Tag Archive for: hard money

How to Fund Your Fix and Flip

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When looking to fund your fix and flip, it’s important to understand where the money comes from.

In general, the money in your bucket comes from two places: lenders and your own pocket. It’s important to know how these funds work together to fund your project.

What Does “Lender Funding” Actually Mean?

When lenders talk about funding 90% of purchase or 100% of a renovation, it sounds like they’re paying for more than they actually are.

True, they’re taking care of a huge portion of the cost (that you will pay back eventually). However, you’re still going to encounter additional costs and fees that you’ll have to pay out of pocket to complete your fix and flip.

If you’re not prepared, it stalls your project, and you might end up paying even more than you otherwise would have.

Reimbursable Fix and Flip Costs

This is a sub-category of money you’ll need for your fix and flip. You should also have extra funds in your money bucket to pay for certain projects up front. Even for costs that will be reimbursed!

Because most lenders only reimburse you for completed work, you’ll need out of pocket money to fund the first one or two draws to keep the project going. 

These can be expensive and could cost around $15,000 each. You can find more information about how to pay for these first draws in this article from Hard Money Mike.

These draws will be reimbursed eventually, but you need the funds available up front to get your fix and flip moving. This isn’t technically an out of pocket expense, but it can feel like it while you’re waiting for those first renovations to be completed.

How to Fund Out of Pocket Costs

It can be overwhelming to look at the out of pocket costs adding up for your fix and flip. You can easily expect to pay an additional $20,000 in expenses alone, and that number can rise to $50,000 if you include the funding you’ll need for draws.

It’s best to have these funds available in a savings account, but you can also use gap financing

It’s also important to build your credit and be smart about how you’re using credit cards. Some business credit cards let you draw beyond the cash limits. This can be helpful in covering some out of pocket expenses. 

You can also look into hard money loans. Depending on your project, different loan options could better fit your needs. Shop around on the front end to avoid delays in your fix and flip projects. You can also use our loan cost optimizer to help you find the right deal for you.

Read the full article here.
Watch the full video here:

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Here’s how to use both hard money and bank funding to maximize your cash flow.

You can’t get by on just hard money or banks alone. Hard money and bank funding both have their place in your real estate portfolio.

Here’s an overview of the advantages of both types of leverage.

Speed with Hard Money

What if you have a great deal, but you’re required to close in 5-7 days? In that case, you need hard money.

You’ll meet sellers in your real estate career who just don’t want an extended closing. These sellers would rather you close quickly – and they’ll give you a better deal on the price if you can do it. Sometimes, taking too long to secure your financing can get you kicked out of a deal.

You can call your hard money lender and get leverage fast. There’s no hold-up for an appraisal or trudging through a lengthy underwriting process. Hard money is specifically designed for real estate investing.

Even seasoned real estate investors, who do dozens of deals every year, still require hard money from time to time. Every investor runs into deals where they need to close quickly. Whether it’s because your bank won’t be ready in time, you’ve maxed out your line with your hedge fund, or some other unexpected circumstance, you need a hard money lender in your portfolio for speed.

Fast closing can capture a lot of equity on a property. Despite hard money being one of the most expensive forms of leverage, purchase price savings on a quick close can far outweigh the cost of the loan.

Pricing with Banks

If hard money is for speed, then banks are for price.

Finding a bank that loves working with real estate investors is a valuable weapon. If you can build a relationship with the right bank, you can get a better rate and a better closing cost.

Some circumstances when you’d benefit from getting your leverage from a bank include:

  • Whenever you have the time to close. If you can afford to wait for appraisals and underwriting, your loan costs will be much cheaper.
  • If the rehab work will take longer than 6-9 months. When you close on a flip with hard money, you need to complete construction on the property within a month or two. If you use a bank loan, you can afford to spend longer fixing up the house.
  • Any time you want more cash in your pocket! Banks have half the interest rates of hard money lenders. Lower rates and fees mean more money in your pocket by the time your property sells.

Hard Money and Bank Funding

Hard money’s role is to save the day when you need a quick close. Banks are the stars if you need a slow and steady loan at low cost. Having just one or the other won’t cut it. You need both forms of leverage.

Read the full article here.

Watch the video here:

https://youtu.be/3_T81gqiZdk

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Text: "Bridge Loans"

The real estate market is changing. Here’s what you need to know about bridge loans in 2022.

Have you used bridge loans for your portfolio in the past? 

In 2022, all money sources are tightening for real estate investors. Interest rates are rising, banks are reluctant to lend, and lender requirements have shot up.

You might find you’ll need more bridge loans than ever before.

Here are 3 ways you can use bridge loans for real estate investing in 2022.

1. Gap Loans to Supplement Hard Money

In the current market, lenders’ priority is to lower their risk. Many hard money lenders are limiting loans to 65% of the after-repair value (ARV).

If you could still complete a project under-budget at 65%, you’ll be able to find a lot of funding options. But if your project will take more than 65% of the ARV to complete, you might need to bring in a bridge loan.

A bridge loan can fill the gaps left by a hard money loan – whether for a down payment, rehab expenses, or carry costs.

You can get a bridge loan from:

  • A hard money lender
  • A hedge fund
  • Real OPM

OPM (Other People’s Money) is the ideal option for this type of gap funding. OPM is real money from people you know. It can be used to bridge gaps in investments, refinance hard money, and more.

2. Buy a New Property with Bridge Loans in 2022

Another effect of the upcoming market is the amount of time houses will take to sell.

Instead of selling in two to three days, we’ll soon see houses taking two to three months to sell, depending on size and location.

Your investment career can’t come to a halt just because a house takes too long to sell. What if you find a great deal while your old project is still on the market? All your capital is tied up in that first property.

Bridge loans solve this problem.

A bridge loan puts a lien on both the new property and the old property. This gives you the equity needed to close on a new house before the money from selling the old one hits your pocket.

Bridging from one property to the next like this is the number one way investors use bridge loans.

3. Bridge Loans for Wholesalers

Wholesalers use bridge loans, too. Sometimes called “transactional” or “wholetailing” loans, these short-term funds are also a type of bridge loans.

This type of loan bridges a very small gap. Usually, it’s just the money needed for one day until the buyer’s money comes into the title company.

With these types of bridge loans, it’s important for wholesalers to find a lender who will give 100% financing, without overcharging.

What to Look For In Bridge Loans in 2022

Bridge loans are all about getting the right lender and the right position.

Terms of a Bridge Loan

It’s important to pay attention to the terms of a bridge loan. You want a lender who charges fewer points – even if their interest rate is higher.

You only have to pay interest in small, monthly chunks. With points, you have to pay a percentage of the whole loan. Since bridge loans are very short-term, you won’t end up paying much in interest anyway. However, you’ll still have to pay the points (regardless of how long you kept the loan).

Shop Around for Lenders

Make sure you shop around for the right lender for your bridge loan. Find out who does bridge loans, who can do them quickly, and who focuses more on the interest rate rather than other costs (originations, appraisals, etc.).

Bridge loans are meant to be quick, short-term, and relatively inexpensive. You want to find a lender who can provide that.

How The Cash Flow Company Can Help

The Cash Flow Company offers DSCR loans, traditional loans, and blanket loans. Plus, we have the flexibility of hard money.

If you have any questions about bridge loans in general or our bridge loans in particular, reach out!

Email us with a specific deal or question at Info@TheCashFlowCompany.com.

Join our weekly call where we work with investors’ deals in real time, every Thursday from 1:15 PM – 2:15 PM MST.

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Hard Money Basics

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Real Estate Funding Solutions: Welcome to The Cash Flow Company

Hard money basics you need to know before real estate investing.

We’ve been in the hard money loan business for 20 years. Half the calls we receive are still beginner real estate investors trying to learn the money side of investing.

If that’s you, you’ve likely applied for, heard of, or thought about using hard money lenders. But maybe you don’t fully understand the private lending world yet. How does a hard money loan work? How much interest do private lenders charge? Do hard money lenders require a minimum credit score? Should you just wait until you qualify for better bank loans?

This guide will help answer:

  • What is hard money?
  • What do hard money lenders look for?
  • How is hard money different than other loans?
  • How do you qualify for hard money?
  • Is hard money better than banks?

Becoming hard money proficient will put you miles ahead as an investor.

Ready to nail the basics?

Real Estate Funding Solutions: Welcome to The Cash Flow Company

What is Hard Money?

Hard money is a short-term loan designed for real estate investors. HM lenders focus on lending money on undervalued properties in need of rehab.

HML are short term – usually around six months or a year – and are designed to help buy properties to fix up.

While “easier” than traditional bank loans, hard money loans are also more expensive due to higher interest rates. Which brings us to the most important quality of hard money loans: they’re fast.

In real estate investing, discounted properties typically require fast-closing deals. Hard money loans can help you take advantage of prices while they’re low, and:

  • Save on the property cost to begin with
  • Get more from selling or refinancing the property.

These savings more than cover the costs of a hard money loan for most investors.

The speed of hard money makes it valuable for newbie and seasoned investors alike. Hard money loans are made for real estate investors.

How Does A Hard Money Loan Work?

What do hard money lenders look at? There are two main factors lenders of hard money consider.

Loan-to-Value Ratio

An important number a lender takes into account is the cost of the property. The ratio of the loan they offer and the cost is important for you to know.

Let’s say you have a property with a current appraisal of $200,000. Then you get a loan for $100,000. The loan is half of the value of the home, so your loan-to-value is 50%.

After Repair Value (ARV)

ARV, after repair value, is another important factor hard money lenders consider. The properties targeted by real estate investors are undervalued. They need work to be brought up to the standards of the surrounding community.

So, lenders look at not only the current value of the house, but also the future value of the house, after it’s all fixed up.

Many hard money loans are based on after repair value rather than loan-to-value. Your lender might offer you up to 75% – not of what you’re buying it for, but what you could sell it for by the end.

What Does ARV Cover?

A key factor to ARV is that lenders will lend not only for the initial purchase, but for the fix-up costs.

Many lenders will put money aside in escrows to use throughout the project to pay contractors and cover other renovation costs.

If your loan considers ARV, it’s possible for you, with ZERO money down, to:

  • Buy a property.
  • Fix it up.
  • Either sell it (fix-and-flip) or refinance it (BRRRR).

After selling or refinancing, you use that money to pay the loan back.

Hard money is designed to build value into real estate. Understanding the role of the after repair value will help you immensely in your hard money investments.

How Is Hard Money Different from Other Loans?

Interest rates on hard money are between 2-5% higher than what you’ll find at banks. You can expect origination fees to be about twice as much. Appraisals will be close to the same.

So on paper, the rates and fees are higher, so it feels like you’re spending more. Which you are! But with hard money loans, you’re paying for:

  • Accessibility
  • Convenience
  • Flexibility
  • The opportunity to purchase properties you’d never be able to while relying on bank loans.

While hard money costs more than other loans, the potential value is also way higher. When sellers have discounted real estate, they want it sold fast. Banks can take 25-30 days to close. You can receive hard money in a matter of days.

Every week, we see hard money work to save people money.

When a recent client of ours bought a property, he saved 10% – just because he could close faster than the other five bidders. His savings on that purchase were $30,000: much more than double what he’ll spend on the loan transaction.

How Do You Qualify for a Hard Money Loan?

There are two kinds of hard money lenders. They each have different qualification requirements.

National Hard Money Lenders

National lenders lend in almost every state. They are larger organizations, backed by hedge funds and private equity.

National hard money lenders require:

  • A credit score check, and a good score.
  • Experience – at least five deals in the last three years.
  • Properties to be in specific larger communities.

So if you’re new to investing, need to improve your credit score, or are looking at more rural properties, you may need to look into local lenders.

Local or Private Hard Money Lenders

A local, or private, lender will specialize in your state or area. Local lenders are much more likely to:

  • Not ask for a credit score.
  • Not require experience.
  • Lend for rural areas.

Local lenders are focused on the deal itself and whether it has good value.

When deciding which lender to use for hard money, always shop around to see what fits your situation now. And be aware that another lender may fit you better in the future.

Are Private Lenders Better Than Banks?

It’s impossible to say whether hard money lenders or banks are “better” for real estate. It all depends on your deal and where you are in your investment career.

When to Use Bank Loans vs Hard Money Loans

Bank loans will have lower rates and may be the better route if you:

  • Have had a successful investment business for over two years.
  • Make a lot of money at a W-2 job.
  • Have 3-4 weeks to close.

Hard money loans will be easier, faster,  and may work better if you:

  • Are newer to real estate investing.
  • Don’t have money up-front to invest.
  • Don’t want to put your own money into a deal.
  • Need to close within a week or two.

As long as a property promises income, hard money more than makes up for its higher rates with the speed and greater potential savings. Starting in hard money paves the way for you to work up to bigger funding opportunities.Hard more

 

 

Find out more on how to leverage up your real estate investments on our Youtube channel.

The Cash Flow Company can help you with all real estate investor loans.

We also can help you find and set up real private money from those around your area.

We scour 100’s of loan programs across the country every month locating the best investor friendly loans.

 

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My Credit Score...What's That About?

Money Chat: My Credit Score…What’s That About?

When you need a loan, do you ever think, “My credit score…What’s that about?”

Well, during our next Money Chat, Mike Bonn is going to answer all of your questions. He’s also going to share insider tips on how to raise your score so you can get the best loan possible.

My Credit Score...What's That About

Want to join Mike’s Money Chat? Then register for FREE here.

Mike will answer common questions like:

  • Is this based on my credit?
  • Will you pull my credit?
  • How can I boost my credit score? 
  • What score do I need to get the best rates?

By the end of the Money Chat, you should have a much better grasp of how your credit score impacts your loan options…and, more importantly, your cash flow and profits.

When: Thursday, September 30th, 11 AM MST

Where: Virtual nationwide.

Register for free at https://my.demio.com/ref/lw8s3Krd8n4vKXqo

Can’t make it? No problem. We run free Money Chats every week to make sure you have an opportunity to listen, learn, and ask all of your questions.

Mike and the rest of the Hard Money Mike/Cash Flow Mortgage Company team looks forward to seeing you on Thursday.

If you have any questions about our weekly Money Chats, then our team is here to answer them any time.

Happy investing!

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Second Chance Money Chat: How to Fund a Flip

Second Chance Money Chat: How to Fund a Flip and Other Deals

If you missed Tuesday’s Money Chat with lending expert, Mike Bonn, then here’s your second chance to learn how to fund a flip and other deals.

Mike will be hosting another Money Chat tomorrow, Thursday, September 2nd at 11 a.m.

During tomorrow’s chat, Mike will answer all of your questions on How to Fund a Flip.

If you’ve always wanted to get into the fix and flip game, but don’t know where to start when it comes to buying properties, then this Money Chat is perfect for you!

This is your chance to join other like-minded real estate investors and ask all of your questions to a lending professional.

Money Chat Encore: How to Fund a Flip

If you’d like to join Mike’s Money Chat tomorrow, then you can register for FREE here.

During the virtual call, Mike will answer common questions like:

  • What are my funding options?
  • What is hard money?
  • How do I qualify? What credit score do I need? Income? Experience?

By the end of the Money Chat, you should have a much better grasp of how to get going in real estate investing…and how to pay for your properties.

Can’t make it to tomorrow’s chat? Then go ahead and let us know. If there’s enough interest, we’ll set up more Money Chats on how to fund a flip. Or you can reach out to our team and schedule a time for a one-on-one call. That way you have an opportunity to ask all of your questions on how to fund a flip (and any other value-add property).

But we hope to see you and other like-minded investors for tomorrow’s chat! As a reminder, here are the details to join:

When?

Tomorrow at 11 AM MST

Where?

Virtual nationwide.

Register for free at my.demio.com/ref/1j9cO1wJ3Co6QkW1

Mike and the rest of the Hard Money Mike/Cash Flow Mortgage Company team looks forward to seeing you tomorrow!

If you have any questions about our weekly Money Chats, then our team is here to answer them any time.

Happy investing!

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Money Chat: How to Fund a Flip

Don’t Forget to Join the Money Chat: How to Fund a Flip

Want to know more on how to fund a flip? Then don’t forget to join our Money Chat tomorrow with lending expert, Mike Bonn.

During Tuesday’s Money Chat, Mike will spend time answering all of your questions on how to fund a flip and other real estate deals.

If you’ve always wanted to get into the real estate game, but don’t know where to start when it comes to buying properties, then this Money Chat is perfect for you!

This is your chance to join other like-minded real estate investors and ask all of your questions to a lending professional.

Money Chat Reminder: How to Fund a Flip

If you’d like to join Mike’s Money Chat tomorrow, then you can register for FREE here.

During the virtual call, Mike will answer common questions like:

  • What are my funding options?
  • What is hard money?
  • How do I qualify? What credit score do I need? Income? Experience?

By the end of the money chat, you should have a much better grasp of how to get going in real estate investing…and how to pay for your properties.

Can’t make it to tomorrow’s chat? No problem, because we’re running another Money Chat on Thursday. That way you have an opportunity to listen, learn, and ask all of your questions on how to fund a flip (and any other value-add property).

And if you miss both Money Chat, no sweat. We’ll be hosting many more in the future. Plus, our team is always here to assist you.

So, mark your calendar!

When?

Tomorrow at 6 PM MST

Where?

Virtual nationwide.

Register for free at my.demio.com/ref/1j9cO1wJ3Co6QkW1

Mike Bonn and the rest of the Hard Money Mike/Cash Flow Mortgage Company looks forward to seeing you on Tuesday or Thursday (or both).

If you have any questions about our weekly Money Chats, then our team is here to answer them any time.

Happy investing!

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How to Make Real Estate Investing EASY: 3 Steps to Funding Your Fix and Flip Deals

How to Make Real Estate Investing EASY: 3 Steps to Getting A Fix and Flip Loan

When you’re looking to buy a value-add property like a fixer upper, then you’re probably also looking to get a fix and flip loan (aka, a hard money loan).

But what exactly does a fix and flip loan process entail for real estate investors?

Well, let’s take a look at the first 3 steps you need to take to fund your fix and flip deals. Because in order to make the most money, you need to make sure you’re working with the best lender. For you!

S0, here we go!

Know the difference between fix and flip lenders

Just like houses, real estate lenders come in all shapes and sizes. Some require in-depth real estate portfolios, good credit scores, and 10 to 20 percent into each project. These are typically the larger national companies.

Some lenders will work with newer investors with little to no money in the deal. Some will charge higher rates and less points. And some have a ton of junk fees, while some have none.

Overall, you’ll likely find the more flexible the lender, the higher the cost.

But to discover the best lender for you, you’ll need to shop around in your area.

Know what you bring to the table

If you want real estate lenders competing for your business, make it easy for them. Become a borrower that all lenders want to help.

What does that mean? Well, simply put:

  • Keep your credit score high
  • Get projects done on time
  • Pay your lenders on time
  • And build your real estate portfolio to show everything you’ve completed and who’s on your team.

Know what you’re looking for

It’s so important you know what YOU need. For example, do you need a lender who requires less money in? Less experience? Better rates? Faster closings? Just ask yourself, “What will make me the most successful?”

Once you complete these 3 easy steps, we can guarantee your search for the perfect fix and flip lender will be a great one. And that means your bank account will be very happy with you.

Ready to chat? Our team is here and ready to help you find the right loan for you!

Happy investing!

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Busting Hard Money Myths: Why Hard Money is a Cure, Not a Curse

Busting Hard Money Myths: Why Hard Money is a Cure, Not a Curse

Today, we’re going to wrap up our Busting Hard Money Myths series, and talk about why hard money is a cure, not a curse.

But, first, be sure to check out our YouTube channel in case you missed any of our other hard money myth busting videos.

So, this past month, we’ve explored the important question of, “What is hard money?” That means we’ve busted myths and revealed how it:

  • Can be acquired for cheaper rates than most investors believe.
  • Are NOT a trap if you create a plan ahead of time.
  • And can be cheaper than bank lines.

As you can see, hard money is far from a curse.

It’s a cure.

A cure to:

  • Buying properties faster and cheaper.
  • Keeping your real estate investment projects moving along so you can sell or rent ASAP.
  • Boosting your cash flow.
  • Tackling more value-add properties than you ever could with a traditional bank loan.

Look, hard money gets a bad rep because so many real estate investors have serious misconceptions about it. But if you address each myth and see that that’s all it is—a myth—then you can transform your investments and generate positive cash flow.

No longer will you be limited to conventional loans that are harder to qualify for, and far more time consuming. Now you can buy fast, renovate fast, and either sell or rent fast.

Remember, time is money.

And hard money is the key to keeping your real estate deals moving along—AND keeping money flowing into your bank account.

Ready to chat about your hard money and other lending options? Great! Our team is here to help. We’re excited to set you on a path that makes you the kind of money you need…to live the life you want.

Happy investing!

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Busting Hard Money Myths: How Hard Money Can Be Cheaper Than Banks

Busting Myths: How Hard Money Can Be Cheaper Than Banks

Let’s keep busting hard money myths and talk about how hard money can be cheaper than banks.

But, first, in case you missed our other hard money myth busting videos, check them out on our YouTube channel!

So far, we’ve busted common myths like “Hard money is too expensive,” and “Hard money is a trap.”

Now, let’s look at another common misconception about hard money:

“Bank lines are cheaper than hard money.”

Okay, on the surface, bank loans are cheaper. Yes, that part is technically true.

However, when you scratch below the surface, you’ll discover hard money can be cheaper. All because of one important factor that doesn’t get calculated into the equation at the start of a loan:

Timing.

Think about how long it can take to close a bank loan. You might get lucky and close within 30 days, but it often takes longer. Sometimes MUCH longer.

Hard money, on the other hand, moves much, much faster. You can usually close within two weeks, but it can be even faster. Some lenders can close in just a few days. When you close faster, you can get to work faster…which means you can complete your project faster. Faster projects mean more money in your pocket.

Another timing issue real estate investors fail to consider: The amount of time it takes to fund escrow.

AKA, your rehab.

If it takes longer to access those funds, then it’ll take longer to pay your contractor. And if your contractor isn’t paid quickly enough, they might move on to another value-add property project.

Not only does it take banks longer to approve escrow funds, but they have stricter guidelines. Let’s look at an example:

You want to withdraw $10,000 from your escrow account to pay your electrician. But when you get the invoice from your electrician, you realize you only needed $8,000.

However, your plumber suddenly also needs to be paid $2,000.

Unfortunately, the bank won’t care about your plumber. They’ll send you only what you need to pay your electrician since that’s what you originally asked for.

You’ll have to waste precious time sending in another request for the $2,000. Within that time, your plumber might take off and find a different project. They can’t wait around for you to pay them so they can complete their work.

That means you have to search for a new plumber…which means you waste time.

And time is money!

Hard money lenders respect that.

Most of them focus on moving fast, being flexible, and working with you to get you through your project as quickly as possible so you can tackle your next real estate deal.

So, there you have it. In the long the run, hard money can be cheaper than banks.

Again, it all comes down to timing. And, again, time is money in real estate investing.

Stay tuned for our next video where we talk about the biggest and most misleading myth of all:

Hard money is a curse.

Ready to chat about your hard money and other lending options? Great! Our team is excited to set you on a path that makes you the kind of money you need…to live the life you want.

Happy investing!

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