Tag Archive for: real estate funding

Business Credit Card FAQs: Can You Get One with Bad Personal Credit?

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If you have bad personal credit, can you still get a business credit card?

As a real estate, you may be wondering how to get a business credit card and what sort of credit you need.

It can be challenging to secure credit when your personal credit score is less than ideal, but it’s not impossible. In this post, we’ll explore some tips and strategies for getting a business credit card with bad personal credit.

Personal Credit is Key to Business Credit Card Success

First, it’s important to understand that you’ll need a good credit score to get business credit cards. A credit score of at least 700 is usually the minimum requirement, with higher scores providing access to larger limits and more card options.

Assuming you have everything you need to get a business card, including a high credit score, a business or sole proprietorship, and a good, non-real-estate related business name, getting a credit card is relatively straightforward. 

Go to a site like bankrate.com or Credit Karma to pick the card that’s best for you. You can also visit Nav’s list of business cards to compare different types.

If you keep balances, then you may want to look at cards with 0% intro rates. You can change them out every year and save a lot of money.

Business vs Corporate Lines

It’s worth noting that business credit cards and personal lines of credit are different from corporate credit.

Business credit is typically based on your personal credit score and requires you to personally sign on the debt. 

Corporate credit, on the other hand, is based on your Dun and Bradstreet score and does not require you to personally guarantee the debt. Obtaining corporate credit can be a longer process, and it’s not common for small companies to obtain credit at the corporate level.

Resources for Business Setup and Credit Boosting

If you need to set up a business or improve your credit score, reach out to us at The Cash Flow Company. We have ways to help raise your credit score fast, and can guide you in setting up a business.

You can also check out Fund & Grow. Ask us about the discounts they gave us to pass on to you!

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3 Ways to Use Credit Cards in Real Estate Deals

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How can credit cards help real estate investments? Here are 3 ways to use 0% cards.

Business credit cards with 0% rates can be a great entry point for new investors. Unsecured credit can fill the gaps left by your primary loan.

But how is a credit card supposed to help on a real estate investment? Let’s go through 3 ways you can use it.

1. Reserves or Down Payment on Credit Cards for Real Estate

If you have unsecured lines, or even 0% credit cards, and move the money over to accounts, then you could use those funds as reserves or a down payment.

The more money you can put in as a down payment, the better your rate, terms, and cash flow will be. Maybe funds from a credit card could allow you to put 10% rather than 5% down. This change could lower your interest rate by 1-2%.

Lenders give better rates to lower loan-to-value deals – especially for bridge loans. Take advantage of this by using unsecured credit to get more money.

2. Saving Money on Interest

Typical interest rates on credit cards are around 19-29%.

Say you put $25,000 on a 24% credit card for an investment project. Over the course of a year, that’s about $6,000 in interest. Multiply that by however many projects you complete in a year, and the costs add up fast.

0% business credit cards just make sense. With these, you can pay $0 in interest for your first year or two, rather than an astronomically high 29%.

3. Protecting Your Credit Score

When you use credit cards on your personal account, the usage negatively affects your credit score. You can’t get great loans from banks and private lenders with a bad credit score.

These 0% credit cards and other unsecured lines should be put under your business name, not your personal name. When you use an LLC, this credit usage comes off your personal credit report.

Read the full article here.

Watch the video here:

https://youtu.be/REkxzKoe6kw

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How to Get a Business Credit Card (And Get Better Loans)

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Using a business credit card changes your RE career. Here’s how to get one.

Real estate investors should think of their investment projects as a business. And a huge step in propelling your business forward is to get a business credit card.

A card for your business can solve some major credit-related problems. Here’s what you need to get one.

What You Need to Get a Business Credit Card

There are three main things you need before you can get a good credit card with an easy process. You need good credit, a business, and a generic business name:

  • Good personal credit. The higher your score, the better your options are for card terms.
  • A business. (A sole proprietorship counts). The longer you’ve been in business, the better. But bare minimum, it will need to be a couple months old and have a bank account.
  • A generic name. Additionally, the process will be smoother if the business’s name doesn’t sound like a real estate or lending company.

How to Get One

Do you have the credit, the business, and the right name? If so, then getting a business credit card for real estate is easy.

Go to a site like bankrate.com or Credit Karma to pick the card that’s best for you. You can also visit Nav’s list of business cards to compare different types. Fund & Grow also has some great options you could look into.

If you keep balances, then you may want to look at cards with 0% intro rates. You can change them out every year and save a lot of money.

Once you stop putting your projects’ expenses on your personal card, your credit will be more free for investment opportunities.

Need Help Setting Up a Business Card?

Not sure how to set up a business? Don’t have the right credit to open a card? Reach out to us – we have solutions to fix this quickly.

And lastly, you can also check out Fund & Grow. Ask us about the discounts they gave us to pass on to you!

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Solve Your Credit Problems: Business Credit Cards for Real Estate Investors

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Here’s how business credit cards for real estate investors impact your credit.

You rack up business expenses on your personal credit card for your real estate investing business, and now… Your credit score is too low to get more loans to keep your real estate investing business going.

What’s the answer to this dilemma? Business credit cards for real estate investors.

Personal Credit vs Business Loans

A lower credit score makes it harder to obtain the loans you need in your personal life, such as:

  • Car loans
  • Home loans
  • Student loans
  • Credit cards
  • Boat loans

But your personal credit doesn’t only impact your personal loans. It also impacts the loans you get for your real estate business – which are based on your personal credit score. Whether or not you can get a loan, or how good the terms of the loan is, depend on your credit score.

You need credit cards to keep your real estate projects and business going. What you don’t need, however, is that credit usage driving down your personal score and costing you tens of thousands to hundreds of thousands of extra interest over the years.

What Do Business Credit Cards Do For the Real Estate Investor?

Business credit cards can help solve this problem of usage.

Business credit cards for real estate investors remove your balances from your personal credit, fixing the problem created by the need to use the cards for your projects.

These cards don’t show up on your personal credit, so they don’t drive down your score or get counted against your debt ratios for new loans.

Your business expenses become business debt when put on a business card.

Getting a Business Credit Card as an Investor

Using a business credit card as an investor gives you the benefit of using a card, making accounting easier and not negatively impacting your personal score.

If your investing career is a business, you should be working to obtain a business credit card. Reach out to us to ask how to get started.

And for more credit score tips, check out these videos.

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OPM: The Real Estate Funding Holy Grail

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What does ordinary people’s money mean? And how do you get OPM for real estate investments?

Real estate investing has two main parts: the money side and the property side. While finding a good property to invest in is essential, securing funding can often be the most challenging part of the process. 

That’s where OPM (what we call Ordinary People’s Money) comes in. OPM is the “holy grail” of funding real estate projects, making real estate investing faster, easier, and cheaper.

Let’s go over what you need to know about this type of OPM in real estate.

What Is OPM?

OPM refers to money that you find from ordinary people, such as friends, family, or anyone in your investment network. 

Ordinary People’s Money can fund any real estate deal – whether it’s just the down payment, the carry cost, the whole purchase price and rehab, or a long-term hold. 

The beauty of OPM is projects can get funded with a phone call. These people are your family members, friends, someone from an investment group.

The Sheer Power of OPM

Fourteen years ago, we didn’t know anyone who could fund deals for us. We had no hedge fund backing us. We had no black book that gave us all the knowledge and tips.

So we figured out how to find OPM for our company. Fourteen years later, we’ve funded thousands of transactions and hundreds of millions of dollars with OPM.

We’ve done it on a larger scale, but we know that you can do it for your investment business too. With our experience using OPM in real estate, we’re happy to walk you through the process. 

Why OPM Is The Best Real Estate Lending Source

OPM is arguably the best lending source out there.

Unlike traditional lenders, OPM does not require:

  • a credit check
  • income verification
  • appraisal
  • extensive paperwork

The terms of the loan are also flexible to fit your specific needs. This could include carrying the interest, a longer or shorter term, or a first or second position. Additionally, OPM loans often come with fewer fees, such as points, processing, and underwriting.

OPM could be all or part of a project’s funding. It could cover:

  • down payment
  • carry cost
  • long-term hold
  • short-term flip

Any project you have, any money you need, you can find it with OPM. And best of all, it’s a partnership where you both win.

Why Would Someone Want to Be an OPM Real Estate Lender?

Part of why OPM in real estate works so well is because it’s a win-win.

Your lender gets a better return on their money than many other investment methods, for zero work.

You’re paying them a (lower than institutional funding) rate of interest. Especially with the economy as unpredictable as it is right now, people who have cash want a stable place to put it with a consistent return. Becoming an OPM real estate lender offers just that.

In addition to a stable rate, OPM investors also get to invest in their community. Rather than putting money in stocks, national banks, or huge funds, they get to support a small business like you.

Finding OPM for Real Estate

Reach out at Info@TheCashFlowCompany.com, and we can show you exactly how to find OPM real estate lenders.

What we can’t help you do is keep them – that part is up to you. When you find an OPM lender, make sure to take care of them, get them their returns on time, and be honest throughout the process.

A good lender will either stick with you for the long haul or disappear after the first deal, and it all depends on how easy you are to work with.

Other Resources for OPM & Real Estate Investing

It doesn’t matter if you’re experienced or a novice. OPM should be in everyone’s money bucket.

For more info on getting OPM, download this free checklist. For more on real estate funding and strategy, check out the videos on our YouTube channel.

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4 Ways Bad Credit Impacts Loans for Real Estate Investors

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Ease of funding makes real estate investing easy or hard. Here are 4 ways bad credit impacts loans.

In our 20+ year history in the lending world, we continually see credit usage as the #1 thing keeping real estate investors from obtaining the best funding possible.

Credit is the main reason funding is granted or denied. To win this game, you need to understand this and work to put yourself in the best position to succeed.

Let’s go over 4 ways that bad credit impacts loans and what you need to succeed.

The 4 Ways Bad Credit Impacts Loans

The 4 most negative potential impacts due to low credit scores for real estate investors are:

  1. Being denied a loan (so you can’t purchase or refinance a property)
  2. Cash flow takes a hit with higher rates, around 1-4%
  3. Higher closing costs, around .5 to 2%
  4. Being required to put more money down on a property (lower LTV on loans)

Let’s dive in to what each of these means for an investor.

1. Bank Turn Down

If lenders won’t lend to you, then it’s almost impossible to invest and make money. No loan, no property – no property, no investing.

Sometimes this means no one will lend to you with bad credit. Other times, you can squeeze in, but pay more than your competitor.

2. Paying Higher Interest Rates

Paying higher rates brings a lot of setbacks.

With a bad credit score, you might need to go to a different type of lender who will charge more. If not that, then you’ll at least be dropped to a lower lending tier (ie, higher interest rate) with the cheaper lender.

In any case, you’ll feel the hit of higher rates in your cash flow.

To show this, here’s an example of a 2.5% difference in rate on a $300,000 mortgage:

  • Rate of 6.25% = monthly payment of $1,847.15
  • Rate of 8.75% = monthly payment of $2,360.10

An investor with a 680 score might get the 8.75% rate. Another investor with a 780 could get closer to 6.25%. That’s over $500 more per month one investor pays versus the other.

More money means more you can re-invest. Another example of why it is easier to succeed with better funding.

3. Paying Higher Fees

Almost every lender has pricing tiers. These tiers are usually tied to credit scores in some way.

The lower the score, the higher the cost of the loan. With bad credit, some lenders jack up the rate and others jack up the fees.

These fees typically come in tiers similar to this one from a bridge lender:

In this example, on a $300,000 loan, you will pay an extra $1,500 to $3,000 more than your competitor with great credit for the same loan.

4. Lower LTV Funding

Credit score is the main reason some investors can get away with only putting 10% (or even 0%) into a project while others have to bring in up to 25%.

In our $300,000 property example:

  • At 10% down, you bring in $30,000
  • At 25% down, you bring in $75,000

That extra $45,000 could keep you out of deals and or limit the number of deals you could have going at a time.

Keep Bad Credit from Impacting Loans

Overall, we need funding to succeed in real estate. The cheaper, easier, and faster it is, the more opportunities and success it creates. Bad credit impacts the loans you can get for your investments.

Check out these other tips to quickly raise your credit score on our YouTube channel.

You can also send us an email anytime with questions about your credit and real estate investing loans at Info@TheCashFlowCompany.com.

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How to Use a 0% Business Credit Card in Real Estate Investing

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Loans won’t cover your real estate project and you don’t have cash? Here’s how to use a 0% business credit card.

At The Cash Flow Company, we’ve used business credit cards for our investments for over 12 years.

The people here have used them, we’ve helped other people use them, and we understand first-hand that this is a great tool for investors.

Why are they so great?

Why We Recommend 0% Business Credit Cards for Real Estate

Typically, the more money you have to put into a transaction, the better the terms you’re going to get on a loan. When you show that you have other lines of credit (or cash) available, lenders can open up doors that are otherwise closed for you.

When it comes to lines of credit – why pay 20%+ interest rates when there are 0-3% card options available to you?

The Right Way to Use a 0% Business Credit Card

In real estate investing, you always need money. You have a money bucket that constantly needs refilled. This is just one way to fill it.

Using unsecured lines of credit is perfect for the right investor – someone who can treat the credit like a business.

You have to stay on top of unsecured credit. If you put expenses on your cards, then you have to pay it off when the property sells. 

Using a 0% business credit card to fund your personal life leads to nothing but trouble. Misusing unsecured credit in this way is what gives it a bad name.

Investors who use this method get new credit cards every year with new 0% offers. Many investors use them as a stepping stone for the first year or two of their career. Leaning on credit cards early on eventually gets you the funds to move onto more secured or dependable financing sources later.

How Do You Get 0% Credit Cards?

Curious about how to use 0% credit cards for your real estate investing business? Here are some options with the folks at Fund & Grow that could be right for you.

If you want to put business credit in your name and get up to $250,000, we have a service just for you. Reach out at Info@TheCashFlowCompany.com for more information.

Read the full article here.

Watch the video here:

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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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Why You Need Hard Money and Bank Funding

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Here’s how to use both hard money and bank funding to maximize your cash flow.

You can’t get by on just hard money or banks alone. Hard money and bank funding both have their place in your real estate portfolio.

Here’s an overview of the advantages of both types of leverage.

Speed with Hard Money

What if you have a great deal, but you’re required to close in 5-7 days? In that case, you need hard money.

You’ll meet sellers in your real estate career who just don’t want an extended closing. These sellers would rather you close quickly – and they’ll give you a better deal on the price if you can do it. Sometimes, taking too long to secure your financing can get you kicked out of a deal.

You can call your hard money lender and get leverage fast. There’s no hold-up for an appraisal or trudging through a lengthy underwriting process. Hard money is specifically designed for real estate investing.

Even seasoned real estate investors, who do dozens of deals every year, still require hard money from time to time. Every investor runs into deals where they need to close quickly. Whether it’s because your bank won’t be ready in time, you’ve maxed out your line with your hedge fund, or some other unexpected circumstance, you need a hard money lender in your portfolio for speed.

Fast closing can capture a lot of equity on a property. Despite hard money being one of the most expensive forms of leverage, purchase price savings on a quick close can far outweigh the cost of the loan.

Pricing with Banks

If hard money is for speed, then banks are for price.

Finding a bank that loves working with real estate investors is a valuable weapon. If you can build a relationship with the right bank, you can get a better rate and a better closing cost.

Some circumstances when you’d benefit from getting your leverage from a bank include:

  • Whenever you have the time to close. If you can afford to wait for appraisals and underwriting, your loan costs will be much cheaper.
  • If the rehab work will take longer than 6-9 months. When you close on a flip with hard money, you need to complete construction on the property within a month or two. If you use a bank loan, you can afford to spend longer fixing up the house.
  • Any time you want more cash in your pocket! Banks have half the interest rates of hard money lenders. Lower rates and fees mean more money in your pocket by the time your property sells.

Hard Money and Bank Funding

Hard money’s role is to save the day when you need a quick close. Banks are the stars if you need a slow and steady loan at low cost. Having just one or the other won’t cut it. You need both forms of leverage.

Read the full article here.

Watch the video here:

https://youtu.be/3_T81gqiZdk

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Your Fix-and-flip Loans When the Fed Tightens Money

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What changes to expect on LTVs for fix-and-flip loans when the Fed tightens money.

There are a couple ways raised federal interest rates impact fix-and-flips.

In about six to twelve months, the market is expected to have another shift. Prices should come down, and better properties will become available.

However, your fix-and-flip loans when the Fed tightens money also get tougher to work with. To be ready for those upcoming opportunities, here’s what you need to know about loans for fix-and-flips now.

Fix-and-Flip Loans with Tightened Money

What does it mean for real estate investors when the Fed starts tightening money? Lenders start to pull back.

Lenders want to wait to figure out what will happen with the markets. Their money isn’t returned as fast as usual because investors’ properties take longer to sell. Less money becomes available overall.

This tightening of money results in many recent changes we’ve seen in loans for fix-and-flips.

Changes in LTVs

The loan-to-cost or loan-to-ARV on properties has lowered, and appraisals are being cut. The average LTV used to be 75%. Now, most lenders have pulled back to 65-70%.

Lower LTVs mean you need to bring more money into a deal. It’ll take more out-of-pocket to actually close on a property in the current market.

With low LTVs and lenders being picky with transactions, it’s important to only take fix-and-flips you can obviously turn a profit on.

Home Value Changes

While loan-to-values are going down, credit score requirements are going up. Typically, lenders’ credit score minimums start at 620 or 640. Now, many lenders won’t take anyone with lower than a 680 or 700 score. Six months from now, that could become even tighter.

If you’ve been investing for a while, you’ll need to change how you look at leverage. For the past ten years, lenders have been seeking you. Now, you’ll have to proactively find your money. It’s more important than ever to plan your funding.

Read the full article here.

Watch the video here:

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