What is Peer to Peer Lending For Real Estate Investing

Categories:

What is Peer to Peer Lending For Real Estate Investing

Today we are going to discuss peer to peer lending and why it’s beneficial for real estate investing. What is peer to peer lending? To put it briefly, it is one person lending to another person. By working with people within the community, it helps others who want to make better returns on their hard-earned money. Let’s take a closer look! 

Removing the middle man.

This form of lending has been around for centuries, long before formal banks were established. Nowadays banks are increasing their requirements and decreasing their lending. By using peer to peer lending, real estate investors no longer have to worry about meeting bank requirements. Instead, it removes the bank and reintroduces the human factor. Just to clarify, this doesn’t have to be done with family and friends, it can be anyone in your community. 

There is something for everyone.

There is something for everyone with peer to peer lending. Whether it’s $5,000 to $3,000,000, someone in the community has the money you need. For example, funds can be used for down payments, fix up costs, small business start up costs, and even used to cover the entire project! This form of lending provides more flexibility, simpler underwriting, faster closing, and no prepayment requirements. It’s an excellent option for real estate investors. 

How can you guarantee success? 

It is important that real estate investors protect their peer’s money by putting them in secure deals. To clarify, a secured deal is with real estate and cash flowing. The first step in creating a secured deal is closing with a Title company and proper paperwork. This protects both the real estate investor, as well as the peer, to ensure everything remains honest.  Most importantly, don’t gamble with your peer’s money. Pay them back as agreed and be truthful. In doing so it will establish a positive relationship that will ensure future deals. By doing these things, you’ll create a win-win situation. 

Make the lending switch today!

Every investor needs peer to peer lending! It’s a fast, cheap, and dependable funding option! 

Contact us today to find out how you can win in the real estate game.

Watch our most recent clip to find out more!

by

Peer to Peer Lending – Why You Need it NOW

Categories:

Peer to Peer Lending – Why You Need it NOW

Today we are going to discuss why you need peer to peer now! This form of lending allows you to work with people in the community who have just as big of a need as you do. In today’s market more people are looking for new sources to meet their needs. Let’s take a closer look.

Who are peer to peer lenders?

Whether they are in retirement and needing extra income, or have money in an IRA, these individuals are looking for a better investment.  These individuals are going through the same crunch as you are in this market. By switching these lenders can have anywhere between 6% to 8% secured while helping you with your investment needs. It creates a win-win for both people!

Changes with affordability.

We all know what is happening with affordability in today’s market. Banks are not only charging more than they have in years past, but they are increasing their requirements as well. The lending pie is now heavily dependent on your credit score, while taking the LTV and income into consideration as well. In looking at the changes in rates, DSCR loans are rising into the 9% and 10% range. Fix and flips have increased as well and are now into the 11% to 13% range. 

Benefit of taking out the middleman.

Peer to peer lending allows us to work directly with humans again by taking out the middleman. This form of lending has been around since before banks were established. Many good investors have a few relationships established already. This not only helps to provide funding, but it also creates the flexibility they need to close deals quickly. Additional benefits are flexible terms, no prepay requirements, simpler underwriting, and fewer closing costs. 

Do it right to succeed.

As a real estate investor it is important that you take the time to make everything secure. In doing so, you will create a good relationship with your lender. This relationship not only helps you financially, but it also creates the flexibility you need to succeed. Any investor or business owner should be looking at alternative lending! Whether it’s for a down payment or funding for an entire project, there is money available.

Don’t make it complicated

It is not uncommon for people to feel uneasy asking family and friends to become financially involved. Whether it is a family member, friend, or a complete stranger, the most important thing you need to do is put them in a good deal. If you are not diligent about this, then it will make things uncomfortable and puts a strain on relationships. What is a good deal? These are deals that have cash flow, or properties that will be easy to flip. Take your time, crunch the numbers, and make sure it is a good deal for both of you.

In conclusion.

As a real estate investor you need to set yourself up for success by finding peer to peer lenders within your community. Over the past few years we have seen things tighten up and become stricter. In doing so, it has created the perfect opportunity to reintroduce this alternative lending source. There are billions and even trillions of dollars out there that can be used for your lending needs! 

Contact us to find out more and how we can help you with your investment needs.

Watch our most recent video to find out more about Peer to Peer Lending – Why You Need it NOW.

by

DSCR Loans: What Does Interest-Only Mean?

Categories:

DSCR Loans: What Does Interest-Only Mean?

DSCR loans are excellent for real estate investors who are working with rental properties. In today’s unpredictable market, one of the best options for investors is an interest-only DSCR loan. This will provide more flexibility, greater cash flow, and the ability to purchase more properties. So what exactly does interest-only mean and is it right for you? Let’s take a closer look.

What is interest only DSCR?

Interest only loan products are loans where you are only paying on the interest that is owed on the loan. The principal on these types of loans never goes down unless you decide to put a  little money towards it. One thing to keep in mind with DSCR loans is that there are prepayment restrictions for the first 3 to 5 years. In most cases this means that you have a 20% cap during this prepay period. Paying a little extra doesn’t normally create an issue. It is just something that you need to keep in mind when working with an interest only loan.  

Example:

Loan amount: $200K

Rent: $1,700

DSCR ratio 1.1 

Loan Type Rate $200,000 x rate = annual interest Annual interest ÷ 12 = monthly payment Payment amount to mortgage company  Add the Taxes, Insurance, HOA, and Flood = $150.00 

This creates the Grand total for the month
Interest Only 8.25% $16,500 $1,375 $1,375 $1,525

One more step. Adding the DSCR ratio.

What you will normally find is that the interest only rates in this market will be a little higher than the amortized loan rate. However, we still have one more step before we can determine if you can qualify for the DSCR loan on this property. We will need to multiply the grand total for the month by the DSCR ratio. This will help us to determine if the property will qualify for a DSCR loan based on the current rent amount of $1,700. Just as a reminder, the rents are based on what is happening in the market and the assessments done by an appraiser.

DSCR ratio 1.1 Grand total for the month Grand total for the month x 1.1 = Difference after adding the  DSCR ratio and the $1,700 rent
Interest only $1,525 $1,677.50 Will qualify for DSCR

With DSCR loans you will have the flexibility of a 5, 7, or 10 year period. A DSCR interest only loan also provides an excellent opportunity for you to cash flow on the property. 

If you have any questions or want to run though the DSCR numbers, contact us today. We can help you compare a DSCR loan to an amortized loan. This will help you determine which is a better fit for your needs. 

Watch our most recent video to Discover Your Best Option: DSCR Loan – Interest Only vs Amortized.

by

What is House Hacking – Real Estate Investing Tips

Categories:

What is House Hacking – Real Estate Investing Tips

Here at The Cash Flow Company we want to give you as many investing tips as possible to help you win the real estate game. Today we are going to discuss house hacking by looking at the benefits and highlighting some examples. What is house hacking? It is when you buy a property and rent out a portion for additional income. These properties are multi tenant properties that often need some work. Let’s take a closer look at the benefits and a few examples of how this process works. 

Benefits of house hacking.

There are a few benefits to house hacking. Real estate investors are able to apply for an owner occupied loan for the multi tenant property. These loans not only allow them to stay in the property that they are renting, but they also tend to have better rates as well.

Example:

There is a gentleman who bought a duplex and fixed up one side to rent out. Then moved into the other side of the duplex. By using an owner occupied loan, he not only had a lower interest rate, but also got into it for 100%. This customer put little to no money into the property for the purchase, while only having to cover the fix up expenses. 

Example 2:

I also helped a doctor who bought 5 or 6 duplexes and triplexes with 100% financing. We find that banks will typically give doctors and dentists 100% financing. Every year or so this doctor buys a new duplex or triplex and continues the cycle of house hacking. She will live in one side in order to get better financing on the property, while renting out the other side to generate cash flow.

In conclusion.

While it takes more time, house hacking provides the opportunity for real estate investors to have 100% financing and better rates compared to traditional loans. In order to be successful, it is imperative that the property is cash flowing and pays for itself. This will provide the financial flexibility you need to move onto the next property. 

Do you have more questions? Here at The Cash Flow Company we are happy to share our real estate investing tips with you! Contact us today to learn more.

Watch our most recent video to find out more about What is House Hacking – Real Estate Investing Tips.

by

A is for Effort in 2024 Real Estate Investing

Categories:

A is for Effort in 2024 Real Estate Investing

It is going to be a different market this year compared to years past. Rates are going to flatten out and everything will be changing. Rates are expected to hover between 6% and 7% this year. Predictions are also indicating that the Fed is going to lower their rates starting in May. Until then, this first quarter is going to be a little tougher for the consumer until we see that shift in rates. It is critical that real estate investors take the time to do more research in order to find the best deal. Those who do will receive an A for effort in 2024.

Look at more homes and do more research.

If you are going to be investing in this market, then you need to be willing to look at more properties. It is important to remember that you will need a 15% to 20% discount from where you were buying it a year ago. You will need to put in a little more effort and work. Those who look at 100 homes compared to 10 homes will find good properties. By spending 2 to 3 hours a day looking at properties, you will be successful in 2024.

Go smaller

In this market there is a shortage of homes compared to the number of people looking for properties. In order to find the more affordable properties, you will have to go smaller. What do we mean by smaller? The property would be less square footage or a smaller price point. In some cases both the square footage and the price point will be significantly less than they would have been a few years ago. By expanding your search area, you will find greater affordability. This might mean that you are looking into smaller communities in other states to find the best deals. 

Contact us at The Cash Flow Company if you have any questions or would like to find out more about investing in 2024. 

Today we only reviewed 2 out of the 5 key steps. Watch our most recent video to discover more about 2024 Real Estate Investing and the 5 Key Steps to Succeed.

 

by

How to Calculate Monthly Interest Payments

Categories:

How to Calculate Monthly Interest Payments

As real estate investors it is important to understand and master the 4 key real estate loan calculations. These 4 keys include how to calculate a point, simple interest, loan to ARV, and loan to value. One of the most important of these is learning how to calculate the monthly interest payments, because it will impact your monthly budget. So grab your calculator, paper, and a pen! 

How do you calculate your interest rate?

Not only does DSCR have some interest only options, but private money and hard money do as well. Today, we are looking at how to calculate the monthly interest rate on a simple mortgage. Just to clarify, monthly interest and simple interest are one in the same. So, if a lender says that you are going to be charged 11% or 12% on your loan amount, what does that mean? First and foremost, that 11% or 12% is an annual amount not a monthly amount. Let’s jump into an example to see how you calculate the interest rate.

For example:

Loan for $150,000

Lender says the interest rate is 11% (this is an annual amount)

$150,000 x .11 = $16,500  (this is the interest that is charged on an annual basis)

Now we have to divide it by 12 to determine the monthly interest cost.

$16,500 ÷ 12 = $1,375 monthly interest cost

It is important that you know how to calculate your interest rate because that is the monthly amount that is coming out of your pocket.

In conclusion

All investors should learn to master the 4 key real estate loan calculations no matter how long they have been in the game.  One of the most important is learning to calculate the interest rate. Again, this is the amount of money that will be coming out of your pocket monthly. By being prepared and knowing your numbers, the sky’s the limit to your success. To learn how to master the 3 remaining key real estate loan calculations, please visit our website.

If you have any other questions or need a run through to show how things work, please contact us today! 

Watch our most recent video to Master These 4 Key Real Estate Loan Calculations.

 

by

DSCR Loan vs Traditional Loan – What’s BEST For You?

Categories:

DSCR Loan vs Traditional Loan – What’s BEST For You?

There are a variety of loans available to investors. Some of these include a traditional 30 year fixed, hybrid 40 year fixed, 5 year interest only, 10 year interest only and even adjustable. Depending on your cash flow and what you are needing, you can create the flexibility you need to succeed. Today we are going to discuss DSCR vs traditional loan. What’s best for you? Let’s take a look!

What is a prepay penalty?

When applying for a DSCR loan vs a traditional loan you need to take into consideration that a DSCR has prepay penalties.These are standard 3 or 5 year prepay penalty that will be charged if you refinance, sell, or pay the loan off in full before the 3 or 5 year mark. This is normally a 3, 2, 1 structure. Just to clarify, 3% would be charged if the loan is paid within the first year, 2% the second year, and 1% the third year. Traditional loans however do not have a prepay penalty. Instead investors can come and go as they please. Before considering a DSCR loan, take into consideration the duration that you will need the loan for. It could potentially cost you a significant amount to get out of the loan if you decide to pay it off early.

Understanding rates for a DSCR vs a traditional loan.

When we are looking at a traditional loan vs a DSCR loan the rates will vary. A DSCR loan could be up to a half point higher than a traditional loan. A DSCR loan typically has a higher interest rate. This is because the lender does not verify your income when you apply. Instead they calculate whether or not the property will cash flow. A traditional loan on the other hand does verify your income over a two year period. This provides them the security they need to offer a lower rate. Income verification is difficult for many real estate investors because they write as much off as possible on their taxes. A DSCR can help these investors to get a good loan as long as they have good credit.

Would you like to learn more about DSCR loans? Contact us today to see if a DSCR loan is the best for you! 

Watch our most recent video to find out more about DSCR Loan vs Traditional Loan – What’s BEST For You?

by

DSCR Loan – Interest Only vs Amortized

Categories:

Discover Your Best Option: DSCR Loan – Interest Only vs Amortized

Today we are going to discuss DSCR interest only products and compare them to an amortized loan. Our goal is to not only look at the flexibility of an interest only loan, but to also demonstrate how it will help with cash flow. Which is best for you? Let’s start by comparing an interest only loan vs an amortized loan. 

What is interest only DSCR?

Interest only loan products are loans where you are only paying on the interest that is owed on the loan. However, principal on these types of loans never goes down unless you decide to put a  little money towards it. One thing to keep in mind with DSCR loans is that there are prepayment restrictions for the first 3 to 5 years. In most cases this means that you have a 20% cap during this prepay period. Paying a little extra doesn’t normally create an issue. It is just something that you need to keep in mind when working with an interest only loan.  

What is an amortized loan?

An amortized loan on the other hand requires you to pay not only the interest, but a little bit towards the principal as well. In this market, the rates are a little bit higher than they have been in years past. While an amortized loan typically has lower rates, it is important to keep in mind that the principal payment will be added to the monthly payment. In many cases the monthly payment for the amortized loan will end up being greater than the interest only loan. This difference can affect your ability to qualify for the loan because the property will not be a cash flowing investment. 

Example:

Loan amount: $200K

Rent: $1,700

DSCR ratio 1.1 

Loan Type Rate $200,000 x rate = annual interest Annual interest ÷ 12 = monthly payment Payment amount to mortgage company  Taxes, Insurance, HOA, and Flood = $150.00 

Creating Grand total for the month
Interest Only 8.25% $16,500 $1,375 $1,375 $1,525
Amortized 8% $16,000 $1,333 $1,333 Interest + principle = $1,468 $1,618

One more step. Adding the DSCR ratio.

What you will normally find is that the interest only rates in this market will be a little higher than the amortized loan rate. However, we still have one more step before we can determine if you can qualify for the DSCR loan on this property. We will need to multiply the grand total for the month by the DSCR ratio. This will help us to determine if the property will qualify for a DSCR loan based on the current rent amount of $1,700. Just as a reminder, the rents are based on what is happening in the market and the assessments done by an appraiser.

DSCR ratio 1.1 Grand total for the month  Grand total for the month x 1.1 = Difference after adding the  DSCR ratio compared to the $1,700 rent
Interest only  $1,525 $1,677.50 Will qualify for DSCR
Amortized  $1,618 $1,779.80 Will not qualify for DSCR

With DSCR loans you will have the flexibility of a 5, 7, or 10 year period. A DSCR interest only loan also provides an excellent opportunity for you to cash flow on the property. 

If you have any questions or want to run though the DSCR numbers, contact us today. We can help you compare a DSCR loan to an amortized loan. This will help you determine which is a better fit for your needs. 

Watch our most recent video to Discover Your Best Option: DSCR Loan – Interest Only vs Amortized.

by

Why You Need to Avoid Bad Properties in 2024

Categories:

Why You Need to Avoid Bad Properties in 2024

2024 is going to be a different market compared to years past. Rates are going to flatten out and everything that we have seen will be changing. Predictions indicate that the Fed is going to lower their rates to 6% or 7% starting in May. That is why real estate investors need to avoid bad properties! In an earlier post we discussed the 5 key things that real estate investors need to do in 2024 in order to succeed. Avoiding bad properties is one of the most important key things that real estate investors need to focus on. So what makes a property a bad property? Let’s take a closer look. 

What do we mean by bad properties

When the market is going, then every property sells. This includes properties on corners, busy streets, overlooking commercial properties, and even the ones that are next to big apartment complexes. These are the properties that are normally going to take a hit and sit on the market for a longer period of time. As the market changes, buyers will have more choices. They will also become more selective because of the cost. In order to be successful, real estate investors need to buy good properties that are in good areas. Take your time and do the comps in order to avoid bad properties in 2024! 

Contact us at The Cash Flow Company if you have any questions or would like to find out more about investing in 2024. 

Watch our most recent video to discover more about 2024 Real Estate Investing and the 5 Key Steps to Succeed

by

What Are Points and How Do They Impact Closing Costs?

Categories:

What Are Points and How Do They Impact Closing Costs?

As a real estate investor it is important to master the 4 key real estate loan calculations.  These 4 key calculations include how to calculate a point, simple interest, loan to ARV, and loan to value. Today we are going to focus on points and discover how they can impact your closing costs. Let’s start by taking a closer look at what points are.

What is a point?

When a lender says that they are going to charge you 1 or 2 points, what exactly does that mean? A point in the lender world means percent. Therefore, 2 points for example equals 2%. To clarify, it’s 2% of your loan amount, as opposed to 2% of your purchase price. This percentage is the amount that you are paying in the origination to the lender and it is included in your closing costs. The closing costs will also include down payment, appraisal, just to name a few. Let’s jump into an example to see how to calculate point.

For example:

Loan for $150,000

They will charge you 2% 

Origination fee = $3,000

$150,000 x .02 = $3,000

You need to understand how to calculate a point because it will impact your closing cost and your overall cost of doing business. 

In conclusion

Whether you’re a new investor or an old pro, you need to master the 4 key real estate loan calculations. As an investor, these are the things that you are going to come across when you are working with lenders. By focusing on how to calculate point today, you are now able to determine the origination fee quickly and easily. To learn how to master the 3 remaining key real estate loan calculations, please visit our website.

If you have any other questions or need a run through to show how things work, please contact us today! 

Watch our most recent video to Master These 4 Key Real Estate Loan Calculations.

by