2020 is going to be a big year. It is time to set your sights high. Doing big things this year does not mean buying big, it means selling big.
You will do yourself a tremendous disservice if you pursue properties that are in the jumbo category because only jumbo lenders can participate in this segment of the market and that represents only about 4 percent of the market.
Now, if you pursue properties where your After Rehab Value (ARV) does not exceed the FHA cap for your area, you’re more likely to get funding and more likely to easily find an end buyer. The FHA cap is the Federal Housing Administration’s maximum loan amount in each real estate market. To find the FHA Cap in your market click her
For example in my market, the FHA cap is about $330,000. Because of this, I avoid buying any fixer-upper where my retail exit price exceeds $330,000. I know that 80 percent of the buyers to whom I will be marketing to are going to be getting an FHA or other government-backed loan.
Don’t Price Yourself Out
I don’t want to price myself out of the majority of buyers, so I’m going to buy below the FHA cap and then know, without a shadow of a doubt, how to renovate the property so that it conforms to FHA. To rehab to conform to FHA underwriting guidelines, consider the Rehab Certification Program at Lee Arnold System here:
Certain things must be done with the property to qualify it for an FHA loan. I use private money to acquire real estate that does not qualify, and then, through renovation and repair, I make sure it qualifies for the end retail buyer. Also, unlike banks’ funding, which must meet agency (Fannie, Freddie, FHA) requirements, private lenders do not need to meet these requirements. It is completely at their discretion where to deploy their capital.
At Cogo Capital our lending criteria mirrors these requirements. We lend for your success and craft loans for deals that will be profitable. If your investment doesn’t fit in this box, it may be an indication that you should reconsider the deal. We have made it simple by creating a page to see if your deal fits and for you to get started with funding smart deals.