Does Credit Score Matter in a Bad Real Estate Market?

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When the real estate market tightens up, you might ask “does credit score matter anymore?” The answer is YES! Credit score matters now more than ever.

Once you’ve been in the business for as long as we have, you start noticing patterns. The investing world goes through cycles every few years where things tighten up before flowing normally again. 

However, a ‘bad market’ doesn’t necessarily mean bad news. 

If you’ve prepared beforehand, you can actually take advantage of the challenging landscape to build some wealth.

What is a ‘Bad Real Estate Market’?

Essentially, what’s happening right now is banks are tightening up. This means most are lending out less money, making it harder for investors to get the money they need.

This also means that, over the next 6-9 months, people are going to be getting rid of some properties and fewer people will be buying.

If this sounds like bad news, don’t worry. If you’re ready for these market changes, it can actually be the perfect time for you to buy. 

Get Your Credit Score in Line

In the past, 660-680 used to qualify you for an okay loan. Not anymore! As lenders tighten up, most will be looking for scores closer to 750-799+. 

Lenders are depending more and more on credit scores. Make sure your credit score isn’t holding you back!

If you’re using personal credit cards for your investing projects (using them to buy supplies, pay vendors, etc.) stop now! 

Personal credit cards aren’t made for that level of usage, and most cards will drop your credit score if you’re using too much of your balance on a regular basis.

This can lead to a significant usage issue. There are two things you can do to help fix this problem:

Once you raise your credit score, make sure you maintain it. Since lenders look so closely at your score, you should too!

 

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Why business credit cards make real estate investing easier

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Why business credit cards make real estate investing easier

70%-80% of investors are overwhelmed with business expenses and are resorting to using their personal credit. By using personal credit cards for business expenses, investors are jeopardizing their credit score and endangering the success of their business. How can you get your personal credit in good standing and back on track? What can you do to stabilize your business expenses? The answer to both of these questions is business credit cards. Let’s look closer at how they can make your life easier.

First, personal credit scores are no longer taking the hit.

While personal credit cards are easily accessible, they make life more complicated for investors. Whether it’s a fix and flip, or a rental property, expenses can easily add up and jeopardize your credit score. Putting expenses on personal credit cards drives down your score due to the utilization rate. This in turn makes everything harder, from trying to apply for a loan, to putting more money into the investment. The ultimate solution is business credit cards because they do not impact your credit score, nor do they have the same utilization rate restrictions. This is a simple step that every investor should be taking to alleviate future strain on personal credit scores.

Second, making things easier, faster, and cheaper

How can you make things easier, faster and cheaper for your business? The answer once again is applying for and using business credit cards! Once a card is established, you can start moving expenses over to consolidate balances, thus making your life easier. They have the same benefits as personal credit cards if not more! By using them more often and making payments in chunks, investors are able to increase their credit limits quickly. In doing so, personal credit scores will increase and create more leverage for additional loans, as well as create better funding options. 

Third, we are here to get you on track.

In having better credit scores, it then opens the door to endless possibilities that will create wealth. We can help you by providing a usage loan that can be used to pay down personal credit cards. With the utilization rate then decreased, your credit score will increase, allowing you to make the switch. We can help guide you through the entire process from setting up your business correctly, to researching credit cards, and provide usage loans to get you back on track. Don’t wait for corporate credit to take effect! Call or message us today to find out more.

Watch our most recent video to discover more about the importance of business credit cards and how we can help guide you to success.

 

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Why Do You Need Debt?

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Although most people spend years trying to get rid of it, you actually need debt to keep your score alive.

Especially in the real estate industry, your credit score plays a huge role in the success of your investing. We see many investors (especially ones who are new to the game) struggle with some common issues:

  • Forgetting to pay bills on time
  • Overusing credit cards
  • Not using enough credit or not having any debt

Cultivating and maintaining a healthy score is a fine balance between creating debt and paying bills.

Why Do You Need Debt?

Without some debt, FICO doesn’t recognize you. Without debt, even if you try and calculate your score, you can only get a low one.

This isn’t helpful when you’re trying to purchase investment properties.

Essentially, debt allows your score to exist and gives it the chance to be high—you just shouldn’t owe anyone too much money, and you need to pay your bills on time.

Consequences of a Bad Credit Score

If you end up with no debt, your credit score is likely to drop (or disappear altogether for a while). 

With a low credit score, you can expect higher interest rates on your house, car, and any other loans you hope to take out. 

This makes you lose money fast and can get in the way of your investing or even your retirement. 

Consequences of a Good Credit Score

In contrast, if you have a high credit score, you can look forward to cheaper interest rates and lower bills. 

This makes it far easier to create successful income from real estate investing.

Additionally, if you maintain a high score, you’re more likely to build positive relationships with lenders and grow your business more quickly.

 

Read the full article here.

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The ABC’s of DSCR loans: What every investor should know

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The ABC’s of DSCR loans: What every investor should know 

Do you need additional income for rental properties without the hassle of tons of paperwork or long processing times? Let’s take a closer look at the ABC’s of DSCR loans and how they can help. There is no need for employment history, and better yet there are only a few factors that are needed to qualify. DSCR, also known as the debt service coverage ratio, calculates whether or not a property breaks even or better yet, has a positive cash flow. These investors only loans are not only simple to apply for, but they can also be used for properties that have 1 to 4 units. Larger unit sizes can also apply, however, there are normally only a few available. DSCR loans are an excellent way for investors to get a 30-year product without worrying about how long they have been in business, their income, or even their business income. 

What three factors impact DSCR loan approval? 

1. Income from the property

The main factor that impacts an approval for a DSCR loan is income. When an investor is buying a property, the lenders will look at personal income, business income, or both. In almost all cases, lenders require two years of taxes showing a businesses income prior to approval. If you are a new investor, or like to write everything off, you will not meet the necessary requirements to apply. This is where a DSCR loan comes into play. The only thing that is taken into account, is whether or not you are going to break even with the rental property. The lenders will then look at the mortgage payments, property taxes, property insurance, HOA, and flood insurance to determine if you are eligible.

2. Your personal credit  

Especially in the real estate industry, your credit score plays a huge role in your success as an investor. Here at The Cash Flow Company, we see investors who struggle to pay bills on time, overuse credit cards, and don’t use enough credit. This greatly affects your personal credit scores. What can you do to get things turned around? The most important thing is to separate your personal credit from your business expenses to raise credit scores. In turn, it will allow for better rates with better terms for future investments. 

3. Loan to value

The loan to value, or LTV, is the amount of the mortgage compared to the value of the property. Most DSCR loans have a max LTV set to 80% for purchase, as well as rate and term refinances. This percentage then changes to 75% LTV for cash out refinances.  LTV’s can go 5% higher with the right factors, but investors should expect to pay a higher rate. In summary, the lower the loan to value, the less risk for the lender.

DSCR loans are incredibly helpful for investors who need additional income for rental properties. Not only are they fast and easy to apply for, but they also allow you to apply before your investment property is up and running. This is done by appraising properties in the current market and estimating the rent. In doing your research and estimating your cash flow, the sky’s the limit for success! Would you like to find out more and see if DSCR loans are right for you? Use our DSCR calculator to see the impact a DSCR loan can have on your investments.

Find out more about DSCR loans by watching our most recent video. 

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Why real estate investors need to understand escrow?

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Why real estate investors need to understand escrow?

Real estate investors need to understand escrow for their business to be successful. Escrow is a portion of the loan that a lending company puts aside for repairs on the property. As a real estate investor, you need to understand the rules and regulations of the lender in regards of Escrow, in order to save both time and money.  When investors understand escrow, and what they are responsible for, it can ease their frustration, prevent a finance wall, and establish a foundation for cash flow.

1.Understand the rules of escrow

As a real estate investor, you need to understand escrow by researching the rules and regulations for your lender. Any misunderstandings can very easily stall or even jeopardize a project. Investors also need to construct their budget beforehand, to ensure that they stay within it during the process. There is no flexibility after the amount is approved by the lender. Without the ability to expand the Escrow, any additional expenses will come out of your pocket instead.  

2.Begin repairs to receive escrow

Lenders allocate a set amount to not only purchase a property, but also to fix it up in order to get it market ready. The only way to access Escrow funds when buying a fix and flip, or an undervalued rental property, is to submit proof. These can be in the form of receipts, photos, and other documentation sent to your lender to show that repairs are underway. 

3. Optimize profits by using escrow correctly

When real estate investors understand escrow, they can optimize profits and avoid missing the market when it’s “hot.” This is achieved by taking into account all repair costs, having the money set aside to complete repairs, and completing the work quickly. Remember the longer you’re on hold, the more it will cost you, plus it will delay paying contractors. By understanding the importance of cost and timeline, it will result in a larger profit. 

So, what are the other Major Roadblocks that cause burn out, financial hemorrhaging, and unfortunately defeat? 

Watch our latest interview to discover more about the 5 Major Roadblocks

Want more information on real estate investment roadblocks or have any other questions? Contact us today!

 

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Why You Should Fix Your Credit Score for the Current Market

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If you’re stuck with a bad credit score, a 911 loan could help you fix your credit to thrive in this competitive market.

One of the most common issues of investors we talk to is low credit score.

In the real estate world, when the Fed tightens everything up (as they have done recently), credit scores become more and more important. This means that the threshold of what qualifies as a “good” credit score goes up, and it’s almost impossible to get a loan if you don’t meet that threshold.

How can you fix that quickly so it doesn’t tank your investments?

The Changing Economic Landscape

Everyone used to have options. If your credit score was a little low, it was alright; you could still find someone willing to lend to you without too much penalty.

In recent years, things have shifted.

As the Fed tightens up, there’s less money going around, meaning banks don’t have as much money to lend as they used to. 

How do they solve this problem? 

They raise the requirements for getting a loan.

Now, instead of being minorly penalized for a low credit score, some people are finding it difficult to find loans at all. And some of the loans they do find are smaller and have significantly higher rates.

Some banks may not even look at your loan application if you don’t meet their credit score requirement. Therefore, to survive in this market, you need to fix your credit score.

Understanding Your Credit Score

The 2 largest factors that make up your credit score are payments and usage.

  • Payments look at whether or not you’re paying on time. 
  • Usage looks at how much of your total possible balance you’re using each month.

For example, if your usage limit is $10,000, and you’re frequently using $7,000 of that, you have 70% usage.

Ideally, FICO wants to see you using about 20%-30% of your available credit. Any higher than that, and you become riskier for the banks.

Especially when you’re beginning as a real estate investor, it can be so easy to rack up the usage: getting supplies at Home Depot, paying contractors, etc.

It’s all-too-common to see people have $50,000 or $100,000 on maxed out credit cards.

This is where a credit 911 loan comes into play to pay down debt.

How Can I Set Myself Up to Avoid Needing a 911 Loan?

The root of this problem is almost always using personal credit cards for business-level needs. 

Getting the right business credit card in the name of your investing company has a number of benefits:

  • It won’t report to your personal credit if you pay on time.
  • They don’t penalize high usage.
  • Some business cards even reward running up a larger balance.
  • Even if your business is brand new, if you apply for a business credit card with a high personal credit score, you’ll likely be approved.

We’ve partnered with Nav to help you find a business credit card that works well with real estate investing. 

As with a personal card, you can find cards that offer perks and rewards that appeal to you. Just make sure you look for ones that 1) don’t report to your personal credit and 2) like high usage.

Our goal is to help you fix your credit score and get your business in order so that you never need a 911 loan again!

 

Read the full article here.

Watch the full video here:

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How to Fix a Bad Credit Score

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Your credit score is powerful. A bad score can take you from making it big to losing a lot of money.

Especially in the real estate industry, your credit score plays a huge role in the success of your investing. We see many investors (especially ones who are new to the game) struggle with some common issues:

  • Forgetting to pay bills on time
  • Overusing credit cards
  • Not using enough credit

Cultivating and maintaining a healthy score is a fine balance between creating debt and paying bills.

Why Do You Need Debt?

Without some debt, FICO doesn’t recognize you. Without debt, even if you try and calculate your score, you can only get a low one.

This isn’t helpful when you’re trying to purchase investment properties.

Essentially, debt allows your score to exist and gives it the chance to be high—you just shouldn’t have too much debt, and you need to pay your bills on time.

Consequences of a Bad Credit Score

If you end up with no debt, your credit score is likely to drop (or disappear altogether for a while). 

With a low credit score, you can expect higher interest rates on your house, car, and any other loans you hope to take out. 

This makes you lose money fast and can get in the way of your investing or even your retirement. 

Consequences of a Good Credit Score

In contrast, if you have a high credit score, you can look forward to cheaper interest rates and lower bills. 

This makes it far easier to create successful income from real estate investing.

Additionally, if you maintain a high score, you’re more likely to build positive relationships with lenders and grow your business more quickly.

What Can I Do About a Bad Credit Score?

This is where companies like us or Hard Money Mike come in.

If your score has dropped because of late payments, the best way to fix that is simply time. However, if it’s low from over-usage, you have some options!

Usage Loans

So long as you are paying your bills on time and have a small amount of debt that keeps your credit score active, you can fairly easily raise your credit score with a usage loan.

We offer emergency usage loans here at The Cash Flow Company to raise your score FAST.</span>

Business Credit Cards

If you’re using personal credit cards for business-level investing, it’s time to re-evaluate. 

Real estate investing simply requires more usage than personal credit cards are designed to reward. Business cards, on the other hand, typically like higher usage.

If this is new to you, we have many resources to help you find the right business card for you.

Next Steps

We’re always happy to walk you through the ins and outs of navigating your credit score.</span>

Having a healthy score is accessible to nearly everyone with the right coaching and tools. If you’re struggling with low credit, talk to us, and we’ll be happy to discuss your options.

As always, let us know if you have questions about credit scores, usage loans, or business credit cards. You can reach out to us at Info@TheCashFlowCompany.com or fill out a contact card.

Happy investing!

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80% of Real Estate Investors fail at taking this step

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80% of Real Estate Investors fail at taking this step:

A looming problem that 70%-80% of investors are facing today, is the effect that business expenses are having on their personal credit. How can you make things easier, faster and cheaper? The answer is applying for and using business credit cards! This is a simple step that every investor should be taking to alleviate future strain on personal credit scores. In having better credit scores, it then opens the door to endless possibilities that will create wealth. Let’s look closer at how business credit cards can make your life easier both on the personal side, as well as on the business side.

1. What impacts investors’ personal credit score?

High credit scores are important for investors because it creates the leverage and funding they need to grow their business. Almost every investor runs up their personal credit card balance, by putting too many business charges on them. Thus, jeopardizing their personal credit score due to their credit utilization rate. For personal credit cards, MyFico only allows for a 20% utilization rate before it impacts your credit score. However, business credit cards do not have the same restrictions. Instead, you are able to use the entire credit limit without having to worry. In having better credit scores, it opens the door to endless possibilities that will create wealth.

2. What are the benefits of getting a business credit card?

Business credit cards are the most important thing that investors can do to ensure success. They not only provide funding, but also the leverage required to create further growth. Many investors have heard of corporate credit and have taken the steps to get started down that path. Unfortunately, this option results in years of hard work and multiple steps before any progress can be made. Business credit cards on the other hand, are quick to set up, extremely flexible, and most importantly they will not impact your credit score. Eliminate the cash crunch by separating your personal credit from your business.

3. How do low credit scores impact acceptance?

One challenge that many investors have, is that their personal credit is too low to apply for a business credit card. In this case, they need to pay down their credit card balances by using their savings, or they can take out a personal loan. How can real estate investors repair their credit score and help grow their business? By applying for a usage loan, investors can pay off credit card debt quickly and easily. This in turn allows them to qualify for fix and flip loans, DSCR loans, or other bank loans that can get the business back on track. 

4. What steps do you need to take to set up your business correctly?

The fourth and most important step is setting up your business properly. If it’s not, fix it now! In having your business set up correctly it will make it easier to access more lending options and increase your profits. How can you get on track and set up your business correctly? We are here to help by providing a 1-10 checklist for you to follow. This includes links to the Secretary of State, EIN information, and much more to help get the ball rolling. Our goal is to make it as easy and profitable as possible.

By using personal credit cards for business expenses, you are jeopardizing your credit score and endangering the success of your business. Do not join the 80% of real estate investors who fail. We can help guide you through the entire process from setting up your business correctly, to researching credit cards, and can even provide usage loans to get you back on track.

Watch our most recent video to discover more about the importance of business credit cards and how we can help guide you to success.

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How a Bank Collapse Impacts Real Estate Investors

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How a Bank Collapse Impacts Real Estate Investors

Without a doubt, banks are experiencing a significant decrease of money flowing into the lending pool. But, how does this impact investors? There are three main ways a bank collapse could impact real estate investors today. What are they? Let’s dive in and discover more!

Banks are Lending Less

Nowadays, banks are being forced to swim upstream in search of the “best of the best clients.” But what makes a perfect client? Well, it’s those who have more cash in the bank, more revenue, and higher credit scores.

Investors Book of Debt

To put it briefly, savings accounts and CD’s that were booked years ago at low percentages are experiencing a dramatic increase. What started at a monthly profit of 3% to 4%, has become a deficit of 5% to 5.25%. For this reason, investors are now upside-down on their assets.

Book of Business

Now, the notes that banks wrote 3 to 5 years ago, are now coming due. What started at 3%- 4% interest rates, has skyrocketed to 8%-10%. As you can see, lending is no longer in the forefront of banks’ minds in the traditional sense. 

How Investors are Managing the Lending Squeeze

So, what can real estate investors do? To start, they can prepare by making sure they have cash, high credit scores, and keeping up on projects. At this point and time, money and credit are going to be your keys to success. They are what will ensure you are in the game as rates continue to rise.  

Undoubtedly, there’s a bank collapse on the horizon. But as long as you’re aware of the situation and are willing to put in some work, you’ll be okay. Plus, we can guide you through a bank collapse by helping you improve your credit sores, increase your cash flow, and explore alternative lending options. Contact us today! 

Do you need more resources on how to navigate a bank collapse? Watch our most recent video to learn more!

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How to Fill Your Money Bucket For a Bad Market

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When the real estate market tightens up, you need to be prepared with leverage in your money bucket so you can take advantage of opportunities.

Once you’ve been in the business for as long as we have, you start noticing patterns. The investing world goes through cycles every few years where things tighten up before flowing normally again. 

However, a ‘bad market’ doesn’t necessarily mean bad news. 

If you’ve prepared beforehand, you can actually take advantage of the challenging landscape to build some wealth.

What is a ‘Bad Real Estate Market’?

Essentially, what’s happening right now is banks are tightening up. This means most are lending out less money, making it harder for investors to get the money they need.

This also means that, over the next 6-9 months, people are going to be getting rid of some properties and fewer people will be buying.

If this sounds like bad news, don’t worry. If you’re ready for these market changes, it can actually be the perfect time for you to buy. 

Filling Your Money Bucket

Since there’s going to be fewer loans coming out of banks, what can you do to make sure your finances are prepared for the shift in funding?

For every project, there is an amount of money that goes into it. We call it a bucket of money, or, your money bucket. 

Your money buckets needs to cover purchase, rehab, closing costs, etc. Part of that bucket comes from lenders, and part of it comes from you. 

If you’re a newer investor, don’t panic! Read on to learn how to build up that money.

Finding Money for Your Bucket

If you’re new to real estate investing, this is often the hardest part. However, there are many ways you can work to fill your bucket without needing to drain your personal bank account.

Obviously your lines of credit can be an asset to your money bucket, but Other People’s Money (OPM) is also important.

Ask around your friends, neighbors, family members, or investment clubs. Many of them could be interested in investing a few thousand dollars into a project with a secured return of 8-10%.

There are so many creative ways to help fill your money bucket from hard money, to lines of credit, to OPM. With more money in your bucket, you can do more transactions.

If you need help filling your personal bucket, reach out to us. We’ve coached many new investors through this process.

 

Read the full article here.

Watch the full video here:

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