Investment real estate; Some of my personal experiences and suggestions

Hi Chris,

My friend and I are looking into investment properties. How did you manage having multiple mortgages at the same time when doing your real estate investing properties?

Is there a maximum number of mortgage loans you can take or it depends on credit worthiness and debt to income ratio? We are MD, VA, DC.

What are the best loan providers that you have used and how did you manage?

N – DC area

Congratulation on taking your next steps to becoming more self-reliant. You ask excellent questions. I have been a real estate investor since 2001, and have learned a lot over that time frame. I have made a lot of mistakes, but have also timed the markets fairly well.

Identify your potential market

When I first started, I sought out townhomes and single-family detached residences, and shied away from condos. However, condos at the right price can be amazing cash flow generators, as I will show. The downside with owning or buying condos as investments is that obtaining superior cash-out and purchase financing can be more daunting.

Last decade, condos were too expensive and the numbers didn’t make sense. But this changed as a result of the last housing bust, as many condo associations went functionally insolvent and/or lost their FHA status. This legacy still haunts many condo developments today, especially in the working class areas. As a result of their sharp price declines, many condo associations now have too high a percentage of investor-owned units to qualify for FHA or Fannie Mae financing. So, they can often sell at sharp discounts to last decade’s highs, even though rents are much higher. This is why I believe that many of these condos still provide the best opportunities.

When prices were severely depressed earlier this decade, many investors paid cash for their investment properties. I bought all my properties with cash during the early part of this decade, because I was competing with other cash investors and the banks did not want to deal with financing contingencies. Now, prices have risen to the point that one usually needs to obtain financing and the sellers expect it. As of now, I would not be buying condos in downtown Toronto, San Francisco, NW Washington DC, or New York. I do not necessarily look for rentals where I want to live, but I search out where the returns and cash flow are appealing and where locating a quality tenant is simple.

For instance, I bought several condos and single family houses just outside the Beltway in Prince George’s County, MD. Their rental income is far superior than any where else. A person in the DC area could find some properties in that particular area. The housing market in Fairfax County, VA is expensive and though my partners and I have long-term investments here, the rent rolls are much lower vis-a-vis the property values. People here would rather buy than rent and that is reflected in tenant turnover and rental rates.

Identify your sources of capital

Once you identify your potential market, the next step is to find the best and most flexible financing.

Obtaining cheap mortgages during the early part of last decade was much easier than now, and before prices went through the roof, home prices were more reasonable on an absolute basis. Of course, rents were a lot less, so the capitalization rates and IRRs were substantially similar to what these properties earn today.  This is good news for those who are starting out now.

Despite what many may think, getting mortgages are as difficult as ever. Thus, credit worthiness is your biggest asset. Without superior credit, it will be almost impossible to find government-backed loans. If a person or partners can get a 20% down payment, have good credit and can show the loan underwriter the required income, getting a conforming loan is the first step. With this cheap financing, investors can look for more expensive properties with lower positive cash flow, because the cost of carry will be less, all other things being equal.

But getting these loans can be very difficult and if an investor cannot obtain the best financing, the next step is to run the numbers on potential properties to see what kinds of cash flow you can find. After you identify potential properties, contact hard money lenders. My last loan was through a hard money lender. It was a cash-out at 7.5%. As you can see, I was not able to buy a single family house with that rate, but instead I used the proceeds to purchase a two condos and completely rehab two more previous purchases, which generated an almost 15% cap rate at the time of purchase, based on my upfront costs. As you can see, hard money in this instance was a good thing.

With conventional and government-backed loans, unless you have ample documented W-2, 1099, or tax-return earned income, it is almost impossible to get more than 2-3 conforming rental mortgages. But with hard money lenders there really is no cut off, as the lender will lend out to you based on the property’s rental cash flow potential. If the property’s numbers make sense to the underwriter, your credit is at least high 600’s, you have enough money for the down payment with a cash cushion in the bank, you will get your loan.

Younger investors can be more aggressive as you have more time. At my age I have been paying off the two loans I have left. One is for 6.5% and the other is for 7.5%. I pay down much more than what is due, so I only have a couple years left. Once these loans are paid off, I will obtain the best financing as my rentals will provide me enough income to qualify. With superior financing I will seek out a higher end rental. I do not earn W-2 or 1099 income, so my sources are heavily discounted by the underwriter.

Hard money lenders are less concerned with the number of loans you have outstanding, as long as your properties provide a rent that is at least 1.3x the monthly expenses, including mortgage. Moreover, they now ask you to purchase and finance the property in an LLC.

Here are two hard money lenders that I have worked with in the past. I provide no endorsement to any lender, but I provide these two as examples.

Lima One Capital

Lending One

The more costly your financing, the higher your cap rate and upfront IRR must be to service the mortgage. The cheaper your money, the lower the numbers can be. Do not get too caught up with the interest rate you pay as long as the numbers make sense.

I believe the condo market in Prince George’s County can still provide a cap rate of about 10%. Thus, obtaining a hard money, long-term loan at 7.5% can make perfect sense for those starting out. The two lenders I just mentioned provide these loans.

My condos, based on my upfront costs now provide me with a 18% cap rate and a 10% cap, based on current market value. If I spotted an opportunity to buy another one and needed a quick loan turnaround with minimum hassle, I would contact a hard money lender for a rental mortgage. Of course, I have excellent cash flow, because I manage the properties myself and do not hire property managers. I keep my costs low, since I can do most repairs if I choose and can find the best tenants. For those who are seriously entertaining real estate investment on a sizable scale I would only recommend self-management. Costs can easily spiral higher, plus the experience you can attain is priceless.

Response to an email; This monetary system is sustainable, since “unconventional” is now conventional

“Unconventional” is conventional in the new monetary system and the global investors approve

I’m with you, Chris. Why would the new Tower of Babel in Basel, Switzerland collapse the world market? They are close to owning all the world’s assets.

Keep the dumb down masses scared of collapse, while the elite are buying up the remainder of assets.

Kind of looks like the depicted pictures of the Tower of Babel. I think just about every central bank minus a couple of them is represented here.

V – Canada

Here was my response (edited for grammar);

I speak against those [in the alt-financial media] who employ the argument from incredulity. I say this because I observe this new monetary system as being sustainable.

The vast majority of people cannot quantify the real costs of “free” money. Thus, it didn’t cost them anything.

Earlier in the decade it was nearly impossible to tell whether this system was going to fall apart or not. My two primary concerns were:

1) the central banks needed to maintain their legitimacy [in the face of potentially hyperinflationary unconventional monetary policy] and

2) whether the global pool of investors were going to accept this unconventional monetary policy as a normal course of action.

Fast forward to a decade later, and it is clear that not only do the global investors accept it, but they actually embrace it.

Here’s a monetary system in which everyone can have their cake and eat it, too. With this new monetary system, people can spend without inflation growth, governments can continue going into further debt with little concern for deficits and higher interest rates, investors expect and will receive an explicit backstop for asset prices, and the New World Order agenda can move forward.

It is so satanic and devilish, but it is actually a very sustainable system. I submit that this is the end times system. We probably will have some blockchain thrown into it and Facebook coins may be the future. But notice that these Facebook coins are pegged to [existing] currencies.

The collapsers are getting it wrong. But these novices and charlatans fill a void to those who can not believe, or refuse to believe, that this system can sustain itself. I am here to completely disagree as functionally it can easily continue.

If I were a charlatan trying to make money, I would get more subscribers and monetized media if I preached gloom and collapse.

This system promotes poor behavior and the true costs are nearly impossible to quantify

Many personality disorders are egosyntonic, which makes their treatment difficult as the patients may not perceive anything wrong and view their perceptions and behavior as reasonable and appropriate.

Egosyntonic behavior – Wikipedia

Don’t get me wrong; the costs of this new monetary system are profound, but unquantifiable. It promotes everything that is ungodly. It encourages reckless speculation and spending, disingenuity, slothfulness, as well as egosyntonic behavior. At the same time, it discourages saving, prudence, temperance, economy, and Godliness. It’s perfect for the current state of humanity and the people wouldn’t have it any other way.

The ones who most directly bear the costs come from a particular category. Ask anyone who has no income-generating assets and lives in a formerly first-world nation, like the United States, Canada, or England. Ask anyone who has earned wages as their only source of income. These are the people who pay the direct costs of this new end-time Talmudic system. Those with the assets or who are from the poorer or second-world nations will do better. The vast majority of a reprobate humanity actually ostensibly benefits from this system. It’s the wage earners in the former first world nations who are falling further behind. And as luck would have it, these are the people who primarily populate the alt-financial media.

Karl Marx said religion is the opiate of the masses, but I submit that government largesse is the opiate of the people.

This monetary system is very devilish, so the New World Order elites cannot come out and say this is a very stable system, because most will then view it as what it really is. So the only way it can be built is through uncertainty, fear, and doubt. As time goes on, those who wake up to it and profess collapse will be viewed as outliers and seditious. You will have to go along with it and you will not be able to criticize it. If it does collapse, the most vocal critics will get the blame.

With this said, the central banks now control the whole system and have completely reinvented the monetary system without anyone waking up to this fact. As long as inflation remains low, the central banks can buy up everything with printed money. There will be no way that the system’s critics can convince people who are the recipients of government social largess. Whether the benefits accrue from tax cuts or social spending, the majority who directly benefit will vehemently disagree with its detractors.

Don’t even waste your time trying to explain how this new end-time monetary system covertly destroys lives; the 90% of the population who can measure their benefits will have no part in that discussion. They are too busy trying to spend and receive their free money.

This system is here to stay.

June 9th Market Update – Central banks and tariffs; Stocks, bonds, gold, bitcoin, real estate; A new FB crypto; answering email questions

To download the podcast – Right mouse click here

Commentary as of 2:30 pm, Sunday, June 9th

-Mexico trade situation taken care of late Friday after markets close. Relief rally tonight?
-Dovish Fed policy designed to help out the other central banks and it’s working out well. Until the recent Fed policy jawboning becomes more clearly defined, stock markets could be in a holding pattern.
-S&P futures just barely retakes 50-day mva. Dow and Nasdaq both lagging. Anti-trust concerns holding back large tech.
-Euro futures could rise another penny to 50-week mva, but upside is limited as ECB desperately needs to embark on more unconventional policy.
-Russell 2000 and trannies further lagging and that gives me pause.
-Bonds need to rest after a great run and I doubt the 10-year UST will take out 2.00% immediately. I see the short-term Mexican trade solution pushing up yields short-term as fears of catastrophe wane. This does not change the longer-term picture. A powerful daily bullish pennant flag has been established, but we need to see more concise language from the Fed to trigger further upside in bond futures.
-I am no longer bullish on gold and would be a seller of rallies. We could touch 1362, but that has been the resistance since mid-2013. The latest COT report shows an extremely stretched condition in just two weeks as many traders fear Armageddon. An almost 70k contract surge in large spec longs last week (as of Tuesday’s close), and most likely additional increase since, has reduced gold’s firepower tremendously. Mexico solution and trader uncertainty on how the Fed will proceed could cap rallies near-term.
-Facebook introducing a new crypto. I am concerned the alts as well as BTC could suffer short-term (already have). You and I may think that FB is Satan incarnate, but more than one-third of adult humanity will gladly go along with it. Many alts could become superfluous? A test of mid 6,000s on BTC not out of the question. It needs to retake 8200 immediately.
-Could FB crypto be the answer to what the future looks like?
-Why I do not run a traditional business nor work for someone.
-Real estate opportunities come about more than we think.

June 6th Market Update – A response to some emails and a warning to those who take the advice of the alt-financial media

To download the podcast – Right mouse click here

-A response to a few emails
-A warning to the alt-financial followers. A warning to the alt-financial “experts”
-Some macro predictions
-Why bring out a new monetary system when the current one represents little of what the system of 50 years ago looked like? The elites already brought it out into full view.
-The futurists of 80-150 years ago explained how the future economy would operate. Wake up, we are here. This is the end time system. It will just slowly transform into the finished product. No need for collapses.
-For at least 50% of the population in the Western nations, the monetary system has effectively collapsed… for them.
-For the majority of humanity, this system suits them fine as their standards of living have risen. I see China, India, SE Asia, all doing better under this NWO. All the former 1st world nations are moving toward second nation status. The futurists discussed this leveling process and most of their agenda from 100 years ago has been accomplished, while the “unwashed” washed screamed collapse.
-What better way for the elites to achieve their goal, but by having their critics continually underestimating them.
-The Art of War is just a bunch of empty platitudes to most in the alt-media, because these so-called “washed” people, who can recite entire passages of that book, were never able to comprehend their adversary’s power, while constantly underestimating their enemy’s abilities. They already lost and still think their enemy is about to fold.

Manufactured distractions provide cover for the Fed to lower short-term rates

The nations must stay in business, so the central banks are acting fast
This puppet needs to keep the IV-drip going and today, he acknowledged this. It has been in place for a decade and if it’s withdrawn, the central banks will get the blame.

Though I do not know of anyone else who agrees with my research, my readers know the agenda; the central banks must all work together to continually lower interest rates over time, so that the nation-states can remain in business. Since 2008, no nation-state has been able to effectively fund its own spending  activities at prevailing rates without central bank bond buying.

This list of nations includes China and Russia, because without the low rates afforded by the western central banks, Russia’s and China’s credit systems would have collapsed as well. Moreover, China’s high rate of credit and economic expansion would have been impossible if global debt yields were higher. After all, China needs to be built up as quickly as possible for the upcoming global conflict, and only low rates and cheap credit can promote this auspiciously timed expansion.

Falling yields around the world
Falling yields support higher asset prices, which support lower yields

Yields need to continue dropping, so by default, asset prices will continue climbing. These higher asset prices will also support the demand for the ballooning sovereign debt pile. The whole dynamic generates a self-supporting mechanism. If asset prices fall, monetary policy will be more supportive and visa versa.

With respect to monetary policy, no nation-state can act independently anymore. Even the manufactured enemies for the upcoming global conflict are coordinating monetary policy at the highest levels. So, as this timeline reaches certain key moments, the central banks need to act decisively to ensure that all the debt is absorbed with room to spare. This will help to guide the yield curve lower as the debt burdens swell.

All this talk about impending economic and financial market calamity, or the ostensible trade friction both work to achieve the same goal – they give cover to the the U.S. Fed and other central banks to lower short term rates, expand credit, and manage longer-dated bond yields. Therefore, it makes me wonder about the true motives of politicians like President Trump or the mainstream and alt-media’s recession drum pounding.

Since 2013 when I started writing on Henry Makow’s site, my one overriding instruction to my reader has remained the same;

  • Those at the top are in firm control of the monetary system. It’s their monetary system and their central banks possess plenty of fire power with unconventional tools, and can easily lower rates to below zero.
  • Interest rates need to continue moving lower over time, and as rates fall and the supply of sovereign debt balloons, asset prices will rise, ceteris paribus.
  • Despite this monetary expansion, inflation growth will continue to fade as the world sinks in a sea of deflationary red ink.
  • It has become clear, especially in the wake of last year’s late market swoon,  that TPTB intend to keep this moving forward. They seem to be achieving more of their new world order agenda by keeping the system intact.

There are always opportunities to speculate on all types of assets, including fungible ones like gold, bitcoin, and commodities. But over the long run, we will be best served by owning assets that can be priced by discounting their cash flows. Obviously, stocks, bonds, real estate, and private (but liquid) businesses come to mind.

The actions of the Fed will eventually overwhelm the trade situation, because in the long run, all that matters are bond yields. These low yields and explosive credit expansion will power the new order forward until the next phase, which can be years away.

June 2nd Market Update – Beware of more dovish Fed policy. Trump theater designed for more rate cuts

To download the podcast – June 2, 2019 Update

-Bond and stock analysis.
-Market predictions, given the chart and market action.
-2.1% UST 10-year getting close. Predicting interest rate movements is easy when one knows the conspiracy for the global financial dictatorship and can properly interpret central banks actions.
-Beware of Fed emergency actions. Don’t fall in love with the downside
-Trump’s actions provide cover for the U.S. Fed to begin cutting the Fed funds rate.  I see the patterns and make connections and have to believe that Trump is doing this to make certain the Fed acts. The Fed is happy and its owners probably think Trump is doing a fine job forwarding the NWO agenda.
-Trump’s opponents seem to be making sure he gets reelected.
-Gold market analysis
-Until further notice, I am trading BTC, ETH, LTC, and the the other “currency” alts from the long side.
-Oil market and the XOP; a tag team of telegraphing. Russia’s oil output continues to drop while prices fall.
-A response to an email. I am not an expert on the grains, softs, and trops, and normally stay away from analyzing them, but I have to believe that a lot of the current weather and ebola swine flu is priced in. The long-term trends in the grains have been down and many have been caught offside.
-My concern is that when the common refrain in the farm sector is that of catastrophe, I have to believe the upside is limited. I am just being a contrarian.
-The internet and wealth inequality. More proof that the internet is not good for those who cannot leave their biases and predilections at the door.

-Links to media and articles
Russia’s May oil output hits 11-month low on dirty oil crisis
Gold COT chart
UST 10-year COT Chart
Share of top 1% wealthiest increased to nearly 32% in 2018 from 23% in 1989