And we hope you enjoy the show. If you want to get a hold of me if you have any questions on any mortgages, purchase refinance, you want to look at renovation loans, anything like that, just please give me a call or send me an email actually, the best way is going to my website. And that is hard working mortgage guy.com. That's Hard Working Mortgage Guy.com. Or you can call me at 317-215-7600. That's 317-215-7600. Today, I want to talk about financing your wealth, it's a how to on financing rental properties. I know that it’s a tough market and it's hard to buy a home. However, there are many, many, many people buying homes and either keeping them as rental properties or renovating them and selling them on the market. It’s something that I see a lot of people doing, we're financing quite a few of those. And I thought you know, this is a time really, to talk about it and really go over it in case anybody you know, or you have any interest in the possibility of financing a rental property or owning rental properties. And this could be something you own, you're looking at short term, you want to buy something, you know, do the renovations put it back on the market and sell it in this market or maybe something you want to long term rent, there's different reasons to do that you can rent it out, some people will buy a home with a plan to move into the home at a later date. So, they buy it now, rent it out until they get to the point where they are ready to move into the home. They want the benefits of a long-term rental, the appreciation they receive and the lowering of the mortgage payoff due to paying principal each month. Just last week we were talking with Jeremy Page with Carpenter Realtors and he said the appreciation rate in Indiana and 2021 was 19%. He also projects that the appreciation rate will be 6% to 7% in 2022. Although he says he's being very conservative on that, and we're most housing experts are predicting appreciation rates in the 9% to 10% range, no telling, but that's what they're thinking, it is a great way to increase your wealth. Additionally, you know, with the home values which have increased to record levels, like we talked about, and rents have increased at somewhere between 5% and 12% year over year, depending on if you look at somebody who just renewed their lease or somebody who's getting a new lease on a property. If you're renewing your lease, we've seen an average of 5% year over a year of increase in rent. And that's direct to the payment, it's a little different than interest rates going up or the house prices going up. This is direct to the payment. On new rents, this would be a place you have not been renting rent the rents have increased 12% year over year. And why does that matter? Because you can turn that bit of knowledge into your very own real estate empire. And to do that you really have to understand how to finance these jewels. You have to find these homes and you have to know how to finance them. Let’s look at the wide variety of options out there. The first piece I want to talk about the first option I want to talk about is something called a Debt Service Coverage Ratio. DSCR is the acronym and it is designed for investors to purchase rental properties. Now the value of this you'll see here in a minute on what it does but here are the basics of this type of product. First, you're going to need 20 to 30% down. As opposed to a conventional mortgage which requires 25% down. Of course, your credit scores and your debt-to-income ratios will determine if you need 20%, 25%, 30% or more down. You’ll also need six months reserves. What does that mean? It means you have to have six months of cash sitting there available to make payments on the property and any other properties you own. If this would be your first rental property and your total monthly mortgage payment plus the homeowner’s association dues were $1,000 a month you would need $6,000 in reserve plus 6 months of your primary residence if you owned that property. Normally we use a retirement account, a 401k or an IRA but it can be in an investment account or a savings or checking account. Most people have the reserves that are required. Bottom line is if you're going to buy a rental property, you're going to need the reserves. Normally you buy a home, or you refinance a home and you have an appraisal on this product, you're going to be looking at normally an appraisal with what's called a rent analysis, that's going to increase the cost of the appraisal. But they're going to do an analysis, analysis of the rent. And there's a lot of reasons they need that. But one of the biggest reasons they need that is because we're not going to look at your income we're going to look at, are you are you netting enough from this property and rent to make the mortgage payment. And if you are, and credit scores are reasonable. It depends on which which, you know, different companies have have these, they're going to have different numbers. But basically, you're going to need to be, you know, mid sixes, maybe a little lower than that up to, in your credit score to be able to qualify. But we're not going to look at income. Now this only works. Also I need to make sure you understand this only works on non owner occupied properties. You cannot buy a an owner occupied property with this, this product if the government doesn't want that they won't allow it. So we are not, we are not allowed to do that. Some people have tried to do it and 99.9% Chance times they get caught you if you're a first time homebuyer and you don't you don't own a home and you're buying a rental property in the area that you live in. It's not going to go through they're never going to prove it because even if that is what you're doing, there's no way to 100% prove that and they're not going to make that loan. So if you're a first time homebuyer, it is a very difficult program to do you really need to have a primary residence, it can happen if you're living in Indianapolis, but you're you know, you're buying a rental property in Florida, that might you know, with enough documentation, we might be able to prove that that's what you're doing. And that might be acceptable. But for the most part, this needs to be this has to be on a non owner occupied property. So that what do you do if this sounds like a product, you think, Wow, this sounds pretty good. I think this is something I might want to look at and might be something that would be of interest to me, the first thing you'd want to do is get pre qualified, we would want you'd want to contact me at hard working mortgage guy.com. Again, Rick Ripma, you're hardworking mortgage guy hard working mortgage guy.com. Again, I'm with advisors Mortgage Group. And we'll get the information that we need. Because you still have to qualify even though we aren't going to use your income we're going to get we're going to have to get all the documentation, we're going to have to pull credit and we're going to have to get you qualified. However, it's a much easier process than most other mortgages because there's just not as much information needed. As long as that property is going to cash flow, which we're finding as most the vast majority of them are. This is a fairly easy process. In the mortgages, no process doing a mortgage is you know that simple any any longer. There's things that have to be be gotten, you know, documentation that we have to have, but in reality, it's not all that difficult part of the pre qualification or pre approval is the downpayment, you have to have the downpayment and again, non owner occupied properties require 20 to 30% down conventional requires normally 25% down this product, the debt service coverage ratio DSCR requires 20 to 30% down again depending on the exact situation. So it will depend on that situation on how we go about doing that. But we are going to go to break and after the break we're going to talk more about how to finance investment properties and some of the other options that are available. A penny saved is a penny earned was one of my dad's favorite sayings. I was about for the first time dad said it to me we were inside a head drugstore in the candy area and the smells were heaven. At least to my four year old knows it smelled of chocolate. I asked dad for a piece it was only two cents. He knelt down, looked me in the eye and said you know penny saved is a penny earned. He was right but I wanted chocolate with mortgage rates at near record lows. You can have your chocolate and maybe a new kitchen. One thing I do know you'll likely save a lot of pennies. Tau refinance your mortgage call me Rick Ripma The hard work and mortgage guy with advisors Mortgage Group 31767 to 1938 that's 31767 to 1938 with your savings you can buy a lot of chocolate you know lots of folks do what we here at advisors Mortgage Group Do we just do it better that bought me chocolate that day, which was sweet Unknown Speaker 9:55 licensed by the Indiana Department of Financial Institutions NMLS number 33041 Witness NMLS number 64589 equal housing opportunity comes very Rick Ripma 10:06 welcome back. And I appreciate it very much. If you have any questions on mortgages, you want to talk about refinancing purchasing buying an investment property, like we're talking about today, please contact me at hard working mortgage guy.com, that's hard working mortgage guy.com, you can go online, get all my contact information there. If you prefer just to call me, you can call 317215 7600. That's 317215 7600. And I will do my best to get back with you as quickly as possible. And as we get going on, before we get into the rest of the rental properties and how we go about that. Now it's time for questions with the gurus. It's amazing, I get so many questions I talked to I probably talked to 10 to 15 people a day about mortgages. I talked to people all the time. And there's there's always questions coming up. There's always things that just to me make a lot of sense, that need to be gone over that people need to understand and this is Jennifer and will have been thinking about buying a home to run out and they they're wondering if they should try and find a property now. Or wait for the market? You know, once it slows down? It's a great question because as you look at this market, it's it's very, very hot. Last year, we in 2021, Indiana, Indiana, Indianapolis appreciated at 19%. And that is an incredible number. If you think about that, if you had $100,000 rental property at the start of 2021. At the end of 2021. It was worth if it had appreciated on the average appreciation, it would have been at 119,000. Now of course the lower lower homes may have appreciated more may have appreciated last hires from homes tend to appreciate the real high price tend to appreciate a little less, who knows in this market, but you can really take advantage of the appreciation, and even the outlook for 2022 and 2023. We're not looking at the same type of market we were looking at in 2007 2008, when we had the housing bubble and everything crashed. There were there were homes, there were a huge volume of homes on the market. And there were very few buyers out there. Homes would sit on the market for months, sometimes years back then. So they were very difficult to sell that the appreciation rate had not been there and actually was negative. So somebody had financed the house and owed 400,000 on it. And in 2007 and 2008. Now they're now that $400,000 house may only be worth 375. And they owe 400 Do they owe 380 on it, they can't get out of the house without paying to get out. So that and so then that ends up a foreclosure and you end up with all these foreclosures. Today we're a record low foreclosures, we have very, very, very few foreclosed homes because there's no reason for anybody to have their home foreclosed on. If you can't make the payment, you can put it on the market, you can sell that home, and you're going to sell it for top dollar. And you should be able unless it's a you know has a lot of issues, sell it for more than what you owe. That's what we're seeing. So it's very few people who are who are in that situation where they are struggling, and they can't get out of their house if they need to. And that's what Jennifer Wilson are asking. They're looking at it they're thinking, well, they you know, with the way that it's gone, man, maybe they don't want to do that. Well, here's another piece that might be you know, we're thinking about not only are you getting the appreciation on the home when you're when you're renting it out, you know according to the apartment list, national rent report, rental prices went up $300 per month in 2021. That's an average three $300 a month. And sources like MBS highways expect this expects this trend to continue in 2022. They think it might be a little slower pace. But they don't actually know that but they do believe that the prices are going to continue to go up so you the rent rental prices are going to go up so not only do you get the appreciation, Your rent goes up, and your your payment other less taxes and insurance goes up it's going to stay the same principal and interest as long as you're on a fixed rate does not increase. If you're currently renting or are considering running while you have the roof over your head renting doesn't help you build wealth like homeownership does so if you're renting or thinking about renting, that that rentals roof over your head does not help you build wealth like homeownership does. For example, the extra $300 per month you're spending on rent based on current rates would be like having a $70,000 mortgage at $300 is like a $70,000 mortgage, meaning if you were to use that extra $300 per month to purchase a home You would have an additional $70,000 in buying power you could put towards purchasing your dream home. This is very important. Additionally, when you purchase a home, that property continues to appreciate helping you build wealth. So it's going to continue to appreciate and maybe not at the 19%. But we we are looking at, you know, still very high appreciation rates. But if you decide to rent, the only person building wealth through real estate is your landlord, they're getting the appreciation, and they're getting the rent increase. If you go to my website, hardworking mortgage guy, you want to talk about this, you have any questions on this, just let me know we can talk about this. It really, really does make sense if if you would like to buy rental property, we have some great options. And this is just one of we just talked about the easiest way to do to finance those now there, it's a little higher rates and things like that, because it is easier. But it's that debt service coverage ratio DSCR. So let's talk about some of the other options and financing rental property. Probably the biggest way most people finance a rental property is conventional financing. And it's it's really pretty basic, you have to have good credit. And we really want to see on a conventional mortgage, I'm not saying you couldn't go lower than this, but they really want to see, you know, for rental property in the upper sixes would be best up into the seven hundreds, the higher, the better. 25% down is required. There are some options at 20% down, but it just absolutely destroys the interest rate increases that a lot. I don't know how it's it goes up by at least 1% by going up to to earn 80%. So it's really not effective for most people to do the 20% 25% is what I would if I were looking to buy a rental property, that's what I'd want to have available. You You're still going to need reserves, you're going to need that six months reserves. And again, we can use the reserves. If you have a 401k you have an IRA retirement funds. If you have a if you have stocks or investments, we just need reserves. And we need six months reserves on every rental property that you have. And also, we very likely will need it on your primary residence. Because we need to make sure that you have the reserves for all properties in case you run into a difficulty. It's one of those changes they made because people did run into difficulties. And they didn't have the reserves reserves make it less stressful for you, we just want to make sure you have the reserves. And those reserves, we also have to look at, it's not just the monthly mortgage payment, it's going to include the property taxes, any of the escrows homeowners insurance, it's going to include any homeowners association dues, all of those things are going to be included. Now if you pay their property taxes, and your homeowners insurance and your rental mortgage, which most people do, then it's just your your mortgage plus the homeowners association dues. So we have to look at all of that. Now when you're looking at that understand you take a condo condominium, you're going to see on a on a condo, you're going to see much higher homeowners association dues. And those have to be looked at those have to be, you know, put into the equation when we're running our debt to income ratio. So we need to, we need to look at that. So if you decide, hey, we want to, because a lot of people do they want to buy a condo, they feel like that's less work, they don't have to do much of the maintenance, but you're paying for that you're paying a service. But to do all that to do all the work. So you're it's it many times limits the dollar amount of a place that you can purchase, it's a single family or up to a four Plex is easier to purchase than a condo, generally, we also are going to look at if you if this is your first house, it's not your first rental, that's not a problem. But if you have a bunch of rental properties, we do have to look at how many rental properties you have, and how many homes total you have financed conventionally, that lets you have 10 homes financed or you could if you have a primary residence, you if you bought, let's say 10 rental properties on you and a primary residence, you bought another primary, you could do that. And that could be your 11th mortgage. But only for a primary. You can't buy another rental property under this if you if you have that many then we need programs like we just talked about the debt service coverage ratio. Now what if the property needs to be renovated? So now you're looking at a property and it's it's a you're going to use it as a rental property, maybe you're not maybe maybe it's an investment property, you're looking at it and you're just you want it you found a house that needs work. It hasn't sold in this market. It's been sitting on the market for, you know, 60 7080 days, and you're looking at it and you think well if I could do this work on this property, I could sell it and I can make X amount of dollars on the property. Can you finance that? Well, that is something that we can certainly do, we can do renovation loans on a purchase or refinance of a rental property. And that can be a big boon. If you want to have, you know, have that work done, especially if you're buying it, you want to have the work done, before you move anybody in, you want to buy the property, have the work done. And then right away, we can, and you would like it finance, we can finance that. So how does that work? The way that that works is we're going to take your, the purchase price, and then we're going to have a person who construction consultant who's going to look at the property going to tell you what needs to be done. And then you're going to tell them what you want to do. And they're going to come up with a basic idea of what that is going to cost. And then you're then you're going to find contractors, and hopefully they'll align with the cost of that. And then we'll have once we know what you're going to do, we can obviously have the Property Appraised until we know what it's what you're going to do. And that's another piece of this, that's very valuable. When you're looking at renovation and doing a renovation loan, on a rental property, or on any property, we're going to look at the finished product value, the appraisal is going to be this home, plus the work that you're going to do. And they're going to praise it based on that finished value. And that's where it can come in very, very handy, let's say on a on a refinance of a non owner occupied property or an owner occupied but we're talking not owner occupied. Let's say the house is worth 200,000, you want to do $70,000 In work. And when you get done, they're saying the house is gonna be worth 400,000. With that, and right now you owe 300. Or it's worth 300, you couldn't do that to that $270,000 loan, because you're not at 80% loan to value or 75% loan to value, you have to be at a 75% loan to value so you wouldn't have enough equity in that property to do a normal finance of the property. So it is extremely important or extremely helpful that you have that there is a product where you can look at the end result. And that's the appraised value, we're going to use it on a purchase, we're going to use the purchase price plus the renovation costs. And that's going to be the value unless the appraisals lower and then then we're going to use the appraised value on a refinance, we're going to use the appraised value of the property based on the completion of the home being completed of all the work being done. So that gives you a lot more buying power helps, it usually helps a lot and making that a very doable project. Understand though, this type of product because it takes a lot of additional work from you to to get all the information you have to have, you know, we have the the you have to have contractors you have to bids that just takes a little longer to get the the mortgages through, it can take as much from the time you actually have all that information to close as usually, you know, 45 days, but it could take you 3060 90 days even to get us all that information. But once we have it all, and we have what we need, then we can get that that close. And we have a great, great company, fix it mortgage, which is part of advisors, it's all they do, we have the most experienced people I've ever met in this in this realm of mortgages. The person who runs it's been doing it since like 1988, he's helped help them actually develop the product through like Freddie and Fannie. He's actually been on boards to help them come up with the product. So he knows these products inside out. And he can really push these through at a much better level than most people. And he understands it. So it's it's a, it's a very, it's not an easy process. That's fairly easy, but it's a long a longer process, it does take a little bit more patience to work through it and make sure that at the end you have exactly what you want it also because there's a lot of things that have to be done in that it does have a higher costs to it. But a lot of that is is inspections and things that have to be done in the process. So you have you have the consultant you have to pay them, there are things that are going to cost a little bit more money. As long as the value is there, you can usually have those in the loan amount. You can even on a primary residence you can even have the payments made. If you buy a house and you you're not going to be able to live in it for six months you can buy the house close on it and and have the payments made through the mortgage if you set it up that way until you move in the house for six months. So there are there are some other options when you're looking at this type of product for a primary residence. It's a little different it gives There are some additional flexibilities in it, and it can be of great value. You know, in the last few minutes I just want to talk about, we talked about our market. On the last show and we've talked a little bit about our market in this show, but I pulled some of the, the information I just in our area, and and the Indianapolis and surrounding counties, even I pulled Hendricks County I pulled Marion Of course, I also did the Bloomington area, Monroe County. And I just just thought it was very interesting, as you look at this, in the last five years, this is historical data in the last five years. Basically, we've seen an appreciation over the last five years of and this is this is before 2021 of 8.4% on an average over the last five years. I take that back that is including it, but that's because of the five years. For the last 62 years, we've averaged 3.97%, approximately in this area, the last 3.97% last 10 years, because of the last few years, we've averaged 6.35%, the last five years, we've averaged 8.49%. But the projection and this is really what I wanted to talk about the projection is almost 25% Over the next five years. So significant increases the projection. This is where you can build wealth and not only primary residence but in an investment property. And I just have to encourage you it's certainly worth it. If you're a first time homebuyer or you have a home and you want to look at buying rental properties, it can definitely be worthwhile if you want to talk about it. Just go to my website, hardworking mortgage guy.com You can fill out the information there you can text me you can email me you can call me from there. Just get a hold of me and let me know what you're looking for. I'll get back with you as quickly as I can. And we'll talk about your situation and go through what you need to do to hopefully accomplish whatever goal you're looking to accomplish as it as it applies to real estate. You can call me also 317215 7600 That's 317215 7600 Again, it's Rick Ripma your hard working mortgage guy with advisors Mortgage Group. I thank you so much for joining me today have a great weekend. Credit cards student loans car payments, when is it going to stop run shouted Karen just shrugged and look defeated. Their debts were literally killing their marriage in them. They tossed and turned every night pet stress headaches all day long and snapped at each other constantly all over the stress of out of control debt payments. Then the Debt Crusher mortgage came into their lives, they can now sleep in their debt stress disappeared. This is Ripma your hard work and mortgage guide advisors Mortgage Group and if you have debt stress we have the solution the Debt Crusher debt consolidation mortgage call us to see if you qualify 317215 7600 That's 317215 7600 and let the Debt Crusher mortgage crush your debt. Rick Ripma hurt every weekend at Unknown Speaker 29:02 3:30pm on freedom 95 branch NMLS number 33041 Ripma is NMLS number 664589 equal housing opportunity some restrictions apply