Tag Archive for: leverage

Real Estate Investing: Leverage Explained

Today we are going to discuss the importance that leverage has in real estate investing. Here at The Cash Flow Company, we see success from the money side because money is the key factor in real estate. The foundation of this business is leverage in order to build portfolios. Learn how it can play a vital role in your investments as well as provide opportunities that accelerate your success. Let’s take a closer look!

The importance of leverage.

Whether there are two properties or 10 properties, it is important to create more leverage over someone else. How can investors take care of their leverage on certain properties or on their portfolio? This can be accomplished by picking one property and focusing on paying it down quickly. In doing so, it will free up the equity in that property, and will provide you with more opportunities as well. 

Let’s look at the numbers!

5 properties

Each  Total for 5 properties
Property Value  $200K $1,000,000
LTV (loan to value) 75% $150K $750K
Equity  $50K $250K

In the world of leverage, an LTV of 75% unfortunately does not free up any equity. This is due to the fact that investors are paying down each property equally as opposed to paying a little more towards a single property. For example, if there was a deal available for $150K, you would not have enough equity available to purchase the property. Just to clarify, lenders will not lend over 75% on an investment property. How can you set yourself up for success while using the equity in your properties? The answer is by focusing on paying one property down faster. In doing so, you will in turn free up the equity Remember, those who will accelerate in this business are those who create financial flexibility. 

Contact us today! 

Use your equity to your advantage and create the leverage that you need to succeed! Do you need some guidance on where to get started? Here at The Cash Flow Company we can help you get on the path to success! Contact us today to find out more about Real Estate Investing: Leverage Explained<b>.

Watch our most recent video to learn more about Real Estate Investing: Leverage Explained</strong>

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The Key to Creating Leverage

Today we are going to discuss the key to creating leverage in real estate investing. Here at The Cash Flow Company, we see success from the money side because money is the key factor in real estate. In regards to the foundation of this business, it is imperative that you have the leverage you need in order to build your portfolio. What is the trick that can help you accelerate your success? Let’s take a closer look!

Taking care of your leverage.

How can people take care of their leverage on certain properties or on their portfolio? Whether there are two properties or 10 properties, it is important to create leverage over someone else. This can be accomplished by picking one property and focusing on paying it down quickly. In doing so, it will free up the equity in that property, and will provide you more leverage. 

What is the benefit to paying one property off?

By paying down or off one property within your portfolio, you can then get a line of credit or a HELOC on the property. This provides the leverage you need to invest in other deals. We have seen a number of clients who are able to invest in new deals quickly because they had free cash flow. Just to clarify, we are not talking about these clients having money in their pocket. To say it another way, by either paying off a property completely or paying it down to a lower loan to value, you create more options for leverage. How can you take advantage of this additional leverage? One of the options is a HELOC. A HELOC is a Home Equity Line of Credit. Investors can take out a HELOC on the paid off property in order to take advantage of great deals quickly and easily. 

Free up the equity and create more leverage! 

In the world of leverage, an LTV of 75% does not free up any equity. This is due to the fact that investors are paying down each property equally as opposed to paying a little more towards a single property. For example, if there was a deal available for $150K, you would not have enough equity available to purchase the property. Just to clarify, lenders will not lend over 75% on an investment property. How can you set yourself up for success and use the equity in your properties? The answer is by focusing on paying one property down faster. In doing so, you will in turn free up the equity and create more leverage. Remember, those who will accelerate in this business are those who create financial flexibility. 

Contact us today! 

Use your equity to your advantage! Do you need some guidance on where to get started? Here at The Cash Flow Company we can help you get on the path to success! Contact us today to find out more about the The Key to Creating Leverage

Watch our most recent video to learn more about The Key to Creating Leverage.

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Personal Credit vs Business Credit: When and Where to Start

Here at The Cash Flow Company we have seen so many people become overwhelmed and confused by credit! Alex Erlich, a credit advisor and educator, is joining us today to discuss personal credit vs business credit with a focus on when and where to start. Don’t let the numbers overwhelm you! We are here to help walk you through the process!  

The importance of planning ahead!

In order to be successful in real estate investing it is important that you plan ahead. There is a common expression stating that “you should always get things before you need them, because when you most need them you’re least likely to get them.” This is especially true in real estate investing. Investors who got lines of credit a few years ago will be at a greater advantage than those who are trying to get them now. Those who apply now will need to be in a better position with their personal credit in order to be approved for the same products. 

Separating personal and business credit.

By separating personal and business credit, it will prevent further strain on your personal credit, increase loan eligibility, and create more leverage. What exactly do we mean by leverage? Leverage is how much you are eligible for and what it looks like on paper. Leverage is the King in real estate. Having more leverage allows for more opportunities, not only your business, but for your personal life as well. 

The ideal Credit Score

MyFico.com is the best place to obtain credit score information. This site not only provides an overall credit score, but it also separates scores into 40 different categories. It can be an information overload, however, by going straight to the source it provides you a cost free and spam free way to gather all of the information you need. So what is the ideal credit score that lenders are looking for? The ideal credit score range should be between 680 and 720. However, with the current economy, banks are increasing their minimum requirements to 720 and above. How do you get from 680 to 720? We can help you discover ways to improve your scores quickly to get you back in the game.

Don’t let your personal credit score impact your business success!

The faster you can separate your personal credit from your business credit, the better your personal credit score will be. We can guide you through the steps. From establishing your business, to finding the right business credit cards, and even providing a 911 loan, we have the tools to help you win.

Contact us today to find out more about setting yourself up for success.

Watch our most recent video to find out more about Personal Credit vs Business Credit: When and Where to Start

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#1 Trick that Successful Real Estate Investors Use

Today we are going to discuss the #1 trick successful investors use. Here at The Cash Flow Company, we see success from the money side because money is the key factor in real estate. The foundation of this business is leverage in order to build portfolios. What is the trick that can help you accelerate your success and take advantage of more opportunities? Let’s take a closer look!

Taking care of your leverage.

How can people take care of their leverage on certain properties or on their portfolio? Whether there are two properties or 10 properties, it is important to create leverage over someone else. This can be accomplished by picking one property and focusing on paying it down quickly. In doing so, it will free up the equity in that property, and will provide you more leverage. 

What is the benefit to paying one property off?

By paying down or off one property within your portfolio, you can then get a line of credit or a HELOC on the property. This provides the leverage you need to invest in other deals. We have seen a number of clients who are able to invest in new deals quickly because they had free cash flow. Just to clarify, we are not talking about these clients having money in their pocket. To say it another way, by either paying off a property completely or paying it down to a lower loan to value, you create more options for leverage. How can you take advantage of this additional leverage? One of the options is a HELOC. 

What is a HELOC and how can it help you?

A HELOC is a Home Equity Line of Credit. Investors can take out a HELOC on the paid off property in order to take advantage of great deals quickly and easily. These deals can come up in actions or on properties where someone needs to sell a property quickly. In many cases, you can get HELOCS at 70% to 75%, as long as the LTV is lower. Whether it’s $50K or $100K HELOC, you will have the money set aside for future investments that just make great sense. Just to clarify, you do not pay for the money from the HELOC unless you use it. These funds are just set aside in case you need them. The really good people who grow their wealth will be able to sit back and grab these deals quickly because they have the money to do so.

Let’s look at the numbers!

5 properties

Each  Total for 5 properties
Property Value  $200K $1,000,000
LTV (loan to value) 75% $150K $750K
Equity  $50K $250K

In the world of leverage, an LTV of 75% does not free up any equity. This is due to the fact that investors are paying down each property equally as opposed to paying a little more towards a single property. For example, if there was a deal available for $150K, you would not have enough equity available to purchase the property. Just to clarify, lenders will not lend over 75% on an investment property. How can you set yourself up for success and use the equity in your properties? The answer is by focusing on paying one property down faster. In doing so, you will in turn free up the equity and create more leverage. Remember, those who will accelerate in this business are those who create financial flexibility. 

Contact us today! 

Use your equity to your advantage! Do you need some guidance on where to get started? Here at The Cash Flow Company we can help you get on the path to success! Contact us today to find out more about the #1 Trick that Successful Real Estate Investors Use. 

Watch our most recent video to learn more about #1 Trick that Successful Real Estate Investors Use

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Most Small Business Owners Fail at THIS

Alex Erlich, a credit advisor and educator, is joining us today to discuss what most small business owners fail at! The main focus for today’s conversation is the importance of leveraging business credit vs personal credit. Credit and debt are not equal in any shape or form, but we have to play the game to win it. Knowing the rules of how to play will get you in the best position to win! Whether it’s the credit card game, credit game, or the leverage game, you need to create a leverage profile. Let’s take a closer look!

How to leverage business credit instead of personal credit?

So many people are putting business expenses on their personal credit. Unfortunately that is not as efficient as one might assume. 70-80% of clients are overextended on projects, and have maxed out their credit cards. Thus making it extremely difficult to be approved for additional loans moving forward without further impacting personal credit scores. In order to prevent this landslide, we need to approach business expenses more professionally and keep everything business focused. In doing so, it will prevent further strain on your personal credit, increase eligibility, and create more leverage. What exactly do we mean by leverage? Leverage is how much you are eligible for and what it looks like on paper. Leverage is the King in real estate. Having more leverage allows for more opportunities, not only your business, but for your personal life as well.  

How do we turn the focus from personal to business? 

First and foremost individuals need to acknowledge that they have a business. Surprisingly, many business owners don’t consider themselves to be entrepreneurs. From realtors, to contractors, and everyone in between, they typically consider themselves to be employees of the overwriting company. However, this mindset needs to change! They should not only view themselves as entrepreneurs, but also a representation of the brand. Another component that should be evaluated are items on your personal credit that need to be removed. This will in turn prevent you from personal liability as you continue to grow your business.

We are here to help you!

Here at The Cash Flow Company we want to set you up for success! Are you ready to start your own business but wondering where to start? Do you have personal credit cards that have business expenses on them? Contact us today to find out what you need to do in order to win in real estate investing! 

Watch our most recent video to find out more about: Most Small Business Owners Fail at THIS. 

Watch the complete interview with Alex Erlich now to learn even more! 

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The Benefits of Peer to Peer Lending

As a real estate investor it is important to understand not only what peer to peer lending is, but more importantly, the benefits that are available from using this type of leverage. Peer to peer lending, also known as other people’s money, is funding that is provided by family, friends, or individuals within the community to help you in your investments. Here at The Cash Flow Company, we have done about a billion dollars over the past 23 years using peer to peer lending. The majority of this money is not from family and friends, but instead from other people who are interested in making a good return. Today we are going to look at the benefits of peer to peer lending, and why it is often better than traditional loans.

Peer to peer is replacing banks.

We all know what is happening out there with affordability. The banks are starting to change their requirements, DSCR is getting into the 9% and 10% range, and fix and flip loans are anywhere between 11% and 13%. This lending squeeze is causing affordability, terms, and credit score requirements to all become tougher as well. Which creates the perfect opportunity to reintroduce peer to peer lending, which is something that has been around since before banking began. Peer to peer lending is taking out the banks and allowing people to begin working with humans again. 

Peer to peer gets deals done quickly.

Every good investor always has a few peer to peer lenders that they work with on a regular basis. These are individuals that the investors have built a good reputation with, and proved that they can produce quality work. By creating this foundation, it allows investors to act quickly on deals that come available instead of waiting for the bank’s approval. Peer to peer lenders also benefit because they are able to use money from their savings accounts or retirement accounts in order to get a better return that is something secured. It’s a great win-win situation for everyone!

Peer to peer keeps things simple.

We want to keep it simple and find the people that fit your needs. Not everyone needs $300K or $500K. They might just need $35K or $50K to get their business going. While they do have real estate to secure a loan, they might not have the income that the bank requires. That is where peer to peer lending comes in. Most peer to peer lenders don’t care what your income is. They want to know what the property looks like, if it will protect their money, and what you are going to pay them. Another way to look at peer to peer lending is like a personal DSCR. A DSCR doesn’t care about your income either. With the high interest rates of DSCR in this market, peer to peer lending is a comparable option for investors with rental properties.

Double your money!

Peer to peer is so important for those who are lending. They can easily make $8K on $100K. Banks on the other hand, would only have a return of $4K to $5K on the same amount if it were in a CD or savings account. Peer to peer lenders could easily double what they are making without having to worry about the inconsistency of the stock market. This is a time when things are tightening and people are having to look for new opportunities. Those who are prepared, ready, and have money, will succeed. 

Where do you start? We can help!

Every investor or business owner should look into peer to peer lending. Even if it is just for a down payment, fix up cost, or any other expense in the real estate world. Businesses could also benefit from peer to peer lending for start up costs or unexpected business expenses. It doesn’t have to be $500K, but it could be! With lending becoming tighter, banks could require an additional 10%. In that case, where would you go for the additional money? The answer is peer to peer! There are all kinds of people out there with pockets full of money. You just need to find one that has what you are needing.

If you want to find out more about peer to peer lending and how to get started reach out to us. We want to make sure that this market grows and that we get rid of some of the lenders and bankers out there. The better it grows, the bigger it grows, and the more options people will have for their future. Our target is to make it a win-win for both peer to peer borrowers and peer to peer lenders. 

Contact us today to find out more about the lowest risk lending option with the best return! 

Watch our most recent video explaining What is Peer to Peer Lending and Why You Need It

We have created an excellent resource site for you to discover more about peer to peer lending. This information can be found at www.TheNoteShop.com.

 

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From Denial to Approval: Credit and Interest Explained

Our goal today is to show how interest rates, credit scores, and LTV can affect your ability to not only qualify for a loan, but also to cash flow on the property. As a result, investors are walking a very fine line between being denied or approved for a loan. Learn how to shift from denial to approval today!

Type of property Purchase price Appraisal 

average 

rents in area 

Amount down Financing 

30 year loan

Fees

Taxes

Insurance

HOA

DSCR 

(LTV) 

Rental $250k $1,950 20% 80%

($200K loan) 

$300 75%
Credit Score DSCR rate Payment amount 

principle and interest

Payment amount plus fees  Cash flow 

based on appraisal 

Client 1 680 9.75% $1,718 $2,018 -$68.00
Client 2 720 8.99% $1,608 $1,908 +$42.00
Client 3 780 8.75% $1,573 $1,873 +77.00

The power of credit scores.

Your credit scores not only affect your rates, but they also will impact your cash flow on the property. Do you need to raise your credit score in order to qualify? We can help you get your credit scores back on track with our 911 loan. Contact us today to find out more. As credit scores go up, you will be able to not only capture more monthly income, but you will also create wealth.

How do rates affect cash flow?

As rates continue to rise, your payments are going to increase as well. This in turn causes your cash flow to suffer, and in most cases it will be a negative. Cash flow positive on the other hand, means that there are going to be more properties available for more investors. So keep your eye out for this change!

Rates are decreasing!

Over the past three weeks rates have been decreasing. We may be at the peak right now and many are predicting that rates are going to significantly drop in 2024. It is imperative that you stay up to date and keep track of current trends. We have created a Weekly Investor Mortgage Report for you! Reach out through our website or email to find out more.

Keep increasing your leverage!

In real estate investing leverage is the key to success. It is what makes your wealth and creates your income. By using banks, other people’s money, and filling your leverage buckets, you will set yourself up for success.  

In Conclusion.

This example paints a very clear picture showing how 3 different people compare side by side on the same property. Nowadays, investors can either be denied or approved just based on their credit score, or where the markets are. While being denied is discouraging, it is important that you understand why you didn’t qualify in order to make a change. If you want to impact where you are and where you are going in 2024, then check out our website. We have a lot of ways to positively impact your credit, as well as a weekly newsletter. We are here to help you get on the path to success. 

Watch our most recent video to find out more on How High Interest Rates Impact Real Estate Investments.

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Always Have Enough Money for Your Real Estate Investments

Real estate investors always need to have enough money for their investments. It is important that they see every deal or transaction as a bucket of money. If you are buying a fix and flip or a rental property, there is a bucket of money that is needed. These funds can be used to purchase the property, complete rehab projects, cover closing costs, and take care of the interest. While the majority is going to come from the lenders, the remaining portion is going to have to come from you for a down payment or to cover the interest costs. It is important that you take everything into consideration when you are setting things up in order to win in the real estate game.

What do you need to look at when setting things up?

  1. Make sure that the lenders who are lending you money will give you more at a better price.
  2. Make sure that you have your bucket of money to not only qualify for this loan or multiple loans. Determine what represents your bucket of money, and how you can set it up to play in the game.

What if you don’t have any money going in?

There are many investors who enter the game without establishing their buckets of money. For these investors, it becomes a matter of creativity and how they feel about what they’re doing. There are a lot of people who don’t have anything coming into a deal. For these individuals, they can use lines of credit, or credit cards to do down payments. 

There is always another way to find the funds you need!

One of the most important things to do when you’re starting out is to use other people’s money. Often this is from family and friends. However, it doesn’t have to be. There are a lot of people out there who are looking for better returns. Take a moment to consider if there is someone out there who you can borrow $10K from. Perhaps someone from your real estate group or even a neighbor down the street. By doing this, you can fill your bucket of money with someone else’s money in order to get the return you want. As long as you use the funds correctly, then you can in turn make the money you need in order to pay them back. 

Let’s look at the numbers.

When you are purchasing a property, you can have the bank lend you up to 80% to 90%. The remaining 10% to 20% can then be provided by someone who is looking for a better return. By paying them 10%, it will be a lot cheaper than making payments on a credit card or a loan. The person lending you the money directly will in turn get a better return than they would find elsewhere. It’s a win win on both sides.

What do you need for success?

First and foremost you need to have confidence in order to succeed! If you are going to go out and ask people for money, then you need to show them that it will be a good deal for them. You can show confidence by knowing your project and by developing a business plan that showcases your investment goals. Once they have faith that you will find good properties, fix them, sell them, and make money, then they will partner with you. If you get one person in, then it’s easier to get more later.

We can help you!

We have developed a good system of how to not only find other people’s money, but more importantly how to talk to them about joining you in your investment journey. Here at The Cash Flow Company, we help to find you the leverage you need, get your buckets of money set up, and ensure that the properties you find are good deals. Remember, confidence comes with a good project, finding good projects will then help you make more money. Creating leverage now will help you jump into a deal quickly while others are scrambling. 

Contact us to find out more!

Watch our most recent video to make sure that you Always Have Enough Money for Your Real Estate Investments

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There is Hope in a Tough Housing Market

Things have changed, bankers have changed, and lenders have changed. You should always have control over your lending options. There is a glimmer of hope in this tough housing market. Investors can empower themselves by setting things up right, cultivating relationships, and knowing their numbers. You can still make a lot of money in this market as long as you understand the rules in the game and have the flexibility to change with the times. How do you get started? Let’s take a closer look at what you need to do to succeed.

What do investors need to do?

This is the time when the select few will make a lot in the near future. If you want to take advantage of this, then you have to do certain things. Let’s take a closer look at real estate investment essentials for today’s market. Also known as the pillars of success.

1. Find a lot of properties/find good properties

It is important to buy when everyone else is running away. A successful investor needs to determine where they will find properties, connect with others to start buying better properties, and understand the value of the property. The better the property you find, the better chance you have to get the financing you need. Especially from private lenders or hard money lenders. 

2. Set up your business correctly  

It is imperative that you set up your business to look like you are serious about investing. This includes setting up your business name, establishing business accounts, and applying for business credit cards. In setting these things up correctly, banks and lenders will know that you will do what it takes to succeed.

3. Make sure you have a diverse source of funding 

Start by looking for lenders who are actually lending, and build a relationship with them. In taking the time to build that foundation, you will be the person who goes to the top of the pile. Lenders will not be willing to help investors who don’t return calls, or those who are unprofessional. Finally, broaden your horizons by looking at other options to see who can help create the wealth you want. 

4. Find contractors and resources that will help you complete repairs.

We still see properties that are selling like crazy. These are in good locations and have quality work done. It is important to find contractors and resources that will help create a product that people will want to buy. Don’t skip on the flips! Take the time to find a team who can make your property shine. This will result in a shorter sell at a better return for you.

Creating the leverage you need to succeed.

Make sure that your business is set up correctly from the very beginning in order to create wealth. In doing so, you will be able to open up business credit cards, business lines of credit, and seek out OPM or other people’s money. An underused source of funding is OPM. Nowadays more people are searching for better returns, you can be their solution. Investors who create these buckets of money will set themselves up to win. It is also imperative that you have a good credit score and a good business history so you will be more attractive to the lending community. Do you need help with raising your credit score or locating OPM. Contact us to find out more! 

In Conclusion

There is a glimmer of hope in this more restrictive economic environment. Those who set things up correctly in the beginning will have an advantage over those who do not. It is important to always remain in control amongst all of this change. By setting your business up correctly, increasing leverage, doing research, and creating relationships, the sky’s the limit for your success. This is one of the most valuable times to get into real estate investing! Contact us to find out more.

At The Cash Flow Company we can help you find the funding you need and guide you through this market. 

Watch our most recent video to find out more about Real Estate Investment Essentials for Today’s Market.

 

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Why to Take Action When Other Investors Run Away

Today’s market can be very daunting to real estate investors. Many are asking why take action when other investors are running away? Unlike years past, money for financing is just gone. This in turn is forcing investors to obtain more knowledge and leverage in order to win in this real estate game. While this is causing many to run away, it is actually the perfect opportunity to get into real estate investing. Are you ready to take advantage of this excellent opportunity? Let’s take a closer look at why you need to take action now!

How can investors prepare?

To get started, buy when property values are low and rates are high. This will guarantee your success when the market changes. When rates go back down over the next few years, you will already have your property, and can take advantage of the higher property value. Those who are positioned correctly, and stick with it, need to be set up correctly. Let’s look at the steps you need to take in order to take advantage of this current market.

  1. Understanding the market by going through knowledge based learning
  2. Set up your realtors
  3. Determine how you are going to find your deals
  4. Learn how to calculate your ARV

By getting all of the training completed over the next 90 days, it will allow you to confidently enter the market right away. If everything keeps going the way it is, then there are going to be more opportunities available compared to before, as well as a smaller pool of investors who can take advantage of this.

If things are tightening up, why does that create more opportunities?

When the Fed shrinks the money pool, it in turn decreases what’s available for everyone. This causes lenders and banks to swim upstream in order to look for the best of the best. Banks are being pushed to the point that they can only lend a portion of what they could before. Let’s take a closer look at the money side as a customer, and as an investor, to explain why these times are creating more opportunities. The customers are the ones who own their homes and are going to give it up for a discount. While investors are looking at the property as money to invest. Once again, leverage is the key to real estate investing and why we can make money from nothing. Anybody can do this and create generational wealth if you are set up correctly and financially prepared

How lending has changed.

One of the largest private lenders used to lend on ARV. ARV stands for after repair value. Lending based on ARV allows investors to get more money, create more leverage, and buy more deals. So if you’re in real estate investing you need to focus on purchasing undervalued properties, fix them up, and either keep it or sell it. This will in turn create wealth for you to reinvest in another property. In today’s market however, lenders are lending off of LTV, or loan to value, instead of ARV. This is often a $50K to $75K difference from what they were lending before the market changed. 

Let’s look at an example of ARV vs LTV

Purchase a house for $250K with a rehab of $50K
Worth when all said and done Percentage Amount they will lend Amount lenders  want you to put in 
ARV $400K $400K at 75% Close to $300K 10%
LTV Lenders don’t looks at this  $300K at 75% Close to $225K 10% to 30% 

It is clear to see what a big difference it makes when lenders switch from ARV to LTV. They are becoming tighter on their lending, lending less, and charging more. This creates a smaller pool of investors, because many can no longer qualify for those deals. While the deal flow might remain the same, only 20% to 30% of investors are prepared to continue buying in this market. There are going to be better deals for those who can buy and buy quickly.

How rates are impacting DSCR

Rates are impacting a lot of things, including DSCR and the rental side of real estate investing. A DSCR ratio of 1 means that the expenses and the income are equal to each other. In the past, DSCR ratios were based on a 1:1 ratio. Nowadays, the ratio has increased to 1:1.1, which means that you need to create even more cash flow. Now if we layer that onto a credit score of 680 or 700, then the ratio will increase to 1:1.2. Therefore, the people with better credit scores often get the better deals. 

Now is the time!

It is one of the most valuable times to get into real estate investing. This is because the Fed is tightening up and banks are starting to lend less. In doing so, it creates better deals that will in turn create wealth and income in the near future. One of the most important things to remember is that when there is fear in the street, that is when people start running. These are the times when you need to make your move. 

At The Cash Flow Company we can help you find the funding you need and guide you through this market. 

Watch our most recent video to find out more about Real Estate Investment Essentials for Today’s Market.

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