Many real estate investors hesitate on whether or not to expand their portfolios to include non-qualified mortgage investments.

There is risk involved with these markets. Non-qualified means these lending products are not held to the standards of traditional financing. For real estate investors, this means both opportunity and risk.

However, by looking at what the non-QM market could mean for you, you can get a better sense of whether an investment might be a good idea. From new markets to social media, here’s what you need to know about non-QM mortgage markets.

Understanding the Markets

There is a wide range of reasons why you might explore non-QM properties. These can free up your financing opportunities while presenting the means to make a significant return in a tight market.

That’s because non-QM loans aren’t beholden to the agency standards of other lending products. This gives borrowers more room but also more risk.

These are some types of non-QM loans out there on the market:

•        Over 30-year terms

•        Negative amortization

•       Interest-only payments

The added risk inherent in these lending products requires a trade-off. As a result, a non-QM loan has higher interest rates and can be a large, unwieldy burden for unscrupulous investors.

That said, investing with a non-QM loan can be great for many non-traditional borrowers. For example, for those whose income does not come from an employer (such as gig workers or those living off investment returns) a non-QM loan might be your only option.  Lenders expect proofs and collateral, which may not be present depending on your situation. This doesn’t mean you’re not good for a loan, however.

If you’re investing in the perfect market — complete with appreciating home values and a steady economy — a non-QM loan on fix-and-flip might be all but a sure bet. Using these loans to break into growth markets can be the perfect opportunity for some investors. However, you’ll have to do thorough research, meet with finance professionals, and make the right connections. That’s where social media can help.

Leveraging Social Media

Because the success of non-QM real estate loans is so tied to finding the right market, every investor needs connections in that market. You need to learn the area and its potential for growth.  Fortunately, social media makes forming these connections simple. All you have to do is reach out to real estate brokers, investors, and groups.

Join the conversation. Ask questions. Get trustworthy tips and feedback. Organizations and online groups are out there who want to see you succeed as an investor. Often, this means lucrative partnerships.

Opening up communication and building opportunities are key to cutting down the risk of a non-QM loan. You have to work with people you trust.  From social media reviews to the individual interactions you have with brokers online, you can get a better sense of who to trust and which markets to invest in. From here, you are better positioned to explore non-QM opportunities.

Start by getting a good sense of up-and-coming markets. To make a return out of these investment types, you’ll have to trust that you can flip or sell a home for much more than you bought it for — and in a short amount of time.

Win the non-QM market with careful research and an expert team.

Winning the Non-QM Market

No successful investment happens in a vacuum. First, you have to do your homework. Then, you have to partner with experts in the investment market.

When it comes to real estate, you need a property and a location that checks all the boxes for a worthwhile investment. These are some of the traits you want to look for:

•        Locations with high homeownership rates and income

•        Cheaper homes in more valuable neighborhoods

•       Markets with a close ratio between list price and sale price

From here, you need to make sure the individual property you’re investing in is worth the investment. Do not skimp on your inspections and research. Talk to the neighbors and local real estate agents.

Once you have a good sense of the right property, itemize the potential and risks of the investment. Consider all the factors that might affect a deal right now.

For instance, interest rates are on the rise. Consider factors like this in your overall assessment of the deal, and speak with financial experts to ensure you have sound information. Your finance pros will be starting players on your investment team. Additionally, you’ll want real estate agents to collaborate with you and share their expertise on local market trends.

Only with expert and specific advice can you effectively reduce the risk on a non-QM investment. With information you can trust, move forward by finding the right broker.

The financing you get will determine your overall ROI, so don’t take the first product offered to you. Explore your options and consult your team about the best deal. Have a thorough plan in place before investing. The proper preparation can help you win the non-QM market.

Conclusion

Real estate investment can be for anyone. As long as you take the right steps and form an expert team, there is money to be made from an investment in housing.  Non-qualified mortgage markets are riskier than traditional financing for real estate investment. However, they can also be a means to break into the investment game.

Find the right property, team, and investment type, then begin your journey. For more information on real estate investment, explore these insights.