Tag Archive for: BRRRR

Why You’ll Get Rejected for a DSCR Loan

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Why You’ll Get Rejected for a DSCR Loan

Today we are discussing why you’ll get rejected for a DSCR loan. DSCR loans are based off of LTV, and are 75% for rate and term and 80% for purchase. However, there is another factor that you need to take into consideration. That factor is the break even point. This amount limits how much you can get out of the property, and requires more money for the purchase. In today’s example we will be comparing and contrasting two properties to show how you can easily be rejected for a DSCR loan.

What do you need to know before purchasing a property?

Investors use the BRRRR strategy for rental properties and creates an easy way to build a portfolio. However complications arise when refinancing the property. While investors expect to refinance out at 75% to 80%, it doesn’t always work as planned. This is due to the fact that the DSCR ratio comes into play. The DSCR ratio limits the amount that you can get out of the property. That is why it is important to know your numbers before purchasing the property or prior to refinancing. By calculating the break even point on your DSCR ratio you will create the cash flow you need to succeed.

Example: One property qualifies and one does not.

It is important to take everything into consideration to see whether or not the property qualifies. The numbers that you need to consider include taxes, property insurance, flood insurance (when applicable), and HOA (when applicable). Remember, in order to qualify for a DSCR loan the rent needs to be greater than or equal to the expenses. To demonstrate the break even point today we will compare two properties that have the same property value, loan amount, and monthly payment.

 

Value of the property Loan amount  Monthly payment 
$200K $150K $1,050
Property A Property B 
Taxes: $1,800 $3,600
Property insurance: $1,200 $3,600
Flood insurance: $0 $0
HOA:  $0 $0
Total $3,000 $7,200
Monthly amount $3,000/12 months = $250 $7,200/12 months = $600
Break even point (mortgage payment + taxes and insurance) $1,050 + $250 = $1,300 $1,050 + $600 = $1,650
Rent is $1,400 a month  This property will qualify for the full $150K refinance This property will NOT qualify for $150K because the rent is less than the break even point

In this example it is clear to see that even though you qualify for the DSCR loan, the property doesn’t always qualify. This example is all based on the DSCR ratio and shows how the income and expenses compare. 

In conclusion,

It is important to run the numbers prior to purchasing the property to find the break even point.  The break even point will affect your ability to refinance the property later on. Always keep in mind that every property will be different and every location will be different as well. 

If you have any questions or want to run through some numbers reach out to us! We are happy to work through the numbers with you to ensure that the property will be a good investment. 

Watch our most recent video about Why You’ll Get Rejected for a DSCR Loan.

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Discover the #1 KEY to DSCR and BRRRR

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Discover the #1 KEY to DSCR and BRRRR

Today we are going to review BRRRR and DSCR in order to discover the #1 Key to your success. While DSCR and BRRRR are excellent products by themselves, when used correctly together, you can have the cash flow you need to create generational wealth. Let’s take a quick recap of what DSCR and BRRRR are before combining them!

What is BRRRR?

BRRRR is a popular real estate investment strategy that stands for buy, repair, rent, refinance, and repeat. In order to buy the property, investors use a short-term loan such as hard money or private money. Once the property is purchased, investors repair the property in order to add more value and make it worth more. After repairs are completed, the property can then be rented out and investors can refinance the property. The refinance provides an excellent opportunity to get into a cheaper long-term loan, such as a DSCR. Finally, repeat the process again and again in order to create generational wealth.

What is a DSCR loan?

A DSCR loan is a real estate loan that is geared towards rental properties. This type of loan focuses on income versus expenses. As a result, the more a property cash flows, the better! 

Let’s put BRRRR and DSCR together!

The #1 rule that you must follow when using BRRRR and DSCR together is that you do NOT buy first! Instead, you need to plan your refinance. This begins by checking your numbers! If you have an income of $1,400 and expenses of $1,300, then you would have a DSCR ratio of 1.08. It is important that you always ask yourself whether or not you will break-even. If the answer is no, then you will not qualify for a DSCR loan.

Is it really a good deal?

Again, you need to determine if the property will break even or not. If not, then you will get stuck in an expensive short-term loan when the time comes to refinance the property. Those who can’t refinance will also begin to see their profits disappear. Investors who take their time and know their numbers will hit the bullseye! Remember, cash flow is key! Properties that cash flow will qualify for a DSCR loan. 

Do you have a property in mind? Do you need help with your numbers? Give us a call today and we will walk you through the steps to ensure your success!

Watch our most recent clip to Discover the #1 KEY to DSCR and BRRRR

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How to Calculate Your Maximum DSCR Loan Amount

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How to Calculate Your Maximum DSCR Loan Amount

Today we are going to go over how to calculate your maximum DSCR loan amount. Most DSCR loans are based off of LTV. Just to clarify, LTV is normally 75% for rate and term and 80% for purchase. However, there is another factor that you need to take into consideration. That factor is the break even point. The break even point can either limit how much you can get out of the property, or make you put more money in at purchase. Let’s take a closer look at the numbers to ensure that you can calculate your maximum DSCR loan amount prior to purchasing a property. 

What do you need to know before purchasing a property?

Many investors use the BRRRR strategy when investing in real estate properties. While this is an excellent method to use to build a portfolio, investors are often faced with issues when it comes to refinancing the property. While investors expect to refinance out at 75% to 80%, it doesn’t always work as planned. This is due to the fact that the DSCR ratio comes into play. The DSCR ratio can limit the amount that you can get out of the property. That is why it is important to know your numbers before purchasing the property or prior to refinancing. By calculating the break even point on your DSCR ratio you will be able to create the cash flow you need to succeed.

Example: Calculating how much you would qualify for. 

Value of the property is $200K

Refinance is 75% rate and term

$200K x .75 = $150K (this is the loan amount you would qualify for)

Keep in mind that this example is with a good credit score and a good rate at 75%. 

Example: Calculating monthly payment.

At 75% we are going to use a 7.5% rate.

$150K x .075 = $1,050 monthly payment (includes principal and interest)

If we have the same property in a different area, different zip code, or different state, then this property may or may not qualify for the 75% loan.

Example: One property qualifies and one does not.

It is important to take everything into consideration when determining whether or not the property qualifies. The numbers that you need to consider include taxes, property insurance, flood insurance (when applicable), and HOA (when applicable). Remember, in order to qualify would mean that the rent needs to be greater than or equal to the expenses for the property.

Property A Property B
Taxes: $1,800 $3,600
Property insurance: $1,200 $3,600
Flood insurance: $0 $0
HOA: $0 $0
Total $3,000 $7,200
Monthly amount $3,000/12 months = $250 $7,200/12 months = $600
Break even point (mortgage payment + taxes and insurance) $1,050 + $250 = $1,300 $1,050 + $600 = $1,650
Rent is $1,400 a month This property will qualify for the full $150K refinance This property will NOT qualify for $150K because the rent is less than the break even point

In this example it is clear to see that even though you qualify for the DSCR loan, the property doesn’t always qualify. This example is all based on the DSCR ratio and shows how the income and expenses compare. Keep in mind that every property will be different and every location will be different as well. 

In conclusion,

Before you purchase a property or get into BRRRR make sure that you run the numbers to determine if the property breaks even. This is done by finding out what the rents are for similar properties in the area, along with collecting quotes for the taxes and insurance on the property. In doing so, you will be able to ensure that the property is going to hit the LTV that you want when refinancing. 

If you have any questions or want to run through some numbers reach out to us! We are happy to work through the numbers with you to ensure that the property will be a good investment. 

Watch our most recent video How to Calculate Your Maximum DSCR Loan Amount to find out more!

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How Your DSCR Ratio and BRRRR Work Together

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How Your DSCR Ratio and BRRRR Work Together

Today we are going to talk about how your DSCR ratio and BRRRR work together. Just to clarify, BRRRR stands for buy, repair, rent, refinance, and repeat. The main purpose of BRRRR is to get into properties using little to no money out of your pocket. Here at The Cash Flow Company we are averaging 10 to 15 calls a day regarding the fundamentals. This includes knowing where to start, what you need to do, and how to be successful. In order to be successful, it is imperative that you go over the numbers first to make sure that you are getting into a good property. 

Two loans, one goal!

With BRRRR you need one loan for the purchase and repair, plus a long term loan for the refinance. The short term loans are often a hard money loan or a private loan ranging from 10% to 12% interest rates. It is important to keep in mind that these loans are only temporary, lasting 6 to 12 months. After that time, the loan balloons. That is why it is so important to have a long term loan option available when using the BRRRR strategy. Unfortunately,  many people do not do the research up front or run through the numbers before making the purchase. Don’t wait until the refinance! Take a look ahead to make sure that the property you want to buy will be able to cash flow later on. 

What is a DSCR loan and how can it work with BRRRR?

A DSCR loan is based solely on the property and your credit score. If the property’s income or rents are not very high, then you’re not going to get that big of a loan. The lenders will decrease the LTV until the break even point or sometimes higher. In the end, the lenders need the income and the expenses to be the same. This is referred to as the DSCR ratio. Just to clarify, expenses include the monthly payments, taxes, insurance, HOA, and flood insurance. One thing to keep in mind is that the LTV is different for each person and for each property. In the end you need to determine if your expenses equal your income prior to purchasing the property. 

For example:

An investor is using a DSCR and buys something where the purchase, rehab, and everything puts them at 80%. However, the property itself only qualifies for 70% because of its break even point. While many think that they are good because they bought it and are into it for 75% to 80%, this is not always true. When it comes to refinancing the property, lenders can only do 70% to 75%. It is confusing and often daunting because there are so many moving parts. However, by laying it out and making sure that the property cash flows, you will be successful.

We are here to help!

Here at The Cash Flow Company, we are happy to run through the numbers with you to make sure that you are setting yourself up for success. That would include checking your rents, taxes, insurance, and LTV to make sure that you would qualify for a long term loan in the future. Start by making sure you know what your DSCR ratio is and how it can work with the BRRRR strategy. 

Contact us today to see if a DSCR loan and the BRRRR strategy are right for you!

Watch our most recent video DSCR Loans and BRRRR Properties – Fundamentals Explained to learn more!

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DSCR Loan: How to Qualify for The Maximum Loan Amount

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DSCR Loan: How to Qualify for The Maximum Loan Amount

Many investors wonder how they can qualify for the maximum loan amount when using a BRRRR strategy or DSCR loan. When you are looking at a DSCR, there are two different qualifiers that you need to keep in mind. This includes the break even point and the LTV for the property. Whether you are using the DSCR loan for a BRRRR, refinance, or a purchase, it is important that you look at the qualifiers first. 

How much money can you get when using a DSCR loan?

The guidelines say that on a DSCR loan you can get 80% for a purchase or 75% to 80% for a refinance. Just to clarify, that means that you can get 75% to 80% of the current appraised value. While the DSCR guidelines say that you can receive that percentage, we always advise customers to hold off. We recommend that they wait because there are additional underwriting guidelines that need to be taken into consideration.One of which is a concern as to whether or not the property will qualify for 75%. Remember, DSCR loans are based on a ratio that indicates where the property breaks even. What does break even mean? Breaking even is determined by comparing the money coming into the property to the expenses. The expenses include the principal, interest, taxes, HOA, and flood. 

Each property is unique and each situation is unique.

A property appraised for $400K and the customer wants 75% cash out or rate and term. If their credit is good, property is good, and it is rented, then they could get 75%. However, we also have to determine whether or not the property breaks even. While it is appraised for $400K, is it bringing in $3K or $2K a month in rent? This amount can vary greatly depending on where the property is located and the current market. Each property is unique and each situation is different. Not only will the rents be different, but the taxes and insurance will be different as well. It is imperative that you run the numbers and find the DSCR ratio prior to purchasing. Now just imagine that the taxes and insurance are the same, but the rents are $1K off. The $2K rent is going to qualify for a smaller loan amount. 

Break even point and LTV go hand in hand.

Each property is different on where it can break even and the LTV you can get on the property. Even if the guidelines say 75% to 80%, we have to take into account the rents, credit score, and rate. The higher the rates, the higher the payment, and the faster you hit the threshold where you break even. When comparing a $300K property to a $200K property, maybe the $300K property gets 75% because their DSCR ratio is above 1. This is because the property is either breaking even or greater. However, the $200K would only get $250K because the property breaks even at that loan amount. Just to clarify, the $50K difference is not impacted by the customer’s credit score. It is dependent on the break even point.

Maximize your loan amount today!

In order to maximize your loan amount you need to understand your numbers beforehand! Whether or not you are purchasing, refinancing, or using the BRRRR strategy, you need to know what loan amounts will be available to you. For those using the BRRRR strategy, knowing your numbers ahead of time is going to be the key to your success. If you are using a DSCR, you need to make sure that the property qualifies based on rents so that you can refinance in the future. Don’t run the risk of being $50K short! Always keep in mind that each property is unique and every situation is different. Watch for our next video as we walk through the numbers to show different scenarios that will affect your maximum loan amount.

Do you have a property that you would like to run the numbers on? Contact us today to see what your DSCR ratio would be for your next property. 

Watch our most recent video to find out more about DSCR Loan: How to Qualify for The Maximum Loan Amount.

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DSCR and BRRRR: The importance of refinancing

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DSCR and BRRRR: The importance of refinancing

Today we are going to talk about the importance of refinancing when using a DSCR loan and BRRRR strategy.  Here at The Cash Flow Company we are averaging 10 to 15 calls a day regarding the fundamentals. This includes knowing where to start, what you need to do, and how to be successful. In order to be successful, it is imperative that you go over the numbers first to make sure that you are getting into a good property. In doing so, investors can then determine if the property is a profitable investment. 

What is the BRRRR strategy?

What exactly is BRRRR? BRRRR stands for buy, repair, rent, refinance, and repeat. The main purpose of BRRRR is to get into properties using little to no money out of your pocket. Those who use this strategy correctly will be able to accumulate “value at” properties quickly and create a portfolio. Just to clarify, “value at” properties are those that are under market value and need work done. These are often hoarder houses, in need of yard cleanup, and ones that need maintenance or repairs. Whether the current owners were unable or unwilling to fix up the property, it creates the perfect opportunity for investors. By taking the time to fix up the properties, you will in turn create net worth for the property.

Two loans, one goal!

With BRRRR you need one loan for the purchase and repair, plus a long term loan for the refinance. The short term loans are often a hard money loan or a private loan ranging from 10% to 12% interest rates. It is important to keep in mind that these loans are only temporary, lasting 6 to 12 months. After that time, the loan balloons. That is why it is so important to have a long term loan option available when using the BRRRR strategy. Many investors use a DSCR loan for their long term loan because it is based solely on the property and their credit score. One thing to keep in mind is that the LTV is different for each person and for each property. In the end you need to determine if your expenses equal your income prior to purchasing the property. Unfortunately,  many people do not do the research up front or run through the numbers before making the purchase. Don’t wait until the refinance! Take a look ahead to make sure that the property you want to buy will be able to cash flow later on. 

Look ahead to ensure success.

One of the most important pieces of the BRRRR strategy is refinance. A refinance is needed so that you can carry the loan long term. While buying the right property is important, it is crucial that you look ahead and understand the importance of refinancing. Oftentimes investors get to the refinance and either can’t get a loan or they can’t get enough money to cover their costs. In either case, it would defeat the purpose of using the BRRRR strategy. By doing the research up front and making sure that the whole thing works, you will actually make money. A lot of people don’t take the time to work through the numbers. Instead they discover during the refinance closing that they are going to lose money.

What is a DSCR loan and how can it work with BRRRR?

A DSCR loan is based solely on the property and your credit score. If the property’s income or rents are not very high, then you’re not going to get that big of a loan. The lenders will decrease the LTV until the break even point or sometimes higher. In the end, the lenders need the income and the expenses to be the same. This is referred to as the DSCR ratio. Just to clarify, expenses include the monthly payments, taxes, insurance, HOA, and flood insurance. One thing to keep in mind is that the LTV is different for each person and for each property. In the end you need to determine if your expenses equal your income prior to purchasing the property. 

For example:

An investor is using a DSCR and buys something where the purchase, rehab, and everything puts them at 80%. However, the property itself only qualifies for 70% because of its break even point. While many think that they are good because they bought it and are into it for 75% to 80%, this is not always true. When it comes to refinancing the property, lenders can only do 70% to 75%. It is confusing and often daunting because there are so many moving parts. However, by laying it out and making sure that the property cash flows, you will be successful.

We are here to help!

Here at The Cash Flow Company, we are happy to run through the numbers with you to make sure that you are setting yourself up for success. That would include checking your rents, taxes, insurance, and LTV to make sure that you would qualify for a long term loan when you go to refinance. Don’t chance being surprised at the refinance closing! Take the time now to run through the numbers and ensure your success for the future! 

Contact us today to see if a DSCR loan and the BRRRR strategy are right for you!

Watch our most recent video to learn more about DSCR and BRRRR: The importance of refinancing.

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How to Finance a BRRRR Investment

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How to Finance a BRRRR Investment

Today we are going to discuss how to finance a BRRRR investment!  Just to clarify, BRRRR stands for buy, rehab, rent, refinance, and repeat. Financing is often the biggest roadblock that investors face when using the BRRRR method. However, by using it correctly, you can put little to no money in and win the real estate investing game.

Financing is the biggest roadblock.

How can you build your portfolio quickly and easily while using little to none of your own money? The answer is by finding the right loan. The right loan is one that allows you to buy an undermarket property, will cover the purchase, and cover the rehab. Since the success of BRRRR is reliant on buying properties that are under market, it is imperative that you have the right loan. To get on the fast track to success you need to use a  bridge loan, hard money loan, or a private loan when considering BRRRR.

Example:

Traditional loans:

Buy a rental property for $300K.

Traditional Lender requires 20% down, which totals $60K

Your $60K is gone.

This would be for only one property.

BRRRR

Buy a rental property for $300K

Closing costs are $6K.

If you were to  buy 10 properties it would total of $60K

After refinance the property would have $54K in equity.

If you bought 10 properties and refinanced them all, the equity would be $540K 

This is money that you have just created by using little to none of your own money. 

One method, 2 loans.

Just to clarify, BRRRR is not a type of loan. Instead, it is a strategy that uses 2 different loans. One loan is to purchase and fix up the property. The second loan is a long term loan that you can put the property into after it is fixed up. Many lenders are able to cover 100% of the purchase as well as 100% of the refinance depending on the property. One thing to keep in mind is that some lenders have restrictions as too when you can refinance the property. It is important that you understand the system so that you know what’s coming!

BRRRR timeline:

30-45 days – get in and rehab

30-60 days – rent out the property

60-90 days – refinance into a long term loan

While there might be some carry costs, the rent is going to cover it.

Create life changing money today!

Finance a BRRRR investment today by making sure that you find under market value properties and can qualify for a long term loan. In doing so you can create a great life! While many real estate investors expect to find the perfect property in a matter of months, the reality is that it could take a few years. Take the time to learn the process and be patient. Once you go through one or two of them, it will become easy! Would you like to learn more about building $500K in only 3 years? Contact us today!

Watch our most recent video to learn more about How to Finance a BRRRR Investment.

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DSCR Loans and BRRRR Properties – Fundamentals Explained

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DSCR Loans and BRRRR Properties – Fundamentals Explained

Today we are going to talk about DSCR loans and explain the fundamentals that you need to keep in mind when working with BRRRR properties. Here at The Cash Flow Company we are averaging 10 to 15 calls a day regarding the fundamentals. What are the fundamentals? They include knowing where to start, what you need to do, and how to be successful. In order to be successful, it is imperative that you go over the numbers first to make sure that you are getting into a good property. Investors need to determine whether or not the property is cash flowing before diving in. How can you be successful and create a profitable investment? Let’s take a closer look.

What is the BRRRR strategy?

What exactly is BRRRR? BRRRR stands for buy, repair, rent, refinance, and repeat. The main purpose of BRRRR is to get into properties using little to no money out of your pocket. Those who use this strategy correctly will be able to accumulate “value at” properties quickly and create a portfolio. Just to clarify, “value at” properties are those that are under market value and need work done. These are often hoarder houses, in need of yard cleanup, and ones that need maintenance or repairs. Whether the current owners were unable or unwilling to fix up the property, it creates the perfect opportunity for investors. By taking the time to fix up the properties, you will in turn create net worth for the property.

Two loans, one goal!

With BRRRR you need one loan for the purchase and repair, plus a long term loan for the refinance. The short term loans are often a hard money loan or a private loan ranging from 10% to 12% interest rates. It is important to keep in mind that these loans are only temporary, lasting 6 to 12 months. After that time, the loan balloons. That is why it is so important to have a long term loan option available when using the BRRRR strategy. Unfortunately,  many people do not do the research up front or run through the numbers before making the purchase. Don’t wait until the refinance! Take a look ahead to make sure that the property you want to buy will be able to cash flow later on. 

Look ahead to ensure success.

One of the most important pieces of the BRRRR strategy is refinance. A refinance is needed so that you can carry the loan long term. While buying the right property is important, it is crucial that you look ahead in preparation for the refinance. Oftentimes investors get to the refinance and either can’t get a loan or they can’t get enough money to cover their costs. In either case, it would defeat the purpose of using the BRRRR strategy. By doing the research up front and making sure that the whole thing works, you will actually make money. A lot of people don’t take the time to work through the numbers. Instead they discover during the refinance closing that they are going to lose money.

What is a DSCR loan and how can it work with BRRRR?

A DSCR loan is based solely on the property and your credit score. If the property’s income or rents are not very high, then you’re not going to get that big of a loan. The lenders will decrease the LTV until the break even point or sometimes higher. In the end, the lenders need the income and the expenses to be the same. This is referred to as the DSCR ratio. Just to clarify, expenses include the monthly payments, taxes, insurance, HOA, and flood insurance. One thing to keep in mind is that the LTV is different for each person and for each property. In the end you need to determine if your expenses equal your income prior to purchasing the property. 

For example:

An investor is using a DSCR and buys something where the purchase, rehab, and everything puts them at 80%. However, the property itself only qualifies for 70% because of its break even point. While many think that they are good because they bought it and are into it for 75% to 80%, this is not always true. When it comes to refinancing the property, lenders can only do 70% to 75%. It is confusing and often daunting because there are so many moving parts. However, by laying it out and making sure that the property cash flows, you will be successful.

We are here to help!

Here at The Cash Flow Company, we are happy to run through the numbers with you to make sure that you are setting yourself up for success. That would include checking your rents, taxes, insurance, and LTV to make sure that you would qualify for a long term loan when you go to refinance. Don’t chance being surprised at the refinance closing! Take the time now to run through the numbers and ensure your success for the future! 

Contact us today to see if a DSCR loan and the BRRRR strategy are right for you!

Watch our most recent video DSCR Loans and BRRRR Properties – Fundamentals Explained to learn more!

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How to Buy 5-10 Properties with Little to $0 Down

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How to Buy 5-10 Properties with Little to $0 Down

Today we are going to talk about how real estate investors can buy 5 to 10 properties with little to none down. While this may be difficult in some markets because of the price points, real estate investors are still finding good deals in smaller communities. Within these smaller communities and smaller markets, there is the opportunity to find properties at 50¢ to the dollar. How can you buy 5-10 properties with little to $0 down? Let’s dive in!

Great deals can create excellent opportunities.

Here at The Cash Flow Company we recently helped a couple in a small town in Oklahoma to purchase 8 properties. They have since rented out all 8 properties and refinanced 5 of them. As their lender, we not only liked the properties that they were purchasing, but more importantly what they were doing with them. This allowed us to finance more and even all of it in some cases. Once the couple rolled the property into a long term loan, they were able to pay off the loan with us. Now the couple is getting ready to purchase 5 more properties. This is just one of the many examples of how buying great deals can create excellent opportunities. 

 Every lender is different.

Every lender has their own requirements, so it is important to set things up correctly and do it right. In doing so, the lenders who like the numbers and the leverage will be able to finance 100% for both the purchase and the rehab. Once the property is rented, then it can be refinanced, lenders paid off, and the real estate investor has nothing in. It is important to be flexible on where you look as well. In the Denver market for example, it could take 3 to 5 years to find 5 properties. As far as lenders, the majority of lenders will require 10% to 20% of your own money. Start by  finding properties that are 70¢ to the dollar and below. This will create a better opportunity for funding. Take your time and do your research!

Buy now to take advantage of rate drops later.

Real estate investors who are able to purchase now and hold them for a few years will have a huge advantage. Predictions indicate that interest rates are going to decrease over the next few years. When they do, real estate investors will have the opportunity to refinance. This will allow them to take advantage of the lower rates and increase their cash flow. By purchasing undervalued properties right now and at least breaking even, then in a few years when rates go down you will be in a great position. Not only will you have a lot of equity, but you will also have cash flow for the property.

Example of how decreasing rates increase cash flow:

Property has a $400K mortgage with rates at 7%

The current monthly payment is around $3000

In a few years when rates go down to 5%

The current monthly payment will go down $500 to $1000 

This will increase the monthly cash flow for the investor. 

While the property might just break even right now, the rate decrease will provide cash flow in the future.

Example of exponential growth for the future.

Property that is $400K can be purchased for $350K right now

In a few years, it will be worth $450K to $500K

If you were to buy ten of those properties at $350K and put in $50K into each property. 

This would total $500K in rehab costs.

In a few years each property would be worth $450K or $500K. 

You can use this money as leverage.

 Buy now to create wealth later.

Those who are able to purchase properties now that are under market value will set themselves up for wealth later. If you are able to break even or tread water in this current market, then when the market takes off you have the opportunity to create cash flow or wealth. Now is the time to buy 5-10 properties with little to $0 down so that you can open the doors to endless possibilities over the next few years.

Watch our most recent video about How to Buy 5-10 Properties with Little to $0 Down.

Contact us at The Cash Flow Company to discover your options for fix and flip investment opportunities and BRRRR loans.

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Get Our Weekly Investor Mortgage Report

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Get Our Weekly Investor Mortgage Report

2024 is here! Now is the time to look at interest rate predictions and discuss the importance of the weekly investor mortgage report. I have been in finance a little over 35 years, and working with real estate investors for 24 years. While experience isn’t exactly a crystal ball, it does help guide your investment decisions, as well as identifying trends. Real estate investors saw a prediction come to life in October of 2023 when rates did improve. As we begin 2024, it is important that we follow the trends from Fannie Mae, NAR, and the Mortgage Brokers Association. Here at The Cash Flow Company we have created a Weekly Investor Mortgage Report. Let’s take a closer look at how things have changed and why you need to stay up to speed. 

How is the Fed affecting bank loans?

A lot of investors go to banks for rental loans or fix and flip loans. As rates drop, it will have a greater effect on investors because Fed funds affect prime. Fed funds are controlled by the Fed and dictate what banks can borrow from the Fed or other banks. The fed funds are currently at 5.25% to 5.5%. Banks then add 3 points to that in order to create their lending base number for short term loans or 1 to 2 year bridge loans. Some lenders even have a prime -1 or prime -2 for their real estate products, it just depends on the lender.  To clarify, prime, also known as the Wall Street Journal Prime Rate, is the most common benchmark that lenders use when setting their interest rates. 

What are basis points and how do they affect you?

There are predictions out there that the Fed might drop from 75 basis points, down to 200 basis points in the next year. What is a basis point? A basis point is the same as a percentage point. For example, for every 1% there are 100 basis points. So 50 basis points is equal to .5%. You will hear that a lot in the economic world. Just keep in mind that it’s a percentage of a point. As stated before, rates will be volatile in the upcoming year. It is important that you track the basis points along the way because they will make a big difference when you are trying to sell something. The basis point trends can be found on our weekly investor mortgage report and are available on our website. It will be updated weekly in order to make sure everyone is informed on current trends.

Keep an eye on DSCR.

Here at The Cash Flow Company we will be keeping a close eye on DSCR, as well as private mortgage loans. We will see how the rates are impacted by upcoming changes, and track the trends in our weekly mortgage reports. Just today we discovered that rates dropped .25 of a point across the DSCR lenders that we work with.Thankfully we are starting to see where rates are going back to the 7% range instead of 8%. This drop is great for investors! Every .25 of a point it drops, means there is more cash flow for you, as well as more opportunities to qualify for properties. The real estate world is going to open up again as rates keep dropping. We are working hard daily to make sure you get the best rates out there.

How will private rates be impacted?

The private money lenders borrow money from either banks or other institutions. A lot of their money is based on either the Fed funds or prime, then they add to that. The amount that they add on is the margin or profit they receive when lending out to someone else. Private rates were in the 7% range and 8% range. Today these percentages have increased to 11% and even 13% for some private lenders. This increase is affected a lot by prime, and prime is affected by the changes that the Fed makes. As rates drop, you should start to see the cost of private money loans on your flips, as well as the BRRRR’s come down as well. 

In conclusion.

2024 interest rate predictions have indicated that real estate investors will see a decrease this year! Here at The Cash Flow Company we have created a weekly mortgage report to keep you up to date on current changes and trends. While we don’t have a crystal ball to predict the future, we can utilize trends and experiences to help guide us towards success.

Email us at info@thecashflowcompany.com to receive the weekly mortgage report updates or look for it on our website at www.thecashflowcompnay.com. This will go over some economic data, the best DSCR rate, and what current rates are for conventional so you don’t run the risk of overpaying. If you are going to be a real estate investor, then you need to know where financing is going. Not only for yourself, but for potential buyers as well. We are here to help! 

Many of our customers want to know what the rates would be for their situation, credit, or properties. We can put together a personal report for you. This can then be used for your portfolio, or for when you are buying a property. Contact us today to find out more!

Watch our most recent video to find out more about 2024 Interest Rate Predictions and the Investor Mortgage Report

 

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