Why a 12% Hard Money Loan Can Cost You LESS Than 8.5%

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At first, it sounds crazy. Why a 12% Hard Money Loan Can Cost You LESS Than 8.5% does not seem to make sense. However, once you break it down, it becomes very clear. The truth is, the interest rate is only one part of the total cost. You also have to look at fees, points, and most important, time. Because of that, a higher rate loan can actually put more money in your pocket on the right deal. So, let’s walk through a simple example to show you how this works and how you can use it to protect your profits.

What Is Hard Money (and Why It Matters)

Hard money is simple. It is a loan backed by real estate. However, it works very different than a bank. Instead of focusing only on your income, it focuses on the deal itself. Because of that, it can move fast, which helps you win deals that others miss. In addition, it stays flexible, so it can fit projects that do not fit inside a bank’s rules. So, while banks stay inside the box, hard money works outside the box. And because of that, it becomes a powerful tool for investors who want speed, flexibility, and more control over their deals.

The Big Myth: Lower Rate = Lower Cost

Most investors believe that a lower interest rate always means a cheaper loan. However, that is not always true. In fact, sometimes a 12% loan can cost less than an 8.5% loan. At first, that sounds backwards. But once you look at the full picture, it starts to make sense. The truth is, the rate is only one piece of the puzzle. You also need to look at fees, time, and how long you will hold the property. Because of that, focusing only on the rate can actually cost you money.

Real Deal Example (Simple and Clear)

Let’s walk through a real example so you can see how this works. In this deal, the purchase price is $450,000, and the rehab is $50,000. The after repair value is about $700,000. The lender will fund 90% of the purchase and 100% of the rehab. Now, there are three loan options to choose from. The first option is a hard money loan at 12% with one point and almost no extra fees. The second option comes in at 9.75% with higher points and added fees like draws and inspections. The third option has an 8.5% rate but includes even more fees and processing costs. At first glance, the lower rate looks better. However, we need to look deeper.

Now Let’s Look at Time (This Changes Everything)

Time is the key factor that changes everything. First, if the project takes about three months, the 12% loan actually comes out cheaper by about $2,600 to $4,000. This happens because you avoid many of the upfront fees and extra costs tied to the lower rate loans. Next, if the deal stretches to six months, all three options come very close in total cost. This is the break-even point where rate and fees balance out. However, if the deal goes longer, such as nine to twelve months, the lower rate loan becomes the better option. This happens because interest has more time to build, and over time, the lower rate saves more money.

The Simple Rule (Easy to Remember)

So, here is the simple rule you can remember. If the deal is short, a higher rate loan can often cost less. On the other hand, if the deal is long, a lower rate loan will usually win. Because of that, you always want to match your loan to your timeline. This one shift in thinking can save you thousands of dollars on every deal.

Why This Happens (Plain English)

Now let’s break down why this happens in simple terms. First, points are just prepaid interest. So, when you pay points, you are paying part of the interest upfront instead of over time. Next, fees like draw fees, inspection fees, and processing costs can add up quickly. Even though they may seem small, they slowly eat away at your profit. Finally, time multiplies everything. The longer you hold a deal, the more interest you pay, and the more those costs grow. Because of that, time plays a bigger role than most investors think.

A Quick Example You Can Feel

Let’s make this real. Imagine you expect to make $40,000 on a deal. Now, each extra month you hold that property costs you about $4,000. So, if your project runs three months longer than planned, you lose $12,000. That is a big hit. And in many cases, those delays happen because the funding was not set up correctly from the start. Because of that, having the right loan and enough funds ready can protect your profits.

Why Hard Money Can Be the Best Choice

Even though hard money often has a higher rate, it can still be the best choice for many deals. First, it allows you to move faster, which helps you finish projects sooner. Next, it reduces delays, which keeps your costs down. In addition, it often has fewer hidden fees, which means more money stays in your pocket. Finally, it allows you to complete more deals each year. And when you do more deals, your total profit grows.

Protect Your Profits with Better Funding

You may have heard this before: you make your money when you buy, but you protect it with your funding. What this really means is that you need to choose the right loan for each deal. You also need to match your loan to your timeline. In addition, you should always look at the total cost, not just the rate. Because every deal is different, your funding should be different too. When you take the time to do this right, you keep more of your hard-earned profit.

The Smart Move: Run the Numbers First

Before you move forward with any deal, take the time to run the numbers. First, compare at least two or three lenders. Next, look at the full picture, including rate, fees, and time. Then, test different timelines to see how the cost changes. When you do this, you can clearly see which loan is best for your situation. This is exactly why tools like a loan optimizer are so valuable. They help you make smart decisions based on real numbers, not guesses.

Final Thought

So, yes, a higher interest rate can actually cost you less. However, this only works when the deal moves fast. That is why smart investors do not chase the lowest rate. Instead, they focus on the best loan for the deal in front of them. Because when you choose the right funding, you do more than save money. You protect your profits and set yourself up for long-term success.

Watch our most recent video to find out more about: Why a 12% Hard Money Loan Can Cost You LESS Than 8.5%

Hard Money: The Out-of-the-Box Loan Real Estate Investors Need

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Real estate investing is full of deals that don’t fit the normal rules. However, that’s often where the best opportunities are found. That’s why understanding Hard Money: The Out-of-the-Box Loan Real Estate Investors Need can change how you look at funding. Instead of getting stuck when a deal doesn’t fit the bank’s box, you can move forward with speed, flexibility, and confidence.

What Is Hard Money?

When real estate investors talk about hard money, they are talking about out-of-the-box lending. So, what does that really mean? Most loans today come from big lenders. However, those lenders work inside a tight box. They want perfect deals, clean properties, strong credit, and clear history. But here’s the problem—not every great deal fits in that box. That’s where hard money comes in, and because of that, investors can move forward when others get stuck.

“In-the-Box” vs “Out-of-the-Box” Lending

In-the-Box Lending (Traditional Loans)

Most lenders want a simple and safe deal. For example, they prefer a single-family home, sometimes up to 3–4 units. In addition, they want a credit score over 700, past experience, and money into the deal. Also, they look for strong comparable sales nearby. So, in short, they want everything to fit neatly into their system.

Out-of-the-Box Lending (Hard Money)

On the other hand, hard money looks at deals in a different way. Instead of asking, “Does this fit our rules?” they ask, “Does this deal make sense?” Because of that, hard money can fund deals that others won’t, and that is why it plays such a key role for investors.

Why Investors Need Hard Money

Real estate is not always clean and easy. In fact, many of the best deals are messy, unusual, or time-sensitive. So, if you only rely on traditional loans, you will miss out. However, when you use hard money, you gain speed, flexibility, and opportunity. More importantly, you gain control over your deals, which helps you move faster and make better decisions.

Real Examples of Out-of-the-Box Deals

Let’s make this simple. Here are a few real-world examples that show how hard money works.

Example 1: Quick Flip (2–4 Weeks)

Sometimes, you find a deal you don’t want to fully rehab. Instead, you clean it up, list it fast, and sell it quickly. Traditional lenders usually won’t touch this type of deal. However, hard money can step in, and because of that, you can move quickly and lock in profits.

Example 2: Double Closing (Wholesale with Ownership)

In some deals, you buy the property first and then sell it to another buyer. This is called a double closing. Now, many lenders won’t allow this structure. But again, hard money can step in and help you complete the deal smoothly.

Example 3: Land Deal

Here’s a simple example. You buy land for $300,000, then you split it into 8 lots, and after that, you sell each one for $75,000 to $100,000. That creates strong profit potential. However, most lenders will say no to this type of deal. Meanwhile, hard money sees the opportunity and focuses on the upside.

Example 4: Small Town Property

Many lenders avoid small towns because there are fewer sales and fewer comparable properties. Because of that, they feel the deal is too risky. However, some of the best deals live in small towns, and hard money works well in these areas. So, instead of missing out, you can move forward with confidence.

Example 5: Finish a Project Loan

Let’s say you are 80% done with a project, but then you run out of money. Now, the project slows down, and as a result, your profit starts to shrink. However, hard money can step in, fund the remaining work, and help you reach the finish line faster.

Example 6: Bridge Loan

Sometimes, you need to buy a new property while selling another one. That’s where a bridge loan helps. It allows you to move forward without waiting, and then once your old property sells, the loan is paid off. Because of that, you keep your deals moving instead of getting stuck.

What Hard Money Really Cares About

This is where things get simple. Hard money is not focused on perfection. Instead, it focuses on the deal, the exit plan, and the opportunity. In other words, does the property have value, can you sell or refinance it, and is there profit and equity? If those three pieces work together, then the deal can work, and that is what really matters.

What Hard Money Does NOT Focus On

Unlike traditional lenders, hard money is more flexible. For example, your credit score matters less, your experience is not always required, and your income is not the main focus. Instead, the deal leads the way. Because of that, even a first-time investor can succeed if they find the right opportunity.

Why This Matters for Your Profits

Here’s the truth most investors miss—the best deals are often the hardest to fund. So, if you only use traditional loans, you move slower, miss deals, and lose profits. However, when you add hard money to your strategy, you move faster, close more deals, and increase your profits. As a result, you create more opportunities over time.

Simple Story to Bring It Together

Think about this like driving across town. If you have full funding, it’s like hitting every green light. On the other hand, if you have some funding, it’s like hitting every other light. And if you don’t have funding, it’s like hitting every red light and sitting in traffic. So, who gets there first? More importantly, who makes more money?

When Should You Use Hard Money?

You should use hard money when the deal does not fit the normal box, when you need speed, when you need flexibility, or when you see a strong profit opportunity. Because at the end of the day, if the deal makes sense, hard money can help you make it happen.

Final Thought

Real estate investing is not about perfect deals. Instead, it is about finding good deals and having the right funding to close them. So, don’t let the “box” limit your success. Because when you think outside the box, that is where the real profits live.

Next Step

If you have a deal that feels a little different, that might be your best deal. So, take a second look, run your numbers, and get a second set of eyes. Because the right funding can turn a “maybe” deal into a real profit.

Watch our most recent video to find out more about: Hard Money: The Out-of-the-Box Loan Real Estate Investors Need

How to Get the Best Rates for a Hard Money Loan

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Today we are going to discuss how to get the best rates for a hard money loan! Let’s talk about the truth about hard money rates. More importantly, let’s talk about how you can save real money on them.

After all, many investors wonder why two people send in the same deal, yet one gets better rates, better terms, and faster closings. The good news is this isn’t luck. Instead, it’s about preparation, fit, and presentation.

Let’s break it down step by step.

Why Hard Money Rates Are All Over the Place

First of all, hard money is not a bank loan.

Because of that, rates do not come from one big Wall Street rulebook. Instead, every lender sets their own guidelines. As a result, you may see one lender offer 9.5% while another offers 13.5% on the same deal.

At the same time, one lender may cap you at 70% LTV, while another offers 75% of ARV.

However, here’s the key point: most of the pricing comes down to you and your deal.

So yes, shopping around matters. Even more important, learning how to attract better terms matters even more.

Understand This First: Hard Money Is a Segmented Market

Before anything else, you need to know this:
Every hard money lender has their own bucket of money.

Because of that:

  • Each lender has different rules

  • Each lender wants different types of deals

  • Each lender tightens up when their money runs low

So, when one lender pulls back, another may still be aggressive. That’s why understanding the market helps you land better terms faster.

The 4 Biggest Mistakes That Drive Up Your Rates

Now, let’s look at the mistakes that quietly cost investors thousands.

1. Not Having Your Numbers Ready

First and foremost, lenders want to know you understand your deal frontwards and backwards.

So before you submit anything, make sure you know:

  • Purchase price

  • ARV

  • Scope of work

  • Rehab budget

  • Timeline

For example, when you clearly explain your numbers, you signal confidence. Because of that, lenders often move faster and sharpen their terms. On the other hand, when numbers feel fuzzy, your deal often drops to the bottom of the pile.

Preparation matters.

2. Not Showing Enough Liquidity

Next, liquidity plays a big role in hard money underwriting.

Why? Because lenders want to know:

  • You can make payments

  • You can handle surprises

  • You won’t stall the project

For instance, if an unexpected repair pops up, liquidity keeps the project moving. As a result, lenders feel safer, which often leads to better pricing.

3. Missing the Mark on ARV

Just as important, your ARV must be spot-on.

That means:

  • Using nearby comps

  • Matching square footage

  • Matching beds, baths, and garages

  • Staying in the same property type

Remember, appraisers follow national standards. So if your comps stretch too far, your deal weakens. However, when your ARV makes sense, lenders gain confidence. And when you buy right, you can fix almost anything that comes later.

4. Not Knowing the Lender’s Sweet Spot

Finally, many investors send good deals to the wrong lender.

Some lenders prefer:

  • Small commercial

  • Condos

  • Rural properties

  • City-center homes

  • Small loan sizes

  • Large loan sizes

So before you submit, ask yourself: Does this deal match what this lender likes?
When it does, rates and terms often improve. When it doesn’t, pricing usually gets worse, or the deal gets declined.

How Hard Money Lenders Actually Price Deals

Now let’s talk about how lenders really think.

In simple terms, pricing depends on:

  • Your experience

  • The deal fit

  • Available capital

  • Loan size

  • Clean documentation

For example, when lenders have extra money to place, pricing often improves. Meanwhile, when money is tight, lenders get picky.

Most importantly, lenders focus on math—not emotion. They want:

  • Interest paid on time

  • Clean exits

  • Fast turnover to the next deal

So the easier you make that process, the better your leverage becomes.

Rates, LTV, and How to Lower Your Costs

Here’s another powerful lever: loan-to-value.

When you reduce lender risk, rates usually drop.

For instance:

  • Putting in 10–25% down often improves terms

  • Covering repairs yourself can lower rates

  • Using outside funds reduces points and interest

At the same time, tools like HELOCs or 0% credit cards can lower your blended cost. For example, borrowing repairs at 7.5% with no points often beats paying 10–12% plus points through hard money.

So always ask lenders:

  • What happens at 10% down?

  • What happens at 20% down?

  • What if I cover the rehab?

Then compare the total cost. Small changes add up fast.

Hard Money vs Banks: Know the Difference

Of course, banks offer lower rates. However, they also require:

  • Tax returns

  • Work history

  • Long approval timelines

In contrast, hard money costs more on paper but offers:

  • Faster closings

  • Higher LTVs

  • Flexible property types

  • Creative structures

Because of that, hard money can actually save you money when speed, flexibility, or deal certainty matters.

How to Get the Best Deal Every Time

To wrap this up, getting the best hard money rates comes down to this:

  • Know your numbers

  • Match the right lender

  • Reduce risk where possible

  • Present a clean, clear deal

When lenders see a solid plan, they respond with better terms.

And finally, if you want help comparing options, use a Loan Cost Optimizer. It lets you compare multiple scenarios side by side, so you can see the true cost of each option.

Because in the end, every deal is different. And the investor who compares wins.

Bottom line:

Shop every deal. Prepare every file. And always know your numbers. That’s how you stay on the fast track and keep more money in your pocket.

Watch our most recent video to find out more about: How to Get the Best Rates for a Hard Money Loan

Download our free Loan Optimizer, to see which loan option is best for you!

Quick Guide to Pricing Properties as a Real Estate Investor

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Today we are going to share a quick guide to pricing properties as a real estate investor. Pricing a property is one of the most critical skills a real estate investor can master. It’s about more than just guessing a number, it’s about understanding the market, analyzing data, and knowing your strategy.

Start by looking at comparable sales in the area, also called “comps.” For example, if you’re eyeing a three-bedroom, two-bath property, compare it to others with similar features sold nearby in the last 6–12 months. Comps give you a realistic idea of what buyers are willing to pay.

Next, think about the property’s potential value after any upgrades. This is especially important if you’re planning a fix-and-flip project. Let’s say similar updated homes in the area sell for $300,000, and your estimated renovation costs are $40,000. You’d want to buy at a price low enough to leave room for profit.

Also, don’t overlook the local market trends. Is the area growing or declining? A hot market might mean higher prices and faster sales, but a slower market could call for more conservative pricing.

Finally, remember to factor in your investment goals. Are you holding the property as a rental or flipping it for a quick profit? Your strategy will shape what “right price” means for you.

Pricing is both an art and a science, but with research and a clear plan, you can find the sweet spot to maximize your return.

Contact Us Today! 

Would you like to discuss our quick guide to pricing properties as a real estate investor?  Contact us today to find out more about what to look at when comping! 

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We also have free tools available! Download the Quick Deal Analyzer to see if your potential property will be a good investment.

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What Is a Bridge Loan?

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What is a bridge loan, and how should a real estate investor use it?

Let’s get the obvious out of the way first: they are not used to buy a bridge.

Then why are they called a “bridge loan”? Because they’re short-term loans that bridge a gap left by other financing or by the timing of your investments.

How Does a Bridge Loan Work?

Bridge loans fill a need for short-term capital. These loans have a short duration and cover a gap from:

  • Hard money to long-term financing.
  • One property selling to buying another.
  • Covering a down payment or closing faster on a new property.

They’re always secured by your current property. For most bridge loans, you pay them off between a few weeks to a few months later.

When Is a Bridge Loan a Good Idea?

You can use bridge loans to purchase a property while waiting on another property to close. Once the first property sells, you use that money to pay the bridge loan off.

The loan works perfect when a bank is dragging its feet to close a loan, or asks for another 30-60 days for processing.

As long as there is a property with good equity available, you can use it as collateral for the bridge loan.

More Info on Real Estate Investing

Hard Money Mike has been assisting real estate investors for over 20 years. If you have questions about bridge loans, we are always here to help.

Not looking for bridge loans? You can also ask us about hard money, traditional lending, setting up bank lines of credit, and more. Email us any questions at Info@HardMoneyMike.com.

For more real estate investing resources:

If you get connected, you accelerate your cash flow. Happy Investing.

What Are Property Values?

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What property values should you know as a real estate investor?

In real estate investing, there are several values you need to know when looking at a deal so you can understand your potential profits and cash flow.

The better you know your values, the more likely you are to be a successful investor.

5 Kinds of Property Values Investors Should Know

Let’s go over the 5 main values you need to know. To find any of these values, you must compare like-properties in like-areas to get an accurate number.

1. As-Is Value

This is the market value of the property in its current condition. Aka, what you could buy it for right now. With no repairs, no updates, and no other conditions. You take it as it sits with this value.

2. After-Repair Value (ARV)

This is the estimated future value of the property once all repairs and updates are completed. This is a major value used in fix and flips and under-market rental purchases (think BRRRR).

ARV is contingent on the quality and quantity of work completed on the property. It is not a true market value but a guess about what it will be in the future.

3. Appraised Value

This is the value of the property as determined by an appraiser whenever they do an appraisal. Lenders use this value to determine the current amount they can lend on.

The appraised value is usually based on comparisons, like homes that have sold in the same area within the last 6 months. It’s also based on the condition, size, location, and features (like number of bedrooms, bathrooms, garage spaces, etc.) of the property.

4. Market Value

This is the value the market is willing to pay for the property right now, based on the current supply and demand of like-properties. Market value may be higher or lower than appraised value for reasons such as:

  • Demand for homes is greater than the current supply of homes. This means there are more buyers than their are sellers, so buyers have to overpay to get a property.
  • A property needs to sell faster than market conditions. This limits the supply of buyers able to close quickly, in turn lowering what the market will pay.
  • Quick positive migration. This means there’s a big uptick in the number of buyers moving into an area within a short amount of time.

5. Loan-to-Value (LTV)

This is the percentage rate a lender will lend up to on a property. If a lender states they lend up to 80% LTV, then that means they’ll loan $80k for every $100k in appraised value.

Lenders will have different LTVs based on the type of loan they offer. Typically, cash-out loans and borrowers with low credit scores will get the lowest LTV options.

What Else Do Real Estate Investors Need to Know?

Looking for what value-add properties are? We have a blog on that here.

For more real estate investing resources:

Get connected and accelerate your cash flow. Happy Investing.

What Is a Value-Add Property?

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In real estate investing, we are focused on one type of property: value-add.

Value-add is the practice of taking a property and increasing its market value – but how? By:

  1. Updating it
  2. Increasing the income from it
  3. Changing the use of it

Typically, you will increase the value by more than what you put into it, thus creating a profit for you.

“Value-add” is the opposite of buying a property that is “at retail” or “turn-key.”

What Does a Value-Add Project Look Like?

Here are a few examples of value-add investments:

  1. A fix and flip investor purchases a run-down house. They complete a rehab to add value and realize a gain or profit from the sell.
  2. A real estate investor buys a small house in a neighborhood with larger homes around it. They add square footage to the property to bring it up to the local market. Selling or renting this now larger property creates profits for the real estate investor.
  3. A land developer takes a large tract of land and subdivides it into smaller home sites. The smaller lot sales will be bigger than just selling one large lot.
  4. A real estate investor buys an 8-plex that is currently only at a fraction of the market rents. They increase the rent, creating both more cash flow and a higher valuation of the property.

As you can see by these examples, in the world of value-add properties, you create profit and cash flow.

How to Learn Real Estate Investing

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Get connected and accelerate your cash flow. Happy Investing.

How Much Does Hard Money Cost?

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How much does hard money cost? Are these loans expensive?

Is hard money expensive? The quick answer is no, when used correctly.

Hard money loans are actually cheap when used in transactions that fit what they’re intended for.

Pros of Hard Money

Hard money loans are helpful in a few ways:

  • Using hard money is cheaper than taking on a partner.
  • Hard money lenders focus on real estate investors, unlike most banks.
  • It’s easy to qualify for.

Getting a hard money loan is much quicker than the process for a bank loan. In the real estate investment community, closing quick will: 1) get you the deal first, and 2) often get it at a better price.

When investors add up the savings they can get by closing fast with hard money loans, it’s clear this form of financing is a bargain. Missing out on deals and discounts can be the end of your lucrative real estate investing business.

When NOT to Use Hard Money

That being said, hard money does not belong everywhere. Used wrong, it can cost you big time. Here are some things to keep in mind:

  • It does NOT replace a bank loan.
  • If you have 30 to 60+ days to close and have a bank that works well with investors, you should be using a bank over hard money.
  • If you don’t expect to sell or refinance ASAP, a hard money loan probably isn’t right for you.

When hard money loans are used on the right deals for the right borrower, they put more money in your pocket. To increase your speed of investing and increase your cash flow hard money is one of the best tools.

At the end of the day, is it not your goal as a real estate investor to put more money in your pocket?

How Much Does Hard Money Cost?

How much do hard money rates cost? Typical hard money across the country runs from between 8% to 14%. Your actual rate will depend on your loan-to-value and your specific lender’s points and policies.

People see that these rates are higher than bank loans, and they assume it’s a scam. You have to remember that the flexibility, speed, and ease of hard money loans used right helps them pay for themselves.

How to Get a Hard Money Loan

Hard Money Mike has been assisting real estate investors for over 20 years. What form of financing are you looking for?

Contact us for hard money, traditional lending, and setting up bank lines of credit. Email us any questions at Info@HardMoneyMike.com.

Lastly, for more real estate investing resources:

Get connected and accelerate your cash flow. Happy Investing.

5 Paths to Financing Your Loan

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Did you know you have more than one option when it comes to financing your property investments?

Investor Loan Chart

As you can see, there are 5 paths to take with financing your properties:

  1. Standard/Traditional
  2. Non-Standard
  3. Local Banks
  4. EZ Loan
  5. Limited Credit or Experience Loans (also known as Non-QM)

So, which loan type is best for your project so you can boost your cash flow and reach your goals faster? Find out here on our sister site, Investor Real Estate Loans.

What’s Your 2-Year Plan?

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Close your eyes. Clear your mind. Take a deep breath.

Now, let’s pretend we’re talking to each other two years from now. What happened during that time period that made you proud and put a smile on your face? How does your cash flow look? What kind of work schedule do you have? How does life look for you and your family?

When it comes to investing, we have discovered that thinking ahead two years leads to the most success. Why two years? Well, it’s short enough to imagine without being overwhelming, and it’s long enough to create tangible, positive change in your life.

Coming up with a plan is as easy as one, two, three:

Step 1: Imagine where you want to be in two years.

Step 2: Evaluate where you’re starting at today.

Step 3: Create a plan that connects your current reality to your future dreams.

How do you formulate an actual plan? Well, that’s what our team is here to help you do. It’s just a matter of picking up the phone and giving us a call to chat.

One conversation can change your future…and your life!