Tag Archive for: fix and flip

What is ARV and Why is it Important?

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Today we are going to answer the question “what is ARV and why is it important?” ARV, or After Repair Value, is a term every real estate investor should know. It’s the estimated value of a property after all repairs and upgrades are complete. In simple terms, it’s what your property could sell for when it’s in top-notch shape.

Why is it so important? It’s your road map to a profitable deal. Knowing the this number helps you figure out how much you should spend on a property and its repairs. It also shows if your investment is worth it in the end.

Here’s an example: Imagine you find a fixer-upper listed at $150,000. After some research, you learn similar homes in great condition sell for $250,000. That’s your ARV. Now, let’s say the repairs will cost $50,000. If you buy the property, your total investment would be $200,000. With an ARV of $250,000, you could make a $50,000 profit, before any extra costs like loan interest or closing fees.

It also matters when you’re looking for financing. Lenders often use ARV to decide how much they’ll loan you. The better your numbers, the more likely you’ll secure funding for your project.

In short, ARV is your guide to smart investing. It keeps your plans realistic and helps you stay on budget. Want to dive deeper? Check out our website today! 

Contact Us Today! 

Are you still wondering “what is ARV and why is it important?” Contact us today to find out more!

Free Tools For You! 

We also have free tools available! Download the Quick Deal Analyzer to see if your potential rental property is going to be a good investment!

Learn more!

Visit our YouTube channel to learn more about real estate investing and how you can maximize your profits! 

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Starting Your Small Business Correctly

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Today we are going to discuss the importance of starting your small business correctly. Starting a small business can be exciting, but it’s important to set it up right from the start.

Choose your business

First, make sure to choose the right business structure. Whether it’s an LLC, corporation, or sole proprietorship, this decision impacts your taxes and legal protection. For instance, an LLC might work best for real estate investors because it protects personal assets if something goes wrong.

Create a plan

Next, don’t skip creating a solid business plan. A plan helps you stay focused and gives lenders confidence if you need funding. For example, outlining how your business will grow or generate income makes it easier to secure a loan.

Get everything in order

Additionally, register your business and get all the proper permits. Skipping this step can lead to fines or delays. For example, a house flipper might need a local business license to operate legally.

Setting yourself up for success

After that, set up a separate business bank account. Keeping your business and personal finances separate makes it easier to track expenses and file taxes. For instance, if you’re managing multiple rental properties, mixing accounts can get messy fast.

Credit is key

Finally, focus on building your credit. A strong business credit profile opens doors to better loan terms. Paying bills on time and keeping credit usage low helps build trust with lenders.

Get started today

By taking these steps, you can avoid common pitfalls and set your business up for success. Plus, it’s easier to adjust and grow when your foundation is solid. Start right, and your small business will have a big chance to thrive.

Contact Us Today! 

How can you maximize your profits as a small business owner? Contact us today to find out more!

Free Tools For You! 

We also have free tools available! Download the 5 ways to start a biz with no money to see if your potential rental property is going to be a good investment!

Learn more!

Visit our YouTube channel to learn more about real estate investing and how you can maximize your profits! 

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How Interest Rates Will Impact Fix and Flips in 2025

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Today we are going to discuss how interest rates will impact fix and flips in 2025!  Let’s dive into what this means for you and how to set yourself up for success.

Why Timing and Funding Matter

Timing is everything in real estate. Selling at the right time, like early spring or late summer, can maximize your profits. Missing these windows? That can add months of carrying costs, extra stress, and potentially reduced profits.

But timing isn’t the only factor—your funding strategy plays a huge role. Having the right money bucket ensures you’re ready for surprises without slowing down your project.

What Happens Without Proper Funding?

One of the most common mistakes we see is when investors aren’t money ready. Let’s look at an example:

  • Investor A had everything planned. The property was supposed to take 6 months from start to sale. But halfway through, they found $7,500 in unexpected repairs—old wiring and copper plumbing. Since they didn’t have enough reserves, they scrambled for funds.
  • This caused delays. Subcontractors moved on to other jobs, pushing the project back 4-6 weeks. By the time Investor A finished, they were 4 months behind and had to pay $12,000 in extra carrying costs. On top of that, they had to drop the price by 5%, losing $20,000.
  • In the end, their $60,000 profit shrank to just $15,000—and their stress levels went through the roof!

The Tale of Two Investors

Let’s compare Investor A with someone who was prepared.

  • Investor B also faced the $7,500 surprise but had their funding ready. They covered the cost immediately, keeping their project on schedule.
  • Investor B finished in 5 months, saving an extra month of holding costs. Despite the unexpected expense, they still walked away with $55,000 in profit.

What’s the difference? Speed and preparation. Being money ready made all the difference for Investor B.

How Interest Rates Will Impact Your Deals in 2025

Higher rates increase borrowing costs, so every delay becomes even more expensive. Here’s why:

  1. Larger Monthly Payments: Each month you hold the property costs more. Taxes, insurance, and interest can eat into profits fast.
  2. Extension Fees: Lenders often charge hefty fees if your project goes past its original term. For example, a 2% extension on a $250,000 loan adds $5,000 in unexpected costs.
  3. Price Adjustments: Slower markets due to higher rates may force you to drop prices to sell quickly.

Steps to Succeed in 2025

  1. Build Your Money Bucket: Plan to have 20-40% of your total budget in accessible funds. This includes reserves for unexpected costs, payments, and project overruns.
  2. Stick to a Fast Schedule: The faster you complete your project, the less you’ll spend on carrying costs.
  3. Partner with Reliable Lenders: Work with lenders who understand the challenges of fix-and-flip investing.

Get Help So You Don’t Make This Mistake

2025 will bring challenges for fix-and-flip investors, but preparation is key. Want help setting up your money buckets or finding the right funding options? Reach out to us!

Let’s ensure you’re ready to profit faster, stress less, and enjoy real estate investing in the coming year.

Wrap-Up

Speed and preparation are your best friends in a fix-and-flip project, especially when interest rates are high. The more prepared you are, the more successful you’ll be.

If you have questions or want to learn more, contact us today and check out our programs. We’re here to help you thrive in 2025 and beyond!

Watch our most recent video to find out more about: How Interest Rates Will Impact Fix and Flips in 2025!

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Real Estate Investors: How to Control Your Interest Rates in 2025

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Today we are going to discuss how to control your interest rates in 2025. Interest rates play a big role in your real estate success. Whether you’re flipping properties or building your rental portfolio, knowing how to manage interest rates is a game-changer. Let’s dive into how you can make interest rates work for you in 2025 using strategies straight from real-world examples.

How Rates Impact Fix-and-Flips

Interest rates can make or break your ability to sell a property. Here’s how they affect your buyers and your profits:

Example: Rates and Affordability

Imagine a consumer shopping for a home at today’s rate of 7.12%. At that rate, they might afford a $400,000 house. But if rates drop to 6.12%, their affordability jumps to $440,000 — a $40,000 difference. If rates drop further to 5.5%, they could afford a $490,000 home.

The larger the buyer pool that can afford your property, the more competition you create. That competition helps you sell faster or for a higher price.

Strategy: Buy Down the Rate

If rates are high, you can buy down your buyer’s rate to make your property more attractive. For example:

  • A $440,000 property might cost you 2.5% of the loan amount to buy down the rate.
  • With a loan amount of $352,000 (80% of the purchase price), the cost to buy down the rate is around $8,800.

This investment can save you from dropping your price by $20,000 to $40,000 just to attract buyers. You keep your profits high while expanding your buyer pool.

How Rates Impact Rental Properties

For rental investors, interest rates directly affect your cash flow and your ability to qualify for loans.

Example: Local Banks vs. DSCR Loans

Let’s say you need a $250,000 loan for a rental property. At a 7% rate on a DSCR loan, your monthly principal and interest (P&I) would be $1,664.

But local banks and credit unions often offer lower rates, like 5.5%, for short-term fixed loans. At 5.5%, your payment drops to $1,458, saving you over $200 per month. That’s extra cash flow in your pocket or the difference between qualifying for a loan or not.

Strategy: Match Your Loan to Your Market

If you expect rates to drop in a few years, a short-term fixed loan from a local bank can be a great option. You lock in a lower rate now and refinance later if rates improve. This strategy keeps your rental property profitable and cash-flow positive, even in a challenging market.

Crush It in 2025!

2025 might bring steady interest rates between 5.5% and 7.5%. Instead of waiting for rates to drop, you can take control:

  1. For flips: Buy down rates to increase affordability and attract more buyers.
  2. For rentals: Explore local bank options for lower rates and better cash flow.

Understanding interest rates and using these strategies puts you ahead of the game. The bigger your buyer pool or rental margin, the more money you’ll make. Let’s make 2025 your most profitable year yet!

Have questions or need guidance? Reach out to learn how to optimize your rates and deals. We’re here to help!

Watch our most recent video to find out more about: Real Estate Investors: How to Control Your Interest Rates in 2025

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Why Loan Terms Matter for Real Estate Investors

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Why do loan terms matter for real estate investors? Loan terms can make or break your real estate investment. They decide how much you’ll pay each month and how quickly you’ll see profits. For investors, understanding loan terms is key to making smart choices.

Imagine you’re flipping a house. A short-term loan with high monthly payments might eat into your profit if the flip takes longer than expected. On the other hand, a rental property might benefit from a longer-term loan with lower payments, freeing up cash flow.

Here’s another example: Two investors borrow $100,000. Investor A has a loan with a 15-year term and a 5% interest rate. Investor B has a 30-year term at the same rate. While Investor A pays off the loan faster, their payments are much higher. Investor B pays less each month, which can free up money for other investments.

The right loan terms depend on your goals. Are you looking to flip and move on quickly? Or do you want steady cash flow from a rental? Knowing how terms affect your costs and profits can help you plan better deals.

Loan terms might seem like a small detail, but they’re the foundation of a successful investment. In the world of real estate, every dollar counts. Choosing the right terms means keeping more of those dollars in your pocket.

Contact Us Today! 

How can you maximize your profits as a real estate investor? Contact us today to find out more!

Free Tools For You! 

We also have free tools available! Download the Loan Cost Optimizer to see which loan is best for your investment property.

Learn more!

Visit our YouTube channel to learn more about real estate investing and how you can maximize your profits! 

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Real Estate Market Update for Investors – September 2024

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Real Estate Market Update for Investors – September 2024

Welcome to Your September 2024 Market Update

Hey there, it’s Mike with The Cash Flow Company! I’m here to give you a quick rundown of where the real estate market is headed and what it means for you as an investor. Whether you’re looking at DSCR loans, fix-and-flip projects, or even conventional rates, I’ve got you covered. Let’s take a closer look at the real estate market update for investors.

DSCR Loans: Rates are Dropping

If you’ve been eyeing DSCR loans, there’s some good news. We’ve seen rates drop by about 30 basis points this month alone. For well-qualified clients with strong properties, rates are now in the high sixes for 75% to 80% loan-to-value (LTV) ratios. That’s a significant decrease and nearly half a point lower than just a few months ago.

What’s Next?

Looking ahead, it’s a bit uncertain. The Federal Reserve is likely to increase rates by a quarter-point in September, and they’re talking about a few more hikes before the year ends. However, DSCR rates are based on a 5-year term rather than a 10-year, so they may fluctuate differently. However, by the end of the year, we could see these rates dip into the low sixes and possibly even the high fives early next year.

Conventional Rates: A Better Time for Buyers

Why should you care about conventional rates? Well, they’re crucial because they determine what your end buyers can afford. Right now, we’re seeing rates in the high fives and are around 5.625% to 5.75% for those with excellent credit and strong LTVs on owner-occupied properties.

Looking Forward

If the Fed continues to drop rates, we could see conventional rates fall into the low fives by the end of the year or early next year. While I don’t expect rates to drop more than a point or point and a half in the next 12 months, even these modest decreases will make a big difference. More buyers in the market mean more opportunities to sell your properties and move on to the next deal.

Fix-and-Flip Loans: Trending Downward

Now, let’s talk fix-and-flip loans. If you’ve got experience, which is 10 or more projects under your belt in the last two to three years, then you’re in luck. Rates for seasoned investors are now dipping back into the 8% range. Even better, we’re seeing lenders offer 10% down and 100% financing options, depending on your credit score.

What to Expect

This trend of decreasing rates is likely to continue, with some lenders already offering rates below 10% and even into the 8% range for well-qualified investors. Don’t expect huge changes by the end of the year, though. We might see another quarter or half-point drop, but this new reality of lower rates is here to stay, at least for the next 6 to 9 months.

The Bottom Line

So, what’s the takeaway? Rates are trending down across the board. That’s great news for cash flow, affordability, and getting your properties sold. The past year has been tough with high rates, but the tide is turning. More buyers are entering the market, properties are starting to cash flow again, and there’s a lot more activity overall.

Stay Updated with Our Mortgage Report

Want to keep up with where rates are headed? We’ve got a mortgage report that tracks the trends and tells you who’s offering the best rates for fix-and-flip, DSCR, and other loan products. Watch our most recent video to find out more about Real Estate Market Update for Investors – September 2024

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Loan Cost Optimizer: Find the BEST Loan for Your Deal

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Loan Cost Optimizer: Find the BEST Loan for Your Deal

Today we are going to discuss our Loan Cost Optimizer! This crucial financial tool helps you find the best loan for your real estate deal. Just like a house, a contractor, or a realtor, loans cost money and, more importantly, impact your bottom line. So, why wouldn’t you shop around and find the right one? 

Understanding Loan Costs.

In a nutshell, loans can be complicated. However, when you break it down, it’s all about simple math. Here’s what you need to consider:

  • Interest Rates: How much you pay to borrow the money.
  • Loan Term: The length of time you’ll be paying back the loan.
  • Fees: These include origination fees, appraisal fees, inspection fees, and more.

Therefore, each of these factors affects the total cost of your loan.

Why Use a Loan Cost Optimizer?

A Loan Cost Optimizer helps you compare different loan scenarios. By entering details about your project, you can see which loan costs you the least. Here’s how it works:

  1. Input Different Scenarios: Enter details like loan amount, interest rate, fees, and loan term.
  2. Compare Costs: See the total cost for each scenario.
  3. Find the Best Deal: Choose the loan that saves you the most money.

Examples

Let’s look at some examples to see how this works.

Example 1: Short-Term Fix and Flip

  • Loan Term: 3 months
  • Interest Rate: 8%
  • Fees: $2,000

Total Cost: $4,000

Example 2: Long-Term Renovation

  • Loan Term: 12 months
  • Interest Rate: 6%
  • Fees: $5,000

Total Cost: $11,000

With this in mind, even though the interest rate is lower in the long-term loan, the fees in addition to the longer term make it more expensive.

Tips for Using the Loan Cost Optimizer

This is an excellent tool that real estate investors can use in order to find the best loan option for their needs. It’s as easy as one, two, three! First, enter accurate details to ensure you get the best comparisons. Second, compare multiple loans to find the best option. Finally, consider the entire cost. This cost includes both the fees as well as the terms. To clarify, the entire cost is not just the interest rate. Additionally, there are a few more things that you need to keep in mind as well. Let’s take a look.

`1. Each Project is Different

Since every project has unique needs, it is important that you find the best loan every time. For example, sometimes you might need 100% financing, while other times, you can put more money down. With this in mind, let’s see how different scenarios can affect your choice:

  • Quick Flips: Higher interest rates along with lower fees might be better.
  • Longer Projects: Lower interest rates in addition to higher fees could be more cost-effective.

2. Keep Your Costs Low

In order to make the most money from your investments, keep your loan costs low. Here’s how:

  • Negotiate Fees: Don’t be afraid to ask for lower fees.
  • Shop Around: Compare offers from different lenders.
  • Match Loans to Projects: Use the Loan Cost Optimizer to find the best fit for each project.

Conclusion

Ultimately, using a Loan Cost Optimizer can help you find the best loan for your deal. In fact, by understanding and comparing the total costs, you can not only make smarter decisions but more importantly maximize your profits as well!

Ready to get started? Visit our website and try our Loan Cost Optimizer today! It’s free and easy to use. You don’t have to commit to anything, just see how it works and find the best loan for your next project.

Watch our most recent video to find out more about: Loan Cost Optimizer: Find the BEST Loan for Your Deal

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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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Investor Code Red: Doing Too Many Projects at Once

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Investor Code Red: Doing Too Many Projects at Once

Today we are going to discuss how doing too many projects at once can create a roadblock in your success. For example, we just worked with a guy who is a very successful business owner whojust got into flipping. He found 3 great properties and bought them all with our help. After finishing his first property, he gave us a call and said that he would never do that again. Unfortunately this is not uncommon in real estate investing. By biting off more than you can chew, you can quickly become overwhelmed. Don’t let this happen to you! 

Having too many projects can cost you more. 

By taking on too many projects at once, you can slow down the process entirely. 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.

Don’t focus on the unicorns.  

While there are some people who are unicorns and able to juggle multiple properties at once, they do not make up the majority of investors. The rest of us have to play by the rules and work hard in order to make money on our real estate investments. It is important to be aware of your own strengths and weaknesses throughout the process so that you can set yourself up for success. 

Limit your losses

You don’t want to get into your first property and lose $40K! In order to move onto the next property, it is important that you make money on your investments. We have seen so many investors who have hit a wall because they didn’t understand escrow, the need for cash flow, or they are doing too many things. Prevent the stress and move at a pace that’s right for you.

We are here to help!

Remember, what you can do in a couple years is a lot more than what you can do in a few months. Take the time to do things correctly in order to create the generational wealth you want. This is only one of the 5 major roadblocks that can prevent you from being successful in real estate investing. Where do you start? We can help you get on the path to success! Contact us today to find out more.

 

Watch our most recent video to find out more about Investor Code Red: Doing Too Many Projects at Once.

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70% of REI Investors Lose Money Because of THIS

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70% of REI Investors Lose Money Because of THIS

I have been in real estate investing for 23 years. Within that time I’ve seen 70% of new investors lose money within the first year. Many of them purchase real estate courses for $10K to $30K in hopes of learning all of the tips and tricks. Blinded by the promise of instant success, many people don’t take the time to set themselves up properly. On the other hand, those who take things at a slower pace and follow a few simple steps, will have a better chance of winning. How can you avoid becoming part of the 70% of investors who lose money? Let’s take a closer look.

Simple steps to success.

First and foremost the most important thing that you need to focus on as a new real estate investor is taking simple steps. This includes looking at properties, finding people who can send properties to you, and securing the money you need. Here at The Cash Flow Company we recommend that you look at 200 properties, talk to 100 wholesalers, and talk to 100 lenders before you jump in to your first purchase. Those who are focused can get everything set up in a matter of weeks. While others may take longer to get set up because they can only set aside a few hours a day. By taking the time to consume and understand everything, you will set yourself up for success. 

Make money instead of lose money! 

Some seminars can be beneficial to real estate investing, however, that is not normally the case. Many people become wrapped up in the idea of investing without understanding all of the factors that come into play. While it’s not rocket science, you do need to work hard to set yourself up for success. Those who are new to real estate investing often get talked into taking courses. These average $10K to $30K and focus on how to fix and flip quickly and easily. Not only do you have to pay for it using credit cards, but you are encouraged to use their credit cards as well. This get rich quick method causes many to lose steam quickly because they are not talking to people in the business or looking at enough properties. While this method may work for some, it doesn’t work for most.

Take your time 

Surprisingly 70%  of REI investors lose money because they dive in before going through the simple steps. In doing so, investors often lose $20K to $30K, which in turn prevents them from purchasing their next property. Successful real estate investors ensure that they have 1 to 3 good deals before moving forward in purchasing more properties. Just to clarify, a good deal is one that makes money! Real estate investing is all about making money so that you can live the life you want!

Contact us today to learn more about the simple steps you need to take to be successful in real estate investing. 

Watch our most recent video 70% of REI Investors Lose Money Because of THIS to discover how to get on the right path to success.

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