Tag Archive for: money bucket

Always Have Enough Money for Your 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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Leveraging Bargain Properties for Maximum Gains

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Leveraging Bargain Properties for Maximum Gains

Real estate is all about creating leverage. Another way to create that leverage is to buy undervalued properties. What exactly is an undervalued property? It is a property that is being sold for less than it is worth. These are the properties that provide an opportunity for you to receive 100% financing and steady income for the rest of your life. Let’s take a look at a few examples of how an undervalued property can help you to succeed. 

Hoarders helper

Just the other day a friend of mine helped someone move out of a hoarder house that was under foreclosure. The homeowners no longer wanted the property, and they just couldn’t get everything done in time. My friend was able to come in and give them some money to take care of things, allowing the homeowners to get out of the property.. My friend was able to get the house at 70% of the value and put in 10%. In doing so, he created 20% net worth for himself. With the condo appraisal for $250K, he created $50K in wealth within just one weekend. 

Starting with nothing

Another local guy we know sold his car in order to get his first real estate deal. Fast forward 4 years, he has built three 6 unit apartment buildings with cash. These properties are owned free and clear, which is creating a steady income for him for the rest of his life. He achieved this success by being very diligent with both his process and his numbers. This is a prime example of how people who put their mind into something, can in turn create the wealth that they want. 

Lenders like undervalued properties

Lenders consider undervalued properties to be safe. This is because they are such a good deal compared to other properties on the market. Therefore, real estate investors can often get 100% financing on a property that is under market value. There are a lot of properties that are well under market value out there and many of them need some work. By taking the time and fixing them up correctly, you could guarantee a future profit for your investment.

Buy undervalued properties for maxim gains

Real estate is all about leverage. By leveraging bargain properties, you will in turn have maximum gains on your investment. It doesn’t take a PhD or a masters, it just takes some Doers! These are people who want to get out there and just do it. Investors who go through the correct steps can in turn make great returns within a short period of time. Some people want to make $50K to 80K in a year and have 6 months off. That is the beauty of investing and leveraging correctly. 

Watch our most recent video to find out more about Leveraging Bargain Properties for Maximum Gains.

Contact us to find out more about the importance of leverage and how to fill up your money buckets.

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How to Fill Your Money Bucket For a Bad Market

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When the real estate market tightens up, you need to be prepared with leverage in your money bucket so you can take advantage of opportunities.

Once you’ve been in the business for as long as we have, you start noticing patterns. The investing world goes through cycles every few years where things tighten up before flowing normally again. 

However, a ‘bad market’ doesn’t necessarily mean bad news. 

If you’ve prepared beforehand, you can actually take advantage of the challenging landscape to build some wealth.

What is a ‘Bad Real Estate Market’?

Essentially, what’s happening right now is banks are tightening up. This means most are lending out less money, making it harder for investors to get the money they need.

This also means that, over the next 6-9 months, people are going to be getting rid of some properties and fewer people will be buying.

If this sounds like bad news, don’t worry. If you’re ready for these market changes, it can actually be the perfect time for you to buy. 

Filling Your Money Bucket

Since there’s going to be fewer loans coming out of banks, what can you do to make sure your finances are prepared for the shift in funding?

For every project, there is an amount of money that goes into it. We call it a bucket of money, or, your money bucket. 

Your money buckets needs to cover purchase, rehab, closing costs, etc. Part of that bucket comes from lenders, and part of it comes from you. 

If you’re a newer investor, don’t panic! Read on to learn how to build up that money.

Finding Money for Your Bucket

If you’re new to real estate investing, this is often the hardest part. However, there are many ways you can work to fill your bucket without needing to drain your personal bank account.

Obviously your lines of credit can be an asset to your money bucket, but Other People’s Money (OPM) is also important.

Ask around your friends, neighbors, family members, or investment clubs. Many of them could be interested in investing a few thousand dollars into a project with a secured return of 8-10%.

There are so many creative ways to help fill your money bucket from hard money, to lines of credit, to OPM. With more money in your bucket, you can do more transactions.

If you need help filling your personal bucket, reach out to us. We’ve coached many new investors through this process.

 

Read the full article here.

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The Money Bucket: Lenders vs. You

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For any project you do, you need money. We refer to this collection of money as your money bucket. 

The money in your bucket comes from two sources: 1) a lender and 2) you.

Both of these areas of funding are going to come together and fill the bucket to finance your project. 

Lenders

This is the part most people think about the most when it comes to real estate investing.

As an investor, it’s important that you’re attractive to lenders. Lenders, as a rule, want to lend you money, but it’s important to understand what they’re really looking for as well as how you can diversify your money bucket to maximize your success. 

Sometimes you need hard money, sometimes you need a bank, sometimes you need conventional loans. Sometimes you just need gap funding. 

Lenders offer a variety of options, and you should shop around to make sure you’re finding the right option that fits your project.

You

When it comes to the part of the money bucket you’re responsible for, there are two important areas for you to consider:

Credit Score

The better your credit, the more options you’ll have. 

Impact of Credit: Banks love clients with high credit scores. The higher the score, the more options they’re likely to offer. 

As with finding a loan, the more options banks offer, the more likely you are to find a great deal.

Personal vs. Business cards: Using personal credit for investing can quickly turn into a problem. 

Using personal credit cards or lines of credit for business projects can drive people’s scores down.

We strongly recommend using business credit cards for your real estate investing. You still should make sure you’re paying everything on time, but that business credit card in your name isn’t going to be reported on your personal credit report.

This keeps your credit score higher as you’re looking for loans.

Lines of Credit: Having a variety of credit lines, and opening those strategically, will help you fill  your money bucket. Lines of credit in business credit cards, HELOCs, etc. can get you more prepared for down payments, earnest money, repairs, and more. 

It’s helpful to have backup lines of credit that are ready for when you need money for time-sensitive deals. 

Fill your bucket and your options. 

Other People’s Money

When trying to fill your money bucket, you shouldn’t overlook your friends and family. 

Look out for real people in your life who are willing to invest in your project. Even if they only want to invest $10K, that can still help you cover your earnest money or smaller payments.

A lot of people are looking for private investments that offer better returns than traditional banks. Working with the real people in your life can make a huge difference in your ability to fund your project.

If you need help with navigating those personal investments, we’re happy to help. We have a lot of experience working with diverse money buckets and know how to keep notes for your financial records so those private loans are correctly accounted for.

Read the full article here.

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Real Estate Investors: How to Win in 2024

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How can real estate investors WIN in the changing 2024 market?

We’re expecting to see more foreclosures and more properties available at discounts in the coming year which is ideal for real estate investors in the business of fix and flips and rentals. 

No matter where you came from or whether you have a college degree, anyone with the willingness to work and learn can make good money in real estate. 

We’re here to share a few tricks so that, as opportunities show up in the coming year, you’re set for success. 

Preparing as Real Estate Investors

There are typically two sides of real estate investing: 1) finding good properties and 2) financing. 

As we said before, you need money to make the money. Today, we want to look at the financing side of things so you’re ready when the good properties show up. 

As an investor, it’s important that you’re attractive to lenders. Lenders, as a rule, want to lend you money, but it’s important to understand what they’re really looking for as well as how you can diversify your money bucket to maximize your success. 

Filling Your Real Estate Money Bucket

For any project you do, you need money. We refer to this collection of money as your money bucket. 

The money in your bucket comes from two sources: 1) a lender and 2) you.

Both of these areas of funding are going to come together and fill the bucket to finance your project. 

1. Be Honest With your Lender and Get Your Projects Done

This may seem obvious, but make sure you’re honest with your lender.

Make sure you’re upfront about your financial history. It should go without saying, but don’t try to hide that you’ve had a bankruptcy or defaulted on a loan in the past. 

If you’re concerned about your financial history, trust us: It’s much worse to hide it and make the lender find out on their own (which they will).

Once they find out, it will be harder for you to get a loan. And if you do find a loan, your options are going to be severely limited—not just because of the history, but even more so because you hid important information. 

Options are super important for real estate investors. 

Options drive down the costs of loans, and anytime you pay less for money, the more money there’s going to be in your bucket. 

Similarly, when you say you’re going to get a project done, get it done. Whether it’s a flip or a BRRRR, construct a solid timeline on the front end so you and your lender are on the same page.

It’s often a good idea to put in a bit of a cushion when talking to your lenders so that you don’t panic if there are minor delays in your project. 

Lenders want to see honest people who are doing their best. Most lenders are happy to support honest investors who are upfront with them with more money, more funding, more options. 

2. Your Credit Score Matters

The better your credit, the more options you’ll have. 

Impact of Credit: Banks love clients with high credit scores. The higher the score, the more options they’re likely to offer. 

As with finding a loan, the more options banks offer, the more likely you are to find a great deal.

Personal vs. Business cards: Using personal credit for investing can quickly turn into a problem. 

Using personal credit cards or lines of credit for business projects can drive people’s scores down.

We strongly recommend using business credit cards for your real estate investing. You should still make sure you’re paying everything on time, but that business credit card in your name isn’t going to be reported on your personal credit report.

This keeps your credit score higher as you’re looking for loans.

Lines of Credit: Having a variety of credit lines, and opening those strategically, helps real estate investors fill their money buckets. Lines of credit in business credit cards, HELOCs, etc. can get you more prepared for down payments, earnest money, repairs, and more. 

It’s helpful to have backup lines of credit that are ready for when you need money for time-sensitive deals. 

Fill your bucket and your options. 

3. Finding Real People’s Money as Real Estate Investors

When trying to fill your money bucket, you shouldn’t overlook your friends and family. 

Look out for real people in your life who are willing to invest in your project. Even if they only want to invest $10K, that can still help you cover your earnest money or smaller payments.

A lot of people are looking for private investments that offer better returns than traditional banks. Working with the real people in your life can make a huge difference in your ability to fund your project.

If you need help with navigating those personal investments, we’re happy to help. We have a lot of experience working with diverse money buckets and know how to keep notes for your financial records so those private loans are correctly accounted for.

Calling All Real Estate Investors: Prepare for 2024!

It’s important in 2023 to get ready for what’s coming in the future. 

Make sure you have lenders set up from hard money to neighbors and everyone in between. Check your credit scores now to ensure you have the options that will make your investing a success. 

You can also check out our free and easy tools to help get you ready for the upcoming market. We even have a free credit score checklist for you to use.

As always, we’re always happy to help! If you have any questions about the upcoming market, your loan options, or how to fix your credit, reach out to us at Info@TheCashFlowCompany.com.

You can also check out our YouTube channel to learn more about real estate investing.

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6 Things to Consider When Estimating Out of Pocket Expenses as a Real Estate Investor

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What out of pocket expenses should you expect to pay when you’re getting into the real estate investment game?

1. Initial Deposit and Closing Costs

When you sign the contract, you’ll need to put down an initial deposit. This is part of what you see in a HUD-1 settlement.

Additionally, if a lender lends 90% of the purchase price and a 100% of the rehab costs, it looks like all you have to bring in is the remaining 10% of the purchase price.

However, you should also be prepared for additional closing costs and fees. Lenders will not cover those, and you’ll need to pay out of pocket.

2. Out of Pocket Lender Costs

Lenders also have additional fees. They often charge between 1% to 2.5% of the loan amount for appraisals, credit underwriting, and other services

For example, if the total purchase cost of a property is $200,000, and a lender covers 90% of that cost, you can expect to cover the remaining 10% ($20,000). Additionally, lender fees can quickly add an extra $2,800 to $5,600 that we owe to the lender as an out of pocket cost.

3. Title Costs

On top of that, we have title costs. Title costs are typically 0.5%f to 1% of the purchase price. 

Using the same example, if you have a purchase price of $200,000, title charges will likely be an additional $1,000 to $2,000 in out of pocket costs.

4. Mortgage Tax (In Some States)

Check your area to find out about your mortgage tax rates. You won’t have to worry about this in every state, but do your research so you’re prepared.

5. Insurance Costs

Insurance often costs somewhere between $1,000 to $2,000 and needs to be paid out of pocket upfront. 

6. Out of Pocket Monthly Interest

Interest rates depend on your particular loan. To add to our earlier example ($200,000 purchase price, covered 90% and $100,000 rehab price, covered 100%), let’s say your interest rate is 12% (1% a month). 

If you have a loan for $280,000 and they’re charging you interest on the full amount, you could expect a payment of $2,800 every month. If you have it for four months, that’s $11,200 out of your pocket. 

Essentially, after we add up all of these expenses, you can expect to pay a fair amount of additional out of pocket costs that the lender won’t cover. You should also look out for HOA fees or overages that will also have to come out of your own pocket.

 

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How to Get 100% Financing on Real Estate in ANY Market

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Sounds like a gimmick, but it’s true – here’s how to get full financing on any real estate deal.

There’s a trick large developers use to finance their real estate projects all the way to 100%. Does the same strategy work on your real estate investing scale?

Sounds like a pipe dream, especially in a market where the Fed keeps tightening lenders’ funds.

Let’s go over how it’s actually possible. We’ll call the funding you need for your project your “money bucket.” We’ll show you how to fill that bucket with different funding sources just like they do on the biggest development projects.

The Money Buckets: How Financing Real Estate Works

Your money bucket is empty at the start of a project. Its size is determined by the costs. For successful investments, you need to fill up the bucket with money.

The financial term for filling the bucket is a “capital stack.” It’s when an investor stacks one loan on top of another until an entire project is funded to 100%. Let’s go over how to put your capital stack, or “money bucket” together.

How Big Is Your Bucket?

If we’re just starting a deal, then our money bucket is empty. How big is it? AKA, what costs do we need to cover?

There are four main costs in real estate investing:

  • Purchase price
  • Rehab
  • Carry costs
  • Interest payments and other miscellaneous

Financing Real Estate to Fill Your Money Bucket 

We need to see if we can fill our money bucket, so we start looking for other buckets of money to throw in. We begin with the loan from our primary lender.

In a typical market, a real estate investment lender (like hard money) would pay 75% of the ARV of the property. That 75% would cover 90% of the purchase price and 100% of the rehab costs.

With tightened money, however, the underwriting guidelines for this bucket have changed. Almost universally, you’ll see these same lenders only offering 70% of the ARV. This adds up to 80% on the purchase and 100% on the rehab. You’re getting less financing for real estate projects, so you’ll have to bring in more money out-of-pocket for this deal.

That’s not an insignificant amount of money, either. Down payments now, in early 2023, are sometimes double what they were six months ago.

Our money bucket might be around 80-90% full with our lender’s loan. But we have to get it filled to 100% somehow. Where do the funds come from so you can keep buying good properties when deals are getting great?

4 Money Buckets to Use When Financing Real Estate

There are 4 other buckets of money you might be able to dip into to complete your capital stack:

  1. Secured lines of credit
  2. Secured gap funding
  3. Unsecured lines of credit
  4. OPM

Word of Warning Financing Real Estate with Credit

Before we get into these 4 extra money buckets, we want to make one thing clear about financing: You have to pay credit sources back.

Treat your lines of credit like lenders that need to be paid in full at the end of your project. Treat your business like a business. What’s left over after you pay off your credit is the profit you get to keep for your project.

If you turn the financing for real estate into a personal piggy bank, these sources will only drain your bucket instead of filling it. Poor credit management will tank your investment business.

1. Secured Lines of Credit

In volatile markets, the most common starting place to complete your capital stack is secured lines of credit.

The most common secured line of credit is a HELOC. You can take out a HELOC on your personal home, or any of your investment properties.

A HELOC just takes good credit, good income, and owning a piece of real estate. If you meet these criteria, then you can take money from this credit line and drop it into the money bucket for your current project.

2. Secured Gap Funding

Another important bucket for financing real estate is secured gap funding from a private money lender (like The Cash Flow Company).

This is a good option if you:

  • Don’t have the income to qualify for a loan.
  • Don’t have the equity to qualify for a HELOC.
  • But do have a real estate property.

This funding can help cover the down payment, carry costs, or part of the rehab using another property to secure the loan.

3. Unsecured Lines of Credit

The appeal of a 0% line of credit is:

  • You can use it for a down payment or rehab costs.
  • Other types of credit can have rates up to 19-29%. Zero percent is a major advantage.
  • The right credit cards can be a great stepping stone to get your first few deals done so you can move on to better forms of financing.

The danger of unsecured credit is:

  • The temptation to use it outside of business expenses.
  • If you don’t pay them off at the end of the project, then you get into trouble fast.

4. Real OPM

Other People’s Money is one of the most powerful ways to boost your real estate career.

OPM is money from ordinary people. The biggest real estate investors always have multiple regular people who loan them money for projects. Borrowing in this way is the fastest, easiest, and cheapest way to fill your money bucket.

It may seem impossible to find someone who wants to give you money. But the reality is: people who have cash aren’t getting good returns from banks; they’ll get higher secured returns lending to you.

Fill Your Money Bucket with 100% Financing on Real Estate Deals

The market has changed. Your primary loan will leave your money bucket emptier. It takes a little more creativity to fill it up.

The bigger the pool of money you have in any market, the more options you’ll have. Financing makes your real estate investing easier and more profitable.

Want to build your capital stack? We have a free download about money buckets.

If you have any questions about a deal, getting funding, or setting up OPM, email us at Info@TheCashFlowCompany.com.

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