Tag Archive for: The Cash Flow Company

How Rising Interest Rates Impact Cash Flow

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How Rising Interest Rates Impact Cash Flow

Today we are going to look at an example of how rising interest rates impact cash flow for real estate investors who are using a DSCR loan. To clarify, a DSCR loan is a loan that focuses on the rents from a rental property and the credit worthiness of the borrower. In today’s market, the increasing interest rates are truly affecting payments and more importantly they are negatively impacting cash flow. 

Example:

$250K Loan 
Time Frame Percentage Expected Payment Change over Time
Couple years ago 3.75% $1,158
Now 9% to 11% 

(depending on LTV)

 $2,011 $853 

Payment Increase 
In the Future 7% 

(you refinance $2,011 principle)

 $1,663 $348

Cash flow increase 
The Optimus  5%

(Looking if it dropped from 9% to 5%)

 $1,342 $669 

Cash flow increase 

This example allows us to visualize why rental properties are failing to cash flow while using a DSCR loan. As a result to higher interest rates, investors are experiencing increasing payments for their properties. This is in addition to rising taxes, and increasing insurance expenses as well. As a result, investors are struggling to break even, let alone create cash flow. In sum, all of these pressures are making it harder to be successful in real estate investing. 

What’s next?

I will be doing a follow up video that will further show you the effect that interest rates have on cash flow. This will include a look from the buyers side, and how the market is going to push up your values. While we don’t have control over the interest rates, we can instead use this time to make the most of the market. By investing in undervalued properties now, you can then refinance when rates go down. This in turn will create the cash flow you need to succeed in the years to come.

Watch our most recent video about why rental properties fail to cash flow and how you can set yourself up for success by investing now.

Do you have questions about DSCR loans or how you can create generational wealth? Contact us today!

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#1 Mistake Made by Small Businesses and Real Estate Investors

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#1 Mistake Made by Small Businesses and Real Estate Investors

What is the #1 mistake made by small business and real estate investors? The answer is not applying for and using business credit cards for business expenses. They are the most important thing and the simplest thing that all investors can do for both their business, as well as their personal lives. While personal credit cards are easy to use, it makes life more complicated as you get into investing.  It doesn’t matter if you are doing flips or rentals, you need to make the switch today!

We Want To Help You!

Our goal is to make it as simple as possible for business owners to succeed. Real estate investing is reliant on leverage or funding for growth and generational wealth. We just want to make the process easier for you. 

Stop Using Personal Credit Cards. 

70% to 80% of people we see are using personal credit cards for business expenses. By putting business charges on your personal credit, it drives down your credit score and makes everything harder. Personal credit cards are used to complete repairs, as well as to grow your business. However, using them on a regular basis will drive down your credit score quickly. This problem even affects investors who are applying for loans. They are either being denied, or required to put more money down because of their credit score.

Where Do You Start?

One of the easiest things to do is to stop using personal credit cards and instead get into simple business credit cards. The best part about business credit cards is that they don’t impact your credit scores. We are talking about the same credit cards you use now, the only difference is that they are in your business name. In making this simple switch, it then allows you to take your business expenses and transfer them onto your business credit card. This not only removes those charges from your credit report, but it also gives you peace of mind that your business expenses will no longer affect your DTI. In the end, the better the credit score, the better the funding you can get to create wealth.

Increase Your Credit Score Quickly.

Here at the Cash Flow Company, we provide a usage loan or 911 loan that will help get your credit score back on track. We use a private non-reporting loan to pay off or down your credit card balances.  With little or no balances showing up on your credit report the next time your credit card cycles, your score increases.  With usage counting for 30% of your score, this will have a huge impact on your new score. We receive calls daily from people who say that they need to increase their score 18 to 20 points. These investors are charged an additional 10% to 20% down, or even being denied loans because of their score. To be clear, this loan is for those who have high balances but don’t have late payments. Is a usage loan right for you? Give us a call today to find out more. 

Open A Business Credit Card Today!

Everyone has credit cards and uses them on a regular basis, so why not make the switch over to business credit cards? Unfortunately, investors ht a detour and go down the path of applying for corporate credit. This is a tiered system that can take months or even years to build. Business credit cards on the other hand can be applied for right away. If you have really good credit and you’re starting a business, then you can get a business credit card right now. Chase, American Express, for example, will give you somewhere to start, as long as you are set up and running like a real business. The more you use the business credit cards, the greater your available credit, and the more benefits you will receive. This includes Southwest, United, Marriott, and so much more. 

Make The Change Today And Succeed Tomorrow!

Both credit scores and leverage are important to create wealth. We want to make sure you do it right! If you have a real business and operate as a real business, then you need to apply for business credit cards today! Investors are hesitant when they are approved for a few thousand to get started. However, when lenders see that you’re using it and paying it down in chunks, they will quickly raise your limits.It may take 2 to 6 months to move everything over, it just depends on where you’re at. Making the change now will make your life so much easier as you grow your business.

Watch our most recent video to find out more about #1 Mistake Made by Small Businesses and Real Estate Investors

Do you have more questions about setting your business correctly? Do you need additional information about raising your credit scores? Contact us today!

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Why You Need More Money to Invest in 2024

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Why You Need More Money to Invest in 2024

2024 is approaching quickly! Will you have the money you need? Investing in 2024 will require more liquidity than ever before. What is liquidity? Liquidity is the money that is available to you to help fund deals. These funds are not from lenders, but are instead from you. This includes funds that you bring into your investments, the amount that you put down on a property, and the money that you have to carry on a project. Let’s take a look at why you need more money to invest in 2024.

Changes In Lending

Banks and credit unions are currently driving down their loan to value percentages, which is making it difficult for investors to qualify. As the new year approaches, Lenders are going to require you to be more liquid, have more reserves, and put more money down. So, by having more liquidity, you will have more opportunities, as well as a huge advantage in 2024 over those who don’t act now.  

Fill Your Buckets Now

The term, “save it for a rainy day” is exactly what you need to be focusing on in today’s market. There are four “liquidity buckets” that should be filled to the brim for not only buying properties, but making payments, doing construction, or any other expenses that may come your way. These four buckets are HELOCS, Unsecured Lines of Credit, Business Credit Cards, and Peer to Peer Lending. All of these resources cost little to nothing for you to have on hand for the New Year. 

Save Today So You Can Invest Tomorrow

The goal is to gather as much money as you can now by filling your liquidity buckets to the brim! As investors, we are all going to need these extra funds for down payments, escrow, paying contractors, as well as any other expenses that come our way. Investors who take the time to prepare, will set themselves up for success come the new year! 

Watch our most recent video to find out more about why you need liquidity. 

If you have any questions on liquidity, finding HELOCs, or have any other questions, please reach out to us!

We would be happy to help guide you to become more successful in 2024. 

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DSCR Loan: Why Rental Properties Fail to Cash Flow

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DSCR Loan: Why Rental Properties Fail to Cash Flow

Today we are going to dive into an example illustrating why rental properties fail to cash flow using a DSCR loan. A DSCR loan are loans focused on the rents from a rental property and the credit worthiness of the borrower. In today’s market, the increasing interest rates are truly affecting payments and more importantly they are impacting cash flow. As a result, it has become harder and harder to qualify for a DSCR loan. Likewise, DSCR ratios are changing also. What used to be a 1:1 ratio (rents compared to expenses), has now increased depending on your LTV. Therefore, many investors can no longer qualify because there is no cash flow for the property. So, what does this look like numbers wise? Let’s take a closer look.

Example:

$250K Loan 
Time Frame Percentage Expected Payment Change Over Time
Couple years ago 3.75% $1,158
Now 9% to 11% 

(depending on LTV)

 $2,011 $853 

Payment Increase 
In the Future 7% 

(you refinance $2,011 principle)

 $1,663 $348

Cash flow increase 
The Optimus  5%

(Looking if it dropped from 9% to 5%)

 $1,342 $669 

Cash flow increase 

In this example it is clear to see why rental properties fail to cash flow, especially with a DSCR loan. The increasing rates have caused payments to increase as well. When combined with ever rising taxes and insurance expenses, investors are struggling to break even, let alone create cash flow. All of these pressures are making it harder to be successful in real estate investing. 

Why is it a good time to buy?

So, why is it a good time to buy? My suggestion for investors is that they need to find something that has good equity and at 25% to 30%. As long as it is breaking even, then in a year or two when rates go back down, you will be able to refinance to increase your cash flow without buying another property. The more affordable the homes are, the bigger the market becomes. The good news is that buyers are going to start buying again, and the values around you are going to increase.. While no one can predict that the interest rates will go back down to 2.5% for owner occupied and 3.75% for investors, there are indications that interest rates will drop in 2024. 

What’s next?

I will be doing a follow up video that will further show you the effect that interest rates have on cash flow. This will include a look from the buyers side, and how the market is going to push up your values. If you can find a good undervalued property now, then you are going to not only create cash flow, but create generational wealth as well. You’re not alone! There are a lot of people who are questioning if they should buy now. 

Watch our most recent video about why rental properties fail to cash flow and how you can set yourself up for success by investing now.

Do you have questions about DSCR loans or how you can create generational wealth? Contact us today!

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How can a newbie invest in today’s real estate market?

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How can a Newbie Invest in Today’s Real Estate Market?

As a newbie real estate investor it can be incredibly daunting. The question on everyone’s mind is whether or not they should take the plunge and invest in 2024 with the high interest rates. There are a few things that new investors need to consider before they invest in this market. This includes shopping wisely, evaluating repair costs, and current interest rates. By taking all of these things into consideration, new real estate investors will be set up to win in 2024.

First, Focus on the Lower End of the Market 

Since interest rates are high, you should probably focus on the lower end of the market. This includes homes that are in the $300K range and below. Affordability is a factor when you’re flipping, because someone has to be able to afford to buy the property once repairs are completed. Thankfully, we have a good inventory shortage as investors, which in turn is creating a greater demand. Therefore, if you have a good price point and a good product, then it’s going to sell quickly. 

Second, Create a Product that People will want to Buy

Especially since you will be the one fixing up the property, it is important that you create a property people will want to buy. As real estate investors, it is crucial that you complete repairs both quickly and correctly in order to maximize your investment. By creating a nice fixed up property in this market, you will have an advantage over those who are not putting in the effort. 

Third, Consider the Impact that Interest Rates will have on your investment.

Interest rates will be a major factor when purchasing a property in this current market. However, if you can find a rental property that can break even, or better yet one that can make a little money, you should invest now to generate cash flow quickly. Interest rates should go down in the next 18 months to 2 years. When they do, you will be able to refinance and come out ahead of everyone who has been sitting on the sidelines.

In Conclusion

Take the plunge and invest in real estate in 2024! By strategically selecting properties and doing the research, a newbie can not only invest in real estate, but they have the opportunity to grow their wealth when rates drop. New investors need to set themselves up for success. In doing so, you will have the potential to increase cash flow and set yourself up to win.

Watch our most recent video to find out more about investing in today’s market.

We can help you get set up to win in 2024! Contact us today!

 

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How to Make Wealth NOW in Real Estate Investing

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How to Make Wealth NOW in Real Estate Investing

In real estate investing it all comes down to leverage. Leverage or loans make up roughly 50% of what makes a successful real estate investment. Funds that are faster, easier and cheaper will consequently drive your investments and create the wealth. So, how can you make wealth now? In real estate it is imperative that you create a step by step plan regarding what you need in order to accomplish your investment goals. Let’s take a closer look at how you can get started!

First and foremost, you need leverage!

Make sure that you have the right leverage and that you are prepared before jumping into a deal. It is so easy to let your emotions drive your business decisions. In doing so, there is a tendency to overspend and get behind the eight ball. Take a step back and research your options, contact lenders, and analyze all of your numbers. In a nutshell, even if you find the right deal, yet you don’t have the money, then you really don’t have a deal at all.

Second, find the right property.

Again, take a step back and create a plan, research properties, and compare them as well. It may take a couple months to research and test things out. In taking the time to get comfortable with the process, you will in turn be more successful. You need to go through a live example and take a couple test runs in order to understand everything that is involved. Get your hands dirty and you will figure out the nitty gritty stuff down the road. It is important to not just conceptualize the project. Instead just do it! 

How do you get into the game?

As a new investor that is just getting started, it can be very daunting. There are three ways that you can get the ball rolling.

1. Find a mentor

It is helpful to find a successful real estate investor to mentor you through the process. By finding a good flipper right now, you will not only have the opportunity to invest with them, but you will be able to walk through the steps as well. Just be careful not to hand over your money to someone who will not use it properly. Do your research and take the time to find the right partnership. 

2. Look into the 12 week year program

Currently I’m working on completing a 12 week year program. This method is very structured and helps you complete a year’s worth of work in only 12 weeks. As a result, investors avoid the pitfalls and low productivity that occurs when the goals are stretched out throughout the year. 

3. Do your research every day

If you are just starting out in real estate investing, it is important that you get up every day and look at properties, contact realtors, contact wholesalers, and find lenders that will help you achieve your investment goals. The more you talk to them, the more likely they will be to work with you in the future. Now this process should only take 15 to 20 minutes, not 8 hours. If you start out slowly and build your database, then in 3 months time you will be better off compared to others who jumped in right away.

Make wealth Now!

Taking the time to get prepared, will not only increase confidence, but more importantly it will set you up for success. Likewise, you will also be able to regulate your emotions, so they will no longer dominate your business decisions. Ultimately you do need some emotions to drive your business, however, it is important to let the numbers guide your business decisions. Avoid getting behind the eight ball by making investment moves that will set you up to win the game of creating wealth. 

Watch our most recent video to find out more about how you can make wealth NOW!

Do you have more questions about setting your business correctly? Do you need additional information regarding lending options? Contact us today!

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Investing in 2024: Why you need a HELOC

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Investing in 2024: Why you need a HELOC

Investing in 2024 will look completely different compared to years past. Investors will need more liquidity due to the increasing lending squeeze from banks. What do I mean by liquidity? Liquidity is the money that is available to you to help fund deals. These funds are not from lenders, but are instead from you. Now is the time to fill your liquidity buckets to the brim. One of the best cash reserves is a HELOC. What is a HELOC and how can it help you save for a rainy day? Let’s take a closer look.

What is a HELOC?

A HELOC, also known as home equity line of credit, provides a revolving line of credit that can be used at any time. HELOCs are normally used for large expenses, paying off high interest rate debt, and any additional expenses that you may face. Investors are feeling the pressure of the lending squeeze from both banks and credit unions. They are both driving down their loan to value percentages and putting more pressure on investors. What started at 90% LTV a year ago, has now plummeted to 75% LTV, and in some cases even 70% LTV. Loan to values are shrinking fast, so now is the time to lock everything in before it drops even further! Make sure that you get HELOCS wherever you can! This can be on your primary residence, as well as on all of your investment properties. Remember, you don’t have to use the funds from the HELOCS immediately, the money is just reserved for a rainy day. While it may cost a few hundred to close your HELOC later on, it is a great resource to have when buying properties, making payments, doing construction, or any additional expenses that come your way. 

The Time is NOW!

The goal before the end of the year is to fill your liquidity buckets! By opening a HELOC you can fill your liquidity bucket to the brim in preparation for  2024. As investors, we are all going to need these extra funds for down payments, escrow, paying contractors, as well as any other expenses that come our way.  Lenders are going to require you to be more liquid, have more reserves, and put more money down. Investors who take the time at the end of this year to prepare, will have more opportunities and a huge advantage in 2024 over those who don’t act now. 

Watch our most recent video to find out more about why you need liquidity. 

If you have any questions on liquidity, finding HELOCs, or have any other questions, please reach out to us!

We would be happy to help guide you to become more successful in 2024. 

 

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2024 Housing Market Predictions: Why You Should Invest

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2024 Housing Market Predictions: Why You Should Invest

The question on every real estate investor’s mind is why you should invest in 2024 with the higher interest rates. There are a few things that people need to consider before investing in this market. This includes shopping wisely, evaluating repair costs, current interest rates, property location, and funding. By considering all of the factors before jumping in, real estate investors can increase their cash flow for future investments. 

Let’s take a closer look at the three things real estate investors need to consider when purchasing a property

First, Focus on the Lower End of the Market 

Since interest rates are high, you should probably focus on the lower end of the market. This includes homes that are in the $300K range and below. Affordability will be a factor when you’re flipping, because someone has to be able to afford to buy the property once repairs are completed. Thankfully, we have a good inventory shortage as investors, which in turn is creating a greater demand. Therefore, if you have a good price point and a good product, then it’s going to sell quickly. 

Second, Create a Product that People will want to Buy

Especially since you will be the one fixing up the property, it is important that you create a property people will want to buy. As real estate investors, it is crucial that you complete repairs both quickly and correctly in order to maximize your investment. By creating a nice fixed up property in this market, you will have an advantage over those who are not putting in the effort. 

Third, Consider the Impact that Interest Rates will have on your investment.

Interest rates will be a major factor when purchasing a property in this current market. However, if you can find a rental property that can break even, or better yet one that can make a little money, you should invest now to generate cash flow quickly. Interest rates should go down in the next 18 months to 2 years. When they do, you will be able to refinance and come out ahead of everyone who has been sitting on the sidelines.

Now is the time to jump in! Let’s take a look at how the market has changed and what you should avoid as you move forward.

How has the market changed?

It is the perfect time to jump in if you can buy something low. As long as you do it correctly, you should invest now while everyone is running away! Then when rates go back down, you will be able to create wealth for future investments. A few years ago many people were buying properties for $100K over asking price. In today’s market  they would be able to sell it for maybe $250K. Since they overpaid on the property a few years ago, they are now upside down on their investment. Don’t let this happen to you! As a new buyer, make sure you are purchasing it at a good number while the market is down. Over time you are going to win the game by buying at the right time.

What should you Avoid?

Getting into real estate investing now will get you on the fast track to success. If you are able to buy good properties in good markets, then you will be successful. It is important to avoid properties that are on corners or busy streets. In these times, the best properties are on a culdesac or near local parks. Real estate investors need to research current market trends before jumping in. There are some markets where cities are doing better than suburbs, while others are growing at a faster rate. Another thing to be aware of as a real estate investor is all of the negativity out there, which is driving people out of the market. Instead of following the herd, turn this negativity around so it can benefit you.There are better deals now than there were a few years ago. This is because people are fearful and want to get rid of properties before things get worse. As long as the sellers have that fear, then investors who are level headed can benefit. 

Number of Real Estate Investors is Shrinking 

There has been a whole generation of real estate investors who have gone through good times with money, banks, and lenders in the past. This was when everyone was trying to give you more money for your investments. However, the Fed is now trying to slow that down. The huge pool has gotten a little bit smaller for those who are trying to qualify for loans. This lending squeeze has resulted in many real estate investors getting out because they don’t have the credit score or income to succeed in this market. In 2024 there will be less real estate investors, less money available for funding projects, but more deals available for the driven investor.

In Conclusion

Now is the time you should invest in real estate properties! By strategically selecting properties, investors have the opportunity to grow their wealth when rates drop. If you are coming in as a new investor, it is important to make sure that you are set yourself up for success. By increasing the amount of money you bring in, and filling your liquidity buckets, you will stand out to lenders. Real estate investing is all about using other people’s money to create wealth with a little bit of your own money. By considering all of the factors and creating a plan, real estate investors will have the potential to increase their cash flow for future investments.

Watch our most recent video to find out more about investing in today’s market.

We can help you get set up to win in 2024! Contact us today!

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Business Credit: 5 Simple Steps To Get Started

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Business Credit: 5 Simple Steps To Get Started

It is imperative that investors take the time to set up their business correctly from day one. In doing so, they can easily get onto the fast track to success. Alex Erlich, a credit advisor and educator, is joining us today to discuss the steps investors need to take to win the investment game. Let’s take a closer look to discover the five simple steps to get started.

Getting started is daunting! Here is what you need to get in it to win it.

First, Personal Credit

Make sure that your personal credit is setting you up for success. The majority of investors use their personal credit for business expenses. As a result, the utilization rate begins to have a negative impact on personal credit scores. By identifying and separating personal expenses from business expenses, you can in turn get your credit score back on track. 

Second, Identify Your Business

It is important that you not only identify the type of business you are starting, but the corresponding subcategorization as well. Banks will look at the NAICS, also known as the North American Industry Classification System, when you apply for business financing. 

Third, Select a Business Name

How do you select a name for your  business? Will there be a parent company? It is imperative that you select a business name that represents your company, and that your name is available within your state.

Fourth, Set Things Up Correctly 

Establishing the company properly through the secretary of state, applying for an EIN, applying for a business license, and opening business accounts for expenses. Setting this up correctly ensures that both lenders, as well as clients, see it as a business.

Fifth, Set Clear Goals

Be very clear with your goals from day one! Where do you want to go with your business, how many properties do you need, do you need to buy machinery? 

In Conclusion

Starting a business is overwhelming. Taking it step by step will result in not only helping your business succeed, but it will also have a positive impact on your personal life as well. We have created a guide that will help you step by step through the process of starting your business. This includes links to all of the important websites that you need for your specific state. We are here to help get you on the fast track to success.

Contact us today to find out more about setting yourself up for success.

Need more tips and tricks? Watch the full interview with Alex Erlich

 

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A Key Lesson In Real Estate Investing: Times Versus Time

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A Key Lesson In Real Estate Investing: Times Versus Time

Throughout the years I have been able to help thousands of clients become successful in real estate investing. Looking back over my journey, there are several things that I would do differently. While there are a number of lessons I would like to share with you, I feel that Times vs Time is the most imperative to your success.

What is Times VS Time?

The question that all investors ask is, how long does it take to be successful? Success is heavily reliant on the number of times you practice the steps before you become confident in the process. The more practice you have looking properties, comparing properties, and contacting lenders, the more knowledgeable and confident you will become.

It takes 100 times to walk through these steps before an investor becomes confident in the process. Some investors can achieve this in a week, while others may take 6 months to 6 years. Again, it’s not the amount of time it takes to be successful, it’s the number of times you practice.

How can investors set up for success

It is vital that you create a process that works for you and your business. In doing so, you are then able to follow the same steps each time. As a result, it further builds the confidence you need to succeed. There are five lessons in total including: Take the fast track, Set your business up to win, Create simple processes, and Scale with flexibility. There is a bonus one as well, which is Do whatever it takes!  

 

Watch our most recent video to find out more about these 5 valuable lessons that will put you on the fast track to success. 

Have more questions on how to get started with your business and how you can win in real estate investing? Call us today! 

 

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