September 10, 2024

DSCR Loan: 40 Year vs 30 Year Loan

Categories: Blog Posts

Are you trying to figure out which loan term is the best fit for your real estate investment? Let’s dive into the differences between a 40-year vs 30-year DSCR (Debt Service Coverage Ratio) loan and see how each can affect your cash flow and ability to qualify for more deals.

What’s the Difference Between a 40-Year and a 30-Year Loan?

30-Year Loan
The traditional 30-year mortgage is a common option for real estate investors. It allows you to spread your payments over 30 years, keeping monthly payments lower than shorter-term loans. You’ll still pay off some principal each month, which helps you build equity.

40-Year Loan
A 40-year DSCR loan stretches out the loan term even more. This lowers your monthly payments even further. This extra decade can make a big difference in your ability to qualify for a loan, especially if your rental income is close to the debt service.

Lower Payments = Better Cash Flow

One of the biggest advantages of a 40-year DSCR loan is the lower monthly payment. This is perfect for investors focused on improving cash flow. In today’s market, where rents might not always cover all expenses, having a lower monthly mortgage payment can be a game-changer.

Here’s an example:

30-Year Loan: A $250,000 loan at 6.65% interest results in monthly payments of $1,596.
40-Year Loan: A $250,000 loan at 6.9% interest results in monthly payments of $1,535.

While the interest rate is slightly higher on the 40-year loan, your monthly payment is lower. This extra cushion can help improve your DSCR ratio, making it easier to qualify for more properties.

Example: Does a 40-Year Loan Help You Qualify?

Let’s look at a real-world scenario. Say you have a property where the rent is $2,000 a month, and you’re looking at a loan of $250,000.

For a 30-year loan, your monthly payment of $1,596 plus taxes and insurance might leave you with around $246 for other expenses. This might not qualify for the best DSCR terms.

But with a 40-year loan, your payment drops to $1,535. Now, with taxes and insurance included, you’ve got a bit more breathing room to meet the DSCR ratio requirements and qualify for the loan.

Which Loan Is Best for You?

It comes down to your goals. If you want to pay off the loan faster and build equity quicker, the 30-year loan is a solid choice. But, if your main focus is qualifying for more properties or increasing cash flow, the 40-year loan might be a better fit.

Prepayment Penalties – What You Should Know

DSCR loans often come with prepayment penalties, meaning you can’t pay off the loan early without a fee. But, there are options to avoid these penalties:

Zero Prepay: No prepayment penalty but a higher interest rate (about 1% higher).
One-Year Prepay: A middle-ground option with a lower prepayment penalty.

Both options give you more flexibility if you expect to refinance soon as interest rates change.

Conclusion: What’s the Best Loan for You?

Choosing between a 40-year and a 30-year DSCR loan depends on your cash flow needs and your long-term strategy. If you want to maximize your cash flow and qualify for more deals, the 40-year loan could be the better option. On the other hand, if building equity faster is your goal, the 30-year loan will work for you.

If you have questions about how these loans fit into your investment strategy, feel free to leave a comment or visit our site, The Cash Flow Company, for more resources, like our DSCR calculator.

Watch our most recent video to find out more about: DSCR Loan: 40 Year vs 30 Year Loan

by Kira

September 6, 2024

DSCR Loan: Market Update for Real Estate Investors

Categories: Blog Posts

The DSCR (Debt Service Coverage Ratio) market is evolving, and the good news is that it’s shifting in favor of investors. Rates are dropping, and new loan options are making it easier to qualify for deals. Here’s a market update for real estate investors!

What’s New in DSCR Loans?

40-Year Mortgage Options

A major shift in the market is the introduction of the 40-year mortgage. This option lowers monthly payments compared to a 30-year mortgage, which can make it easier for you to qualify for more properties. Here’s how:

Lower Payments: A 40-year mortgage spreads out the loan over a longer period, reducing your monthly payment.
Amortization: With a 40-year loan, you get a mix of amortization and lower payments, which can help you pay down the loan while keeping cash flow in mind.

For Example:

A $250,000 loan with $2,000 in monthly rent. With a 30-year mortgage at a 6.65% interest rate, your monthly payment would be about $1,596. After adding taxes and insurance, the expenses would leave you with around $246 left for the DSCR calculation. The property wouldn’t qualify.

However, if you switch to a 40-year mortgage with a 6.9% interest rate, your payment drops to $1,535. This difference could help you qualify for the loan. The 40-year option is designed to help investors like you get into more deals with less cash out of pocket each month.

No Prepayment Penalty Options

Traditionally, DSCR loans come with a prepayment penalty. However, new options in the market offer no prepayment penalty. This flexibility can benefit you if rates continue to drop and you want to refinance. Here’s what to consider:

Zero Prepayment Penalty: This option allows you to refinance at any time, but it comes with a catch—a higher interest rate, typically around 1% more.
1-Year Prepayment Penalty: If you’re unsure about how long you’ll hold the loan, this might be a better option. You’ll get a lower rate than the zero prepay but still have the flexibility to refinance after one year.

These options let you pick the best path for your portfolio without worrying about being locked into a loan for several years.

Should You Go With a 40-Year Loan?

If you’re focused on cash flow or qualifying for more deals, the 40-year loan could be a great tool. For example, a client looking to buy a property with $2,000 in rent wouldn’t qualify with a 30-year loan. But by moving to a 40-year option, they could make the deal work.

More properties qualifying means more opportunities to build wealth.

What’s Next?

The DSCR market is becoming more flexible, and as rates go down, more products will continue to emerge. We’re here to provide a market update for real estate investors on a regular basis. If you want to explore options like the 40-year mortgage or no prepayment penalty, it’s a great time to look at how these products could boost your portfolio.

If you have any questions or want to run your numbers through our DSCR calculator, head over to our website. You’ll find tools to help you determine whether your property qualifies and how much cash flow you can expect.

Watch our most recent video to find out more!

by Kira

September 5, 2024

Why Investors Should Know About Conventional Rates

Categories: Blog Posts

Why Investors Should Know About Conventional Rates

Welcome to Your September 2024 Market Update

Today we are going to discuss why investors should know about conventional rates in this real estate market. Here at The Cash Flow Company we want to keep you as up to date as possible on these changes so that you can make the most of it! Let’s take a closer look.

Conventional Rates: A Better Time for Buyers

Why should you care about conventional rates? Well, they’re crucial because they determine what your end buyers can afford. Right now, we’re seeing rates in the high fives and are around 5.625% to 5.75% for those with excellent credit and strong LTVs on owner-occupied properties.

Looking Forward

If the Fed continues to drop rates, we could see conventional rates fall into the low fives by the end of the year or early next year. While I don’t expect rates to drop more than a point or point and a half in the next 12 months, even these modest decreases will make a big difference. More buyers in the market mean more opportunities to sell your properties and move on to the next deal.

Now is the time for change!

So, what’s the takeaway? Rates are trending down across the board for DSCR loans, fix and flip projects, and even conventional loans. That’s great news for not only cash flow and affordability, but for getting your properties sold as well. The past year has been tough with high rates, but the tide is turning. More buyers are entering the market, properties are starting to cash flow again, and there’s a lot more activity overall.

Stay Updated with Our Mortgage Report

Want to keep up with where rates are headed? We’ve got a mortgage report that tracks the trends and tells you who’s offering the best rates for fix-and-flip, DSCR, and other loan products. Watch our most recent video to find out more about Why Investors Should Know About Conventional Rates.

by Kira

August 29, 2024

DCSR Rates: What Investors Can Expect to See

Categories: Blog Posts

DCSR Rates: What Investors Can Expect to See

Welcome to Your September 2024 Market Update

Today we are focusing on DSCR rates and what investors can expect to see! Here at The Cash Flow Company we want to keep you up to date on where the real estate market is heading and what it means for you as an investor. Let’s take a closer look!

Great News for DSCR Loans: Rates are Dropping

If you’ve been eyeing DSCR loans, there’s some good news. We’ve seen rates drop by about 30 basis points this month alone. For well-qualified clients with strong properties, rates are now in the high sixes for 75% to 80% loan-to-value (LTV) ratios. That’s a significant decrease and nearly half a point lower than just a few months ago.

What’s Next?

Looking ahead, it’s a bit uncertain. The Federal Reserve is likely to increase rates by a quarter-point in September, and they’re talking about a few more hikes before the year ends. However, DSCR rates are based on a 5-year term rather than a 10-year, so they may fluctuate differently. However, by the end of the year, we could see these rates dip into the low sixes and possibly even the high fives early next year.

The Bottom Line

Thankfully we are seeing rates trending down across the board. That’s great news not only for cash flow and affordability, but also for getting your properties sold. The past year has been tough with high rates, but the tide is turning. More buyers are entering the market, properties are starting to cash flow again, and there’s a lot more activity overall.

Stay Updated with Our Mortgage Report

Want to keep up with where rates are headed? We’ve got a mortgage report that tracks the trends and tells you who’s offering the best rates for fix-and-flip, DSCR, and other loan products. Watch our most recent video to find out more about DCSR Rates: What Investors Can Expect to See.

by Kira

August 23, 2024

Real Estate Market Update for Investors – September 2024

Categories: Blog Posts

Real Estate Market Update for Investors – September 2024

Welcome to Your September 2024 Market Update

Hey there, it’s Mike with The Cash Flow Company! I’m here to give you a quick rundown of where the real estate market is headed and what it means for you as an investor. Whether you’re looking at DSCR loans, fix-and-flip projects, or even conventional rates, I’ve got you covered. Let’s take a closer look at the real estate market update for investors.

DSCR Loans: Rates are Dropping

If you’ve been eyeing DSCR loans, there’s some good news. We’ve seen rates drop by about 30 basis points this month alone. For well-qualified clients with strong properties, rates are now in the high sixes for 75% to 80% loan-to-value (LTV) ratios. That’s a significant decrease and nearly half a point lower than just a few months ago.

What’s Next?

Looking ahead, it’s a bit uncertain. The Federal Reserve is likely to increase rates by a quarter-point in September, and they’re talking about a few more hikes before the year ends. However, DSCR rates are based on a 5-year term rather than a 10-year, so they may fluctuate differently. However, by the end of the year, we could see these rates dip into the low sixes and possibly even the high fives early next year.

Conventional Rates: A Better Time for Buyers

Why should you care about conventional rates? Well, they’re crucial because they determine what your end buyers can afford. Right now, we’re seeing rates in the high fives and are around 5.625% to 5.75% for those with excellent credit and strong LTVs on owner-occupied properties.

Looking Forward

If the Fed continues to drop rates, we could see conventional rates fall into the low fives by the end of the year or early next year. While I don’t expect rates to drop more than a point or point and a half in the next 12 months, even these modest decreases will make a big difference. More buyers in the market mean more opportunities to sell your properties and move on to the next deal.

Fix-and-Flip Loans: Trending Downward

Now, let’s talk fix-and-flip loans. If you’ve got experience, which is 10 or more projects under your belt in the last two to three years, then you’re in luck. Rates for seasoned investors are now dipping back into the 8% range. Even better, we’re seeing lenders offer 10% down and 100% financing options, depending on your credit score.

What to Expect

This trend of decreasing rates is likely to continue, with some lenders already offering rates below 10% and even into the 8% range for well-qualified investors. Don’t expect huge changes by the end of the year, though. We might see another quarter or half-point drop, but this new reality of lower rates is here to stay, at least for the next 6 to 9 months.

The Bottom Line

So, what’s the takeaway? Rates are trending down across the board. That’s great news for cash flow, affordability, and getting your properties sold. The past year has been tough with high rates, but the tide is turning. More buyers are entering the market, properties are starting to cash flow again, and there’s a lot more activity overall.

Stay Updated with Our Mortgage Report

Want to keep up with where rates are headed? We’ve got a mortgage report that tracks the trends and tells you who’s offering the best rates for fix-and-flip, DSCR, and other loan products. Watch our most recent video to find out more about Real Estate Market Update for Investors – September 2024

by Kira

August 21, 2024

How Debt Impacts Your Real Estate Investments

Categories: Blog Posts

How Debt Impacts Your Real Estate Investments

Debt plays a significant role in real estate investing, and understanding its impact can help you make informed decisions. Let’s explore how debt impacts you real estate investments and why it’s important to manage it wisely.

Why Use Debt in Real Estate?

Debt can be a powerful tool for real estate investors when used correctly. It allows you to leverage your resources and achieve more than you could with cash alone. For example:

1. Using Debt Effectively:

When used correctly, debt helps you purchase properties that may have been out of reach. For instance, instead of paying cash for a single property, you can use debt to finance multiple properties, potentially increasing your returns.

2. Choosing the Right Type of Debt:

Not all debt is created equal. Whether it’s a cash-out refinance, home equity loan, or a 0% credit card, selecting the right type of debt for your specific situation is crucial. The right choice can save you significant amounts of money over time.

The Importance of Smart Debt Choices

Making smart debt choices can save you hundreds of thousands of dollars over your lifetime. On the flip side, making poor decisions can lead to financial struggles. Here’s how to approach debt:

1. Avoiding Costly Mistakes:

One common mistake is choosing a cash-out refinance when a home equity loan might be better. For example, a typical cash-out refinance could end up costing you a quarter of a million dollars more over the life of the loan compared to other options.

2. Getting the Right Advice:

It’s essential to get the correct information before taking on debt. Missteps can be costly, so understanding your options is key. Smart with Debt, a new venture focused on helping consumers, aims to provide you with the knowledge needed to make informed decisions without trying to sell you loans.

Balancing Debt and Investment Goals

Your goal should be to use debt to enhance your investments without letting it become a burden. Here are some strategies:

1. Focus on the Best Debt:

Always aim to get the best debt for your situation. This could mean choosing between a cash-out refinance and a home equity loan or finding the best lender for your needs.

2. Protect Your Future:

Managing debt wisely isn’t just about saving money now; it’s also about protecting your future. By choosing the right type of debt and understanding its long-term impact, you can ensure your investments remain profitable.

Conclusion: Use Debt, Don’t Let It Use You

Debt can be a powerful tool for growing your real estate investments, but it must be used wisely. The key is to understand your options, avoid common pitfalls, and always aim to put more money into your life by making the best debt choices. Remember, the goal is to use debt effectively, not let it use you. Would you like to find out more about how debt impacts your real estate investments? Contact us today!

by Kira

August 14, 2024

Get Smart with Your Debt

Categories: Blog Posts

The Cash Flow Company is introducing a new website, Smart with Debt! Our goal is to help you choose the best type of debt, save money, and more importantly protect your financial future. So, let’s dive into some key topics and get smart with your debt!

Why Smart with Debt?

Nowadays, many people get into debt without understanding the best options available. As a result, this can cost them thousands over time. At Smart with Debt, we believe in using debt wisely. Our goal is to help you:

First, Choose the best type of debt
Next, Save money
Finally, Protect your financial future

Use Debt, Don’t Let Debt Use You

Cash-Out Refinance vs. Home Equity Loan

Sometimes, you need extra money for big expenses or investments. Two common ways to get this money are:

Cash-Out Refinance: This replaces your current mortgage with a new, larger one. You get the difference in cash.
Home Equity Loan: This is a second loan against your home’s value.

However, a typical cash-out refinance could cost someone a quarter of a million dollars over the life of the loan.Therefore, you need to always compare the options first.

Getting 0% Credit Cards

0% credit cards can also be a great way to manage debt. These cards offer a period where you pay no interest. Here’s how to use them smartly:

Transfer Balances: Move high-interest debt to a 0% card.
Pay It Off: Aim to pay off the balance before the 0% period ends.
Avoid New Debt: Don’t add new charges while paying off the balance.

Protect Your Future

Choosing the right debt can not only save you money, but it can also protect your future. Here are some tips:

Research: Always compare different loan options.
Plan: Have a clear plan to pay off your debt.
Ask Questions: Don’t be afraid to seek advice.

Our goal is to get you on the right path but not do the loans for you. It can muddy the water when giving advice and trying to get you a loan also.

Join Us!

We’re here to help you get the best debt for your needs. Check out our videos, leave comments, and ask questions. Together, we can help you get on the right path to financial success.

by Kira

August 9, 2024

Smart with Debt: Stop Giving the Bank Your Money!

Categories: Blog Posts

Debt can be a useful tool, but only if you use it smartly. At Smart with Debt, we believe in helping you find the best debt options, so you keep more money in your pocket. Let’s explore how to stop giving the bank your money and make debt work for you!

Why Smart with Debt?

Many people take on debt without understanding the full cost. This often leads to paying more than necessary over time. Our mission is to educate you on how to choose the best debt options, whether it’s a home loan, HELOC, or credit card.

Use Debt, Don’t Let It Use You

It’s easy to fall into the trap of taking the first loan that you are offered. However, there are better ways to handle debt. Here’s how:

Cash-Out Refinance vs. Home Equity Loan

Imagine you need money for home improvements. You could choose a cash-out refinance, but this might cost you a quarter of a million dollars over the life of the loan. Instead, a home equity loan might be cheaper in the long run.

Example:

Cash-Out Refinance: Higher upfront costs and longer terms can add up.
Home Equity Loan: Often lower interest rates and better for short-term needs.

0% Credit Cards

Zero percent credit cards can be a smart way to manage short-term debt. Instead of paying high interest on balances, you can move your debt to a 0% card and save on interest.

Example:

Typical Credit Card: High-interest rates add up quickly.
0% Credit Card: No interest for an introductory period, giving you time to pay off the balance.

Best Debt Paths in Your Market

Debt options vary depending on changes in the market. Therefore, knowing the best local lenders can in fact save you thousands. Our main focus is helping you find these lenders in order to make the best choices.

Protect Your Future

By choosing the right debt, you can protect your financial future. To put it another way, better rates and terms mean more money in your pocket now as well as down the road.

Example:

Better Loan Terms: Lower interest rates reduce your monthly payments.
Future Savings: Less money paid in interest over time means more savings.

Get Educated, Make Smart Choices

Our goal at Smart with Debt is to provide you with the information you need to make smart debt choices. We’re here to help you understand your options and choose what’s best for your situation.

Join Us!

Interested in learning more? Visit our new channel, subscribe, and start your journey to smarter debt today. Leave comments, ask questions, and let us help you keep more of your money and learn how to stop giving the bank your money!

by Kira

August 7, 2024

The Six Money Buckets You Need in Real Estate Investing

Categories: Blog Posts

The Six Money Buckets You Need in Real Estate Investing

As a real estate investor, it’s crucial to always be ready for opportunities. Successful investors have two key secrets: always looking for properties and being prepared to buy them. Now, let’s dive into the six money buckets that help them stay ready.

1. Other People’s Money (OPM)

Firstly, consider Other People’s Money (OPM). This includes family, friends, and other investors. They can lend you money without credit or income checks. For example, if you need $20,000 for a down payment, you can call someone from your OPM bucket. You might offer them a return of 8-12%, which is better than what they’d get from a bank.

2. Home Equity Lines of Credit (HELOCs)

Next, think about Home Equity Lines of Credit (HELOCs). If you have equity in your home or rental properties, a HELOC can be a flexible funding source. For instance, you can use a HELOC to withdraw money for down payments or to fix up properties. The best part is, you only pay interest on what you use.

3. Business Credit Cards

Moreover, business credit cards are a fantastic tool. Unlike personal credit cards, they don’t affect your personal credit score. This helps keep your credit in good shape for future loans. For example, you can use these cards to pay for repairs or other expenses without impacting your credit score.

4. Hard Money Lenders

Then, there are Hard Money Lenders. These lenders don’t focus on your credit or experience. They can lend you more money for flips or 100% for BRRR projects. Because of their flexibility, they are great for deals in remote areas or properties that need significant work.

5. Private Lenders

Additionally, Private Lenders are essential. They provide loans without needing your tax returns. For example, private lenders like Kiavi or RCN Capital might offer 90% of the purchase price and 100% of rehab costs. While they take longer to close, they are less costly than hard money lenders.

6. Local Banks

Finally, don’t forget Local Banks. They usually offer lower rates and fewer points. They might take longer to close, but they can be great for projects that aren’t time-sensitive. For example, if you’re planning a major renovation, a local bank’s loan might be perfect.

Conclusion

In conclusion, having these six money buckets at your disposal can make you a more flexible and prepared investor. Each bucket serves a different purpose and offers unique benefits. By building and maintaining these funding sources, you can ensure you’re always ready to seize opportunities and grow your real estate business.

For more tips and tools, visit The Cash Flow Company. Here, you’ll find resources like our deal analyzer and a detailed guide on money buckets to help you succeed.

by The Cash Flow Company

July 31, 2024

Why You Need to Fill Your Money Buckets

Categories: Blog Posts

Why You Need to Fill Your Money Buckets

Example:

If you’re planning a pop-top renovation, a local bank can provide the necessary funds at a lower rate.

Benefits:

Lower interest rates
Ideal for long-term projects
Personalized service

Be Ready for Every Opportunity

In conclusion, by filling your money buckets now it ensures that you’re always ready to seize opportunities in real estate. By having diverse funding sources, you can act fast and get the best deals. Start building your money buckets today, and watch your investment opportunities grow. For more tips and tools, visit The Cash Flow Company. You’ll find tools like our Deal Analyzer and a comprehensive guide to building your funding stack.

Watch our most recent video to find out more about: Why You Need to Fill Your Money Buckets

by The Cash Flow Company