Tag Archive for: rental property

There are many DSCR loan options – but how do you calculate the ratio for each one?

Some of your DSCR loan options include 30-year fixed mortgages, 40-year fixed, or interest-only. But how do you know which one’s best?

You’ll have to crunch the numbers. Here’s one example of calculating different DSCR loan options on a $200,000 loan with $2,000 rent.

What Is a DSCR?

DSCR means debt service coverage ratio. It’s a loan for rental properties that hinges on cash flow.

A DSCR loan will be a useful product in your real estate investing career. It requires no income verification and no work or investment history. These loans only require that the property’s income is the same (or higher than) the expenses.

Cash flow is always important to you as an investor, and for DSCR loans, it matters just as much to your lender. The better your cash flow, the better LTV and rates you can get. 

It all depends on a little number – the ratio itself. Here’s how to calculate the DSCR with different loan options.

How to Calculate the DSCR

Loan LTVs and rates on a DSCR are determined by the debt service coverage ratio itself. Now that we have all our raw information, we can plug it into our DSCR calculation to get the ratio.

Here’s how you get the numbers you need:

Add up your expenses (taxes, insurance, and HOA fees) with each loan’s payment amount. Then divide rent by all those expenses.

Costs + Mortgage = Total Expenses

Rent ÷ Total Expenses = DSCR Ratio

Here’s an example of what it would look like with an example using a $200,000 loan and an 8% interest rate:

We want the DSCR to at least equal 1.

Over 1 is ideal. This is a higher cash flow, and you’ll get a better loan.

Less than 1 means negative cash flow, and means you might have to look at a negative DSCR or a no-ratio loan instead.

<1 = Negative Cash Flow

At 1 = Rent = Expenses

>1 = Positive cash flow

Read the full article here.

Watch the video here.

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An Example of the BRRRR Buy Box

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This framework can save your entire rental property from failure. Here’s an example of the BRRRR Buy Box.

What is a “BRRRR Buy Box”? It’s a set of parameters to keep your BRRRR on track to a successful, profitable refinance.

Let’s take a look at the contents of your Buy Box.

What Is the BRRRR Buy Box?

What’s in your BRRRR Buy Box? There are four important numbers:

  1. What is your minimum cash flow requirement? Not only yours, but what is your lender’s minimum net cash flow for you to qualify? 
  2. What amount, if any, do you want to put into the property? This is money that you’re willing to keep in the property. You don’t get it back out at the refinance. 
  3. What’s the maximum loan you feel comfortable with? What do you qualify for? What fits your cash flow requirements for this particular market?
  4. What’s your maximum amount for purchase and rehab? These numbers are vital to keep you in-budget with cash flowing.

Let’s go through an example of what a BRRRR Buy Box would be. 

Example BRRRR Buy Box

Cash Flow Requirements

Let’s start with the first question. Say your minimum needed cash flow for a property is net $500 per month.

This is your first criteria, so you want to make sure every property you look at would cash flow $500/month. To predict cash flow, you can approximate rent in the area of the property, as well as estimate the monthly mortgage payment and other costs. 

If you know you can charge $2,000 for rent, but your loan, taxes, and insurance will equal $1,450, then you can predict a $550 monthly cash flow.

Cash Put into the BRRRR

How much money do you want to put in? On one hand, people do BRRRR for the appeal of zero down properties. On the other hand, some people want to put as much in as possible at the beginning to keep loan payments down and cash flow up.

Having a target number helps you better set up your refinance.

Maximum Loan

The maximum loan doesn’t always mean the highest possible loan you qualify for. Rather, it’s the loan that works best for the property and the situation.

What is the maximum leverage you could use and still meet your cash flow requirements and the bank’s refinance guidelines?

Most banks will refinance you on rate-and-term from 75 – 80% of the appraised value, as the house sits after you’ve bought and rehabbed it. Cash out refinances cover somewhere between 65 – 75%. That may be too much for your particular area, or not enough. It’s important to understand the maximum loan for your particular deal.

Purchase and Rehab Budget Example for BRRRR Buy Box

Finally, what is the maximum amount of money you can put into the purchase price and rehab? What budget fits in your buy box?

Remember that on top of the purchase and rehab, you’ll still have carry costs and closing costs. All of these numbers will have to fit within your budget.

Read the full article here.

Watch the video here:

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Here’s an example of just how much dropping listing price hurts a refinance.

A recent client of ours came across a common issue in today’s market:

He got caught in the market with a big flip project. After weeks on the market, he just couldn’t sell. Negative cash flow pushed him to continually drop his asking price.

Here are the numbers of his deal and what happened to his chances at a refinance.

How Dropping Listing Price Hurt a Refinance

This client listed his property in late July, early August of this year. Everything had been going well for his investments in the last 7 or 8 years, so he took his time on a couple recent flips. But it took him a little too long on this one, and the timing is now killing him.

Let’s look at his numbers.

The First Price

This client owed $425,000 on the loan for this property. His initial listing price for was $769,000.

So far, so good. These numbers are great. He has a low loan-to-value. Sixty-five percent is a major threshold for LTVs. Being under 65%, this would be a great position for a refinance.

He would have had a lot of options available to him at this point, even if his income didn’t suffice for a conventional loan.

Price Drop #1

A couple weeks later, like most people would do when their property hasn’t sold, he decided to lower the price.

The new price was $725,000. His LTV crossed the threshold to above 65%.

Although not as great as before, he still would have plenty of loan options. Everything still looking good.

Third and Fourth Price Drops

One week later, he decided to drop price again. His realtor talked him into dropping below $700,000.

Now at $699,800, he’s lowered the price three times. When the appraiser looks at this, they’re going to see the continual drops, making it clear that the property is not selling at these prices.

Eight weeks in, this client started getting desperate. Remember, he’s making monthly payments on this property. The house has a high negative cash flow. So he drops the price to $649,000 in hopes of selling.

He’s crossed another major LTV threshold into 70-75%. He’s created a big hurdle for refinancing by dropping the property 4 times over the last 8 weeks.

Dropping Listing Price Hurts Refinance

The appraiser will see the property isn’t selling at $649,000. So based on the current market rates, they’ll appraise it 1-10% less than that number. With this low appraisal, our client could get trapped above a 75% LTV. Getting a decent refinance loan just became way harder, with a nearly guaranteed negative cash flow.

The LTV has gone up, so now his refinance rates will go up. Additionally, he’s backed into a corner where he’ll need a higher credit score to get the loan. At a 65% LTV, there are options for almost any credit score. At 75%, you need a much higher score to get anything.

Every time you drop the price, you’re putting yourself at a higher risk of a worse rental refinance loan. Dropping price gets you lower LTVs, worse cash flow, and potentially takes away the option to refinance altogether.

Read the full article here.

Watch the video here:

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From figuring out expenses to doing the math… Here’s how to calculate a DSCR loan.

The more you know about DSCRs, the more power you have when you go to buy or refinance. 

When you practice the numbers yourself, the less you have to rely on a lender to tell you if a deal is good or not.

Download your own DSCR calculator here. Follow along with your own numbers as we go through an example of how to calculate a DSCR loan.

What Is a DSCR?

DSCR means debt service coverage ratio. It’s a loan for rental properties that hinges on cash flow.

A DSCR loan will be a useful product in your real estate investing career. It requires no income verification and no work or investment history. These loans only require that the property’s income is the same (or higher than) the expenses.

Cash flow is always important to you as an investor, and for DSCR loans, it matters just as much to your lender. The better your cash flow, the better LTV and rates you can get. 

But even if your property has negative cash flow, you still can get DSCR loans. You’ll just have to pay for it when it comes to the LTV and interest rate.

Calculate a DSCR Loan Expenses

You can follow along with your DSCR loan calculator (free download here). We’ll fill out these form to show each step of how to calculate a DSCR loan.

Rent Income & Loan Amount

Firstly, you need to estimate your loan amount and your rent income. If you have a deal in front of you, you probably have a good idea of the loan amount you’ll need to be able to afford the property.

As for rent, you can get realistic amounts from online sources. Look at Zillow or Rent.com to find the market rate for rent in the property’s neighborhood.

Let’s keep it simple for our example and say our loan is $200,000, and our rent income is $2,000.

What Expenses Count in a DSCR Loan?

We know our income (rent), but now we need to figure out our costs.

The expenses considered in a DSCR loan DO include:

Taxes

Insurance

HOA fees

Expenses NOT considered in a DSCR loan are things like:

Property management fees

Utilities

Maintenance

To estimate the taxes on the property, you could use a property tax calculator like this one. If you need an estimate on insurance, you can try this home insurance calculator. You can figure out HOA fees by contacting the HOA, if that applies to your property.

If any of these costs are charged annually, then you’ll need to divide by 12 to break it down into a monthly cost.

Let’s take a look at what information we have now for our example DSCR loan:

Calculating Loan Cost

Secondly, DSCR lenders will offer many types of the loans – fixed-rate mortgages, interest-only, ARMs, etc. You need to find what best fits you, and to do that, you’ll have to run all the numbers.

To calculate each of the amortized loans, you can use an amortization calculator like this one. Add in your information – loan amount, interest rate, and loan length.


We’re going to use an 8% interest rate for our example, since that’s the anticipated average for next year.

In reality, each loan and lender will have a different interest rate. Additionally, the interest rate may fluctuate depending on your qualifications and DSCR. You can get this information from your lenders to plug into your calculator.

We’ll use three common loans for this example: a 30-year fixed, 40-year fixed, and interest only loan.

If we had a 30-year mortgage for $200,000 at 8%, our monthly payment would be $1,467.

For a 40-year fixed with the same info, payments would be $1,390.

For interest-only, you can calculate the loan fairly simply yourself. Multiply the loan amount by the interest rate (e.g., 200,000 × .08 = 16,000). That gives you the yearly interest, then you divide it by 12 to get the monthly payment. For our example, that’s $1,333.

So what do you do with these numbers? How do you know which loan is best?

It depends on your priorities. To have the most cash flow, the lowest number is best (in this case, interest-only). If you need something that amortizes, a 30-year would probably be best.

But you don’t really know which loan will be best for you until you calculate the DSCR.

How to Calculate the DSCR

Loan LTVs and rates on a DSCR are determined by the debt service coverage ratio itself. Now that we have all our raw information, we can plug it into our DSCR calculation to get the ratio.

Here’s how you get the numbers you need:

Add up your expenses (taxes, insurance, and HOA fees) with each loan’s payment amount. Then divide rent by all those expenses.

Costs + Mortgage = Total Expenses

Rent ÷ Total Expenses = DSCR Ratio

Here’s an example of what it would look like with an example using a $200,000 loan and an 8% interest rate:

We want the DSCR to at least equal 1.

Over 1 is ideal. This is a higher cash flow, and you’ll get a better loan.

Less than 1 means negative cash flow, and means you might have to look at a negative DSCR or a no-ratio loan instead.

<1 = Negative Cash Flow

At 1 = Rent = Expenses

>1 = Positive cash flow

Help with How to Calculate a DSCR Loan

Do you have a deal with a DSCR of 1 or more? Do you need help finding out?

If you have any questions, we’d be glad to help. If you have a deal, we can run the numbers for you. Email us at Info@TheCashFlowCompany.com.

You have choices in the DSCR world. Let us help you find them!

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You Are Doing BRRRR Wrong

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Most people do BRRRR wrong. Here’s the step they usually miss.

Buying properties at undermarket prices. Fixing them up. Keeping them as rentals. Refinancing.

We’ve helped clients with this process for over 20 years. What’s the biggest error we see people make?

They don’t start with the end in mind.

Many beginning investors take the order of the BRRRR acronym literally. They buy, rehab, rent, THEN try to figure out what the refinance will look like. That’s actually doing BRRRR wrong.

Going into the refinance blindly is how to do BRRRR wrong. At best, you won’t know how the property cash flows. At worst, you can’t get a refinance loan at all.

Let’s look at what you need to do instead.

How to Keep From Doing BRRRR Wrong

The refinance is where you make your money in a BRRRR. Refinancing determines the cash flow, your money out-of-pocket, and the financial success of the project.

If everything hinges on the refinance, why would you wait until the fourth step of the process to start figuring it out?

You need to mentally move the third R, “Refinance,” up to the beginning of the process, before you even buy.

Refinance Questions to Answer

There are certain questions you should know the answers to before you put money down on an undermarket property.

You can get the cheapest house out there, with the highest ARV… But if you aren’t able to get a decent refinance for it, you’ll still lose money.

Here are some questions you should be able to answer at the beginning to ensure you don’t do BRRRR wrong:

  • What loan-to-value (LTV) does the bank require?
  • When you go to refinance, will you have to bring in money? How much?
  • Will it cost more money than you have? Or more than you want to spend on this project?
  • Will you do a rate-and-term or cash-out refinance?
  • What will be your cash flow on the property?
  • What’s the minimum cash flow you need? What about the minimum the bank needs?
  • Does the bank require investment experience to lend you a refinance loan?
  • Does the bank have reserves requirements? (This is usually around six months’ worth of payments the bank requires you to have in savings or a mutual fund).

If you don’t know the answer to these questions up front, you end up like a lot of buyers who get BRRRR wrong and lose money.

You get to the refinance part of the process and learn you don’t have enough money to bring in. Or you find the cash flow is bad.

Prepping for a BRRRR Buy

Does it make sense to buy a property (with a higher interest loan), put all the money into repairs, rent it, and THEN figure out whether it’s a good or bad investment?

It takes just a little time and effort up-front to figure out if a property is worth pursuing.

We like to call this time up-front “building your BRRRR buyer’s box.” It’s a process that helps you prepare for the refinance ahead of time so you don’t do BRRRR wrong.

Going into a property, you should know:

  • Your max LTV
  • Your cash flow minimum
  • How much cash you’ll need to bring in
  • What rehab budget you can afford.

Do BRRRR Right

Download our free BRRRR Checklist to understand the numbers of your refinance. Make your rental property a success.

Leverage determines whether you’ve done BRRRR wrong or right. All real estate investing hinges on leverage, and our goal is to help you create the best leverage possible. 

Using the right debt will accelerate your business, while the wrong stuff will slow your investing career to a halt.

If you have questions about a BRRRR product, email us at Info@TheCashFlowCompany.com.

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Listing price has an impact on appraisals. You have power. Use it wisely.

The appraisal of a property decides the details of its refinance. Appraised value is an especially important detail if you have a fix-and-flip you need to turn into a rental.

Here’s what you need to know about how your flip’s listing price impacts its life as a rental.

What Is the Impact of Appraisals?

If you expect to keep a flipped property, stop dropping the listing price NOW. Otherwise, it will impact the value of your home (and your LTV when you go to refinance).

The appraiser has certain guidelines they have to follow while determining the value of your home.

First of all, they have to go by whatever the current market conditions are. What are like-properties selling for in your market?

It doesn’t matter what properties sold for 3-6 months ago in the same place – they look at current conditions.

Your Price Changes the Appraisal

From the appraiser’s perspective, your price keeps dropping because the house won’t sell there. If the house won’t sell at a price, then it’s not worth that value.

If you dropped the price by $30,000, then $40,000, then $50,000, and it still hasn’t sold… the appraiser can’t give you the original value. In fact, they can’t even use your last list price. It’s clear the house didn’t sell for that much, so it must not be worth that much right now. Typically, your appraisal will come in between 1-10% lower than your last listing price.

The impact of appraisals is huge. Everything in a refinance hinges on it. If the appraisal is too low, you’ll get a low LTV. With a low LTV, your rates will be high. If your rates are too high, you’ll have negative cash flow. Your loan options can get totally squashed – all because of a lower list price.

Stop dropping the price if you may want to refinance before selling.

Read the full article here.

Watch the video here:

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Your flip isn’t selling? Here’s our view on why you should refinance a flip into a rental.

Have a flip on the market? It probably didn’t sell in a week like it might have this time last year.

Once it’s clear you won’t get the price you need to turn a profit… What do you do? 

Keep dropping the price and take the hit? 

Cross your fingers the market improves in a few months and refinance with a bridge loan?

Or take the hint, turn the property into a negatively cash flowing rental, and wait out the market for another couple years?

None of those options are ideal. But the most effective way to make your money back over time is the rental unit route. Here’s why we believe you should refinance a flip to a rental right now.

How Bad Is the Negative Cash Flow?

The hesitation for many investors in this situation is: if you take the property off the market, it will have negative cash flow. The price is too high, and rent probably won’t cover the costs. Why would you intentionally put yourself in a situation where you’re losing money?

But the reality is: the house is a negative cash-flowing property now. Every month the house is on the market, you pay interest. That money adds no value to the property – you’re just draining your money straight into your lender’s pocket.

Even if you don’t refinance with a rental loan, you already have a negative cash flow property.

Why not take the step to turn your flip into a rental now and reduce the amount of money you’re losing each month?

Refinance a Flip To a Rental

Typically, people spend more money leaving a house on the market for 2 or 3 months than they would turning it into a negative cash flowing rental for 2 years.

Does it make more sense to pay $2,500 monthly on a house with a for sale sign on it? Or get $2,200 in rent and only pay $300 of your own money per month? This is the question you’re left with when your flip isn’t selling in this market.

Turning a Flip to a Rental in Past Down Markets

Take a lesson from 2008 and 2009. Many investors who sold during the crash later realized that if they had waited 3 or 4 years, they could have made their money back on those properties.

Not only would their property values have gone up, but rates would have come down. Those properties would have become major assets. Instead, investors took a big hit selling in a down market.

What Loan Can Refinance Your Flip Into a Rental?

So if you decide to go with this negatively cash flowing property, what are your options for a loan? 

We recommend a negative DSCR or no-ratio loan program.

These loans allow you a 30-year fixed product that’s interest-only. These DSCR loans work even on properties that aren’t cash flowing.

Typically for a DSCR loan, the rent from the property has to at least cover the monthly expenses (principal, interest, taxes, and insurance). Outflow has to equal inflow.

But the negative DSCR and no-ratio options allow you to refinance rental properties even when you bring in less rent than you pay out per month.

Read the full article here.

Watch the video here:

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Stop Dropping Listing Price NOW

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If you want to refinance your flip – stop dropping the listing price!

Will you keep your flip property as a rental? If the answer is “yes” or “maybe,” then STOP dropping the listing price today.

Lowering the listing price kills your deal. It becomes impossible to get the best loan to keep the property as a rental. 

Why? Let’s go over the ways a lower list price affects your ability to refinance – plus a real life example from one of our clients.

How an Appraisal Impacts Real Estate Loans

If you plan on keeping the property, stop dropping the listing price NOW. Otherwise, it will impact the value of your home (and your LTV when you go to refinance).

The appraiser has certain guidelines they have to follow while determining the value of your home.

First of all, they have to go by whatever the current market conditions are. What are like-properties selling for in your market?

It doesn’t matter what properties sold for 3-6 months ago in the same place – they look at current conditions.

Your Price Changes the Appraisal

From the appraiser’s perspective, your price keeps dropping because the house won’t sell there. If the house won’t sell at a price, then it’s not worth that value.

If you dropped the price by $30,000, then $40,000, then $50,000, and it still hasn’t sold… the appraiser can’t give you the original value. In fact, they can’t even use your last list price. It’s clear the house didn’t sell for that much, so it must not be worth that much right now. Typically, your appraisal will come in between 1-10% lower than your last listing price.

Everything in a refinance hinges on the appraisal. If the appraisal is too low, you’ll get a low LTV. With a low LTV, your rates will be high. If your rates are too high, you’ll have negative cash flow. Your loan options can get totally squashed – all because of a lower list price.

Stop dropping the price if you may want to refinance before selling.

How Dropping Listing Price Hurt a Refinance

We had a recent client come across this exact issue. Here are his real numbers and what happened to him.

The First Listing

This client listed his property in late July, early August of this year. Everything had been going well for his investments in the last 7 or 8 years, so he took his time on a couple recent flips. But it took him a little too long on this one, and the timing is now killing him.

Let’s look at his numbers.

This client owes $425,000 on the loan. His initial listing price for this property was $769,000. 

So far, so good. These numbers are great. He has a low loan-to-value. Sixty-five percent is a major threshold for LTVs. Being under 65%, this would be a great position for a refinance.

He would have had a lot of options available to him at this point, even if his income didn’t suffice for a conventional loan.

The Second Price

A couple weeks later, like most people would do when their property hasn’t sold, he decided to lower the price.

The new price was $725,000. His LTV crossed the threshold to above 65%. 

Although not as great as before, he still would have plenty of loan options. Everything still looking good.

Third and Fourth Price Drops

One week later, he decided to drop price again. His realtor talked him into dropping below $700,000.

Now at $699,800, he’s lowered the price three times. When the appraiser looks at this, they’re going to see the continual drops, making it clear that the property is not selling at these prices.

Eight weeks in, this client started getting desperate. Remember, he’s making monthly payments on this property. The house has a high negative cash flow. So he drops the price to $649,000 in hopes of selling.

He’s crossed another major LTV threshold into 70-75%. He’s created a big hurdle for refinancing by dropping the property 4 times over the last 8 weeks.

Dropping Listing Price Hurts Refinance

The appraiser will see the property isn’t selling at $649,000. So based on the current market rates, they’ll appraise it 1-10% less than that number. With this low appraisal, our client could get trapped above a 75% LTV. Getting a decent refinance loan just became way harder, with a nearly guaranteed negative cash flow.

The LTV has gone up, so now his refinance rates will go up. Additionally, he’s backed into a corner where he’ll need a higher credit score to get the loan. At a 65% LTV, there are options for almost any credit score. At 75%, you need a much higher score to get anything.

Every time you drop the price, you’re putting yourself at a higher risk of a worse rental refinance loan. Dropping price gets you lower LTVs, worse cash flow, and potentially takes away the option to refinance altogether.

Other Tips to Help You Stop Dropping Listing Price

If you made the decision to rent the property and you’ll keep it on the market, that’s fine up to a certain point. We recommend a few extra tricks to get the property sold without lowering price:

  • “Accepting all offers.” Putting this in your listing tells buyers you’ll take less. But it doesn’t affect the actual listing price (so it won’t knock down your property’s value in an appraisal).
  • Offer an incentive. You can give an incentive to the buying broker to put your property up front.
  • Buy down. Buying 2 points on a $500,000 loan costs you $10,000. This buys down the rate up to 1 point, which could help a buyer qualify with a new debt ratio.

Help to Stop Dropping Listing Price

We hate to see clients end up with pains from dropping their listing price. Let’s make sure you don’t land in the same spot.

If you have a loan you want us to look at, price out, and calculate cash flow on, send it our way!  Email us at Info@TheCashFlowCompany.com.

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How to Launch Your Retirement Through Private Lending

How to Launch Your Retirement Through Private Lending

Launch your retirement!

The most common ways to save for retirement are the stock market, 401Ks, and other retirement savings accounts. They’re common journeys most people take when they start putting money away for their future.

But did you know there’s another frontier to explore when it comes to preparing for retirement?

Although it’s a frontier that’s been around for centuries, and it’s a frontier that’s helped many, it’s not exactly a frontier people think to explore.

But this frontier can lead to lucrative cash flow and a safe, comfortable, and happy future.

We’re talking about private lending.

https://youtu.be/3shyEuw1zSI

Private lending can launch your retirement savings into a whole new universe. Compared to the stock market, which is volatile, and retirement savings accounts, which are questionable, private lending is consistent, easy, and safe. And, most importantly, profitable.

What is private lending?

Simply put, you become a bank for someone who needs cash. And, in the real estate world, that someone is a fix and flipper, rental owner, or another property investor.

These real estate investors can’t always rely on a traditional bank for funding.  Either because they can’t meet a bank’s strict qualifications, or because they need to buy a property super fast…and banks don’t close deals super fast.

So, they turn to private lenders. Private lenders, like you, lend them the money they need and charge them interest for it.

The amount of interest you charge is up to you. Most private lenders make between 5% and 12%. You can’t make that kind of interest by letting your money sit in a bank. And you can’t know for sure you’ll make it through the stock market.

So, how do you become a private lender? Well, there are a couple of ways to get going.

The easiest way is through companies like ours. We connect private lenders with real estate investors, and help with all the paperwork and other steps that secure your money.

Or, if you’d rather explore the private lending frontier on your own, then you can work directly with real estate investors. This is best known in the business as OPM (Other People’s Money). OPM puts you directly in the pilot’s seat, and you get to decide your path…and the risks that come with it.

Private lending is definitely a worthwhile adventure! If you’re ready to learn more about it and launch your retirement, then our team is always here to help.

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What is a Private Note?

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What is a Private Note?

What is a Private Note?

You have a variety of options when it comes to making money for retirement.

The most obvious and popular ways are retirement saving accounts and the stock market. But retirement saving accounts can be questionable, and the stock market constantly fluctuates up and down.

But, fear not. Did you know there’s another, more secure way to save up for your future?

We’re talking about investing in private notes. They’re an easy, lucrative method to boosting your cash flow…and your retirement funds.

https://youtu.be/sTh8QI07gpQ

You see, when people think about investing in real estate, they assume they have to fix and flip or rent properties. But private notes allow you to make money in real estate without ever picking up a hammer.

Basically, you become a bank for a fix and flipper or a rental owner.

But what is a private note?

Well, in a nutshell, it’s an IOU.

Essentially, a private note is an agreement between you and your borrower, and it outlines things like:

  • How much money you’ll lend.
  • The amount of interest you’ll charge.
  • The length of time you’ll let your borrower use your money.
  • And the date you expect them to pay you back in full.

And if you’re thinking, “Well, what if they can’t pay me back?”, then don’t worry.  Your money is secured by the property. So, as long as you do your homework and make sure it’s a worthwhile investment, then your money is safe and sound.

Now, how do you actually create a private note?

Well, the easiest way is to work with a company like ours. In addition to creating a secure private note on your behalf, we help with all the other steps to private lending. Those include:

  • Finding real estate investors who need funding.
  • Interviewing them and reviewing their portfolio to determine how much you can trust them with your money.
  • Analyzing properties to make sure they’re worth the investment.
  • Handling escrow draws.
  • And overseeing the life of the loan, including all payments, extensions, and modifications.

Of course, if you’d rather handle all of those steps by yourself, then you can simply hire an attorney to create your private note.

Bottom line, private notes are an excellent way to prepare for retirement, especially if you want to invest in real estate without breaking a sweat.

Ready to talk about investing your money in private notes and securing your future? Great! Our team is always here to chat.

Happy investing!

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