09 Jun 2011

Hampton Roads Real Estate Trends, Private and Hard Money Lending

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Hampton Roads Virginia Real Estate Trends

Private and Hard Money Lending

The Hampton Roads, Virginia real estate market is very different than most markets in the country. With a military installation close to 400K and a “revolving door” of new military families, the market is a dream for real estate investors. The Hampton Roads real estate market continues showing signs of stabilizing and strengthening. The number of residential settled sales and under contract sales maintained positive trends while the number of active listings for sale slowed its climb. The number of distressed property sales continues to grow. The media reports trouble, but the real estate investor sees opportunity. The more distressed properties, means more opportunities.

Don’t allow the media to distort the facts. February 2011 saw solid gains in the number of residential settled sales, up 9% when compared to February 2010. However, the Hampton Roads market seems to be divided between the Southside region and the Peninsula when it comes to settled sales last month. The Southside region saw an increase of 16% year-over-year while the Peninsula was down 8.5% for the month. All of the major cities in the Southside area showed year-over-year monthly gains in the number of settled sales. Only James City County experienced significant growth in the Peninsula region, up 11.5% when compared to February last year. The one area of the residential market that continues to show weakness is the distressed homes sector. The number of distressed homes, those that are bank owned or short sales, that settled in February 2011 climbed for the third month in a row to 42% of resale residential settled sales. This is the largest percentage for a single month since the tracking of distressed sales began. The percentage has climbed steadily starting in 2008 and has doubled from 21% in May 2010 to the current 42%. The Hampton Roads market (Virginia Beach, Norfolk, Chesapeake, Portsmouth, Hampton, Newport News, and Williamsburg) is primed and ready for investors to take advantage of the market. However, there is one BIG problem that all investors know when it comes to buying these distressed properties….Where do I get the money to buy them?

Banks and conventional lenders do not lend money on investment properties that are distressed and need improvements. Banks do have 203K loans that give the borrower purchase and construction funds, but the 203K loan is only for owner occupied properties only. They have no interest in investor rehab loans as they are considered too high of a risk. So what is the average investor supposed to do to break into the real estate market? You have two choices. 1. Liquidate all of your assets to come up with the cash to buy and fix up real estate. 2. Use Private or Hard Money Lenders. Number one could be financial suicide, so let’s focus on Private, Hard Money Loans.

What are Private Hard Money Lenders? Private Lending and Hard Money Lending are often intertwined, which is fairly correct. When people speak of Private Money Loans, they are speaking of money supplied by a Private Group or Investor that do not follow SEC, Bank, or Conventional guidelines. Hard Money Loans are typically based off the asset (The Property). Hard Money Lenders typically do not base their underwriting decisions on the borrower. Hard Money Lenders use the asset to protect their investment. These loans are based on commercial guidelines, which fall outside the state and federal laws of traditional lending. There are many different types of Private/Hard Money Lenders and Loan Programs out there. Some require down payments, certain credit scores, tax returns, asset statements, LTV (Loan to Value) limits, ARV (After Repair Value) limits. These are some of the things you need to investigate when choosing which hard money lender you are going to use.

Mortgage Consulting, LLC has been in the Hampton Roads (Virginia Beach, Norfolk, Chesapeake, Portsmouth, Hampton, Newport News, and Williamsburg) and also the Richmond, VA area since 2006. Mortgage Consulting, LLC provides Private and Hard Money Lending, Loan Consulting, Conventional Lending Consulting, Short Sale Negotiations, Real Estate Agent Services, and Construction Services. Mortgage Consulting, LLC is considered a Hard Money lender as we can do loans based on only the asset, with no credit or income required. Mortgage Consulting, LLC is also considered a Private Money Lender because the funds provided to clients are from private sources. So Mortgage Consulting, LLC is considered both a Private Money Lender and a Hard Money Lender. To learn more about Mortgage Consulting, LLC go to varehabloans.com

How do I get started as a Real Estate Investor? First you need to get proof of funds showing that you can purchase properties. Sellers, Banks, and Real Estate Agents will want to see this to ensure you are serious and not wasting their time. Get in touch with a private and/or hard money lender in Hampton Roads, Virginia to discuss what lending options they have for you. Second, get a real estate agent to help you sort through the Hampton Roads real estate inventory. You will want to look for distressed properties that you can fix up and sell. You will need to find properties that have the potential to create at least 30% equity after it is rehabbed. This is called the ARV (After Repair Value). For example, if a property is going to be worth 100K once it is rehabbed, you need to be able to buy and fix it up for less than 70K. You also need to make sure that the property need “substantial” rehab work. This is because you need to ensure that you can justify the new value, because of the substantial work that has been completed.

Reach out to varehabloans.com to get started as they will be able to consult you at no charge and let you know what options you have and/or what direction you need to go in.