Tag Archive for: cash flow

Maximizing Rental Profits: Ensuring Your Property Makes Money

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Maximizing Rental Profits: Ensuring Your Property Makes Money

In order to be successful in real estate investing it is crucial that you maximize your profits on rental properties. Previously we discussed the roadblocks in real estate investing and what needed to be done in order to avoid them. Today we are going to focus on the 4th roadblock, which is rentals. How can you ensure your property makes money? Let’s dive in and find out more.

What makes up monthly costs?

In real estate investing it is important to know your numbers. What exactly does that mean? It all begins by calculating the monthly costs and subtracting them from the rental income. The monthly costs include interest, taxes, insurance, HOA, and flood. Another thing to keep in mind if you plan on using a DSCR loan is the DSCR ratio. This value would be added into the monthly costs as well. Here at The Cash Flow Company we know that numbers are not for everyone! We are happy to help walk you through things to ensure that the property will make money before you dive in! 

Does the property cash flow?

Real estate investors need to make sure that the property will make money before diving into the deal. By taking the time to do the calculations, you can quickly determine if the property will have a positive cash flow. Just to clarify, a positive cash flow is created when the rental income is greater than the monthly costs. It is imperative to determine this before purchasing a property, closing on a loan, or beginning a BRRRR. Don’t get into properties if you can’t afford to take losses. You never know what expenses may come up in the future.

The impacts of today’s market.

In today’s market, you need to break even if not make a little money monthly on the rental property. Predictions indicate that rates will be going back down this year to 5.5%. When rates decrease, it allows you to make even more on your investment property by refinancing. This is the ideal situation for a BRRRR, because you will have the opportunity to refinance. It creates the opportunity to take advantage of a lower rate, while capturing the equity. A DSCR on the other hand has prepayment penalties that could affect your ability to refinance. What do we mean by prepayment penalties? A prepayment penalty is a percentage of the remaining balance that will be charged if you pay off the loan early, refinance, or sell the property. While no one has a crystal ball predicting the future, it is important that you take everything into consideration beforehand.

The fine line between being approved or denied for a loan.

For a DSCR loan as well as many others, loan approvals are becoming more challenging. Whether it’s changes in your credit score or the DTI, investors walk a fine line. Being denied could cost $5K to $10K in earnest money. In looking at a BRRRR, if you have a fix and flip loan, bridge loan, or even a hard money loan, you may not be able to refinance it due to the bank’s requirement changes. The increased interest rates that are associated with the requirement changes could cause your property to have a negative cash flow as opposed to a positive one. When you are looking at investing in rental properties it is imperative that you are approved for financing prior to going shopping.

In conclusion.

Real estate investing is heavily reliant on funding and leverage. It is a high intensity business that is reliant on someone else giving them money at a rate that makes sense. Whether you are just starting out or you are a  seasoned investor, it is important that you understand numbers. In doing so, you will create the wealth you need to  succeed in this business. 

How can you start Maximizing Rental Profits and  Ensuring that Your Property Makes Money? Watch our most recent video to find out more!

Not sure where to begin or how to do the calculations to ensure cash flow? Contact us today! We are happy to walk you through the numbers.

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Top 3 Benefits for Real Estate Investors

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Intro to Interest Only Loans: Top 3 Benefits for Real Estate Investors

Interest-only loans are becoming a popular choice for real estate investors. Why? Because they offer unique advantages that can make a big difference in your investment strategy. Today we will explore the top three benefits of interest-only loans and how they can help you qualify more easily, improve your cash flow, and access larger loan amounts. Let’s dive in and see why an interest-only loan might be the right move for your next investment.

What is an Interest Only Loan?

An interest-only loan is exactly what it sounds like. You only pay the interest on the loan for a set period of time. Unlike typical mortgages where you pay both interest and a bit of the principal, an interest-only loan keeps your payments low by only covering the interest.

Benefits of Interest Only Loans

Interest-only loans offer several advantages, especially in today’s market. Here are the top three benefits for real estate investors:

1. Easier Qualification

One of the biggest benefits of an interest-only loan is that it can make it easier to qualify for financing.

Example: Let’s say you want to buy a rental property, but the current rent isn’t high enough to qualify for a regular loan. By switching to an interest-only loan, your monthly payments are lower. As a result, this reduces your expenses and improves your chances of meeting the lender’s requirements.

2. Improved Cash Flow

Next, interest-only loans can significantly boost your cash flow. With lower monthly payments, you have more money available each month.

Example: Imagine you own several rental properties. With an interest-only loan, your payments are smaller, giving you more cash each month. Consequently, this extra money can be used for renovations, paying off other debts, or simply enjoying a higher income.

3. Greater Loan Amounts

Finally, interest-only loans can help you access larger loan amounts. Since your payments are lower, you might qualify for more money.

Example: Suppose you’re an investor looking to cash out on a property to fund another project. By opting for an interest-only loan, you reduce your payments and can pull out more cash. This gives you the capital needed to start your next investment sooner.

How to Get Started with an Interest Only Loan

Ready to explore interest-only loans further? Visit our website, TheCashFlowCompany.com, to learn more. We offer a simple inquiry form where you can share your details. Don’t worry, we don’t do hard credit pulls or make frequent calls. We’re here to provide helpful advice and see if an interest-only loan is right for you. If it works, great! If not, no pressure.

In conclusion, interest-only loans are a fantastic tool in the right market and for the right investor. They help you qualify easier, improve your cash flow, and access more funds. Whether you’re building, renovating, or just want better cash flow, consider if an interest-only loan fits your strategy.

Watch our most recent video to find out more about: Intro to Interest Only Loans: Top 3 Benefits for Real Estate Investors

 

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What Does Debt Service Coverage Ratio Mean?

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What Does Debt Service Coverage Ratio Mean?

Today we are going to discuss what debt service coverage ratio means and how a DSCR loan can help you achieve your investment goals. Thankfully there are a multitude of products that are available for investors to not only purchase new properties, but to refinance as well. Whether or not you have a job, just changed jobs, or write everything off on your taxes, there are products out there for you. How can a DSCR loan help you? Let’s take a closer look!

What does debt service coverage ratio mean?

The debt service coverage ratio is where your property breaks even. Just to clarify, that is when the income from the property and the expenses break even. While every property has a different break even point, this is the value that lenders will be looking at to determine whether or not the property qualifies for a DSCR loan. The expenses that lenders take into consideration are the mortgage payment (including interest), taxes, insurance, flood, and HOA. For example, if your rent is $1,000, then your expenses need to be $1,000 or less in order to qualify for a DSCR loan. The best scenario would be if your rents were $1,500 and the expenses were $1,000. This would create a $500 cash flow for the property.

A DSCR is the best loan option!

One of the most versatile loan options available for investors is a DSCR loan. How do you qualify? As long as your rental property will cover the debt, you will be able to qualify for a DSCR loan. Unlike traditional loans, a DSCR loan will not take into consideration when you started your job or how long you’ve been self-employed. Instead, the lender’s primary focus is whether or not the income from the property qualifies for the loan.

Contact us today!

Here at The Cash Flow Company we are happy to run through the numbers with you to see what product is best for you. Contact us today to find out more about how you can qualify!

Watch our most recent video: What Does Debt Service Coverage Ratio Mean?

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How to retire by 65 years old

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How to retire by 65 years old

Today we are going to discuss how to retire by 65 years old! Nowadays many people are getting into real estate investing later in life because they are trying to build wealth for retirement. This additional pocket of money not only provides additional options for them, but financial security as well. Are you interested in building wealth, increasing your cash flow, and retiring by 65? Let’s take a closer look at why it is never too late to invest in real estate!

Example: Making money for later

Within three short years you can set yourself up for the future that you want! After you have purchased the properties, you can then begin to pay them off. Just to clarify, the only things that you would need to pay are the taxes and the insurance once the properties are paid off. Here is an example of how you can create the options and security you need before age 65!

Number of properties 10
Cash flow $300 (per property) or $3000 (10 properties) 
Property #1 Paid off in 5 years
Property #2  Paid off using Property #1 
Property #3 Paid off using Property #2
By age 65 You own 3 properties free and clear! 
Property #1, #2, and #3  Worth $400K each totaling $1.2 million
Property #1, #2, and #3  They bring in $2100 each per month

Supplemental income options.

First, the money that you are making off of the rental properties can supplement social security as well as retirement. A second option is to take out a new loan. This would allow you to get money out of a paid off property. Finally, you could sell a property every three years, which would get you to age 95 by just using the proceeds from the property. Keep in mind that you will have some taxes, however, it provides more flexibility and financial security in the long run. Just to clarify, once the 10 properties hit maturity, they will be $600K each for a total of $6 million! 

Start now!

It’s never too late to get started in real estate investing! Set yourself up for the future you want by building your supplemental income today. Those who do it correctly by using BRRRR will have a lot of options down the road. Do you want to learn more about setting yourself up to retire at age 65? Contact us today! 

Watch our most recent video to find out more about: How to retire by 65 years old

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Tricks for Business Credit Cards that Propel Your Business

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Tricks for Business Credit Cards that Propel Your Business

Today we are going to discuss some of the tricks that you can use to propel your business using business credit cards. Unfortunately many real estate investors have racked up a lot of debt using their personal credit cards for business expenses. The beautiful thing about a business credit card is that you often find ones that are 0% for 18 months. By taking advantage of this, you can move items off of your personal card over to your business credit card. In doing so, you will be able to help free up your personal credit while increasing your credit score as well. Are you wondering how you can get started and the roadblocks you may face? Let’s take a closer look! 

What is the biggest roadblock?

One of the biggest roadblocks that you might face when getting a business credit card is not having the credit score you need. However, many investors need a business credit card in order to improve their credit score. Don’t let this catch prevent you from getting what you need! There are a few options that could help. Improve your credit scores today by using your savings or a usage loan to pay down balances quickly and easily. Once the business credit cards are open, you can then migrate any further charges over to the new card. 

Watch out for companies who report!

Keep in mind that some lenders like Capital One report to your personal credit report, while others do not. Some  lenders who do not report are Chase, American Express, Regional banks, BOK, US bank and Vectra, just to name a few. These lenders offer really good incentives that will encourage you to do business with them. Remember to take your time and find the right lender for your needs.

Where do you start?

It is important that you go to the larger banks in order to get unsecured loans, business credit cards, and unsecured lines. These are just a few of the things that they love to do. The smaller banks on the other hand are excellent for setting up relationships with. These relationships are helpful when you are ready to bring on more rentals, or when you want to have banks help you with flips. In regards to business credit cards specifically, you are not typically able to go to the smaller banks or credit unions. Oftentimes they do not have the best rates, terms, or products compared to the bigger banks. 

What can business credit cards be used for?

Business credit cards can be used for a wide variety of things including growth, bringing on more people, office space, paying contractors, and so much more! To clarify, business credit cards allow you to spend up to your limit without penalizing you. Keep in mind that you need to manage them correctly in order to see the benefits and avoid unsecured debt that will be reported later on. Apply for a business credit card today and find the money you need to grow your business. 

For example:

Here at The Cash Flow Company we just opened a business credit card ourselves with 0% interest for 18 months. We were able to purchase software for a total of around $13K using our business credit card.  In doing so, it is helping us grow without paying the interest. 

Contact us today!

Don’t be the reason that credit card companies make good money at your expense! Take the time and do your research every year to find the best deals that will help your company grow! Contact us to find out more about business credit cards and other tricks that can help propel your business!

Watch our most recent video about Tricks for Business Credit Cards that Propel Your Business.

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Funding strategies for PadSplits

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Funding strategies for PadSplits

Today we are going to discuss some funding strategies for PadSplits. PadSplits are something that will be growing more and more popular in the near future due to affordability. Creating a PadSplit property will double and even triple your income off of a property.  How can you fund a PadSplit? Let’s take a closer look! 

What is a PadSplit?

A PadSplit takes a regular house that is a 3 bedroom/1 resident, and converting it. The property will then have 6 to 8 bedrooms/6 to 8 residents. To clarify, individuals rent the property by the bedroom as opposed to renting the whole house. These bedrooms are a suite and would have a private bathroom attached. Only the kitchen is a shared space. Each bedroom can then be rented by the week, month, or year depending on individual needs. A PadSplit property creates an affordable property for investors because they get 2 to 3 times the rent for the same property.

How do you finance a PadSplit?

PadSplits are a newer concept in real estate investing. That means that they are new to the lending community as well. Investors need to approach this strategically to get the funding they need to be successful. Right now there is a more limited market for PadSplits, however, down the road, it will become a more common. Here at The Cash Flow Company we receive a lot of inquiries regarding PadSplits and the financing options that are available. Let’s take a look at some of the options that are available for pad splits.

  1. The most important thing that you need to do is to get it funded before splitting it up. Get the property locked into a 30 year loan before dividing it into multiple units.
  2. There are also options under commercial for DSCR that could be used for PadSplits. These options are continuing to grow and there will be more available in the next few months.
  3. If you are looking for a refinance and you already have a PadSplit it is important that you have 12 months of experience and can show the numbers from bank statements or PNL from your company. This would allow us to use the income from the property to refinance the property

Is a PadSplit right for you?

We are here to help answer your questions regarding PadSplits and run through the numbers with you to see if it’s right for you. If you do it right and make your payments, you will have the opportunity to make a lot of money! Contact us today to find out more and get in before everyone else does! 

Watch our most recent video to find out more about Funding strategies for PadSplits.

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How to build wealth at age 50

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How to build wealth at age 50

Today we are going to discuss how to build wealth at age 50! Nowadays many people are getting into real estate investing later in life because they are trying to build wealth for retirement. As a result, they are able to create an additional pocket of money that provides not creates more options for them, but financial security as well. Building wealth for your retirement and increase your cash flow today? It’s never too late to invest in real estate!

Example: Building equity

Purchasing properties prior to age 65:

Year 1 Buy 2 properties
Year 2  Buy 3 properties
Year 3  Buy 5 properties
Total  10 properties
Property value $250K (per property)
National average 4% We will use 3% for this example
Buying strategy BRRRR
Equity after 3 years $600K in equity  (per property)

What is BRRRR?

To put it briefly, BRRRR stands for buy, rehab, rent, refinance, and repeat. In fact, these properties are undervalued properties that you fix up and rent. Therefore, once they are fixed up then you are able to refinance typically at  75%. Another benefit to starting later in life is that you aren’t using your own money for your investment properties. Instead, you are using the strategies in order to buy these properties. By putting multiple strategies together, you have the opportunity to create more than most people have for retirement within only 3 years time.

Start now!

It’s never too late to get started in real estate investing! Set yourself up for the future you want by building your supplemental income today. Those who do it correctly by using BRRRR will have a lot of options down the road. Do you want to learn more about setting yourself up for the life you want? Contact us today! 

Watch our most recent video to find out more about How to build wealth at age 50!

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How to Unlock Your Rehab Funds from Your Lender

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How to Unlock Your Rehab Funds from Your Lender

Many real estate investors wonder how they can unlock their rehab funds from their lender. The answer is understanding their escrow. It is imperative that real estate investors understand escrow in order for their business to be successful. What is escrow? Escrow is a portion of the loan that a lending company puts aside for repairs on the property. You need to understand both the rules and the regulations of the lender in regards to Escrow prior to purchasing. In doing so, you will prevent frustration, avoid a finance wall, build a foundation for cash flow, save money, and save time!  Let’s take a closer look! 

1.Understand the rules YOUR escrow

As a real estate investor, you need to understand your escrow because the rules and regulations vary by lender. It is important that you have a firm understanding of their policies prior to purchasing. Any misunderstandings can very easily stall or even jeopardize a project. Investors also need to construct a budget beforehand in order to ensure that they stay within their budget during the process. Unfortunately, there is no flexibility in the amount after it is approved by the lender. Without the ability to expand the escrow down the road, any additional expenses will come out of your pocket instead.  

2.Unlocking your rehab funds

Lenders allocate a set amount for the escrow that not only includes the amount needed to purchase a property, but also the funds that are needed to fix it up. To clarify, these repairs are intended to get the property market ready. Keep in mind that the only way to access the escrow funds when buying a fix and flip, or an undervalued rental property, is to submit proof. This proof can be in the form of receipts, photos, and other documentation. It is important to send this information to your lender in a timely fashion in order to show that repairs are underway. 

3. Optimize your profits 

Optimize your profits today and avoid missing the market when it’s “hot” by considering all repair costs, setting money aside for repairs, and completing work quickly. Remember the longer you’re on hold, the more it will cost you and further delay paying your contractors. Those who understand the importance of a timeline and the cost can maximize their profit.

We are here to help! 

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

Watch our most recent video to find out more about How to Unlock Your Rehab Funds from Your Lender

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

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

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Real Estate Investing at 50: Worth It?

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Real Estate Investing at 50: Worth It?

Today we are going to discuss if it is really worth it to invest in real estate at 50. The answer is yes! Many people are getting into real estate investing later in life because they are trying to build wealth for retirement. This additional pocket of money provides not only additional options for them, but financial security as well. Are you interested in building wealth for your retirement and increasing your cash flow? Let’s take a closer look at why it is never too late to invest in real estate!

Example: Building equity

Purchasing properties prior to age 65:

Year 1 Buy 2 properties
Year 2  Buy 3 properties
Year 3  Buy 5 properties
Total  10 properties

 

Property value $250K (per property)
National average 4% We will use 3% for this example
Buying strategy BRRRR
Equity after 3 years $600K in equity  (per property)

What is BRRRR?

BRRRR stands for buy, rehab, rent, refinance, and repeat. These properties are undervalued properties that you fix up and rent. Once they are fixed up then you are able to refinance typically at  75%. Another benefit to starting later in life is that you aren’t using your own money for your investment properties. Instead, you are using the strategies in order to buy these properties. By putting multiple strategies together, you have the opportunity to create more than most people have for retirement within only 3 years time.

Example: Making money for later

Create the options and security you need before age 65!

Number of properties 10
Cash flow $300 (per property) or $3000 (10 properties) 
Property #1 Paid off in 5 years
Property #2  Paid off using Property #1 
Property #3 Paid off using Property #2
By age 65 You own 3 properties free and clear! 
Property #1, #2, and #3  Worth $400K each totaling $1.2 million
Property #1, #2, and #3  They bring in $2100 each per month

Just to clarify, the only things that you would need to pay once the properties are paid off are taxes and insurance.

Supplemental income options.

First and foremost the money that you are making off of the rental properties can supplement social security or retirement. The second option that you have is to take out a new loan and get money out of one or all of the three paid off properties. Finally, you could sell a property every three years, which would get you to age 95 by just using the proceeds from the property. Keep in mind that you will have some taxes, however, it provides more flexibility and financial security in the long run. Just to clarify, once the 10 properties hit maturity, they will be $600K each for a total of $6 million! 

Start now!

It’s never too late to get started in real estate investing! Therefore, you need to set yourself up for the future you want by building your supplemental income today. Those who do it correctly by using BRRRR will have a lot of options down the road. Do you want to learn more about setting yourself up for the life you want? Contact us today! 

Watch our most recent video to find out more about: Real Estate Investing at 50: Worth It?

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What is a PadSplit?

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What is a PadSplit?

Today we are going to discuss the newest real estate investment concept, PadSplit! This is something that will be growing more and more popular in the near future due to affordability. By creating a PadSplit property, investors will be able to double and even triple their income off of a property.  What exactly is a PadSplit and how can it create greater cash flow?  Let’s take a closer look! 

What is a PadSplit?

A PadSplit is where you take a regular house that is a 3 bedroom/1 resident, and convert it to a property that has 6 to 8 bedrooms/6 to 8 residents. In doing so, individuals are renting the property by the bedroom as opposed to renting the whole house. To clarify, these bedrooms would be a suite and would have a private bathroom attached with only the kitchen being the shared space. Each bedroom can then be rented by the week, month, or year depending on individual needs. By creating a PadSplit property it creates an affordable property for investors because they are getting 2 to 3 times the rent that they would have before. Also, no need to worry about rooms not being rented. There are companies available that can help to ensure your property is full. 

For example:

Regular investment property: 4 Bedroom with 1 stream of income totalling $2,300 

PadSplit property: 6 Bedroom with 6 streams of income totaling $4,800

Affordability is key

Nowadays, more people are only able to afford $800 per month for housing. This includes young people, old people, singles, and others who are traveling for work. Families are typically the ones who want the full house, as opposed to those who are just searching for affordability. PadSplits are becoming a bigger part of the real estate community because there is such a need in the community to create affordable housing. By putting 6 to 8 units into a property, investors can then afford to buy properties where people want to live.

Is a PadSplit right for you?

We are here to help answer your questions regarding PadSplits and run through the numbers with you to see if it’s right for you. If you do it right and make your payments, you will have the opportunity to make a lot of money! Contact us today to find out more and get in before everyone else does! 

Watch our most recent video to answer the question, What is a PadSplit?

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