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No Money Down Investing? No Problem.

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How do you buy investment properties with no money out of your pocket? Intro to Subject Tos.

Maybe you’re looking at interest rates and thinking, “I’m not sure I can put my money into real estate right now.” Maybe you’re new to investing, and you don’t yet have the money to put in. Or maybe you’ve got the money – but you’d much rather have it free than tied to properties.

In any case, every market has options for real estate investing with zero money down. For this upcoming market, our top 3 investment suggestions are: subject tos, BRRRR properties, and owner carries.

Here’s what you’ll need to know.

3 Ways to Invest in Real Estate with No Money Down

These are the most tried-and-true ways to invest in real estate with no money. Some of these methods will sound familiar – but they’ll have a twist to ensure your success in the market we’re about to enter. 

Other methods might be unfamiliar to you. They’ve fallen out of popularity the last 15 years, but rising interest rates will bring back their usefulness.

1) BRRRR with No Money Out-of-Pocket

Buy, rehab, rent, refinance, repeat. That process becomes easier the better your deals are. And as we see more foreclosures happen in the near future, and more people are sitting on the market, you’ll have the chance for better deals.

To get BRRRR properties with no money out-of-pocket in this market, though, you’ll need a good deal. What makes a deal good? One of the best guidelines is the 75% Rule. As long as the property costs 75% or less of the ARV, you can get into that property with zero money down. 

(Even following the 75% rule, you’ll need to qualify for a bank loan, so you’ll have to be sure your credit’s good.)

We’ve had a lot of success helping people with BRRRRs in down markets. Around 2010, we would often do ten properties every year for couples. They built portfolios with no money from their pockets.

2) Subject Tos with Zero Down

As properties get stuck in the market longer and interest rates rise, subject tos will become a great way to invest using no money.

A subject to is when you go on title, own the property, and take over mortgage payments – but leave the existing mortgage on the property, in the seller’s name.

What good does this do for you as the buyer?

  • Loans on subject to properties were originated two or three years ago, with 2.5-3% interest rates. Much lower than if you were refinancing for yourself in the current market.
  • You don’t have to refinance. It’s not on your credit, not based on your income, and you don’t have to go through underwriting.
  • The loan is probably already a few years into amortization. So every payment becomes lower – all without you needing to qualify for anything.
  • You can accumulate a large portfolio without the hassles of finding the money.

More on subject tos later in this article.

3) Owner Carry with No Money Down

An owner carry deal is somewhat similar to a subject to, where the buyer gets ownership of the house without taking out their own mortgage. But in an owner carry, the buyer doesn’t pay the property’s existing mortgage. Instead, the owner owns the home outright, so the buyer gives them mortgage payments directly.

Owner carries can be especially beneficial when you’re the seller. But an owner carry is also a potentially good option to invest without putting much, or any, money down.

Here’s an example of a recent owner carry deal we helped with:

A client was selling their parents’ property. They were planning to put the money in the bank and live off the interest.

Instead of settling for the 1% or 2% interest they’d make in the bank, we helped them with an owner carry. So they:

  • Sold the property.
  • Put a lien on the property so they held the mortgage.
  • Received mortgage payments from the buyer at closer to a 4% or 5% interest rate.

You’ll probably have more luck finding subject tos than owner carries. Not many people own a house free and clear, or take over a property without a mortgage.

What are Subject To Real Estate Investment Strategies?

With a subject to, you buy a property subject to the seller leaving their mortgage on the property. 

We talked about the benefits of subject tos – but how do you make it work? What are the right investment strategies to successfully get a subject to?

Subject To Strategy #1: Going Through a Proper Closing

First of all, still go through a proper closing on subject tos. You want to make sure the owner doesn’t have any other liens you don’t know about. When you take ownership, you become responsible for any existing liens on the property.

At the very least, get a title report to verify there are no liens. If you want, you can get title insurance – an extra cost but potentially worth it.

Subject To Strategy #2: Adding Your Name and Avoiding Problems with the Mortgage Company

With subject tos, some people may say you’re not allowed to take ownership and make someone else’s payments. They fear the lender may call the mortgage. 

But we’ve never seen a lender ever call a mortgage in this situation.

The main reason is because the lender usually doesn’t break even with the loan until year three or four.  When a lender originates the mortgage, they buy it, so it takes at least three years of payments to get their money back.

So as long as you pay on time and don’t cause friction, the mortgage company should have no problem with you taking over. They make money every time you make a payment, so they have no reason to call it off.

Subject To Strategy #3: Negotiating with the Seller

Sometimes you’ll have to negotiate with the seller for them to go through with a subject to. 

Maybe they’ll need a payment of $5,000 – $15,000 to be able to leave. Maybe they’ll include terms that they’ll only keep the mortgage on for five more years.

It’s helpful to know when a seller is in a position that they’ll want a subject to. A subject to takes place because the seller, for whatever reason, needs to sell the house but can’t. They don’t want to be stuck with the property, and they don’t want a foreclosure or missing payments to ruin their credit.

If you make their payments for around 12 months, they can usually qualify for another mortgage on another property without this one hurting them.

For more details on real estate investment strategies and setting up subject to deals, reach out to us at HardMoneyMike.com. We have plenty of experience, and we want to help you build a real estate portfolio without worrying about your credit or income.

How Do You Make Sure a Subject To Is a Good Real Estate Investment?

Not all subject tos and owner carries are created equal. Here are some tips on knowing when a property will be a good investment for you.

Good Location

In the upcoming market, don’t settle for properties in bad locations. A good real estate investment is a deal in a good area.

As more foreclosures happen, more REITs and investment companies will buy large amounts of rental properties, creating new “rental areas.” Your target tenants might want to avoid those areas. You might have more success buying in “better” areas.

Know Your Goals

When you go into a subject to deal, you’ll need to know the terms that will make the investment worth it to you, along with the goals you’d have for the property.

How long do you want to carry this property? Are those terms your seller can agree to? What does your seller require?

What’s your plan? What are your options for this property? Will you want to rent out the property, or look at lease to own or contract for deed options? 

Lease to purchase and contract for deed deals are worth considering. Those buyers will give you a down payment, which is a lump sum you can use to fund the property’s fix-ups, put in a reserve, or just keep in your pocket.

Subject Tos are a Good Real Estate Investment, Even with High Loan-to-Value Ratios

Subject tos will have a high loan-to-value ratio. It’s often around 90%, but we’ve seen subject to properties with over 100% loan-to-value.

Naturally, this could give you pause, but high loan-to-value properties are okay for subject to deals. They’re still good real estate investments. As a subject to buyer, you know:

  • There’s no money out of your pocket.
  • Rent will cover your payments.
  • The loan will amortize down.
  • Over time, you can own the property free and clear, and when the market’s up, you could sell for straight profit.
  • You can create wealth without even using your own credit.

Subject tos are a good real estate investment if you have no experience or money – or if you do!

How Do You Create Wealth with Subject Tos in this Market?

Once you know how to set up a subject to deal correctly, with terms that benefit you and ensure your safety as an investor… How do you make it a system that not only generates cash flow, but creates generational wealth in real estate investing?

Going Big with Zero Down Subject Tos

Volume is how you make your money. Subject tos can be easy and relatively passive, so it’s possible to stretch yourself from five to ten properties to 50 to 100.

But to go for volume, you’ll have to be less picky with the amount of money you put in a deal. 

You might have to bring in some money to help the seller move. You may have to fix up a few things in the property. Or you could need to carry the payments for a few months while you find a good renter.

Using OPM in Subject Tos

The number one investment strategy we recommend here is to bring in an OPM partner. This will be a person who’s willing to put in $10,000 to $50,000 in exchange for a portion of rent.

This partnership will allow you to expand quickly. Your partner gets a 5-6% return on their money, there’s still no money down for you, and you get the speed and flexibility that cash gives a subject to.

We have a history of helping people with this part of the process. You can get the start-up cash that’s holding you back from creating wealth by investing in real estate. Reach out at HardMoneyMike.com.

What’s an Example of a Subject To?

Lastly, here’s a subject to example deal – what the process should look like from beginning to end.

Why the Seller Wants a Subject To

A subject to starts with a seller who has a problem. Either they can’t make payments on their property, or they need to move ASAP (got a new job across the country, etc). They can’t sell the property as fast as they need to; or maybe they could sell, but paying 6% realtor fees and 2% closing would leave them upside down.

The seller would rather have someone else take over the property and make the loan’s payments. This saves the seller’s credit and helps them avoid foreclosure.

A subject to helps a seller get out of a messy situation.

Closing the Sale

Once you find a seller, you’ll need to set up your terms. You’ll go through a typical closing, so you can get a title report and check for any existing liens.

You’re responsible for any liens on the property. They may have a first, second, or judgment lien that would become your responsibility. You don’t want to get stuck with a property whose value is way undermarket.

Payment Example for Subject Tos

After closing, you’ll need to set up the payment system to the seller’s mortgage company. Many people use a third-party escrow company. They make the payments to the escrow company, and that company makes the actual payments to the mortgage lender. 

A seller’s credit is on the line when they agree to a subject to deal. If you offer to use a third-party company to make the payments, that could give the seller the reassurance they need to go through with a deal.

The escrow company may cost five to twenty-five dollars per month, but it’s a small price to get in on an existing loan with 2.5% – 3% interest. 

Where Next?

Once you’ve acquired a subject to property, all you need is to find either:

  • A renter.
  • A property management company to help rent.
  • A rent to own or lease purchase buyer.

And then? …Make money, and repeat the process.

Subject tos are clean, easy, and repeatable.

If you want to find out if creating a large real estate portfolio using subject tos is the right path for you, reach out to us at HardMoneyMike.com.

For information on lending options for potential properties, download the free resource here.

To learn more about real estate investment with zero money down, watch the videos here.

Happy Investing.

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How Does A Hard Money Loan Work? 

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What do hard money lenders look at? There are two main factors you need to know.

Becoming hard money proficient will put you miles ahead as an investor.

Before you run to any lender with a deal, you’ll need to know… How does a hard money loan work? There are two key terms you’ll need to understand: loan-to-value ratio and, more importantly for fix-and-flips, after repair value.

Loan-to-Value Ratio

The first important number a lender takes into account is the cost of the property. The second is the amount of the loan. Loan-to-value ratio is the ratio of the loan and the cost.

Let’s say you have a property with a current appraisal of $200,000. Then you get a loan for $100,000. The loan is half of the value of the home, so your loan-to-value is 50%.

After Repair Value (ARV)

ARV, after repair value, is another important factor hard money lenders consider. The properties targeted by real estate investors are undervalued. They need repair-work done to be brought up to the standards of the surrounding community.

So, lenders look at not only the current value of the house, but also the future value of the house, after it’s all fixed up.

Many hard money loans are based on after repair value rather than loan-to-value. Your lender might offer you up to 75% – not of what you’re buying it for, but what you could sell it for by the end.

What Does A Hard Money Loan Using ARV Cover?

A key factor to ARV is that lenders will lend not only for the initial purchase, but for the fix-up costs too.

Many lenders will put money aside in escrows to use throughout the project to pay contractors and cover other renovation costs.

If your loan considers ARV, it’s possible for you, with ZERO money down, to:

  • Buy a property.
  • Fix it up.
  • Either sell it (fix-and-flip) or refinance it (BRRRR).

After selling or refinancing, you use that money to pay the loan back.

Hard money is designed to build value into real estate. Understanding the role of the after repair value will help you immensely in your hard money investments.

Read the full article on hard money for beginners here.

Watch the full video here:

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Be Recession-Ready: How to Raise Your Credit Score

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Credit score tips to prepare your real estate investment career for a recession.

The upcoming economy will be an opportunity to create generational wealth.

In the years after the 2008 crash, Hard Money Mike helped people create a great real estate portfolio. A portfolio that has taken them through the past decade and onto the next generation. 

We know the opportunity is always there in a recession. But we also know that if you’re not money-ready… you’ll probably miss your chance. 

Your credit score is more important now than it has been for a long time. With inflation hitting and a possible recession on the way, lenders are tightening up with loans. Your credit decides whether your real estate investment career will be easy or hard. 

So what do you need to know about investing with your credit score? How can you turn a time of struggle into a time of opportunity?

What is a Good Credit Score?

Credit scores range from the 400s to 800s. But for the purposes of the lending world, that range shrinks to the mid-600s to upper-800s. 

Over the past 6 months, with inflation and interest rates rising, big institution lenders have tightened their grip on loans. Not just anyone can get a loan – you’ve got to have a good score. 

But what is a good credit score for real estate lenders?

Before this recent shift in the economy, the lowest score considered by a lender was 640. Now, most lenders won’t look at anyone under 680. And that 680 minimum could soon turn into 720.

Institutions raise credit score minimum requirements to cut investors from the loan pool. This means many of your competitors will be unable to find the same kind of money they could 6 months ago.

You don’t need to be one of the investors squeezed out of the lending space. But you’ll need to understand exactly where your credit is, how to improve it, and what good credit score range lenders are looking for.

Make sure you’re credit-ready for these upcoming opportunities.

How to Increase Your Credit Score

To take advantage of this next market, you’ll need to keep money coming in. Banks and hard money lenders will be stricter with loans. You’ll need a good credit score to not be squeezed out of opportunities with lack of funding.

There are a few simple things you can do to raise your credit score.

Pay Your Bills on Time

This is the absolute most important action to increase your credit score. Payment history makes up at least 40% of your score. Lenders who don’t require a minimum credit score will still look at whether or not you pay your debts back.

Focus on this habit if you haven’t. Missing payments is the biggest red flag to lenders. No one – from banks to small hard money companies to OPM lenders – will want to give money to someone who has a history of not paying back. 

Reduce Your Credit Card Balances

If you’re using a credit card to fund fixes on your projects, make sure to pay it off completely after every flip. Pay off as much as possible as you go. Keeping a lower balance on your cards will:

  • Improve your credit score.
  • Ensure you won’t run into late payment.
  • Keep your balance from getting out of control.

It’s smart to have credit cards paid down before applying for a bank loan. To do this fast, you can get money in ways that won’t show up on your credit report. You could use a personal loan or OPM, a 401k loan, or a HELOC.

Get Authorized on Someone’s Good Credit

If you’re struggling with your score, find someone with good credit who will authorize you on their account.

This person will likely be a little older. They’ll have a great credit score, and their accounts will be established. Older people will naturally have an advantage you don’t – the length of their accounts.

Simply getting authorized on another person’s good credit will bump your credit score up.

Know How to Increase Your Credit Score

It’s important to give your credit score all the boosts you can before trying for a loan. Right now, the difference between a 680 credit score and a 679 is the difference between getting a loan and not getting a loan. The difference between a 720 and a 719 is getting a 9.5% rate rather than 11%. 

Real Estate Investing with a Low Credit Score

Investing in real estate when you have a low score is definitely more difficult, but it’s not impossible. 

If you’re researching how to invest with a bad credit score, raising your score should be your number one priority. These options aren’t replacements for a good score. But you also shouldn’t have to pause all investments until your credit is good.

So, what are your lending options with a low score?

You’re essentially out of the market for both banks and national hard money lenders.

You’re down to two options.

1) Using Small, Local Hard Money Lenders When You Have Bad Credit

Individuals or small hard money companies (like Hard Money Mike) don’t depend so much on credit. Instead, they focus on the quality of the deals. 

Corporate hard money lenders can afford to turn off their lending and turn it back on. Small lenders rely on loans to make a living, so they’ll always be willing to offer you money if you have a good deal.  

If you know how to put a deal together, if you understand all the numbers, if you can prove a deal is good – small hard money lenders will want to work with you, regardless of your credit score.

Small hard money lenders probably won’t require a certain credit score… But they will check your credit. Particularly your payment history. If you have habitual late payments, even a smaller lender won’t want to lend to you. 

However, a small hard money lender will be more likely to understand that life happens. Sometimes certain life events negatively impact your credit. National lenders won’t ask for the story behind the number; they’ll just see that your credit score doesn’t fit their criteria. Small lenders will work with you. 

2) Using Real OPM for Money When Your Credit Score is Low

As lenders are tightening up, investors aren’t the only ones who will feel the squeeze of the economy. There are regular people out there – with money – who will also be affected by inflation, interest rates, and the market.

These people are typically 50 or older and looking for ways to live off the retirement money they’ve accumulated. Banks are still only paying around 1% rates, but someone could get a rate of 5 or 6% by loaning money to you. 

Inflation matched with stagnant bank rates make your potential OPM lenders lose money. Lending to you is a way for their money to keep its value.

OPM lenders will also care less about whether you have a 620 credit score or an 800 score. They’ll just care that you’ll secure their money and do deals the right way.

Don’t let the economy fool you into thinking there aren’t any big pools of money out there. You just need to know how to find them, navigate them, and keep them.

There’s No Replacement for Good Credit

Again, these are some of your options if you have low credit, but they are not a replacement for high credit. This is your business. Take your credit seriously.

Higher credit scores open up other options. Having other options make hard money loans and OPM work even better for you.

Your business will be easier, faster, and smoother when you have a credit score that doesn’t work against you.

BRRRR and Fix-and-flips During a Recession

You’ll soon be able to make money like no other time in the last 12 years. Deals will be easier to find than ever.

In the last decade, loans have been easy to come by. But home prices have been going up, so it’s been hard to find good properties. What will happen next is money will get tighter, but deals will get better and better as rates go up and property values go down.

So what can you do in the upcoming fix-and-flip and BRRRR market? Especially when your credit score is low?

Fix-and-flip Loans with Bad Credit

If you have bad credit while doing fix-and-flips, local hard money lenders will become your best friends.

Reach out to your real estate community, go to biggerpockets.com, and find those small lenders in your community. 

You’ll need to keep plenty of lenders in your back pocket. Local hard money companies will be swamped by other investors with low credit scores. To have a good chance at getting money when you need it, you’ll want to know five or six good lenders.

BRRRR Properties and Long-term Rentals with Bad Credit

There’s always two loans with BRRRR – the acquisition, and later, the refinance. Some smaller hard money lenders can help with that first loan, but longer term, you’ll have to start looking at other options. If you run into trouble with the refinance, it can be hard to pay the hard money loan back. OPM could become vital for getting money for these properties.

Another route is to find something like a subject to, rather than a traditional BRRRR. There will be people who need to get rid of a property because they’re behind on payments. You can jump in and take over the property and the payments without assuming the loan. You don’t necessarily need a good credit score – you just need to be able to make the monthly payments and rent the property.

Overall, be aware that your pool of options will be much smaller with a bad credit score. Your price point will be lower, your range of options is smaller, and your ability to close on deals is slower.

Private Lending Options for Investors with Bad Credit: OPM

OPM is other people’s money. Real people that you know – friends, neighbors, family, people in local real estate groups. OPM can help with down payments, construction, monthly payments – it fills the gaps of your project. And if you really find the right people, the entire cost of a property could get funded with a $500,000 check.

OPM lenders won’t care about the same qualifications as institutional lenders. Your credit score is less important than whether you secure their money and pay them back as agreed. Good credit or bad, OPM will be one of the best tools for you as an investor in this next market.

Usually these are people closer to retirement. They want to get off the roller coaster of the stock market and get more reliable, consistent returns.

Someone with $300,000 in a bank account at 1% makes $3,000 a year on that money. If you can give them 5%, they make $15,000 instead. OPM will be mutually beneficial in this upcoming economy – you just need to know where to find OPM lenders and how to make it work.

With OPM, you can do more deals, better deals, faster deals, and deals other people can’t afford. We want to help you take advantage of this opportunity. 

Hard Money Mike has funded over $1 billion of loans with Real OPM. During the crash in 2008, we couldn’t get money from banks, so we went the OPM route and have stayed that way ever since. We know how to do it right, and we know that it works.

Where to Go From Here

Few real estate investors will be prepared to take advantage of the impending recession.

You can be the one to take this opportunity, get the information, and be ready with your credit score. We have the experience to help you get ahead.

Download our free Credit Score Checklist here and free OPM checklist here.

Watch videos on credit tips here.

Reach out to us with any questions at HardMoneyMike.com.

Happy Investing.

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How to Make Money Real Estate Investing in 2022

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You’re here to make money. How do you make money real estate investing in 2022?

The real estate market has changed. The economy has changed. The money side of flipping has changed. If you’re a newer real estate investor, you might be feeling hesitant right now.

We’ve been through over twenty years of markets. We’ve seen many markets that look similar to ours in 2022.

Take our word for it: here’s what will make you money this year in your real estate investment career.

4 Real Estate Basics That Can Make You Money in 2022

The best real estate investments are the evergreen basics. Here are 4 consistent ways of creating cashflow — if you do it right based on your market.

1) Flips

Buying, fixing, and then selling properties is a common investment strategy. But to make money on fix-and-flips in 2022, you’ll have to focus carefully on the numbers. Flips make money in one lump sum, not in a steady cash flow over time. So in tougher markets, it’s important to make that large sum count.

This year especially, we recommend staying in the medium to lower price range for your flips. We’re still seeing people selling well in the medium price range. Larger properties, however, are feeling a lot of pressure in this market.

For flips, focus on the numbers and stick to medium price ranges. (More on this later in the article).

2) BRRRR

Buying and fixing up rental properties is another of the best real estate investments. But BRRRR is taking a bit of a hit right now due to interest rates. Interest rates have more than doubled since the beginning of 2022, which will seriously impact your cash flow.

You can still make money from BRRRR properties this year, but you’ll have to be extra careful with numbers. Know your credit score, know your interest rates, and know the rent prices for your area.

3) Subject Tos

A “subject to” is when you buy someone’s property, take over their mortgage, and make all payments, but you don’t assume the loan. The property is in your name and you have ownership, but it stays financed by the seller. 

Subject tos will be great opportunities in 2022. You can walk into a property where the rate on the mortgage is still 2.5% – 3%, potentially with renters in place. This will bring a much higher cash flow than if you started from scratch on the open market, where interest rates are almost double that.

Using subject tos is a great way to grow a big portfolio using someone else’s financing. (You’ll see more about subject tos in 2022 later in the article).

4) Notes

Another great tactic for real estate investors this year is to use your money in deeds of trust or other private lending.

Rates have gone up, but banks still haven’t really raised CD rates. If you have some money sitting in an account, notes are a good way to get a higher return. You can lend to other investors through gap funding or a more long-term agreement. Notes are becoming big in real estate again, especially with the market in 2022.

Passive Ways to Make Money in Real Estate in 2022

Maybe you feel like you want to use 2022 as an opportunity to tap out of the active flipping game. But, you also don’t want to lose the chance for real estate cash flow. We’ve got three good passive real estate investing options for you.

1) Subject Tos with Rentals

Subject to rentals will be a pretty safe bet for passive real estate income this year. With a subject to, the loan is still under the original financier’s name. You’re just making payments, so the mortgage won’t cloud up your credit.

It’s relatively easy to add 5 – 10 properties to your rental portfolio without adding more debt to your name. If you put these rentals in with a property management company, you can still make a good amount of passive cash flow.

2) Private Notes

Deeds of trust or private lending is a reliable, secured, passive way to put money to work in real estate. With notes, you lend your money to friends or other people in the markets who are looking for funding – and you don’t have to worry about doing any of the work on the property.

Instead of making 1-2% with a bank’s CD rate, you could double or triple that by lending privately. We’ve helped thousands of people successfully lend this way, so contact us for more information.

3) REITs (Real Estate Investment Trusts)

Real Estate Investment Trusts work a bit like a mutual fund. You pool your money with a bunch of other people, and the company uses that money to buy real estate. You’re just one of many investors, and everyone earns a return on the properties. 

There are public REITs and private REITs. With public, you can trade on the open market. With private, you have a little more restriction; once you get in, you stay in.

REITs are a great option if you want to invest in real estate but want someone else to manage it. If you’re looking for passive real estate income, research REITs in your area.

Commercial Real Estate Investing in 2022

2022 may be the year you want to venture into commercial real estate. Apartments buildings with over five units, retail space, office buildings, and industrial areas all fall under commercial real estate.

How do you invest in commercial real estate?

One option for commercial real estate investing is to hold or flip just as you would any single-family home. We’ve also seen a lot of people find success with another option recently: buying bigger industrial properties, flipping them, and splitting them up into separate properties to sell.

Cap Rates in Commercial Real Estate

An important number to consider in commercial real estate is the cap rate. All commercial properties come with a cap rate, which is the return you can expect on your investment. 

For example, if you put $100,000 into a property with a 4% cap rate, you can expect a return of $4,000; this is probably an area that pays lower rent. But a $100,000 investment on an 8% cap rate will have an $8,000 return, so the property will have higher cash flow.

Generally, the higher the cap rate, the lower the value because it may be considered a riskier investment. The lower the cap rate, the higher the value because more people are more willing to put more money in. 

People take lower cap rates over higher ones because they believe a lower cap rate market is more stable. It’s like when you put money into a CD – the appeal is the stability, despite the lower rate. People who look for higher cap rates prioritize return over long-term growth or stability.

Cap rates differ city-to-city and within cities. If you’re interested in commercial properties, you can talk to a commercial broker in your area to understand local cap rates.

Two Biggest Opportunities for Real Estate Investing in 2022: Fix-and-Flips and Subject Tos

How you’ll choose to make money in 2022 will depend on you, your market, and your current financial situation. 

But we expect that the two best real estate investment methods this year will be flipping and subject tos. Here’s how you can make money using these investment strategies:

How to Flip for Profit

At the beginning of 2022, flipped homes would sell in a matter of hours, rather than weeks or months. The fix-and-flip experience will be a little different in the remainder of 2022. But flipping is still a great opportunity to make a profit in real estate.

What Properties Will Flip for Profit?

Your best bet for income in real estate flipping will be sticking to medium price point properties.

Some areas – for example, City center of Denver — are still doing great in higher price ranges. People are still selling $1 – 2 million dollar properties with no issues. But in smaller communities, there are fewer people who can afford $600,000 – $900,000 properties.

With rising interest rates, people who were looking in those higher price ranges now need to look a little lower. Medium property prices are also always competing with rent.

Even though interest rates have gone up 5 – 6%, a $150,000 – $250,000 house will still be in a competitive market with rent. As long as they can afford it, people will always steer toward buying a home rather than renting. 

Rent prices aren’t going anywhere but up. We may see changes in the renting sphere as congress discusses hedge funds and other big investors driving rent prices up. But for you now, rising rents could push more people to consider home ownership in the low-to-mid price range.

Flipping Expectations for 2022

When you look at your market, know that 3-bedroom, 2-bath, and garage homes will always be reliable as a seller. People will always be searching for those types of properties for their families.

You’ll find buyers in this range, but be sure to adjust your expectations. In the last market, buyers would make offers within hours or days. The reality of this upcoming market is it might take one or two months to find a buyer. Be patient, take your time, look at your area, and keep an eye out for upcoming foreclosures and other opportunities.

Subject To Real Estate Investing

A “subject to” is when you buy someone’s property subject to them leaving the mortgage on the property. You become the owner, you receive the deed or title, and you take over the loan. But it’s still the same loan, in the original owner’s name. You’re not assuming, or refinancing. They keep the loan on the property, and you just make the payments.

Should You Do a Subject To?

How is a subject to beneficial for you? The property’s existing mortgage will likely have rates close to 2.5-3% – rather than the 6% rate you’d get on a new loan. Also, in a subject to, you assume no additional debt.

Most subject tos are made for rentals, lease options, or contract for deeds. A subject to property is not a great place to flip. When people are willing to do a subject to, the reason they’re not selling the property is they can’t get the price that they want at the speed they want. So they have to get rid of the property this way to avoid wrecking their credit for future loans.

The Money Side of Subject Tos

We’ve seen clients with 50 – 200 subject to properties. Subject tos are a great way to build a portfolio without using your credit, and without maxing out your loan opportunities with lenders.

Sometimes with subject tos, you’ll have to give the owner of the mortgage some money to give over the property. There are also occasional fix-up costs, depending on the condition of the property. 

Why some people don’t want to jump into a subject to is because they don’t have the $5,000 – $15,000 start-up costs to get into it. We recommend looking into OPM as a way to cover these costs and take advantage of subject tos. 

You’re getting the cheapest possible financing on a property, so it doesn’t matter much if the loan is still at 100%. Making monthly payments continually brings the loan down. And you’re free from many other financing and closing costs.

If you get a long-term renter, or someone who wants to do a lease option and put some money down, subject tos can become a great source of cash flow.

Subject tos are going to be hot as foreclosures pick up, selling times slow, and people can’t afford to fix up their properties. They are one of the best ways to take advantage of a down market and build a large real estate portfolio.

What To Do Next?

The real estate market at the end of 2022 will look very different than it did in the beginning. But there are always options for making money in real estate – in any market.

We have plenty of experience in markets like the one we’re now entering. If you need more guidance as you navigate your real estate investment career this year, let us help.

Download our free real estate investment resources here.

Check out the information on our YouTube channel here.

And always feel free to reach out to us at hardmoneymike.com.

 

Happy Investing.

How to Buy: Breaking Down BRRRR

The BRRRR Method

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Ready to build up a rental portfolio and get cash flow on properties with zero money down? The BRRRR Method.

Check out this 8-step guide to BRRRR investments.

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Have you heard of BRRRR? Here’s our 8-step guide to rehab and rent undermarket properties for maximum cash flow in your real estate investment business.

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Buy

Rehab

Rent

Refinance

Repeat

 

Check out these other crucial steps to the BRRRR  of real estate investing:

 

 

Read more on the BRRRR Method on Hard Money Mike here?

Download our free BRRRR roadmap at this link. And for more resources, check out these videos from our YouTube channel.

 

Wholesale properties

3 Must-Know Answers to Finding Undermarket Properties

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A real estate investor’s intro to wholesalers.

At the end of the day, successful real estate investing hinges on one thing: finding good deals on properties.

The #1 way to get those deals is through wholesalers. But how do you find wholesalers? And what should you do next?

What Are Wholesalers?

Wholesalers are companies that research and locate below-market-value properties. They find homeowners – through mailers, texting, or other means of marketing – that are willing to sell undermarket.

Wholesalers keep some of the properties they acquire, but they sell many of them off to real estate investors. That’s where you come in.

You can, and should, make wholesalers a profitable member of your investment team. Let’s talk about:

  • How to find wholesalers
  • How to get on their “A-list”
  • How to verify their numbers

1. Where Do You Find Wholesalers?

There are some really small wholesalers that find one or two properties a month. Others are huge companies that spend hundreds of thousands of dollars per month, finding hundreds of homes every year.

Generally, the only way to find wholesalers is to ask around about who is selling properties in your area. Here are three ways to do this:

  1. Search Google. Simple: look up “I want a house in” and your city name. You’ll get lists of people wanting to buy houses. These are the same people who will be selling them to investors.
  2. Use biggerpockets.com. Your best resource is other real estate investors. Log on and ask who the wholesalers for your area are.
  3. Join local Facebook groups. You can ask other investors who the wholesalers are. Or, you can look and see what people and organizations are trying to buy cheap properties. Those will likely be wholesalers.

Other investors are a good resource for finding wholesalers, but of course, they’re also your competition. Once you find wholesalers, your next step will be to find a way onto their A-list.

2. How Do I Get to the Top of a Wholesaler’s Preferred Buyer List?

Before they send out a property to their whole group, wholesalers will send it to their best buyers first. They will want to get rid of it as quickly and efficiently as possible. If they can sell it without having to coordinate property tours and indecisive buyers, they will. 

So, how do you get on that list?

  1. Know exactly what you want. Don’t show up uncertain. Come with either cash in-hand or a hard money lender. They will want a smooth, no-drama process.
  2. Find lenders they work with. This way, the wholesaler will be confident that the deal will close, close fast, and close with no issues.
  3. Close the deal. If you get under contract with them, follow through with the deal, and do it as fast as possible. Don’t get into a contract unless you know it’s what you want. 

In general, you’ll want to cause the least amount of friction possible. After all, you probably feel the same way: the people who make things easy and enjoyable are the people you’ll want to work with over and over again.

3. How Do I Know If I’m Getting a Good Deal with a Wholesaler?

You and the wholesaler will have different motivations in the deal. They need to make money, so they may be “optimistic” with the numbers they tell you. To protect your interests, you’ll have to be proactive and realistic.

Double check their numbers. This includes:

  • The current condition of the property
  • The cost of repairs to bring it to market
  • How long it will take to get to market

It’s also important that you go in knowing your numbers. It will make verifying their numbers a lot easier, and it makes the process smoother for them (see #2 of this list). 

If you’re not sure how to plan these financials for a deal, have a friend or a contractor help you get an estimate.

The Wholesaler and Investor Relationship

A wholesaler will be a valuable member of your real estate investment team. Do everything you can to stay on their good side, but also be prepared to advocate for yourself in every potential deal.

If you need extra help with evaluating cash flow for a property, download our free loan optimizer at this link, or check out this video series on our YouTube channel.

OPM Gap Funding

What is Gap Funding?

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Fill in the financial blanks of your fix-and-flip! Learn about gap funding for real estate investors and where to find it:

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Gap funding is necessary to take your real estate investing to the next level. And gap funding lenders for real estate investments are all around you. How do you find them?

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You’ve got your property, you’ve got your mortgage… Now you just need gap funding.

 

Read/Watch this to learn who gap funding lenders are, and where you can find them.

 

What questions do you have about gap funding?

 

Read more here about Gap Funding on Hard Money Mike?

Learn more about gap funding and OPM with these videos.

 

 

The 8-Step Guide to BRRRR Real Estate Investment

The 8-Step Guide to BRRRR Real Estate Investment

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How to turn a profit using the BRRRR method.

 

Buy, Rehab, Rent, Refinance, Repeat. That’s the BRRRR method in a nutshell.

Many investors use this method to generate monthly cash flow and build a real estate empire. Following BRRRR is one of the best ways to build a rental portfolio with little to no money out-of-pocket.

Little to no money down for rental properties? How does that work? Here’s our 8-step guide to BRRRR.

1. Set Your Goals

The first step happens before you even look at a property. It’s important to sit down and think about what you want out of your real estate investing experience. Answer the following questions:

  • Where am I in life now? Where do I want to be?
  • Why do I want to invest in real estate?
  • Where do I want to invest?
  • How many properties do I want?
  • How much cash flow do I want to generate?

Before you take any action, find your answers to all of these questions. This will show you where to start, how to go about it, and when to stop. You’ll get much more out of the BRRRR method if you stay aware of the process as it’s happening.

2. Search For Properties

Now, you can begin the hunt for the right properties. But you’ll need to know the right places to look.

BRRRR projects require undermarket properties. You won’t find these on the MLS, or through many traditional realtors. Undermarket properties are found by wholesalers, investor-friendly realtors, or other real estate professionals.

For advice on getting these off-market, discounted properties, read this post from Hard Money Mike.

3. Get Long-term Loan Approval

Before you buy a house, meet with banks about a long-term loan. You’ll want to find the maximum loan amount you qualify for. This becomes important later in the process when you’re maximizing your refinance.

Once you have pre-approval for this loan, you can move forward with the undermarket property you found.

4. Buy with a Short-term Loan

Undermarket properties have fast closings. Once you find a property, you’ll only have a couple days (or a couple weeks, max) to close the deal. As a buyer, the key to a fast closing is a short-term loan.

The most common short-term loan is a hard money. Although you could also use OPM, or another type of gap funding at this point in the process.

5. Rehab

Once you close on the property, you can begin rehab.

For this step of a BRRRR project, it’s important to strike a balance. An undermarket property will require a lot of repairs, but since it’s not a fix-and-flip, you don’t have to go “all out.” It will be a rental, so you’ll want to make it appealing for tenants. But at the same time, you don’t want to go overboard and lose money on the project.

A good guide for how much money and effort to put into the rehab of a BRRRR is the ARV, after-repair value. You should always renovate enough to meet the ARV.

6. Rent

After rehab, your property is ready to rent. Find a trustworthy, reliable tenant, and then we’re at the exciting part – you start earning cash flow!

7. Refinance

Short-term loans are expensive, so don’t get trapped in yours. You’ll want to get in and get out of the hard money loan at your first opportunity. Refinance the long-term loan in order to get the short-term loan paid off ASAP.

Now, with a cheaper loan payment and a tenant, you’re on your way to wealth!

8. Repeat

At this point, you’ll want to consider the goals you outlined in the first step. You can repeat this process until you’re happy you’ve met your goals.

For More Information

Hard Money Mike can help you get started on your BRRRR journey. 

Download our free BRRRR roadmap at this link. And for more resources, check out these videos from our YouTube channel.

 

Brrrr method

 

5 Ways to Make Money in a Volatile Market

5 Ways to Make Money in a Volatile Market

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5 Ways to Make Money in a Volatile Market

Check out our latest Market Watch videos here: https://youtube.com/playlist?list=PLb…

The current market is going CRAZY with increasing interest rates, rising inflation, and supply chain issues. As a real estate investor, how can you prosper in these times? In this video, we share 5 ways to make money in a volatile market. Check it out! STAY CONNECTED ========================

 

What is gap funding

What Is Gap Funding? And How Do You Get It?

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When to use gap funding and how to attract lenders.

A mortgage covers the bulk of the cost of purchasing a new property. But what about all the costs in-between?

There are some big price tags in real estate investment that bank loans won’t usually cover. You’ll still need to find a way to pay for your down payment, the fix-up cost, and any carrying costs for the property.

How do you fill those gaps?

What is Gap Funding?

Gap funding is the money source you use to cover these extra costs in real estate. Private individuals can lend money to fill the gaps in your investment.

All real estate investors at any stage can utilize gap funding. Typically, gap funding is most useful to investors just starting out, who haven’t yet made or saved enough money to fund their own investments entirely.

However, we also see people who are already multimillionaires with years of investing under their belts use gap funding. It’s a great way to leverage investments at any level.

Where Do You Find Gap Funding?

You might find a few banks and other lenders who do gap funding, but the main way to get it is through OPM, Other People’s Money – think of it as Real People’s Money.

These people can be family, friends, or members of a real estate group. These people don’t necessarily have enough to fund your entire flip, but do have $20,000 to $50,000 sitting in an account or IRA. They don’t want to do the actual work and risk of investing, but they do want the potential for a higher return on their money than they’d get from a bank.

How Do You Get Gap Funding?

Getting people to loan you their money may sound easier said than done. After all, OPM is often either secured by second-lien or unsecured, so you wouldn’t put your money in that situation with just anyone.

There are a few key traits you’ll need to show to attract the people who can provide you with gap funding:

  • Respect their money
  • Protect their money
  • Be honest

Having these qualities will be the deciding factor in someone lending to you over another investor.

Respect Your Lender’s Money

Understand what your lender wants and expects out of the deal, and be sure they get it. Make them feel respected and confident with you handling their money.

Protect Their Money

Treat the money professionally – even more carefully than you’d treat your own cash. Be diligent in arranging the proper liens, proper insurance, and proper documents.

Be Honest

Tell your lender everything that happens with your project. They have a right to know what they’re investing in. It’s better to be straightforward and allow your lender to make their own decisions than to keep secrets about the deal until it comes back to bite you.

Grow Your Funding

If you make your lender feel good after the first transaction, they’ll want to come back for another. Good deals can lead to a web of funding. A lender who has a good experience with you will tell their family and friends that you’re a good person to lend to.

Respecting, protecting, and being honest with your OPM helps you grow. Investing is much easier with gap funding covered by OPM, and it’s possible to someday fund entire projects with OPM.

Learn More about Gap Funding and OPM

If you’re interested in growing your real estate investment business, check out the following resources:

Download our free OPM checklist at this link.

Learn more about gap funding and OPM with these videos.