Home News 2008-Style ‘Massive Opportunity’ in Real Estate, Loans to Secure

2008-Style ‘Massive Opportunity’ in Real Estate, Loans to Secure

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  • Travis Hanson secured a Guardian line of credit to take advantage of market corrections.
  • He then buys a house and uses the loan to renovate it.
  • As the house increases in value, he requests a mortgage for the value after repairs.

Travis Hanson starts investing real estate In 2009, he was still a college law student. In the midst of the financial crisis that began just a year ago, housing prices were plummeting.

Even after becoming a lawyer, he continued to grow his real estate portfolio as the cash flow continued to flow. He currently has more than 109 properties in about 150 rental units, according to county records viewed by an insider. owns a number of real estate businesses, including an educational platform called The Real Estate Retreat Network, which hosts .

He expects an even bigger buying opportunity than in 2008, as high mortgage rates and inflation have pushed many buyers to the sidelines. We are in step with a correction that could drop as much as 10%.

Median US home prices fell 19% from a peak in the first quarter of 2007 to a trough two years later, according to Census Bureau data. Although it is a photograph, Nationwide not so strict And there is still no crisis on the scale of 2008. sales are slowing nationally, and prices are falling In some cities where prices have skyrocketed due to the pandemic.

To seize this opportunistic moment, Hanson has secured guidance line of credit For $5 million, according to a screenshot of an email from his bank. This is a line of credit (LOC) that has been approved by the bank, but is not openly available to the borrower until a specific event, often triggered by a request for funding from the borrower.

“That’s what I’m already prepared for, just because I think there’s a big chance,” Hanson said.

Advice for those starting out

Most people do not have large amounts of cash readily available at the bank. This is why Hanson recommends considering a line of credit (LOC). This is a loan anyone can request from their bank as long as they have a decent credit score. Otherwise, if you have property, you can set it up as collateral against the loan. Some banks may require him to hold 10% of the loan amount in cash.

There are different types of LOCs, open-ended or revolving lines of credit, which the borrower can withdraw at any time and can repay over the life of the loan. There is also a closed-end credit the bank grants for his one-time payment that needs to be repaid. Finally, you can consider a Home Equity Line of Credit (HELOC) that uses your property as collateral against a loan.

Hanson uses LOC when his cash is already tied up. It allows him to make cash offers at home. He also uses it to cover rehab costs. However, this type of loan often has a higher interest rate than a regular mortgage, so you plan to pay off the loan once the property has been refurbished.

Renovate your property to increase its value. This allows him to go back to the bank and request a mortgage on the house. A third-party appraisal provides proof of the home’s new value, and the bank can give him 80% of his post-repair value (APR).

Mr. Hanson is only eligible for a mortgage if the property itself is the property and the rent collected is higher than the principal, interest, taxes and insurance (PITI). Hanson often pre-leases properties to prove to the bank that the rent is higher than his PITI. However, using rent rates for similar homes in the area is another way of showing how much rent a bank can collect.

If the process is done correctly, Hanson will own the new property without spending any of his own money. The rent then becomes the mortgage payment for the new house.

He pointed out that there are two big mistakes that can turn a good deal into a very bad deal. The second biggest risk is underestimating rehabilitation, he added.

This is why it’s important to know the market you’re in well, he said.

Also, use the PITI calculator to determine your monthly costs. You can find this on Google. To determine rents, Hanson uses his AppFolio property management software. But if you’re in a big market like a big city, you can also trust his website like Zillow.

When it comes to properties he buys, Hanson is looking for a home that looks like a big mess and needs rehab, he said. , he can often negotiate a lot.

“I’m looking for the ugliest house on the block so I can buy it cheap,” Hanson said. “Many homeowners are vacant because they look ugly and can’t sell.”

To find these homes, he uses the Deal Machine’s Driving For Dollars app. This app can be used while driving around the neighborhood. He said that if he saw a dilapidated house, he could take a picture of it. The app has ownership data and tracks photos geographically. Hanson then uses the app to send a postcard to the owner of record, offering to buy the house.

If someone appears to live there, he will look up the address through the property management company to determine if the house has a lease. I mean

In that case, he often knocks on the door himself.

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