TLC Real Estate



Posted by TLC Real Estate on 4/29/2022

If you have a tight budget and love DIY, buying a fixer-upper might seem like a straightforward decision. Fixer-uppers are homes that need repairs and updates rather than being ďmove-in ready,Ē and can be affordable options in any kind of market. However, fixer-uppers require significant money, effort and careful planning. If youíre trying to determine whether a fixer-upper is right for you, here are the biggest things to think about:

Time Investment

Even the smallest home renovation can take weeks or months of time to complete. If youíre planning on renovating an entire house, expect to dedicate months of hard work to the task. Even if you hire professionals to do the hard work, youíll be investing a lot of your time in the project. Hardcore DIY enthusiasts might be tempted to tackle all the work themselves but will need all the right skills, equipment, safety measures and more. Consider the time youíre willing to commit to before you get a fixer-upper.

Total Budget (Including Renovations & Repairs)

When building a budget for a fixer-upper, many small projects combine into one. This can make it really difficult to get an accurate idea of how much money youíll need or want to spend. Itís also tricky to factor the cost of the home purchase into the equation, as well. If you stretch your budget too thin on buying the property, youíll have less available for the repairs and upgrades.

Luckily, mortgage lenders and real estate professionals can help advise you on the best choice of funding for your situation. There are special types of loans meant for major home renovations that can help with your fixer-upper project and traditional mortgages.

Temporary Living Situation

Because fixer-uppers can take a long time to complete, itís important to have a stable living situation in the meantime. If youíre selling your current home and planning to move into the fixer-upper when itís done, this can make the timing awkward and also allow expenses to pile up. You and your fellow household members will need somewhere safe to live until the property is move-in ready. If youíve sold your current home already, that means paying for temporary lodging.

A fixer-upper might be your dream scenario, but donít forget to assess the reality of the situation. Before taking the plunge, consider these three key things to help you make the best decision.




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Posted by TLC Real Estate on 7/17/2020

Image by Nattanan Kanchanaprat from Pixabay

If you're looking for "subject-to" real estate, you know it can be a good investment. This kind of real estate is purchased "subject-to" the existing mortgage. So the buyer owns the property, but the mortgage stays in the seller's name. Payments are made by the buyer, but it's not necessary for that buyer to obtain a loan, pay all the fees associated with that, and use their own credit to buy a house. It can be an excellent deal for an investor and for a seller who's facing foreclosure or other types of problems. Here's what you need to know about the different kinds of "subject-to"  real estate.

"Subject-To" an Existing Mortgage 

The most common type of "subject-to" real estate has that designation because it's "subject-to" the current seller's existing mortgage. If you want to buy this kind of property, you won't need to get a mortgage of your own. Instead, the seller will deed you the property and you'll continue to make their mortgage payments. This can help you get properties fast and keep you from worrying about things like whether your credit is good. Not all investors like these kinds of properties, but they can be good choices when they're handled correctly.

"Subject-To" Other Types of Liens 

Even though they aren't as common, it's also possible to buy "subject-to" properties that don't have a traditional mortgage on them. These properties might have some other reason that they aren't free and clear, such as tax or contractor liens. If payments are being made on these things and you don't want to pay them off to buy the property, you can offer to buy from the seller "subject-to" those liens. Just make sure you know what you're really committing to, all the liens on the property and how much they're for, in total.

Who Would Typically Choose the Kind of Investment?

Both single-family and multi-family properties can be purchased "subject-to" existing mortgages and other types of loans or liens. When it comes to these kinds of investments, most investors who choose them are familiar with investing already. That's because there's risk involved, and brand-new investors might not protect themselves against these risks as well as they should.

Still, investors who are careful and want to get started in the market can do well with these kinds of properties because they don't have to use a lot of their own money or qualify for mortgages. Then can simply purchase properties, and that can mean a much bigger portfolio much faster than they would have thought possible. If you're looking for a way to build a big real estate portfolio quickly, buying "subject-to" properties can be one of the ways to do that.




Tags: loans   Investment   home buyer  
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Posted by TLC Real Estate on 5/8/2020

Image by Gino Crescoli from Pixabay

The common understanding of an asset-based debt is a loan meant to be repaid with interest, over time, and backed by a physical asset such as a building or a car. The asset serves as collateral that can be claimed by the lender in case of borrower default.

An Asset-Based Security (ABS), however, in investment terminology, is somewhat different.

Even though the common understanding of an Asset-Backed Security (ABS) might be a loan that is based on an actual asset, such as a home or an automobile, that is only partially the case in investment terminology. By definition, the ABS represents a pool of debt -- usually a group of individual loans -- that can include any type of debt other than mortgages. It may include loans that are backed by real property, such as equipment, land, buildings, or business inventory, but not necessarily.

Mortgages are specifically excluded and classed separately today. The ABS evolved from the mortgage-backed securities that were first introduced in the 1980s, but a debt secured by a mortgage is today known as Collateralized Debt Obligation (CDO). To make it more confusing, a CDO is a specific type of ABS.

An ABS represents other types of debt. Liability might be associated with an automobile loan, student loan debt, credit card debt, home equity loan or other types of loan debt that are to be repaid, with interest, over a specified period of time. Investors in asset-based securities assume the risk; the anticipation is that payment of outstanding principal and interest will be repaid as scheduled, so that investors will earn a reasonable rate of return. The risk is that borrowers may default on the loans, or that a collection process will delay repayment and involve unexpected costs. 

The relative risk and anticipated return depends on the way such loans are packaged and sold. And the packaging depends in part on the reasons an original lender has for wanting to transfer the liability.

The original lender, often a small bank, credit union or other type of funding agency, will "sell the paper" as part of a package to a larger investor. This is accomplished in many ways and for a variety of reasons. Sometimes, it is to better the creditor's financial position or to comply with government rules regarding loan percentages and cash reserves. Such a sale may also be an attempt to dispose of non-performing loans by transferring the burden of collections to another entity. 

Investment institutions package loans based on risk assessment. The loans are separated into three classes known as tranches. Risk and potential return are proportional: A higher-risk tranch also promises higher yield, while lower risk invariably holds potential for a lower interest rate return on investment.

Working with a knowledgeable financial advisor is recommended if you are interested in ABS investing. Almost any brokerage firm can be used for such investment.  





Posted by TLC Real Estate on 2/14/2020

Image by OpenClipart-Vectors from Pixabay

A Real Estate Investment Trust (REIT) is a specialty corporate entity that owns and operates real estate to generate a profit. Several types exist. An Equity REIT typically generates income by leasing and managing income-producing property. The type of property makes no difference -- commercial, multi-family residential, retail, office, industrial, or a mix of specialty developments, including medical facilities and retirement communities.

Shares are sold to individual investors, who then receive a steady income based on operating earnings. According to some estimates, at least 225 publicly-traded REITs exist in the United States, all traded on a national securities exchange and regulated by the SEC. Public, non-traded REITs also exist, and are SEC-regulated. Private real estate investment trusts are not registered and not publicly-traded, offered instead only to a select group of investors. Picking the right type for individual investment goals can involve extensive homework.

Internal Revenue Service regulations are strictly applied. They stipulate that an REIT must be a taxable corporation, and derive at least 75% of its income from real estate sales, rents or mortgage interest. The corporation must then return at least 90% of taxable income to shareholders on an annual basis. There are additional requirements, in addition to holding at least 75% of assets in real estate, U.S. Treasury bonds or cash.

An REIT can provide important liquidity to an investment portfolio, with a typically steady annual income stream, although there may be little capital appreciation. The yield from different types of REIT can vary substantially. Equity REITs own and manage real property, while Mortgage REITs deal in financing products and mortgage-backed securities; both can be affected by the market, interest rates, the economy and consumer confidence. In addition, dividends paid to investors are treated as regular income by the IRS.

As with any form of investing, it's important to investigate the pros and cons, not only of REITs in a general sense, but the performance over time of a specific investment trust. On the plus side are the ability to diversify an investment portfolio, and the relatively secure potential of a steady return and low risk in tandem with the transparency that comes from regulatory oversight.

On the minus side are the low potential for actual growth in value, the REIT's reinvestment and expansion potential which is capped at 10% annually, and the unknown effect of real estate market volatility over the term of the investment. High management and transaction fees can also affect the financial return.

Investing in an REIT, however, is a viable way to gain knowledge and establish a presence in real estate, especially in currently hot segments of the market.  Especially for a beginner, REIT investment can represent a path to future growth and security, leading to additional real estate options over the long term.







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