by Kenbry Capital | Apr 5, 2024 | Blog
Investing in real estate is a proven path to long-term wealth, and rental properties can provide a steady income stream. However, the world of real estate investment poses some critical questions: Should you invest in multifamily rentals, or is a single-family rental (SFR) the better option? Let’s delve into the pros and cons of each to help you make an informed decision.
Single-Family Rentals (SFRs)
SFRs are standalone homes with their own plot of land, offering privacy to the tenant and less maintenance for the landlord. Here are some key advantages:
Lower Acquisition Cost:
SFRs typically have lower purchase prices than multifamily properties, making them more accessible to beginner investors.
Market Liquidity:
SFRs tend to have higher market liquidity. It is generally easier to find buyers for single-family homes than for multifamily properties.
Flexibility:
With SFRs, you can sell off one property at a time, which provides more flexibility and doesn’t require you to liquidate your entire investment.
However, some challenges include:
Vacancy Risk:
If a single-family rental becomes vacant, you lose 100% of the rental income until a new tenant is found.
Scalability:
Growing a portfolio of single-family homes can be time-consuming. Each new property requires a separate transaction.
Multifamily Rentals:
Multifamily rentals are properties that have more than one unit, such as duplexes, triplexes, and apartment complexes. Here are some advantages:
Cash Flow:
Multifamily properties often provide more cash flow because you’re collecting rent from multiple tenants.
Economies of Scale:
With multiple units under one roof, you can achieve economies of scale, reducing the cost per unit for maintenance and management.
Lower Vacancy Risk:
If one unit becomes vacant in a multifamily property, you still have income coming in from the other units.
On the downside:
Higher Acquisition Cost:
Multifamily properties tend to have higher purchase prices than single-family homes, which can be a barrier to entry for some investors.
Complex Management:
Managing multifamily properties can be more complicated due to the number of tenants and potential disputes.
So, should you invest in multifamily rentals, or single-family rentals? The answer depends on your investment goals, budget, risk tolerance, and management preference. Consider the pros and cons of each carefully, and perform thorough due diligence before making your investment decision.
Whether you need financing for multifamily rentals or SFRs, contact the team at Kenbry.
by Kenbry Capital | Mar 8, 2024 | Blog
The real estate market has always been a lucrative platform for investors seeking tangible assets that generate both passive income and potential value appreciation. But the traditional approach of buying to let on long-term contracts has been somewhat outdone by a new strategy – short-term rentals.
High Revenue Potential
Short-term rentals, often facilitated by platforms like Airbnb, offer an opportunity for owners to generate significantly higher income. The ability to charge per night often equates to a higher monthly income than a traditional lease, particularly in tourist hotspots or during peak times. By adjusting rates based on demand, owners can maximize their income in a way that just isn’t possible with long-term leases.
Flexibility in Property Usage
Aside from the financial perspective, short-term rentals also provide flexibility. If you want to use the property for personal reasons, you can simply block out the dates you need. This is particularly beneficial for those who own properties in vacation destinations and want to utilize them occasionally.
Better Maintenance and Less Wear and Tear
On the surface, it might seem that short-term rentals would suffer more wear and tear than long-term leases, but that’s not necessarily the case. Because short-term rentals are cleaned and inspected regularly, any issues are likely to be caught and addressed early, preventing minor problems from becoming major repairs.
Diversifying Your Investment
The real estate market fluctuates, and having your investment spread across different types of rentals can help to mitigate risk. If long-term rental demand declines, the short-term market might still be thriving, allowing you to maintain a steady income.
Tax Benefits
Depending on your location, you may also be able to enjoy significant tax benefits from short-term rentals, with the possibility to deduct expenses such as mortgage interest, property taxes, insurance, and maintenance costs.
To wrap up, investing in short-term rentals is a promising avenue offering high potential returns and flexibility. Of course, as with any investment, it is not without its challenges. However, with careful planning, a well-chosen property, and effective management, short-term rentals can be a smart addition to your investment portfolio. Contact Kenbry today to learn more about our financing programs for short-term rentals.
by Kenbry Capital | Feb 2, 2024 | Blog
Navigating the landscape of home loans can be a daunting task for any prospective homeowner. Among the multitude of options available, two of the most commonly discussed types are Stated Income Loans and Traditional Loans. To help clear up some of the confusion, we will delve deep into each of these loan types, contrast their features, and aim to provide you with the information needed to make an informed decision.
Traditional Loans
Traditional loans are the most common types of home loans. They usually come in two forms: Fixed-Rate and Adjustable Rate Mortgages. With these loans, lenders require comprehensive documentation, including W-2 forms, tax returns, and bank statements to verify your income and ability to repay the loan.
The primary benefits of traditional loans lie in their relatively low interest rates and fixed payment schedules, making them a predictable option. However, they require a good credit history, a stable income source, and usually a substantial down payment.
Stated Income Loans
On the other hand, Stated Income Loans, also known as “no-doc” or “low-doc” loans, require less documentation. As the name suggests, borrowers simply state their income without needing to provide extensive evidence. These loans were designed for self-employed borrowers, or those with variable incomes, who may have a harder time gathering traditional income documentation.
Stated income loans offer flexibility that can be attractive to some borrowers, but they often come with higher interest rates to offset the perceived risk by the lender. They also require a higher down payment and a good credit score.
Comparison
When comparing the two, Stated Income Loans offer convenience and less documentation, but they come at a cost. Higher interest rates can significantly increase the amount paid over the life of the loan.
In contrast, traditional loans require more paperwork and have stricter qualification criteria, but they typically offer more favorable terms, including lower interest rates.
Final Thoughts
In summary, the choice between a Stated Income Loan and a Traditional Loan depends largely on your personal circumstances, including your income structure, credit score, and your ability to provide documentation. Before making any decision, it’s always best to consult with a mortgage professional who can guide you based on your unique financial situation.
Remember, the key to successful homeownership is not just getting a loan, but getting the loan that’s right for you. Contact Kenbry today to learn more about our stated income loans for commercial real estate.
by Kenbry Capital | Jan 5, 2024 | Blog
When it comes to financing commercial real estate, Small Business Administration (SBA) loans hold a prominent position. These loans, designed by the U.S. government, aim to support small businesses by providing them with capital at favorable terms. Here’s why SBA loans could be an excellent choice for your commercial real estate ventures.
Lower Down Payments
One of the primary advantages of SBA loans for commercial real estate is their lower down payment requirement. Traditional loans often require a down payment ranging between 20% to 30% of the property’s value. In contrast, SBA loans allow down payments as low as 10%, making it easier for small businesses to acquire commercial properties without draining their cash reserves.
Longer Repayment Terms
Another significant advantage of SBA loans is the extended repayment terms they offer. With traditional commercial loans, typical repayment periods range from 5 to 20 years. SBA loans, on the other hand, can have repayment terms of up to 25 years for real estate loans. Longer repayment periods mean lower monthly payments, improving cash flow and financial stability for businesses.
Competitive Interest Rates
SBA loans offer competitive interest rates, often lower than those of conventional commercial loans. The rates are usually based on the prime rate plus a markup rate. The government caps the rates, ensuring that they remain affordable for small businesses.
Flexible Use of Funds
Unlike some traditional loans where you might be restricted in how you use the funds, SBA loans offer more flexibility. Funds from an SBA loan can be used for a variety of purposes, including purchasing land or buildings, construction or renovation costs, or even refinancing existing debt.
Greater Accessibility
Lastly, SBA loans provide greater accessibility to small businesses. For businesses that might not qualify for a conventional loan due to a limited track record or lack of collateral, SBA loans can be a viable alternative. The government guarantees a portion of the loan, thereby reducing the risk for lenders and increasing the likelihood of approval for small businesses.
In conclusion, SBA loans are a powerful tool for financing commercial real estate, offering lower down payments, longer repayment terms, competitive interest rates, flexible use of funds, and greater accessibility. If you’re considering purchasing, building, or renovating a commercial property, it’s worth exploring the benefits an SBA loan from Kenbry.
by Kenbry Capital | Dec 8, 2023 | Blog
Commercial real estate (CRE) financing is a critical aspect of any business venture. Traditionally, businesses have leaned towards banks and other institutional lenders for financing. However, the rigid structure and stringent requirements of these traditional lending institutions may not be suitable for every business. That’s where private lenders step in, offering flexible, fast, and personalized financial solutions.
Quick Financing
One of the standout advantages of using a private lender is the speed at which they operate. Traditional lenders have to follow a lengthy underwriting process that includes several levels of bureaucracy. Private lenders, on the other hand, have the flexibility to make swift decisions, thereby accelerating the loan approval process. This speed can be particularly advantageous in a competitive real estate market where securing a property rapidly is crucial.
Flexibility
Private lenders provide a higher degree of flexibility compared to traditional lending institutions. They generally function on a case-by-case basis, considering the unique needs and circumstances of each borrower. This flexibility extends to loan terms and repayment options, allowing borrowers to tailor the loan structure to their specific needs.
Less Stringent Criteria
Private lenders often have less stringent eligibility criteria than their traditional counterparts. Where banks may decline applications due to poor credit scores or lack of sufficient collateral, private lenders may still consider the viability of the project itself, offering loans based on the potential profitability of the property.
Personalized Service
Private lenders often provide a more personalized service than traditional lenders. They take the time to understand the borrower’s needs, goals, and plans. This personalized service can be beneficial, particularly for complex or unconventional financing needs that traditional lenders may not understand or accommodate.
In conclusion, private lenders for CRE financing provide an efficient and flexible alternative to traditional lending institutions. They can respond quickly to financing needs, offer significantly more flexibility, have less stringent criteria, and offer a more personalized service. While each financing option has its pros and cons, it’s clear that private lenders fill an important gap in the market and are an option worth considering for commercial real estate investments.
Kenbry is a private lending firm, committed to providing tailored solutions to meet the needs of property investors. If you need CRE financing, contact Kenbry today.
by Kenbry Capital | Nov 3, 2023 | Blog
In the realm of real estate investment, timing is everything. Property flippers, those who buy homes to renovate and sell for profit, often operate in a high-paced environment where access to funds can make or break a deal. It’s in these circumstances where bridge loans prove their worth.
A bridge loan, as the name suggests, serves as a temporary “bridge” that enables investors to secure a property swiftly, even before they’ve sold their current holdings. But why do property flippers often prefer this type of financing?
Quick Access to Funds
The ability to move quickly is a significant advantage in the competitive real estate market. Bridge loans offer the promise of rapid access to funds, often within a week or less. This speed gives property flippers an edge when multiple buyers express interest in a property.
Flexibility
Bridge loans are designed to be short-term, allowing flippers to borrow for specific renovation projects and repay the loan after selling the refurbished property. This flexibility allows investors to use the loan for a variety of purposes, ranging from property acquisition to renovation costs.
No Prepayment Penalties
Unlike traditional loans, bridge loans usually have no prepayment penalties. This feature means that if a flipper finishes their project and sells the property quicker than anticipated, they can pay off their loan early without incurring extra costs.
Less Reliance on Credit History
While credit scores and history are important, bridge loan lenders are primarily interested in the property’s value and the investor’s potential profit. This focus allows flippers with less than stellar credit to still secure funding, provided they demonstrate a sound investment strategy.
Looser Requirements
Bridge loan lenders often have looser requirements compared to traditional banks. This leniency allows for a wider range of flippers to access funding and encourages entrepreneurial spirit within the property flipping industry.
While bridge loans are not without their risks – including higher interest rates and the potential for default if the property doesn’t sell – they offer a unique and valuable financial tool for property flippers. By offering quick access to funds, flexibility, no prepayment penalties, less reliance on credit history, and looser requirements, they allow flippers to seize opportunities and turn them into profits. Contact Kenbry today to get the financing you need for your fix and flip projects.
by Kenbry Capital | Oct 6, 2023 | Blog
When it comes to investment diversification, rental properties stand out as an appealing option deserving serious consideration. Here are five compelling reasons why rental properties should form part of your investment portfolio.
1. Consistent Cash Flow
With rental properties, you can secure a steady stream of income through rent, which can act as a safety net during market volatility. This income is often sufficient to cover your property-related expenses while providing additional cash flow.
2. Appreciation Potential
Over time, real estate has consistently proven to appreciate in value. While the market can fluctuate in the short term, the long-term trend has always been upward. This appreciation can be a significant wealth-building tool.
3. Tax Advantages
Owning rental property comes with several tax benefits. For example, you can deduct rental expenses like mortgage interest, property tax, operating expenses, depreciation, and repairs. These deductions can offset your rental income, thereby reducing your overall tax liability.
4. Inflation Hedge
Inflation erodes the purchasing power of money over time. However, real estate often acts as an effective hedge against inflation. As the cost of living rises, so too can rent prices, enabling property owners to maintain their purchasing power.
5. Control Over Your Investment
Rental properties offer a level of control not always available with other investment types. As the property owner, you can make decisions about property management, rent pricing, and when to buy or sell. This ability to directly influence your investment’s performance can be empowering.
In conclusion, diversifying your investment portfolio with rental properties can provide consistent income, potential appreciation, tax advantages, an inflation hedge, and control over your investment. As with any investment, it’s crucial to do your research and consider your financial goals and risk tolerance before diving in. If you need tailored funding solutions to help you diversify your portfolio, contact the team at Kenbry today.
by Kenbry Capital | Sep 29, 2023 | Blog
Investing in multifamily properties can be an excellent way to generate a steady stream of income and diversify your investment portfolio. Here are seven compelling reasons to consider this investment strategy:
1. Stable Cash Flow
Multifamily properties, such as apartment buildings, are designed to generate income. With multiple units for rent, these properties can provide a more consistent cash flow compared to single-family homes. Even with a few vacancies, you’re still likely to earn revenue from other occupied units.
2. Economies of Scale
Owning and operating multifamily properties can be more cost-efficient than managing multiple single-family homes. You can save on maintenance, renovations, and property management costs by having all units in a single location.
3. Lower Risk
The risk of income loss is lower in multifamily properties because the income doesn’t rely on a single tenant. If a single-family rental unit is vacant, you lose 100% of the rental income for that property. In contrast, a few vacancies in a multifamily property won’t significantly impact your overall rental income.
4. High Demand
With the increasing costs of homeownership, more people are opting to rent, driving up the demand for rental properties. This trend is particularly true for millennials and the elderly who value the convenience and flexibility of renting.
5. Tax Advantages
Investing in multifamily properties comes with several tax benefits. IRS allows investors to deduct expenses related to property ownership, management, and depreciation. Consult with a tax professional for detailed advice.
6. Appreciation Potential
Over time, multifamily properties can appreciate in value, especially if they’re in a growing market. This appreciation can lead to significant wealth growth down the line.
7. Control Over Value
Unlike stocks or bonds, real estate investors have more control over their investments. They can add value to their properties through renovations, adding amenities, or increasing rents.
In conclusion, investing in multifamily properties can be a smart move due to the potential for stable cash flow, lower risk, economies of scale, high demand, tax advantages, appreciation potential, and the ability to add value. If you need financing for multifamily investments, contact Kenbry today.
by Kenbry Capital | Sep 22, 2023 | Blog
In the complex world of construction, change orders are practically inevitable. They are modifications to the original contract that can occur due to unforeseen circumstances, alterations in design, or changes to the scope of work. While change is a natural part of progression, it’s important to understand how change orders can significantly impact your construction budget.
The Impact of Change Orders
Change orders often lead to an increase in project costs. The reasons for this can range from the need for additional materials, labor, or equipment, to extensions in project timeframes that escalate overhead costs. Occasionally, change orders can lead to a decrease in costs, but this is generally the exception rather than the rule.
Managing Change Orders
Understanding how to manage change orders effectively can limit their impact on the overall budget. This starts with careful planning during the pre-construction phase and continues throughout the project lifecycle. Having a robust change management process in place can help ensure that any changes are addressed promptly and efficiently.
Planning
During the planning phase, it’s crucial to anticipate potential changes and account for them in your budget. This involves understanding the project’s scope and identifying any areas that might be prone to alterations. For example, if you are renovating an old building, it’s prudent to account for potential issues that might arise once the work starts, such as the need for additional structural support.
Implementation
Once construction is underway, it’s critical to have a process in place for handling change orders. This involves understanding what triggers a change order, who can authorize it, and how it will be documented. Having a clear process helps manage expectations and prevent disagreements or misunderstandings.
Re-evaluation
After a change order has been implemented, it’s crucial to re-evaluate the project’s budget and timeline. This involves updating your cost and schedule estimates to reflect the changes. It’s also important to communicate these changes to all stakeholders to ensure everyone is on the same page.
In conclusion, while change orders are often a necessary part of construction, understanding their potential impact on your budget and managing them effectively can help ensure your project stays on track. By taking the time to plan, implement, and re-evaluate, you can navigate the change process successfully and maintain control over your construction budget. If you need ongoing or permanent financing for your construction project, contact the team at Kenbry today.
by Kenbry Capital | Sep 15, 2023 | Blog
Commercial real estate is a key arena for savvy investors looking to expand their portfolios. One financing option that has emerged as exceptionally beneficial is the use of permanent loans. These loans, also known as term loans or end loans, offer myriad advantages that can propel the success of commercial real estate ventures.
What Are Permanent Loans?
Before delving into the benefits, it’s essential to understand what permanent loans are. Permanent loans are long-term financing options, typically used to pay off construction loans, and may span 15 to 30 years. They are named ‘permanent’ because they are designed to be in place until the property is sold or the loan is fully paid off.
Why Choose Permanent Loans for Commercial Real Estate?
Long-Term Stability
One of the primary benefits of permanent loans is the financial stability they offer. With fixed interest rates over the term of the loan, investors can accurately forecast their financial obligations, mitigating the risks associated with variable rates and market fluctuations.
Lower Monthly Payments
Due to their long duration, permanent loans typically have lower monthly payments compared to short-term loans. This allows investors to effectively manage their cash flow and allocate funds to other critical aspects of their business.
Potential for Property Appreciation
Commercial real estate often appreciates over time, meaning that the property could be worth significantly more when the loan period ends. Therefore, a permanent loan lets investors potentially reap the rewards of this appreciation.
Considerations and Conclusion
However, just like any financial product, permanent loans are not without their risks and should be carefully considered. Prepayment penalties and longer time to equity are among the factors to account for when deciding on this route.
In conclusion, permanent loans offer numerous advantages that can make them an excellent choice for commercial real estate financing. They provide financial stability, lower monthly payments, and the chance to benefit from property appreciation. While the decision to use a permanent loan should be made based on individual circumstances, these advantages make them an attractive option for many. Contact Kenbry today to explore our permanent loan programs for commercial real estate.
