Tag Archive for: gap funding

Real Estate Investing Tips: Getting 100% Financing

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Real Estate Investing Tips: Getting 100% Financing

Today we are going to focus on one of the biggest questions real estate investors have, which is how they can get 100% financing. Here at The Cash Flow Company, we talk to an average of 20 to 25 investors a day. Many of them are facing a number of hurdles that are not only impacting them, but their investments as well. By looking at the patterns that we have seen over the years, it allows us to better meet the needs of our clients. How can you get 100% financing on your next investment property? Let’s take a closer look.

How do I get 100% financing?

Everyone wants to get into real estate investing with 100% financing. However, many of them wonder how can they get the money they need for their rental property or fix and flip. While there are some lenders who offer 100% financing, they will only do so if you have already done 1 or 2 deals. To put it another way, investors who have not had the experience yet, need other lending options immediately. Many traditional lenders will only lend 80% to 90%. Become a real Real Estate Investor by building your confidence to go ask people for the money you need for your investments. By finding good deals and demonstrating your confidence, the sky is the limit to your success.

First, HELOCS:

HELOC stands for home equity line of credit. A HELOC allows you to take money out of your property or a rental property. You can then use these funds to bridge the lending gap for your next investment.

Second, Real peoples money:

Real people are those within the community who are in search of better returns on their funds. There are a ton of people out there who have $20K to $100K to invest and are looking for better returns. 

Third, Start using creative financing today:

Creative financing includes business credit cards, which can be used to fund the rehab, staging, and even a Vrbo. However, it is important to keep in mind that the credit card needs to be a business credit card at 0%, otherwise it will not be beneficial to you or your investment needs. 

Fourth, What is stacking and how can it help you reach your financing needs?

The lending journey begins with your primary mortgage company who will give you 80% to 90% financing. As a result, investors must begin the search for additional financing options in order to get up to 100% financing. Gap funding options can actually include HELOCS, family friends, real peoples money, as well as establishing a partnership. 

Are you on the right path? 

Contact us today if you have any questions on how to get started in real estate investing! Do you have a property in mind? Send us the numbers and we will see if it is a good investment opportunity for you. Nowadays funding is a critical piece to real estate investors’ success, it is important that you know your numbers ahead of time to make things easier, cheaper, and faster. 

Watch our most recent video  to learn more Real Estate Investing Tips: Getting 100% Financing.

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Real Estate Investing: Popular Questions Asked and Answered

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2024 Real Estate Investing: Most Popular Questions Asked and Answered

Today we will be answering a few popular questions in real estate investing. On average, we talk to 20 to 25 investors a day. Many of them are facing a number of hurdles that are not only impacting them, but their investments as well. By looking at the patterns that we have seen over the years, it allows us to better meet the needs of our clients. What are the hurdles and how can you avoid them? Let’s take a closer look.

#1: How do I get 100% financing?

Everyone wants to get into real estate investing with 100% financing. How can they get the money they need for their rental property or fix and flip? While there are some lenders who offer 100% financing, they will only do so if you have already done 1 or 2 deals. For those who have not, it is important that they look into other options. If you are looking for 100% financing on a property it is important that you open up to other financing options other than traditional loans. Many traditional lenders will only lend 80% to 90%. Become a real Real Estate Investor by building your confidence to go ask people for the money you need for your investments. By finding good deals and demonstrating your confidence, the sky is the limit to your success.

HELOCS:

HELOC stands for home equity line of credit. A HELOC allows you to take money out of your property or a rental property. You can then use these funds to bridge the lending gap for your next investment.

Real peoples money:

Real people are those within the community who are in search of better returns on their funds. There are a ton of people out there who have $20K to $100K to invest and are looking for better returns. 

Start using creative financing:

Creative financing includes credit cards, which can be used to fund the rehab, staging, and even a Vrbo. However, it is important to keep in mind that the credit card needs to be a business credit card at 0% in order to be beneficial to you and your investment needs. 

What is stacking and how can it help you reach your financing needs?

The lending journey begins with your primary mortgage company who will give you 80% to 90% financing. This creates a funding gap that leaves you searching for additional financing options in order to get up to 100% financing. Gap funding options can include HELOCS, family friends, real peoples money, and even establishing a partnership. 

#2: Be prepared. 

Inflation is causing everything to become tighter and as a result it is harder to find financing for your investments. In order to be successful, investors need to be prepared before they go out and look for properties. This will give them a better chance of being approved for the lending that they need. Here at The Cash Flow Company we are searching  for deals where we can lend people money, get it back, and lend it back out again. What do you need to do to be prepared?

Valuation:

It is imperative that you have all of your numbers in line before talking to lenders. Keep in mind that wholesalers often stretch the value of the property. That is why it is important that you look at the numbers yourself to prevent frustration. When you are coming to lenders make sure that you know your values, know how appraisers look at properties, and make sure that your numbers are in line. These numbers include purchase, rehab, and rent. At the end of the day your goal is to create income and wealth. 

For example:

Someone reached out who is buying a single family house and he is going to make it into a two unit property. This single family property will sell for $200K. However, his belief was that the property will be worth $400K because he is splitting it into two properties. Unfortunately, that is not how the market works. 

#3: The future of real estate investing.

Many people wonder what the future of real estate investing is. How can they make money on buying rentals? Making money on rental properties right now is becoming a struggle because properties are $600K to $800K. While this is a concern for many investors, there are some options available to make investments more profitable. 

What is a padsplit?

A padsplit is when a property is divided into multiple single units. For example, a 3 bedroom could be divided into a 6 or 8 bedroom property. Just to clarify, each of the bedrooms would have a bathroom and all they would share is the kitchen space. Each unit could bring in a rental amount of $1,000, which could potentially total $6,000 to $8,000 per month depending on how many units you have. With an overall monthly rent of $3,500, the investor would have the cash flow they need to be successful. This method provides the flexibility and affordability that many people are looking for.

#4: Credit score obstacles.

Your credit score can often hinder your success in real estate investing. Over half of our calls are from people who have a score that is too low for them to get what they want. For example, we have a guy from Texas who is trying to get his property refinanced.  While the property is great and he has an amazing tenant, his credit score is too low for him to get the rate he needs to cash flow. By working on your credit scores and setting things up right, you can achieve the credit score you need to get what you want. 

Business credit cards.

Getting business credit cards is the #1 thing that will help you achieve your goals in real estate investing! Those who are able to get business charges off of their personal credit cards will in turn open up a lot of funding options. Struggles with credit scores is often the cause of people getting out of real estate investing. Don’t let this happen to you! 

Increasing your credit score quickly.

We have a lot of different options available to investors that will help them get their credit score back on track in a matter of weeks!

Usage loan

A usage loan is used to pay down credit cards by using a private loan. As a result of paying down the credit cards, it raises your credit score. By increasing your credit score it will then allow you to refinance and buy your next investment property.

Business credit cards

We can not stress enough how important business credit cards are! By setting up business credit cards instead of personal credit cards it will help to increase your funding options. The majority of business credit cards do not report your usage. Therefore they are not hurting your DTI or your credit score. Make the change today and see the effects it can have on your credit score! 

#5: Small steps vs Giant leaps

Oftentimes real estate investors make the process of getting started into such a big deal that their brain shuts off. As opposed to looking at one property a day, many attend a class that says that they need to purchase their first property within the first 30 days. This method is not always realistic for most people. Instead, you need to focus on the steps that stretch you a little bit as opposed to shutting you down. Consistency is the tortoise in real estate investing. By looking at one property a day and talking to one contractor a day, you will be better prepared to purchase your first investment property. Remember, it’s better to have 2 properties that are successful than to have 5 that are struggling.

Are you on the right path? 

Would you like to find out more about the popular questions in real estate investing? Contact us today! Do you have a property in mind? Send us the numbers and we will see if it is a good investment opportunity for you. Since funding is such a critical piece in real estate investors’ success, it is important that you know your numbers ahead of time to make things easier, cheaper, and faster. Also remember that by building your team now, you can set yourself up for the generational wealth that you want. 

Watch our most recent video 2024 Real Estate Investing: Most Popular Questions Asked and Answered to find out more.

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Where to Find Gap Funding

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Where to Find Gap Funding

In the past few days we have spoken with 4 clients who lost properties because they didn’t secure financing beforehand. While getting into real estate investing requires a lot of planning, it is imperative that investors set up their money correctly from the very beginning.  This often includes finding gap funding options prior too shopping for properties. Those who take the time to set things up correctly will have more opportunities than those who wait!

What is gap funding?

Gap funding is borrowing money from someone for the down payment, carry, or any money that you have to put into the deal. When you are buying a property, the first lender requires something in order to approve the loan. This could be a down payment, reserves for payments, or they may require you to do the fix up. Many investors don’t have the additional funds that are needed in order to meet the lenders requirements. Real estate investors might go out and find a family member, friend, or someone in the real estate community who can lend them that money to bridge the gap. It is important to make sure that your primary lender allows gap funding before purchasing a property. If the lender doesn’t allow gap funding, it could jeopardize the deal. 

How do you find gap funding?

There are a lot of people out there who have anywhere between $10K to $50K that they are looking to invest. By working with you, they have a chance to receive a better return on their investment. So how do you find gap funding? There are real estate groups throughout the community that provide opportunities for investors to meet. While peer investors are not often interested in diving into real estate themselves, they are interested in getting a better return on their money. While you can start by asking family and friends, many fear that it will create an awkward situation. By finding peer investors in the community who have $100K or $200K set aside, you will be able to compete in today’s market!

Ready, set, GO!

In order to be successful in real estate it is important that you find and secure funding prior to purchasing properties. Thankfully there are a lot of options out there to help investors. These include HELOCs, credit cards, and peer lending, just to name a few. Here at The Cash Flow Company we have seen people use multiple ways to get the gap covered. Those who take the time to  gather pre-approvals, will be ready to go when the next deal comes!

Contact us today to find out more about gap funding and what you need to do to get pre-approved.

Watch our most recent video to learn Where to Find Gap Funding

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How to Compete in Today’s Real Estate Market (2024)

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How to Compete in Today’s Real Estate Market (2024)

In the past few days we have had 4 clients who lost properties that would have been really good flips. The reason that they lost the deal was because they didn’t secure financing beforehand. While getting into this business requires a lot of planning, it is imperative that investors set up their money correctly from the very beginning.  Those who do will be able to compete in today’s market and have more opportunities for the best deals! 

New investors prepare!

Those who are new to real estate investing should focus on setting up the proper financing immediately! The last thing that you want to do is to put a property under contract and not close . This could burn the relationship that you created with the realtor or wholesaler. Instead of being at the top of their list for good properties, you will instead move to the bottom of the pile.  Here at The Cash Flow Company we want to give you the competitive advantage. Part of that is making sure that you do everything correctly. It is a business! As a business it is important that you get pre-approved for the loans you need. 

Don’t miss out on deals!

Oftentimes real estate investors miss out on amazing deals because they are not prepared. Whether you are new or just into a new adventure, it is important to set yourself up for success from the beginning. If you are going to get into the real estate game, make sure that you are not only looking for properties, but that you are also keeping the money flowing. What do we mean by keeping the money flowing? Maybe you need 100% financing, need a second, or you’re new to flips and need to know what to do. By talking to lenders as you find properties and getting pre-approved, it will help you to move forward quickly on deals. 

Choose the right lender for the deal.

One of the most important things that you need to do as a real estate investor is to create a good relationship with lenders. Those who have a good relationship with their lender will be able to consult with them prior to purchasing in order to see what financing options are available. One thing to keep in mind is that your lending needs will not only change over time, but they will change depending on the property. For example, financing on a fix and flip will be different from the financing on a rental property. It is important to look around and evaluate your lending options annually in order to find the best options for you. 

How do you get pre-approved?

Before seeking out a pre-approval, it is imperative that you know what type of property you are looking for. Are you going to focus on flips, rentals, 1 to 4 units, or multi units. Those who do can then make sure that the lender lines up with what they are trying to do. By getting pre-approved can help you go into a deal with reassurance. How can you find the right lenders? The answer is by talking to those in the real estate community. They can guide you to the lenders who are closing, those who work with new investors, and also tell you about requirements that the lenders might have. 

Get the competitive advantage.

As you talk to lenders it is important to consider what their requirements are, and areas that you need to focus on. While one lender might require more money down, another may require a higher credit score. Find out all of the steps that you need to complete in order to guarantee pre-approval. Just to clarify, these steps can be done in conjunction with looking at properties. For example, you can work on improving your credit score or look for private money options while searching for properties. By taking your time to work through the process, you will have a competitive advantage.

What is gap funding?

Gap funding is borrowing money from someone for the down payment, carry, or any money that you have to put into the deal. When you are buying a property, the first lender requires something in order to approve the loan. This could be a down payment, reserves for payments, or they may require you to do the fix up. Many investors don’t have the additional funds that are needed in order to meet the lenders requirements. Real estate investors might go out and find a family member, friend, or someone in the real estate community who can lend them that money to bridge the gap. It is important to make sure that your primary lender allows gap funding before purchasing a property. If the lender doesn’t allow gap funding, it could jeopardize the deal. 

How do you find gap funding?

There are a lot of people out there who have anywhere between $10K to $50K that they are looking to invest. By working with you, they have a chance to receive a better return on their investment. So how do you find gap funding? There are real estate groups throughout the community that provide opportunities for investors to meet. While peer investors are not often interested in diving into real estate themselves, they are interested in getting a better return on their money. While you can start by asking family and friends, many fear that it will create an awkward situation. By finding peer investors in the community who have $100K or $200K set aside, you will be able to compete in today’s market!

Ready, set, GO!

One of the biggest hurdles in real estate investing is finding the funding you need to purchase properties! Thankfully there are a lot of options out there to help investors. These include HELOCs, credit cards, and peer lending, just to name a few. Here at The Cash Flow Company we have seen people use multiple ways to get the gap covered. Those who take the time to gather pre-approvals, will be ready to go when the next deal comes!

Contact us today to find out more about gap funding and what you need to do to get pre-approved.

Watch our most recent video to learn How to Compete in Today’s Real Estate Market (2024).

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5 Small Loans You Can Use to Help Your Business

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Here are the top 5 small loans we fund to our clients.

Most real estate lenders won’t touch small loans. Anything less than $75,000, and you’ll find many institutions won’t even fund you.

But for the last 23 years, we’ve helped thousands and thousands of investors fund billions of dollars – and one of our specialties is small loans.

We understand the important role smaller loans play in your real estate investing career. Let’s go over 5 types of small loans you might find a need for in your investments.

1. “Finish a Project” Small Loans

The first kind of small loan we fund is what we refer to as a “finish a project” loan.

It’s exactly what it sounds like: you run out of money on a project, and you need a bit more to get it over the finish line.

We help people with:

  • New builds that don’t have the money to finish.
  • Started flips that need a few more thousand dollars to get to market.
  • Rentals that require more capital to get to a rentable state.

We can fund these loans without touching your first mortgage on the property.

2. Small Town Loans

We help a lot of clients from small communities, or who invest in small towns. A lot of properties in these areas are available for less than $75k, so other lenders aren’t interested in funding them.

Just last month, we funded 3 properties like this. The number for each of them broke down like this:

  • Purchase: <$40k
  • Rehab: ~$20k
  • All-in: <$60k
  • ARV: $100k – $110k

There is a lot of money to be made on properties like this, yet most lenders wouldn’t fund this deal.

We don’t care if a property is rural or agricultural. If the numbers make sense, our loan is secure, and there’s money to be made for you, then we’d love to help you with small-town loans.

3. Gap Funding

Another loan we commonly do is gap funding.

Gap funding can cover a lot of different parts of a project. Anytime there’s an expense on an investment project that your primary loan doesn’t cover, a gap loan can come in to save the day.

These loans include:

  • Down payment (usually 20-30%)
  • Rehab costs (especially if your primary lender won’t include that in your LTV)
  • Carry costs (like mortgage payment, insurance, taxes, etc)

If you don’t have (or don’t want to use) your own capital or other lines of credit, we can come in with small loans to fill in these little gaps in your project.

4. Credit Usage Loans

Another popular loan we do is an “Improve Your Credit Score” loan.

Credit usage is a common sore spot for many real estate investors’ credit scores. Maybe you use your personal credit card to fix up your properties and pay it off once your flip sells or refinances.

In the meantime, you’re using up a high percentage of your personal credit limit. This usage negatively impacts your score, which in turn wrecks your chances of getting a great loan for your next project.

Where our loans come in is:

  • You take out a private loan with us.
  • Use those funds to pay off your personal credit cards.
  • Your usage goes down dramatically, improving your score so you can get approved for other loans.

5. Cash Flow Loans

The last of our popular small loans are the type that creates cash flow for your budget.

If you need to make payroll, compensate a contractor, get some extra capital for more growth, or any other business expense, we can provide a loan for that.

In this case, you don’t even need to be a real estate investor. You just need to own a piece of property that we could secure the loan with.

How a Small Loan Works

All of these loans work because you use a current piece of real estate to secure it. Our primary concerns are keeping the loan safe and making you money.

We don’t worry about your credit score, income, or experience levels. As long as they’re secured, we can get you small loans.

Have questions about how these small loans work? Need a smaller loan? Reach out at Info@TheCashFlowCompany.com and we’d love to see how we could help.

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How to fund with lines of credit

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How to fund with lines of credit

Today we are going to discuss how to fund your real estate investments with lines of credit. With lenders cutting back, there is a greater need for investors to find alternative financing. Don’t let this lending squeeze affect you! Let’s take a closer look at your options and how you can ensure success.

What is a lending squeeze?

If you’re a real estate investor, you’re probably familiar with the concept of shrinkage in the loan business. During economically turbulent times, lenders cut back the amount of money they’re willing to lend. As a result, this affects how much money you get for your project (aka, your LTVs).

For example: If the typical bridge lender offers you 80-90% of the purchase, you’ll need something to help you cover the other 10-20%. It’s up to savvy investors to find alternative sources of funding to fill that gap left by your loan. 

What Determines Your Gap Financing in Real Estate?

Firstly, there are a few ducks you’ll need in a row before diving into gap financing. Most gap funding will determine whether to lend to you based on three things: credit, assets, and experience. Both the amount of primary funding you’ll receive from your lender and the amount of gap funding you’ll be able to get will be dependent on credit. Also, you can get other lines of credit by putting up your assets as collateral. Finally, having experience or knowing what you’re doing may incline some gap funding lenders to give you a loan.

1. HELOC

If you have good credit and real estate assets (owner-occupied or not), you should always have a line of credit called a HELOC available to you. HELOC stands for “home equity line of credit.” These funds will typically be the safest, easiest, and cheaper you can get. All real estate investors who have property and good credit should have a HELOC. This is going to be your safest, easiest, and cheapest source of funds because they’re always available to you.

2. Lines of Credit from Banks

But what if you have good credit but no real assets? In that case, you’ll need to look at other, unsecured options to fill the gap. One option is to use an unsecured line of credit from a local bank or national company. These lines of credit typically have higher interest rates than a HELOC, but they’re still a good option if you have good credit. 

Don’t Misuse Your Funds

One thing needs to be clear with gap funding: dDo not abuse it. If you use a line of credit that was intended for a real estate investing project, then make sure it’s used for that purpose. It should also be entirely paid off after each transaction is completed. Treat credit like a lender, and treat your investments like a business. Never use real estate lines of credit for personal use. It will kill your credit, your financial future, and your investing career.

How to Get Gap Financing in Real Estate

We’re happy to help with any questions you have about funding or gap financing on real estate projects.

We’ve helped with thousands of transactions worth millions of dollars using OPM. You can download our free OPM guide here.

Watch our most recent video to find out more about: How to fund with lines of credit

Any other questions? Send us an email at Info@TheCashFlowCompany.com.

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What is Gap Funding?

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Gap funding

In the real estate investment world… What is gap funding?

You should never count on a bank or hard money lender to give you a loan that will cover 100% of your real estate investment property.

What you should be able to someday count on, though, is funding up to 100%.

So, what is this type of funding?

Definition: What Is Gap Lending?

Gap funding is the money you bring in from another source to fill any gap left between the lender and the project costs.

If a lender offers you 70% of the LTV on a property, this type funding is how you fill in the remaining 30%. Usually, you secure gap funding, although unsecured funding is possible.

A “secured” loan means that the debt is backed by a piece of collateral. In a typical gap funding scenario, the loan is secured by the property being purchased.

For the most part, you won’t be able to find a gap lender at an institution like you can a bank lender. Instead, gap lenders are family members, friends, or someone you know.

OPM vs Gap Funding

You can use a couple funding terms interchangeably:

  • gap funding
  • gap lending
  • OPM (other people’s money)
  • real people’s money

All of these terms get at the same concept. It’s money, not from you and not from an institutional lender, that covers whatever costs of an investment property that your lender won’t fund.

OPM can cover up to 100% of a deal, but for now, we’ll be talking about it in a strictly 100% funding sense. These are loans that fill in the holes of a project that a mortgage or hard money loan wouldn’t cover.

Check out our Youtube channel for more great information.

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