How Much Hard Money Can I Get? A Guide to Borrowing

How much hard money can you get from lenders? Here’s a brief guide.

Which hard money lenders lend the most?

That question may mean two things to two different investors.

Some people want to know: How much hard money can I get? Five million dollars? Ten million? For other people, the question is: What is the max loan-to-value I could borrow? 

Let’s go through the 3 types of private money lenders, who lends the highest dollar amounts, and who offers the best LTVs.

3 Types of Hard Money Lenders

There are 3 types of hard money lenders:

  • Local: Hard money lenders near your state, city, or region.
  • National: Newer in the hard money scene. They’re backed by Wall Street and lend across the US.
  • Real OPM: A real person you know who has cash they can lend to you for a return.

How Much Does a Hard Money Lender Lend?

First, let’s look at who lends the most as far as dollar amounts.

How much hard money can you get? This comes down to the fund availability and lending capacity of the lender.

National Lenders Loan Amounts

Which lender has the capacity to lend big dollar amounts? That will almost always be national lenders.

These lenders are backed by hedge funds. This means they have a seemingly endless supply of money for loans. (The catch is they only supply loans that fit inside their box, which tends to be fairly limiting).

Larger loans might be $1-10 million and up, even as high as $150 or $250 million. National, hedge-fund-backed lenders will be your only option if you need these amounts.

Local Lenders Loan Amounts

Regional lenders’ loans come in many sizes, but the majority only lend under $1 million. The affordability sweet spot for these lenders, however, is between $100,000 and $300,000, depending on your area.

Real OPM Lenders Loan Amounts

Remember that OPM involves a real person. This person has money stowed away in an IRA and other investment accounts. They want to lend to get a better return, but their pool of funds is definite.

Most OPM loans range between $25,000 to $50,000 – perfect for gap funding, but not always for a complete project. There are some individuals with $500k to $1M to lend, but ultimately, that cash runs out fast in investing.

An OPM lender will be the first one to run out of funds (and the one with the smallest dollar amounts to lend).

What Is the Max LTV You Can Get for Hard Money?

When you think of lender loan amounts, you might think of the gross dollar amount. But you should also think of the LTV.

LTVs are very dependent on market conditions. Now, at the end of 2022, all lenders have tightened up LTVs.

  • National hard money lenders have tightened the most on max LTVs. Hedge-backed hard money lenders will offer somewhere between 80% and 90% of the value of the project’s cost. This number will be dependent on your credit score, experience, and other criteria.
  • Local hard money lenders offer the next best LTVs. At Hard Money Mike, for example, we understand our local markets and are still lending at high loan-to-values. It’s dependent on the loan-to-ARV number, but most local lenders are offering LTVs from 80% to 100%.
  • OPM lenders tend to give the best LTVs. If they can cover the entire cost of the project, they likely will, with minimal requirements. OPM is more trust-based, so it operates more flexibly than actual loan companies.

You’ll certainly need all of these lenders to be successful in real estate. The right lender will be different for each project.

How to Calculate How Much Hard Money I Can Get?

Download our free loan optimizer here. With this tool, you can enter the numbers from 3 different lenders to compare the cost of borrowing from each one.

We want you to find the right lender to make more on your project. There are some people who would like to charge you as much as possible to make maximum profit on each loan. We would rather see you have a successful deal and a long, happy real estate investing career.

Happy Investing.

How To Guarantee Profits in Real Estate Investing

Real estate isn’t a guessing game. Here’s a step-by-step guide of how to guarantee profits in real estate investing.

As a hard money lender, we want to see you actually make money on a flip.

We know firsthand that education is the first step to profit in real estate investing. Many people come to us with a fundamental misunderstanding of the numbers.

Any seasoned real estate investor can tell you: these numbers are all really simple. You just have to practice them. The more you understand, the higher your profits. There’s money in the money.

Don’t be scared off by the math involved in investing. Repetition is key. We’ll walk through the simple numbers, and show just how easy it is to guarantee profits in real estate investing.

The Fundamental Numbers

Let’s go through a simple deal analysis.

You’ll need to do a little research to find the numbers to plug into this equation. You can get most of this information from:

  • The listing/seller
  • The lenders you may work with
  • Real estate communities (like Bigger Pockets, or local Facebook groups)
  • Simple market research on sites like Zillow
  • Your personal experience over time

We’ll walk through each number in our example step-by-step.

ARV & Purchase Price

After-repair value (or ARV) is what you can anticipate selling a property for after you fix it up. For our example, we’ll say our ARV is $200,000. Meaning, we can get $200k for this property when we go to sell.

Next is purchase price. This is the contract price – how much you bought the property for. In our example, the purchase price is $120,000.

Closing & Loan Costs

However, the purchase price does not include the closing cost. Beginner investors often fail to consider these.

Closing costs are what you owe the title company for closing the contract, plus the fees on the loan itself.

The title will be around $2k or $3k. Closing fees, appraisals, etc for your lender will be based on your loan amount – somewhere between 2 and 3 points. For all the closing costs, we’ll say $8,000 total in our example.

Rehab & Insurance

The next crucial number is rehab costs. What’s a realistic budget to make this property one someone would buy for $200k? For this example, we’ll low-ball a bit. Let’s say we already have some materials on-hand, and we’ll do a bit of the work ourselves. We estimate to fix up the home for $20,000.

Property insurance is the next cost to consider. Most lenders require property insurance in the case of theft, fire, weather damage, vandalization, or any other unexpected loss of property. We’ll say the insurance for our example will cost us $2,000.

At this point, all our costs add up to $150,000. Typically, people who come to us get about this far. They say, “We can finish this project for $150k and sell for $200k. That’s $50,000 in equity. All profit!”

But those people fail to factor in some final important payments: what it costs to hold and then sell the property.

Holding Costs

Between interest, mortgage, insurance, HOA, utilities… What’s the monthly cost to keep the property while you fix it up?

It depends how long it takes to complete and sell. Rehab can take anywhere between 2 months and 6 months. For our example, let’s say we hold for 4 months.

This number is impossible to calculate perfectly, but on average, you can estimate holding costs to be about 1% of your sale price every month.

Our 4-month hold works out to 4%, or $8,000 total.

Fees at the Sale

Once you go to sell, you now have realtors involved – both on your side as a seller and the buyer’s side.

Typically, the high end of realtor fees are 6%, occasionally as low as 4%. We’ll go with the high end for our example, and say these fees will cost us $12,000.

Also, you’ll have more closing costs on the sale of the house. There are some tricks investors can use here to lower the price, like doing a hold open. Let’s say this will cost us $3,500.

Total Fix-and-Flip Costs

We’ve finally factored in all the costs of our example property. In total, this fix-and-flip would cost us $173,500.

It’s vital to factor all costs in number when you’re doing the math if you want to guarantee profits in your real estate investing.

With a $200,000 ARV, our anticipated profit would be: $26,500. Not bad at all for a $200k house.

Calculations to Quickly Guarantee Profits in Real Estate Investing

There are a few quick calculations you can do to find out if a property is in the profit range or if the squeeze is too tight.

Start with your sale price. 100% of our example’s sale price is $200,000. What we want to know is:

  • What percentage of that number should your other costs be in order to guarantee a profit in a real estate investment?

Purchase Price & Rehab

In real estate investing, it’s typical to have your purchase price below 70% of the ARV. (Keep in mind – the last few years have not been a typical market. Buyers had been overpaying, and leverage was easier to find. Don’t base your expectations here on the market from the last 2-3 years).

If your purchase price and rehab costs are around 65% or 70% of the after-repair value, it’s likely the flip will profit.

Closing & Loan Closing

The loan fees, closing costs, insurance, etc should cost somewhere around 5-6% of the ARV, at the high end.

It’s an important cost-saving measure to make sure you have some control over the insurance, maybe with a blanket policy. A great credit score can also cut these costs down pretty drastically.

Holding Costs

Holding costs can truly trap flippers in this market. However, as long as you buy good properties and do good rehabs, we’re still seeing houses sell quickly.

Most fix-and-flips that get stuck on the market are because:

  • They’re at a higher price point (and buying power is low).
  • The investor didn’t do their due diligence.
  • The quality of the rehab is poor.

Ideally, you’re getting the house ready to sell in less than 6 months. So holding costs shouldn’t cost any more than 6% of your ARV.

Realtor & Closing Fees

As we shift into a buyer’s market, realtors become more and more important. It’s possible to negotiate with realtors, but these costs should stay around 4-6%.

You can also expect around 1.5% of the ARV for the second batch of closing costs.

How to Calculate Profit Based on Percentages

If you can estimate your costs’ percentage of ARV, you can guarantee profits in your real estate investment.

The percentage of costs added up have a direct impact on the percentage of profit leftover for you:

You should always aim for a minimum of 10% profit on a flip. The 10-15% range is even better.

In the example we’ve been using, our number for costs comes in at 86.75%. The leftover is profit, so 13.25%.

Floor vs Ceiling

Ideally, calculating these numbers gives you a floor – the bare minimum of what this property could earn you.

Then you’re left to find out the ceiling. As you gain more experience in real estate investing, you’ll find new ways to save money. Maybe cutting a little from purchase price, having a more efficient rehab, selling for a little over the ARV.

Not only can you guarantee your profits in real estate investing, you can make them skyrocket.

Sticking to the Numbers Guarantees Profit

Learn these numbers and stick to them. The number one way beginner real estate investors fail is that they go by emotions instead of math.

If you buy a property because it feels like it will work, or because you like it… You’ll probably lose money and hate real estate investing.

We want to see you try real estate investing and stick with it.

Visit our YouTube channel for more free info on real estate investing. 

And reach out to us if you need help running through the numbers on a property. Send us an email at Info@HardMoneyMike.com.

Happy Investing.

How to Calculate Your Hard Money Loan Amount

What does your lender take into consideration to calculate your hard money loan? Here’s what you need to know.

How much could you get in a hard money loan?

At least 50% of your success as a real estate investor will come from using and understanding leverage well. Simply knowing your numbers gets you ahead of the curve.

You need to be able to figure out a ballpark number of what a lender will give you for your property. Let’s go over how to calculate your hard money loan, what costs you’ll need to know about, and run through some examples.

Calculate a Hard Money Loan: Maximum LTV

There are two main calculations for a hard money loan.

The first is: What is the maximum loan value a lender will offer?

Every hard money lender has a maximum loan ability. This maximum is based on the property’s after-repair value or ARV.

ARV is what the property will be worth at the appraisal when you sell or refinance. This is the number the property could go for on the open market after you’ve done all your renovations.

LTV vs ARV

Traditional lenders use “loan-to-value,” which means they base their loans on the cost of the property. 

But hard money is designed for real estate investing, so they lend with the assumption that your property is value-add. It’s a property that needs work, and when you put in the work, the home will be worth more in the future.

The after-repair value is what hard money lenders base their loan on. Most lenders will lend somewhere between 70-75% of the ARV. However, the actual loan-to-ARV percentage you get depends on factors like experience, credit, etc.

Most hard money lenders will only approve a loan for an amount you can actually afford. These lenders want two things:

  1. To get their money back.
  2. For you to make money.

75% ARV is the average amount they can lend safely. This amount estimates that you’ll be able to both pay all your costs and still make a little profit for yourself.

Max LTV for Hard Money Example

Let’s look at an example. We’ll keep it as simple as possible and say our ARV is $100,000. This loan amount is likely unrealistic depending on your market, but this calculation works the same with any number.

If $100,000 is our ARV, that means it’s the absolute maximum any hard money lender could loan you. In rare situations, a hard money lender may loan you up to 100% of your ARV.

More common, however, is that you get 75% of your ARV. To figure out this number, you just multiply your ARV by .75:

ARV  ×  % of ARV  =  Loan Amount

$100,000  ×  .75  =  $75,000

$75,000 is the realistic maximum loan you can expect from a hard money lender for a property with an ARV of $100k.

Calculating the loan-to-ARV for a hard money loan is only the first calculation, though…

Calculate a Hard Money Loan: Maximum Actual Loan 

If the first question is what is the maximum loan amount you can get, then the second question is: What’s the actual amount they’ll lend?

You might hear a hard money lender say they’ll lend up to “80/100” or “90/100” – let’s go over what that means.

How to Figure Out Actual Loan

You’ll notice there are two numbers with a slash in between.

The first number is the loan-to-cost (not ARV). For example, if it’s 90/100, that means they’ll lend up to 90% of what you bought the property for. 

The second number is the rehab cost. In the 90/100 example, the lender would give you 100% of the costs needed to fix up the property.

So in this case, they’ll offer you a loan that covers up to 90% of the purchase price and 100% of the rehab costs.

But remember: there’s still the overall maximum loan of $75,000 that we can’t go over.

Calculate Your Costs for a Hard Money Loan

So say a lender tells you they can loan 90/100 and 75% of the ARV, and your ARV is $100,000. That means they’ll give you 90% of the purchase cost + all the construction costs, but that total number can’t be more than $75,000.

Let’s break this down with some simple examples.

Don’t Forget Closing Costs

We’ll say we’re buying a property for $60,000, and it will take $20,000 to fix up.

There’s one more number many real estate investors fail to include here: closing costs. This number includes:

  • What you pay the title company, escrow attorney, or whoever performs the closing.
  • Lender origination fees.
  • Title costs.
  • Insurance.
  • Anything else that goes into the closing of a transaction.

Your closing costs will be dependent on your purchase price. For our $60k property, closing costs will be somewhere between $1,800 and $3,000. We’ll go with $3,000 for our example.

90/100 Hard Money Loan Example

Here are the numbers broken down for our current example. How do they work out for a 90/100 loan?

Purchase Price:  $60k

Rehab Costs:  $20k

Closing Costs:  $3k

Total:  $83k

Now, if the lender offers 90% of the purchase price, they’d cover $54,000 on this property. That leaves $6,000 (aka, 10%) you’ll have to cover.

They’ll also pay for 100% of the $20,000 construction costs. So as long as you stay in-budget, there will be no out-of-pocket costs there.

A hard money loan covers no closing costs. You’ll need to fund all $3,000 there.

Here’s what we’re left with:

Loan Covers:  $74,000

You Cover:  $9,000

Now you know going in that you’d need $9,000 to make this deal work. 

You can also see that the $74,000 is less than the max LTV of 75% (or $75,000 on this case). But what if our rehab costs were actual going to be $25,000 instead of $20k?

This would push our loan coverage up to $79k. The loan would still only cover $75k, so you’d be stuck with an extra $4,000, totaling your out-of-pocket cost for this property to $13,000.

80/90 Example

To really drive this home, let’s go through the exact same example but with an 80/90 loan.

If the purchase price is still $60k, they’ll give you 80%, so:

$60,000  ×  .80  =  $48,000

Rehab costs are still at $20k, so now the loan would cover:

$20,000  ×  .90  =  $18,000

The total loan amount would be:

$48k  +  $18k  =  $66,000

Your total costs would be:

Purchase:  $12,000

Rehab:  $2,000

Closing:  $3,000

Total: $17,000

For a 80/90 loan, you’ll need to bring in $8,000 more than you would a 90/100 loan.

Other Factors in Calculating a Hard Money Loan

This is a very basic way to calculate your hard money loan. Keep in mind these numbers will shift a bit depending on your qualifications, experience, and credit score.

But even a ballpark number keeps you prepared. And the better prepared you are money-wise, the better terms you can get.

Additional Costs on Your Property

The costs of real estate investing can add up. This is why it’s important to know before closing on a loan – or even before approaching a lender – what you can truly afford.

One more cost that’s easy to lose sight of in the midst of leverage is the carry costs once you actually own the property.

You’ll be paying interest and principal every month, plus the accumulation of taxes, insurance, and potentially HOA costs. These are all amounts that will be coming either out of your pocket or from gap funding sources. 

More Info on Calculating Hard Money Loans

We hope this helps you as you navigate your real estate investment career. Our purpose is to make sure you use hard money correctly, knowledgably, and in the right positions.

Be sure to check out our YouTube channel for more real estate investing breakdowns.

If you have any questions, or a deal you’d like us to run the numbers on, we’d be happy to help. Email us at Info@HardMoneyMike.com.

Happy Investing.

What Is the Best Real Estate Loan For Investing?

10 things to look for to find the best real estate loan for your investing.

You can get confused fast with real estate funding. 

What’s the difference between hard money and private money? Institutional lenders and bank lenders? And what even is OPM?

Most importantly – how do you know which lending option is best for you?

Our goal is to make sure you use the correct leverage for your real estate project:

  • What will fit your project?
  • What will be the most profitable for you?

Realistically, you need a little bit of everything.

Let’s go through the nuances of each leverage type, so you know the best real estate loan for your investments. Here are 10 qualities of real estate leverage to consider.

1. Speed

In real estate investing, most of your deals come down to speed. If you can close faster than another bidder, you can get the property – even if the other person offered more money.

Typically, the fastest lending options will be hard money and real OPM. 

OPM is using real people’s money, from family, friends, or anyone with money to lend. If you build a relationship with the right OPM lenders, this can be your fastest funding option. OPM can be one phone call and bank transfer away.

Although more expensive, hard money lenders can save you money in the long run with the savings you get from closing quickly on wholesale properties. Hard money lenders can potentially get you money within days (sometimes quicker).

Institutional lenders are fairly quick, typically taking two or three weeks, sometimes four.

Banks are usually the slowest at four or more weeks (unless you already have a line of credit set up, like a HELOC).

2. Credit Score

Credit is a major factor in the loan process. Requirements for credit scores have gone up over the last few months as money tightens. 

Institutions and banks have strict credit score requirements. The target for acceptable credit is constantly moving. Currently, you’ll have a tough time finding any loans with a score lower than 680. The best loans are available to people with a 740 and above.

Hard money lenders will check credit to make sure you’re not defaulting. But your actual score doesn’t have much bearing on your ability to get a loan.

OPM lenders aren’t as concerned with your actual credit score. OPM requirements will vary from person to person. But as long as you’re responsible in protecting their money, you can get an OPM loan.

3. Experience

Have you been in business for 2 years? Have you done enough transactions?

The toughest on experience are banks and institutional lenders.

Institutional lenders typically require three to five transactions over a three-year period. They’ll still consider you if you have less experience than that, but they’ll need a higher down payment.

Banks are the strictest. They usually want you to have five completed projects in recent years, plus at least two years of tax history on investment properties.

Hard money and OPM are the easiest on experience.

Hard money lenders care that you have a profitable deal. OPM lenders care that they get a return on their money. Neither lender will be overly concerned with your experience level. They’re more understanding that “you gotta start somewhere.”

4. Income

What lenders are concerned with your debt ratio? 

Banks are the only lenders that are always concerned with your income. 

Institutions look at the money you have in the bank, but not necessarily what you have coming in as income.

Hard money might look at your tax returns, but it won’t make or break your loan.

5. Underwriting

How does each lender look at your whole file? What is their criteria, and is it similar from lender-to-lender?

Institutional lenders have fairly consistent underwriting. They all basically require experience, 10 – 20% down, etc.

The other three types of lenders vary drastically.

Banks will always have some sort of requirements. But it’s different between large banks and small banks. Local banks will always be more interested in lending to investors.

Hard money and OPM both vary, too. You have to get to know the lenders in your area to get a feel for their requirements.

6. Flexibility

What if you need a loan for a rural property? Or what if some other unique situation pops up? Which lenders can be flexible with that.

Institutions and banks are the most fixed in what they offer. Institutional lenders loan only within MSAs. If a property is outside of city limits, they won’t offer any loans. Similarly, banks typically only lend within their footprint. You’ll have to talk to banks near you to learn those service areas.

Of course, hard money and OPM are more flexible with locations, funding plans, and more.

7. Pricing

Every loan has a cost.

Bank loans have a lot of limitations, but this is where they shine. Interest rates and origination fees will almost always be lowest at banks. Interest rates average around 5.5 – 6%, and fees are around 1 – 1.5 points.

OPM is also pretty cheap, and more flexible than banks. Your interest rate will depend on your lender, but there are usually little to no points with real OPM.

Institutional and hard money lenders will be the most expensive, with interest rates around 10 – 12% and fees at 2 – 3 points.

8. Verified Funds

It makes sense that lenders want to know that you’ll have enough money to pay them back. But lenders go about verifying funds differently.

Institutions and banks typically require two months of bank statements. They want to prove you have the money for the down payment, rehab costs, and any carry costs. These lenders emphasize how much money you have and where it came from. They often don’t allow gap funding.

Hard money and OPM lenders, however, are fine with gap funding. These lenders’ requirements vary, but generally, funds are not a major consideration.

9. Funds Available

How much money does the lender have to offer? Do they ever run out of money, or tell you you’ll have to wait a couple weeks before they have funds?

Typically, the places that have “unlimited” money are institutions and banks. Institutions are backed by Wall Street funds, and banks can always borrow from the Fed.

Hard money and OPM are a bit more limited. Hard money fund availability is based on how many investors they have. Real OPM is limited by the bank account of your lender. A downside of hard money and OPM is that money may run dry; there’s no guaranteed constant flow.

10. Multiple States

If you’re an investor who does deals in multiple states, who will be able to consistently help you? If you live in Oklahoma but invest in Texas, which lender can you count on?

Typically, institutions are your best bet for multi-state investments. If you need someone to grow with you state-to-state, this is your main option.

Many hard money lenders are local, and they focus their investments in a single community. Similarly, banks only lend within their region.

OPM’s multi-state lending ability depends on the client, but there is flexibility.

So What Is the Best Real Estate Loan?

All in all, there is no “best” real estate loan. Remember, you need all types of leverage for a flexible, lucrative investment career.

Each loan has its limitations and perks. Here’s a quick overview of each type of real estate loan.

More Info on Real Estate Loans

If you’re left with questions about the best leverage option for you, we’re here to help.

Email us at Mike@HardMoneyMike.com with questions about your deal.

Or join our weekly call here, every Thursday from 1:15 PM – 2:15 PM MST.

Text: "When to Use Hard Money"

5 Times You Should Use Hard Money for Your Real Estate Investments

Here are 5 ways to use hard money right as a real estate investor.

Real estate investing is all about making profit.

And sometimes, to make profit, you need to use hard money loans.

When is hard money your best option in real estate investing? Let’s look at 5 situations where you should use hard money to fuel your investments.

1. Using Hard Money for Speed

The number one way hard money makes you money in real estate investing is how fast they are.

Look at a real example from one of our clients.

He was able to buy a property in Colorado at a $30,000 discount.

Five other people were bidding as high as $330,000 on the property.

But our client was able to close in less than a week, so the sellers accepted his bid of $300,000.

How Much Does a Hard Money Loan Cost?

People can get tripped up with the cost of hard money. Wouldn’t the price of the loan leave our client at a loss here? Let’s compare his hard money loan on this deal to his competitors with a bank loan.

For hard money, he spent $7,500 on origination. A bank loan would have cost $4,500.

Six months’ worth of interest on the hard money loan adds up to $15,000. The same time on a bank loan would accrue $9,900 of interest.

Appraisal underwriting, and processing fees were lower with hard money at $984 (vs $1500 with the bank.)

Overall, our client did pay a lot more for the loan itself using hard money. His hard money loan cost $23,484, and a bank loan would have cost $15,525. That’s an extra cost of $7,959 to use hard money.

Can You Save Money by Using Hard Money for Real Estate?

Despite seeming more expensive, hard money still gave this investor a discount. Why? Hard money enabled him to close fast, so he got a better deal on purchase price.

What was the total cost of hard money? The discounted price of the property ($300,000) plus the hard money loan costs equals $323,484. 

What about the bank loan? The home price of $330,000 plus bank loan costs totals $345,525.

This is a savings of $22,041. Just for closing fast with hard money rather than using the cheaper but slower bank loan.

Using hard money for speed works even when the discount is smaller.

Let’s say our client had bid only 10,000 less than the other investors. He still would’ve saved $1,191 up front on the deal.

Hard Money Savings without a Purchase Price Discount

The option of buying real estate with bank loans is often cheaper. However, in many investment situations, using a bank loan is not a viable option.

If you have to wait 4 weeks to clear your bank loan, but only 4 days for a hard money loan… that becomes the difference between closing on the property or not.

Ultimately, even if using hard money doesn’t get you the lowest price, you still save money in the long run. If the speed of a hard money loan gets you a property, you will still come out on top.

Buying then selling a profitable fix-and-flip will always make more money than never buying and never selling.

2. Use Hard Money if You Have Low Credit

Institutional lenders, private equity, and banks have credit score minimums. If you don’t have a high enough score, you don’t get a loan.

Hard money lenders, on the other hand, are typically not credit-score-driven. Yes, they’ll probably look at your credit, but they won’t base your loan on it.

Real estate investors can have low credit scores for many reasons:

  • Usage – You put your flip rehab costs on credit cards
  • Thin Credit – You have few lines of credit, or young lines of credit
  • One-time Event – You had good credit, then life happened and your score temporarily dipped.

Hard money lenders understand that these issues are not always a reflection of your ability to pay back loans. 

That’s why hard money lenders don’t worry about your credit score, just your credit.

Do you have a history of late payments? Are you defaulting? That will negatively affect you with a hard money lender. 

If you are responsible with credit, but have a score banks won’t accept, a hard money lender will be a good option.

3. Using Hard Money Because It’s Flexible

Sometimes you need an outside-of-the-box lender.

  • Unique Properties – If you have a house or area that’s unique (maybe a dome house, an old manufacturer, etc.), hard money lenders will give you more options.
  • Rural Areas – Most local banks and large hard money lenders don’t lend outside of MSAs. Traditional lenders might not cover thirty miles outside of an urban area, but many small hard money lenders will.
  • Cross Liens – Hard money lenders have more flexibility putting a cross lien on another property. This is useful if you don’t have a lot of money to put down, but do have another property with a lot of equity.
  • Gap funding – Sometimes a mortgage doesn’t quite cover all the costs of your project. Hard money can fill in those gaps.
  • Lot splits – Splitting off a lot can be a headache with a traditional lender. A hard money lender is more flexible with the time it takes to get a survey and everything else prepared. This allows you to split off a lot, sell the house, and keep the lot.

4. Using Hard Money for BRRRRs

Hard money is crucial for successful BRRRRs.

With BRRRR (rental flips), you:

  • Buy undermarket valued properties
  • With a hard money loan
  • Then rate-and-term refinance into a longer-term loan.

If you want to get into BRRRR transactions (rental properties), you have to find a hard money lender or private lender who will loan you 75-80% of the after-repair value of the property you want to buy.

If you get a hard money loan to fund the purchase price and rehab up to 75-80% ARV, you can maximize your refinance. This saves you money, time, and interest.

5. Other Times to Use Hard Money

There are many other reasons real estate investors use hard money. Here are a few:

  • Banks limit you to 2-3 loans. If you’ve maxed out those lenders, hard money can help.
  • Hard money can work as a bridge loan. It covers the down payment of your next property until your other bank-funded property sells.
  • You can keep a project off your credit. Hard money typically doesn’t show up on your credit report.
  • Investment beginners might need help with their first couple projects started before banks will lend to them.
  • Complete a started project. If you end up with a property mid-flip, many banks won’t lend for it. But a hard money lender can easily provide a gap loan to finish the rehab.
  • Hard money has the flexibility to let you come in with other funding sources. (If you want to put repair costs on a credit card, want to use an OPM lender, etc.).

How to Use Hard Money for Real Estate

Want to learn more about real estate funding? Wondering if a hard money loan might be right for your investment? 

Email us your questions anytime at Mike@HardMoneyMike.com

Or join our weekly Leverage Up call here, every Thursday from 1:15 PM to 2:15 PM (MST).

Text: "ARV & Comps: How to profit on your real estate investments"

What Does ARV Mean in Real Estate Investing?

To profit in real estate investing, you’ll need to know: What does ARV mean?

Real Estate Investing: What Does ARV Mean?

ARV is the after repair value. It’s what the property will appraise for, or sell for, on the current market once the scope of work is completed.

You estimate a property’s ARV by looking at the prices of similar homes in the current market.

What Are Comps?

Comps (comparables) are those similar homes you look at. It’s important that your comps have the same value as your property.

For example, if your deal is for a 950 square-foot home, you’ll compare it to other 900 to 1,000 square-foot homes on the market, not a 2,000 square-foot one. Similarly, compare a 2-bedroom, 1-bath house to houses of the same specifications – not to 4-bedroom, 2-bath homes.

How To Get an Accurate ARV

For your ARV to be accurate, you need to stay true to your scope of work. If you only repaint and re-carpet a house that needed much more work, you won’t get top-of-the-market value when you try to sell or refinance.

On the other hand, if your scope of work is a full remodel, your comparables should be homes that are fully remodeled, so you don’t miss out on any profit.

The money you put into fixing up a house isn’t a direct indicator of how much the house will be worth. What the property looks like when it’s finished has nothing to do with how much it cost to get it there.

What Does ARV Mean for Profit in Real Estate Investing?

Estimated profit is what you expect to make on the transaction between:

  • buying the property
  • fixing it up
  • selling it again.

Additionally, equity is the difference between the amount you owe and what the property is worth. You build equity on your rentals by:

  • buying properties with a low purchase price and a high ARV
  • successfully refinancing after a flip
  • paying down the mortgage with rent income.

If you want to find the true profitability of a deal, then use your ARV and comparables:

ARV – (Purchase Price + Budget) = Profit Amount

Read the full article here.

Watch the video here:

https://youtu.be/4RErCDhSi44

Text: "Leverage Up!"

The Power of Leverage: Are You Losing Money?

These simple examples show you the power of leverage in real estate investing.

Real estate investors know they need loans to buy properties. But few real estate beginners understand exactly how big of a difference leverage makes.

Leverage turns property-buying into a real estate investment career. It builds real money, and a portfolio of net worth that can create generational wealth.

In this article, we’ll use simple examples to break down the power of leverage in real estate – and how maximizing leverage skyrockets your real estate career.

What Is Leverage?

In short, leverage means buying with money that isn’t yours in order to make a profit.

Leverage takes the form of loans from lenders: banks, credit unions, hard money lenders, people you know.

The greatest tool for a real estate investor is leverage.

How to Find the Power of Leverage

Let’s look at some simple numbers to show the power of leverage.

We’ll look for two things:

1) How much income can you get from a rental?

2) How much equity will a property generate over time?

Note: We’re going to use $100,000 as our base number. That might be a lot more money than you have to start with. It’s also likely a lot less money than you’ll spend for your properties.

Regardless, it’s a simple number to show the power of leverage. These same principles will apply despite your starting number or your property costs.

Now, let’s dive in.

Income without Leverage vs with Leverage

Rent is the income you get from tenants. Net rent is that income after you’ve made any loan payments for the month on that property.

Net rent is the number that’s true cash flow for you. We’ll use this number to analyze real estate income with and without the power of leverage.

Income No Leverage

Say you have $100,000 to invest in real estate.

You could take this money and buy one rental property valued at $100,000. You can invest the full $100,000 and receive $1,200 of net rent income per month, or $14,400 per year.

Income With Leverage

Now let’s see how it plays out when you involve a lender rather than buying outright.

You could talk to a lender who might offer to loan you $75,000 if you put in the other $25,000. Now, instead of pouring all of your money into one rental property, you’ll only have to use $25,000. The $75,000 covered by the lender is considered leverage.

Using lenders like this, you could buy four properties, each with a $25,000 down payment. Because you’re paying a mortgage, however, your net rent per month goes down. Your net rent is now $750 per property. This brings in $3,000 per month, or $36,000 per year.

With leverage, you have the potential to make $1,800 per month more, or an additional $21,600 per year – just from using leverage.

Net Worth without Leverage vs with Leverage

Rent income isn’t the only financial outcome of buying and renting real estate. There’s also appreciation. 

According to the stats over the last 20 years, real estate goes up an average of 5.3% per year. Using this 5.3% number, one home increases value by an average of $5,000 per year. 

This isn’t a straight line (ie, exactly $5,000 per year). Some years may appreciate more, some less. But over the long-term, that’s the average yearly appreciation, so we’ll use this number.

Net Worth No Leverage

Let’s see how appreciation would impact our real estate portfolio had we bought the one home outright, with no leverage.

Our single rental would have $5,000 in equity after one year, $25,000 after five years, and $150,000 after 30 years.

Net Worth with Leverage

Now let’s see the equity of the four properties purchased with leverage. 

Each of the four homes increases in value by $5,000 every year. Multiply that by four, and your portfolio appreciates $20,000 per year.

Over a 30-year span, your four properties would add $650,000 to your net worth (compared to $150,000 with the single property).

Total Power of Leverage

Let’s put all these numbers together now.

Using leverage brought in an extra $21,600 of income per year,  plus a total net worth increase of $600,000 over 30 years.

This is the power of leverage: bringing in extra income and raising your net worth through equity.

By using other people’s money, you can take advantage of the true wealth in real estate.

Maximizing Leverage

Now, we’ll take this example one step further. Simply using leverage unlocks a lot of money. What happens when you maximize leverage?

We looked at an example of a lender giving you 75% ($75,000 on a $100,000 property). “Maximizing” that leverage would look like getting a bigger loan. Instead of 75%, another lender might give you 80-85%.

80% Leverage

Let’s go back to the original example, but say a bank gives you 5% more. Now, you get $80,000 per $100,000 transaction.

Income with Maximized Leverage

Your down payment per property is now only $20,000, so you can buy 5 properties. But since you borrowed more money, the mortgage payment is higher, and the net rent goes down.

At this point, it may seem like you’re set up to make less money since you’re paying more on your loan. But let’s see how it plays out.

Five properties with an income of $700 per month is $3,500 per month. This works out to be $42,000 per year. Annually, that’s $6,000 more than using a 75% loan, and $27,600 more than using no leverage at all.

Equity with Maximized Leverage

For five properties, after 30 years, equity appreciates by $750,000. All that money is added to your net worth.

Maximizing your leverage in this scenario would give you $42,000 in yearly income, plus $750,000 added to the value of your properties over time.

That’s the road to generational wealth.

How to Maximize Leverage

To maximize your leverage, focus on becoming the sort of investor that attracts lenders.

Have a great credit score. Make sure your income is in line. Know the numbers lenders will ask about. Be professional about your investment career.

Having all the right pieces in place will help your leverage take you further. The more leverage you use, the better returns you’ll see – both in the short-term income and long-term equity.

Harnessing the Power of Leverage

Now you can see how leverage impacts your real estate career. 

What are your next steps?

If you need an entry point into real estate investment, email Mike@HardMoneyMike.com. Ask about our 30-day fuel up challenge to learn how to maximize your leverage.

You can also join our weekly Leverage Up chat, on Thursdays from 1:15pm – 2:15pm MST at this link.

Text: "Get Money Wise!"

7 Real Estate Loan Fundamentals – Hard Money 101

For a successful investment career, start with these 7 real estate loan fundamentals.

Are you “money wise”? It’s not hard to get there. And it will save you a lot of cash down the line.

It’s like when a person who knows about cars goes to a mechanic – they have peace of mind because they understand what’s going on. If you’re not a “car person,” at the mechanic’s it’s harder to figure out if they’re telling you the truth, or just trying to sell you more than you need.

As a real estate investor, leverage is at the center of what you do. It’s like a foreign language when you first start out. But when you become money wise, the leverage in your real estate investment career is fully in your hands.

Here are 7 real estate loan fundamentals that will make you money wise.

Fundamentals of a Real Estate Deal

There’s certain information you’ll need to bring to your lender when you need a loan. If you know the answers to their questions, the time with your lender will be much more productive.

At the end of the day, lenders want to know: Do you have a good deal? (And you should want to know the answer, too!)

We’re going to dive into 7 main concepts to answer that question:

  • Strategy
  • Purchase Price / Contract
  • Scope of Work
  • Budget
  • Estimated Profit  / Equity
  • Comps / ARV
  • Exit Strategy

1. Strategy – What Is a Real Estate Strategy?

When your lender asks about your strategy, they want to know whether you’ll use the property as a

  • fix-and-flip
  • a rental
  • or if you’re not sure yet.

What is a real estate strategy dependent on? 1) your goals, and 2) the property.

You’ll have to know the numbers to know if the property will make a good flip with carry costs you can afford, or if it would cash flow well as a BRRRR-style rental.

But how do you “know the numbers”? Let’s start with the cost of the property.

2. Purchase Price / Contract – What Are the Fundamental Numbers of a Real Estate Loan?

Your lender could refer to this as purchase price, contract, or as-is value.

In real estate investment, there’s a distinction between what you’re paying for a property and what it’s worth. The purchase price isn’t necessarily what the value of the home is. 

This is the number on the contract, the number you’ve agreed to buy the property for. And this number is foundational to whether or not your project will turn a profit.

3. Scope of Work – How Do You Fix Up a Real Estate Investment?

Many beginner investors mistake “scope of work” for the budget. Scope of work is what you’re going to do to the property, not the number of what that work will cost. 

Will you add a bedroom? Re-do the garage? Are you going to convert the porch to additional square footage? Or add egress windows to the basement?

Scope of work is your rehab plan. Lenders need this info to find out what kinds of properties they should compare to yours to estimate an after repair value.

4. Budget – What Is a Real Estate Budget?

During the conversation with your lender, have a high overview of your construction budget. You don’t necessarily need all the details ironed out quite yet.

For example, you can estimate that the kitchen will cost $10,000, siding $6,000, windows $4,000, and new paint $2,000. At this point, you don’t need to share a breakdown of the cost of each new appliance, labor and materials, etc.

You just need a realistic estimate of how much it will cost to get into the property. Having your scope of work lined out helps you with an estimated budget. When you know the purchase price an your budget, then you know how much the entire project will cost.

5. Estimated Profit (Flips) / Estimated Equity (Rentals) – How Much Will a Deal Make?

Estimated profit is what you expect to make on the transaction, between buying the property, fixing it up, and selling it again.

Equity is the difference between the amount you owe and what the property is worth. You build equity on your rentals by successfully refinancing after a flip and paying down the mortgage with rent income.

The number one reason to be in real estate investment is to make money and create wealth – it’s true for lenders, and it’s true for you. So, it’s important to both you and your lender that your properties make profit or build equity.

You’ll need your estimated profit / equity when you bring a deal to your lender.

6. Comps / ARV – What Does ARV Mean in Real Estate Investing?

ARV is the after repair value. It’s what the property will appraise for, or sell for, on the current market once the scope of work is completed.

You estimate a property’s ARV by looking at the prices of similar homes in the current market. 

Comps (comparables) are those similar homes you look at. It’s important that your comps have the same value as your property.

For example, if your deal is for a 950 square-foot home, you’ll compare it to other 900 to 1,000 square-foot homes on the market, not a 2,000 square-foot one. A 2-bedroom, 1-bath house will be compared to houses of the same specifications, and not compared with 4-bedroom, 2-bath homes.

For your ARV to be accurate, you need to stay true to your scope of work. If you only repaint and re-carpet a house that needed much more work, you won’t get top-of-the-market value when you try to sell or refinance.

On the other hand, if your scope of work is a full remodel, your comparables should be homes that are fully remodeled, so you don’t miss out on any profit.

The money you put into fixing up a house isn’t a direct indicator of how much the house will be worth. What the property looks like when it’s finished has nothing to do with how much it cost to get it there.

To find the true profitability of a deal, your ARV and comparables help:

ARV – (Purchase Price + Budget) = Profit Amount

7. Exit Strategy – How Will You Pay Your Real Estate Loans?

When a lender asks for your exit strategy, they want to know your plan for paying off the loan. For hard money loans, your exit should be fast.

If it’s a flip, your exit strategy is to sell the property, then pay off the loan.

If it’s a rental, your exit strategy is to refinance into a long-term loan, which will pay off the hard money loan.

The Why Behind Money Wise – Real Estate Investing Definitions

When you come to the table prepared, with strategies, numbers, and knowledge, you can speak the same language as your lender.

This is key to ensuring you have a safe transaction with a lender that is working in your best interest.

Curious About Other Real Estate Loan Fundamentals?

If you have any questions, or want coaching through a deal, we’re happy to help. Reach out at HardMoneyMike.com.

For more info on real estate loan fundamentals, keep up with our Hard Money 101 series on our blog, or visit our YouTube channel here.

Happy Investing.

Text: "Retire Early with Real Estate"

How to Retire Early with Real Estate

Our time-tested, actionable plan to retire early with real estate investing.

Here’s the plan we give to people who want to start investing in real estate at 40:

Buy ten properties in three years.

This simple plan can let you earn over $150,000 per year during retirement. Here’s exactly how.

The Timeline

Year One: Buy two properties. You’re learning the ropes this year, so you take it slow. Take this year to learn how to do everything right, build relationships in the industry, and prep for the coming years.

Year Two: Get three more properties. After the initial experience of your first year, it’s a reasonable stretch to do one more property. By the end of year two, you’re halfway to your goal of ten properties.

Year Three: Do the remaining five properties. By this time, you’re in the swing of things, you know the right people, and buying five properties in one year is very manageable.

What Type of Properties to Buy

These ten properties should be BRRRRs or subject tos. Both of these real estate investment methods are ways to:

1) Gain properties with little to no money down

2) Create rental properties that will generate cash flow.

So when we say “buy 10 properties,” it’s not with money out of your pocket. It’ll be with debt leverage and investment strategies that will help you reach your goals quickly (without dipping into retirement savings or hurting cash flow).

Understanding the Numbers to Retire Early with Real Estate

In this example, we’ll look at properties with a value of $200,000. That number is spot on for some regions, and very low for others. Remember, you can use these same equations and concepts no matter what actual price range you’re dealing with.

Loans and Net Worth

Let’s say we’re using BRRRR and looking at $200,000 properties. You can get a loan for $150,000 per property (which means you only owe $150,000 on each house).

Each property adds $50,000 in net worth to your portfolio. So ten properties in three years automatically builds you $500,000 in net worth.

Also, these rental properties will add up to $800/month in cash flow (more on cash flow in the next section).

Chart of property costs, amount owed, and net worth. Total net worth is $500k.

Calculating Cash Flow

Let’s look at an example property that has a loan for $150,000 and an interest rate of 6%.

In this case, your monthly principal and interest payment will be $899.33.

Once you add taxes, insurance, and other costs, you’ll be at $1,184.33 in expenses.

If you’re in an area where you’re finding a $200,000, 3-bedroom 2-bath property, you should be able to reasonably rent for $1,600.

With that rent, we’d have a net total of $415.67/month coming into the property.

Chart showing loan amount and rate, monthly principal and interest, total expenses, and rent. Net cash flow is around $400 per month.

How Should You Use Cash Flow?

If you’re nearing retirement age and don’t need to pocket the cash flow on your new properties, there are some options to make that money work for you.

By using the income from your rentals, you can get the properties completely paid off. So once you finally retire, you’ll have several options:

  • Sell off the houses
  • Take out equity loans to buy more real estate or supplement retirement income
  • Get higher cash flow on each property with no loan payments

How to Increasing Cash Flow to Retire Early with Real Estate

If you use the cash flow on properties pre-retirement to pay down the mortgages, you can retire early (and with more money!).

Let’s round our $415.67/month net income down to $400. So instead of taking that $400 and putting it in your pocket, let’s see what it looks like to pay down an extra $400 on your mortgage every month.

Instead of paying around $1,200 toward your loan plus insurance and taxes, you’ll be doing around $1,600/month total.

This will cut your mortgage down to 14 years. So even if you’re 50, you can own these properties free and clear by the time you’re 65.

And once all the houses are paid off, you’ll automatically have:

  • $2 million in equity.
  • $1,300/month income per property. (You no longer have to pay principal or interest, just taxes and insurance.)

$1,300/month per property equals $13,000/month total across 10 properties. That’s an annual income of $156,000/year. While being retired!

Chart showing the math to find annual cash flow. Annual cash flow is $156k.
Read the full article here.

Watch the video here:

https://youtu.be/k3FDgD-gwPU

Text: "Start investing in real estate at 40"

How to Start Investing in Real Estate at 40

Set yourself up for retirement – start investing in real estate at age 40+!

We have a lot of people in their 40s and 50s come to us wanting to get into real estate investing. They always say the same thing:

“I wish I would have started 20 years ago.”

But it’s never too late to start real estate investing. The best time is now.

It’s possible for people 40+ years of age to start real estate investing now and retire at 65.

Here’s our plan for how to kickstart your real estate portfolio quickly. In 10-15 years, you’ll have wealth built and cash flowing for retirement.

How to Create Wealth Investing in Real Estate Past 40 – The Plan

Here’s the plan we give to people wanting to start investing in real estate at 40: 

Buy ten properties in three years.

For a beginner, that sounds like a lot. But we break it up, you take your time, and ten properties in three years becomes doable.

The Breakdown

Year One: You buy two properties. You’re learning the ropes this year, so you take it slow. Take this year to learn how to do everything right, build relationships in the industry, and prep for the coming years.

Year Two: You get three more properties. After the initial experience of your first year, it’s a reasonable stretch to do one more property. By the end of year two, you’re halfway to your goal of ten properties.

Year Three: You do the remaining five properties. By this time, you’re in the swing of things, you know the right people, and buying five properties in one year is very manageable.

Now Is the Best Time

This is a great time to be in real estate investing. Rent is high, supply is low. Plus, we’re about to hit a recession. 

Property prices will come down soon. Low prices are the best time to buy, and the best opportunity to create the most wealth.

Maybe after hearing all this, you’re concerned about how you’d pay off ten properties in 10-15 years. How are you really building wealth when you’re spending hundreds of thousands on real estate?

You don’t have to wait 30 years to pay off the mortgages of these homes. Next, we’ll talk about the numbers behind this plan and how these ten properties will change your retirement.

Example of Building Wealth in Real Estate Over 40

So the plan is to buy ten properties, fast. You’ll learn the logistics of that process quickly enough with the three-year breakdown… But how on earth are you expected to pay for ten pieces of real estate in such a short amount of time?

Here’s an example of how the money breaks down for these retirement properties.

What Type of Properties to Buy Over 40 (And How to Pay for Them)

These ten properties should be BRRRRs or subject tos. Both of these real estate investment methods are ways to: 

1) Gain properties with little to no money down

2) Create rental properties that will generate cash flow.

So when we say “buy 10 properties,” it’s not with money out of your pocket. It’ll be with debt leverage and investment strategies that will help you reach your goals quickly (without dipping into retirement savings or hurting cash flow).

Understanding Your Numbers – Example of Real Estate Retirement

In this example, we’ll look at properties with a value of $200,000. That number is spot on for some regions, and very low for others. Remember, you can use these same equations and concepts no matter what actual price range you’re dealing with.

Let’s say we’re using BRRRR and looking at $200,000 properties. You can get a loan for $150,000 per property (which means you only owe $150,000 on each house).

Each property adds $50,000 in net worth to your portfolio. So ten properties in three years automatically builds you $500,000 in net worth.

Also, these rental properties will add up to $800/month in cash flow (more on cash flow in the next section).

Chart of property costs, amount owed, and net worth. Total net worth is $500k.

How to Use Cash Flow

If you don’t need the cash flow immediately, you can use it to pay down the loans. This way, you own the houses free and clear. When you do retire, you have all that equity in your portfolio, plus a higher monthly cash flow.

Next, we’ll dig into the details of cash flow and how it can help you retire early.

Retire Early with Real Estate – How to Make Cash Flow Work for You

We’re all about the money and leverage side of real estate. We want you to understand the numbers behind the mortgages so you can reach your goals and get out of the loans faster. 

To retire early at 40+, it’s important to look at some key numbers.

Evaluating Cash Flow When You Start Investing in Real Estate at 40

Let’s look at an example property that has a loan for $150,000 and an interest rate of 6%. 

In this case, your monthly principal and interest payment will be $899.33.

Once you add taxes, insurance, and other costs, you’ll be at $1,184.33 in expenses.

If you’re in an area where you’re finding a $200,000, 3-bedroom 2-bath property, you should be able to reasonably rent for $1,600.

With that rent, we’d have a net total of $415.67/month coming into the property.

Chart showing loan amount and rate, monthly principal and interest, total expenses, and rent. Net cash flow is around $400 per month.

How Should You Use the Cash Flow?

If you’re nearing retirement age and don’t need to pocket the cash flow on your new properties, there are some options to make that money work for you.

By using the income from your rentals, you can get the properties completely paid off. So once you finally retire, you’ll have several options:

  • Sell off the houses
  • Take out equity loans to buy more real estate or supplement retirement income
  • Get higher cash flow on each property with no loan payments

Increasing Cash Flow to Retire Early with Real Estate

If you use the cash flow on properties pre-retirement to pay down the mortgages, you can retire early (and with more money!).

Let’s round our $415.67/month net income down to $400. So instead of taking that $400 and putting it in your pocket, let’s see what it looks like to pay down an extra $400 on your mortgage every month. 

Instead of paying around $1,200 toward your loan plus insurance and taxes, you’ll be doing around $1,600/month total. 

This will cut your mortgage down to 14 years. So even if you’re 50, you can own these properties free and clear by the time you’re 65. 

And once all the houses are paid off, you’ll automatically have:

  • $2 million in equity.
  • $1,300/month income per property. (You no longer have to pay principal or interest, just taxes and insurance.)

$1,300/month per property equals $13,000/month total across 10 properties. That’s an annual income of $156,000/year. While being retired!

Chart showing the math to find annual cash flow. Annual cash flow is $156k.

Long-Term Wealth in Real Estate Over 40

Once the houses are paid off, the only work left to do is upkeep on the properties. A small price to pay to make over 150k every year you’re retired! 

These calculations, of course, are in “today’s” money. Inflation will continue at a steady rate, so rents will go up and home values will go up. But all costs will rise over time, so these amounts will “feel” about the same.

It’s never too late to start investing in real estate.

Real Estate Investing for 40+ Beginners with No Money

Ten properties in three years. Paying down the loans so you own them free and clear by retirement. It really is great, but…

How can you start with no money?

BRRRR

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. 

You buy the same type of properties as fix-and-flippers, but instead of selling them, you rent. They’re properties from wholesalers that are listed undermarket.

These properties require quite a bit of work to fix up, but they have the opportunity for the highest cash flow.

Subject To

A subject to is when you take ownership of someone’s property without taking out a loan. You make all payments, but the previous owner keeps their mortgage on it.

Subject tos are a great way to get into a property for little money – this is especially important since money is tightening in the real estate lending world. This investment technique has been less popular in recent years, but with the market turning, they’ll be coming back strong in the next year or two.

The Value of No Money Down Investing for Soon-To-Be Retirees

You don’t want to tap into your retirement or savings with your real estate investments – you want to add to them.

Look into BRRRR, Subject Tos, and other no money down investment techniques. This is the path to adding $2 million to your net worth without spending any money.

Real Estate Investing for Beginners in a Recession

A recession can cause unease for people nearing retirement – and people who are considering any major investments.

So why is this the best time to get into real estate investing? Even for older people?

Looking Back at the Great Recession

If you had bought the homes real estate investors did in 2010, you’d be retired by now.

Our current market is beginning to look a bit like 2008-2009 – a recession coming on, inflation hitting, the money supply tightening. Which means there will be more homes available at a discount.

Consumer debt is increasing. Especially after the housing blitz we’re just getting out of, it will be harder for homeowners to keep up on payments. When people need to move, it will be harder for them to sell. People get stuck with houses they can’t afford. 

For real estate investors, that means there’s more inventory, at lower prices.

Using The Recession to Increase Net Worth

Buy soon, when prices are down and inventory is high. In the future, rates will come down and prices will go back up. So that plan that offers $2 million of net worth could potentially double or triple.

In 2010, we helped people use the same retirement real estate investment plan outlined in this article.

One client bought ten properties that year. Since then, his real estate has quadrupled in value, and ten years later, he owns eight of the properties free and clear.

This is the time. You don’t want to buy when prices are high and sellers have control. Jump in and buy now to get the deals that will truly create wealth and help you achieve the retirement you want.

Start Real Estate Investing at 40 – Where to Go From Here?

Whether you’re ready to kickstart your investment career now or not, the best place to start is to get educated.

It doesn’t matter if you’re 30, 40, or 50 years old. Reach out to us with specific questions, or any help starting your plan for retirement at info@hardmoneymike.com or HardMoneyMike.com.

Visit these links for a BRRRR investment guide and more information on no money down investing.