Why You Need Hedge Funds and OPM
Categories: Blog Posts
Here’s how to use both hedge funds and OPM to maximize your cash flow.
Hedge funds and OPM are forms of real estate leverage that can be overlooked by newer investors. These funding sources can fill in the blanks left by hard money and banks.
Here’s an overview of why hedge funds and OPM should be a part of your lender circle.
You might find yourself in need of a lender who is more flexible than banks, but still has an “unlimited” cash supply. In that case, hedge funds will have the right leverage for you.
We also call hedge funds “capital funds” or “private equity.” These are firms that can fund real estate investments across multiple states, have a lot of money available for both flip loans and DSCRs.
A problem with banks is they’re limited to one state or region. A problem with hard money and OPM is that funds can run dry. Hedge funds solve those problems.
Keep hedge funds in your portfolio to have a lender who can handle every deal. They can grow with you as you move across state lines and take your investment career to the next level.
OPM stands for other people’s money. It comes from a real person you know (who’s sitting on a lot of cash!). They want to put their money somewhere secure that’ll give them a better rate than a bank… So they loan it to you.
You can give your OPM lender a rate of 5-6% back. For you, this beats the 9-12% rates of hedge funds or hard money. For your lender, this beats the 1-2% rate they’d get from a CD or savings account.
OPM can fill in the gaps of any project. It could cover down payment or construction costs, or potentially fund entire properties.
With reliable OPM, you have access to the speed of hard money, the low cost of a bank loan, and the flexibility of a hedge fund.
The main drawback of OPM is simple: it can run out.
Hedge Funds and OPM
Hedge funds give a steady stream of money that can help advance your real estate career. OPM is the quiet hero that has you covered for cheap, fast, and easy money… But it won’t last forever. Having both of these forms of leverage at your disposal will make you a better investor than just hard money and banks alone.
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