Tag Archive for: interest only loan

Real Estate Investing: How to Make Money Now Versus Later

Categories:

Real Estate Investing: How to Make Money Now Versus Later

Welcome to the world of real estate investing! Whether you’re a seasoned investor or just starting, it’s essential to understand the different strategies that can help you make money now versus later. Let’s dive into how you can maximize your investments both short-term and long-term.

Making Money Now

Interest-Only Loans

An interest-only loan is a type of mortgage where you only pay the interest on the loan for a set period of time. This means that your monthly payments are lower because you’re not paying down the principal balance yet. By switching to an interest only loan you have an easier time qualifying, improve your cash flow, and can also be approved for higher loan amounts! 

Making Money Later

Long-Term Investment Strategy

Real estate investing isn’t just about making money now; it’s also about building wealth over time. Here’s how long-term strategies can help you achieve that.

Different Philosophies in Real Estate Investing:

Some investors aim to buy properties and pay them off as a retirement plan. Others prefer to keep refinancing and taking out cash to reinvest. It is important to keep in mind that by refinancing, it can help you to take advantage of lower interest rates and property appreciation. It also allows you to pull out cash from your properties to reinvest or cover personal expenses.

Immediate Cash Flow vs. Long-Term Wealth:

  • Immediate Cash Flow:

      • Great for investors who need cash now.
      • Interest-only loans provide more monthly cash flow.

  • Long-Term Wealth:

    • Ideal for investors focusing on future growth.
    • Refinancing and property appreciation build wealth over time.

Factors to Consider When Choosing a Strategy:

  • Personal financial goals
  • Current market conditions
  • Risk tolerance

Combining Both Strategies for a Balanced Portfolio:

  • Use interest-only loans to improve cash flow now.
  • Plan to refinance and invest in long-term properties for future wealth.

Conclusion

Real estate investing offers various strategies that can help you make money now and build wealth for the future. It is important to assess your personal goals, consider market conditions, and choose the right approach for your investment needs. For personalized advice and loan options, contact The Cash Flow Company. We’re here to help you succeed in your real estate investing journey!

Watch our most recent video to find out more about: Real Estate Investing: How to Make Money Now Versus Later

by

What is an Interest-Only Loan?

Categories:

What is an Interest-Only Loan?

Are you a real estate investor looking for ways to boost your cash flow and make your investments more manageable? If so, you might want to consider an interest-only loan. These loans are becoming more popular among investors who want lower monthly payments and more flexibility with their finances.

How Does an Interest-Only Loan Work?

For the first few years (usually 5, 7, or 10 years), you only pay interest. After this period, you start paying both interest and principal. This means your payments will go up, but by then, you might be earning more rent or have other ways to cover the higher payments. Consequently, you can plan your finances better knowing when the higher payments will begin.

When is an Interest-Only Loan a Good Idea?

Interest-only loans can be great for:

  • Investors wanting to improve cash flow: Lower payments mean more money in your pocket each month. Therefore, you can handle your financial obligations more easily.
  • People planning to sell or refinance soon: If you plan to sell or refinance before the interest-only period ends, you can benefit from lower payments without worrying about the higher payments later. Thus, this can be a strategic move to maximize your investment.
  • Short-term projects: If you’re working on a project that will increase your income soon, like renovating a property to increase rent, this can help bridge the gap. As a result, you can complete your projects without financial strain.

Example:

Let’s say you own a rental property, but your current loan payments are too high compared to your rental income. By switching to an interest-only loan, your monthly payments go down. This helps you qualify for more loans, improve cash flow, and even take out more money to invest in another property. Consequently, you can grow your investment portfolio more effectively.

Conclusion

In conclusion, interest-only loans can be a powerful tool for real estate investors. They offer better cash flow, easier loan qualification, and more flexibility with your money. If you think an interest-only loan might be right for you, talk to a lender or financial advisor to explore your options. Therefore, taking advantage of interest-only loans can help you achieve your real estate investment goals more efficiently.

Ready to explore interest-only loans further? Visit our website, TheCashFlowCompany.com, to learn more. We offer a simple inquiry form where you can share your details. Don’t worry, we don’t do hard credit pulls or make frequent calls. We’re here to provide helpful advice and see if an interest-only loan is right for you. If it works, great! If not, no pressure.

Watch our most recent video to find out more about: What is an Interest-Only Loan?

by

Top 3 Benefits for Real Estate Investors

Categories:

Intro to Interest Only Loans: Top 3 Benefits for Real Estate Investors

Interest-only loans are becoming a popular choice for real estate investors. Why? Because they offer unique advantages that can make a big difference in your investment strategy. Today we will explore the top three benefits of interest-only loans and how they can help you qualify more easily, improve your cash flow, and access larger loan amounts. Let’s dive in and see why an interest-only loan might be the right move for your next investment.

What is an Interest Only Loan?

An interest-only loan is exactly what it sounds like. You only pay the interest on the loan for a set period of time. Unlike typical mortgages where you pay both interest and a bit of the principal, an interest-only loan keeps your payments low by only covering the interest.

Benefits of Interest Only Loans

Interest-only loans offer several advantages, especially in today’s market. Here are the top three benefits for real estate investors:

1. Easier Qualification

One of the biggest benefits of an interest-only loan is that it can make it easier to qualify for financing.

Example: Let’s say you want to buy a rental property, but the current rent isn’t high enough to qualify for a regular loan. By switching to an interest-only loan, your monthly payments are lower. As a result, this reduces your expenses and improves your chances of meeting the lender’s requirements.

2. Improved Cash Flow

Next, interest-only loans can significantly boost your cash flow. With lower monthly payments, you have more money available each month.

Example: Imagine you own several rental properties. With an interest-only loan, your payments are smaller, giving you more cash each month. Consequently, this extra money can be used for renovations, paying off other debts, or simply enjoying a higher income.

3. Greater Loan Amounts

Finally, interest-only loans can help you access larger loan amounts. Since your payments are lower, you might qualify for more money.

Example: Suppose you’re an investor looking to cash out on a property to fund another project. By opting for an interest-only loan, you reduce your payments and can pull out more cash. This gives you the capital needed to start your next investment sooner.

How to Get Started with an Interest Only Loan

Ready to explore interest-only loans further? Visit our website, TheCashFlowCompany.com, to learn more. We offer a simple inquiry form where you can share your details. Don’t worry, we don’t do hard credit pulls or make frequent calls. We’re here to provide helpful advice and see if an interest-only loan is right for you. If it works, great! If not, no pressure.

In conclusion, interest-only loans are a fantastic tool in the right market and for the right investor. They help you qualify easier, improve your cash flow, and access more funds. Whether you’re building, renovating, or just want better cash flow, consider if an interest-only loan fits your strategy.

Watch our most recent video to find out more about: Intro to Interest Only Loans: Top 3 Benefits for Real Estate Investors

 

by

DSCR Loans: What Does Interest-Only Mean?

Categories:

DSCR Loans: What Does Interest-Only Mean?

DSCR loans are excellent for real estate investors who are working with rental properties. In today’s unpredictable market, one of the best options for investors is an interest-only DSCR loan. This will provide more flexibility, greater cash flow, and the ability to purchase more properties. So what exactly does interest-only mean and is it right for you? Let’s take a closer look.

What is interest only DSCR?

Interest only loan products are loans where you are only paying on the interest that is owed on the loan. The principal on these types of loans never goes down unless you decide to put a  little money towards it. One thing to keep in mind with DSCR loans is that there are prepayment restrictions for the first 3 to 5 years. In most cases this means that you have a 20% cap during this prepay period. Paying a little extra doesn’t normally create an issue. It is just something that you need to keep in mind when working with an interest only loan.  

Example:

Loan amount: $200K

Rent: $1,700

DSCR ratio 1.1 

Loan Type Rate $200,000 x rate = annual interest Annual interest ÷ 12 = monthly payment Payment amount to mortgage company  Add the Taxes, Insurance, HOA, and Flood = $150.00 

This creates the Grand total for the month
Interest Only 8.25% $16,500 $1,375 $1,375 $1,525

One more step. Adding the DSCR ratio.

What you will normally find is that the interest only rates in this market will be a little higher than the amortized loan rate. However, we still have one more step before we can determine if you can qualify for the DSCR loan on this property. We will need to multiply the grand total for the month by the DSCR ratio. This will help us to determine if the property will qualify for a DSCR loan based on the current rent amount of $1,700. Just as a reminder, the rents are based on what is happening in the market and the assessments done by an appraiser.

DSCR ratio 1.1 Grand total for the month Grand total for the month x 1.1 = Difference after adding the  DSCR ratio and the $1,700 rent
Interest only $1,525 $1,677.50 Will qualify for DSCR

With DSCR loans you will have the flexibility of a 5, 7, or 10 year period. A DSCR interest only loan also provides an excellent opportunity for you to cash flow on the property. 

If you have any questions or want to run though the DSCR numbers, contact us today. We can help you compare a DSCR loan to an amortized loan. This will help you determine which is a better fit for your needs. 

Watch our most recent video to Discover Your Best Option: DSCR Loan – Interest Only vs Amortized.

by

Interest-Only Loan Part 2: Calculating the Paydown Payment

Categories:

The basics on calculating the paydown payment on the amortization part of an interest-only loan.

There are two parts to an interest-only loan. Part one is just interest, and part two is the paydown, or amortization.

You never have to wait to get to the paydown in order to refinance your interest-only loan. Some investors refinance the same interest-only property over and over before ever getting to the paydown part.

But it’s important to know the numbers even if you don’t want to keep an interest-only loan until the paydown. Here are the basics of calculating 30-year and 40-year interest only loans.

 

Calculating The Paydown

The interest-only portion of an interest-only loan lasts for a set number of years. For example, let’s say ours lasts 10 years.

The paydown period is when the loan starts amortizing – the actual amount borrowed starts going down. However, you’ll still need to pay normal interest along with the principal payment.

With most lenders, you’ll get either a 30-year or 40-year loan. A 30-year interest-only loan would involve 10 years of just interest, plus 20 years of paydown. For a 40-year, you’d have 30 years’ worth of amortization payments.

A 30-year loan’s payments will be higher because you’re paying the same amount off in a shorter period of time.

Calculating a Paydown Payment Example

Let’s break down the difference between a 30-year and 40-year interest-only loan.

30-year loan = 10 years interest, then 20 years of amortization

40-year loan = 10 years interest, then 30 years amortization

You can use an amortization calculator tool to figure your monthly payments for the paydown period.

Let’s look at an example for a $300,000 interest-only loan. The paydown period payments would be:

30-year =  10 years of $2,000/month + 20 years of $2,509/month

40-year =  10 years of $2,000/month + 30 years of $2,201/month

Remember that you’re never locked into paying a full interest-only loan. An interest-only loan may be worth looking into for your property. Especially if you need a product with lower monthly payments while you wait out rising interest rates.

Help with Interest-Only Loans

Have questions about interest-only loans, or calculating your paydown payment? Is there a deal you’d like us to take a look at?

We search hundreds of loans every month – now is a great time of variety in loan products. We’d love to help you find exactly what you need.

Email us at Info@TheCashFlowCompany.com.

Read the full article here.

Watch the video here:

by