General Industry News – There are applications in the law that allow for “partial tax free exchanges”. Under this situation the percentage of cash received under the law is referred to as ‘Boot”. In partial tax free exchanges the proportional percentage of cash received from sale of the property will be subject to the recapture of property depreciation and becomes a taxable event in the year the property is sold. General Industry News

There are companies known as accommodators that can be retained to perform the duties of handling the funds, filing required forms and completing paperwork required to finalize an IRS 1031 tax free exchange. There are companies that only act as accommodators. There are also escrow companies that provide accommodation services in addition to standard escrow services. General Industry News

It is very important that any accommodator you chose to handle your transaction needs to have adequate insurance and fidelity bonds to guard against misappropriation of your money while in their custody. There are many reputable companies that can professionally handle an IRS 1031 tax free exchange.

Many times, when Borrowers apply for a real estate loan from one of the “Big Banks”, and later get turned down, they often think there’s no other options available for them to obtain real estate financing.

The Big Banks, which are also known as “A” Paper Lenders or even FNMA/FHLMC Lenders have a “One Size Fits All” Underwriting Approval Standard.

Those that aren’t aware, FNMA is the (Federal National Mortgage Association) and FHLMC is the (Federal Home Loan Mortgage Corporation).

Both FNMA and FHLMC are “Quasi Governmental Agencies” that operate in the “Secondary Mortgage Market”, where they stand ready to Purchase loans originated by the Big Banks or other “A” Paper Loan Origination organizations.

But there are very strict Underwriting Guidelines that MUST be followed and complied with in order to Qualify for either FNMA or FHLMC to purchase the loan from one of the Big Banks. Sub-prime Real Estate Loans

Most real estate loans can be compared to a “Tree Legged Stool”, the “3” legs of a real estate loan are:

1. Income
2. Credit
3. Property Condition

If only “1” of the above “3” Qualifying Requirements don’t comply with the Underwriting Standards from one of the Big Banks, then the Borrower’s Loan Application will be turned down.

The Big Banks are very strict on each of the above “3” Qualifying requirements.

So just to restate, when Borrowers apply for real estate financing at one of the Big Banks and they just don’t quite “Fit in the Box”, then their Loan Applications are denied.

Many potential Borrowers are not aware that there are many alternative loans available in the marketplace for those that just don’t quite “Fit in the Box”.

These type of loans are known as Sub-Prime Loans.

Sub-Prime loans have interest rates that are a little higher than “A” Paper Loans, but not much more.

The main advantage to Borrowers when applying for real estate financing is that Sub-Prime Loans are much more “Lenient” on both Credit and Income Qualification Standards.

So, for Borrowers who have FICO Credit Scores that the Big Banks just won’t accept, then a Sub-Prime Loan is the next best choice.

Additionally, the Income Qualifying Standards are again much more “Lenient” and there are several “Other” ways to Document/Prove the necessary income to Qualify for the requested loan.

For Borrowers who own property or wish to purchase a property that has Deferred Maintenance or is not in at least in “Average Condition”, then unfortunately a Sub-Prime Loan is Not a choice, since Sub-Prime Lenders are just about as difficult as “A” Paper Lenders when it come to property condition.

In such situations, Borrowers would need to apply for a Private Equity/Hard Money Loan.

Some of the situations that Subprime Loans allow:

• Borrowers with Low Income
• Borrowers with Credit Scores below 600
• Borrowers with a Poor Credit History
• Borrowers with Prior foreclosures
• Borrowers with a New Businesses or Self Employed

The Income Qualifying alternatives that Sub-Prime Loan allow are:

Bank statement Programs…………this requires the Borrowers to provide 12 to 24 months bank statement where all Deposits are added up and then divided by either 12 or 24 to determine a “Monthly Average”, which is then used as the Borrower’s “Qualifying Income”.

Stated Income Programs………under certain circumstances Borrowers are allowed to simply State their income, versus having to provide “2” year’s Federal Income Tax Returns which the Big Bank require. This situation is ONLY available for Non-Owner-Occupied Properties……………otherwise known as rental properties. Subprime Real Estate Loans

Sub-prime Real Estate LoansSub-Prime Loans do require a larger Down Payment than the Big Banks when applying for purchase financing, so Borrowers that apply for a Sub-Prime Loan should anticipate being required to put down at least 10% to 20% of the purchase price.

A few other benefits that Sub-Prime Loans provide:

• Longer Term Options – Up to 30 Years
• Lower Rates than Private Equity/Hard Money Loans
• Alternative Income Qualification Options
• Loan to Foreign Nations

Our company arranges and funds Sub-Prime Loans.

We would be happy to discuss the Specifics with those that have been turned down by one of the Big Banks to determine if a Sub-Prime Loan would be a good real estate financing option.

Additionally, for Borrowers inquiring to obtain a Private Equity/Hard Money Loan, we would also be happy to determine if a Sub-Prime Loan might be a better real estate financing option.

If anyone would like additional information or assistance, then please contact our company by phone at (888) 797-7970 or us E-Mail at info@westarlending.com and we’ll be happy to assist in any way.

 

It just can’t be emphasized enough how important it is to obtain a Policy of Title Insurance for every type of real estate transaction.

When a Buyer enters into a Contract to purchase Real Estate from a Seller, the last thing any new Property Owner wants to have happen is for someone to later show up after the close of escrow and further say……………that’s Not your property…………..….it’s mine!!!!!

Title Insurance protects Buyers/New Owners from the possibility that a Seller earlier sold the property to someone else, before he later sold it to the unsuspecting New Buyer.

When a Buyer obtains a Policy of Title Insurance when they purchase a property, if anyone ever does shows up later and claims ownership to the property, the New Owner simply turns the matter over to the Title Insurance Company.

Further is a Buyer ever purchases real estate directly from a Seller, without obtaining a Policy of Title Insurance, where the Seller simply Deeds the property over to the Buyer/New Owner, any recorded Deeds of Trust, Tax Liens or Judgments passes with the property over to the Buyer/New Owner.

A Buyer/ New Owner might think they are buying real estate with only an existing 1st Trust Deed Loan, but in realty many undisclosed liens might come with property.

Title Insurance protects against any such matters ever happening to an unsuspecting Buyer/New Owner.

In California it’s customary that the Seller pays for the Policy of Insurance, insuring the Buyer/New Owner that everything that was “Agreed To” and nothing more passes over to the New Owner.

When a Buyer/New Owner is purchasing a property, the Seller pays for a CLTA Homeowner’s Policy of Title of Insurance, and if the Buyer/New Owner is obtaining Financing from a Lender/Investor then the Buyer/New Owner will need to pay for a Concurrent ALTA Lender’s Policy of Title Insurance.

Whenever a Buyer/New Owner needs to obtain a Concurrent ALTA Lender’s Policy of Title Insurance the costs are much lower due to the Seller concurrently paying for the CLTA Homeowner’s Policy of Title Insurance.

If later the now property owner wants to refinance, then they would pay a “Refinancing Rate” when obtaining an ALTA Lender’s Policy of Title Insurance insuring the new Lender/Investor.

When a Lender/Investor agrees to fund a loan to an owner of real estate, the Lender/Investor also needs Insurance to insure that if the Lender/Investor funds a 1st Trust Deed Loan that it’s insured as a 1st Trust Deed Loan, and doesn’t end up being a 2nd or 3rd Trust Deed Loan.Title Insuracne

Any prior Policy of Title Insurance the now Property Owner received when they first purchased the property was only effective up to the date the Buyer/New Owner took title to the property and does NOT insure “Anything” after the date of purchase.

Subsequent to the date of purchase the now Property Owner could have obtained additional Loans, or became subject to Tax Liens or Judgments, which would have priority to any new loan the Borrower is looking to obtain.

If there’s ever a dispute regarding a claim against the Homeowner or a claim by a Lender/Investor to a property, the Title Company who provided Title Insurance will be responsible to defend any possible claims in court or be required to payoff in full any Lien that was “Missed” by the Title Insurance Company when they did their investigation prior to issuing a policy of Title Insurance.

In the real estate world there’s an age old adage relating to recorded documents…………….”First in Time, First in Line”

A Policy of Title Insurance will protect the Interests of both Buyers and Lenders.

Whenever our company arranges real estate financing, we “Always” make sure that both our Clients/Borrowers and our company’s Investors are properly insured.

 

 

In contrast to conventional lenders, which look mostly at a borrower’s income and credit score before deciding whether to approve a loan or not, Private Money/Hard Money Lenders typically base their final decision on the value of the Subject Property, which would be the collateral for a proposed loan.

Fix & Flip Loans contain “3” underlying Valuation Numbers:

  • Value of the Subject Property when purchased
  • Necessary Funds to make the Repairs & Improvements
  • Final value following completion…..After Repaired Value (AVR)

Often the “Acquisition Price” paid by a buyer is lower than the Value of the Subject Property, and if so, then the Borrower would be “Credited” for the “Acquired Equity” in the Subject Property.

Whenever a lender is considering the possible MAX LTV financing limits, several factors are taken into account:

  • The necessary amount of “Repairs & Improvement Funds”
  • The “Additional Value” that will be obtained from the Repairs & Improvements
  • The amount of “Repair & Improvement Funds” that the Borrower is able to invest
  • The anticipated Finished Value, now known as After Repaired Value (ARV)

Once the above “Numbers” have been calculated, then a Lender can determine the MAX LTV loan that could be funded against the Subject Property.

Compared to other financing options, Hard Money Fix & Flip Loans have shorter repayment terms and higher interest rates, but they’re much easier to qualify for and obtain, and Private Money Lender will fund on properties that the Big Banks won’t.Hard Money Fix & Flip Loans

 

It’s very important that when “Deciding & Calculating” the desired list of “Repairs & Improvements” to be made to the Subject Property that Costs and Incremental Value increase be carefully examined.

Repairs

These are the “Cost Components” that always need to be made to the Subject Property, but still the costs to make such repairs must always be carefully calculated, since if MAJOR repairs need to be done that require a Building Permit, that Building & Safety Department could require that much more additional work be done than was anticipated.

This is often the case when Plumbing or Electrical repairs are made, and the possibility exists that complete upgrades be required to be made to the Subject Property to comply with current building codes.

It’s important to always visit the local Building & Safety Department to confirm if the “City” will require additional repairs that might substantially increase the repair budget.

Improvements

Whenever the possibility exists to make Improvements that the following be carefully addressed:

  • Costs to make the desired improvements
  • Requirement of getting a Building Permit
  • Estimated added value that the improvements will add to the Subject Property

Time is money, and if a Building Permit is required then the “City” could require Plans or Drawings be submitted relating to the desired improvements, this will add additional time and money to a Fix & Flip project, which could prove to be financially devastating.

Whenever calculating the estimated “Cost & Time” relating to a Fix & Flip project, its always best to assume that it will take longer than anticipated and cost more than budgeted.

If Repair & Improvements Funds are needed and the investment of such funds adds necessary value to the Subject Property, then a Fund Control Account might need to be set up with an outside Fund Control Company who will oversee the disbursement of the Repair & Improvements Funds.

The Fund Control Company will further make inspections of the Subject Property to confirm that the Repair & Improvements are being made and are in compliance with local Building & Safety requirements.

Unfortunately, many Lenders only take into consideration a home’s purchase price when determining to fund a Fix & Flip Loan, and oftentimes don’t look furth into the proposed loan.

We delve further into the deal to determine the final market value of the Subject Property on which to base the Fix & Flip Loans our company arranges.

In addition, we can provide the necessary funds to make needed repairs and upgrades and can also consider the property’s ARV (After Repaired Value) when determining our final Fix and Flip loan amount.

Our LTV’s reach as high as 70% or more when we’re considering funding Fix & Flip Loans, and If the house is purchased at a substantial discount from current market value, the need for borrower funds contribution can be greatly reduced.

If you need a Fix & Flip Loan and would like our company to investigate the merits of the transaction, please call one of our fix and flip loan consultants at (888) 797-7970, or you can complete the Short & Simple Loan Submission for a fast response. Hard Money Fix & Flip Loans.

 

In most people’s lives the largest investment they’ll ever make is to buy a house, and Hazard Insurance protects their biggest investment.

Hazard Insurance provides protection against the loss of a property from fire damage, but it also protects against:Hazard Insurance

  • Slip & Fall Accidents
  • Weather Damage
  • Burglary
  • Dog Bites

And many other potential liabilities.

Should a person’s house ever “Burn to the Ground” without Hazard Insurance, that person could be financially ruined and could literally end up homeless.

Another thing to consider, Hazard Insurance protects the structure and your personal property, but only up to the insurance policy’s “Coverage Limits”.

If a homeowner owns a valuable coin or stamp collection or any other unusually high value items, then the homeowner must pay the additional cost to add a “Rider” to the insurance policy to provide the extra insurance coverage.

Depending on where a person lives and their needs, Hazard Insurance may or may not include all the coverage they might need.

All Hazard Insurance Policies have what’s known as a the “Declarations Page” which Lists each “Category” of insurance coverage, and their respective Limits of Coverage.

Homeowners are encouraged to carefully “Check & Review” the Declarations Page to make sure that the insurance policy provides the necessary insurance coverage.

Almost all insurance companies hide behind the term “Act of God” and use that term for types of damages that they don’t want to cover.

Some of the types of coverage that insurance companies don’t typically cover are:

  • Earthquakes
  • Floods
  • Landslides
  • Damages caused by Social Unrest

If coverage is even available for “Act of God” losses from an insurance company, the homeowner would be required to pay for additional coverage or obtain a separate policy.

In California just about every insurance company won’t insure a home or any other structure if its location is in close proximity to “Brush”.

In this situation, there’s a Government Agency called the “California Fair Plan”, which works with insurance companies in providing the requested insurance coverage, and simultaneously “Shares the Risk” with the insurance companies when they provide insurance coverage in a brush area.

Another item to consider is that insurance companies have requirements relating to Deferred Maintenance, and many insurance companies will NOT insure a property if the property has:

  • Roof Damage
  • Large Cracks
  • Un-Permitted Additions

If a homeowner’s property has one of the above “Insurance Issues” then it might be difficult to obtain Hazard Insurance, but the good news is that there are “Non-Prime” insurance companies that might provide insurance coverage, but the costs will be more than traditional insurance companies.Hazard Insurance

Having hazard insurance coverage is paramount to all homeowners to protect their investments.

Lenders also need Hazard insurance to protect the security for their loans, which is the Subject Property.

There’s an old adage in the Real Estate world…………… “Land doesn’t Burn” but if the structure on the property burns to the ground, and all that’s left is a “Concrete Foundation”, the possibility exists that the lender’s loan could exceed the remaining value of the land and the lender could end up losing money.

When a Lender/Investor funds a loan there is a procedure where the Lender/Investor’s information is added to the Insurance Policy, this is known as the “Lender’s Loss Payable Endorsement”.

This procedure doesn’t “Specifically” Insure the Lender/Investor, it’s the homeowner that’s insured, but it does allow the Lender/Investor to receive any Notice of insurance Cancellation should the homeowner NOT pay the insurance premium.  This gives the Lender/Investor the opportunity to “Pay the Insurance Premium”, so the loan will continue to have insurance coverage.

Whether you’re a homeowner or a lender it’s important to check with the insurance agent or directly with the insurance company to confirm that there’s adequate insurance coverage to protect the interest of the homeowner and the interests of the lender.

Here at Westar Lending Group, we’re a “Make Sense Lender”, where we always put our Borrower’s needs first and we always go the extra mile to get our clients the money they need.

We focus on solutions, not problems!

 

We thought we would again review the Sales & Marketing Loan Origination strategies that every Loan Officer or Mortgage Company should employ to properly compete in the competitive mortgage industry.

First off, it’s been our experience since our company was founded way back in 1986 that the following “2” conditions MUST be satisfied before any Borrower will make the decision to apply for real estate financing with any Bank, Mortgage Company or Loan Officer…….they are as follows:

  1. A Borrower MUST have “Confidence” in the Loan Officer or Mortgage Company
  1. A Borrower MUST have “Trust” in the Loan Officer or Mortgage Company 

If a potential Borrower does not have both “Confidence and Trust” in the Loan Officer or Mortgage Company…………………. then they’ll take their business elsewhere.

With above in mind, Loan Officers that originate Real Estate Loans MUST always present themselves in a professional business manner and impress upon all Borrower Clients that they are there to help the Borrower achieve their goals.

During the Origination and Processing timeframe, always make sure to keep your Client/Borrower fully updated as to the “Status” of their pending loan.

Make sure that your Client/Borrowers are provided all required Loan Disclosures within “3” days following the signing of the 1003 Loan Application, and always follow up to see if your client has any questions or concerns relating to the Disclosed Interest Rate or Closing Costs.

If a Borrower does have an issue with anything, immediately address their concerns to their satisfaction …………no one expects perfection, but a client will very much appreciate the attention to their concerns.

Make sure that the Borrower’s contact information is entered into your CRM (Client Relationship Management) system so the Borrower can receive E-Mailed information regarding informative information and any available “Specials” and updates on possible alternative loan programs that the Borrower might be interested in obtaining.

Following the closing of the Borrower’s Loan, always make sure to follow up with them within a month or so to check in to see if they’re satisfied with the loan provided, and if there was a specific purpose as to why they obtained the loan………. then check to see if everything went well with their intended plans for any Cash Out.

It just can’t be emphasized enough…………………always stay in contact with your past Borrowers, so they’ll keep you in mind when the time comes when they need real Estate financing again or wishes to refer a family or friend.

Following are a number “Sales and Marketing Actions” that can be implemented that will help you or your company originate more clients:

 Professionally Designed Website

Every Loan Officer or Mortgage Company MUST have a professionally designed website, that provides the information that potential Borrowers are looking to obtain when searching for a loan program……………… and a loan officer or company to arrange the requested loan. Sales & Marketing Loan Origination

E-Mail Marketing Campaigns

 This can be a limited or large endeavor, from just staying in contact with past clients up and to a wide-reaching campaign directed at many contact categories.

Some of the possible actions are as follows:

 E-Mail Contact with ALL “Past Clients”

 We covered this above…………. but we just can’t emphasize enough how important it is to be vigilant in staying in contact with all past clients.

E-Mail “Referral Sources”

 Realtors

 Depending on the type of real estate financing provided this can range from FNMA/FHLMC financing for their Buyers to Sub-Prime and Private Equity Financing available to their Buyers who are having trouble obtaining financing.

Builders

 This can range from traditional FMNA/FHLMC to Sub-Prime & Private Equity Financing.

Typically, Builders align themselves with one primary lender, so if a Builder enters into an Exclusive Agreement, then most available opportunities to originate financing would be by “Saving the Deal” with alternative financing options.

CPA’s, Accountants & Financial Planners

People that employ a CPA, Accountant or Financial Planner typically have above average net worth and income.

Most of these people have good to great credit and are very busy in their daily lives, so if a relationship can be established with a CPA, Accountant or Financial Planner which have the trust of their clients can be a great opportunity for them to introduce their clients that are in need of real estate financing.

Direct Mail Campaigns

While direct mail has fallen a little out of favor due to the costs and logistics involved when compared to E-Mail marketing………………it can still be an effective avenue for new clients.

 Mail to “Past Clients”

This can be in addition to an E-Mail Marketing Program………. believe it or not, but not everyone has an E-Mail account.

 Mail to people that only “Contacted” you or your company in the past

All good Loan Officers should keep a “List of all Contacts”, this should include the person’s name, phone number and E-Mail address.  Just because the Borrower made the prior choice to obtain financing elsewhere, or was Not qualified at the time of contact, doesn’t mean you should overlook the opportunity to assist the person in the future.

 Mail to Identified potential Borrowers

This can range from FNMA/FHLMC Borrowers to Borrowers who have been identified to have “Credit Issues” that might benefit from Sub-Prime or Private Equity Financing.

 Mail to Identified Property Types

This is usually done to identify properties that are “Outside the Box” for traditional financing sources, such as Small Commercial Properties, Light Industrial or Vacant Properties.

 Online Advertising

 Facebook and Other PPC Marketing Venues

 This can be set up on a limited basis at first, most of this type of advertising is based on PPC (Pay Per Click), where there is a charge “Every Time” people “Click” an Online Add that takes the interested people to the associated website.  This can make the phone ring or additional E-Mal contacts, but extreme care must be taken when setting up the Online Add to limit “Clicks” from the most relevant and interested parties.

Online Directory Listings, Internet Ads & Craigslist Postings

Most online directory listing sites offer an opportunity to add you or your company to their directory listing………most are 100% free.

Many potential clients will often visit online directory listing sites as part of their quest to locate a loan officer or mortgage company to assist them with needed real estate financing.

Additionally, Google and the other search engines will become aware of the various directory listing of you, or your company and it will help in search results when potential clients are searching online.

Internet ads can be set up as Display Only Ads where a set price is established prior to placing the online display advertising, as opposed to PPC (Pay Per Click) ads.

This can be a good way to get your message in front of many potential clients for a reasonable price.

Placing ads on Craigslist and their other competitors is very inexpensive and could lead to new clients.  The advertising prices for most categories cost only $5.00 per month……. don’t overlook this inexpensive and possible profitable marketing opportunity. Sales & Marketing Loan Origination

Print Advertising

Sales & Marketing Loan Origination

Full Color Flyers

We’re aware that we now live in a “Digital World”, but we’re all still people and just about everyone appreciates the personal touch that’s outside the Digital World.  Full color flyers that have that “Wow Factor” and contain helpful and informative information for a prospective Borrower…………………… in addition to information to contact you or your company can make a great impression.

Full color flyers can be mailed as part of a Mailing Campaign, or personally handed out to prospective clients at trade shows.

 

Newspaper Advertising

This can take several forms, from simple and small Classified Ads to ROP (Run of Press) display ads in the general section of the newspaper.  The draw back to this type of advertising is that it can be expensive, and the “Window of Opportunity” for your message to reach a perspective client is very short, because by the end of the day most newspapers are tossed out along with any classified or display ad you or your company paid to have in the newspaper.

The Big Banks that are Household Names use this type of advertising to promote Brand Awareness and to compete against each other.  This type of advertising might not be the best way for a Loan Officer or Mortgage Company to invest their advertising budget.

Magazines

This type of advertising is typically directed to publications that are real estate related, as opposed to general circulation magazines……publication such as Homes & Land Magazine might be a good choice to place an ad about you or your company and the purchase financing that your company offers.

 Relationship/Partnership Marketing

  • Realtors

There are many different ways that a “Relationship” can be established with Realtors, the best is getting to be the Realtor’s Primary referral lender for their Buyers.

If the Realtor already has a Primary Lender relationship, but is open to working with another lender, then there are many ways to establish a Relationship with a Realtor that is open to working with other lenders, but most of the time it involves “Saving a Deal”.

Building relationships with Realtors can take time. Sales & Marketing Loan Origination

  • Builders

Most builders typically establish a Primary Lender relationship with one of the big banks, but it never hurts to beat the big banks and contact a builder early on in the development stage, in an attempt to show then “What You Got”, and if it’s good enough, then maybe you or your company can be the builder’s Primary Referral Lender.

The government is required to make public all “Pending” development projects and the companies that have submitted their development plans, obtaining information on the development companies and contacting them early, might provide an opportunity to become their Preferred Referral Lender.

But most of the time the best opportunity for a Loan Officer is to establish themselves or their company as a Backup Lender, for when a Borrower is not able to obtain a FNMA/FHLMC loan from the builders Primary Lender but might be able to be approved for a Non-Prime or Sub-Prime Loan.  The Builder would then be able to complete the sale of another property, the Buyer is able to close escrow on their new home………..everyone wins!!!!!!!

  • CPAs, Accountants & Financial Planners

Establishing a Relationship with one of the above Trusted Advisors has long been a reliable way Loan Officers have originated new clients.  As always, anytime a Trusted Advisor refers a Loan Officer or Mortgage Company to one of their client’s they need to have both “Trust & Confidence” in who they are referring to their client.  They don’t want to end up looking bad and further regretting the referral.  When considering taking the time and hard work to establish a Relationship, always make sure to be 100% professional and “Know Your Stuff”……………………Trusted Advisors always appreciate referral sources that exhibit professionalism and product knowledge. Sales & Marketing Loan Origination.

 Business Organization Involvement

 Mortgage Trade Organizations

Every Loan Officer or Mortgage Company should have a membership in one of the Mortgage Trade Organizations, and to further take advantage of all the support and educational services available.  If you or your company become a member………. make sure to get involved.

Trade organizations provide educational and new law of regulation updates to their members, and further have experts that can address and assist members with specific clients matters and regulatory compliance.

While this is not necessarily a “Sales & Marketing Action” that is directed at potential clients, always remember, no one does everything, so the opportunity might present itself where another member needs help with a specific loan transaction.

General Business Organizations & Chamber of Commerce Membership

Becoming a member in a general business organization or Chamber of Commerce is always a good idea, it’s a great way to be a positive force in the business community and provides an opportunity to meet and get to know other business owners and active community leaders in the community.

So often the general membership is comprised of Trusted Advisors and possible client referral sources.  But don’t just make membership a hustle opportunity, other members will take notice.

Just know every other member is also looking for new clients and opportunities……………get involved and active………….others will notice.

Charitable Organizational Involvement

 

Sales & Marketing Loan Origination Local Charities, Schools and Police & Fire Departments

This can take the form of many different types of involvement, from participating in events, such as being a sponsor, where there are typically different levels of sponsorship to assisting in a support capacity.

Situations such as providing financial support, where you or your company is Mentioned as a sponsor or “Thanked” by the Charity for you or your company’s support, to “Purchasing a Table” and “Comping” the event’s to deserving people to attend the event can build good will. Sales & Marketing Loan Origination.

Many schools provide opportunities for people or companies to participate in Sponsoring sporting events or “Other” school sanctioned events.  If you or your company participate as a “Sponsor” in a local Baseball League, the opportunity is available to have Banners or “Other” ways to inform the Community of you or your company’s support of a worthy event.  People in the community always like to work with people or companies that support worthy causes and the overall community.

Government agencies are always wanting for “More Money”, and the Police and Fire Departments have many ways to both support them and in turn receive credit for you or your company’s support with the community.

Both the Police and Fire Departments have Annual Open Houses, which provides an opportunity to show you or your company’s support.  In today’s world most people like the Police, but everyone loves the Firemen………. you’ll never go wrong supporting your local Fire Department.

But, even past the benefits that such support might bring to you or your company………………it’s just the right thing to do!

Well, that about covers the “Sales and Marketing Action” list.

We hope that something we mentioned above can be implemented and put into action by you or your company and will lead to many future happy clients.

If anyone notices a missing “Sales and Marketing Action” that we’ve left out, then please take a moment to point it out to us………………. we would be most appreciative!

 

Our company funds Private Equity/Hard Money Loans, and if anyone has a “Problem Loan”, and just can’t seem to get it past the finish line with traditional Institutional sources, then please give our company the opportunity to assist you and your client in obtaining real estate financing.  We’re very competitive with interest rates and we’re very broker friendly!!!

 

 

Our general E-Mail address is:            info@westarlending.com

Our toll-free phone number is:          (888) 797-7970

Over the past decade several “Government Sponsored Financing Programs” were set up to provide property owners an alternative way to pay for necessary or desired property upgrades.

Since last March many of us have been impacted by the Covid19 Pandemic in one way or another, be it health problems or government compelled Shutdowns.

It’s now November 17, 2020 and again the “Government” is threatening another round of Shutdowns.  The Governor or the Mayors never seem to shut themselves down, or deem themselves “Non Essential” nor quarantine their government paychecks, yet they just keep saying……………………….. “We’re all in this together”.

Those of us in the real world are compelled by the “Iron Fisted Government” to shut down our businesses.  Where everyone associated with the business suffers, and if rental property is owned, then the government is also there ordering what property owners can and can’t do with their rental property.

Many of the available “Government Programs” that we’ve all heard so much about are just not there for Business or Property Owners…………..I wonder why????? During these difficult times it seems that one of the only ways to get through to the other side is to raise additional funds to keep our businesses open or at least on life support and our investment properties afloat.

Currently the Big Banks seem to also be in with the Government in trying to crush both Business and Property Owners.  Unbelievably difficult and time-consuming Underwriting and Loan Approval Process.  We’ve heard recently from a number of Borrowers who never before had trouble obtaining Traditional Bank Financing state that “If I can’t get a Bank Loan then who can?”

Since our company is licensed to only fund real estate loans, we would need to arrange any loan we might fund against property owned by the business owner, whether is be where the business is located or any other owned real estate.

Our company specializes in providing Private Equity Financing, often times referred to a Hard Money Financing that is outside of the stringent Lending and Underwriting Guidelines employed by the Big Banks.  We’re not constrained by traditional Credit and Income Approval Guidelines or Subject Property condition requirements

But, before deciding to obtain any type of real estate financing, the age old adage must be considered………………..“You need to look before you leap”.

What we mean by this statement here is just like Sir Isaac Newton’s, 3rd Law of Motion that states that “For every action there’re an equal and opposite reaction”, in other words, life has consequences!!!!

Getting a real estate loan to offset the negative Covid19 restrictions could be the solution, which would be a good thing. The costs and expenses related to obtaining financing MUST be weighed against the benefits provided, which can be done by preforming a “Cost Benefit Analysis.”

We always advise our “Client/Borrowers” to look at the “Big Picture” when considering obtaining a Real Estate Loan, which includes “How do I get in, but furthermore how do I later get out”.

Whenever a financial obligation is obtained provisions must be arranged to provide for the Monthly Mortgage Payments, but possibly more important, how do I later pay off the loan.  Any Private Equity Loan should only be considered to be a short-term fix, and not a long-term play. Covid19

Our company can assess a client’s available lending options and further perform a Cost Benefit Analysis as to the effects in obtaining a real estate loan.

If anyone would like additional assistance or information, then please contact our company by phone at (888) 797-7970 or by E-Mail at info@westarlending.com.

1031 Tax Free Exchange will Save You Money

1031 Tax Free Exchange – Since property values are going up some of you might be considering selling and taking profits on your properties. If the property you are considering selling is NOT your personal residence and qualifies as an investment property then the option is available to sell by taking advantage of IRS tax code section 1031. This is the tax code that allows investors to defer paying capital gains taxes when selling investment properties. This procedure is referred to as a “1031 tax free exchange”.

Under current tax laws the capital gains tax rate for selling investment property is taxed at a rate of 15%. The tax rate for capital gains is lower than most marginal tax rates, so it would be beneficial to take advantage of selling using a 1031 tax free exchange to get immediate tax savings.

There is a catch as there so often is with tax laws exceptions. The catch is that you can’t get your profits in cash, but you are allowed to roll over your profits into another investment property that you MUST purchase within 180 days.

If you don’t “need the money now” then rolling your profits into a replacement property will add to your net worth by saving taxes now and should allow for greater appreciation of the property purchased.

One other reason to do a 1031 tax free exchange is that the IRS calculates a 3% depreciation amount for every year an investment property is owned. This amount is “re-captured” at the time of sale by being added back into the property’s cost basis and taxed at the taxpayer’s marginal tax rate. Taking advantage of selling using a 1031 tax free exchange will also allow for the taxation of IRS depreciation to be rolled into the replacement property.

Under IRS tax code 1031 a tax fee exchange is treated as an exchange and not as a sale. This is an important distinction since selling is always treated as a “taxable event”.

It is this unique distinction that allows for any profits also known as capital gains to be transferred into the replacement property. It is VERY important that each requirement of tax code 1031 be followed very carefully as the devil is in the details, since if all requirements are not followed the exchange can be rejected and the “sale” will then be subject to capital gains taxes in the year of sale.

A few things need to be explained or defined prior to going any further:

Capital Gains: Taxable profits from an investment property

Like Kind Property: Property qualifying to be included in a 1031 tax free exchange must be considered like kind. In the world of real estate all real estate is considered like kind.

Replacement Property: This is the property that is purchased.

Accommodator: Company or third party that accepts and controls the net money from the sale of the property sold while the 1031 tax free exchange is in process.

Boot: Any sum of money received by the seller of a property in a 1031 tax free exchange. The amount of money received is taxable at the taxpayer’s marginal tax rate.

Recaptured depreciation: This is the taxable event that is triggered upon the sale of investment property when depreciation is added back to the cost basis of the property. The IRS 3% annual depreciation calculation is added back at the time of sale and taxed at the tax payer’s marginal tax rate.

“3” Property Rule: This is the rule that states that no more than 3 potential replacement properties can be identified to the IRS in any 1031 tax free exchange.

The general requirements of an IRS 1031 tax free exchange are:

  • The property must be an investment property
  • The replacement property much be like kind
  • The replacement property much be of equal or greater value
  • The seller is prevented from receiving the net cash proceeds
  • The funds much be handled by a third party, known as an accommodator
  • The replacement property much be identified within 45 days
  • The purchase of the replacement property must close within 180 days

There are applications in the law that allow for “partial tax free exchanges”. Under this situation the percentage of cash received under the law is referred to as ‘Boot”. In partial tax free exchanges the proportional percentage of cash received from sale of the property will be subject to the recapture of property depreciation and becomes a taxable event in the year the property is sold.

There are companies known as accommodators that can be retained to perform the duties of handling the funds, filing required forms and completing paperwork required to finalize an IRS 1031 tax free exchange. There are companies that only act as accommodators. There are also escrow companies that provide accommodation services in addition to standard escrow services.

It is very important that any accommodator you chose to handle your transaction needs to have adequate insurance and fidelity bonds to guard against misappropriation of your money while in their custody. There are many reputable companies that can professionally handle an IRS 1031 tax free exchange.

There are reasons other than tax deferment to consider when selling by way of an IRS 1031 tax free exchange. Some things to also consider are:

  • Relinquishment of management duties: The options exists to exchange into a managed real estate investment where monthly management duties are handed by a management company or by a general partner or some other management arrangement.
  • Exchange into a triple net property: Where management duties, costs and expenses relating to property ownership are transferred to the tenant occupying the property.
  • Exchanging multiple properties: It is permissible to exchange numerous properties into one replacement property thus reducing multiple management duties required when owning more than one property.

With tax rates high and possibly going higher in the near future it only makes sense if you are considering selling to take advantage of IRS 1031 and defer taxes now. In a future Blog we will be discussing tax advantages available when selling a personal residence.

Mortgage vs. A Deed of Trust – What’s in a Name?

Mortgage vs Deed of Trust – Have you ever heard the term “I need a mortgage” or “I just refinanced my mortgage” or another other statement that contains the word mortgage? Was the person making that statement talking about a property in California? Was that person you?

The public has a huge misconception when referring to the legal document used in California known as a mortgage when discussing real estate financing. This is due to the fact that there is no such thing as a mortgage in California. Our country is comprised of 50 states with each state having its own unique laws and customs. States are free to adopt whatever type and form of legal real estate documents.

California is known as a “Trust Deed State” which refers to California legislation requiring that for promissory note to be used as a lien on a property it must be secured with a deed of trust.

The word “mortgage” has simply been adopted by California society as the normal and customary way of referring to a deed of trust, whether knowingly or unknowingly. In fact, there is a mortgage company or bank on just about every corner that advertises low rates on mortgages. So even the lenders and banks who lend money to purchase or refinance real estate in California are using the wrong word. There are many other such misconceptions often used customarily in society.

The main differences between a mortgage and a deed of trust are listed as follows:

 

Mortgage Deed of Trust
2 party instrument 3 party instrument
Borrower: Mortgagor Borrower: Trustor
Lender, Mortgagee Lender, Beneficiary
Trustee: Has Power of Sale
Reconveyance by Mortgagee Reconveyance by Trustee
Foreclosure by Judicial Action Foreclosure by Trustee Sale

 

As you can see the title of the parties to each respective document is referred to differently, but in each document there is a borrower and there is a lender. It’s just the deed of trust that has the 3rd party that a mortgage doesn’t have. The 3rd party to a deed of trust is the trustee. This is the main difference between the two documents.

The trustee has authority “authorized” by the borrower when they signed the deed of trust. A trustee can be a person, a Title Company or even the beneficiary as it is acceptable for the lender to also be the trustee. The trustee handles reconveying the deed of trust when the loan is paid off or processing a foreclosure sale.

The other main distinction between the two documents is in the way a foreclosure is processed. A mortgage requires that a lawsuit is filed in court and the process is handled in a court of law. The process of foreclosing on a deed of trust is by way of a non judicial process known as a trustee sale. This is processed and conducted by the trustee. A trustee sale is processed outside of court. After simply recording several documents, mailing out notices by certified mail and advertizing in the newspaper for 3 weeks a trustee sale can be held on a street corner or on the courthouse steps. The process is fast and simple.

After a foreclosure sale of a mortgage there is a Right of Redemption period for 1 year allowing the borrower the opportunity under certain circumstances to redeem their property. With a deed of trust that is foreclosed on by way of a trustee sale there is no Right of Redemption. Once the property is sold the borrower has no right to redeem their property. Mortgage vs Deed of Trust.

A deed of trust does allow the lender the option to either foreclose judicially or hold a trustee sale. A judicial sale will take about 1 year to complete and a trustee sale only takes 4 months. A judicial sale does provide for a deficiency judgment which allows the lender the option to foreclose on the property and also get a judgment against the borrower. Lenders almost always though choose the trustee sales route since the timeframe is so much shorter and there is no right of redemption.

The trustee to a deed of trust holds “Naked Title with Power of Sale” for the entire term of the loan. If a borrower has a 30 year mortgage the trustee possesses the power of sale for the entire term of the loan. The power of sale provision only becomes effective if the borrower defaults on their payments. The trustee’s power of sale is only removed when the borrower pays off their loan. The trustee will then issue a deed of reconveyance to the borrower. This action releases the deed of trust against the borrower’s property. It is at this point the trustee’s power ceases to exist.

If the borrower makes the monthly payments and eventually pays off their loan then the differences between the documents will have little to no effect on the borrower. Most borrowers will never even realize the differences. Mortgage vs Deed of Trust.

So, in the future, if someone in California tells you they’re getting a mortgage you can let them know what they really mean is they’re getting a deed of trust.