the property) and covenants (a legal document that explains how a property can be used) are fairly common and not a big deal, but a lien can make or break a sale. Your goal when buying real estate is to only buy properties that have a "clear title". This means a title that has been researched and found to be complete and free of liens or other issues. [2015] - Brandon Turner

When you're working with a real estate agent, your agent will likely recommend an attorney or title company if you don't already have a favorite. If you are buying the property without an agent, through a private sale, you will need to contact the title company yourself to get the title process rolling. [2015] - Brandon Turner

The following is a list of documents you may receive from the seller: seller disclosures (most states require that the seller disclose any known defects in a property before selling it), seller's tax returns (to get these - simply ask them), current leases, current rent roll, tenant estoppel certificates, current year's tax bill, recent utility bills (either ask for specific bills or call up the local utility companies and get the information directly from the source. Also verify who pays for which utility, and always check to make sure the utility bills have all been paid), security deposit (make sure you are given the correct cash at closing), HOA documents. [2015] - Brandon Turner

Unless you are a licensed and experienced contractor, do not do your own inspection. Yes, you should walk through the property and make sure there are no major red flags before spending the money on an inspector, but your official inspection should be done by a real, licensed property inspector. Try to get the inspector onto the property within four days of mutual acceptance. If possible, make sure the power, water, and all other utilities for the property are turned on before the inspection. I recommend you are present for the inspection. The report that the inspector provides you several days after the inspection will likely be scary. Your job is to decide which issues are important and which aren't. Being present for the inspection makes this process much easier. [2015] - Brandon Turner

The cost of an inspection depends largely on the size of the property, but for easy reference, a typical single-family home will cost between $350 and $500 for an inspection. Your home inspector may suggest the following separate inspections after he completes his walk-through of the property: plumbing, asbestos, lead-based paint, pets/wood destroying organisms. The items you discover in your inspection can be used to negotiate a better price on the property. If you find things that you didn't know about, you can ask the seller to either fix those issues, credit you the cost of those repairs at closing, or simply lower the price of the property. [2015] - Brandon Turner

Choose the right insurance: For homes that will need some fixing up, you may be limited to an actual cash value (ACV) policy. That means the insurance company will give you only enough insurance to cover what you paid for the property, minus the value of the land it sits on. On the other hand, a replacement cost policy is the preferred option if you can get it. The coverage is better, and it will pay for the full cost of a covered loss (minus your deductible) or even to fully rebuild the house, if necessary. To qualify, the property must be in good condition, with the roof and paint in good shape. With most policies, if you are more than 20% under market costs, you will be subject to a coinsurance penalty. Make sure your policy includes outbuildings (garage, shop, etc.) and you have liability coverage on the home (common limits are $300,000, $500,000 and $1,000,000). I recommend requiring your renters to carry their own renter's insurance as well. [2015] - Brandon Turner

You must keep your rental property expenses separate from your personal income. Don't use your personal checking account to run your rental business! If you have the property owned by a legal entity, this could destroy any chance of protection that entity might otherwise offer. Head to your local bank and open a business checking and savings account for the property. [2015] - Brandon Turner

Property Manager Interview Questions: What are your management fees? How do you communicate with owners (how frequently, what about)? How many properties do you manager? How long have you been a property manager? Am I locked into a management contract with you (if so, how does that work)? How many evictions do you have each month? What kind of reserves do you/does your company require? How long does a typical tenant stay in a property? How long do properties usually stay vacant before being rented? How do you screen tenants? Do you accept people who have had an eviction on their record? How do you handle maintenance requests? Is there a minimum charge for a maintenance visit? What do you do if a tenant doesn't pay rent? How do you market vacant properties? [2015] - Brandon Turner

If you are going to use a property manager, just remember this: most of them suck. You need to find the one that doesn't. Treat it like a job interview. Get referrals and actually talk with those referrals. Ask the property manager hard questions in an interview. Don't settle for mediocre. [2015] - Brandon Turner

In my experience, the leads I get on Craigslist tend to be higher-quality applications than those from other sources, though that could just be my area. I recommend using the free website Postlets.com to create your ad, because this will give you some basic HTML code you can simply copy and paste into the Craigslist ad to stand out. [2015] - Brandon Turner

If you live in a large city, it's very possible that the MLS will be the main driver of tenants for your property. Homes can be listed for rent on the MLS and real estate agents can help bring you tenants--for a price. You will typically need to pay the agent a fee when the property is rented, but this might be a small cost to get a great tenant. [2015] - Brandon Turner

Rental Criteria Example: Gross monthly income must be approximately three times or more than the monthly rent; Applicants must have a favorable credit history (a score of 600 or higher); Applicants must have a source of income and be able to furnish acceptable proof of the required income; Applicants must have good references concerning rental payment, housekeeping, and property maintenance from all previous landlords; The number of occupants per bed room is limited to two (per Washington State law); Only non-smokers are considered. [2015] - Brandon Turner