Tag Archive for: new investors

2024 Real Estate Investing: Why Should I Invest? 

2024 is going to be an excellent year for real estate investing. Whether you are a new investor who is just starting out, or a seasoned investor who is looking to decrease your inventory, there is no better time than now. Today we are going to answer the question “why should I invest”. We will not only look at how things have changed over the years, but we will also discuss how the real estate community is changing in this current market.

New real estate investors

For new real estate investors there is no better time to get into the game. There are more deals coming out and more foreclosures. This is due to the fact that many people are becoming overwhelmed by debt and needing to give up their properties. New real estate investors will see 5% to 10% more homes available to them this year!

Investors are leaving the community

We are seeing more investors leave this community. The changes in the market over the past few years has caused everything to tighten up. The banks are swimming upstream to find the best of the best and lending has become harder to obtain. Many investors are not willing or able to continue in this current market We are seeing less people who are sticking around and even fewer who know what they are doing. As a new investor, the competition is going to be better for you, thus creating better deals.

If they are leaving? Why should I step in and take over?

By having less investors, it creates more properties and better deals for the people who are sticking around. For the first time in a long time, there are better deals, as well as better margins on deals. To put it another way, there is “more meat on the bone” with more properties coming up. Real estate investing is like anything else. Not everyone will be successful every time. There are a lot of people who do succeed and make a lot of money in real estate investing. 

What deals should you expect? 

In 2024, you are going to find better deals, including 60% to 70% LTV. There will also be more opportunities for you to succeed than there were two years ago. A few years ago there were more people bidding on properties. When there are too many people bidding, they become overzealous and crazy. This creates overbidding and causes properties to become less profitable. By having less investors in 2024, you will have more properties available, resulting in better deals for people who are sticking around.

What is the biggest hurdle you will face?

The biggest hurdle that you are going to face is finding money. Over the last 10 years, real estate investors have had big pools of money available to them and the rates kept going down. In today’s market, you will need to be prepared and ready for anything that lies ahead. In taking the time to set yourself up properly, you will have the opportunity to create the wealth and income you want. 

Now is the time to buy!

Now is the time for you to invest in real estate. This is the opportunity for you to take advantage of not only more deals, but more profitable deals in this market. As a new investor, you need to be able to jump in when other people are getting out. Here at The Cash Flow Company we can help walk you through the steps and ensure that you are on the path for success.

Watch our most recent video 2024 Real Estate Investing: Why Should I Invest? to find out more!

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If you want to build wealth through real estate, the key is leverage.

In the investing world, leverage is using other people’s money (typically in the form of loans) to build income.

If you master the art of using leverage, you’ll be able to build wealth easily in the real estate game.

Especially at the beginning, it can be tempting to try and use only your own savings for your real estate projects. However, those funds are limited, and it can take forever to save up for a full down payment on your own. Using loans and debt wisely will help you turn larger profits faster, ultimately making you more money, even factoring in the cut of the lender.

Leverage Makes Real Estate Investing Accessible

Especially in the central USA area, other people’s money (OPM) makes real estate investing accessible.

You don’t need to have generational wealth built up in your savings or your parents’ bank account. You just need leverage.

Leverage lets you grow your investing business from little-to-nothing. We see this over and over again in the industry. All you need is the willingness to take a little bit of risk and use OPM.

Types of Leverage and OPM

Leverage comes in many forms. When we talk about using OPM, we’re not implying you need to take up a collection at Thanksgiving dinner. 

These are the most common types of leverage/OPM:

  • Bank loans
  • Private loans
  • Hard money loans
  • Financial gifts

Obviously, in most of these cases, you need to pay the money back (with interest). However, that’s fairly easy to do once you’re selling an improved property.

What Does the Process Actually Look Like?

Most lenders want to see you put a portion of your own money into projects as well. But that doesn’t mean you need an extensive backlog of savings to get started.

Step 1. Buy

Hypothetically, if you wanted to buy a $200K property, you would only need around $10K of your own money. The rest could be covered with OPM. 

Step 2. Improve

If you put $30K-$40K into a property, you’ll significantly increase its value by more than you put in. These improvements can also be covered with OPM. 

Certain loans are created specifically for property-improvement projects, so look into options like DSCR or hard money.

Step 3. Sell 

This is where the money comes rolling in. You pay off your loans, and everything else is money in your pocket.

For our example of a $200K property, after $40K worth of improvements, it’s likely worth closer to $300K. 

That’s a worthwhile investment!

From $10K out of pocket, you end up with around $40K net worth that you’ve created with leverage.

The Long Haul Option

If you don’t want to do a basic fix and flip, you could go the rental route. If you keep a property like that as a rental, you’ll be able to pay the loan all the way down and own the property outright.

In today’s housing economy, hanging on to properties long-term is also a great investment. A property that began as a $10,000 investment could turn into your million-dollar retirement fund!

 

If you have questions about leverage or OPM, reach out to us at Info@TheCashFlowCompany.com or fill out a contact card.

You’re also welcome to check out our YouTube channel where we talk about how to WIN in real estate investing.

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Building wealth is all about leverage in real estate investing. But what exactly is it, and how can you use it correctly?

If you look at investing, it’s all about using other people’s money. It’s all about leverage. 

Understanding leverage and using it correctly, is the key to unlocking the profits of real estate investing.

Why Leverage Matters

Leverage is the term we use for using someone else’s money (typically in the form of loans) to make a profit for yourself.

Frequently, you will also use a small amount of your own money. But leverage—the opportunities you can access with external funds—is what makes real estate investing accessible regardless of your personal wealth. 

Additionally, leverage allows investors to enter the market quickly, without needing to wait 5 years to save up for a downpayment.

If you know how to get money from others and use it to strategically turn a profit for yourself, you’ll be able to build income out of nearly nothing. 

Different Kinds of Leverage

Leverage comes in many forms:

  • Financial gifts
  • Loans
  • Mortgages
  • Liens
  • And more!

The most common form of real estate leverage is probably a classic mortgage. However, how you use that mortgage (and what you look for in a property) can make all the difference.

Looking for undervalued properties that owners are looking to sell quickly typically maximizes the ARV (After Repair Value). By getting a mortgage to cover the cost of the purchase price and leveraging those funds, you can fairly easily increase the value of the property and turn a profit on the resale (or rental).

Additionally, if you’re looking to buy a property that’s appraised under the market value, lenders are more likely to cover 100% of the purchase price (and sometimes a large piece of the renovations as well). 

How to Start Building Wealth as a New Investor

1. Don’t let emotions take over your investing.

Investing is all about the numbers. Don’t give up when things are moving slowly, and don’t overextend yourself by becoming greedy. 

Be strategic at every level—from the properties you pursue to the contractors you use.

2. Be persistent.

You don’t need $500,000 in savings to make your first deal. You just need to be a doer. This business is all about grit and follow through. 

3. Look for the right leverage.

Not every loan is going to fit your needs. Once you have a property or project in mind, look for leverage that specializes in those areas. 

Do you need DSCR? Have you considered the BRRRR strategy? What about hard money?

4. Run through examples with an expert.

Both at The Cash Flow Company and Hard Money Mike (our sister company), we want you to feel confident and educated.

One of the first things we do when new investors come to us is sit down and run through some sample properties. This helps you understand the different fees you should look out for. 

Different areas have different fees, regulations, and options, and talking to an expert can greatly benefit you as a new investor.

5. Dive in.

The only way to start building wealth is to, well, start

It’s typically easiest to begin with a straight-forward fix-and-flip. But be on the lookout for properties of all kinds. Check your area every day and get in contact with realtors or wholesalers. 

As a new investor, it might take you a few tries before someone takes you seriously, but you need to go for it.

6. Commit to the business.

Real estate investing (even if you see it as a personal hobby) is ultimately a business. Don’t cut corners or only renovate with the cheapest fixtures. Every choice you make is an opportunity to build a good reputation.

Be thoughtful and hold yourself to a high standard.

Fight Fear with Knowledge

One of the biggest struggles new investors face is fear

It can feel like a huge leap to jump into the investment game, and learning is a great antidote to those nerves. 

One of our goals as a company is to make investing accessible and less frightening through education. Our YouTube channel provides free lessons that walk you through the different aspects of real estate investing. 

Getting started can be daunting, but if you take the time to educate yourself, find a mentor, and find leverage, you have nothing to fear.

How Far Can Leverage Take You?

In the current market, successful investing over the next few years is likely to have a huge payoff. 

Many real estate investors are even able to accumulate hefty retirement funds strictly through real estate investing in addition to annual income.

There are so many strategies you can use to build income with leverage:

  • Fix and flip (buy, fix, sell)
  • Renting (buy, fix, rent)
  • House hacking (buy, fix half, rent fixed half, fix other half with income from first half)

Even new investors can make quick progress if they use leverage wisely.

Recently, we had an investor from a smaller community who has already purchased 8 properties this year with little-to-no money down on each. They’ve been refinanced, rented, and are building her income. By the end of the year, she’ll probably have purchased anywhere from 10-15 properties. And she’s accomplished this by using other people’s money.

Of course, some markets are harder to work in and some communities move a little slower. 

But if you are committed to the game, and you pursue the best loans, you can build a successful business without emptying your pockets.

It’s all about finding the right leverage and using it wisely.

We’re Here to Help!

We have so many tools and resources designed specifically to help you on your investment journey.

We’re happy to help you find the right properties, loans, etc., and we’ll help you feel confident about your decisions.

If you’re interested in discussing a loan or you simply want to talk to someone who has been in the business for a long time, reach out to us at Info@TheCashFlowCompany.com or fill out a contact card.

Getting started as a new investor can be daunting, but with the right knowledge and the right leverage, there’s nothing holding you back.

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How can your credit score impact different types of loans in the real estate investing world?

Credit score impacts investors potentially more than anything else. Lenders will adjust the rates and terms of loans based purely on the three digits of credit score on a person’s financial records. 

Leverage is the key to successful real estate investing, and understanding the impact of credit score is a critical facet of that leverage. 

This article uses real-life examples to illustrate the difference a good credit score makes in the investment world.

How Does Credit Score Impact Fix and Flip Loans?

Let’s compare two clients: 

  • One (Person 1) has a low credit score of 660
  • The other (Person 2) has a high score of 740

These numbers are based on real clients who have approached us for loans.

What Changes?

If you look at the way the numbers worked out in the chart above, you’ll notice that the actual interest rate is the same for both clients.

Obviously credit score can impact a rate, however it’s also common for the impact to be even simpler. In this situation, the lender simply gives less money to clients with lower scores.

In this scenario, the lender only offered 85% of the purchase price to the person with the lower credit score. The person with the higher score ended up having 85% of the purchase price covered as well as 100% of the rehab costs. 

The Cost of a Low Score

If we estimate the closing costs for Person 1’s project at around $7,500 and combine that with the leftover 15% of the purchase price and 85K rehab, the cost of a low credit score starts to take shape. In our example, Person 1 will need to find over $171,000 of additional funding simply because they had a lower score.

Even when the rates aren’t affected, a low credit score is going to cost more in the long run. It’s hard to do multiple projects when you have to bring in that much money on your own. 

How Can Credit Score Impact DSCR Loans?

Using a similar example, let’s look at how DSCR loans can be impacted by a low credit score. We’ll use the same clients:

  • One (Person 1) has a low credit score of 660
  • The other (Person 2) has a high score of 740

We see a lot of clients looking at cash out refinancing, so we’ll look at that type of project.

What’s the Difference?

If Person 1 has a 660 credit score, not only will they likely struggle to find lenders, but 65% is about the best they could look for. This directly translates into less money out of that property.

In contrast, Person 2 with a 740 score should be able to fairly easily get 75%. The more money out, the better your leverage.

As you can see in the chart above, not only does the person with a lower credit score get less cash out, but their rate is also higher which raises their monthly payments. 

Credit Score Matters

Although at first glance, it’s tempting to just look at the monthly payments and think, “It’s not that big of a difference,” don’t fall into that trap!

The person with the higher score not only has a lower monthly payment, but because they also got a higher Cash Out % which gave them an additional $35,000 out. 

Having that good credit score makes it possible to keep cash flowing. If you’re serious about investing, your credit score matters.

How to Raise Your Credit Score

If you’re serious about real estate investing, you need to keep your credit score up. A low score is really going to cost you over time by strangling your cash flow. 

But how can you fix a bad credit score?

There are a lot of options that can help you raise your credit, including usage loans, credit card strategies, or various tips

If you’re interested in learning more about how credit scores affect investment opportunities or need help raising your score, reach out to us at Info@TheCashFlowCompany.com.

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New investors in the real estate game often struggle with the details of their first loan payments.

Real estate, like many fields, has its own vocabulary and rules. This can make it extra challenging for people who are trying to enter the real estate investing world.

So many people come to us confused, asking for guidance as they’re getting started.

Real estate is all about leverage. Understanding the lingo and how to calculate the most common rates will help you be money-wise and confident in your investment journey.

This is especially true (and important!) when it comes to paying off your loans.

What Should You Know About “Payments”

When do payments start? How much do they cost?

If you’re new to real estate investing, it’s a good idea to ask a lot of questions about payments so you know what to have in your budget before you begin.

A few terms to look out for:

“Arrears”

Product interest always shows up after the fact (in “arrears”). Basically, your July 1st payment is going to pay all of the interest for June.

Interest accumulates over the course of a month. Then the bill shows up after.

This how all mortgages are set up. So when you’re trying to figure out your payments and when they’re due, always look ahead 30-45 days after you close for the first payment.

Payments are typically due on the 1st or 15th of the month. Check with your specific lender to make sure you know your pay period.

“Simple Interest”

Above, we showed you how to calculate your monthly interest rate based on the simple interest rate of your loan.

When you start paying off your loan, you’ll see a big accumulation of interest. If you’ve taken time to calculate your monthly rate, this shouldn’t be a surprise to you. You can multiply that monthly rate by however long your project took to find your overall interest cost.

You need money to make money in real estate, but you want to know the cost ahead of time as closely as possible.

Take time to figure out these numbers up front so you don’t have any surprises.

 

Read the full article here.

Watch the full video here:

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Five real estate investing tips to make sure you get the leverage to finish your projects. 

In real estate investing, leverage comes from using other people’s money to generate wealth and income. 

The better your leverage, the easier and more profitable real estate investing becomes. 

But how do you find the right loans that can give you that leverage?

Here are 5 real estate investing tips from our experts at The Cash Flow Company to help get you where you need to go:

Tip #1: Tell the Truth

This may seem basic, but it can be really tempting to slip in a few lies when you’re trying to get a deal. Don’t do it.

Lenders do background checks, look at credit, and generally get external confirmation for everything you tell them. Lying not only makes their jobs harder, but your lack of honesty can ruin your reputation with that lender.

It’s better to be honest about a bad credit score and have a detailed plan about how to fix it than to lie. 

Make sure you disclose if you’ve gone through bankruptcy or if you have any credit card debt. 

They will find out if you’re hiding information or stretching the truth, and you’ll get dumped to the bottom of the pile.

Tip #2: Know Your Real Estate Lingo

This can be tough for new players. We recently created a list of some of the most common real estate lingo that new investors will encounter. 

Knowing terms like LTV, ARV, DSCR, Prepayments, etc. before you meet with prospective lenders shows that you’ve put in the time to educate yourself. 

Understand the numbers that go into making profits, including realtor fees, interest, and escrows. You should have a basic understanding of everything that goes into a project before seeking a lender. 

Resources like our YouTube channel or Investopedia can also help you learn the ins and outs of real estate jargon.

Tip #3: Raise Your Credit Score

One of the first things lenders look at is credit score. That score is often a determining factor in whether you even get considered for a loan.

If credit score is something you’re concerned about, there are ways to raise your score, including looking into usage loans

The better the score, the better terms you’ll be offered. The better the terms, the better your leverage. 

If you have questions about raising your score or are interested in discussing a usage loan, you can contact us here, and we’ll be happy to discuss your options.

Tip #4: Be Personally Invested

If you’re also investing your own money in your project, lenders know you’re serious about the job. 

Using other people’s money (OPM) also demonstrates that your friends and family are willing to invest in your project. Lenders like to see you have skin in the game, even if it’s as simple as borrowing from a line of credit.

Especially if you’re a newer investor, the less you ask of lenders and the more at risk you take on, the more lenders will be attracted to you.

Tip #5: Shop Around For Good Deals

The 2024 real estate market is setting up to be a profitable one for investors. 

Shop around and be selective so you pick the best deals. It’s better to find two really good deals in a year that you can complete than to overextend and not follow through.

This step can take a lot of time and effort, but it’s worth it. Just as lenders are selective with the investors they back, you should also be selective as you look for properties and lenders. 

How We Can Help

As we said earlier, leverage is key.

Knowing these real estate investing tips can help you make your lenders happy so you can start productive cash flow:

  • Be honest
  • Learn the language
  • Work on your credit score
  • Keep it personal
  • Hunt for the right deals

Real estate investing takes time and hard work, but it’s a great way to create generational wealth. 

We have a ton of free tools to download that will help you prepare for these investment opportunities.

If you have questions about these tips or how to get leverage, we’re happy to help. Just reach out to us at Info@TheCashFlowCompany.com.

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