Tag Archive for: Lending Squeeze

Investing in 2024: Why you need a HELOC

Categories:

Investing in 2024: Why you need a HELOC

Investing in 2024 will look completely different compared to years past. Investors will need more liquidity due to the increasing lending squeeze from banks. What do I mean by liquidity? Liquidity is the money that is available to you to help fund deals. These funds are not from lenders, but are instead from you. Now is the time to fill your liquidity buckets to the brim. One of the best cash reserves is a HELOC. What is a HELOC and how can it help you save for a rainy day? Let’s take a closer look.

What is a HELOC?

A HELOC, also known as home equity line of credit, provides a revolving line of credit that can be used at any time. HELOCs are normally used for large expenses, paying off high interest rate debt, and any additional expenses that you may face. Investors are feeling the pressure of the lending squeeze from both banks and credit unions. They are both driving down their loan to value percentages and putting more pressure on investors. What started at 90% LTV a year ago, has now plummeted to 75% LTV, and in some cases even 70% LTV. Loan to values are shrinking fast, so now is the time to lock everything in before it drops even further! Make sure that you get HELOCS wherever you can! This can be on your primary residence, as well as on all of your investment properties. Remember, you don’t have to use the funds from the HELOCS immediately, the money is just reserved for a rainy day. While it may cost a few hundred to close your HELOC later on, it is a great resource to have when buying properties, making payments, doing construction, or any additional expenses that come your way. 

The Time is NOW!

The goal before the end of the year is to fill your liquidity buckets! By opening a HELOC you can fill your liquidity bucket to the brim in preparation for  2024. As investors, we are all going to need these extra funds for down payments, escrow, paying contractors, as well as any other expenses that come our way.  Lenders are going to require you to be more liquid, have more reserves, and put more money down. Investors who take the time at the end of this year to prepare, will have more opportunities and a huge advantage in 2024 over those who don’t act now. 

Watch our most recent video to find out more about why you need liquidity. 

If you have any questions on liquidity, finding HELOCs, or have any other questions, please reach out to us!

We would be happy to help guide you to become more successful in 2024. 

 

by

How a Bank Collapse Impacts Real Estate Investors

Categories:

How a Bank Collapse Impacts Real Estate Investors

Without a doubt, banks are experiencing a significant decrease of money flowing into the lending pool. But, how does this impact investors? There are three main ways a bank collapse could impact real estate investors today. What are they? Let’s dive in and discover more!

Banks are Lending Less

Nowadays, banks are being forced to swim upstream in search of the “best of the best clients.” But what makes a perfect client? Well, it’s those who have more cash in the bank, more revenue, and higher credit scores.

Investors Book of Debt

To put it briefly, savings accounts and CD’s that were booked years ago at low percentages are experiencing a dramatic increase. What started at a monthly profit of 3% to 4%, has become a deficit of 5% to 5.25%. For this reason, investors are now upside-down on their assets.

Book of Business

Now, the notes that banks wrote 3 to 5 years ago, are now coming due. What started at 3%- 4% interest rates, has skyrocketed to 8%-10%. As you can see, lending is no longer in the forefront of banks’ minds in the traditional sense. 

How Investors are Managing the Lending Squeeze

So, what can real estate investors do? To start, they can prepare by making sure they have cash, high credit scores, and keeping up on projects. At this point and time, money and credit are going to be your keys to success. They are what will ensure you are in the game as rates continue to rise.  

Undoubtedly, there’s a bank collapse on the horizon. But as long as you’re aware of the situation and are willing to put in some work, you’ll be okay. Plus, we can guide you through a bank collapse by helping you improve your credit sores, increase your cash flow, and explore alternative lending options. Contact us today! 

Do you need more resources on how to navigate a bank collapse? Watch our most recent video to learn more!

by

Bank Collapse: How Real Estate Investors Can Prepare

Categories:

How Real Estate Investors Can Prepare for Bank Collapse

How can real estate investors prepare for the collapse of banks? What does that mean for them, and what does that mean for you as a real estate investor? We will coach you through this lending squeeze by not only looking at the challenges, but also highlighting lending alternatives that will help you stay afloat.

In the lending community, banks are experiencing a decrease of money flowing into the lending pool. Over 190 banks have been placed on the watch list because funds are leaving the bank at an accelerated pace. What does this mean for investors specifically?

There are three main ways this problem is impacting real estate investors today. Let’s dive in and discover more!

Changes to the Banks’ Lending Pool

1. Banks are Lending Less

Unfortunately, with the lending restrictions, banks are being forced to swim upstream in search of the “best of the best clients.” What makes up a perfect client? It’s those who have more cash in the bank, more revenue, and better credit scores. However, those specifications don’t always fit the majority of investors. 

2. Book of Debt

To put it briefly, savings accounts and CD’s that were booked years ago at low percentages are increasing dramatically. What started at a monthly profit of 3% to 4%, has become a deficit of 5% to 5.25%. This situation is forcing investors to sell bonds and get rid of old debt, so they are longer upside down on past assets.

3. Book of Business

Banks who wrote notes to businesses 3 to 5 years ago are now coming due. What started as 3%- 4% interest rates, has skyrocketed to 8%-10%. Unfortunately, because of this, many businesses can no longer qualify. What do banks do when notes become nonperforming? The government requires banks to put in more capital to help cover potential losses. Lending is not in the forefront of banks minds in the traditional sense. The primary option for investors is SBA loans, which are backed by the government, and therefore they do not have the same lending restrictions.  

Investors are Searching for New Lenders:

Why are they looking for new lenders? Investors are forced to explore uncharted waters to locate private lenders because banks are focused on the “best of the best.” This waterfall effect is forcing investors to cascade down to private lenders to keep their businesses afloat. With the influx of new clients, private lenders are also swimming upstream alongside banks, searching for borrowers with more experience, more money down, and more liquidity. Lenders who used to lend 75% ARV are now lending 75% LTV. This could result in investors spending 20%-30% more on each deal if you’re even able to qualify. 

Additional Aspect for Fix and Flip Properties

In regard to fix and flip properties, investors need to consider the current interest rates for homes. When rates go up, the ability for a buyer to buy a house goes down. In just two years’ time, a house for $295,000 in 2021 is now $500,000. The affordability of properties has stretched what investors can fit into their budget, and what they are able to qualify for depending on the DTI (debt to income). 

Managing the Lending Squeeze

How real estate investors prepare can will result in success when navigating these rough seas. The goal is to make sure you have cash, high credit scores, and that you are keeping up on projects.  Get into a deal now and hold it for 2-3 years to set yourself up for success.

Open your eyes to additional lending sources, such as “other people’s money” aka OPM, to fund part or even all of your projects. These are individuals within our community that can lend anywhere from $10,000 to $100,000. They are out there! It’s just a matter of knowing where to look and who to ask.

Money and credit are going to be your keys to making sure that you are in the game as the rates continue to increase. We can help guide you through the process of starting your business, increasing your credit scores, finding ways to improve your income, and helping with OPM options.

Need more help navigating these rough waters watch our most recent video!

We’ve raised millions of millions of dollars over the past 15 years by bringing in money from other investors who are just looking for a return. If you need coaching or help taking advantage of these opportunities give us a call! 

by