Tag Archive for: private lenders

Why You Need to Fill Your Money Buckets

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Why You Need to Fill Your Money Buckets

Always Be Ready

One of our main goals at The Cash Flow Company is to help investors succeed! Top real estate investors have a secret formula. First, they’re always looking for properties. Second, they’re always ready to buy those properties because they have their money buckets filled. Therefore, when opportunity knocks, they are prepared to answer. How can you fill your money buckets? Let’s take a closer look! 

What Are Money Buckets?

Besides searching for properties, the second key to success is having the money ready to buy properties quickly. This brings us to the concept of a “funding stack” or “money buckets”. Top investors have multiple funding options lined up so they can act fast when a deal comes along. Let’s explore the six types of money buckets!

1. Other People’s Money (OPM)

Why Use OPM?

First and foremost, Other People’s Money (OPM) is a powerful tool. To clarify, OPM means borrowing money from friends, family, or other investors. Consequently, they lend you money because they trust you and want a better return on their investment.

Example:

If you need $20,000 for a down payment, OPM can help you get it without a credit check or income proof.

Benefits:

  • No credit checks
  • No income checks
  • Flexible terms

2. Home Equity Lines of Credit (HELOC)

Why Use HELOC?

Another incredibly helpful tool is a HELOC. A HELOC allows you to borrow against the equity in your home or rental property. It’s like having a credit card linked to your property.

Example:

For example, Jane in North Carolina has a paid-off property. She can then get a HELOC to buy fix-and-flip properties. Moreover, she uses a debit card that is linked to her HELOC for purchases at Home Depot.

Benefits:

  • Access funds anytime
  • No need for repeated applications
  • Fast and easy to use

3. Business Credit Cards

Why Use Business Credit Cards?

Business credit cards don’t affect your personal credit score. They are useful for short-term needs like repairs, as well as for small purchases.

Example:

If you need to buy materials for a renovation, use a business credit card instead of a personal credit card. As a result, your personal credit score remains intact and separate from your business expenses.

Benefits:

  • Doesn’t report to personal credit
  • Flexible for small expenses
  • Easy to obtain

4. Hard Money Lenders

Why Use Hard Money Lenders?

Hard money lenders are flexible and don’t focus on your credit score. Instead, they can provide funds quickly for flips, as well as rentals.

Example:

If you find a great flip but need the money in a few days, a hard money lender can provide it faster than a bank.

Benefits:

  • Fast approval and funding
  • Flexible terms
  • Suitable for flips and rentals

5. Private Lenders

Why Use Private Lenders?

Private lenders are like a middle ground between banks and hard money lenders. They not only offer better rates than hard money lenders, but they also require less paperwork than banks.

Example:

Private lenders can give you 90% of the purchase price and 100% of the rehab costs. Consequently, this helps you get started on your project without waiting for bank approvals.

Benefits:

  • Less paperwork
  • Competitive rates
  • Covers most of the purchase and rehab costs

6. Local Banks

Why Use Local Banks?

Local banks offer lines of credit or loans with lower rates. They may take longer to process, but they are ideal for long-term investments.

Example:

If you’re planning a pop-top renovation, a local bank can provide the necessary funds at a lower rate.

Benefits:

  • Lower interest rates
  • Ideal for long-term projects
  • Personalized service

Be Ready for Every Opportunity

In conclusion, by filling your money buckets now it ensures that you’re always ready to seize opportunities in real estate. By having diverse funding sources, you can act fast and get the best deals. Start building your money buckets today, and watch your investment opportunities grow. For more tips and tools, visit The Cash Flow Company. You’ll find tools like our Deal Analyzer and a comprehensive guide to building your funding stack.

Watch our most recent video to find out more about: Why You Need to Fill Your Money Buckets

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Why You Need to Find Other Money Sources Now

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Why You Need to Find Other Money Sources Now

Banks are experiencing a significant decrease of money flowing into the lending pool. This has created a bank collapse that is greatly impacting real estate investors today. As a result, banks are forced to swim upstream in search of the “best of the best clients”, thus leaving investors to find other money sources. What can real estate investors do? We are here to help navigate you through these rough waters.

Private Lenders

A waterfall effect occurs when banks are focused on the “best of the best” clients. Thus, forcing investors to cascade down to private lenders in order to keep their business afloat. The influx of new clients has led private lenders to begin swimming upstream alongside banks in search of new borrowers. These borrowers are more experienced, have more money, and more liquidity. Unfortunately, this is making it harder for many investors to qualify for loans.

Other People’s Money 

In addition to private lending, another funding source is “other people’s money” aka OPM. These are individuals that are within our community and can lend $10,000 to $100,000. By knowing who to ask and where to look, you can easily ride the wave to success. So dive in and discover additional lending options and how to succeed during this bank collapse.

What you need to succeed

Investors can prepare for this lending squeeze by making sure they have cash, high credit scores, and are keeping up on projects. By getting into a deal now and holding it for 2-3 years, it can set you up for success in the near future. We can help guide you through the process of starting your business, increasing your credit scores, finding ways to improve your income, and helping with OPM options.

Need more help navigating these rough waters watch our most recent video!

 

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What is Gap Funding?

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Gap funding

In the real estate investment world… What is gap funding?

You should never count on a bank or hard money lender to give you a loan that will cover 100% of your real estate investment property.

What you should be able to someday count on, though, is funding up to 100%.

So, what is this type of funding?

Definition: What Is Gap Lending?

Gap funding is the money you bring in from another source to fill any gap left between the lender and the project costs.

If a lender offers you 70% of the LTV on a property, this type funding is how you fill in the remaining 30%. Usually, you secure gap funding, although unsecured funding is possible.

A “secured” loan means that the debt is backed by a piece of collateral. In a typical gap funding scenario, the loan is secured by the property being purchased.

For the most part, you won’t be able to find a gap lender at an institution like you can a bank lender. Instead, gap lenders are family members, friends, or someone you know.

OPM vs Gap Funding

You can use a couple funding terms interchangeably:

  • gap funding
  • gap lending
  • OPM (other people’s money)
  • real people’s money

All of these terms get at the same concept. It’s money, not from you and not from an institutional lender, that covers whatever costs of an investment property that your lender won’t fund.

OPM can cover up to 100% of a deal, but for now, we’ll be talking about it in a strictly 100% funding sense. These are loans that fill in the holes of a project that a mortgage or hard money loan wouldn’t cover.

Check out our Youtube channel for more great information.

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