Phase Seven - Buying Houses
You Did It!

Only a few tasks remain in your journey to buying houses right.You are rapidly nearing the end of this valuable real estate investment course.

Let's complete the process.

1st - Submit your signed contract and accepted rehab bid to your Hard Money or Private Money Lender. If you were approved for buying two or more houses, submit all accepted contracts and bids.

THIS IS WHERE YOU SECURE YOUR TAX-FREE FIVE FIGURE CASH

Along with your signed contract and accepted rehab bid, submit your 70-80%LTV pre-approval from your Permanent Lender.

Your total costs, including closing costs are 60%LTV or less.

Ask your Hard Money or Private Money Lender to add the difference between your 60%LTV purchasing costs, and 70%LTV to the escrow, as a project contingency. This will be approximately 10% of the appraised value.

Let them know that it would be there in case of a rehab over run or any other emergency. However, also let them know that if you run your project well, that escrow balance would be released to you once the refinance was complete.

You are pre-approved for a 70-80%LTV refinance, so the lender will know they are protected. But since this escrow is only released at refinance, they will receive an extra 10% profit, while only being at risk for 60%LTV.

Do not over-explain this. Keep it simple as explained above. The lender will know what you are trying to accomplish.

Most will like this proposition. Others will not. Private Money lenders never mind allowing this....they are more flexible. Some of the National Hard Money lenders are not as flexible and cannot include this in their policy. Local Hard Money Lenders will generally like this idea.

The key is that the escrow is NOT released until the refinance takes place.

Always fully and honestly disclose what you are trying to accomplish when buying houses. Something like 10% extra in the escrow benefits you and the lender. Trying to be deceptive will get you nowhere. If they say no, simply go to the next lender.

I never have a problem with my lenders regarding my escrow overage requests. As long as the funds are not released until refinance.

You will usually close between 7 and 21 days.

2nd - This is very important. Your Hard Money or Private Money Lender, may or may not order an appraisal for your property. If so, it will be a "Subject To" appraisal. This is an appraisal based on the After Repair Value or ARV.

Ask you Private Money or Hard Money Lender to use the Permanent Lender's appraiser. The permanent lender's appraised value trumps all other values, since they are making the final loan.

If you base your Loan to Value on the Hard Money Lender's appraised value and the Permanent Lender's appraised value is lower, that could lead to disaster. The Hard Money Lender could possibly lend more than the Permanent Lender will refinance.

If the Private Money Lender refuses to use the Permanent Lender's appraiser, it is in your best interest to pay for an extra appraisal, using the Permanent Lender's appraiser. Just consider it a necessary expense when buying houses.

Always use the Permanent Lender's appraised value when working your LTV numbers. I have never seen this mentioned in any real estate investing program, which promotes the use of Hard Money or Private Money lenders. It is very important.

3rd - I know you are now very excited. To the surprise of many veteran real estate investors, you have purchased a deeply discounted property AND received a substantial amount of cash, by simply following these directions.

In your excitement, do not forget to closely monitor your rehab process. When buying houses, this can wipe out all of your anticipated profits and equity gains.

If needed go back to Pt 4 - Fixer Uppers and review the rehabbing process.

4th - Approximately one week before the renovations are complete, submit your property for refinancing with your Permanent Lender.

It should take no more than 30 days to complete your refinance. Your Permanent Lender will have most of your information needed to complete the process. They will only need a few minor items such as updated pay stubs and bank statements.

The End!


From Buying Houses back to Investing In Real Estate.