Utah Credit Union Equity Lines for Investment Real Estate

Investment Real Estate Financing Alert!

Utah real estate investors have been searching for over a year for how to get fast, effective financing in place for their investment properties. I won't go into the obstacles in detail, but they have included:

• Property seasoning of 1+ years
• Unreasonabley high standard for credit scores and W-2 income
• Bad appraisales
• Unknowledgable loan officers
• Very high interest rates
• etc, etc, etc

There is now a great opportunity for the right properties and the right borrowers. Some Utah credit unions have developed a loan product with the following general guidelines:

• Home equity line of credit
• Up to 65% LTV of appraised value for investment properties
• In-house appraiser who will talk with owner and understand the property
• NO SEASONING- apply the day after you purchase the property
• Interest rate at prime+1.5% (currently at 4.5%)
• Property must be in live-in condition (no pre-rehab junkers)
• Borrow must have W-2 income and 700+ credit score
• Borrower must be a member of the credit union (generally $25 in a savings account)
• Origination fee about 1%

Clear Day Capital had two borrowers use this program at Golden West Credit Untion, working with Nate Cox at 801.786.8452. The first purchased a rehab, did the fix-up and paid us back using his equity line from Golden West in about 5 weeks.

The second was completed in under 3 weeks, the property was already in live-in condition.

I understand that other Utah Credit unions offer similar programs. When I get confirmation of which ones I'll let you know. Can you confirm similar programs? Does anyone have any other good investment financing to share?

Life Insurance for Real Estate Investors

Chris, a southernn California real estate investor and friend of mine, passed away in his sleep earlier this week. He was 44 years old and from outward appearances in good health. He leaves behind a wife and 3 grown children.

Chris invested in California and in northern Utah. I had interactions with him in both markets. He was creative, knowedgable, and enjoyed working with people. I will miss him.

Chris left behind a legacy of single and multi-family residential real estate investments. Most have reasonable cash flow and can stand on their own. Unfortunately, he did not have any life insurance to provide cash to his spouse to let her wait for a year or so and not have to make decisions of what to do with his real estate investments.

This is a personal opinion- if you have a family of any kind you owe it to them to cary life insurance, even if it is just enough to carry them for 6-12 months. A policy for $100,000 for a non-smoking male can be purchased for as little as $15-20 per month. If you need a recomendation for an agent to talk to, let me know and I'll put you in touch with people that I trust.

Don't take my word for it. Talk to your spouse and see what they think. Let me hear your opinion about this important topic.

Equity Loans from Banks- Work With the Current Banking System

Clear Day Capital's client's have really struggled with traditional lending institutions over the last 18 months. Borrowers with great credit suddenly denied traditional financing simply because they do not have a W-2 income. They can document the income that they receive, but because it is not a W-2 wage, it is unacceptable for today's lending standards. Everyone is working hard to make adjustments.

One of Clear Day Capital's client's recently borrowed funds in mid-June, rehabbed a house for a couple of weeks, and paid us back in late July using funds from a credit union. About a 5 week turn-around on our loan and a payback a couple of weeks early!! This had not happened for over a year- a quick loan turn around using funds from a traditional financial institution.

Introducing: Equity Lines Based on Appraised Value
Here is how it worked (details might be a little off, but generally this is how he was able to make it happen.) Our client used a loan from Golden West Credit Union to pull out up to 65% of his appraised value. No property ownership seasoning, the application could go in the next day. The rate was prime + a low fixed percentage, but the rate will adjust over time based on prime. There is a (5 year?) balloon payment due. It took about 3 weeks to complete the loan.

We have heard of two other banks and credit unions doing this type of a loan- Zions and Weber Credit Union. They still will not lend you money to purchase an uninhabitable house, but that's where a lender like Clear Day Capital comes into the picture. Here's the scenario:

You find a property with a great LTV.
Borrow your purchase funds from Clear Day Capital.
If needed, borrow fix up funds from Clear Day Capital.
Do the rehab.
Get a loan based on appraised value and pay off Clear Day Capital.

Turn around time to go from expensive money to cheap money: 4-8 weeks.

Once you have cheap money, you can afford to hold in on the market for a higher price offer. You can rent it with great cash flow and wait for a better offer. Sell it on contract or with a lease option with a balloon payment or option time frame that coincides with your balloon payment. Imagine the possibilities again...

What's the next project that you can use a loan program like this for? Post a comment and share it with me!