Tag Archive for: understanding escrow

How to Unlock Your Rehab Funds from Your Lender

Many real estate investors wonder how they can unlock their rehab funds from their lender. The answer is understanding their escrow. It is imperative that real estate investors understand escrow in order for their business to be successful. What is escrow? Escrow is a portion of the loan that a lending company puts aside for repairs on the property. You need to understand both the rules and the regulations of the lender in regards to Escrow prior to purchasing. In doing so, you will prevent frustration, avoid a finance wall, build a foundation for cash flow, save money, and save time!  Let’s take a closer look! 

1.Understand the rules YOUR escrow

As a real estate investor, you need to understand your escrow because the rules and regulations vary by lender. It is important that you have a firm understanding of their policies prior to purchasing. Any misunderstandings can very easily stall or even jeopardize a project. Investors also need to construct a budget beforehand in order to ensure that they stay within their budget during the process. Unfortunately, there is no flexibility in the amount after it is approved by the lender. Without the ability to expand the escrow down the road, any additional expenses will come out of your pocket instead.  

2.Unlocking your rehab funds

Lenders allocate a set amount for the escrow that not only includes the amount needed to purchase a property, but also the funds that are needed to fix it up. To clarify, these repairs are intended to get the property market ready. Keep in mind that the only way to access the escrow funds when buying a fix and flip, or an undervalued rental property, is to submit proof. This proof can be in the form of receipts, photos, and other documentation. It is important to send this information to your lender in a timely fashion in order to show that repairs are underway. 

3. Optimize your profits 

Optimize your profits today and avoid missing the market when it’s “hot” by considering all repair costs, setting money aside for repairs, and completing work quickly. Remember the longer you’re on hold, the more it will cost you and further delay paying your contractors. Those who understand the importance of a timeline and the cost can maximize their profit.

We are here to help! 

Want more information on real estate investment roadblocks or have any other questions? Contact us today!

Watch our most recent video to find out more about How to Unlock Your Rehab Funds from Your Lender

So, what are the other Major Roadblocks that cause burn out, financial hemorrhaging, and unfortunately defeat? 

Watch our full interview to discover more about the 5 Major Roadblocks


This is the #1 Roadblock in Real Estate Investing

It is incredibly easy to get burnt out as a real estate investor. However, by knowing the roadblocks ahead of time, you can avoid many of the common mistakes. Real estate investing, unlike other businesses, relies heavily on leverage and funding. Almost everything we do from buying and holding rentals, to doing flips, and even dividing land, it is all heavily dependent on funding. Money from banks, private lenders, or even other people’s money, are vital to your success. So what’s the #1 roadblock in real estate investing? The answer is not understanding your cash flow and not knowing the numbers ahead of time.

Rushing to obtain generational wealth

Unfortunately, people go to conferences and get hyped up to make generational wealth in a short period of time. While you need emotions to guide your business, it is important to take a step back and know your numbers before diving in. Generational wealth is difficult to achieve in a three month period, however a three year timeline is feasible. By not rushing into investment opportunities, it allows you to form a game plan for success.

Understanding all of your expenses

This week we had a person contact us who didn’t understand how escrow worked, thus creating further financial strain for the client. Escrow can be very confusing for investors. This is a portion of the loan that a lending company puts aside for repairs to the property. Many people do not fully understand how much money is needed up front in order to start the construction process. In addition, many underestimate how much the interest will be every month for the property. If you have a $400K loan, and you’re at 12%, you will in turn pay $4K a month out of your pocket. Thankfully the title company provides a settlement statement that includes a complete breakdown showing exactly what you are buying, and what you owe to everyone. By fully understanding your budget and planning for expenses, you can avoid spiraling debilitating debt. 

Do your research and plan ahead

Investors who do not know their numbers will soon find themselves in a spiral of financial distress.  Not only that, but by not having enough money to make payments it will result in pure panic and overwhelming desperation. Many investors attempt to resolve this crisis by using personal credit cards, or a HELOC to get back on track. In doing so, they put their whole life into jeopardy. People can make a lot of money at this, and there is a lot of money to be made. It is imperative that you know your numbers, take emotions out, and do your research before diving in. People tend to overestimate what they can do in a few months, and tend to underestimate what they can do in a few years. 

Watch our most recent video to find out more about the #1 Roadblock in Real Estate Investing.

Want more information on real estate investment roadblocks or have any other questions? Contact us today! 


Are You Making These Common Real Estate Investing Mistakes?

There are a number of common real estate mistakes that investors are facing. These mistakes occur when buying and holding rentals, flipping properties, and dividing land. Nowadays, these common real estate investing mistakes undoubtedly create frustration and can lead to defeat. With this in mind, let’s take a closer look at the five major roadblocks to make sure that they don’t affect you!

First, Cash Flow 

The first mistake that real estate investors make is immediately purchasing a property before evaluating the cash flow. To put it briefly, you want to make sure your profits are in fact greater than your expenses. Avoid this mistake by making a plan and know your numbers upfront! 

Second, Understanding Escrow

The second mistake is not understanding escrow, let alone what is needed to receive the escrow funds. Escrow is a portion of the loan that a lending company puts aside for repairs to the property. By understanding your lenders policies, you can optimize your profits by completing repairs quickly and correctly. 

Third, Too Many Projects

The third mistake is having too many projects. From multiple property costs to paying contractors, investors can get too big too fast. It is important to “err on the side of caution” to prevent the “finance crunch” that often occurs. 

Fourth, Rentals

The fourth mistake is not properly navigating rental cash flow. The deal needs to be a positive investment not a negative one after considering all costs. In real estate investing, you cannot afford losses or simply break even.

Fifth, Personal Credit Usage

The fifth and final mistake is the misuse of personal credit cards for business expenses. If you want to avoid spiraling into debt, then quickly set up your business and begin using a business credit card

By understanding these common real estate investing mistakes, you can ease your frustration, prevent a finance wall, and learn how to create a constant cash flow.

Watch our latest interview to discover more about the 5 Major Roadblocks