One of the most influential names in real estate is once again showing us how it’s done.
Influencer, motivational speaker, bestselling author, and prominent real estate investor Grant Cardone is selling his beachfront mansion in Florida for $42 million.
But throwing cash at the seasoned investor won’t do the trick.
He wants 646 Bitcoin for his one-of-a-kind house in Golden Beach, Florida — which was formerly home to fashion designer Tommy Hilfiger, who sold it to the billionaire businessman back in 2021 for $24 million.
Cardone, who founded Cardone Capital, a real estate investment firm that manages a portfolio of billions in assets, listed his Florida residence on PropyKeys, a leading blockchain-based platform for real estate transactions.
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The offering: what 646 Bitcoin will buy you in Florida
The Golden Beach residence sits on a 0.63-acre oceanfront lot, with its own private beachfront access and 100 feet of pristine shoreline.
Built in 2007, it features over 13,000 square feet of luxury interior space, with 7 bedrooms and 8 baths. Also on the grounds of the property, there is a heated saltwater pool and a private beach cabana.
The house has sophisticated interiors by Martyn Lawrence Bullard
Celebrity interior designer Martyn Lawrence Bullard — who was also one of the leading stars of Bravo’s short-lived Million Dollar Decorators — designed the interiors of the $42 million abode.
Bullard, who also decked out the homes of other celebs like Eva Mendes, Ellen Pompeo Kylie Jenner, Khloe and Kourtney Kardashian, Cher, Sharon and Ozzy Osbourne, to name just a few, is known for his broad-ranging, sophisticated yet eclectic style.
The interiors were designed to accommodate an extensive art collection
Bullard is the one who fitted the now-famous residence with vibrant spaces filled with patterned ceilings, walls and floors, interesting sculptures, and bright carpeting — meant to highlight the previous owners’ extensive pop art collection.
Previously home to fashion mogul Tommy Hilfiger
Cardone bought the house from fashion designer Tommy Hilfiger and his wife, Dee Ocleppo, who had been trying for years to land a buyer for their Golden Beach house. They had listed it for as much as $27.5 million, before the 10x Rule author took it off their hands in 2021 for $24 million.
Bold interiors, artsy decor & sophisticated touches hint at its famous past owner
While under Hilfiger’s ownership, the Florida mansion graced the cover of many interior design magazines, and was heavily featured in the media — Architectural Digest included.
And it’s easy to see why. Even after the Cardones toned down the interiors slightly with modern upgrades, the house still features dramatic interior touches that include a black marble staircase, chevron-patterned marble floors in the dining room, and reflective ceilings, to name just a few.
It underwent extensive renovations in the past three years
Grant and Elena Cardone invested heavily in updating the 2007-built mansion.
Since they purchased it back in 2021, the couple has meticulously renovated the property, replacing some of the finishes (like the patterned walls and floors) designer Martyn Lawrence Bullard added for the Hilfigers, and replacing them with designer choices that can appeal to a wider demographic of potential buyers.
The outdoor areas have been spruced up the most
Most recently, in 2023, the two have been hard at work updating the property’s outdoor areas, including renovating the pool deck and bar/grill area and upgrading the landscaping. They’ve also added new ocean-side windows and doors.
There’s also a charming beach cabana
Impressive as the main house might be, it’s not the only structure on the property. There’s also a charming beach cabana that neighbors the heated saltwater pool.
See also: Larry Ellison’s house, the $173M Gemini Mansion in Florida
Cardone is embracing blockchain technology
“We are all in on blockchain revolutionizing real estate! We are leveraging top-tier technology to make transactions seamless and unstoppable,” Cardone said in a statement, providing insight into his decision to list the property via blockchain, as opposed to more traditional platforms.
“This is the future of real estate, and we’re leading the charge,” the Sell or Be Sold author stated.
The platform he chose to list his property
As one of the most prominent figures in real estate, Cardone could have partnered with practically any platform. But he went with Propy, a Silicon Valley-based proptech company that’s happy to partner with the seasoned investor:
“It is a privilege to us to be the platform of choice for high-end property sales that we offer to our community of HNWI investors and crypto buyers,” said Natalia Karayaneva, CEO of Propy. “The inclusion of Cardone’s listing in BTC and USD on Propy, minted with our latest privacy deed feature, highlights our leadership in the intersection of real estate and crypto.”
Also publicly listed with his wife as the listing agent
The Golden Beach house is also up on the MLS, with Zillow and other property websites showing the billionaire’s wife as the agent attached to the listing.
An eXp Realty agent, Elena Cardone got her real estate license just a few years ago, per her LinkedIn profile, but has already been making a splash on the Miami real estate scene. An older LinkedIn post shows that Elena and her team had over $840 million in sales volume in 2022 alone.
Rumor has it he’s also selling his Malibu Beach abode
Over on the other Coast, Cardone owns a $40 million “Castle on the Sand” in Malibu, California a 6-bedroom, 10-bathroom beachfront residence that might have a similar fate to his Florida abode.
The Undercover Billionaire star paid a whopping $40 million for the house back in 2022, which sits in the pricey Carbon Beach area of Malibu, also known as Billionaire’s Beach.
He reportedly wants $65M for that one — preferably in Bitcoin
Several news outlets, including the New York Post, have reported that Cardone has been quietly looking to offload his Carbon Beach house for an even more ambitious asking: $65 million, also accepting payments in Bitcoin.
That mansion isn’t being floated on the open market though, and is likely being offered as a pocket listing that only vetted buyers can access.
Who is Grant Cardone?
One of the biggest influencers, authors, and speakers in the real estate space, Grant Cardone has made a name for himself as a serial entrepreneur and financial guru. He’s the founder of Cardone Enterprises, Cardone Capital, Cardone Training Technologies, The 10X Movement, and The 10X Growth Conference — one of the world’s largest business & entrepreneur conferences.
He also famously authored several best-selling books, including The 10X Rule, Be Obsessed Or Be Average, Sell Or Be Sold, and Millionaire Booklet, as well as several bestselling business programs.
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I have 2 laundromats; a very small one in a small town and a medium-sized one in a city of about 100,000 people. I love the laundromats and they are a ton of fun but they come with challenges as well. My medium-sized laundromat makes money but the small one still struggles after a year of improving it.
I think the small laundromat has potential but the larger the laundromat, the more chances for success you will have. I am a real estate investor and broker by trade and I have learned a ton about small businesses the last few years. I also own a liquor store and a small grocery store in a small town. Laundromats are very different from anything else I have ever done. Here is what I have learned.
Table of Contents
What are the biggest challenges of owning a laundromat?
Before I bought my first laundromat, I thought they were a pretty straightforward business. You buy some washers and dryers, people come and use them, and you collect the money. There is much more to the business than buying some machines and hoping people come to use them. Here are some of the biggest lessons I learned:
Washers and dryers in laundromats are very expensive. If you want the big machines that people come to laundromats for, expect to pay close to $10,000 for one machine! The smaller the machines, the less expensive but people won’t use those nearly as much. The good news is you can charge much more for the big machines since they can hold 4, 5, 6, or even more loads of laundry.
It is very hard to find people who can fix commercial washers and dryers. Appliance repair is a lost art and many of the companies that still do it, limit themselves to warranty work for specific companies. There are also a lot of people who claim they can fix these machines and have no idea what they are doing. Ask me how I know that one! The closet repair people to me are over an hour away. If you own a laundromat you must be able to do some of the simple repairs yourself or have someone on your team who can do them or you will go bankrupt because machines break all the time.
Laundromats get dirty as soon as you clean them. I have hired cleaners and cleaned myself and it doesn’t matter how often you clean, the next time someone comes in to do laundry it will be dirty again. People do not like a dirty laundromat. One tip is to get a floor that is as close to dirt color as possible!
Laundromats are not passive. They take constant monitoring and visits. It is fun collecting quarters but you will also get calls or texts about machines not working or taking money or people acting funny. If you want to keep people coming, you have to respond to the complaints and do your best to remedy them. You will be giving out a lot of small refunds.
Laundromats attract crime. My laundromats are not attended and while I have cameras there are still shenanigans going on all the time. Make sure you are not letting people sleep in them, abuse the bathrooms if you have them, or camp out outside.
These points may turn off a lot of people but I still love my laundromats. It is so much fun collecting quarters, watching sales, and trying to improve the business. Below is one of the videos of me collecting quarters.
Do laundromats make money?
The laundromat in the video above has been open for about 7 months and brings in around $7,000 a month with $4,500 in expenses a month. This does not count my own time collecting quarters and managing things. I was very lucky that I did not have to buy this laundromat. I took over the lease with most of the equipment still there. I had to add some equipment that I bought used from another laundromat and fix some of the machines already there. I probably spent $40,000 on machines, a little remodeling, and repairs. I lease this space but I purchased the real estate for my small laundromat. It does not make nearly as much ($1,200 to $2,000 a month) but that real estate came with an apartment, shop, and car wash as well.
Laundromats can make money and large laundromats can do very well but it is tough to make it with smaller spaces just because you are so limited in the equipment you can use and the amount of customers who can use the mat at once.
What kind of machines do you need?
The biggest obstacle with my small laundromat is I have small washers and dryers. The small dryers are not a big deal but the washers are. Many people use laundromats because they have tons of laundry or large items they want to wash. A lot of people who have washers and dryers still use laundromats. You may even have people using your laundromat who have wash-and-fold businesses where they pick up someone’s laundry and do it for them. A successful laundromat almost always has large washers.
With large washers come more expensive machines, more power (3 phase in many cases), more water (upgraded water heaters), and more support (concrete floors). My small laundromat has wood floors and 2 phase power which makes it very tough to add large machines. If you are choosing a place for a new laundromat or taking over an existing one make sure you have the mechanicals needed for big machines. Most of my washers and dryers are Speed Queens but there are many good brands out there.
Below is a video of the small laundromat:
Should you have an attended or unattended laundromat?
Most large laundromats are attended and offer wash and fold services to pay for those attendants. Mine do not have this service but I may offer it at some point. I am still able to make money without the wash and fold but it would most likely make me more if I decide to go that route. A wash and fold service does laundry for customers. Some laundromats even pick up and deliver loads. One nice thing about having wash and fold and attended laundromats is there is usually someone there who can help customers and clean up if things get messy.
If you have full-time staff at the laundromat that is a large expense and you will need to do quite a bit of wash and fold to pay for it. If you have a smaller laundromat you want to make sure you are not taking up machines with your wash and fold business that regular customers want to use. Of course, the biggest challenge is to find the right employees you can trust and who will work hard. I have that challenge in my real estate businesses as well.
Bonus income from laundromats
While my laundromats do okay I get a lot of bonus income from them. People love to watch quarters being collected. I have a pretty large social media following and a decent-sized YouTube channel (110K) and those all make me money. On bad months I make at least $1k from my videos and on good months close to $5k. If you like social media and making videos, the laundromats are perfect for content creators.
Conclusion
It would be impossible to give you all the ins and outs of the laundromat business in one article, well maybe if the article was 50 pages long… but I hope this helps give you an idea of what the laundromat business is like. My YouTube channel has weekly videos on both mats going over the pros and cons. I also am happy to answer questions here but I do check my YouTube comments more often.
If you’re in the market for a new house, you may be wondering how you’re going to afford the mortgage. After all, mortgage rates are near 7%.
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That’s why some homebuyers are getting creative to pay lower mortgage rates.
Consider an Assumable Mortgage
One way you may be able to pay a lower rate is to get a home with an assumable mortgage. That’s where the buyers take over the existing mortgage that the seller already has in place instead of going out and getting their own loan. With this route, you might be able to find a mortgage with a much lower rate than the current one.
Many loans backed by the Federal Housing Administration, Department of Veterans Affairs and Department of Agriculture are eligible for assumption. However, most conventional loans, the most common type by far, are not. That’s because of a “due on sale” clause requiring the seller to pay the loan in full when they sell the property.
Check Out: 8 Places Where Houses Are Suddenly Major Bargains
Know the Risks
Keep in mind, the borrower needs to cover all the equity already built up in the house. For example, if you buy a $350,000 home and assume the seller’s mortgage with a balance of $200,000, you must pay the remaining $150,000 in cash or additional loans. That means an assumable mortgage may not be the best bet if the current owner has paid off a large stake of the house already, as NBC News reported.
In addition, there are disadvantages and risks associated with assumable mortgages. You might not be approved for the loan, for one. And you’ll need to stick to the original terms of the loan, which means no opportunity to negotiate.
Check Out Other Options
If an assumable mortgage isn’t right for you, there are other ways to qualify for a lower mortgage rate. Paying more money down, increasing your credit score and taking out a shorter-term loan — 15 or 20 years instead of 30 — all can help you get a better mortgage rate.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Creative Ways Homebuyers Are Paying Lower Mortgage Rates in 2024
Anaheim, California-based nonbank Change Lending on Tuesday announced the hiring of Madison Simm as its new chief financial officer.
Simm has more than 25 years of experience in financial services and has held multiple executive roles at banks and mortgage companies. He comes to Change Lending after a stint as president of real estate at Texas Capital Bank. His prior experience includes a “proven track record of success in residential mortgage lending, servicing, and capital markets,“ the firm stated in an announcement.
“Madison’s expertise in developing nationally recognized financial services businesses and managing sound growth will be invaluable to Change Lending as the company continues to expand and innovate,” Steven Sugarman, founder of The Change Company, said in a statement.
“I am thrilled to join Change Lending as CFO,” Simm said. “This is an exciting time for the company, and I am eager to contribute to its growth and success.”
The firm noted that Kari Hallowell, who had been serving as CFO, will assume the role of deputy chief financial officer upon Simm’s arrival.
In March, Change Lending announced its membership with the Federal Home Loan Bank of San Francisco. Change was required to purchase $7 million in capital stock in the bank.
Change has been a Community Development Financial Institution (CDFI) under the U.S. Department of the Treasury since 2018. Its offerings include small-business loans and lines of credit, real estate investor loans, rehab loans and renovation loans.
Lending’s services include small-business loans and lines of credit, investor real estate loans, rehab loans and renovation loans.
A bank statement loan allows you to qualify for a mortgage using bank statements rather than tax returns. It’s most often used by self-employed borrowers.
Not all mortgage lenders offer bank statement loans. You might need to work with a mortgage broker to find one.
If you qualify for a conventional or government-backed loan, it’s likely a better option.
If you’re self-employed or a gig worker looking to buy a home, a bank statement loan might help. With this loan, you use bank statements rather than tax returns for mortgage preapproval.
What is a bank statement loan?
A bank statement loan allows you to apply for a mortgage without having to prove your income via pay stubs, W-2s or tax returns. Instead, lenders use recent bank statements to assess your earnings.
This loan type can be helpful if your income is inconsistent, your employer doesn’t issue traditional paychecks or you claim significant tax deductions. This might apply if you’re self-employed or a small business owner, doctor, lawyer, real estate agent or investor.
“One example would be if your tax returns show that you made $100,000 last year when you really made $200,000 because you were able to deduct an expensive printing machine you bought,” says Brad Seibel, president of Sage Home Loans Corp. “Your bank statements, rather than your tax returns, would adequately show your income.” (Editor’s note: Sage Mortgage is owned by Bankrate parent company Red Ventures.)
How non-QM loans relate to bank statement loans
Bank statement loans are considered riskier than typical mortgages, and many banks and mortgage lenders don’t offer them. That’s because they’re non-qualified mortgages (non-QM), meaning they aren’t backed by Fannie Mae and Freddie Mac, so there’s less protection for lenders and borrowers.
Non-QM mortgages include any loan that doesn’t meet the conforming standards set by Fannie and Freddie. These standards cover characteristics like the maximum loan amount and debt-to-income (DTI) ratio.
Non-QM loans allow more borrowers to qualify for a loan. However, they tend to have higher interest rates, meaning they cost more. They also lack some of the consumer protections that conforming loans have. For example, a non-QM loan could negatively amortize or include a balloon payment.
How do bank statement loans work?
When you apply for a bank statement loan, you’ll provide the lender with bank statements as far back as two years. This includes statements for personal and business accounts. You’ll also need to disclose other information about your business and expenses, if applicable.
“The type of business, the number of employees and whether the business has a physical location are some of the questions that bank statement lenders will want to know to decide the expense factor,” says Darrin Seppinni, president of HomeLife Mortgage, a California-based lender specializing in bank statement loans.
The lender then analyzes your income to determine your net income. From there, if you meet the lender’s other requirements, you’ll be preapproved for a certain loan amount.
Bank statement loan example
Let’s assume you’re self-employed, have a credit score of 740 and want to purchase a home. Your income fluctuates month to month, averaging out to $6,875. You also put $800 a month toward other debt payments. If the lender allows a DTI ratio of up to 45 percent, you could potentially qualify for a mortgage with a monthly payment of about $2,295. The exact number will vary widely based on current mortgage interest rates, your down payment and other factors.
Bank statement loan vs. traditional mortgage
Traditional mortgages, such as 30-year fixed-rate conventional or FHA loans, are more common than bank statement loans. They are geared toward borrowers with consistent, verifiable income documented on pay stubs, W-2s and tax returns. You can get approved for a conventional loan with a down payment as low as 3 percent and a minimum 620 credit score.
However, bank statement loans are far less common. They cater to self-employed borrowers or those with inconsistent income. Typically, they come with eligibility guidelines that differ from traditional mortgages.
Bank statement loan requirements
Generally, you can qualify for a bank statement loan with a credit score as low as 620, but 700 or higher gets you a better rate and terms. If your credit score is on the lower end, though, you might also need to make a larger down payment. Doing so lowers the risk posed to the lender.
Overall, expect to meet the following requirements:
Provide two years’ worth of bank statements
Provide a profit and loss statement for your business
Make at least a 10 percent down payment
Have adequate cash reserves
Have a credit score of at least 620
Have a DTI ratio of 45 percent or lower (some lenders allow a higher percentage)
Provide business licenses, organization documents and other related paperwork
Should you get a bank statement mortgage?
A bank statement mortgage loan might be right for you if your tax returns don’t adequately reflect your income. Fact is, many self-employed workers are eligible for other, more traditional types of mortgages, even with inconsistent income. Given that bank statement loans have considerable downsides, it’s crucial to carefully consider all options. Ultimately, you want to try a conventional loan first.
But there are scenarios where it might make more sense to get a bank statement loan, such as if you’re self-employed and heavily use tax write-offs to minimize your adjusted gross income (AGI). Or maybe you’re a small business owner who acquires new businesses, but your personal income taxes are significantly reduced due to large one-time payments.
Borrowers like these will likely face challenges when seeking a conventional or jumbo mortgage loan. But a bank statement loan offers a viable solution, as it assesses income based on bank statements rather than AGI from tax returns or pay stubs.
Good candidates for a bank statement mortgage include:
Self-employed individuals
Freelancers
Small business owners
Entrepreneurs
Gig workers
Full-time real estate investors
You might also consider a bank statement loan if your income can’t be documented in a traditional way. For example, some employers pay workers via prepaid cards instead of direct deposit.
Bank statement loans give non-traditional income earners the chance to buy a home. Still, they aren’t without drawbacks. Weigh the pros and cons when deciding if this mortgage option is right for you.
Pros of bank statement mortgages
Flexibility: If you have non-traditional income streams, you can use your bank statements in lieu of traditional income documents to qualify for a loan.
Accessibility: You don’t need perfect credit to get a bank statement mortgage, as some lenders accept borrowers with credit scores as low as 620.
May have higher loan limits: With a bank statement loan, you might be able to take out a bigger loan than conventional loan limits.
Cons of bank statement mortgages
Higher borrowing costs: Expect higher interest rates due to the risky nature of these loan products.
Larger down payment: Lenders generally require a down payment of at least 10 percent, which is higher than those required for conventional and government-backed loan products.
Prepayment penalties: Some bank statement loans come with prepayment penalties that could make it costly to refinance or pay your balance off early.
How to apply for a bank statement loan
If you aren’t already working with a mortgage lender who offers bank statement loans, a mortgage broker might be able to help you find one. Brokers often have partnerships with several wholesale lenders, which gives them access to various unique mortgages and deals.
Brokers typically don’t charge borrowers for their services. Instead, they charge the lender, who then passes the cost onto you in the form of fees or a higher rate.
When comparing brokers, ensure whoever’s on your shortlist is licensed to work in your state and has experience with bank statement loans. Once you choose the right fit, connect with them to explore lenders that can assist you with securing a bank statement loan.
With a shortlist of lenders in hand, here’s how to move forward:
Step 1: Get preapproved. Connect with loan officers to discuss your situation and get preapproved. Doing so will give you an idea of the loan terms and how much you might be able to borrow.
Step 2: Compare loan offers. When comparing loan options from your top lenders, look carefully at estimated closing costs, APRs and other fees to choose the loan with the best terms that also suit your needs.
Step 3: Formally apply for a loan. Gather all the necessary information and documents needed to apply for a bank statement loan with the lender you select.
Alternatives to bank statement loans
Bank statement loans are one way for people to borrow money, but there are other mortgage loan options. Unlike bank statement loans, these options typically don’t require years of financial records and are typically less expensive to get. These alternatives include:
Conventional loans: Conventional loans are available through virtually every mortgage lender. They tend to offer much better interest rates and terms compared to bank statement loans. Simply put, “if you have pay stubs, it’s a much better deal to submit pay stubs,” says Seibel.
FHA loans: FHA loans are especially popular among first-time homebuyers due to their flexible qualification criteria.
VA loans: Eligible service members, veterans and surviving spouses can obtain a VA-backed mortgage with no money down.
Asset depletion loans: If you have no income but significant assets, a lender might be able to use those assets to qualify you for a mortgage. These types of loans are costly, however — it might make more sense to sell some assets to get the funds to buy a home.
DSCR loans: If you’re a real estate investor, you might qualify for a debt service coverage ratio (DSCR) loan, which is based on your portfolio’s cash flow and how that relates to your ability to repay the mortgage. Keep in mind that when calculating the DSCR, lenders tend to be conservative and account for higher expenses and a vacancy rate.
Interest-only loans: With this type of loan, you’ll only pay interest for the first few years of the loan’s term, then pay principal and interest. This keeps your costs low for a while, but you also won’t build any equity during the intro period, and you might not be able to afford the principal and interest payments once they kick in.
Portfolio loans: When a lender issues a portfolio loan, it retains that loan in its portfolio versus offloading it on the secondary mortgage market. Because of this, these types of loans have more flexible qualifying standards. They aren’t always advertised, however, and are typically reserved for high-value customers or those who already have a relationship with the lender. If you’re an investor, consider maintaining your bank accounts with a portfolio lender. This can give you a leg up when you need a mortgage.
Bank statement loans FAQ
It might be challenging to find a bank statement loan lender, but it’s not impossible. Some even specialize in this type of loan. If you can provide bank statements to prove your income and meet the lender’s other guidelines, getting approved might not be difficult at all.
It depends on the loan amount you’re seeking. You’ll need enough funds to cover the minimum down payment and closing costs, as well as some reserves in your accounts. Learn more about how much of your income should go to a mortgage.
Should landlords report rent payments to credit bureaus? In this post, I’ll discuss the pros and cons for landlords and tenants. This topic is often misunderstood, with many believing landlords are against the idea to keep tenants from building good credit.
In reality, landlords might benefit from this more than tenants, while the implications for tenants can be complex and sometimes detrimental. Let’s dive in.
Table of Contents
Video Overview
The Current State of Rent Reporting
Rent payments are not typically reported to credit bureaus. Some property management companies and national property management software providers do report rent, but it’s not widespread. As a landlord, I have reviewed many tenant credit reports and rarely, if ever, see late rent payments reported. Instead, credit issues related to rent usually show up as judgments or evictions, which are public records.
What is the Best Way to Screen Tenants for Rentals?
The Pros and Cons for Landlords
Pros:
Better Tenant Screening: Reporting rent payments could help landlords identify reliable tenants who pay on time, thus reducing the risk of late payments and potential evictions.
Incentivizes Timely Payments: Knowing that late or missed rent payments will affect their credit scores, tenants might be more motivated to pay on time.
Improved Tenant Credit: For tenants who consistently pay on time, rent reporting can help build their credit history, potentially aiding them in future financial endeavors such as buying a home.
Cons:
Cost: Some rent reporting services charge fees to landlords, which can add up over time.
Administrative Burden: Setting up and managing rent reporting requires additional time and effort from landlords.
Tenant Pushback: Tenants who are concerned about the impact of potential late payments on their credit might resist renting properties where rent is reported.
The Pros and Cons for Tenants
Pros:
Credit Building: Regular, on-time rent payments can help tenants build or improve their credit scores, making it easier to secure loans or credit in the future.
Financial Accountability: Knowing their rent payments are being reported might encourage tenants to budget more effectively and prioritize timely payments.
Cons:
Risk of Negative Impact: Late or missed rent payments could significantly damage a tenant’s credit score, making it harder to secure future housing or loans.
Increased Scrutiny: Tenants with less-than-perfect payment histories might struggle to find landlords willing to rent to them if rent reporting becomes widespread.
Legal and Practical Considerations
Before landlords start reporting rent payments, they must consider the legal implications and ensure they comply with local laws. Some states have stringent tenant protection laws that could impact the ability to report rent payments. For example, in Colorado, landlords cannot check credit reports if the tenant’s rent is entirely paid by public assistance. Always consult with a legal professional to navigate these complexities.
Should you use a property manager?
How to Report Rent Payments
Several services facilitate rent reporting for both landlords and tenants. These include:
Experian Boost: Tenants can add their rent payments, as well as utility, cell phone, and streaming service payments, to their credit reports through Experian Boost.
RentTrack: This service reports to Experian, TransUnion, and Equifax, and can include past rental payments for an additional fee.
ClearNow: Tenants pay rent through a portal, which then reports the payments to Experian.
What is the best way to manage rentals?
Conclusion
Reporting rent payments to credit bureaus has potential benefits for both landlords and tenants. But it also carries significant risks. It is crucial to weigh these pros and cons carefully and consider the specific legal context in your state. For landlords, this could mean better tenant screening and incentivizing timely payments, but it also comes with costs and administrative challenges. For tenants, it could help build credit but also pose risks if payments are late.
As an experienced real estate investor and landlord, I see the value in rent reporting but also understand the potential downsides. It’s a complex issue that requires careful consideration and legal guidance.
I’d love to hear your thoughts on this topic. Should rent payments be automatically reported to credit bureaus? Should it be a choice left to landlords and tenants? Let me know in the comments below!
The OIG also investigated several cases of fraud, including a $165 million mortgage fraud conspiracy, a multimillion-dollar COVID relief fraud scheme, and a civil settlement related to misconduct in residential mortgage-backed securities. These investigations resulted in numerous convictions, prison sentences, and financial penalties. “One successful action this period involved a real estate investor who pleaded … [Read more…]
Purchasing a home is a journey filled with complexities and legalities. The process that can seem bewildering, particularly for first-time homebuyers. Among the many terms you’ll encounter in your home buying process, “escrow” is one that plays a pivotal role but is frequently misunderstood.
To understand the home buying process fully, and to ensure you’re well-equipped for this significant financial decision, it’s vital to grasp the concept of escrow. This guide aims to help you understand escrow, explaining its role in real estate transactions, the purpose of escrow accounts, and the pros and cons of this system.
Key Takeaways
Escrow is a financial arrangement where a neutral third party holds funds until the buyer and seller fulfill their obligations, providing security and neutrality during real estate transactions.
The escrow process includes steps like signing the agreement, depositing earnest money, obtaining mortgage approval, coordinating closing costs, and transferring the property title.
Escrow accounts offer benefits like financial protection and managing taxes but add complexity and extra costs. Be aware of potential escrow fraud by verifying companies and consulting professionals.
What Is Escrow?
At its core, escrow serves as a neutral third party in various types of transactions, most commonly in real estate. It’s a financial arrangement where a third party, the escrow agent, holds and regulates payment of the funds required for two parties involved in a given transaction.
This process ensures the transaction is carried out smoothly and everyone fulfills their obligations before the transfer of ownership occurs. Whether it’s earnest money from buyers, the deed from sellers, or the paperwork in between, escrow plays a critical role in safeguarding assets during the transaction period. It’s like a financial safety net, protecting both the buyer and seller from potential complications.
How Does the Escrow Process Work?
The escrow process can feel like a whirlwind of paperwork, signatures, and deadlines. But when broken down into a series of steps, it’s a structured system designed to safeguard all parties involved in a real estate transaction. Let’s take a closer look at each phase of the escrow process:
Step 1: Agreement Signing
The escrow process starts when both the buyer and seller come to a mutual understanding and sign a purchase agreement. This agreement outlines the terms of the transaction, including the purchase price, any contingencies, and the closing date.
Step 2: Earnest Money Deposit
The buyer then makes an earnest money deposit, demonstrating their commitment to the transaction. This earnest money is placed into an escrow account, providing security until the final closing day of the home purchase.
Step 3: Mortgage Approval Process
Meanwhile, the buyer works with their mortgage lender to secure a mortgage loan for the remaining purchase price. This process includes credit checks, income verification, and property appraisal.
Step 4: Escrow Agent Coordination
The escrow agent coordinates various administrative tasks. They ensure all necessary documents are signed, and that the mortgage lender releases funds to cover the purchase price, less the buyer’s deposit.
Step 5: Managing Closing Costs
The escrow agent also manages the payment of closing costs. These costs can include real estate agent commissions, title insurance, property tax liens, and the fees for the escrow services.
Step 6: Conclusion of Escrow
Once all paperwork is finalized, funds have been disbursed, and all conditions met, the escrow process concludes. The title of the property is then transferred to the buyer.
What Is an Escrow Account?
Escrow accounts are secure, temporary homes for funds during a transaction. Let’s look at how they work in the context of real estate.
Escrow Accounts During Home Purchase
During the purchase of a home, the buyer’s earnest money deposit is held in an escrow account until the sale closes. This account secures the down payment, releasing it only when all contractual obligations are met.
Mortgage Escrow Accounts
Many mortgage lenders set up a mortgage escrow account as part of the home loan process. This account accumulates a portion of the monthly mortgage payments, paying your yearly property taxes and homeowners insurance premiums when they’re due.
Monthly contributions: Each month, as part of your monthly mortgage payment, you contribute to your escrow account.
Payment of taxes and insurance: This account, in turn, pays your yearly property taxes and homeowners insurance premiums when they’re due.
Smooth out expenses: Mortgage escrow accounts help smooth out these significant expenses, breaking them down into manageable monthly payments.
Adjustments: The mortgage servicer can adjust your monthly escrow payment each year based on changes to property taxes or insurance premiums.
Ownership of funds: The funds within these accounts are still yours. If the property is sold, or the mortgage loan paid off, any funds remaining in the escrow account will be returned to you.
The Role of Escrow in Real Estate
In the world of real estate, escrow plays a significant part in ensuring all parties meet their obligations. An escrow company provides escrow services, managing the earnest money deposit and any agreed-upon funds until the sale is finalized.
The real estate agent often helps facilitate the setup of this escrow process, but ultimately, it’s the escrow company that guides the process, ensuring all contract conditions are met before the transfer of funds and property.
Who Manages an Escrow Account?
Managing an escrow account is typically a job for a neutral third party, such as an escrow agent or an escrow company. In the context of a mortgage, however, the task often falls to mortgage servicers. Let’s examine the role of each:
Escrow Agents and Companies
Escrow agents or escrow companies are neutral third parties that hold on to the funds and documents involved in a transaction until the deal’s conditions are met. In a real estate transaction, they handle tasks like facilitating the closing process, recording deeds, and disbursing funds.
It’s worth noting that sometimes, the escrow agent or company may also be the same as the title company. In such cases, this entity not only manages the escrow process but also oversees the title search, ensuring there are no issues with the property’s title before the sale is finalized. This consolidation of services can streamline the transaction, as you will be working with a single company throughout the process.
Mortgage Servicers
Mortgage servicers play a pivotal role in the lifespan of your mortgage, from closing until the day you pay off your loan. They are responsible for various tasks, including collecting your mortgage payments, maintaining the records of payments, and crucially, managing your escrow account.
Your mortgage servicer could be the same as your originating lender. However, this is not always the case, as sometimes lenders sell the servicing rights to your loan. Understanding whether your lender typically services their own loans can be beneficial, as not all mortgage servicers provide the same level of service, and some charge more fees than others.
With a mortgage servicer taking care of your escrow account, your involvement is minimal. You don’t have to send in your tax or insurance bills—your servicer ensures they know who to pay, and when.
The only exception is if you change insurance providers or policies. In such cases, you may need to provide the new policy information to your servicer.
The management of your escrow account, therefore, can fall to different parties depending on the nature of your transaction. Whether it’s an escrow agent, an escrow company, or your mortgage servicer, their role is essential in ensuring a secure, fair, and efficient process.
The Pros and Cons of an Escrow Account
Just as every coin has two sides, using an escrow account in a real estate transaction comes with both benefits and drawbacks. Here’s a look at the main pros and cons:
Pros of an Escrow Account
Protection: An escrow account adds a layer of protection for both parties involved in the transaction. It holds funds and documents securely until all terms of the transaction are met.
Financial management: Escrow accounts, especially mortgage escrows, can help homeowners manage their yearly property taxes and homeowners insurance premiums. They break down these large expenses into manageable monthly escrow payments, preventing any potential financial strain.
Neutral oversight: The escrow process ensures a neutral third party is involved to oversee the transaction, offering a fair and unbiased service to both the buyer and seller.
Cons of an Escrow Account
Complexity: Escrow accounts add an extra layer of complexity to transactions. For some buyers and sellers, particularly those experienced in real estate, this additional step might feel unnecessary.
Time-consuming: The process of setting up an escrow account, managing it, and closing it can be time-consuming. This is particularly the case in more complex real estate transactions, which may already involve a significant amount of paperwork.
Extra costs: While escrow accounts offer benefits, they come at a cost. Fees for escrow services are usually part of the closing costs paid at the end of the transaction. Buyers should factor these costs into their budget when planning their home purchase.
Escrow Fraud and How to Avoid It
The unfortunate reality is that even with systems designed for protection, there can be risks of fraud related to escrow accounts. Just as cybercriminals target banking systems, scammers can also target the escrow process. Let’s look at how you can steer clear of such threats.
Recognizing Escrow Fraud
In escrow fraud scenarios, scammers pose as legitimate escrow companies or agents, creating a false sense of security. They might set up sophisticated websites and provide convincing, yet fake, contact information. The goal? To trick buyers or sellers into handing over funds or sensitive information.
Tips to Avoid Escrow Fraud
With the right precautions, you can protect yourself from becoming a victim of escrow fraud:
Do your homework: Don’t take an escrow company’s legitimacy at face value. Research the escrow service before engaging in any transaction.
Check licensing: A legitimate escrow company will be licensed in the state where it operates. You can typically verify licensing through the state’s Department of Insurance or Department of Financial Institutions.
Beware of unusual payment requests: Be cautious if an escrow service asks you to transfer funds to an individual or to an overseas account. Reputable escrow companies will not make such requests.
Secure communication: Ensure all communications happen through secure channels. Never share sensitive information via email.
Consult professionals: If in doubt, consult a real estate agent, attorney, or financial advisor. They can help validate the escrow company’s legitimacy.
Remember, vigilance and due diligence are your best defenses against escrow fraud. Always double-check before you send funds or personal information.
Conclusion
Understanding the escrow process can make a world of difference in your real estate transactions. It provides security, aids in financial management, and ensures smooth transitions for both buyers and sellers. Despite its complexities, the benefits of escrow are clear, offering a level of protection and neutrality that’s integral to the success of a transaction.
However, It’s essential to do your homework, ensure the legitimacy of your escrow service, and understand the full scope of your financial commitments.
Whether you’re a first-time homebuyer or an experienced real estate investor, a well-informed approach to escrow can help streamline your buying or selling process. As you move forward, remember to consult professionals and always make decisions in your best financial interest. Here’s to successful real estate transactions and secure, informed decisions. Happy home buying – or selling!
Frequently Asked Questions
What happens to the money in the escrow account if the deal falls through?
If a real estate deal falls through, what happens to the money in the escrow account usually depends on the reason the deal didn’t close, and the stipulations outlined in the purchase agreement. Both the buyer and seller have certain contingencies that, if not met, could allow them to back out of the deal without forfeiting the earnest money deposit.
If these contingencies are not met and the buyer backs out, the earnest money is typically returned. If the buyer simply changes their mind or cannot secure financing, the seller may keep the earnest money.
Can you waive escrow?
In some cases, you may be able to waive escrow. This typically requires a significant down payment or a high level of equity in your home. However, waiving escrow means you’ll be responsible for paying your taxes and insurance premiums directly, which requires discipline to ensure these large bills are paid on time. Some lenders may also charge a fee for waiving escrow.
How long does the escrow process take?
The length of the escrow process can vary widely, but it typically takes 30 to 60 days for residential real estate transactions. This timeline can be affected by various factors, including loan underwriting times, inspections, and negotiations after inspections.
What types of transactions might use an escrow account?
While escrow accounts are commonly associated with real estate transactions, they can be used in many types of large transactions where the buyer and seller do not fully trust each other to fulfill their obligations. This can include the sale of expensive items like cars, boats, or art, and even online transactions for goods or services.
Are escrow accounts only used in real estate?
No, escrow accounts aren’t solely used for real estate transactions. They can be used in many types of contractual agreements where an impartial third party is needed to ensure the terms of the contract are fulfilled. This can include business acquisitions, online sales, and construction projects, to name a few.
E-commerce transactions can benefit from escrow, especially when they involve high-ticket items or international trade. The escrow process protects both the buyer and seller by holding the purchase price until the buyer receives the goods in the agreed condition.
How are escrow fees determined?
Escrow fees are typically based on the purchase price of the home and can vary widely by region and company. Some escrow companies charge a flat fee, while others charge a percentage of the home’s purchase price. Always ask for a breakdown of the fees and compare costs from different companies before making a decision.
Barry Sternlicht, cofounder, chairman, and CEO of the $115 billion real estate giant Starwood Capital Group, is worried about the more than 4,000 regional and community banks in the U.S. With the real estate industry struggling against higher interest rates, vacancies, and inflation, its lenders of choice may be in for some pain, according to the billionaire investor.
“I think people are looking for these cracks and you’re going to see the cracks develop now. You’re going to see a regional bank fail every day, or not—every week, maybe two a week,” he told CNBC Tuesday.
Despite Sternlicht’s prediction, just one U.S. bank has failed so far this year: Republic First Bank, a regional lender that operated in Philadelphia, New York, and New Jersey. The bank collapsed and had roughly $6 billion in assets and $4 billion in deposits seized by the Federal Deposit Insurance Corporation (FDIC) after facing issues with rising interest rates among its sizable commercial real estate holdings.
Sternlicht has warned about pending problems due to rising interest rates in the real estate and banking sectors—as well as the whole economy—for more than two years now. In September 2022, just a few months after the Federal Reserve began raising rates to fight inflation, he said that officials were using “old inflation data,” particularly related to housing, to attack the economy unnecessarily. A month later, Sternlicht followed up that criticism by arguing that the entire economy was “breaking hard” due to soaring borrowing costs, and a recession was all but inevitable.
But with the U.S. proving its resilience to higher interest rates and inflation by the summer of 2023, Sternlicht admitted his recession calls were premature, saying that he “did not understand the strength of the consumer.” However, the billionaire real estate guru still believes certain segments of the economy can’t withstand Fed Chair Jerome Powell’s rapid rate hikes, including real estate and regional banking.
“He’s got a hard task, with a blunt tool, and the consequence is the real estate markets are taking it on the chin because rates rose so fast. We could have handled this, but we couldn’t handle it this fast,” Sternlicht said. “The 1.9 trillion of real estate loans, that’s a fragile animal right now.”
Calling on the Fed to lower rates—again
While many segments of the real estate sector are struggling—for example, multifamily property values are down 26.9% from their second-quarter 2022 peak—the office sector has faced more headaches than any other.
The combination of higher interest rates (which raised borrowing costs and reduced asset values) and the rise of hybrid work (which increased vacancy rates) hit the office owners particularly hard over the past few years. In January, Sternlicht even told Bloomberg the office real estate market is experiencing an “existential crisis” at this point, and could face $1 trillion in losses. If his prediction proves prescient, that would lead to serious issues for regional and community banks that hold real estate debt but don’t have the large balance sheets to navigate excessive loan losses.
Multiple Wall Street analysts, strategists, and real estate industry leaders have warned about potential issues at regional banks due to underwater real estate loans over the past year. Scott Rechler, CEO of the New York–based real estate investor, operator, and developer RXR, told Fortune in March that regional banks are essentially facing a “slow-moving train wreck.” With wave after wave of commercial real estate loans maturing over the next few years, and values in the sector plummeting, banks will struggle to deal with rising loan losses, Rechler argued.
“I think there’s going to be…500 or more fewer banks in the U.S. over the next two years,” he warned. “I’m not saying they’re all going to fail, but they’re going to be forced into consolidation if they don’t fail.”
For Sternlicht, at least some of this nightmare could be avoided if the Fed decides to cut interest rates. “One way to get capital into those banks is to lower rates, so it basically makes their assets worth more,” he said.
The billionaire CEO argued that community banks are worth saving, given they are critical to the “fabric” of the American economy, making loans to small businesses or farms that larger banks often ignore. The good news? Sternlicht believes Powell will cut rates sooner rather than later, potentially saving some of these banks.
Sternlicht argued that interest rate hikes are no longer having the desired effect in reducing inflation, instead inflicting unnecessary damage to real estate and regional banks—and Powell is starting to see that.
He noted that most Americans’ mortgages are also fixed low interest rates, “so the rise in rates didn’t change their income,” and Fed policy doesn’t really impact gas, food, or insurance prices directly—some of the key categories causing the current bout of stubborn inflation. In Sternlicht’s view, interest rate hikes might not be providing the anti-inflation medicine they’re supposed to. And finally, with the $34 trillion national debt weighing on the federal government’s budget, Sternlicht argued that Chair Powell will want to lower interest rates to reduce interest costs. “I think that rates will come down,” he concluded. “Powell looks like he’s looking for a reason to bring them down.”
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Are you curious about the real estate deal strategies I use to keep getting great deals in today’s market? Whether you’re an investor eyeing your next property flip or an eager homeowner searching for a bargain, the hunt for great deals is critical. In this comprehensive guide, I’ll cover the 6 strategies I use to get great deals and I’ll show you some recent examples.
Table of Contents
Video: Finding Real Estate Deals Strategies
Real Estate Deals Strategies Video
6 Strategies for Finding Deals
The MLS
Many believe that the Multiple Listing Service (MLS) is exclusively for seasoned investors. However, it’s a misconception. We’ve acquired numerous properties through the MLS, including one notable deal featuring a basement skatepark. Owner-occupants can leverage the MLS to their advantage, especially during exclusive bid periods like those for HUD homes.
The MLS is for real estate agents, but don’t let that stop you. You can either:
Work with an agent to help you find deals.
Use the consumer version of your local MLS. Most MLS systems have a consumer-facing version. For example, my local MLS is IRES, but they have a non-agent-facing version at coloproperty.com.
Wholesale Deals
Wholesalers offer a treasure trove of off-market properties ripe for investment. While these deals lack the scrutiny of inspections and appraisals, they demand quick action and thorough due diligence. Learn how to discern between lucrative opportunities and potential pitfalls when engaging with wholesalers.
For more, read my wholesaling article.
Networking
Networking isn’t just for job seekers; it’s a potent tool for real estate enthusiasts. By fostering relationships with industry professionals, from lenders to fellow investors, you can be made aware of deals. This one may be as simple as telling everyone you know that you’re in the market to buy real estate.
Our recent townhouse flip stemmed from a banking connection, underscoring the value of a solid network.
For more, check out my post about real estate investor associations and clubs.
Direct Marketing
Direct marketing entails proactive outreach to homeowners considering selling their properties. Postcards, bandit signs, and digital ads are just a few avenues for connecting with motivated sellers. While it requires persistence and patience, this approach can yield remarkable results, as evidenced by our success stories.
Read my article on direct marketing.
Auctions
Auction houses present a unique avenue for acquiring distressed properties at competitive prices. However, they come with inherent risks, such as limited visibility and stringent bidding conditions. Discover how we’ve navigated the complexities of auction purchases and capitalized on favorable market conditions.
Read my post about foreclosures and auctions.
Education and Resources
Above all, education is the most important. If you’re not actively studying, you may be throwing away lots of time and money.
Investing in comprehensive courses, like those offered on our platform, equips you with the knowledge and tools needed to thrive in the real estate arena. From deal-finding strategies to financing insights, these resources empower you to make informed decisions and navigate challenges effectively.
My Master the Deal course walks you through everything you need to know to start finding great real estate investment deals.
Special note: Master the Deal is on sale now! Use this link to get it for just $199 $29! https://learn.investfourmore.com/purchase?product_id=5460501&coupon_code=HP84987
Final Thoughts
There are countless opportunities abound for both investors and owner-occupants alike. By embracing a multifaceted approach to deal sourcing and leveraging available resources, you can open yourself to many more deals. Whether you’re scouring the MLS, cultivating relationships, or exploring alternative channels, persistence and diligence are key to achieving your real estate goals.
Remember, the next great deal could be just around the corner. Happy hunting!