What is an Interest-Only Loan?

Are you a real estate investor looking for ways to boost your cash flow and make your investments more manageable? If so, you might want to consider an interest-only loan. These loans are becoming more popular among investors who want lower monthly payments and more flexibility with their finances.

How Does an Interest-Only Loan Work?

For the first few years (usually 5, 7, or 10 years), you only pay interest. After this period, you start paying both interest and principal. This means your payments will go up, but by then, you might be earning more rent or have other ways to cover the higher payments. Consequently, you can plan your finances better knowing when the higher payments will begin.

When is an Interest-Only Loan a Good Idea?

Interest-only loans can be great for:

  • Investors wanting to improve cash flow: Lower payments mean more money in your pocket each month. Therefore, you can handle your financial obligations more easily.
  • People planning to sell or refinance soon: If you plan to sell or refinance before the interest-only period ends, you can benefit from lower payments without worrying about the higher payments later. Thus, this can be a strategic move to maximize your investment.
  • Short-term projects: If you’re working on a project that will increase your income soon, like renovating a property to increase rent, this can help bridge the gap. As a result, you can complete your projects without financial strain.

Example:

Let’s say you own a rental property, but your current loan payments are too high compared to your rental income. By switching to an interest-only loan, your monthly payments go down. This helps you qualify for more loans, improve cash flow, and even take out more money to invest in another property. Consequently, you can grow your investment portfolio more effectively.

Conclusion

In conclusion, interest-only loans can be a powerful tool for real estate investors. They offer better cash flow, easier loan qualification, and more flexibility with your money. If you think an interest-only loan might be right for you, talk to a lender or financial advisor to explore your options. Therefore, taking advantage of interest-only loans can help you achieve your real estate investment goals more efficiently.

Ready to explore interest-only loans further? Visit our website, TheCashFlowCompany.com, to learn more. We offer a simple inquiry form where you can share your details. Don’t worry, we don’t do hard credit pulls or make frequent calls. We’re here to provide helpful advice and see if an interest-only loan is right for you. If it works, great! If not, no pressure.

Watch our most recent video to find out more about: What is an Interest-Only Loan?

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Maximizing Rental Profits: Ensuring Your Property Makes Money

In order to be successful in real estate investing it is crucial that you maximize your profits on rental properties. Previously we discussed the roadblocks in real estate investing and what needed to be done in order to avoid them. Today we are going to focus on the 4th roadblock, which is rentals. How can you ensure your property makes money? Let’s dive in and find out more.

What makes up monthly costs?

In real estate investing it is important to know your numbers. What exactly does that mean? It all begins by calculating the monthly costs and subtracting them from the rental income. The monthly costs include interest, taxes, insurance, HOA, and flood. Another thing to keep in mind if you plan on using a DSCR loan is the DSCR ratio. This value would be added into the monthly costs as well. Here at The Cash Flow Company we know that numbers are not for everyone! We are happy to help walk you through things to ensure that the property will make money before you dive in! 

Does the property cash flow?

Real estate investors need to make sure that the property will make money before diving into the deal. By taking the time to do the calculations, you can quickly determine if the property will have a positive cash flow. Just to clarify, a positive cash flow is created when the rental income is greater than the monthly costs. It is imperative to determine this before purchasing a property, closing on a loan, or beginning a BRRRR. Don’t get into properties if you can’t afford to take losses. You never know what expenses may come up in the future.

The impacts of today’s market.

In today’s market, you need to break even if not make a little money monthly on the rental property. Predictions indicate that rates will be going back down this year to 5.5%. When rates decrease, it allows you to make even more on your investment property by refinancing. This is the ideal situation for a BRRRR, because you will have the opportunity to refinance. It creates the opportunity to take advantage of a lower rate, while capturing the equity. A DSCR on the other hand has prepayment penalties that could affect your ability to refinance. What do we mean by prepayment penalties? A prepayment penalty is a percentage of the remaining balance that will be charged if you pay off the loan early, refinance, or sell the property. While no one has a crystal ball predicting the future, it is important that you take everything into consideration beforehand.

The fine line between being approved or denied for a loan.

For a DSCR loan as well as many others, loan approvals are becoming more challenging. Whether it’s changes in your credit score or the DTI, investors walk a fine line. Being denied could cost $5K to $10K in earnest money. In looking at a BRRRR, if you have a fix and flip loan, bridge loan, or even a hard money loan, you may not be able to refinance it due to the bank’s requirement changes. The increased interest rates that are associated with the requirement changes could cause your property to have a negative cash flow as opposed to a positive one. When you are looking at investing in rental properties it is imperative that you are approved for financing prior to going shopping.

In conclusion.

Real estate investing is heavily reliant on funding and leverage. It is a high intensity business that is reliant on someone else giving them money at a rate that makes sense. Whether you are just starting out or you are a  seasoned investor, it is important that you understand numbers. In doing so, you will create the wealth you need to  succeed in this business. 

How can you start Maximizing Rental Profits and  Ensuring that Your Property Makes Money? Watch our most recent video to find out more!

Not sure where to begin or how to do the calculations to ensure cash flow? Contact us today! We are happy to walk you through the numbers.

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Intro to Interest Only Loans: Top 3 Benefits for Real Estate Investors

Interest-only loans are becoming a popular choice for real estate investors. Why? Because they offer unique advantages that can make a big difference in your investment strategy. Today we will explore the top three benefits of interest-only loans and how they can help you qualify more easily, improve your cash flow, and access larger loan amounts. Let’s dive in and see why an interest-only loan might be the right move for your next investment.

What is an Interest Only Loan?

An interest-only loan is exactly what it sounds like. You only pay the interest on the loan for a set period of time. Unlike typical mortgages where you pay both interest and a bit of the principal, an interest-only loan keeps your payments low by only covering the interest.

Benefits of Interest Only Loans

Interest-only loans offer several advantages, especially in today’s market. Here are the top three benefits for real estate investors:

1. Easier Qualification

One of the biggest benefits of an interest-only loan is that it can make it easier to qualify for financing.

Example: Let’s say you want to buy a rental property, but the current rent isn’t high enough to qualify for a regular loan. By switching to an interest-only loan, your monthly payments are lower. As a result, this reduces your expenses and improves your chances of meeting the lender’s requirements.

2. Improved Cash Flow

Next, interest-only loans can significantly boost your cash flow. With lower monthly payments, you have more money available each month.

Example: Imagine you own several rental properties. With an interest-only loan, your payments are smaller, giving you more cash each month. Consequently, this extra money can be used for renovations, paying off other debts, or simply enjoying a higher income.

3. Greater Loan Amounts

Finally, interest-only loans can help you access larger loan amounts. Since your payments are lower, you might qualify for more money.

Example: Suppose you’re an investor looking to cash out on a property to fund another project. By opting for an interest-only loan, you reduce your payments and can pull out more cash. This gives you the capital needed to start your next investment sooner.

How to Get Started with an Interest Only Loan

Ready to explore interest-only loans further? Visit our website, TheCashFlowCompany.com, to learn more. We offer a simple inquiry form where you can share your details. Don’t worry, we don’t do hard credit pulls or make frequent calls. We’re here to provide helpful advice and see if an interest-only loan is right for you. If it works, great! If not, no pressure.

In conclusion, interest-only loans are a fantastic tool in the right market and for the right investor. They help you qualify easier, improve your cash flow, and access more funds. Whether you’re building, renovating, or just want better cash flow, consider if an interest-only loan fits your strategy.

Watch our most recent video to find out more about: Intro to Interest Only Loans: Top 3 Benefits for Real Estate Investors

 

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Real Estate Investing: Leverage Explained

Today we are going to discuss the importance that leverage has in real estate investing. Here at The Cash Flow Company, we see success from the money side because money is the key factor in real estate. The foundation of this business is leverage in order to build portfolios. Learn how it can play a vital role in your investments as well as provide opportunities that accelerate your success. Let’s take a closer look!

The importance of leverage.

Whether there are two properties or 10 properties, it is important to create more leverage over someone else. How can investors take care of their leverage on certain properties or on their portfolio? This can be accomplished by picking one property and focusing on paying it down quickly. In doing so, it will free up the equity in that property, and will provide you with more opportunities as well. 

Let’s look at the numbers!

5 properties

Each  Total for 5 properties
Property Value  $200K $1,000,000
LTV (loan to value) 75% $150K $750K
Equity  $50K $250K

In the world of leverage, an LTV of 75% unfortunately does not free up any equity. This is due to the fact that investors are paying down each property equally as opposed to paying a little more towards a single property. For example, if there was a deal available for $150K, you would not have enough equity available to purchase the property. Just to clarify, lenders will not lend over 75% on an investment property. How can you set yourself up for success while using the equity in your properties? The answer is by focusing on paying one property down faster. In doing so, you will in turn free up the equity Remember, those who will accelerate in this business are those who create financial flexibility. 

Contact us today! 

Use your equity to your advantage and create the leverage that you need to succeed! Do you need some guidance on where to get started? Here at The Cash Flow Company we can help you get on the path to success! Contact us today to find out more about Real Estate Investing: Leverage Explained<b>.

Watch our most recent video to learn more about Real Estate Investing: Leverage Explained</strong>

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What Does Debt Service Coverage Ratio Mean?

Today we are going to discuss what debt service coverage ratio means and how a DSCR loan can help you achieve your investment goals. Thankfully there are a multitude of products that are available for investors to not only purchase new properties, but to refinance as well. Whether or not you have a job, just changed jobs, or write everything off on your taxes, there are products out there for you. How can a DSCR loan help you? Let’s take a closer look!

What does debt service coverage ratio mean?

The debt service coverage ratio is where your property breaks even. Just to clarify, that is when the income from the property and the expenses break even. While every property has a different break even point, this is the value that lenders will be looking at to determine whether or not the property qualifies for a DSCR loan. The expenses that lenders take into consideration are the mortgage payment (including interest), taxes, insurance, flood, and HOA. For example, if your rent is $1,000, then your expenses need to be $1,000 or less in order to qualify for a DSCR loan. The best scenario would be if your rents were $1,500 and the expenses were $1,000. This would create a $500 cash flow for the property.

A DSCR is the best loan option!

One of the most versatile loan options available for investors is a DSCR loan. How do you qualify? As long as your rental property will cover the debt, you will be able to qualify for a DSCR loan. Unlike traditional loans, a DSCR loan will not take into consideration when you started your job or how long you’ve been self-employed. Instead, the lender’s primary focus is whether or not the income from the property qualifies for the loan.

Contact us today!

Here at The Cash Flow Company we are happy to run through the numbers with you to see what product is best for you. Contact us today to find out more about how you can qualify!

Watch our most recent video: What Does Debt Service Coverage Ratio Mean?

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8 Easy Tricks to Improve Credit for Small Businesses

Today we will be talking with Alex Erlich, a credit advisor and educator, about the 8 easy tricks that you can do to improve credit for small businesses. Those who know the rules and how to play the game will be in the best position to win! Let’s take a closer look! 

1. Do Not Open New Credit! 

Do not open new credit unless you have talked with a professional and they have created a step by step outline. Here at The Cash Flow Company we can help you apply for a 911 loan. This can be used to take care of items on your credit that are holding you back financially.

2. Fix Old Information.

It is important that you remove any derogatory information that is on your credit report. Now is the time to see what can be done about it and how to leverage it, especially if it’s a local bank. Something from three to five years ago that already has a zero balance, should be removed. Remember to be methodical and purposeful.

3. Fast Inquiry Removal.

Take into account all of your inquiries. If you have been shopping for money and applying for things, look into a fast inquiry removal. This can make a substantial positive impact on your credit score. If you are using your personal credit to inquire about your business, those should all be disputed as well. 

4. Build Local Relationships.

Relationships are key to a successful business. Investors need to determine which companies are having the hardest time or tightening their budget. These are the ones that will leave you behind so they can swim upstream. Oftentimes they are searching for bigger and better clients. By building local, human, real relationships, the more successful you will be.

5. Run All Transactions Through Business Account.

It is imperative that you run all of your transactions though a business account. In doing so, you will correctly paint the picture that people want to see. Whether we are talking about personal credit, business credit, leverage, banking, or relationships, we want to consider who is reading this book and what they are reading. Keep in mind that the reader’s personal experience is dictating what they are reading in the picture book that you create. 

6. Pay Cards Before Statement Cycle Closing Date.

Investors need to pay their credit cards before the statement cycle closing date. In doing so, it ensures that the utilization rate is as low as possible. This information can be found on MyFico, as well as by looking at the actual statement. 

7. Establish Business

The next step that you need to consider is whether or not you are established as a business. To clarify, a properly established business has a business license, business phone number, and an EIN. In setting up your business correctly from the beginning, it will provide more opportunities for you than you would have otherwise. 

8. Shop around

It is imperative that you shop around and find the lenders, as well as the products you need for your business. Keep in mind that there are always banks looking to expand and grow. These are the ones that will be helpful in growing your business as well.  

In conclusion.

It is important that you not only establish your business correctly from day one, but that you also work on forming positive relationships. By doing so, it will ensure that you set your business up to win. The faster you can separate your business vs personal credit, the better your personal credit score. In turn, it will also create more leverage for future growth. Give us a call! We can help guide you through this process! 

Contact us today to find out more about setting yourself up for success.

Watch our most recent video to find out more about the 8 Easy Tricks to Improve Credit for Small Businesses

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How Can I Qualify for a Loan for My Real Estate Investments?

Today we are going to answer one of the biggest questions that real estate investors have, “How can I qualify for a loan for my real estate investments?” Thankfully there are a multitude of products available for investors to not only purchase new properties, but to refinance as well. Whether or not you have a job, just changed jobs, or write everything off on your taxes, there are products out there for you. What are your options and how do you get started? Let’s take a closer look!

Your best loan option!

One of the most versatile loan options available for investors is a DSCR loan. A DSCR loan is only available to investors and stands for the debt service coverage ratio. How do you qualify? As long as your rental property will cover the debt, you will be able to qualify for a DSCR loan. Unlike traditional loans, a DSCR loan will not take into consideration when you started your job or how long you’ve been self-employed. Instead, the lender’s primary focus is whether or not the income from the property qualifies for the loan.

What does DSCR mean?

The debt service coverage ratio is where your property breaks even. Just to clarify, that is when the income from the property and the expenses break even. While every property has a different break even point, this is the value that lenders will be looking at to determine whether or not the property qualifies for a DSCR loan. The expenses that lenders take into consideration are the mortgage payment (including interest), taxes, insurance, flood, and HOA. For example, if your rent is $1,000, then your expenses need to be $1,000 or less in order to qualify for a DSCR loan. The best scenario would be if your rents were $1,500 and the expenses were $1,000. This would create a $500 cash flow for the property.

Find the versatility you need to succeed.

Nowadays, DSCR loans are not only for 1 to 4 unit  properties. Instead DSCR loans can cover 8 to 10 unit properties and even mixed use properties! That’s not all! There are also a lot of refinancing options available for investors who want to get cash out of their properties. Don’t miss out on this best kept real estate secret! Find the best product today that not only provides ultimate flexibility but meets all of your investment needs as well. 

Contact us today!

Here at The Cash Flow Company we are happy to run through the numbers with you to see what product is best for you. Contact us today to find out more about how you can qualify!

Watch our most recent video: How Can I Qualify for a Loan for My Real Estate Investments? 

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The Key to Creating Leverage

Today we are going to discuss the key to creating leverage in real estate investing. Here at The Cash Flow Company, we see success from the money side because money is the key factor in real estate. In regards to the foundation of this business, it is imperative that you have the leverage you need in order to build your portfolio. What is the trick that can help you accelerate your success? Let’s take a closer look!

Taking care of your leverage.

How can people take care of their leverage on certain properties or on their portfolio? Whether there are two properties or 10 properties, it is important to create leverage over someone else. This can be accomplished by picking one property and focusing on paying it down quickly. In doing so, it will free up the equity in that property, and will provide you more leverage. 

What is the benefit to paying one property off?

By paying down or off one property within your portfolio, you can then get a line of credit or a HELOC on the property. This provides the leverage you need to invest in other deals. We have seen a number of clients who are able to invest in new deals quickly because they had free cash flow. Just to clarify, we are not talking about these clients having money in their pocket. To say it another way, by either paying off a property completely or paying it down to a lower loan to value, you create more options for leverage. How can you take advantage of this additional leverage? One of the options is a HELOC. A HELOC is a Home Equity Line of Credit. Investors can take out a HELOC on the paid off property in order to take advantage of great deals quickly and easily. 

Free up the equity and create more leverage! 

In the world of leverage, an LTV of 75% does not free up any equity. This is due to the fact that investors are paying down each property equally as opposed to paying a little more towards a single property. For example, if there was a deal available for $150K, you would not have enough equity available to purchase the property. Just to clarify, lenders will not lend over 75% on an investment property. How can you set yourself up for success and use the equity in your properties? The answer is by focusing on paying one property down faster. In doing so, you will in turn free up the equity and create more leverage. Remember, those who will accelerate in this business are those who create financial flexibility. 

Contact us today! 

Use your equity to your advantage! Do you need some guidance on where to get started? Here at The Cash Flow Company we can help you get on the path to success! Contact us today to find out more about the The Key to Creating Leverage

Watch our most recent video to learn more about The Key to Creating Leverage.

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How Interest Payments Work in Real Estate

Today we are going to discuss how interest payments work in real estate. There are a lot of moving parts that you need to take into consideration when purchasing a property. Don’t run the risk of missing deals and missing transactions! Here at The Cash Flow Company we want to guide you through the process to ensure that you have what you need to be successful.

How does interest work?

In regards to mortgages, the biggest question is when is the interest paid when you make a payment? During closing the lender will be asking for a certain amount of interest that is collected arrears. For example, when you are making a July 1st payment, you are paying the interest for the month of June. Whether it’s amortized or interest only, lenders will collect the interest after it’s due. To clarify, the interest payment is arrears while the payment on the property is in advance.  

Interest only loans.

Interest only loans include short term loans, bridge loans, as well as fix and flip loans. When you make a payment, it will only apply to the interest of the loan. For example, if you have an interest only loan, you will only be paying the interest for the previous month. Your payment does not apply to the loan amount itself. Many chose this option so that they have more cash flow going into the business and less going toward the principal. Remember, cash is king in real estate! 

DSCR and 30 year loans.

When you make your monthly payment, you will not only pay the interest for the previous month, but you will also pay a little towards the principal as well.  

We are here to help!

Here at The Cash Flow Company we want to make sure that you have everything you need to be successful. By further understanding the lending process, you will save both time and money!  It is important that you feel comfortable with this process so you can do more deals, and make more money! Contact us today to find more about How Interest Payments Work in Real Estate

Watch our most recent video to learn more about: How Interest Payments Work in Real Estate

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Personal Credit vs Business Credit: When and Where to Start

Here at The Cash Flow Company we have seen so many people become overwhelmed and confused by credit! Alex Erlich, a credit advisor and educator, is joining us today to discuss personal credit vs business credit with a focus on when and where to start. Don’t let the numbers overwhelm you! We are here to help walk you through the process!  

The importance of planning ahead!

In order to be successful in real estate investing it is important that you plan ahead. There is a common expression stating that “you should always get things before you need them, because when you most need them you’re least likely to get them.” This is especially true in real estate investing. Investors who got lines of credit a few years ago will be at a greater advantage than those who are trying to get them now. Those who apply now will need to be in a better position with their personal credit in order to be approved for the same products. 

Separating personal and business credit.

By separating personal and business credit, it will prevent further strain on your personal credit, increase loan eligibility, and create more leverage. What exactly do we mean by leverage? Leverage is how much you are eligible for and what it looks like on paper. Leverage is the King in real estate. Having more leverage allows for more opportunities, not only your business, but for your personal life as well. 

The ideal Credit Score

MyFico.com is the best place to obtain credit score information. This site not only provides an overall credit score, but it also separates scores into 40 different categories. It can be an information overload, however, by going straight to the source it provides you a cost free and spam free way to gather all of the information you need. So what is the ideal credit score that lenders are looking for? The ideal credit score range should be between 680 and 720. However, with the current economy, banks are increasing their minimum requirements to 720 and above. How do you get from 680 to 720? We can help you discover ways to improve your scores quickly to get you back in the game.

Don’t let your personal credit score impact your business success!

The faster you can separate your personal credit from your business credit, the better your personal credit score will be. We can guide you through the steps. From establishing your business, to finding the right business credit cards, and even providing a 911 loan, we have the tools to help you win.

Contact us today to find out more about setting yourself up for success.

Watch our most recent video to find out more about Personal Credit vs Business Credit: When and Where to Start

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