Thursday, 30 October 2014 00:00

How Sophisticated Rental Property Investors are Enhancing Returns with Smart Loans

Rental Property Investors, Multifamily Mortgage Loans, Report

 

Smart investment property mortgages are one of the main tools fueling enhanced returns for intelligent income property investors seeking capital growth and more attractive yields.

 

Understanding of the performance enhancing benefits of new smart investment property loans explains the new values being placed on both single family rental homes and multifamily investment properties, and how the most sophisticated investors are creating spreads that were never possible before.

How Smart Leverage is Creating Recovery

Real estate investors have returned to the US market at all levels. The contribution to the economy has been dramatic. Each new home and renovated apartment complex has added both jobs and tax revenues to build up both the public and private sector across the nation.

 

According to the Federal Reserve Bank of St. Louis US homeowners’ equity rose over 50% in the 18 months between Q4 2011 and Q2 2013 alone. The Federal Reserve Report shows that the housing driven economy surpassed its prerecession peak by over 8% as of Q4 2015, resulting in $74.8 trillion in household net worthi. US household net worth rose $1.4 trillion in Q4 2015 thanks to rising real estate values, to reach its highest ever record of $81.5 trillion according to the Wall St. Journalii.

 

Rents have also greatly attributed to the value of income real estate and multifamily investment properties. Rents have risen sharply from coast to coast including over 8% in Santa Clara County, California, and over 50% in some Southwest Florida neighborhoods. NAR’s leaders have forecast continued strong gains for rental rates ahead.

 

With ongoing opportunities and rising revenue producing fundamentals it is only logical for income property investors to capitalize on the market, discounts, and rising values and wealth by expanding portfolios of single and multifamily investment properties aggressively while the market is ripe and investment mortgage interest rates are low.

 

Broader expansion and restructuring to weight investment portfolios with income producing real estate and enjoy compounding gains during opportune moments as these is only smart. The more property owned, the more compounding gains to be achieved. However, to full capitalize on the situation investors must have access to substantial leverage, and efficient leverage.

Real Estate Market Snap Shot

  • Approximately 5 million homes sold per year in the US
  • 15 million vacant homes in the US in 2015
  • Over $250 billion in non-performing loans and REOs at US banks in Q4 2015iii
  • As of Q2 2015 just 121 FL banks had over $400 million in construction REOiv
  • Cash purchases are declining as access to investment property loans increases
  • NAR expects aver commercial property returns of 8.75% for 2015v
  • Celebrity real estate advisor Kaya Wittenburg anticipates double digit increases to prime property prices ahead, with Oxford Economics forecasting 37% increases by 2019vi

Investment Property Advisors and Mortgage Lenders Bullish on Income Property

Real estate and finance industry leaders are becoming increasingly bullish on the single family and multifamily investment property market. One recent multifamily apartment building in Colorado reportedly attracted over 100 bids from what was described as the “Who’s Who” in real estate investment.

 

Read: Where to Find the Best Multifamily Investment Properties Now

While some see tight cap rates on acquisitions of multifamily investment properties, sophisticated investors and money managers see behind the scenes to two major factors which are propelling increased net income and greater returns.

 

The first is rising rental rates from new generations of captive renters. Consider that even Ben Bernanke hasn’t been able to get a home loan, and the Governor of the Bank of England, Mark Carney decided to apply his $400,000 annual housing allowance on renting his personal residence.

 

The second is that new technology is dramatically increasing the performance of income property investing. Technology has become a massive contributor in innovating in this space to elevate NOI beyond what was previously possible.

 

5 Ways technology is improving NOI for income property investors:

  1. Outsourcing to reduce labor cost
  2. Online payments for improving income and decreasing loss from fraud
  3. Increased profitability and lower operational costs for mortgage lenders
  4. Improved accuracy thanks to big data
  5. Reduced operating expenses

Read 4 Ways to Use New Apartment Building Loans to Boost Multifamily Portfolio Performance 

Realty411 Magazine executives from both Blackstone and Cerberus have declared their confidence in growing US property valuesvii. It is this combination of large funds and technological enhancements in mortgage lending which is driving the emergence of smart loans for rental property investors.

 

Hyper-Efficient Property Management

Commercial mortgage lenders are not only experiencing their own increased efficiency on new technology, they are also expanding their loan parameters based on knowing that today’s investors and property management companies are also benefiting from enhanced operational effectiveness.

 

Check out the most aggressive new Expanded Multifamily Mortgage Loan Parameters

 

New digital property management tools and software are empowering management firms and rental property investors to reduce costs, increase income, and widen spreads as never before.

 

Mobile software like the InfoTycoon suite is enabling asset managers like Cortland Partners and Greystar to…

 

  • Conduct more thorough due diligence in advance of closing on acquisitions
  • Speed up property inspections and delivering results in real time
  • Reduce labor costs
  • Obtain superior detail, social data and utility data
  • Ensure adherence to best practices and systems
  • Increase employee productivity
  • Reduce waste
  • Achieve accuracy in annual budgeting
  • Spend more time on psychology and the finer points of achieve supreme performance

 

Smart Loans

On top of the data mortgage lenders have to predict future market performance which is propelling their expansion of lending options and loan parameters for multifamily and single family rental property investors, new technology is enabling them to become even more efficient in lending.

Thanks to technology commercial real estate lenders are able to:

  • More accurately pin point loan performance based on a wider variety of data
  • Use micro-data pioneered by an ex Google executive, such as time on their website and seconds on pages to give borrowers additional creditviii
  • Enjoy reduced in-house operational expenses which can be passed on to borrowers
  • Provide lower investment mortgage rates
  • Process and approve loans faster
  • Become a partner in providing rental property loan products that increase returns for savvy borrowers

 

Check out the latest investment property mortgage interest rates and how they are calculated

 

Smarter Leverage

New loan products from investment property mortgage lenders like Rental Home Financing are offering smarter loan programs too.

Both single and multifamily investment property loan programs are delivering the ability to leverage capital, assets and entire portfolios more efficiently and profitably.

 

The advantages of the latest smart blanket mortgage and apartment building loan features include:

 

  • Reduced liability in non-recourse loan financing
  • Reduced operating costs and time from consolidating into a single loan
  • Releasing previously captive equity to increase entire portfolio performance
  • Improving personal credit scores and ratings by freeing up all personal credit
  • Reducing chances of errors
  • Increased portfolio NOI on reduced management needs

 

Use this Investment Property Mortgage Calculator to estimate new lower payments, cash flow

 

Summary

In summary; intelligent property investors are able to significantly improve their results by implementing new best practices and leverage smart loans to refinance investment property, make bulk acquisitions with blanket mortgages, obtaining new, more efficient credit facilities and reduce overall operating expenses.

 

Consider that a 10% improvement in each area of property management, interest paid, and in acquisitions, along with a very modest improvement of 5% increases in rental rates and property values over the next 5 years would effectively deliver a 50% improvement to the bottom line.

 

This record setting spread potential, and incredible market opportunity, with unlimited capital is a game changer for those serious about elite wealth generation and management. Looking forward with leading investors able to set a new bar sustainable and effective practices and money management with these tools and strategies, investors might expect future acquisition opportunities to be limited to those utilizing them as all institutions are under mounting pressure to ensure the success of housing portfolios, even after the sale.

 

www.RentalHomeFinancing.com

 

Additional Resources:

  1. 5 Reasons to Refinance Investment Property Now
  2. 5 Tactics to Score the Best Deal on Your Next Rental Property Loan
  3. What to Look for in a Great Investment Property Loan

References:

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