How to Make Lenders Happy: 5 Real Estate Investing Tips
Categories: Blog Posts
Five real estate investing tips to make sure you get the leverage to finish your projects.
In real estate investing, leverage comes from using other people’s money to generate wealth and income.
The better your leverage, the easier and more profitable real estate investing becomes.
But how do you find the right loans that can give you that leverage?
Here are 5 real estate investing tips from our experts at The Cash Flow Company to help get you where you need to go:
Tip #1: Tell the Truth
This may seem basic, but it can be really tempting to slip in a few lies when you’re trying to get a deal. Don’t do it.
Lenders do background checks, look at credit, and generally get external confirmation for everything you tell them. Lying not only makes their jobs harder, but your lack of honesty can ruin your reputation with that lender.
It’s better to be honest about a bad credit score and have a detailed plan about how to fix it than to lie.
Make sure you disclose if you’ve gone through bankruptcy or if you have any credit card debt.
They will find out if you’re hiding information or stretching the truth, and you’ll get dumped to the bottom of the pile.
Tip #2: Know Your Real Estate Lingo
This can be tough for new players. We recently created a list of some of the most common real estate lingo that new investors will encounter.
Knowing terms like LTV, ARV, DSCR, Prepayments, etc. before you meet with prospective lenders shows that you’ve put in the time to educate yourself.
Understand the numbers that go into making profits, including realtor fees, interest, and escrows. You should have a basic understanding of everything that goes into a project before seeking a lender.
Resources like our YouTube channel or Investopedia can also help you learn the ins and outs of real estate jargon.
Tip #3: Raise Your Credit Score
One of the first things lenders look at is credit score. That score is often a determining factor in whether you even get considered for a loan.
If credit score is something you’re concerned about, there are ways to raise your score, including looking into usage loans.
The better the score, the better terms you’ll be offered. The better the terms, the better your leverage.
If you have questions about raising your score or are interested in discussing a usage loan, you can contact us here, and we’ll be happy to discuss your options.
Tip #4: Be Personally Invested
If you’re also investing your own money in your project, lenders know you’re serious about the job.
Using other people’s money (OPM) also demonstrates that your friends and family are willing to invest in your project. Lenders like to see you have skin in the game, even if it’s as simple as borrowing from a line of credit.
Especially if you’re a newer investor, the less you ask of lenders and the more at risk you take on, the more lenders will be attracted to you.
Tip #5: Shop Around For Good Deals
The 2024 real estate market is setting up to be a profitable one for investors.
Shop around and be selective so you pick the best deals. It’s better to find two really good deals in a year that you can complete than to overextend and not follow through.
This step can take a lot of time and effort, but it’s worth it. Just as lenders are selective with the investors they back, you should also be selective as you look for properties and lenders.
How We Can Help
As we said earlier, leverage is key.
Knowing these real estate investing tips can help you make your lenders happy so you can start productive cash flow:
- Be honest
- Learn the language
- Work on your credit score
- Keep it personal
- Hunt for the right deals
Real estate investing takes time and hard work, but it’s a great way to create generational wealth.
We have a ton of free tools to download that will help you prepare for these investment opportunities.
If you have questions about these tips or how to get leverage, we’re happy to help. Just reach out to us at Info@TheCashFlowCompany.com.
