Financing for flips and portfolio loans
Financing for flips and portfolio loans
Let's talk for a moment about financing ... specifically for Flip transactions and portfolio loans (against a cluster of assets) -
From my experience in obtaining financing for foreign investors in the US;
After all, as foreign investors sometimes encounter difficulties… (someone who operates without an "American partner" who takes the burden of the loan on him) ..
De facto financing is money that was not there before and allows you to move on to other money.
Sometimes, many get stuck in the cost of financing… which is actually how much the loan cost them.
But actually get stuck in it and don't look at the big picture ... what the money is doing for them.
After all, a difference of 1% -2% does not really matter if the transaction is profitable with a margin as it should be,
Because in any case you will not pay all the 1% extra but only part of it…
And what the funding does is allow you to use less of your cash ... and if you have enough then you can do several projects at the same time
(And in fact foreign financing opens a door for you where there was once a wall).
To stop taking a loan because of its cost considerations (I'm not talking about a cheaper loan) I think you miss the broad vision and main purpose that you are playing in this game at all ... creating profits and a solid foundation of assets.
In flip deals it's clear ...
Let's talk about Protocol Loan - Loans against asset collections under llc…
True, the cost of the loan is not cheap (a few thousand dollars), but you have now received 60% -NNUMX% financing on an existing asset group ... which allows you to buy additional properties in 70% financing, thus improving the existing cash flow and strengthening it +
To produce a capital gain that did not exist at all before.
boom!!! You broke a ceiling.
The improvement in the cash flow is such that within a few years you will be able to buy with him a more clean asset than money that was not before
at all…!
Some added value for you and your investors,
Incomprehensible.
And as a final bonus, interest is a recognized expense that actually reduces your overall tax liability, including the assets that existed before…
Everyone is talking about investing in real estate for the future. The future you want comes when you look at the big picture, the goal, the overall profit…
Link to the original post on the United States Real Estate Forum on Facebook - Works on a desktop computer:
http://bit.ly/2GcS6Rt
The original responses to the post can be read at the bottom of the current post page on the site or in the link to a post on Facebook and of course you are invited to join the discussion
Erez Shocher
Good post, thank you! I would love for example from someone who took out a loan on a portfolio of assets under llc. I manage quite a few groups of 10-30 properties and to date I have not leveraged any group. If anyone has a good lender in Cleveland, Rochester or Jacksonville I would love to connect. And for example a little in numbers - some closing costs, interest rates and what the requirements are against it. Thanks again everyone are you mighty?
Ido Neuman I also leverage a portfolio of properties, from your answer I understand that you are speaking from a position, and I am not. I do not agree with you that the 2008 crisis is not a comparison point. When you accompany investors it is your duty to explain to them the risks, so that they make their decision from an informed place, and not rush to leverage without fully understanding its meaning.
KobbiWaisman
The interest rate is recognized in each reporting method because it is an income producing expense
OferMoshkovitz
First, 70% leverage gives the ash wide enough even for the investor…
Loans on asset portfolios have a large ash that protects both parties.
Taking a crisis of 2008 is not smart because a lot has changed since then in the system…
In addition, this leverage of the Protocol (cluster of assets) is for periods of 5 years, 7 years or 10 years.
So when you are a judge look at the whole picture…
And there is the possibility of continuing to do refinance.
This whole topic is suitable for those who look ahead and the whole picture..otherwise there will be an investor who will read your response and understand that it is a blocking response and does not allow…
I'm talking about the hat of a financial planner and the hat of one who connects investors to finance in the US…
(Between non us person and us)…
A person who performs a funded flip should work on an interval that allows him to take into account different acquisitions, and not on an interval of 20%…
And it's still a bounce.
The purpose of this post is to open people up to understanding and looking at things.
Ari Frank
An excellent post, any leveraging relies on underlying asset behavior, or rather volatility in the price of assets. So when you leverage, check the volatility of the crisis in 2008, and then you'll figure out where it can go. The price of the asset or the average of the asset portfolio. This leveraging is a double-edged sword, when the price rises or is stable, everyone enjoys it, but the sensitivity to leveraging 70% is enormous if the price falls, until all the equity is lost.
Therefore, the decisive consideration is the volatility in asset prices. I certainly believe in leverage.
Excellent! Thank you.
How does this happen technically to a non-citizen or resident? Who gives the loans? Thanks
It's easy to justify what you wrote when everything is good, but we all know where the big levers have been in recent years... that's right, in prison.
And in practice, the cost of the loan is so high (it's not just the interest, there is a cost to the very act of taking the loan) that a single-digit return, which is usually what you'll get, is not worthwhile. Secondly, to say that the interest is recognized for tax is a deception since it is recognized for tax only if you access a tax route that is not a marginal tax (we are talking about rentals, in sales I don't know if interest can be recognized at all since we are talking about capital gains) and for most of us this is a route that is clearly not profitable.
Excellent!
And that's what I do on 99% of projects 🙂
I liked .. This is how I work for my home .. Value Added Post .. Need to expand on loan fund savings, no less important than net income after all the expenses, ROI?