Tag Archive for: escrow

5 Roadblocks for Investors

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Did you know that there are 5 major roadblocks for real estate investors? By identifying these roadblocks, investors can not only ease their frustration, but they can prevent a finance wall by creating cash flow. Let’s take a brief look at all 5 today!

First, Cash Flow:

Cash flow can greatly affect your success as an investor! If you property’s expenses outweigh your profits, then that’s going to hurt you and your business. The best way to avoid this is to make a plan and know your numbers upfront! 

Second, Escrow:

Escrow is a portion of the loan a lending company puts aside for repairs to the property. The only way to access these funds is to submit receipts, photos, and other proof to your lender that the repairs are underway. 

Third, Too Many Projects:

From multiple property costs to paying contractors, investors can get too big too fast. It is important to “err on the side of caution” to prevent the “finance crunch” that often occurs. So, slow down, be realistic, and limit your losses. 

Fourth, Rentals:

It is critical that you learn to navigate rental cash flow. Remember, the deal needs to be a positive investment, not a negative one! Consider all of the costs, including rents, taxes, and insurance.

Finally, Personal Credit Usage:

Be careful not to misuse personal credit cards in order to cushion purchases or expenses. Consider a business credit card to keep business expenses separate! 

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Why real estate investors need to understand escrow?

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Why real estate investors need to understand escrow?

Real estate investors need to understand escrow for their business to be successful. Escrow is a portion of the loan that a lending company puts aside for repairs on the property. As a real estate investor, you need to understand the rules and regulations of the lender in regards of Escrow, in order to save both time and money.  When investors understand escrow, and what they are responsible for, it can ease their frustration, prevent a finance wall, and establish a foundation for cash flow.

1.Understand the rules of escrow

As a real estate investor, you need to understand escrow by researching the rules and regulations for your lender. Any misunderstandings can very easily stall or even jeopardize a project. Investors also need to construct their budget beforehand, to ensure that they stay within it during the process. There is no flexibility after the amount is approved by the lender. Without the ability to expand the Escrow, any additional expenses will come out of your pocket instead.  

2.Begin repairs to receive escrow

Lenders allocate a set amount to not only purchase a property, but also to fix it up in order to get it market ready. The only way to access Escrow funds when buying a fix and flip, or an undervalued rental property, is to submit proof. These can be in the form of receipts, photos, and other documentation sent to your lender to show that repairs are underway. 

3. Optimize profits by using escrow correctly

When real estate investors understand escrow, they can optimize profits and avoid missing the market when it’s “hot.” This is achieved by taking into account all repair costs, having the money set aside to complete repairs, and completing the work quickly. Remember the longer you’re on hold, the more it will cost you, plus it will delay paying contractors. By understanding the importance of cost and timeline, it will result in a larger profit. 

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

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

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

 

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