Seasoned Funds and Paper Trails

We are well into the most popular season for home purchases. The good news is that qualifying for a mortgage has gotten easier but that is not the same as being “easy”. There are still requirements that you must meet to obtain a loan and one of those is having seasoned funds and paper trails documenting your down payment.

Seasoned funds and paper trails may have been off the radar of many mortgage underwriters during the heyday of undocumented mortgage loans but seasoned funds and paper trails are being verified today. More than likely, a lack of seasoned funds and paper trails were a contributing factor in many of the loans that ended in foreclosure.

Understanding Seasoned Funds and Paper Trails

Seasoned funds are money that has been in your bank account for at least 60 days. The reasoning is that if the money is from a loan that you recently took out, within 60 days that loan will show up on your credit rating account. It can then be applied to the debt to income analysis that mortgage underwriters perform to determine if you qualify for a loan. Something else you want to consider is if anyone other than the names of the people applying for the mortgage are on the bank account the down payment money is coming from. If other people’s names are on the account, the mortgage company probably won’t consider the funds exclusively yours to be used for the down payment.

Seasoned funds and paper trails go together. Because saving for a large down payment can be tough, lenders want to know where the money came from – that’s the paper trail. Traditional places the money comes from are tax refunds, gifts from family members, or taking cash out of a retirement account. Often, it’s a combination of all of these and also you being diligent about saving money from your paycheck. You create the paper trail by keeping copies of the checks that you deposit into your down payment account. You’ll find it difficult or impossible to get the IRS to send you a copy of the refund check after you deposit it. You’ll create a stronger paper trail if you take a copy of it at about the same time you deposit it in your account. You can resort to submitting a copy of your income tax form but that isn’t as strong of paper trail.

It may be easier to go back to family and ask for a copy of the check they wrote to create a paper trail. When you need seasoned funds and paper trails for a down payment, you’re best off when you set up a separate account for your down payment. Then you can show regular deposits that correspond to your paychecks being made into the down payment account.

When It’s Not Seasoned Funds and Paper Trails

Cash deposits made shortly before applying for a loan can be problematic. Maybe part of your down payment strategy is taking a second job for a while. If the work pays in cash and is under the table, it’s not considered documented income and most lenders won’t count it towards your down payment. Same thing if you sell a major asset such as a motor home for cash. You might get away showing a bill of sale or a copy of the title being transferred but it creates a weaker paper trail than a check being deposited along with the title being transferred.

Sources of funds that often don’t need to be seasoned include:

  • Regular payroll deductions going into your savings account. The last few deposits don’t need to be seasoned when the lender can see a long pattern of regular deposits.
  • Retirement funds when you can show they came from an account in your name. Often you don’t want to season these funds because IRS rules allow first time buyers to use these funds, penalty free, if the funds are used to purchase a home within 120 days of making the withdrawal.
  • Gifted funds when you can show a proper paper trail. It’s not your paper trail the lender wants to see. It’s the paper trail for the account the gifted funds came from. The lender wants to be sure that the gifter didn’t take out a loan in your behalf that they are expecting you to repay. The lender wants to see the funds were seasoned in the gifter’s account.

The bottom line is that there is more to it than only coming up with the down payment. You also must be able to show seasoned funds and paper trails.

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

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Disclosures and Tenant Agreements

Disclosures and tenant agreements differ greatly from state to state. This article is not a comprehensive list of everything that landlords must disclose. Rather, it is only an indication of what, as a landlord, your disclosure and tenant agreements need to contain. Or as a tenant, what you landlord should have provided to you.

In most, if not all, states there are landlord / tenant laws requiring a signed lease. This is especially true for residential properties. Typically, these require a description of the property and the amount of rent being charged. The point is to inform the tenant what they are getting into and for the landlord and tenant to have a formal agreement. Disclosures and tenant agreements are intended to protect tenants from unscrupulous landlords and also to establish conditions for when landlords can have unwanted tenants evicted.

Disclosures and Tenant Agreements Protect Tenants From Harm

Some disclosure requirements are less obvious than rental details. At the federal levels are requirements to disclose some toxic substances and certain types of criminals.

If the leased premises were constructed before 1978, federal law requires the landlord to disclose the possibility that there is lead based paint or lead based paint hazards in the apartment or house. If known, the landlord must disclose the location of the lead based paint or the lead hazard. The landlord also must disclose the condition of the painted surfaces. Additionally, the landlord must provide the tenant with a pamphlet with instructions about identifying and controlling lead based paint hazards.

The tenant is allowed 10 days to conduct a risk assessment and inspect the premises. Landlords not complying with the federal law are subject to civil and even criminal charges. They can also be held liable to the tenants for up to three times the amount of damages a tenant suffers as the result of a lead based paint hazard.

In some states, landlords are required to notify tenants in writing when the premise is known to be contaminated with mold. This must be done whether the mold is visible or invisible when the landlord knows or has reasonable cause to know mold is present.

State Level Disclosures and Tenant Agreements

Although based on federal laws, the specifics are written at the state level that require individuals convicted of sex crimes against children to register and that information is made available to the public. Typically, this is done on websites managed at the local, state, and federal levels.

At a minimum, most states require landlords to provide a notice in the lease about how the tenant can access registered sex offender information. Some states require the landlord to inform tenants about any sex offenders known to be living in the area. This is a little more of a gray area because the landlord has to have actual knowledge.

In some states, the disclosures and tenant agreements must also notify the tenant before pest control is performed. The notice is often prepared by the pest control company to include the type of pest to be controlled, the pesticide that will be used, and the active ingredients of the pesticide.

Some state disclosures and tenant agreements require landlords to disclose when a previous occupant died on the premise. Especially, if it was a violent death. This requirement often comes with a time limit such as within the past five years or less.

Most states require tenants be notified of the names and addresses of all owners, agents, and property managers that are authorized to act on the behalf of the owner. This can be for collecting rents, making requests for repairs, giving notice of the lease termination, etc.

Disclosures and tenant agreements are only one of the challenges of being a landlord. Especially, if it is your second job. That’s a big reason I prefer and teach my students about the benefits of real estate investing using low cost / low risk lease options.

Real estate investing does not need to be about owning as much property as possible. It should be about controlling as much property as possible for the least amount of money and risk. That makes the Sandwich Lease Option the most attractive investing method I know of. You can take control of the property for a couple of hundred dollars. You then put an option buyer in place that takes on most of the homeownership responsibilities until they make the purchase and take on full ownership responsibility. The Sandwich Lease Option let’s you make a big profit for a small investment. This is the method that I highly encourage my students to use.

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

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What did you think of this article? Please leave a comment below.

 

How to rehab or flip a house

Today, the residential real estate market is quickly appreciating in value in most metropolitan markets. That makes it the right time to learn how to rehab or flip a house. As any experienced flipper will tell you, you make your profit when you purchase the house. You won’t make the big money investing in just any house by making improvements and trying to sell for a big profit. For instance, investing in the gang war neighborhood is not how to rehab or flip a house.

How to Rehab or Flip a House Begins by Finding the Right Neighborhood

Because you want to maximize your profit, the right neighborhood for rehabbing and flipping is in upper middle income homes. These are neighborhoods for second or third time buyers. Places where more prosperous buyers are buying up. How to rehab or flip a house isn’t for top income neighborhoods because these people want to customize their own homes. They aren’t going to be very receptive to your remodeling choices. Neighborhoods for first time buyers aren’t a good choice either because these buyers are too price sensitive.  flying dollars

How to rehab and flip a house doesn’t have a specific price range because home prices vary greatly across the country. The neighborhood is the consistent factor from city to city and town to town.

Of course, if you want to know how to rehab or flip a house in upper middle income neighborhoods you need a clear understanding of what defines those neighborhoods. What you’re typically looking for are neighborhoods where at least one parent has a college degree and works as a professional. The household income should exceed $75,000 per year. Most of these are in the suburbs, away from inner city crime and poverty. These people enjoy more luxuries than most but remain on a budget. The upper middle class often have two or more cars along with a boat, motorhome, or other spendy recreational vehicles. These people are also able to take annual vacations to foreign countries or Caribbean cruises.

How to Rehab or Flip a House Becomes Profitable When You Make Mom Happy

What you want to strongly consider when deciding how to rehab or flip a house is what the mother in the family finds important. Sure, the father is going to want a workshop in the garage. However, the most important renovations are made to the kitchen, bathrooms, and master bedroom. Those are the domains of the woman of the home. When you make her happy, you’ll get your full asking price.

Here’s how you determine the asking price. It all begins when you earn your profit with the purchase price. First, find a run down and neglected property in the right neighborhood. Don’t pay more than 70% of the after repair value (ARV). Let’s assume you’re going to need to spend $30,000 on the rehab. And the house will retail for $150,000 after you rehab. That means your purchase cost shouldn’t be more than $75,000. Here’s the math equation.

($150,000 ARV X 0.70) – $30,000 rehab = $75,000 purchase price.

That cost needs to include all of your closing costs. Some savy investors use 65% of the ARV.

Your first reaction might be that houses at this price don’t exist. But they do. Retail buyers in the upper middle income range are only looking for ready to move in homes. Real estate agents don’t even want to show these run down and neglected houses to retail buyers. That’s the secret for how to rehab or flip a house. You buy the rundown house in the right neighborhood, fix it up, and sell for the full retail price.

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

How to be a landlord

You need to know the landlord/tenant laws when deciding how to become a landlord. Federal housing law prohibits discrimination based on race, color, national origin, religion, sex, disability, and family status – such as whether children will live in the home. But it doesn’t stop there. Each state and even down to the neighborhood level have landlord/tenant laws and regulations.

One way of learning your local laws is having a real estate attorney draw up a contract covering federal and local laws. Once you have the contract and new tenants, it’s a good idea to have every adult that will be living in the house sign the contract. It’s also a good idea to go over the contract line by line with each adult so there is no confusion about what it means. How to become a landlord is a little more complicated than buying a house and slapping a fresh coat of paint on it.

Getting Dirty Can be Part of How to Become a Landlord

You may want to treat being a landlord as a part time job. If you have the right skills, you can buy a fixer house and make the repairs yourself. You can purchase the house for less and save the cost of contractors. However, you’re still going to have the expense for materials and you won’t be collecting rent until after the repairs are complete. How to become a landlord can involve some serious work – at least in the beginning.

But remember, the do-it-yourself approach requires capital, sweat, and long hours. Some repair work will require permits and inspections that also cost money and have to be completed before you can rent the house. But in the end, this is how to become a landlord to make the most on your investment.

Turn Key Investing is Another Way of How to Become a Landlord

This is another way to become an investor and there are good opportunities out there that do offer a decent return on investment. There are professional businesses that buy cheap homes, fix them up, put tenants in place, and sell the homes to investors. Often, a property management company is also put in place to keep the property rented and arrange for repairs when needed.

One advantage to being a turn key landlord is that you don’t need to live in the same community that your rental house is in. You can live in Denver and invest in Detroit. This enables you to invest in communities where purchase costs are low and rents are high. How to become a landlord is all about minimizing costs and maximizing income.

How to become a landlord has several options but there are real estate investment options other than learning how to become a landlord.

Lease Options are Another Investing Alternative

When you are the landlord, you are fully responsible for all of the repairs and maintenance. The turn key method is a good alternative to helping you manage this but ultimately you are still responsible. On the other hand, the lease option puts a pseudo buyer in place. These people pay you an option fee to purchase the home at a later date. Something important to note when comparing how to become a landlord versus the lease option method is that the pseudo buyer becomes responsible for most repairs and maintenance.

Real estate investing does not need to be about owning as much property as possible. It should be about controlling as much property as possible for the least amount of money and risk. That makes the Sandwich Lease Option the most attractive investing method I know of. You can take control of the property for a couple of hundred dollars. You then put an option buyer in place that takes on most of the homeownership responsibilities until they make the purchase and take on full ownership responsibility. The Sandwich Lease Option let’s you make a big profit for a small investment. This is the method that I highly encourage my students to use.

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

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