Gathered More Friends…To Ensure You Get Your Loan!
Loan of the Week
Recently, a broker sent us a borrower who was looking to refinance a rental property. He wanted to pull cash out of his equity to do some necessary debt consolidation. He wasn’t qualifying for conventional financing due to his credit and wanted to resolve this.
The property was in Los Angeles County and the loan he required was $532,000. With an LTV of 64% we were able to find an interested investor and full complete the transaction in less than 3 weeks.
At Sun Pacific Mortgage we are known for our skillful resolution to lending issues, and we pride ourselves in helping to relieve stressful situations.
If you are looking for a resolution to a stressful real estate problem, want to consolidate debt or use equity in your home to pull cash out, give us a call at 707-523-2099! We have helped thousands like you to find a comfortable way out of a seemingly impossible situation.
With strict regulations in place regarding self-distancing, what is to become of the real estate market? While California real estate sales is now deemed an “essential” industry, it does not mean back to business as usual. All realtors still need to follow health guidelines and each city and county can stipulate what that looks like for their community.
“Necessity is the Mother of inventions”, but with regard to the situation we face today in the midst of Covid-19, it could be rephrased to read: “If necessity is the Mother of Invention, than adversity must surely be the Father of Re-invention.” In keeping with this philosophy, realtors across California have devised old and new ways to stay in touch with their clients and pursue their business, maybe not in the usual way, but still successfully.
Among the ways realtors and clients have been able to communicate is through a virtual tour. Utilizing this tool, a realtor agrees on a specific day to walk through the prospective home with his/her buyer via a video app. (Prior to this exercise, all would need to agree on the app to be used that would be the most comfortable for the buyer.) While “showing” the home, the realtor would comment on the features in each room that are noteworthy and could possibly be overlooked, e.g. high ceilings. Finally, when the realtor has returned to his/her car, there should be a discussion regarding the overall feeling for the property and any specific questions the client might have.
Among the other tools realtors can employ are the old standbys of email, text, phone calls and video calls. With the latter, be sure that your client is using the same platform you use. Maybe when we are on the other end of this pandemic, we will find these tools to be valuable enough to keep
Bottom line: Stay calm and breath! This won’t last forever, and our clients will appreciate whatever efforts you make on their behalf during this time of crisis. Homes will still need to be bought and sold when we see the end of this.
Despite all, we’re continuing to help Homebuyers, Homeowners, Realtors & other Brokers and Lenders with our alternative financing programs.
Alt-A Hard Money with lower rates can benefit those just barely missing out on conventional financing qualifications; Hard Money can be fast with FICO not the determining factor and any property condition is okay.
Call today 707-523-2099 with any questions or scenarios. We will quickly let you know what we can do for you and/or your clients!
Recently Funded By Us
Location: Windsor, Sonoma County Finance Program: Primary Residence Alternative Refinance Loan Size: $419,000 Days to Close: 20 Reason Came To Us: Debt consolidation
Location: Seaside, Monterey County Finance Program: Investment Property Refinance Loan Size: $376,800 Days to Close: 21 Reason Came To Us: Property condition poor and wanted to fix & flip.
Location: San Carlos, San Mateo County Finance Program: Primary Property Refinance Loan Size: $560,000 Days to Close: 15 Reason Came To Us: Credit was poor so wasn’t getting approved elsewhere.
Location: Truckee, Nevada County Finance Program: Primary Property Refinance Loan Size: $550,000 Days to Close: 26 Reason Came To Us: Difficult to prove income as self-employed.
There is no question that investing in real estate can be profitable. However, it is important to be realistic and that you keep your goals achievable.
First of all, you need to keep in mind that you will not make a profit overnight. Secondly, you need to understand that the location of your property will play a critical role in determining how successful you are, and thirdly, the return on your investment also depends on how much money you have to further invest in fixing up the property or keep up with the maintenance.
When it comes to real estate, the primary focus of real estate investor should be on the return on investment. If it is too low, the investment may not be a good idea, but if the return on investment is high, your real estate property could be profitable for a long time, says House Match Real Estate Sales & Property Management.
One of the main reasons why some people fail to make profits in real estate is because they have little or no idea about the return of investment or set unrealistic expectations. But if you have a property that is in a good location and the maintenance costs or upkeep is at a minimum, there are formulas you can use to calculate the return on your investment.
Here are some ways to measure your return on real estate investment:
1. The one percent rule
The easiest way to determine how much money you will make is to use the one percent rule. As per this quick rule, your monthly gross rental income should be at least 1% of your investment.
For example, if you bought an investment property for $500,000, the monthly rental should be at least $5,000. Over 12 months, this equals to $60,000 and even after accounting for all usual expenses, you will still have 6-8% leftover. That can be considered a good return on investment.
2. The capitalization rate
Another formula that is widely used to calculate the profitability of real estate investment is the cap rate. This is basically the ratio of the net income of the investment property to the purchase price.
For example you invest in a home that is worth $250,000 and rent it out for $1,500 a month. After deducting the maintenance fees, you are left with a net monthly income of $1,000 or $12K over 12 months.
The cap rate, in this case, will be $12,000/$250,000 or 4.8%. Whether this a good rate of investment depends on the location of your property, tenant stability, and how much maintenance is required. In general, experts indicate that a cap rate of about 5% is desirable and the higher, the better.
3. Cash on Cash (CoC) return
Another metric that is also used to calculate profitability from real estate investment is the Cash on Cash (CoC) return. Unlike the capitalization rate, CoC calculates the 12 months returns on your investment based on net income and cash investment.
For example, you obtain a loan of $300,000 with $60,000 down payment. The monthly rent is $1500, and your operating costs are $4,000. The CoC is as follows:
12x $1500-$4000/$60,000 – 23.3%
But on the other hand, let us assume you paid cash for the property: a sum of $300,000 instead of a mortgage. The CoC, in this case, would be 12 x 1500-4000/$300,000= 4.6%. The reason for this variation is because CoC depends on how you finance the property. Most real estate investment experts suggest that a CoC between 8-12% is good.
4. Return on investment (ROI)
Measuring the ROI allows you to assess the efficiency of the investment. This is the gold standard of assessing profitability when investing in real estate.
For example, you buy a real estate property for $500,000 and pay an additional $20,000 for things like closing fees, lawyer fees, and the initial home insurance. You rent out the property at $3,000 a month. In this case, the ROI will be as follows:
12 x$3000/$500,000 + $20,000 = 6.9%
Most experts suggest that an ROI between 7-15% is good, but others insist that it should be higher than 20%.
The calculation of the profitability of a real estate investment is just one part of the story. The things that matter include the location of the property, size, type of tenants, and the approximate maintenance and repair costs.
If you own a beach resort, you will never be short of tenants, but if you have a property in a crime-infested area, not only will you have difficulty in finding tenants, but these tenants may not look after your property very well.
It is important to do your groundwork well and choose the property with a great deal of thought. If you do your homework, there should not be any reason why you cannot make a profit.
Our office is still open and very busy right now. We received 102 calls for loans last week. These calls were from other Brokers, internet searches, referrals from Realtors and social networking: Facebook, Linked In, etc. Obviously, not everyone qualifies – so we are carefully reviewing each one
Escrow and Title are overwhelmed as they have been bombarded with refi and purchase loans – due to low rates. The Feds are making sure rates stay low. We’ve received calls from two different County Managers for 2 different title companies and they have assured us, they want to keep our business and will do all they can to help.
We are watching the Real Estate market daily. County officials are still recording real estate transactions. The governor and counties have given the OK for home repair and construction work to continue.
CAR (California Association of Realtors) have issued rules/regulations for how to show a house that’s on the market (or not show a house on the market due to virus) which has made it more difficult to sell a house. But, there are some very clever realtors out there doing virtual showings and properties are selling. The real estate industry is always creative!
Mortgage giants Fannie Mae and Freddie Mac unveiled a payment deferral option for homeowners struggling to make their mortgage payments, regardless of whether the reason is related to COVID-19. Homeowners could be eligible to defer two months of their mortgage payments until the end of their mortgage, depending on their circumstance.
Reminds us once again – after the fires in Santa Rosa 2 1/2 years ago – it was predicted that many people would leave the area due to potential danger of fires. Some said Santa Rosa would become a ghost town. Just the opposite happened! Surprisingly, many decided to rebuild, and the fire areas are abuzz with house building noise. It’s exciting and fun to watch.
We are here and will continue to get you good offerings to invest in.
Besides the wealth accumulation that property appreciation affords, tax breaks are another way homeowners benefit from their real estate investments. Here are some facts that set the record straight on the tax advantages of homeownership:
Mortgage Interest: Homeowners with a mortgage that went into effect before December 15, 2017, can deduct interest on loans up to $1 million. For mortgages that went into effect after that date, only the interest on the first $750,000 is a legitimate deduction. To be able to take this deduction, you must itemize. Most Californians will benefit from this deduction because the majority of itemize deductions will most likely exceed the standard deduction of $24,400 for a married couple, or $12,200 for an individual.
Property Taxes: This deduction is capped at $10,000 for those married filing jointly no matter how high the taxes are. Remember that your taxes may be part of the total payment you pay to your lender.
Private Mortgage Insurance: If you put less than 20% down on your home, you are probably paying private mortgage insurance (PMI). This can cost from 0.3% to 1.15% of your home loan. Good news: you can deduct this interest payment thanks to the Mortgage Insurance Tax Deduction Act of 2019. This credit is retroactive for 2018, so it is a good idea to speak to your accountant to see if it makes sense to amend your 2018 tax return.
There are many reasons owning a home makes sense, but the tax benefits have always been a major motivator. The renter’s deduction is a pittance compared to the tax write-off you can claim as a homeowner when you consider both mortgage interest and property taxes.
We’ve realized that our hometown – Santa Rosa, Sonoma County, CA – has taught us a BIG lesson: No matter what happens, be it wildfires or Coronavirus, we will be open and help all we can! Sonoma Strong!
With the volatility in the stock market and uncertainty about the Coronavirus some are concerned we may be headed for another housing crash like the one we experienced from 2006-2008. The mere scare of this coronavirus and the mystery of its effects are producing hysteria.
There are many indications this real estate market is nothing like the 2006/2008 market but instead is staying strong!
Our Alt-A Hard Money program is super popular, realtors & financial institutions are busy with potential home buyers knowing now is the time to buy and many homeowners are refinancing with the 30-year conventional rates at historic lows.
With the multiple counties operating on “shelter-in” mandates, it is more important than ever to ensure clients who are in need of our alternative refinancing get it. We therefore will continue to provide our services while putting in extra actions to ensure the safety and health of family members at our company.
Timely news recently promoted this in a local paper by licensed Real Estate Agent, Eli Tucker:
“Currently, buyers still seem more motivated by historically low rates and lack of buying opportunities than they are concerned that they likely impact of the virus. It seems that long-term confidence in local real estate is still a stronger influence on people’s decisions”.
Here are some facts showing the current market is stronger:
1. Mortgage standards are nothing like they were back then.
During the housing bubble, it was not difficult to get a mortgage. Today, it is tough to qualify. Not everyone can get a loan
2. Prices are not soaring out of control.
Below is a graph showing annual house appreciation over the past six years, compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash.
3. We don’t have a surplus of homes on the market. We have a shortage.
The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. Statistically there were too many homes for sale in 2007, and that contributed to prices tumbling. Today, there’s a shortage of inventory which is causing an appreciation in home values.
4. People are equity rich, not tapped out.
In the run-up to the housing bubble, homeowners were using their homes as a personal ATM machine. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over fifty percent of homes in the country having greater than 50% equity. But owners have not been tapping into it like the last time. Compared to 2005 – 2007, homeowners have cashed out over $500 billion dollars less than before.
We have also spoken to many individuals in the California lending and real estate fields as well as experienced opinion leaders in the medical field. Below are facts & information from credible sources we hope helps to bring stability and calm:
From long-time licensed realtor, D.M.: “It’s important to keep things in perspective. It may take some time but the market will power through & become stronger as a result.”
From licensed Realtor and Lender of 32+ years, Lynn Tardibuono: “We made it through the fires and came out stronger, together. Working together our community will get through this too.”
And from a friend of one of our family members, who is a microbiologist closely involved in the research side of both medical and weaponized microbiology:
“Unfortunately, the first things I need to address is the plethora of misinformation being circulated, which has recently grown out of control. It is easy to cherry-pick statistics to fit any narrative, even from reputable sources.
“Coronavirus is a common viral family in both humans and animals. Stop spreading fear and start being more critical of your information sources and how data might be manipulated. Even in the medical field, very few are trained extensively in virology. If you have an underlying medical condition, make sure you are properly managing it to decrease the odds of complications. Keep healthy and informed friends!”
Real Estate market is still strong. We are in business and doing well, buyers are still out shopping, homeowners are still refinancing to pull cash out for their businesses and personal use.
We all need to flourish & prosper as best we can so that our community is helped and gets back to normal.
Taking advantage of our most popular alternative finance program could be the best mortgage option for yourself or a client – with rates as low as *6%!
If the FICO score is good (640 and up), the loan to value is 64% or less, and the property being purchased or refinanced is in good condition, then our Alt-A Hard Money Loan could be just the solution you are seeking.
Call us at 707-523-2099 and we’ll quickly respond with our answer to your financing dilemma!
Recently Funded with Alternative Financing
Location: Oakley, Contra Costa County Finance Program: Primary Residence Bridge Loan Refinance Loan Size: $310,000 with 62% LTV Days To Finish: 19 Why Needed Us: Wanted to buy another property prior to his current home being sold.
Location: Murrieta, Riverside County Finance Program: Investment Property Refinance Loan Size: $650,000 with 63% LTV Days To Finish: 17 Why Needed Us: Was looking for fast capital for his business.
Location: Mill Valley, Marin County Finance Program: Investment Property Purchase Loan Size: $2,100,000 with 67% LTV Days To Finish: 16 Why Needed Us: Real Estate Investor having difficulty with financing elsewhere due to multiple properties owned with mortgages.
Location: Covina, Los Angeles County Finance Program: Primary Residence Temporary Refinance Loan Size: $450,000 with 62% LTV Days To Finish: 11 Why Needed Us: Turned down by other lending institutions due to difficult to prove income.
*APR for this rate based on a $200,000 first mortgage is 6.31%.
Recently Compass California Real Estate issued a 4th quarter report on the sales activity in the larger Los Angeles area. The report heralds a favorable start to 2020 with overall sales increasing more than 7%, although the average home sales prices varied from market to market. Here is a brief summary of a few areas:
South Bay: Healthy increase in demand and activity over last year.
San Fernando Valley: varied widely from one area to the next, with both increases and sharp declines.
Westside communities: Small increase of 2%. Single family residences in Westwood and Century City had price increases of 15% and condominiums increased 17%. Culver City, a popular area for Millennials, enjoyed a 20% price increase from last year for condos and single-family homes rose 19%
Coastal communities: Activity was mixed with only 2% increase in sales compared to last year. Sales prices rose 12%, however.
San Fernando Valley: The West saw an 8% increase in activity driven by strong condo sales. The overall sales price slowed to a 5% increase over last year. The East market for single family homes was strong, but further east (e.g. Glendale, Burbank) sales activity fell because of inventory shortages.
South Bay: Home sales activity was energetic, up 17% from last year. Among the standouts was Playa Del Rey (233%) and Playa Vista (75%) thanks to more companies opening shop in “Silicon Beach”.
What can we take from this recap of the last quarter? It appears that hopeful buyers have returned to the market especially where prices have softened. Homebuyers should take note that current housing conditions remain favorable as we launch into 2020.
Get out there and sell your property if you’ve considered doing this; Get out there and by your new home or investment property – don’t wait, the time is now.