Tag Archive for: cash flow

The Benefits of a DSCR Loan

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The Benefits of a DSCR Loan

Are you looking for a loan that is easy to qualify for with good rates and a 30 year fixed term? Then we have your solution. We call it the Easy Rental Loan, but other lenders in the industry call it a DSCR loan. A DSCR is also known as a debt service coverage ratio loan, measures your ability to cash flow in order to pay your monthly costs. Before looking at the benefits of a DSCR loan, there are two key items that you need to take into consideration. Let’s take a look.

Two key items for the Easy Rental Loan are:

  1. A decent credit score
  2. A lease that covers the monthly cost of your property

The Monthly costs include

  1. Mortgage payment
  2. Property taxes
  3. Insurance
  4. HOA fee

Benefits of a DSCR Loan:

If your property positively cash flows, meaning that you make more than you spend on the property, then you can qualify for an easy rental loan. Better yet, you can still qualify for affordable, long term fixed rates with a 30 year fixed term. 

What makes the Easy Rental Loan Easy:

You don’t have to worry about submitting tax returns, being in business for two or more years, or having too many financed properties. It really doesn’t get easier than that

Contact us today!

So if you’re looking for a fast, efficient, and easy solution to fund your rental properties, then look no further. We have the easy rental loan waiting for you.

Ready to chat? Great! Our team here at The Cash Flow Company is here to help. We are eager to set you on a path that helps you make the kind of money you need to live the life you want.

Watch our most recent clip to find out more about the Easy Rental Loan.

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Master These 4 Key Real Estate Loan Calculations

Today we are going to look at a few examples in order to help you visualize and 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. It is important that you understand this when you are in real estate investing, because they will impact both your cash flow and closing costs. Grab your calculator, paper, and a pen! 

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 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. 

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.

How do you calculate loan to ARV?

ARV, which stands for the after repair value, is also referred to as the anticipated amount. To put it another way, this is what you estimate the value of the property to be after you have finished your flip. The ARV is based on comparables and the current market. When your lender lends you money, part of that money is going to be based on the calculated ARV. That loan amount is also dependent on the lender’s loan to ARV percentage. This percentage is found by dividing the loan amount by the ARV.  Let’s jump into an example and see how you calculate the loan to ARV percentage. 

For example:

In this market, with a property that is all fixed up, the ARV is $300,000

The lender is able to lend $210,000 (because it will be based on the ARV and what their loan to ARV is)

So in this case, we divide the $210,000 by the $300,000, which equals a loan to ARV percentage, which is 70%.

$210,000 ÷ $300,000 = .70 loan to ARV percentage (70%)

This is important to know because lending companies will say what percentage they loan based on the ARV. By crunching the numbers, you can easily determine what the lenders loan amount would be for your property.

How do you calculate LTV?

LTV stands for loan to value. The difference between loan to ARV and loan to value is what the value represents. The value in LTV is the current value of the property with nothing else changed on it. Meaning, what is the value now? What is the value today? How do you find the value? This normally comes off of comps or appraisals that are done by the lender. Let’s jump into an example and see how you calculate the LTV percentage. 

For example: 

Purchase price (current value) $200,000 

Loan amount $140,000

We are going to divide the loan amount by the purchase price.

$140,000 ÷ $200,000 = .70 LTV percentage (70%)

Again, by crunching the numbers, you can then determine what their loan amount would be for your property.

In conclusion

If you’re a new investor or even if you’re an old pro, you need to master these 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. 

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.

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DSCR Loan Explained – Easy Rental Loan for Investors

Are you looking for a lightning fast easy loan for your rental properties? Something that comes with affordable, long term fixed rates? Then we have your solution. We call it the Easy Rental Loan that is for investors, but other lenders in the industry call it a DSCR loan. A DSCR is also known as a debt service coverage ratio loan, measures your ability to cash flow in order to pay your monthly costs. There are two key items that you need to know about the Easy Rental Loan for Investors. Let’s take a look.

Two key items:

  1. A decent credit score
  2. A lease that covers the monthly cost of your property

The Monthly costs include:

  1. Mortgage payment
  2. Property taxes
  3. Insurance
  4. HOA fee

Benefits for investors:

If your property positively cash flows, meaning that you are making more than you spend on the property, then you can qualify for an easy rental loan. Better yet, you can still qualify for good rates and a 30 year fixed term. 

What makes it Easy:

This is an amazing product for investors. Unlike traditional lenders you don’t have to worry about submitting tax returns, being in business for two or more years, or having too many financed properties. It really doesn’t get easier than that

Contact us today!

So if you’re looking for a fast, efficient, and easy solution to fund your rental properties, then look no further. We have the easy rental loan waiting for you.

Ready to chat? Great! Our team here at The Cash Flow Company is here to help. We are eager to set you on a path that helps you make the kind of money you need to live the life you want.

Watch our most recent clip to find out more about the Easy Rental Loan.

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From Denial to Approval: Credit and Interest Explained

Our goal today is to show how interest rates, credit scores, and LTV can affect your ability to not only qualify for a loan, but also to cash flow on the property. As a result, investors are walking a very fine line between being denied or approved for a loan. Learn how to shift from denial to approval today!

Type of property Purchase price Appraisal 

average 

rents in area 

Amount down Financing 

30 year loan

Fees

Taxes

Insurance

HOA

DSCR 

(LTV) 

Rental $250k $1,950 20% 80%

($200K loan) 

$300 75%
Credit Score DSCR rate Payment amount 

principle and interest

Payment amount plus fees  Cash flow 

based on appraisal 

Client 1 680 9.75% $1,718 $2,018 -$68.00
Client 2 720 8.99% $1,608 $1,908 +$42.00
Client 3 780 8.75% $1,573 $1,873 +77.00

The power of credit scores.

Your credit scores not only affect your rates, but they also will impact your cash flow on the property. Do you need to raise your credit score in order to qualify? We can help you get your credit scores back on track with our 911 loan. Contact us today to find out more. As credit scores go up, you will be able to not only capture more monthly income, but you will also create wealth.

How do rates affect cash flow?

As rates continue to rise, your payments are going to increase as well. This in turn causes your cash flow to suffer, and in most cases it will be a negative. Cash flow positive on the other hand, means that there are going to be more properties available for more investors. So keep your eye out for this change!

Rates are decreasing!

Over the past three weeks rates have been decreasing. We may be at the peak right now and many are predicting that rates are going to significantly drop in 2024. It is imperative that you stay up to date and keep track of current trends. We have created a Weekly Investor Mortgage Report for you! Reach out through our website or email to find out more.

Keep increasing your leverage!

In real estate investing leverage is the key to success. It is what makes your wealth and creates your income. By using banks, other people’s money, and filling your leverage buckets, you will set yourself up for success.  

In Conclusion.

This example paints a very clear picture showing how 3 different people compare side by side on the same property. Nowadays, investors can either be denied or approved just based on their credit score, or where the markets are. While being denied is discouraging, it is important that you understand why you didn’t qualify in order to make a change. If you want to impact where you are and where you are going in 2024, then check out our website. We have a lot of ways to positively impact your credit, as well as a weekly newsletter. We are here to help you get on the path to success. 

Watch our most recent video to find out more on How High Interest Rates Impact Real Estate Investments.

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Breaking Down the Numbers: How Rates Impact Your Cash Flow

Today we are going to break down the numbers in order to paint a picture of how rates impact your cash flow. Specifically, we want to illustrate how rates, credit scores, and LTV can affect your ability to cash flow on a property. While we are aware that the Fed is impacting us, it is important that we see what that looks like on paper. The example we are reviewing today will provide an excellent visual of how everything plays a role in the real estate game. DSCR is the product we are using today because it is one of the most popular out there.

Type of property Purchase price Appraisal 

average 

rents in area 

Amount down Financing 

30 year loan

Fees

Taxes

Insurance

HOA

DSCR 

(LTV) 

Rental $250k $1,950 20% 80%

($200K loan) 

$300 75%
Credit Score DSCR rate Payment amount 

principle and interest

Payment amount plus fees  Cash flow 

based on appraisal 

Client 1 680 9.75% $1,718 $2,018 -$68.00
Client 2 720 8.99% $1,608 $1,908 +$42.00
Client 3 780 8.75% $1,573 $1,873 +77.00

What about Conventional and Fix and Flips?

This example is also representative of a conventional, and fix and flips as well. In a nutshell, the more you pay on interest, the less properties you can handle. 

What is the appraisal?

An appraisal determines the average of rents in the neighborhood and uses this amount in the underwriting. The amount can change depending on if you have a couple years of history with rents that exceed the determined amount. The increasing rates are making it extremely difficult for properties to hit the expected rent amount.

What is the DSCR rate?

DSCR rates are determined based on your LTV. A credit score below 680 typically lowers the LTV from 80% to 75%. Therefore, you would need to put in more money up front on each purchase. If you’re looking at a DSCR with a credit score of 679, you will either be declined or it will flip you into a non ratio DSCR. Which means that your rates are going to be higher. Is a DSCR loan right for you? Visit our website to find out more.

How do rates affect cash flow?

As rates continue to rise, your payments are going to increase as well. This in turn causes your cash flow to suffer, and in most cases it will be a negative. Cash flow positive on the other hand, means that there are going to be more properties available for more investors. So keep your eye out for this change!

In Conclusion.

It is vital that you understand how rates, credit scores, and LTV can all affect your ability to cash flow on a property. Today we painted a picture that provided a side by side comparison of 3 different people. This allowed us to illustrate how all of these components work together and impact the overall cash flow. Let today’s example empower you to take a closer look at your numbers in order to create more cash flow in 2024!

Check out our website to find ways to positively impact your credit, as well as a weekly newsletter. We are here to help you get on the path to success. 

Watch our most recent video to find out more on How High Interest Rates Impact Real Estate Investments.

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How High Interest Rates Impact Real Estate Investments

Today we are going to paint a picture of how high interest rates impact investments for those who fix and flip properties or have rentals. Our goal is to show how rates, credit scores, and LTV can affect your ability to not only qualify for a loan, but also cash flow on the property. We all know what is happening with the Fed and how it is impacting us, but what does that look like on paper? The example that we are reviewing today will provide an excellent visual of how everything plays a role in the real estate game. DSCR is the product we are using today because it is one of the most popular out there.

Type of property Purchase price Appraisal 

average 

rents in area 

Amount down Financing 

30 year loan

Fees

Taxes

Insurance

HOA

DSCR 

(LTV) 

Rental $250k $1,950 20% 80%

($200K loan) 

$300 75%
Credit Score DSCR rate Payment amount 

principle and interest

Payment amount plus fees  Cash flow 

based on appraisal 

Client 1 680 9.75% $1,718 $2,018 -$68.00
Client 2 720 8.99% $1,608 $1,908 +$42.00
Client 3 780 8.75% $1,573 $1,873 +77.00

What about Conventional and Fix and Flips?

This example is also representative of a conventional, and fix and flips as well. In a nutshell, the more you pay on interest, the less properties you can handle. 

What is the appraisal?

An appraisal determines the average of rents in the neighborhood and uses this amount in the underwriting. The amount can change depending on if you have a couple years of history with rents that exceed the determined amount. The increasing rates are making it extremely difficult for properties to hit the expected rent amount.

What is the DSCR rate?

DSCR rates are determined based on your LTV. A credit score below 680 typically lowers the LTV from 80% to 75%. Therefore, you would need to put in more money up front on each purchase. If you’re looking at a DSCR with a credit score of 679, you will either be declined or it will flip you into a non ratio DSCR. Which means that your rates are going to be higher. Is a DSCR loan right for you? Visit our website to find out more.

The power of credit scores.

Your credit scores not only affect your rates, but they also will impact your cash flow on the property. Do you need to raise your credit score in order to qualify? We can help you get your credit scores back on track with our 911 loan. Contact us today to find out more. As credit scores go up, you will be able to capture more monthly income and create wealth.

How do rates affect cash flow?

As rates continue to rise, your payments are going to increase as well. This in turn causes your cash flow to suffer, and in most cases it will be a negative. Cash flow positive on the other hand, means that there are going to be more properties available for more investors. So keep your eye out for this change!

Rates are decreasing!

Over the past three weeks rates have been decreasing. We may be at the peak right now and many are predicting that rates are going to significantly drop in 2024. It is imperative that you stay up to date and keep track of current trends. We have created a Weekly Investor Mortgage Report for you! Reach out through our website or email to find out more.

Keep increasing your leverage!

In real estate investing leverage is the key to success. It is what makes your wealth and creates your income. By using banks, other people’s money, and filling your leverage buckets, you will set yourself up for success.  

In Conclusion.

I wanted to paint this picture so you can understand how 3 different people compare side by side on the same property. Investors can either be denied or approved just based on their credit score, or where the markets are. While being denied is discouraging, it is important that you understand why you didn’t qualify and why properties are not cash flowing right now. If you want to impact where you are and where you are going in the New Year, then check out our website. We have a lot of ways to positively impact your credit, as well as a weekly newsletter. We are here to help you get on the path to success. 

Watch our most recent video to find out more on How High Interest Rates Impact Real Estate Investments.

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Why You Should Buy Rental Properties Now

Investors are asking why they should buy rental properties with interest rates being so high. While no one has a crystal ball to see the future of interest rates, there is a market trend that many seasoned investors follow. They buy when rates are high, and then refinance when the rates drop again. In doing so, the seasoned investors put themselves ahead of the game. Consequently, by already having a property in hand, it takes the pressure off not having to rush into deals when rates drop. You too will be able to take advantage of the lower rates without scrambling to find properties. Below is an example of how cash flow is being affected by the current interest rates. Our focus is on the future. The ultimate goal is to buy now in order to create optimum cash flow later. 

DSCR Loan

Today we are going to dive into an example illustrating why purchasing rental properties now will increase your cash flow in just a few years when using a DSCR loan. What is a DSCR loan? A DSCR loan are loans focused on the rents from a rental property and the credit worthiness of the borrower. While the increasing interest rates are making it harder for investors to qualify for a DSCR loan, those who are able to find good properties will in turn set themselves up for success when rates go back down.  

Example:

$250K DSCR Loan 
Time Frame Percentage Expected Payment Change Over Time
Couple years ago 3.75% $1,158
Now 9% to 11% 

(depending on LTV)

$2,011 $853 

Payment Increase 

In the Future 7% 

(you refinance $2,011 principle)

$1,663 $348

Cash flow increase 

The Optimus  5%

(Looking if it dropped from 9% to 5%)

$1,342 $669 

Cash flow increase 

What is a “good property” to buy now?

My suggestion for investors is that they need to find something that has good equity and at 25% to 30%. As long as it is breaking even, then in a year or two when rates go back down, you will be able to refinance to increase your cash flow without buying another property. The more affordable the homes are, the bigger the market becomes. The good news is that buyers are going to start buying again, and the values around you are going to increase. While no one can predict that the interest rates will go back down to 2.5% for owner occupied and 3.75% for investors, there are indications that interest rates will drop in 2024. 

What else can you do to succeed in this market?

You’re not alone! There are a lot of people who are questioning if they should buy now. Navigating this market can be overwhelming for many investors. By doing your research and investing wisely, you will not only increase cash flow, but create generational wealth as well. I will be doing a follow up video that will further show you the effect that interest rates have on cash flow. This will include a look from the buyers side, and how the market is going to push up your values. 

Watch our most recent video about why rental properties fail to cash flow and how you can set yourself up for success by investing now.

Do you have questions about DSCR loans or how you can create generational wealth? Contact us today!

 

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2024 Interest Rate Predictions – Investor Mortgage Report

2024 is fast approaching! Now is the time to look at 2024 interest rate predictions and discuss the importance of the 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 to prepare for 2024, it is important that we follow the trends from Fannie Mae, NAR, and the Mortgage Brokers Association. Let’s take a closer look at trends and what they mean to real estate investors.  

What are some things to look for in 2024?

First and foremost we are going to see a more stable market. Let’s start by taking a look at Fannie Mae and focusing on the conventional rates specifically. Conventional includes people who are buying properties, flippers, and those who are refinancing a rental property. Fannie Mae predicts that rates will be between 7% and 7.6%. NAR on the other hand is more optimistic and anticipating rates to fall between 6% and 7%. We have already seen a shift and are hopeful that the rates will continue to follow this pattern! 

What about the Fed?

Nowadays the Fed is saying that they think inflation is under control, and in turn they are going to stop raising rates. However, this doesn’t always mean that it reflects 1:1 in the real estate world. In an investor’s world, there are all kinds of loans, which are all affected by different economic conditions. Rates will be better, but they will be volatile. This means that there will be months when rates are up, and months when rates are down. It is dependent on economic information, wars around the world, and the possible impact of 2024 being an election year.

Will rates ever go back down to 5%

In looking back at rates in 2023, we did see them pop up over 8%. However, real estate investors are optimistic that rates will go back down to 5% in the New Year. Many are asking when can we expect the rates to decrease? The decrease will continue to be seen in the conventional rates, which are tied to the 10 year treasury. What is the 10 year treasury? It is a bond issued by the United State Government that guarantees repayment of the money plus interest in 10 years. Even though the Fed dropped their rates and then raised them, the 2024 interest rate prediction is that rates will drop again in May. While they may not go down to 1:1, investors will see a significant decrease. 

A closer look at mortgage rate changes.

The government seems to be wanting to spend more and more money, which results in a deficit. In order to create a deficit and pay for it, the government has to issue more bonds. As a result of the government issuing more bonds, investors will want a better rate. This in turn affects mortgages because 3% is added to the 10 year treasury to create the mortgage rate. Just like a stock, these rates are continuing to change. Real estate investors might not see as big of a dip in the 30 year mortgages while the fed funds are dropping.  However, we might see a greater impact on the ARMS. Whether it is the 3, 5, or 7 year ARM, we are expecting them to go down in 2024. Just to clarify, ARMS stands for Adjustable Rate Mortgage. As of now, the 5 year ARM and the 30 year fixed both have similar rates with only .25% difference. I think next year will present a bigger spread for adjustable rates over fixed rates.

Let’s dive into some numbers!

$300K loan
What rates were  What rated dropped to What buyers can afford to buy now Cash flow created on rental properties
7.5% 6.75% $323,500 $150

The lower rate of 6.75% not only increases the amount a buyer can spend on a property, but it can also create cash flow on rental properties. This is great news for flippers, as well as investors. Those who have a $300K loan on a rental property now have a $150 cash flow because of the rate decrease. Every time the rate drops it helps the real estate market. The lower rates create more affordability, and increases the amount people are able to both spend and buy. By combining the high demand for properties and lower rates of 5% or 6%, investors will have the ideal conditions to create cash flow in 2024. 

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 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.

The 2024 interest rate predictions indicate that real estate investors will see a decrease in the upcoming year. This will create more affordability and financing for buyers, as well as an opportunity for investors to sell some of their inventory. As rates go down, it will create wealth, income, and more opportunities. While we don’t have a crystal ball to predict the future, we can utilize trends and  experiences to guide us towards success. 

Here at The Cash Flow Company we have created a weekly mortgage report to keep you up to date on current changes and trends. 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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Act Fast: Real Estate Investment Essentials for Today’s Market

Real estate investing in today’s market can be daunting. Discover the real estate investment essentials for today’s market so that you can succeed in the near future. For the past 10 to 12 years the rates kept getting better and the pools of money were bigger than ever. It was a time where anybody and everyone could get the financing they needed for their investments. Nowadays, the money is just gone. While this may cause many investors to run away, it is actually the perfect opportunity to get into real estate investing. If you want to participate in this market, there is a learning curve. However, once you learn how to play the game, you will set yourself up to win when rates go back down. 

Now is the time!

It is one of the most valuable times to get into real estate investing. This is because the Fed is tightening up and banks are starting to lend less. In doing so, it creates better deals that will in turn create wealth and income in the near future. One of the most important things to remember is that when there is fear in the street, that is when people start running. These are the times when you need to make your move. 

How can investors prepare?

To get started, buy when property values are low and rates are high. This will guarantee your success when the market changes. When rates go back down over the next few years, you will already have your property, and can take advantage of the higher property value. Those who are positioned correctly, and stick with it, need to be set up correctly. Let’s look at the steps you need to take in order to take advantage of this current market.

  1. Understanding the market by going through knowledge based learning
  2. Set up your realtors
  3. Determine how you are going to find your deals
  4. Learn how to calculate your ARV

By getting all of the training completed over the next 90 days, it will allow you to confidently enter the market right away. If everything keeps going the way it is, then there are going to be more opportunities available compared to before, as well as a smaller pool of investors who can take advantage of this.

If things are tightening up, why does that create more opportunities?

When the Fed shrinks the money pool, it in turn decreases what’s available for everyone. This causes lenders and banks to swim upstream in order to look for the best of the best. Banks are being pushed to the point that they can only lend a portion of what they could before. Let’s take a closer look at the money side as a customer, and as an investor, to explain why these times are creating more opportunities. The customers are the ones who own their homes and are going to give it up for a discount. While investors are looking at the property as money to invest. Once again, leverage is the key to real estate investing and why we can make money from nothing. Anybody can do this and create generational wealth if you are set up correctly and financially prepared

How lending has changed.

One of the largest private lenders used to lend on ARV. ARV stands for after repair value. Lending based on ARV allows investors to get more money, create more leverage, and buy more deals. So if you’re in real estate investing you need to focus on purchasing undervalued properties, fix them up, and either keep it or sell it. This will in turn create wealth for you to reinvest in another property. In today’s market however, lenders are lending off of LTV, or loan to value, instead of ARV. This is often a $50K to $75K difference from what they were lending before the market changed. 

Let’s look at an example of ARV vs LTV

Purchase a house for $250K with a rehab of $50K
Worth when all said and done Percentage Amount they will lend Amount lenders  want you to put in 
ARV $400K $400K at 75% Close to $300K 10%
LTV Lenders don’t looks at this  $300K at 75% Close to $225K 10% to 30% 

It is clear to see what a big difference it makes when lenders switch from ARV to LTV. They are becoming tighter on their lending, lending less, and charging more. This creates a smaller pool of investors, because many can no longer qualify for those deals. While the deal flow might remain the same, only 20% to 30% of investors are prepared to continue buying in this market. There are going to be better deals for those who can buy and buy quickly.

How rates are impacting DSCR

Rates are impacting a lot of things, including DSCR and the rental side of real estate investing. A DSCR ratio of 1 means that the expenses and the income are equal to each other. In the past, DSCR ratios were based on a 1:1 ratio. Nowadays, the ratio has increased to 1:1.1, which means that you need to create even more cash flow. Now if we layer that onto a credit score of 680 or 700, then the ratio will increase to 1:1.2. Therefore, the people with better credit scores often get the better deals. 

Creating the leverage you need to succeed.

Make sure that your business is set up correctly from the very beginning in order to create wealth. In doing so, you will be able to open up business credit cards, business lines of credit, and seek out OPM or other people’s money. An underused source of funding is OPM. Nowadays more people are searching for better returns, you can be their solution. Investors who create these buckets of money will set themselves up to win. It is also imperative that you have a good credit score and a good business history so you will be more attractive to the lending community. Do you need help with raising your credit score or locating OPM. Contact us to find out more! 

What do investors need to do?

This is the time when the select few will make a lot in the near future. If you want to take advantage of this, then you have to do certain things. Let’s take a closer look at real estate investment essentials for today’s market. Also known as the pillars of success.

1. Find a lot of properties/find good properties

It is important to buy when everyone else is running away. A successful investor needs to determine where they will find properties, connect with others to start buying better properties, and understand the value of the property. The better the property you find, the better chance you have to get the financing you need. Especially from private lenders or hard money lenders. 

2. Set up your business correctly  

It is imperative that you set up your business to look like you are serious about investing. This includes setting up your business name, establishing business accounts, and applying for business credit cards. In setting these things up correctly, banks and lenders will know that you will do what it takes to succeed.

3. Make sure you have a diverse source of funding 

Start by looking for lenders who are actually lending, and build a relationship with them. In taking the time to build that foundation, you will be the person who goes to the top of the pile. Lenders will not be willing to help investors who don’t return calls, or those who are unprofessional. Finally, broaden your horizons by looking at other options to see who can help create the wealth you want. 

4. Find contractors and resources that will help you complete repairs.

We still see properties that are selling like crazy. These are in good locations and have quality work done. It is important to find contractors and resources that will help create a product that people will want to buy. Don’t skip on the flips! Take the time to find a team who can make your property shine. This will result in a shorter sell at a better return for you.

In Conclusion

Things have changed, bankers have changed, and lenders have changed. You should always have control over your lending options. There is a glimmer of hope in this more restrictive economic environment. Investors can empower themselves by setting things up right, cultivating relationships, and knowing your numbers. You can still make a lot of money in this market as long as you understand the rules in the game and have the flexibility to change with the times. 

At The Cash Flow Company we can help you find the funding you need and guide you through this market. 

Watch our most recent video to find out more about Real Estate Investment Essentials for Today’s Market.

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Are the high interest rates worth paying right now?

There are a number of questions that investors are faced with going into  2024. The main concern is whether or not it is worth paying the higher interest rates right now, and if it will pay off in the end. To help answer these questions, let’s take a closer look at how the market has changed, what you should avoid, and how you can succeed in the New Year.

How has the market changed?

It is the perfect time to jump in if you can buy something low. As long as you do it correctly, you should invest now while everyone is running away! Then when rates go back down, you will be able to create wealth for future investments. A few years ago many people were buying properties for $100K over asking price. In today’s market  they would be able to sell it for maybe $250K. Since they overpaid on the property a few years ago, they are now upside down on their investment. Don’t let this happen to you! As a new buyer, make sure you are purchasing it at a good number while the market is down. Over time you are going to win the game by buying at the right time.

What should you Avoid?

Getting into real estate investing now will get you on the fast track to success. If you are able to buy good properties in good markets, then you will be successful. It is important to avoid properties that are on corners or busy streets. In these times, the best properties are on a culdesac or near local parks. Real estate investors need to research current market trends before jumping in. There are some markets where cities are doing better than suburbs, while others are growing at a faster rate. Another thing to be aware of as a real estate investor is all of the negativity out there, which is driving people out of the market. Instead of following the herd, turn this negativity around so it can benefit you.

Number of Real Estate Investors is Shrinking 

There has been a whole generation of real estate investors who have gone through good times with money, banks, and lenders in the past. This was when everyone was trying to give you more money for your investments. However, the Fed is now trying to slow that down. The huge pool has gotten a little bit smaller for those who are trying to qualify for loans. This lending squeeze has resulted in many real estate investors getting out because they don’t have the credit score or income to succeed in this market. In 2024 there will be less real estate investors, less money available for funding projects, but more deals available for the driven investor.

In Conclusion

Now is the time you should invest in real estate properties! By strategically selecting properties, investors have the opportunity to grow their wealth when rates drop. Don’t let the high interest rates prevent you from investing now. Those who take the plunge will not only take advantage of lower rates later by refinancing, but they will also be ahead of other investors who are just coming into the game. There is a lot of money to be made in real estate. Invest today to succeed in the New Year!

Watch our most recent video to find out more about investing in today’s market.

We can help you get set up to win in 2024! Contact us today!

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