Author: Premela R.

From Hong Kong to Austin. London to Miami. We compare real estate with the most bang for your buck!

Atanta GA & Sydney AU Real Estate

Globally real estate markets are red-hot, and even a pandemic can’t stop it. For the U.S., mortgage applications for foreigners to purchase U.S. real estate have consistently expanded year-over-year as property prices in most global cities have reached record highs. 

What makes the U.S. real estate market so enticing to investors? 

Anyone who has invested time and effort in house hunting for investment properties in Hong Kong, Singapore, Paris, London, Sydney, or Vancouver will acknowledge just how inexpensive real estate has become. Markets outside the U.S. have been increasingly hit with various cooling measures, taxes, stamp duty, and mortgage restrictions impacting real estate investors from either entering the market initially or growing their portfolios. What makes the U.S. market unique: there are no restrictions for foreign investment in any real estate asset class. The market also dictates the rise and fall of real estate values, not the government. You can buy a starter property in Texas for $200,000 or a penthouse in Miami for $10,000,000 regardless of your passport. 

Below we compare the cost of purchasing real estate in various global and U.S. cities. With up to 75% leverage in all 50 U.S. states, America Mortgages provides an opportunity for anyone to invest in U.S. real estate. You no longer need to battle with banks or pay AUM to become a successful real estate investor.

With U.S. interest rates currently at historic lows, mortgage programs are creative, including qualifying not off your personal income but off the property’s rental income, and it is available for both U.S. citizens and Non-U.S. Citizens. The ability to get up to 75% leverage with a 30-year amortization regardless of the borrower’s age increases rental yields and the affordability of investment properties. This kind of leverage is available ONLY in the U.S. market.

If you are wondering whether U.S. real estate merits putting your money into, the short answer is yes. Let’s look at various global real estate price points versus the U.S.

Price comparison of investment properties:

Price comparison of investment properties
Price comparison of Real Estate

Let’s take for example Atlanta, Georgia 2000 sqft home:

Purchase Price: $300,200

LTV: 75%

Loan amount: $225,150

Interest rate: 4.75%

Loan Tenure: 30 years

Monthly Loan repayment: $1,174

Rental Income: $2,500

With the rental yield at $2,500, your monthly repayment is $0 with a profit of $1,326 per month; that’s $15,912 per annum. Within 7.5 years, you’d have fully paid off your loan.

Looking at this, we can clearly deduce that the purchase prices and rental yield of a U.S. property prove that it is a great investment, especially when you consider Return on investment (ROI) and the option to finance your property with higher leverage. With purchase prices significantly lower than the rest of the cities globally, your rental income will cover should, at a minimum, cover your mortgage costs. Smart money management and possibly in a few years, will turn into passive income. 

According to Billionaire Andrew Carnegie, around 90% of the world’s tycoons have been created by investing in real estate. Real estate offers the most ideal way to build wealth as an investor. Likewise, with all possible types of assets and loan programs available, it is ideal to strike when the iron is hot.

If you are keen to invest in U.S. real estate as a U.S. Expat or foreign national, the first step is to get pre-approved for a mortgage. America Mortgages’ ONLY focus is providing market-rate mortgage financing for U.S. Expats and Foreign Nationals. Our most popular programs are AM No Income Mortgages+ and  AM U.S. Expat Mortgage +. However, if for some reason that doesn’t fit your profile or you prefer something more bespoke, our global mortgage team with over 100 years of combined experience is only a phone call away. So investors rejoice and connect with us today at [email protected]. 

Our gift to you – No Income Mortgage Loans are back!

No Income Mortgage Loans

We launched the Asset Depletion Program (AM Liquid Portfolio Mortgages) for investors earlier this month, which allows candidates to qualify for a loan using their assets instead of income from employment. This week, we introduce AM No Income Required + for U.S. expats and foreign nationals!

No Income Mortgage Loans

You can now qualify to purchase or refinance a U.S. property even if you are not a U.S. citizen, do not possess a valid U.S. visa, or lack income documentation (self-employed entrepreneurs). Yup, you guessed it, this is all possible with the AM No Income Required +!

While most banks and lenders request your tax returns, no-income verification mortgages rather consider different factors like assets, home equity, and general cash flow. This makes it even easier for self-employed entrepreneurs or non-U.S. residents who have numerous write-offs on foreign tax returns to get a home loan.

Details of AM No Income Required +:

  • No income verification is needed.
  • No age limitations or restrictions.
  • No U.S. credit is required.
  • No USA visa or residency is required.
  • No reserves are required.
  • No Life insurance is required.
  • No pre-payment or redemption penalty.
  • No tax returns are required.

Sounds too good to be true? With AM No Income Required +, it is definitely feasible.

The AM No Income Required + program allows foreign nationals, non-U.S. residents, and U.S. expats to make a 25% down payment and finance up to 75% of the property value without requiring income verification. The majority of banks and lenders still require a 60% down payment for foreign national mortgage loans, but with AM No Income Required + you can arrange financing with just 25% down payment, with no income verification and with exceptional rates including interest only programs. 

The AM No Income Required + loan program is available as a 30 year fixed-rate and as adjustable-rate mortgages. Adjustable rates are offered at 3/1, 5/1, 7/1 terms for 15 or 30 year fully amortized loans. Fixed rates are offered for the 10, 15, or 30 year fully amortized loan.

  • Are you retired with little or no fixed income?
  • Are you self-employed but have little to no “provable” income?

If you answered ‘Yes’, AM No Income Required + might be the perfect program for you.

Contact us at [email protected] for more information.

www.americamortgages.com

Is a vacation home a good investment?

Holiday/Airbnb Investor Program

Everyone wants to live in The Bu…

The Bu is, of course, Malibu, California… known as the mecca for Airbnb rentals as well as Charlie Sheen’s house in ‘Two and a Half Men.’

One thing the pandemic has done for all of us is force us to think about the next stages of our lives – family, kid’s education, retirement, all intertwined into where you vacation. We have seen unprecedented demand for vacation home financing over the past 12 months. This is an area where many banks will not lend given the lumpy rental income, normally from renting out on Airbnb or VRBO – but that has all changed!

A report by Redfin shows that demand for vacation homes– otherwise known as short-term rentals –is soaring at a record pace. With an active real estate market, rates hovering around historic lows, and with AM Holiday/Airbnb Investor Program, this moment is the ideal opportunity, whether you are a U.S. expat or foreign national, to consider investing in a vacation home.

Introducing AM Holiday/Airbnb Investor Program

Qualify for a U.S. mortgage loan for a U.S. property that will be used for short-term rental such as Airbnb by using only the projected rental income of the property. No longer are you having to spend hours, days, or weeks collecting tax documents, pay statements, translations, etc. AM Holiday/Airbnb Investor Program allows you to get up to 75% LTV in all 50 states. The best thing, you can get pre-approved for this loan within 72 hours, and once approved, you’ll be issued an “approval letter,” which will allow you to go shopping! It’s as easy as it sounds.

There are a few benefits to possessing a holiday investment property. As of late, Airbnb and VRBO continue to grow as an ever-increasing number of properties are being listed. The convenience of such apps has made it that much easier for homeowners to find and market vacation rentals. In turn, the number of people interested in vacation rental investments has skyrocketed. Purchasing a vacation home can be particularly engaging and ideal when you toss in these personal and financial advantages. Here are some of the benefits of investing in a vacation rental:

1. Tap into rental income

Being a second homeowner presents the chance of leasing it out when you’re away. What’s more, assuming your second home is a great property in a desirable town, transforming it into an investment property will provide you with a subsequent source of passive income. Even celebrities like Leonardo DiCaprio, Jennifer Lawrence, and 50 Cent lease their vacation properties. How cool is that? In some cases, you can even offset the costs of leasing your vacation home. You may even be able to use your vacation home to generate rental income when you aren’t there. This could turn the home into a serious passive income producer in popular tourist destinations.

2. Build home equity.

In conjunction with your vacation home being a fun place to relax, it is also a long-term investment that could flourish your wealth and diversify your portfolio. Build equity on your home as your make mortgage payments. The real estate market and home values often vary. Consequently, the choice to buy a vacation home shouldn’t be made with the assumption that the property’s value will give a colossal result later on. However, your house being located in a highly sought-after town might improve the probability of your property increasing in value over time.

Not only can you generate rental income by leasing out your property, but you also have the benefit of vacationing there yourself; now that’s pretty awesome!

3. Tax Write-offs

Investors should take advantage of the tax benefits related to vacation rentals. Your holiday home is considered a business if it is leased for at least 2 weeks per year. This is very helpful for tax purposes because although the rental’s pay will be taxed, you will be able to write off several of the vacation property’s expenses. You can deduct numerous items from your taxes, including utility expenses, costs of maintenance and repairs, property management fees, mortgage interest, and more. (please consult with your tax advisor)

4. Simplify your vacation!

Bid farewell to hotels. Your holiday home makes it simple for loved ones to gather in one place without stressing over the cost of accommodation. Regardless of whether your home is close to the beach, on a lake, or in the country, there’s a possibility this property will turn into your family’s go-to vacation for any season. By owning a vacation home, you get to decide how long you want your travel to be and who will join. What’s better is that you get to save what you would have spent on hotel or rental accommodations somewhere else!

5. Retirement preparation

A holiday home could ultimately become a full-time home. Purchasing a vacation property when you’re young could provide you with an ideal place to retire in the future. You’ll be able to pay off your home mortgage before it even turns into your main residence. After you retire, the profit from your first home can go toward the current mortgage of your vacation home.

This will successively make your retirement progress simpler, considering that you’re now acquainted with the area, community, and most of all, the home.

Regardless, putting resources into vacation rentals can be a reliable asset for the future.

Should you purchase a vacation home?

If you’re still not convinced, here are 3 other reasons why we think you should snap up this trendy opportunity:

  • Mortgage rates are still at record lows
  • Vacation homes are in trend; everyone is getting in!
  • Short-term rental opportunities with vacation homes

A 2019 study of in excess of 7,000 get-away mortgage holders who recorded their property at a vacation rental site VRBO uncovered that around 40% utilized the rental profit as a secondary income.

What is the ideal location for a summer home?

As an investor, you’d expect quick returns from your get-away rental investment; you’ll need to purchase property in an ideal area to purchase a vacation rental – a popular tourist destination. This could mean beaches, amusement parks, lakes, national parks, or even stadiums. All things considered, it’s not generally the popular destinations that attract tourists. Work travel is another significant opportunity—with a regular clientele.

Here’s a list of the top vacation home areas around the U.S., together with its median monthly rental income:

1. Whittier, North Carolina

Median home sale price: $178,000

Median Monthly Rental Revenue: $3,133

2. Killington, Vermont

Median home sale price: $208,828

Median Monthly Rental Revenue: $3,444

 3. Myrtle Beach, South Carolina

Median home sale price: $213,950

Median Monthly Rental Revenue: $2,674

4. Sevierville, Tennessee

Median home sale price: $239,976

Median Monthly Rental Revenue: $5,647

5. Davenport, Florida

Median home sale price: $255,390

Median Monthly Rental Revenue: $2,904

 6. Kissimmee, Florida

Median home sale price: $264,863

Median Monthly Rental Revenue: $3,436

 7. Gulf Shores, Alabama

 Median home sale price: $345,135

 Median Monthly Rental Revenue: $4,206

 8. Fort Bragg, California

Median home sale price: $509,500

Median Monthly Rental Revenue: $4,508 

 9. Palm Springs, California

Median home sale price: $ 539,370

Median Monthly Rental Revenue: $6,054

 10. Waikoloa, Hawaii

Median home sale price: $575,422

Median Monthly Rental Revenue $4,360

 11. Big Sky, Montana

Median home sale price: $585,000

Median Monthly Rental Revenue $6,358

Is Owning A Vacation Rental A Good Investment?

With AM Holiday/Airbnb Investor Program, we say yes! The advantage of purchasing a holiday home is that you get to spend a greater amount of your time rejuvenating. Rather than stressing about paying for a stay at a hotel each time you visit, you’ll bask in the comfort of your own abode.

Vacation properties vary from traditional rentals in that the income a vacation home generates is often subject to the season. A beach house will draw in more interest in the summer, while a place close to a ski resort will thrive in winter.

That being said, though, a vacation rental property is still an excellent method to get passive income.

The tax benefits, passive income, and the option to travel to your very own vacation home are only a portion of the benefits that investing in a rental property can bring you.

Speak to us to find out all about AM Holiday/Airbnb Investor Program specifically for U.S. expats and foreign nationals at [email protected].

www.americamortgages.com 

The New AM Commercial + is just for you!

U.S. Commercial Loan
The New AM Commercial + is just for you!

If you live outside the United States, finding appropriate financing options for U.S. commercial real estate is extremely challenging. Our team of commercial mortgage professionals understands the requirements of Foreign Nationals, U.S. Expat borrowers regardless of where they earn their income or U.S. credit profile. 

Presenting AM Commercial +! A commercial mortgage designed specifically for non-resident real estate investors. 

What’s the difference between a commercial mortgage and a residential mortgage?

A residential mortgage is a type of amortized loan in which the debt is repaid in regular installments over a period of time, normally 30 years. Unlike residential loans, the terms of commercial loans typically range from five years (or less) to 20 years, and the amortization period is often longer than the loan term. This gives the borrower the flexibility to qualify without the commitment for long-term financing. 

A commercial mortgage is intended for borrowers buying or releasing equity for a property that is used for a business. AM Commercial + loan programs have been used for borrowing against assets such as office buildings, industrial facilities, or multi-family properties. Need to expand to the U.S. and need a base to operate from? AM Commercial + has you covered! 

There are various reasons why refinancing with an AM Commercial + mortgage would be beneficial. Regardless of whether it’s an income-based or a pure asset-based mortgage, AM Commercial + has you covered.

Key Loan Highlights:

  • Minimum loan amount is $1,000,000 with no maximum
  • No U.S. credit required
  • Available in all 50 states
  • Interest-Servicing Only (Interest-Only) payments are also available
  • Each loan is bespoke and structured specifically to your requirements

*Indicative only. Rates and terms are subject to change

The quickest method for getting a U.S. Commercial Loan? AM Commercial +

America Mortgages’ quick and easy application is all you need to complete. Our team will tap into our extensive curated network of U.S. lenders to find the best commercial mortgage option for you. Commercial loans for Foreign Nationals and U.S. Expats can be funded quickly depending on the type of qualifications. Unlike commercial bank loans, our process is quick and straightforward. 

Ready to apply or want to find out more?

When you apply through America Mortgages, your mortgage specialist will assist you with gauging the advantages and expenses of your financing choices. Depending on your situation, we normally have more than one option for you to consider. 

America Mortgages has a dedicated U.S. Commercial Lending Team, based globally with a broad network of U.S. lending relationships, including major banks, regional banks, pension funds, and real estate lenders, to name a few. What makes America Mortgages different is that 100% of our clients live abroad. We understand this type of lending better than anyone in our industry. 

Learn all about AM Commercial + when you speak to our team. [email protected]

Stay tuned for next week’s article where we introduce AM Holiday/Airbnb Investor Program for Foreign Nationals & U.S. Expats! 

www.americamortgages.com

Real Estate Investor Toolbox Introducing “AM U.S. Expat Mortgage +”

AM U.S. Expat Mortgage
Real Estate Investor Toolbox Introducing "AM U.S. Expat Mortgage +"

Are you a U.S. citizen living and working abroad? Have you tried to apply for a U.S. mortgage, and the person on the other end of the call thought Singapore was in China or the Netherlands and Holland are two different countries? Sigh. We understand.

America Mortgages ONLY focus is providing U.S. market rate mortgage loans for U.S. Expats and Foreign Nationals with the understanding, knowledge, and experience you require. 100% of our clients are just like you, and no one does it better!

So you’re a U.S. Expat living abroad. Why not qualify just as you would if you walked into a local bank back home in the U.S. with AM U.S. Expat Mortgage +.

I think the easiest way to explain AM U.S. Expat Mortgage + is with actual questions and answers we get from U.S. Expat;

1. I work for a foreign company in Paris, and I don’t receive a W2. America Mortgages does not require a W2, even for a conventional mortgage. As unique as that may be, it’s true.

2. I’ve been living outside of America for a decade and no longer have U.S. credit. This is more common than you may think. We have several enquiries a week where a U.S. citizen has been living abroad for many years and no longer has a U.S. credit footprint. For a “traditional” bank, this is a “no-go.” At America Mortgages, we have not just one but several loans you can qualify for using credit from a foreign country. In short, you do not need U.S. credit even as a U.S. citizen.

3. I haven’t filed my U.S. tax returns in many years. You’re not alone. There are various ways to qualify for a mortgage without using tax returns.

4. I retired and moved out of the U.S. and living in Thailand. I don’t have employment but would like to cash out of my property in the U.S. We see many retired real estate investors that have decided to spend their golden years on the beach in Mexico or the vineyards in Italy. We have several mortgage programs where you can qualify using ONLY the rental income of your property to qualify. No employment required.

5. I’m a U.S. citizen entrepreneur living in Ireland. My income is lumpy and unpredictable. Can I qualify for a U.S. mortgage? America Mortgages has a specific team that specializes in complicated tax returns or HNW borrowers. We understand how to calculate your true mortgage serviceability and present it in a way which banks can understand.

6. I live in Hong Kong. The last time I got a U.S. mortgage, I dealt with a bank in New York. I was up for weeks at 2 am trying to explain why Hong Kong doesn’t have a zip code. What makes you different? Besides knowing Hong Kong doesn’t have a zip code, we have experienced American loan officers living in Hong Kong. ? We have loan officers globally. No longer do you need to work around the bank’s hours. We do that for you. As a matter of fact, you don’t even need to leave your living room in Hong Kong to open and close your mortgage!

7. The U.S. Embassy is closed in Israel, and I can’t travel. How can I sign my mortgage documents? Very good question! Depending on your location, it may be impossible to get an appointment due to Covid restrictions. Not to worry, again, as 100% of our clients are living abroad, unlike U.S. banks or brokers, we understand this before it becomes a problem. We have at least four other ways to close your mortgage without signing at the U.S. Embassy. It’s easier than you may think.

AM U.S. Expat Mortgage + program highlights:

  • No W2 needed
  • No U.S. credit needed
  • Use Foreign Income to qualify
  • LTV 80% for U.S. Expat foreign earned income
  • Purchase, Cash-out, refinance

Documents required:

  • Two years of U.S. Tax returns (if you do not have U.S. tax returns, please let us know)
  • Two months bank statements (foreign okay)
  • One month of pay statements
  • U.S. Passport or driver’s license

America Mortgages has a wide range of mortgage products available for U.S. expats and Foreign Nationals looking to purchase or refinance U.S. real estate. Mortgages can be variable or fixed-rate, with flexibility over the fixed-rate term. In addition to the standard principle and interest U.S. mortgage loans, interest-only mortgages allow for more cash flow.

For more information on this program, please don’t hesitate to get in touch with our team at [email protected]. Stay tuned to our next week’s article, where we introduce AM Commercial +!

www.americamortgages.com

Taking the “Pain” out of High Net Worth mortgages for U.S. Real Estate, without AUM requirements.

Mortgages for U.S. Real Estate

With inexpensive funding and various tax advantages, everyone should take advantage of the benefits of a mortgage when investing in U.S. real estate regardless of the loan size. However, why do the wealthy often find it increasingly difficult to obtain mortgage financing without AUM?

With a portfolio of assets worth millions of dollars, one may assume that securing credit would be a straightforward task for a high net worth (HNW) individual. Unfortunately, the reality can be quite different especially if you’re a foreign national or U.S. Expat.

The unique nature of a HNW’s wealth – their income, investments, and liquidity – puts this group of people at a surprisingly high risk of being turned away by conventional banks unless they are willing to deposit a significant amount of funds for the bank to manage. This is certainly true in the mortgage market, and what’s more, it is an issue that has become more prevalent post-Covid.

American Mortgages has a dedicated HNW Team that focuses on mortgage solutions for foreign nationals and U.S. expatriate clients.

“As a company, our focus is finding solutions that go beyond what Private Banks can offer was the cornerstone of why this has been so successful. Our goal is to be a viable solutions provider and a trusted partner for the private banks and their clients. None of our loans require AUM, hence there are no funds taken away from their current investments or portfolio.”

– Robert Chadwick, co-founder of Global Mortgage Group and America Mortgages.

America Mortgages HNW mortgage loans have a multitude of options when it comes to qualifying for a large mortgage loans regardless of the passport you hold.

1. Asset Depletion – a surprisingly simple way to establish your income. AM Liquid Portfolio uses a unique view on “asset depletion” to qualify HNW clients using their investment portfolio without an encumbrance or pledge of assets. Essentially, all of your assets are entered into a calculation, and a final number is churned out. The final number is then used as the income to qualify. In most cases, as long as the income is sufficient, no other person’s income documentation is required. This makes an often complicated and tedious process simple, transparent, and painless.

2. Debt Service Coverage – When it comes to HNW borrowers, one of the most overlooked and misunderstood loan programs is debt service coverage. HNW borrowers tend to own multiple properties in various asset classes. If the property is used as a rental, then there may not be any requirement to go through the tedious process of providing and verifying personal income. Again, as HNW borrowers tend to have very complicated tax returns, this is a straightforward way to show the borrower’s debt serviceability.

Debt service coverage ratio– or DSCR – is a metric that measures the borrower’s ability to service or repay the annual debt service compared to the amount of net operating income (NOI) the property generates. DSCR indicates whether a property is generating enough income to pay the mortgage. For real estate investors, lenders use the debt service coverage ratio as a measurement to determine the maximum loan amount.

3. Bridge/Asset Based Lending – With Covid still in play, it’s not uncommon for investors to experience a temporary liquidity event. Rather than selling their property, they are using their real estate to release equity. Asset-based lending is an option for both residential (non-owner-occupied) and commercial properties.

Simply stated, HNW bridge loans are used for residential and commercial investment property when more traditional institutional financing sources may not be available. Due to temporary liquidity, many borrowers have capital needs that traditional sources often can’t meet. For example, a borrower purchases property out of bankruptcy or foreclosure and needs to close quickly “same as cash” before long term financing can be arrange.

4. Simplified Income – HNW borrowers often have personal and business tax returns, which are complicated. The complexity of these returns often turns into an administrative nightmare for the borrower when dealing with a mortgage lender. What makes America Mortgages unique is the fact that 100% of our clients are living and working outside of the U.S. We are dealing with HNW clients from Shanghai to Sydney. Simply put, translations and understanding tax codes, deductions, net income, etc., is painful.

America Mortgages HNW Simplified Income documentation is just that. We do not require years or, in some cases, decades of tax returns, P&L, A&L, bank statements, etc. We take an often complicated process and simplify it; 1. If you’re self-employed, we will request a letter from your accountant stating the last two years’ income and current YTD. 2. If you’re employed, then a letter from your employer on company letterhead stating your last two years’ income and current YTD is sufficient. Yes, it’s that simple and painless.

As 100% of our clients are either Foreign Nationals or U.S. Expats, we understand the intricacies and complexities of this type of lending for our borrowers. It’s as simple as that. Our HNW loan programs are structured to meet our client’s requirements. Providing competitive pricing with the assurance that your loan will close is our only focus, and no one does it better.

[email protected]

www.americamortgages.com

Real Estate Investors Rejoice! AMERICA MORTGAGES’ INVESTOR RENTAL. Qualify for a U.S. Mortgage using ONLY the property’s rental income!

America Mortgages’ Investor Rental

“Traditional” banks will require income documents before approving a real estate mortgage. You will need to qualify based on your declared income using tax returns, less your monthly debt servicing. That is fine for a “traditional” investor; however, at America Mortgages, we deal with various real estate investors, and 100% of them live and work outside of the U.S – “traditional” is definitely not our type of clients.

Last week’s launchpad article talked about using your asset portfolio income to qualify for a U.S. mortgage. This week, we introduce our newest mortgage program, The America Mortgages’ Investor Rental Mortgage (AMIRM)!

What is AMIRM?

The America Mortgages’ Investor Rental Mortgage (AMIRM) is a debt service coverage mortgage (DSCR) that uses the borrower’s capacity to service or repay the yearly debt payment to the amount of net operating income (NOI) generated by the property. Lenders use the debt servicing coverage in the underwriting process. By using AMIRM, an investor may qualify for a property purchase or refinance using strictly the rental income. AMIRM does not require the borrower to provide any personal income documents, making the process quick, simple and very straightforward. If the monthly rental income (projected or current) covers the monthly mortgage payment and the incidentals such as tax, insurance, and monthly maintenance fee then the loan “debt services” and should be approved. It’s that simple!

Important takeaways of AMIRM:

  • The debt payment coverage ratio (DSCR) shows how much net cash flow is available to pay the mortgage, typically it is a 1:1 coverage.
  • When examining rental property performance, both real estate investors and lenders utilize the DSCR.
  • Possible to qualify on interest-servicing only.
  • The DSCR might fluctuate yearly, but the approval will be based on the current/project rental income.

The AMIRM determines whether or not a property generates enough revenue to cover the mortgage payments. When a real estate investor applies for a new loan or refinances an existing mortgage, lenders utilize the debt service coverage ratio as one of several factors to determine the maximum loan amount.

The greater the DSCR ratio, the higher the net operating income available to service the debt.

DSCR Formula

  • Debt Service Coverage Ratio = Net Operating Income / Debt Service

For instance, if a rental property generates $6,600 in rent monthly and the monthly mortgage payment is $6,600 (principal and interest), the debt service coverage ratio would be:

  • DSCR = NOI / Debt Service
  • $79,200 Annual NOI / $79,200 Annual Debt Service = 1:1

A DSCR of 1:1 indicates the property makes sufficient income to service the monthly debt.

While there is no industry standard for a substantial debt service coverage ratio in real estate, many lenders and real estate investors will strive for at least a 1:1 coverage. This indicates that, at the very least, the asset covers the minimal amount to service all debt payments.

While the debt service coverage ratio isn’t the only metric assessed when obtaining an AMIRM loan, it is an essential part of the approval process.

Why should you use AMIRM?

Self-employed borrowers often have complicated tax returns or income statements. Instead of a long-drawn-out dissection of your income, you can now simply qualify off the rental income. Period. We won’t ask for tax returns, pay statements, etc. If the property qualifies, the loan is normally approved. If you currently own U.S. property with positive cash flow but are concerned your personal income won’t allow you to release equity or apply for a lower rate, you can now qualify for a loan with your rental income! What better time than now to refinance your property? If these reasons have yet to convince you, here are a few more:

  • Applying for a new loan? Qualify for a higher-yielding property using AMIRM.
  • Investing in Commercial Property? Qualify with AMIRM.
  • Identify profitable rental properties based on rental income. Qualify with AMIRM.

If you’re interested in learning more about AMIRM, speak to one of our professional America Mortgages’ loan officers or email us at [email protected]

www.americamortgages.com

All you need to know about AM’s Liquid Portfolio Mortgages!

AM's Liquid Portfolio Mortgages
All you need to know about AM's Liquid Portfolio Mortgages!

Heard of the term “asset rich but cash poor”? 

It’s a common issue among entrepreneurs “working for equity” or high net worth investors who report low income but have sizeable real estate portfolios.

Traditional banks require pay stubs, employment letters, and credit scores (we have fantastic programs for this as well), but many of us are not in the corporate world and require more flexible programs to suit the needs of this new emerging investor demographic.

This week we “launch” our new Asset Depletion program for investors who own a collection of real estate assets and use the income from the portfolio to qualify as opposed to using your employment income.

Genius! 

Asset depletion, or ‘asset dissipation,’ is a way to qualify for a loan using substantial assets instead of income from employment. There is no AUM (Assets Under Management) or encumbrance of your portfolio at all, rather, it is simply used to qualify for a loan.

With an AM’s Liquid Portfolio Mortgage, we calculate your monthly ‘income’ by dividing your total liquid assets by the duration of most mortgage loans, 360 months.

This way, you can prove your ability to service the debt without regular income from employment – great for entrepreneurs!

You do not have to qualify solely based on your assets to use funds from asset depletion. You may use it as an additional ‘income’ source on top of any regular income you currently receive.

That said, borrowers who use an asset depletion program to qualify do not need to show any other sources of income or employment. If their assets are sufficient to service the mortgage – as well as regular living expenses – they can qualify based solely on that calculation.

What makes this program an excellent option for HNW clients is the mortgage borrower is not required to cash in their portfolio or encumber in any manner. The assets are only used to demonstrate an ability to make the mortgage payments.

  • Checking or savings accounts (bank must have a U.S. presence)
  • Money market accounts (bank must have a U.S. presence)
  • Certificates of Deposit (CD) (bank must have a U.S. presence)
  • Investment accounts such as stocks, bonds, and mutual funds (bank must have a U.S. presence)
  • Retirement accounts (bank must have a U.S. presence)

Asset depletion mortgage example:

Take for instance, a 59-year-old mortgage borrower has $3,500,000 in liquid assets, and another $300,000 in retirement or investment accounts.

This is how their monthly income will be calculated:

  • Retirement account – 70% of $300,000 = $210,000
  • Total assets counted – $3,500,000 + $210,000 = $3,710,000
  • Monthly income – $3,710,000 / 360= $10,305

In this case, America Mortgages will calculate the borrower’s maximum mortgage payment based on a monthly ‘income’ of $10,305.

Should you use an AM’s Liquid Portfolio Mortgage?

If you are wondering whether you are a good candidate for an asset depletion program, try answering these questions:

  • Are you retired with little to no fixed income?
  • Are you self-employed but with little to no “provable” income?
  • Are your assets held in a bank with a U.S. branch or presence?
  • Do you have Trust assets with completely unrestricted use?

If you answered YES to any of these questions, an asset depletion loan is an ideal solution for you.

For more information on AM’s Liquid Portfolio Mortgage, get in touch with us via email at [email protected]

www.americamortgages.com

AM Bridge Loans – The Swiss Army Knife of Financing Solutions

AM Bridge Loans - Financing Solutions

In this edition of the Launchpad Series – we introduce the most widely-used tool for property investors at the moment, A Bridge Loan – often considered the “Swiss Army Knife” of financing solutions.

What are bridge loans?

A bridge loan is a type of asset-based, short-term loan, typically taken out for a few months to a couple of years pending the arrangement of longer-term financing or an exit, such as the sale. It is used to ‘bridge’ the gap during times when financing is critical but not readily available.

Bridge loans let homebuyers take out a mortgage against their current home to make the down payment on their new home. A bridge loan may also be a suitable choice for you if you want to purchase a new home before your current house has sold. This financing structure may also be beneficial to businesses that need to cover operating costs while waiting for long-term funding.

Introducing AM Bridge!

AM Bridge – A liquidity tool once reserved for the wealthy is now available for everyone!

Real Estate investors are often asset rich but cash poor. On paper, their net worth may be significant, but their wealth can be tied up in real estate or other businesses. Accessing such funds might mean sacrificing a stake in their business or surrendering some influence over its future – neither of which may be appealing.

It is not always the case that a real estate investor has a few hundred thousand dollars just sitting in the bank readily available to fund a property immediately. Even if they do, they may not wish to tie all their cash upon one property. In today’s market, the property that investors want could be in high demand and needs to be acted on quickly; these could be higher-yielding investments that need immediate funding. Having access to large sums of cash quickly and easily is what HNW investors have had at their disposal for decades. America Mortgages has now made this powerful liquidity tool available to everyone.

How is it used?

Here are some popular uses of “Bridging” Loans:

– Filling the contingency sale of an old property before you can purchase the new property. You can take a Bridge Loan and use your old house as collateral for the loan. The proceeds can then be used to pay a down payment for the new house and cover the costs of the loan. In most cases, the lender will offer a bridge loan worth approximately 80% of both houses’ combined value.

– To purchase based on the asset value of the new build so the borrower can meet the final payment before delivery.

– For the initial purchase until entitlement or for refinancing after a cash purchase until entitlement.

– To purchase greenfield land to begin commercial development. Once certain stages of development have been completed, it’s easier to obtain traditional bank financing.

– Cash-out Bridge Loan for short term personal or business use.

The Market

The pandemic has created a boom in the bridge loan market in several ways.

Firstly, it has created an economic environment filled with uncertainties, and as a result, more businesses need capital as soon as possible and can’t afford to wait for a traditional loan. They will thus turn to bridge loans.

Secondly, with the threat of the Delta variant and the increased number of companies delaying return-to-office plans, many are looking for new homes in more spacious areas. However, with how hot the property market is – data from Zillow show that houses are currently on the market for an average of 6 days only. Hence, it is critical for buyers to purchase their house as soon as possible to avoid disappointment. But, they may not have sold their old house yet and do not have enough money for this new house, which is why a bridge loan would be extra helpful.

Thirdly, there has been an accelerated trend of people migrating to Sunbelt cities due to greater job opportunities. This has driven up rents in these cities – the Phoenix area had the biggest rent increase in July, up 17% from a year ago. Due to the profitability of the rental trade, more developers and businesses are looking to acquire multifamily rental units. Short-term commercial bridge loans will provide them with the needed flexibility to take on such assets while they look for permanent financing options. This will help businesses get their assets to perform at maximum potential.

The Problem

When an American Mortgage bridge loan specialist gets a request for short term financing, they ask three things;

1. Where is the asset?

2. What is the value and the outstanding debt?

3. What situation are you trying to solve?

Number 3 is the most crucial and often the hardest to rationalize. Even the wealthiest people have used short-term bridge financing to access liquidity even when “conventional” options are still possible. This is mainly due to the time and effort required to obtain long-term financing. Cash-flow, credit issues, or asset use may prohibit a “conventional” bank loan. When time is a factor in a transaction, it is important to see the opportunity cost in not closing quickly or obtaining a simplified equity release.

Our Solution

Typically, the timeline for traditional bank loan processing from origination to closing is longer than most borrowers prefer for a time-sensitive funding solution or if the project lacks sufficient stable cash flow. The short-term nature of bridge loans generally allows alternative lenders to provide an approval decision and funding with greater speed than a more traditional lender. At America Mortgages, we’ve funded loans in as little as a couple of days since the initial contact.

To allow for such a speedy funding process, the sponsor’s expected property value and experience to execute the business plan are the determining factors in the decision-making process. For this reason, the loans are commonly non-recourse, which is another benefit to the borrower.

Bridge loans are often the preferred funding option for uses such as:

– Highly structured transactions

– Discounted note payoffs

– Lease-up stabilization

– Redevelopment of existing properties

– Repositioning of a tired or underperforming asset

– Property acquisitions with a short closing timeline (or challenges on the property or sponsor)

– Recapitalizations/Debt Restructuring or Partner Buyouts

– Other uses on a case-by-case basis depending on borrowers specific funding needs, where traditional funding sources like banks or insurance companies will have a hard time approving such loan requests.

– Lending to foreign nationals with a “same-as-cash” basis

Short-Term vs Long-Term

Unlike short-term financing, longer-term financing is susceptible to the regulatory hurdles associated with securing long-term fixed-rate mortgages. This is why bridge loans are often provided by unregulated lenders, family offices, or in some cases, HNW investors. In addition to the regulatory scrutiny, banks or insurance companies require, the sponsor’s credit history and financial strength also take a front seat in the credit decision for long-term loans. Keep in mind, America Mortgages will never work with “lend-to-own” investors and lenders. Our goal is to find you a solution that works with your situation with a long-term solution and exit from the bridge loan.

While bridge loans are the preferred option for many specific financing needs, several downsides come with short-term financing that is meant to fund projects. When assets need work, lenders will consider these higher risks and, therefore, charge higher interest rates.

Additionally, bridge lenders generally do not exceed 70%-85% of the property cost basis to limit their financial exposure. However, this leverage is higher than traditional lenders would advance for the same project. This is because bridge lenders rely on the sponsor to fix the issues, which made the property ineligible for long-term financing in the first place. This enables the asset to become stabilized and ready for exit through a sale or by refinancing the property through traditional channels.

There’s no denying a bridge loan can be convenient if you’re prepared for a change but don’t want to risk a contingent offer. A bridge loan can also be an excellent way to finance a new house if you need to relocate for a job. For more information on AM Bridge, please connect with us via email at [email protected]

www.americamortgages.com