Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
I was recently in Las Vegas, “the gambling capital of the world,” and my one and only bet there played out unbelievably. Practically speaking, the odds were not in my favor, and I took a risk, but I knew that my intuition was reasonable, so I went with my gut. To clarify, I didn’t step foot into any of the casinos, but I certainly gambled with a timely decision that paid off.
I have a client couple who is very active in buying houses for investment purposes. Most of these houses are quick fix-and-flips, some require more extensive renovations, and every once in a while there is a property that they keep as a long-term hold. Before being referred to me, this husband and wife team would typically buy their properties all in cash and use personal funds for all of the transactions and renovations needed. They were out of money and required options.
We had a few meetings, and I was able to show them creative financing possibilities and sensible strategies that Approved Funding and I can offer them. They were extremely impressed by the diverse products and innovative loan programs that addressed all of their real estate and investment needs.
I know that sounds like an infomercial, but I wanted to emphasize that even experienced and savvy real estate investors were surprised that unique solutions exist in today’s lending world to help them maximize their financial needs. My theory is that many of the current real estate buyers became active after the market crashed, and a lot of their strategies are predicated on the lack of financing and loan options post-crisis.
In this particular case, they were buying a property that would be a long-term hold for them, but it only made sense to them at a certain price-point. When it comes to real estate investments, there are many schools of thought and different investment approaches. More often than not, the numbers speak for themselves. This property was in an extremely desirable location, it had a tremendous upside in the long-run, but the numbers didn’t present as well on paper. To make matters worse, they wouldn’t qualify at these parameters. They don’t have any more of their own funds and would need financing to acquire this property.
Not having worked with them yet, we didn’t have their full financial profile available, but my team and I worked quickly to confirm the details. From there we got the property information for analysis. In the end, they were ready to walk away from the deal because the carrying costs per month were a bit more than they were willing to shoulder. They liked the potential, but the numbers were such that they simply didn’t qualify.
Notwithstanding the above, my recommendation to them was to pursue the offer but request an additional 15 days for due diligence and closing. We crafted the wording of the agreement such that it was acceptable to both parties, and gave them “an out.” My suggestion to wait was gambling on the stock and equities market, and the direction I believed things were heading.
Based on current market rates the loan was ineligible, but I all but guaranteed them that within 72 hours rates would dip. Once that happened, we would be able to capture the benefit of a reduced rate and better monthly payments. Fundamentally speaking, I saw that mortgage-backed securities were undersold and approaching a firm bottom from their recent spikes. My hunch was right, and they were able to watch the 10 year U.S. treasuries drop 25 bps, which is when I recommended they lock in their rates.
Saving them $200 a month on their mortgage payment was just the amount they needed to qualify and push forward with this deal enthusiastically! I took a chance but, for me, it was an educated calculation which helped me earn the trust and business of a family of real estate investors for life.
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