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.

Fix and flip market watch June 2022

Fix and flip market watch June 2022

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Where are the markets for fix and flips and what can we expect in the next 6 months.

I address these questions in this months market watch.

We see signs of less overbidding on homes as interest rates continue to climb.

Median price range homes that have quality of work completed are still moving in days, but larger homes especially in more rural areas are starting to sit.

There is a storm we will have to get through over the next 9 months to figure out our new markets.  After that real estate investors should start to see better deals available to them too flip.

This will weed out some investors and leave more opportunity for the ones who plan wisely.

Looking for other videos on the money side of investing?  Check out our Youtube channel via this link.

Truth about hard money loans

Is Hard Money a Trap?

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Have you heard that hard money loans are a trap?

Here’s what you should do so it doesn’t happen to you.

It’s a big misconception: hard money is a trap.

A lot of investors think if they enter a hard money loan, they’ll never escape. Hard money gets a reputation as a death sentence for your profits.

And like all loans, credit, and other money-borrowing options, if you use it wrong… it does feel like a trap!

We want you to understand what behaviors make hard money loans unprofitable. And more importantly – how to use hard money to your advantage in your real estate investments.

Hard Money Is a Temporary Solution

Here’s where hard money naysayers go wrong: hard money loans should only be a temporary solution. They are not meant to be long-term options for investors.

If you enter a hard money loan with a long-term mindset, then you’ve already fallen into the “trap.” When you treat it like a long-term loan, you’re likely to lose a lot of your profits paying it back.

Hard money is short-term. To make the most of your loan, you have to get in and out of it fast. Here are 3 vital tips to make sure that happens.

Want More Guidance for Your Hard Money Loans?

Hard money is a valuable tool for prepared real estate investors who use it appropriately as a short-term solution.

Let Hard Money Mike give you guidance to get in and get out of your investments quickly and profitably. We’re excited to set you on a path that makes you the kind of money you need to live the life you want.

Read the full article here »

Need to see if you’re paying too much for hard money? Download our HMM Loan Optimizer to quickly find the best hard money option for your project.

You can also check out these videos about hard money on our Youtube channel. Happy investing.

Credit Score Basics: How Lenders Use FICO Scores

3 Simple Ways to Boost Your Credit Score Fast

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Leveraging your real estate investments just got easier with these 3 quick ways to raise your credit score.

Maybe you’ve already noticed it.

Larger lenders are getting into the fix-and-flip hard money space. And many of these companies require credit scores as their underwriting criteria.

In this landscape, your score decides the speed and effectiveness of your journey to fix-and-flip financial freedom.

Your  score will determine your rates, leverage, and overall income from your real investments.

Good or bad, your score impacts every step of your financial process.

So how can you raise your score in a short amount of time?

How Can I Raise My Credit Score?

First of all, it’s helpful to know exactly what a credit score is, which you can read here and here. And how it impacts your real estate investments, which you can read here.

1. Add More Credit to Your Line

Ask your credit card company to raise your credit limit. For example, if you increase your limit from $1,000 to $3,000, owing $1,000 jumps from maxing out your line to only using 33% of it.

Other options that have the same effect are:
Open up new lines of credit, but don’t use them often
When you get a new card, don’t close your old one, just stop using it

Having more available credit will automatically make your accounts owed look better, and raise your score.

2. Get Authorized on Someone’s Good Credit Account

A good credit account:
Is always paid on time
Has existed for awhile
Has a low balance

Ask a parent, friend, or other trusted person if they’ll add you as an authorized user to their credit card account.

This won’t help you immediately open up credit lines with lenders, but it will raise your score.

3. Go Private

This means borrowing money from someone or somewhere to temporarily pay off your credit cards so you can apply for more credit.

Your credit score changes almost daily.

Let’s say you have three credit cards. They’ll each have different reporting schedules. If you borrow private money, you can time payments so your score is increased long enough to open new credit lines.

You can keep the debt paid for 60 days or so while you apply for loans.

Putting in the time and effort for a high credit score more than pays for itself in the leverage it gives you in real estate investments.

Three quick ways bump up your score are to:
Add more credit to your line.
Get authorized on someone else’s good credit account.
Go private – get money from somewhere else to pay off your debts long enough to apply for more credit.

For more tips on building good credit and maximizing real estate investment leverage, check out these helpful videos on our Youtube Channel.

Or you can download our Credit Score Checklist by following this link.

Need Help with Your Credit?  Contact us today for our list of preferred credit boosting companies.

Happy investing.

Credit score and funding a flip

Basics About Your Credit Score

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What a credit score is and why you should care (if you care about your investments).

There’s a magical triple-digit number that seems to decide your fate in this world.

It can determine what car you drive, where you live, and how much money you can have at your disposal. And in some cases, it can make or break your success as a real estate investor.

It’s your credit score.

But it’s not as magical as it seems. There’s a logic to your credit score, and you have the power to change it.

So let’s break it down.

What is a Credit Score?

A credit score is a way for lenders to determine your “creditworthiness.” In other words, your “you-can-trust-me-to-pay-back-your-money”-ness.

Because you know whether someone can trust you with their money. But financial institutions don’t know you like you do.

Lenders need a way to decide if you’re safe to lend to. So your score tells them the story of your financial habits.

Read the full article here »

Need More Information?

Your credit score is incredibly important to keep on your radar. Especially when you’re investing in real estate.

It’s not a made up number that has no effect on your life. But it’s also not as difficult to understand as it may seem at first.

For more tips on building good credit and maximizing real estate investment leverage, check out these helpful videos on our Youtube Channel. You can also download our Credit Score Checklist at this link. Happy investing.

Reach Your Cash Flow Goals

The Way to Get Cash Flow for Your Real Estate Investments that You’ve Never Thought About

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How can OPM benefit your real estate investments? Here are the basics to get you started.

OPM. Other People’s REAL Money.

Not money from a broker or mortgage company or hard money lender. Money from real people to fund your flips and make your investments faster, easier, and more profitable.

OPM vs Private Money

What’s the difference between private money and Other People’s Money? Aren’t they the same thing? Yes and no. They’re related, but there are a few key differences.

Private money is often called “hard money.” It involves going through a broker or a company like Hard Money Mike that lends you private money.

OPM does the same thing, but it’s strictly peer-to-peer, person-to-person. It is private money because it’s a loan outside of a bank. It’s not hard money because you’re not going through a formal company or filling out applications.

What is OPM?

OPM is simple: one person has money and needs a smart place to put it, and one person has a promising property investment but no money to put into it. They form a peer-to-peer transaction.

Both people have the chance to benefit more than they would if they went through a bank. The person with the money gets a simple investment with typically a much higher return than the banks would pay. And the person who needs the money can get it cheaper, faster, and keep it more fluid. Both can end up more profitable and successful.

Taking the OPM route may feel non-traditional from a modern perspective, but historically, it’s the way things have always gotten done. One person has something, another person needs it, so they create a deal where they both benefit.

The Flipper’s Perspective

If you’re the flipper and you have an established relationship using OPM, funding purchases becomes simple. You find a property, and all you need to do is contact your OPM lender and give them details.

“I found a great property, but I need $100,000. We close in a week. Here’s the title company’s information. Please send the money, and we’ll get this taken care of.”

No applications, no appraisals, no middleman. It’s an easier way to borrow money, and usually less expensive than more traditional loans.

The Lender’s Perspective

If you’re the one with the money, you’re probably already looking for a smart place to put it.

Loaning the money to a flipper or other real estate investor will typically give you a better interest rate than a bond, CD, or other interaction with a bank.

How to Make It Work

It’s extremely important that OPM deals are set up to be win-win for both sides. The main reason people avoid OPM is the fear of deals going bad. This system breaks down if one side or the other feels the deal becomes unfair or unsafe.

Let’s talk about how to create a win-win environment.

Priorities for Each Side

Each party has to keep the other party’s interests in mind.

For the flipper, OPM needs to be easy, reliable, and quick. The flipper’s responsibility is to make a good and profitable deal with the other person’s money. If you do that, your OPM lender will always be there to help with your next deal. However, the second you “play games” with their money, the relationship ends, and you lose that source of fast, simple funding.

For the OPM lender, deals need to be secure and detailed. As long as their money is taken seriously, they will be there for the flipper. If you’re the OPM lender, you have to always fund a deal when you’ve agreed to. Don’t leave the flipper high and dry at the closing table.

Setting Up a Proper OPM Relationship

Using OPM may “feel” more casual, but it’s absolutely vital that you get everything in writing. Visit a lawyer, and lay out all aspects of the deal. Everyone will come out more successful if you’re diligent with this step.

Some of the things you’ll want to set up in writing are the following:

  • What is the repayment schedule?
  • What are the interest rates?
  • How long is the loan?
  • What’s the plan with the property?

The clearer, more open, and more detailed you can be with each other, the better the deal and your relationship will be.

The goal is for OPM to be mutually advantageous. People who have money want to find deals that will earn them interest. Flippers need money that flows better and is faster to qualify for. OPM is valuable, so take the time to set it up right.

Want More Details on Setting Up OPM?

Hard Money Mike doesn’t need to be involved with your OPM deals to offer help. We have resources to help you learn how to best set up OPM deals:

  • What should closing look like?
  • What are proper terms?
  • What documents will you need?

We want to keep things flowing in the real estate community.

You can check out more great info on OPM on our Youtube channel, or download our OPM Checklist. Happy investing.

How to invest in real estate with $0

No money to put down on your first investment?

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Money shouldn’t stop you. Use these 3 tips to get started.

You don’t have enough savings. After all, flipping is how you want to start making money, right? And you want to begin that real estate investment journey now.

But if you don’t have the money to begin with… how are you even supposed to start?

We see people do it every day. Here are the 3 main ways people have made successful real estate careers with zero money down.

What Are Other Ways to Start with No Money?

Clients come to us wanting to get into real estate but think they need money in the bank. That’s not always the case.

Here are the 3 key ways we see people start their investments with no money:

  1. If you already have a mortgage, get a HELOC.
  2. Start with money from family, a friend, or an outside partner.
  3. Use a 0% credit card to fund the costs of your investment.

Read the full blog here »

These aren’t the only ways we’ve seen people succeed with a new real estate career. Want even more ways to get into flipping and property investment with zero down? Download our free checklist, or check out these videos on our Youtube channel. Happy investing.