The Top 3 Real Estate Investor ‘Loan Shopping’ Mistakes to Avoid

Real Estate Investment loans are without a question the secret sauce to almost all successful investors. You too could take advantage of them to build your real estate empire. But there are a few traps you must avoid.

For starters, don’t just go out there and borrow money for the sake of borrowing it. Sure, getting a loan goes a long way in greasing the whole process of investing in real estate, but you must have a strategy.

So rule # 1 – you must be clear on what you want to do with the property before you even put it under contract. Otherwise you risk making high monthly mortgage payments with sky high interest with no end in sight.

Now, choosing your exit strategy is just the first step. The second deadly trap you want to avoid with real estate investment loans is picking the wrong investing strategy in itself.

You don’t want to get a loan for investing in a property hoping you will be able to fix it up and then rent it before you can secure a conventional loan pre-approval letter from your bank.

In other words, getting a real estate investment loan for a “buy and hold” exit strategy is misguided if you’re not certain you will be able to get a 30 year mortgage loan from the bank. You risk getting stuck with a high interest loan or even worse getting the property foreclosed on.

The last deadly trap you want to avoid is merely shopping around for a real estate investment loan based on interest rates alone.

This might be the conventional way to shop for your house mortgage, but when it comes to an investment property loan, you also want to make sure you get a loan that is ‘investor friendly.’ By that I mean you want the terms to be flexible.

For example, you can ask your Broker if they lend with zero down payment on investment properties. Most don’t but some do, so make it a point that you ask. Check also to see if they can lend with no monthly payments while you fix up the property. This will go a long way in making your investment effort profitable.

So there you have it, the top 3 mistakes to look out for when shopping for a real estate investment loan. Make it a point to plan your exit strategy and make it a point to shop around for terms in addition to favourable interest rates on your real estate investment loan.

Property Investing – Why Risk It?

So why do people want to branch out into property investing? It seems like there is an incredible risk involved with putting so much of your money into a home, hoping that it is going to sell quickly. Don’t investors and business owners stand a huge risk of losing their money, or is there something that I may be missing out on? For the most part, investors are seeking out these homes to purchase in order to put a minor amount of work into the home, to quickly resell it on an open market. This is where the investment repays itself, because you can often earn substantial returns on your money if you buy low and sell as high as you possibly can. Investors do risk losing their money each time they purchase another new property, but the risk is often settled by buying when the market is rolling full steam ahead. As you can tell, if you purchased a house at the bottom end of a slide in the market, you are going to find that you will hold onto the house for a very long time, which in turn costs you money to maintain the property each month.

When a homeowner finds themselves in the financial position of not being able to fulfill the mortgage they have taken out against the house, they often turn to the help of investors to take over the loan, and either allow them to continue living in the home while charging them rent each month, or by giving them the opportunity to get completely out from underneath the debt of the house allowing them to get an apartment, or pay rent on a smaller home. It is in these types of properties that investors stand the greatest chance of making a profit because of the homeowner being upside down on the loan. As long as you can negotiate a good closing rate with the mortgage holder, you are setting yourself up to make huge returns on your initial investment.

With the economy being in the position that it is in, investors are leery of whether or not to invest in properties, and only the people with large sums of money sitting around are actually buying these low dollar homes right now. They know that by being able to hold onto the property for the next few years, they are going to make a monthly income from the rent on the house, as well as being able to sell it when the market returns strong. Holding onto investment properties is a very strong strategy if you have the funds available to tie up into a few houses. You have to first ensure that the money you are investing can be held for up to a few years, maybe even longer depending on how long it takes for the market to begin its upswing again. As long as you are making sure you are protecting your investment, you can easily see returns of 100% or more on every dollar that you have invested.

An Overview About Multifamily Apartment Loans

Investing in a property may prove to be useful in the long run. But investing in any kind of property requires a huge amount of money especially if you are thinking to purchase multifamily apartments. If you do not have sufficient funds to purchase these apartments then you can apply for multifamily apartment loans. Before you apply for these loans it is best to have some idea about it. Generally these loans are broadly classified into two groups – commercial property loans and residential loans.

Both of these multifamily apartment loans have distinct features. Based on the type of apartment you wish to purchase, these loans are granted by the traditional lenders. The main factor which determines the type of loan the borrowers gets is the number of houses or apartments the building has. If the borrower is planning to purchase two to four houses or apartments, then the borrowers will be eligible for residential loans. If the borrower is planning to purchase apartments which exceed the range of four, they become eligible for commercial property multifamily apartment loans.

Since, there are many sources who offer multifamily apartment loans you can select any lender based on your requirements and convenience. But, before the lender agrees to lend you the money, you as a borrower need to fulfill certain requirements. One among the many requisites is to specify the number of tenants who would be living in the apartment. You will also be required to submit the necessary document asked to get the application of the loan approved.

The lenders of multifamily apartment loans usually offer only 75% percent of the total value of the property. This is because the lenders do not want to take the risk. If there are no tenants, there will be no income thereby leading the leaders towards a loss. Besides these loans, if you are a self-employed individual who cannot show a stable income to the traditional lenders then you can opt for a stated income loan. These individuals have a hard time showing their monthly income. This loan is also ideal for those individuals who are looking for a loan without the hassle of paperwork involved.

The stated income loan permits the borrower to state their monthly income without submitting any document of proof. These loans are also ideal for individuals who have a difficult tax schedules. Since, no document proof is required to be submitted in this type of loans, the borrowers usually lie about their income. This has led the lenders to follow strict procedures for the approval process of these stated income loans.

The lenders of stated income loan focus on three factors. They are the borrower’s credit history, his assets and collateral. The credit history of the borrower will be closely checked by the lenders. If you have a good credit history, chances are your loan application will be accepted without any problem. But, if you have a terrible credit history then you may want to look for other options. If you want to get your stated income loan sanctioned, be ready to show your assets as your asset will be the collateral for the loan amount which you get.

The Best Investment for 2015

Sometimes the best investment is safe investments and 2015 might be one of those times. First, let’s look at your investment options. Then, we’ll focus on finding the best safe investments for 2015 and beyond.

Since early 2009 stocks and stock funds have been the best investment options. The past six years have often been referred to as “the stock market that nobody loves”, yet with the approach of 2015 the stock market continued to reach new all-time highs. Stocks are not cheap, but there are two sectors that might be interesting: oil stocks and natural resources funds (if oil prices get even cheaper); and gold stocks and funds (if gold gets cheaper). Neither are safe investments, but there could be opportunity if oil or gold truly get cheap.

At this point in time any bad economic or political news could trigger a reversal in stocks in 2015 or 2016. The risk vs. potential rewards suggests that stocks and diversified stock funds are no longer the best investment options. Now, let’s look at the flip side of the coin: bonds and bond funds. Historically, when the stock market tanks investors flock to bonds, which sends bond prices higher. Many investors see bonds and bond funds as their best safe investment options.

The problem here is that bonds and bond fund prices are near record highs as interest rates remain historically and ridiculously low. The problem: when rates climb significantly bonds and bond funds fall in price and investors LOSE money. Higher interest rates make existing bond issues and portfolios (like bond funds) less attractive. Looking at 2015 and beyond, bonds and bond funds are not likely to be your best investment options or even your best safe investments when rates threaten to go up.

In fact they never were truly safe. They just looked safe because interest rates have basically been on a downward trend since 1981, which sent bond prices higher and gave investors good returns. Now, the question is: where do you find the best safe investments (that pay interest) when you’re lucky if you can get 1% at the bank and even less in the money market?

The best safe investments might be staring you right in the face. If you have a retirement plan where you work (like a 401k or 401a) one of your options might be a stable or “guaranteed” fund. You might be able to lock in 4% or more for a specified period of time. If you have an older “universal life” insurance contract you may be able to add money to it at a “guaranteed” minimum interest rate of 3%, 4% or more. The same could apply if you hold an older retirement annuity contract. Returns like this might not excite you, but compared to stocks and bonds they could be the best investment options on the horizon.

If interest rates increase significantly across the board (both long-term and short-term rates) and you need quick access to your cash, the good old money market mutual fund could be one of the best safe investments. As rates go up, their dividends automatically adjust upward as well. They are not “insured” by the federal government, but many hold short-term government securities (T-bills) which are considered to be one of the truly safe investments in the world.

In normal times the issue of finding your best investment options focuses on stocks vs. bonds. I’m not alone when I fear that these are not normal times. We (and much of the rest of the world) have lowered interest rates to stimulate our economy and support our markets. There’s not much room to lower rates further in the future. That’s why I suggest that the best safe investments could possibly be the best investment options available for 2015 and beyond. When the dust settles, the debate over whether stocks or bonds are the best investment will likely take center stage again.

Investing In Lombok, Indonesia. How, Why and What You Should Have

Property investment potentials in Indonesia have attracted not only local investors, but also foreign investors, whether individuals or companies. Lombok, especially, is one of the hottest islands to place property investment plan, especially holiday and hospitality properties. While the nearby Bali is always interesting for holiday property investors, Lombok has entered the spot where it should be considered more.

Why Should I or My Company Investing in Lombok?

There are many reasons why you or your companies should consider investing for property in Lombok, especially those who run hospitality, holiday accommodation, restaurant, and entertainment businesses. Here are some things to consider:

• Lombok has slowly become more recognized in the past decade, and has been promoted as ‘the new Bali,’ which offers many places that are still unexplored and pristine.

• Lombok has grown in popularity among beachgoers and surfers, especially since Lombok also has many unexplored or pristine beaches with really great waves.

• Lombok government is in efforts to increase local revenues by attracting tourist and investors, which means that the investment climate is quite positive for many years to come.

• Lombok has been more accessible with the newly built international airport; plus, the availability of cheap airlines has enabled more people to go to Lombok, opening even more investment opportunities.

With these amazing possibilities and potentials, Lombok has become favorite place to invest among individual and group investors. Also, many companies have started to build resorts, hotels, restaurants, bars, salons and other services in some areas, to attract more visitors and finally more revenues. This is a great opportunity if you have company and want to invest in Lombok.

But, there is some hassles that you must pass if you want to get property in Indonesia as individuals. If you have an experience before, you will see that there are several requirements of foreign investors to own full property title in Lombok and Bali, such have to be partner with nominee and lawyer. However, Indonesian government has Penanaman Modal Asing (Foreign Investment) or PMA, which is included a scheme governed by law that regulated foreign investment and investor acts to open business in Indonesia.

Lombok government expects more investors to come and provide more facilities as well as employment opportunities, and therefore, foreign companies can invest for Lombok property even without any partners, representatives, or nominees. The company just needs to hand business plan, proposal, and other required documents, and fulfill all formal requirements before being allowed by the state to get property.

This is definitely a great opportunity for foreign investors to get more profits from Lombok property and provide more contributions and job opportunities for the local. By opening business in Indonesia and buy property in the name of the company, investor can get their dream property in Lombok or Bali, and they can get it without have to deal with extra hassles of nominees and lawyers.

Basically, PMA is the official name of foreign investors that open business in Indonesia. If you are a big-scale investor with big capital and business plan, using PMA scheme is the best and most profitable way to get property in Indonesia, including in Lombok.

What to Prepare for PMA Scheme

If you are a foreign investor interested in buying Lombok property and you want to buy it under the PMA scheme regulated by Indonesian government, you must make sure that you provide:

• Good and concise business plan with profit projections, business goals, business schemes and other required information.

• Proof and documents about how you(your) business plan will help contributing to surrounding communities, such as in relation with employment, life quality, local investment scheme, and national revenues depend on how big your company is.

• Proof that you have deposited certain amount of money in the reputable bank.

• Other formal requirements as requested by local and national governments, depend on what kind of business you have.

You also have to provide other requirements such as formal documents that are essential in forming new foreign investment or business. Usually, a foreign business can be officially called PMA after 3 or 4 months of period after taking care of all requirements.

Why Following PMA Scheme for Lombok Property Investment?

If you follow PMA scheme, you will be able to own a property in Lombok or basically any other location in Indonesia, in which your company or business becomes the official holder or the property title. This is a great option if you plan to spread the business operation to Indonesia, or if you plan to work and stay in Indonesia, or if you do not want to have partnership and other hassles when owning property in Indonesia.

What if I want to Invest as Individual?

Owning a property in Indonesia, especially in potential holiday development area like Lombok, is a great investment if you plan to start a business here.

PMA is one of our suggestion if you want to invest as company. But, if you are one of the individual investors, leasehold transaction may be one of the best methods to gain full title of the property.

Leasehold transaction gives individual investors the right to own full property title, without having to follow Foreign Investment scheme stated by Indonesian realty law. In this case, the investor does not have to own a business in Indonesia or open a company in this country with proposed business plan. Also, this plan does not require individual investor to have nominee or representative that will give the property title through legal steps after the investor buying the property.

Leasehold transaction works like this: once the investor buys the property in Lombok or Bali (or basically any other areas in Indonesia), they can put their property in lease for up to 25 years. Of course, during that time, the owner cannot actually use the property personally, but the owner can have full title of the property without having to go through legal steps with lawyer and nominee (representative).

Benefits of Leasehold Transaction

In Indonesia, foreign investors who want to get any property (including in Lombok) must do it through nominee to get full property title, in which the nominee get the title first during the transaction, and later hands it to the owner rightfully and legally through lawyer as witness. This means extra time, cost and hassle for the owner to get full ownership of the property. Leasehold transaction helps to get the title without having to go through nominee and lawyer.

Also, since the property owner must put the property on leasehold, it is great for property buyers who aim for passive income. Investors can get steady income from people who rent or lease the property, and after certain amount of time, investors can finally gain their property titles back as individual owners.

If you are a foreign investor and wish to have property in Lombok or Bali, but want to keep the property title fully without using any representative, then you should consider this leasehold transaction.

So, are you interested in investing in Lombok and Bali areas right now? If you are, you need to consult with reputable realty service from Indonesia.

Why You Need Realty Company Service for Property Investment

If this is your first time buying property in Indonesia, you will need help from reputable institutions that can guide you through all legal and formal aspects of purchasing until you can get the property title in your hold. Or, if you are a business owner, you may want to avoid problems since the beginning by property conduct all formal steps and requirements necessary to obtain Lombok or Bali property. However, there are other aspects in which realty service in Indonesia will be necessary.

In Lombok and Bali, many land owners use traditional rules to manage their lands. In Lombok, for example, there is the term of ‘Pipil’ or unregistered land that has been passed from generations. Pipil land owner must converse the land first before being able to sell it; a process that takes about 1 year before the investor can get the full title of the land. These aspects have been understood by realty service, and they will help every investor getting the property in pleasing ways.

Asking for help from Indonesian realty service also means that you can get extra recommendations about Lombok or Bali property from it, especially if you never buy one before. Remember, Bali and Lombok are popular so you need to pick the right time and price to get a piece of land or property. Realty service with good knowledge about property trend in Indonesia will help investors earning future profits by choosing the right property or land. This is why that the cost for realty service is just like small investment for the big one.

What is Pipil Land

In Lombok, Pipil term refers to a piece of land that has been passed down from generations, which has happened in a long period that the current owner usually does not have the official registration certificate. Therefore, it can be a real slow process for the investors if they want to buy the land, even if the land owner agrees with the price. There are certain amounts of period both parties need to set everything up before the land can be sold.

First of all, the original land owner must apply for formal registration certificate at Indonesian Land Office, as this is a formal requirement needed to prove the identity and documentation of the land as well as converse the land status. This process can take up about 3 to 4 months long. However, as for the actual purchase, it can happen at least 12 months after the official conversion (which is, after the official certification is released). This means that any investors that want to buy a Pipil land must prepare extra time.

Pipil Conversion and Benefits of Getting Lombok Property

Many potential property investments in Lombok are in the shape of lands, not buildings. These lands are waiting to be converted into hotel, resort, surfer’s cabin, and many more. Buying only the land gives investors more freedom to build the dream property. However, since Lombok is still thick with tradition, investors must follow the tradition, including waiting in certain periods of time when buying any Pipil land.Despite having to wait for land conversion if you get Pipil land, the benefits of this investment are numerous.

Whether you want to hold property title as individual, leasing the property through leasehold transaction, or following PMA (Foreign Investment) scheme, realty service helps you going through all legal matters and documents.

Lombok is one of the hottest spots in Indonesia to own property, especially holiday season. However, foreign investors also need to remember that many people in Lombok have their lands according to traditional rules, which can be perplexing and confusing for people who is not local.

Fortunately, Indonesian realty law also covers everything all foreign investors must know about dealing with traditions related to land selling and purchasing, including Pipil land. If you need anymore information about Lombok, how to Invest, what it needs, don’t hesitate to ask us or visit our websites. We would be pleased to answer all your question.

Have a Good Day!