Just recently, real estate investors had a level playing field where they could do any type of deals with few or no restrictions. Things have changed with the real estate bubble forcing real estate investors to re-discover themselves to succeed.
Here are a few things that affect real estate investing business.
1) Taking over mortgage payments
This is one of the most favorable real estate investing business models with most investors. Deals with lease options, rent to own, owner financing, form a big part of most real estate investors income.
Lots of states are now requiring that you disclose and get permission to the lender before you can take over payments.
They also require you to disclose to the buyer. Some states do not allow you to do a lease option more than 180 days. This means you have to keep up with lots of paperwork.
2) No stated income loans
Gone are the days when self employed people could easily get loans. Previously you just needed to provide proof of assets like bank statements and you could get funded for a mortgage.
This is no longer possible, so if you are self employed, you must have an alternative way of buying properties.
3) Hard money credit based?
This comes as a surprise that some hard money lenders need you to fully disclose your income and lend based on your credit.
They have more relaxed rules, but you still have to shop for hard money lenders who lend based only on property.
4) Limit on number of properties you can finance
Today, if you have a credit score of 720 or more and your income is fully documented, you can only finance up to 10 properties.
It is also necessary to have at least 6 months worth of monthly payments in cash reserves.
Of course if you are self employed you cannot document your income!
5) Seasoning rules
You cannot refinance a property to cash out until you keep it for 12 months even if you bought it with cash. In other words you cannot just move on to the next deal when you want!
If you buy rental properties, you have to take this into account.
And of course if you are self employed, how will you refinance if you cannot disclose your income?
6) No refinancing properties held in an LLC
In order to refinance, you must hold a property in your personal name. If they are held in an LLC, you must transfer them to your personal name for 6 months before you can refinance.
So what do these new limitations mean? Is it the end of real estate investing as we knew it?
The answer is no. Real estate investors know how to re-discover themselves and are flexible enough to adapt to changing market forces.
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