What Are Interest-Only Loans?

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Interest-only loans are a unique way to borrow money, especially for real estate investors or homebuyers looking for flexibility. With these loans, you pay just the interest for a set period, usually 5 to 10 years, before switching to payments that include both principal and interest.

Why would someone want this? Imagine you’re flipping a property. You plan to renovate and sell it quickly. An interest-only loan keeps your monthly payments low, freeing up cash for the project. Or maybe you’re renting out a property. Lower payments can help you maximize cash flow in the early years while you build equity.

For example, let’s say you borrow $200,000 with a 6% interest-only loan. Your monthly payment would be just $1,000 (6% of $200,000 divided by 12 months). Compare that to a traditional loan with principal and interest, your payment could be $1,200 or more. Those savings can make a big difference when every dollar counts.

But, there’s a catch. After the interest-only period ends, your payments will go up, sometimes a lot. That’s why it’s important to have a solid plan for what comes next.

Interest-only loans aren’t for everyone, but when used wisely, they can be a great tool to reach your goals. Want to know if this type of loan fits your situation? Keep reading for the pros, cons, and how to decide.

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Real Estate Investors: How to Control Your Interest Rates in 2025

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Today we are going to discuss how to control your interest rates in 2025. Interest rates play a big role in your real estate success. Whether you’re flipping properties or building your rental portfolio, knowing how to manage interest rates is a game-changer. Let’s dive into how you can make interest rates work for you in 2025 using strategies straight from real-world examples.

How Rates Impact Fix-and-Flips

Interest rates can make or break your ability to sell a property. Here’s how they affect your buyers and your profits:

Example: Rates and Affordability

Imagine a consumer shopping for a home at today’s rate of 7.12%. At that rate, they might afford a $400,000 house. But if rates drop to 6.12%, their affordability jumps to $440,000 — a $40,000 difference. If rates drop further to 5.5%, they could afford a $490,000 home.

The larger the buyer pool that can afford your property, the more competition you create. That competition helps you sell faster or for a higher price.

Strategy: Buy Down the Rate

If rates are high, you can buy down your buyer’s rate to make your property more attractive. For example:

  • A $440,000 property might cost you 2.5% of the loan amount to buy down the rate.
  • With a loan amount of $352,000 (80% of the purchase price), the cost to buy down the rate is around $8,800.

This investment can save you from dropping your price by $20,000 to $40,000 just to attract buyers. You keep your profits high while expanding your buyer pool.

How Rates Impact Rental Properties

For rental investors, interest rates directly affect your cash flow and your ability to qualify for loans.

Example: Local Banks vs. DSCR Loans

Let’s say you need a $250,000 loan for a rental property. At a 7% rate on a DSCR loan, your monthly principal and interest (P&I) would be $1,664.

But local banks and credit unions often offer lower rates, like 5.5%, for short-term fixed loans. At 5.5%, your payment drops to $1,458, saving you over $200 per month. That’s extra cash flow in your pocket or the difference between qualifying for a loan or not.

Strategy: Match Your Loan to Your Market

If you expect rates to drop in a few years, a short-term fixed loan from a local bank can be a great option. You lock in a lower rate now and refinance later if rates improve. This strategy keeps your rental property profitable and cash-flow positive, even in a challenging market.

Crush It in 2025!

2025 might bring steady interest rates between 5.5% and 7.5%. Instead of waiting for rates to drop, you can take control:

  1. For flips: Buy down rates to increase affordability and attract more buyers.
  2. For rentals: Explore local bank options for lower rates and better cash flow.

Understanding interest rates and using these strategies puts you ahead of the game. The bigger your buyer pool or rental margin, the more money you’ll make. Let’s make 2025 your most profitable year yet!

Have questions or need guidance? Reach out to learn how to optimize your rates and deals. We’re here to help!

Watch our most recent video to find out more about: Real Estate Investors: How to Control Your Interest Rates in 2025

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Why Loan Terms Matter for Real Estate Investors

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Why do loan terms matter for real estate investors? Loan terms can make or break your real estate investment. They decide how much you’ll pay each month and how quickly you’ll see profits. For investors, understanding loan terms is key to making smart choices.

Imagine you’re flipping a house. A short-term loan with high monthly payments might eat into your profit if the flip takes longer than expected. On the other hand, a rental property might benefit from a longer-term loan with lower payments, freeing up cash flow.

Here’s another example: Two investors borrow $100,000. Investor A has a loan with a 15-year term and a 5% interest rate. Investor B has a 30-year term at the same rate. While Investor A pays off the loan faster, their payments are much higher. Investor B pays less each month, which can free up money for other investments.

The right loan terms depend on your goals. Are you looking to flip and move on quickly? Or do you want steady cash flow from a rental? Knowing how terms affect your costs and profits can help you plan better deals.

Loan terms might seem like a small detail, but they’re the foundation of a successful investment. In the world of real estate, every dollar counts. Choosing the right terms means keeping more of those dollars in your pocket.

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How can you maximize your profits as a real estate investor? Contact us today to find out more!

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We also have free tools available! Download the Loan Cost Optimizer to see which loan is best for your investment property.

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Apartment Buildings as Investment Properties

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Apartment buildings can be a game-changer for real estate investors. They offer a way to earn consistent cash flow and build long-term wealth. Whether you’re new to real estate or a seasoned pro, apartments can open up new opportunities.

Take this example: A small 6-unit apartment building in a growing neighborhood. Each unit rents for $1,000 a month. That’s $6,000 in monthly income! Of course, you’ll have expenses like a mortgage, maintenance, and taxes. But after those, the profit can still be solid.

Apartments are also great because they spread out risk. If one tenant moves out, the others can help cover costs. Compare that to a single-family home, when it’s empty, you’re paying all the bills yourself.

Plus, apartments let you scale up faster. With one property, you can manage multiple income streams instead of juggling several separate houses. That can save time and money.

Investing in apartments isn’t just about money, it’s about smart strategy. They work best in areas with high demand for rentals, like near colleges or bustling city centers. Start small and learn as you go.

If you’re looking to grow your portfolio, apartment buildings might be the next big step. They’re not without challenges, but the rewards can be well worth it.

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How can you maximize your profits as a real estate investor? Contact us today to find out more!

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We also have free tools available! Download the Quick Deal Analyzer to see if your potential rental property is going to be a good investment!

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Conventional vs DSCR Interest Rates

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When it comes to real estate investing, understanding interest rates can make or break your deals. Whether you’re financing a rental property or a fix-and-flip, it’s essential to know the difference between conventional vs DSCR (Debt Service Coverage Ratio) interest rates. Let’s break it all down so you can stay ahead of the game.

What Impacts Interest Rates?

You may have noticed that even when the Federal Reserve cuts rates, mortgage rates don’t always follow. Why? It all comes down to supply and demand in the market.

  • DSCR Rates: These track closely with the 5-year treasury note.
  • Conventional Rates: These are tied to the 10-year treasury note.

Both types of loans adjust based on market conditions, not directly on Fed decisions.

How to Track DSCR and Conventional Rates

Knowing where rates are headed is key to timing your deals. Here’s how you can stay informed:

DSCR Rates

DSCR loans rely on the 5-year treasury rate, with an added margin. For example, if the 5-year treasury rate is 4.2%, and lenders add 2.75%, your DSCR rate would be around 7%.

  • Example: The 5-year treasury peaked at 4.64% recently but is now in the 4.2–4.3% range. If you’re ready to lock in, this can make a big difference in your payment.

Conventional Rates

Conventional loans follow the 10-year treasury rate, with margins that vary. Typically, lenders add about 2–2.5 points, though it can go higher.

  • Example: If the 10-year treasury rate is 4.41%, conventional rates might range from 6.5% to 7% depending on market conditions and lender fees.

Why Timing Matters

Rates don’t stay still—they move up and down daily, sometimes by 10 to 20 basis points. This is why being ready to lock in during a micro dip can save you thousands.

Micro Dips in Action

When the 5-year treasury dips, DSCR rates follow. For instance:

  • September Example: After rates hit a high, a brief drop occurred as the market believed inflation was under control. But when traders realized inflation wasn’t tamed, rates bounced back up.

The same goes for conventional loans, where dips depend on shifts in the 10-year treasury.

Tools to Stay Informed

You don’t need to monitor rates all day. Here’s how to stay in the loop:

  1. Check Online: Search “Today’s 5-year treasury rate” or “Today’s 10-year treasury rate” on MarketWatch or similar sites.
  2. Subscribe to Reports: The Cash Flow Company’s weekly Mortgage Report keeps you updated on DSCR and conventional rates.
  3. Use Alerts: Sign up for tools like our A-List, where you’ll get notified when rates hit your target.

What’s Ahead for Rates?

In the next year, expect fluctuations:

  • DSCR Rates: Likely to hover between the mid-6% to low-7% range.
  • Conventional Rates: May stay between high-5% to low-7%, depending on inflation and the economy.

This means staying proactive and informed is crucial for locking in the best deals.

Final Thoughts

Interest rates are more than just numbers—they’re the key to cash flow, affordability, and the success of your investments. By tracking treasury rates and timing your loans during dips, you can optimize your deals and maximize your returns.

If you’re unsure where to start, tools like our Mortgage Report and A-List we are here to help.

Ready to learn more? Check out our Investor Mortgage Report for the latest investor forecast for 2024.

Watch our most recent video to find out more about: Conventional vs DSCR Interest Rates

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Set your business up for success!

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Starting a business but not sure where to start? Today we are going to discuss 5 simple steps to set your business up for success! 

First: Personal credit

Set your personal credit up for success by focusing on the areas that need improvement.

Second: Define the business

Decide what the business is and how many businesses you want.

Third: Pick a name

Decide the name the business and decide if you want a parent company. A parent company will not only simplify things, but it will also smooth things out for the banks for future financing needs.

Fourth: Create an EIN

Register the company with the secretary of state. Setting this up correctly will ensure that the company is seen as a business to both lenders and clients.

Fifth: Set your goals

Be clear with your goals! Determine where you want to go with your business. This needs to be done first and foremost when starting up a new business.

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Set your business up for success today? Contact us today to find out more!

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We also have free tools available! Download the 5 ways to start a business with $0 to find out more about starting a business.

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Visit our YouTube channel to learn more about real estate investing and how you can maximize your profits! 

Learn more!

Visit our YouTube channel to learn more about real estate investing and how you can maximize your profits! 

 

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Real Estate Investing: How Important Is Your Credit Score?

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Many real estate investors ask “how important is your score?” when looking at financing options. In a nutshell, your credit score is like your real estate reputation. It tells lenders how trustworthy you are when it comes to paying back loans. But how much does it really matter in real estate investing? The answer: it depends on your goals and the type of loans you need.

Financing Options:

For example, if you want a traditional mortgage, your credit score plays a big role. A high one could mean lower rates and better terms. But if you’re using a loan like a DSCR (Debt Service Coverage Ratio) loan, lenders focus more on the property’s income than your personal credit.

The Power of Cash Flow:

Let’s say you’re buying a rental property with solid cash flow. Even if your score isn’t perfect, a DSCR loan might still work for you. On the flip side, if you’re planning to fix and flip homes, hard money lenders may prioritize the deal itself over your credit.

Save Money Today:

While your credit score isn’t everything, it can save you money. Higher ones often unlock lower rates, meaning smaller payments over time. But don’t let a low score stop you. Real estate investing has many paths, and you can find one that fits your situation.

So, how important is your credit score? It depends on the path you take, but knowing where you stand is always a smart first step.

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How important is your credit score based on your investment goals? Contact us today to find out more about common mistakes and how you can get back on track.

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We also have free tools available! Download the Credit Score Checklist to see if your credit score is in the right place for your investment needs.

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Visit our YouTube channel to learn more about real estate investing and how you can get on the fast track to success! 

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How to Get Ready for Rate Drops

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Today we will be discussing how to get ready for rate drops., and why staying ahead of rate changes is crucial for real estate investors. Whether you’re focused on DSCR loans or conventional loans, being prepared for even small dips in interest rates can save you thousands. Here’s how to stay ready and informed, so you can lock in the best rates at the right time.

Understand What Drives Interest Rates

It’s a common misconception that the Fed Funds Rate directly affects mortgage rates. While it plays a role, investor loans, including DSCR and conventional loans, follow different patterns:

  • DSCR Loans: These are closely tied to the 5-year Treasury rate.
  • Conventional Loans: These track the 10-year Treasury rate.

For example, if the 5-year Treasury rate is at 4.3%, a competitive DSCR loan rate might add about 2.75%, making it just over 7%. Similarly, a 10-year Treasury rate of 4.4% could translate to a conventional loan rate around 6.5% to 7%, depending on lender margins.

Why Rates Fluctuate

Rates are driven by supply and demand in the bond market. When the government issues more treasuries, buyers often demand higher returns, which raises rates. Inflation also plays a big role. If inflation feels out of control, the market adjusts, pushing rates higher.

For instance:

  • In late 2023, inflation concerns caused a jump in 5-year and 10-year Treasury rates, which directly impacted DSCR and conventional mortgage rates.

Monitor Treasury Rates Regularly

To predict mortgage rate trends, keep an eye on Treasury rates. Here’s how:

  1. Search Online: Type “today’s 5-year Treasury rate” or “today’s 10-year Treasury rate” into Google. Look for up-to-date information from sites like MarketWatch.
  2. Review Trends: Check the charts to see recent movements. For example, a drop from 4.6% to 4.3% in the 5-year Treasury could signal a favorable moment to lock in a DSCR loan.
  3. Add the Spread: Use simple math to estimate loan rates by adding the standard spread:
    • DSCR Loan: Add 2.75% to the 5-year Treasury rate.
    • Conventional Loan: Add about 2–3 points to the 10-year Treasury rate.

Be Ready to Act During Micro Dips

Interest rates for DSCR loans often experience brief drops, or “micro dips.” These dips may last only a few days or weeks, so preparation is key.

For example:

  • If DSCR rates dip to 6.5% from 7%, you’ll want to lock in immediately. Waiting could mean missing out on significant savings.

Tools to Stay Prepared

Here are a few strategies and resources to help you stay ahead:

  1. Sign Up for Alerts: Services like The Cash Flow Company’s A-List notify you when rates hit your target. For example, if you’re waiting for a 6.2% DSCR rate, you’ll get an alert when it’s available.
  2. Weekly Mortgage Reports: Subscribe to a weekly update that tracks rate trends for DSCR and conventional loans. This keeps you informed without having to check daily.
  3. Monitor Markets: Use tools like Google and MarketWatch to track 5-year and 10-year Treasury rates. Even small daily changes can make a difference.

What to Expect in 2024

Experts predict rates will remain in a narrow range over the next year:

  • DSCR Rates: Likely between 6%–7.5%.
  • Conventional Rates: Expected to stay between 5.5%–7.5%.

While rates will fluctuate, being prepared to act during a dip will give you the edge.

Ready to Lock in Your Rate?

Taking the time to monitor rates and understand their trends will help you maximize your cash flow. Whether you use tools like our A-List or track Treasury rates yourself, preparation is everything. Remember, even a small dip can make a big impact on your bottom line. Stay informed, act quickly, and get ready for the opportunities ahead.

By staying proactive and monitoring the market, you can ensure you’re always one step ahead. Ready to learn more? Sign up for our weekly mortgage report or join the A-List today!

Watch our most recent video to learn more about: How to get ready for rate drops.

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How can a HELOC help you?

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How can a HELOC help you? A HELOC, or Home Equity Line of Credit, is like having a financial tool in your back pocket. It helps you tap into your home’s equity and use it for things that matter most. Whether you’re upgrading your property, tackling unexpected expenses, or funding your next investment, a HELOC gives you flexibility.

Imagine this: you’re an investor who spots a great deal on a rental property. You don’t want to miss out, but you need funds fast. With a HELOC, you can pull cash from your primary home’s equity to close the deal. Or maybe you’re fixing up a property to flip—using a HELOC for renovations can help you add value without taking on high-interest debt.

The best part? You only pay interest on what you use. So, if you open a HELOC for $50,000 but only spend $20,000, you’ll only pay interest on that $20,000. It’s a flexible and cost-effective way to access funds when you need them most.

In short, a HELOC can be your secret weapon to grow your investments or cover life’s big expenses without straining your budget. Ready to see how it could work for you?

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Is a HELOC right for you? Contact us today to find out more and learn about your different financing options.

Free Tools For You! 

We also have free tools available! Download the HELOC Questionnaire to see if a HELOC is right for you.

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Real Estate Market: What’s Happening with Interest Rates?

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Today we are going to discuss what’s happening with interest rates. Interest rates are the heartbeat of the real estate market, and they’ve been anything but predictable lately. Whether you’re an investor eyeing DSCR loans or tackling fix-and-flip projects, understanding rate trends is key to making smart moves. Let’s dive into what’s driving these shifts, how to keep track, and what it all means for your next investment.

Why Are Rates So Unpredictable?

You may have heard about the Federal Reserve cutting interest rates. However, those cuts don’t directly lower real estate loan rates. Instead, the real estate market relies heavily on treasury yields.

  • DSCR loans align with the 5-year Treasury note.
  • Conventional loans follow the 10-year Treasury note.

This means your rates depend on how these treasuries perform, not just on what the Fed decides.

What’s Happening Right Now?

DSCR Loans: Small Dips, Then Jumps

DSCR loan rates have seen slight drops, or “micro dips”, lasting a week or two before climbing again. These rates typically start with the 5-year Treasury yield and add about 2.75%.

For example:

  • If the 5-year Treasury is 4.3%, DSCR loan rates may land around 7% for 75-80% loan-to-value (LTV) loans.

Conventional Loans: Higher Add-Ons

Conventional loans, commonly used for fix-and-flip projects, work similarly. Add about 2-3 points to the 10-year Treasury rate to estimate rates.

For example:

  • A 10-year Treasury yield of 4.41% could result in rates around 6.5% to 7.5% for borrowers.

Why Are Rates Moving This Way?

Two key factors drive rate changes:

  1. Inflation Worries
    Investors in treasuries expect higher yields when inflation feels uncertain. This increases borrowing costs for everyone.
  2. US Treasury Supply
    As the government issues more treasury bonds, buyers demand higher interest rates. The market adjusts to balance supply and demand.

What’s Next for 2024?

Experts expect rates to bounce within a predictable range:

  • DSCR Loans: Mid-6% to low-7%.
  • Conventional Loans: High-5% to mid-7%.

If you’re investing, watch for those micro dips. When they happen, it’s time to lock in a rate quickly.

How to Monitor Rates

Want to track interest rates like a pro? Here are two simple ways:

  1. Check Treasury Yields
    Search for “today’s 5-year Treasury rate” or “10-year Treasury rate” on Google. Websites like MarketWatch show up-to-date rates and trends.
  2. Sign Up for Weekly Updates
    The Cash Flow Company offers a free Mortgage Report to help investors track changes. We even notify you when rates hit your target.

Be Prepared for Rate Fluctuations

Interest rates are unpredictable, but that doesn’t mean you have to be caught off guard. By tracking trends and understanding the factors, you can make smarter decisions for your real estate investments.

Want to know when rates hit your sweet spot? Join our A-List, and we’ll notify you when they do. Sign up below to stay in the know!

Take Control of Your Investments Today.

Stay informed, act quickly, and secure the best rates for your deals. Let’s make 2024 a successful year together!

Watch our most recent video to find out more about: Real Estate Market: What’s Happening with Interest Rates?

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