Tag Archive for: escrow

How Escrow Can Make or Break Your Fix & Flip Investment

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Why Escrow Matters

Today we are going to discuss how escrow can make or break your fix & flip investment. In a fix and flip, escrow can be your best friend—or the thing that slows your project to a crawl. When you understand how it works, you can keep your rehab moving fast, avoid costly delays, and protect your profits.

What Is Escrow in a Fix & Flip Loan?

Escrow is the money your lender sets aside for repairs.
It’s there to turn an undervalued property into a market-ready one.

Example:
If you buy a home for $150,000 and budget $40,000 for repairs, the lender might escrow that $40,000.

Lenders want to be sure that money goes to the agreed repairs, not something else. That’s why they hold it in escrow instead of handing it to you all at once.

What Escrow Usually Covers

Every lender is different, but escrow most often covers:

  • Repairs and rehab work from your approved budget

  • Certain agreed costs, like insurance or utilities (if negotiated before closing)

Tip: Always get a clear list from your lender before you close. If it’s not in writing, don’t count on it being covered.

What Escrow Usually Does NOT Cover

Escrow funds are not for:

  • Your monthly loan payments (except in rare cases)

  • Surprises or changes you decide to make mid-project

  • Closing costs

  • Ordering materials ahead of time (pre-orders) unless installed and inspected

Example:
If you decide halfway through to add a deck or upgrade all the windows—without it being in your original budget—you’ll likely need to pay for it yourself.

Why Lenders Use Escrow

Lenders lend based on the property being market-ready. Escrow ensures the repairs get done as planned.
They’ll release the funds only after they confirm the work is complete—sometimes with an inspection or permits.

How Escrow Works Step-by-Step

  1. You do the work. Pay contractors or buy materials.

  2. You submit proof. Bills, permits, or inspection sign-offs go to the lender.

  3. They approve. The lender verifies the work is done.

  4. You get reimbursed. The money goes to you or directly to your contractor.

Note: Some lenders release 10–20% of escrow at closing, but most wait until work is verified.

The Role of Speed in Your Profits

Speed is everything in flipping. The faster you finish, the fewer payments you make, and the sooner you can sell.

Example:
If you finish in 3 months instead of 6, that’s 3 months of payments saved and extra time to start your next flip.

Surprises and Overruns

They happen—old wiring, bad joists, price jumps on materials.
If it’s not in your budget, you’ll need to cover it.

Pro Tip: Build a 20% cushion into your budget.
For a $200,000 purchase + rehab, that’s $40,000 in extra available funds.

This covers:

  • Loan payments during the project

  • Pre-orders for materials

  • Overruns and surprises

Without it, you risk delays while hunting for extra cash—turning a 3-month flip into 6 months or more.

One Step Before You Start Investing

Have your available funds ready before you buy. This might mean:

  • A line of credit

  • A HELOC

  • Business credit cards

  • A partner

  • Private money

Final Word: Treat It Like a Business

Escrow protects the lender, but your job is to protect your timeline and profits.
Know what’s covered, plan for what’s not, and have your extra funds ready.

Ready to make your next flip easier and more profitable?
Let’s talk about how to set up your funding so you can move fast and keep more money in your pocket. Contact us today to get started.

Watch our most recent video about: How Escrow Can Make or Break Your Fix & Flip Investment

💰 Want 100% financing, 100% of the time? Get a copy of my book, Money Buckets: The Millionaire’s Secret to Fix and Flipping: https://tcfcoach.kartra.com/portals/ThvALQYZJB9c 💰 Get my online course, 100% Financing, 100% of the Time: https://TCFCoach.kartra.com/page/pdx2086 💰 Download all our FREE real estate investing tools: https://hardmoneymike.com/investor-tools/

Top 5 Questions to Ask Hard Money Lenders

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Today we are going to discuss the top 5 questions to ask hard money lenders before you get a loan. Not all hard money lenders are the same. That’s why asking the right questions before you sign is key. Whether you’re doing a flip, a BRRRR, or a bridge loan, these five questions can save you time, stress, and a whole lot of money.

1. What Are Your Total Costs?

Don’t just look at the interest rate. Lenders can make their deals sound great by hiding extra fees.

👉 Some charge low interest, like 10%, but add in:

  • 2 points (That’s 2% of the loan upfront!)

  • $1,000 in processing fees

Let’s break that down:

  • Loan Amount: $200,000

  • 2 Points: $4,000

  • Six Months of Interest at 10%: $10,000

  • Processing Fee: $1,000

  • Total: $15,000

Now compare it to another lender:

  • Interest Rate: 12%

  • No Points

  • But $4,000 in other fees

  • Six Months of Interest at 12%: $12,000

  • Total: $16,000

👉 Even with no points, the second lender costs more.

💡 Use a tool like the Loan Cost Optimizer at hardmoneymike.com to compare lenders side-by-side.

2. How Do You Decide Loan Amounts?

Lenders calculate what they’ll lend based on different values. Some use just the purchase price, others use ARV (After Repair Value).

Let’s look at two examples:

  • Purchase Price: $150,000

  • Rehab Costs: $50,000

  • ARV: $300,000

One lender might only give you 75% of the purchase price, or about $112,500.

Another lender might lend based on ARV, offering:

  • 90% of the purchase = $135,000

  • 100% of the rehab = $50,000

  • Total Loan: $185,000

👉 That’s a huge difference. Ask if they use purchase price or ARV to calculate your loan.

3. How Do You Decide Property Value?

This one’s big. Some lenders use real appraisers. Others use in-house tools or AI. The problem? They can value your property way lower than what it’s actually worth.

Example:

  • One lender values the ARV at $300,000

  • Another comes in at just $250,000

If they lend up to 75%, here’s what you’d get:

  • $300,000 ARV: Loan up to $225,000

  • $250,000 ARV: Loan up to $187,500

👉 That’s almost a $40,000 difference in your funding!

Always ask:

  • Who determines value?

  • Can I provide my own comps?

  • Can I dispute a low value?

4. Are There Prepayment Penalties?

Some lenders sneak in rules like:

  • Minimum interest guarantees

  • 3, 6, or 9-month required interest payments

Even if you pay the loan off early, you’re stuck paying interest for those months.

👉 Ask about any minimum interest periods. Make sure the loan fits your timeline.

5. How Do Draws Work?

If you’re doing a flip or a BRRRR, you’ll likely have rehab money held in escrow.

For example:

  • Rehab budget: $50,000

  • That money is held until work is done

  • You’ll get it back in draws (aka stages)

Ask:

  • How fast can I get my draw?

  • Are there fees every time I request one?

  • Do I need an inspection or lien waivers?

👉 If your contractor can’t get paid, they might walk off the job. That’s the last thing you want.

Final Thoughts

These five questions can help you find the best lender for your project:

  1. What are the total costs?

  2. How is the loan amount calculated?

  3. How do you come up with property value?

  4. Are there prepayment penalties?

  5. How do your draws and escrow work?

✨ Want help comparing lenders? Try the Loan Cost Optimizer at HardMoneyMike.com.

Watch our most recent video to find out more about: Top 5 Questions to Ask Hard Money Lenders BEFORE You Get a Loan

Fix & Flip Like a Pro: Hard Money Strategies for Maximum Profits

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Today we are going to discuss how to fix & flip like a pro: hard money strategies for maximum profits. Flipping homes is one of the fastest ways to build wealth in real estate. But without the right funding, your project can stall before it even begins. That’s where hard money loans come in. They offer fast, flexible financing that can cover up to 100% of your deal (in the right conditions).

In this guide, we’ll break down the key numbers, loan terms, as well as roadblocks that can make or break your success. Plus, you’ll get access to a free Excel spreadsheet to help you run your numbers before making a move.

Step 1: Know Your Key Numbers

Lenders evaluate fix and flip deals using three key numbers:

1. Purchase Price

  • This is what you’re paying for the property.
  • Example: $200,000

2. Rehab Budget (Scope of Work)

  • This includes repairs, upgrades, and improvements.
  • Example: $50,000

3. After Repair Value (ARV)

  • This is the projected value after renovations.
  • Example: $350,000

💡 Pro Tip: Your lender will use the ARV to determine how much they can lend. Most lenders offer loans up to 75% of the ARV.

Step 2: Understanding Your Loan Amount

Lenders will calculate your loan based on the ARV, purchase price, and rehab costs.

  1. Maximum Loan Amount (75% of ARV)

    • $350,000 × 75% = $262,500
    • This is the highest loan amount a lender might offer.

  2. How Much You Actually Get

    • Lenders will not give more than the total of your purchase price + rehab.
    • In this example:
      • Purchase + Rehab = $250,000
      • Since $250,000 is less than the $262,500 max loan, you could qualify for full coverage.

✅ Result: If your numbers align, you may be able to secure 100% financing. If not, you’ll need additional funds.

Step 3: What Costs Do You Need to Cover?

Even with hard money financing, you’ll have out-of-pocket costs. Here’s what you should prepare for:

1. Down Payment

  • Lenders typically fund 80–90% of the purchase price.
  • You may need to bring 10–20% of the purchase price in cash.
  • Example: $200,000 purchase price × 20% down = $40,000 out-of-pocket.

2. Rehab Cost Contribution

  • Many lenders fund 80–100% of rehab costs, but you must pay upfront and get reimbursed.
  • Example: $50,000 rehab × 90% lender coverage = $5,000 out-of-pocket.

3. Closing Costs & Loan Fees

  • Loan origination, title fees, and processing costs typically range from 2-4% of the loan.
  • Example: $205,000 loan × 3% closing costs = $6,150.

4. Carry Costs (Holding Expenses)

  • Monthly interest-only payments on the loan.
  • Taxes, insurance, utilities while holding the property.
  • Example: $205,000 loan at 10% interest = $1,700/month.

💡 Pro Tip: Many first-time investors underestimate how much cash they need upfront. Make sure to plan for these costs before diving into a deal.

Step 4: The Biggest Roadblocks & How to Overcome Them

Even great deals can fail if you don’t have the right funding strategy. Here’s what commonly trips up new investors:

❌ Not Having Enough Upfront Capital

✅ Solution: Build your Money Bucket with personal savings, business credit lines, or HELOCs.

❌ Not Understanding Escrow Releases

✅ Solution: Hard money lenders hold rehab funds in escrow and release them in stages. Make sure you can cover materials and labor upfront before reimbursement.

❌ Underestimating Holding Costs

✅ Solution: Budget for at least 4–6 months of carrying costs (interest, taxes, insurance).

💡 Avoid These Issues by Running Your Numbers First!

Step 5: Get Your Deal Funded the Right Way

Hard money loans are powerful tools when used correctly. The key is knowing your numbers, planning ahead, and ensuring you have enough funding to complete the project.

✅ Grab Your FREE Fix & Flip Calculator that is featured in this video that discusses fix & flip like a pro: hard money strategies for maximum profits. 

This tool will help you:
First, Calculate your loan amount
Second, See your cash needed upfront
Finally, Estimate your monthly payments

Got questions about fix and flip loans? Contact us today! Let’s make sure your next flip is your most profitable one yet! 🚀

Need More Funding?

Visit HardMoneyMike.com for more expert advice on real estate loans, BRRRR strategies, as well as funding solutions.

Using Escrow for your Investment Deals

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It is critical to learn how using escrow for your investment deals can help you win in real estate investing!

What is escrow?

Think of it as a reimbursement program. Lenders will lock in a certain amount in the escrow fund. You can then submit draw requests throughout your project. 

Plan ahead for your deals!

Be prepared, you will likely need an additional $50,000 from your own pocket to get the project going before submitting the first draw. To clarify, this is essentially a reimbursement request. Keep in mind that it might take some time to go through the lenders verification process, so it’s important to prepare for a few weeks ahead in order to keep things on track.

How to get initial funds to access escrow:

  1. Business Credit Cards
  2. Lines of Credit
  3. Other People’s Money
  4. Gap Funding

By having full money buckets at the front end, it makes a huge difference in your sucess as an investor. Remember, markets move fast! A stalled project can end up costing more than they are worth! 

Contact Us Today! 

To find out more about using escrow of your investment deals can help you win! Contact us today.

Free Tools For You! 

We also have free tools available! Download the Real Private Money Checklist now to see what changes you need to make in order to get on the right path.

Learn more!

Visit our YouTube channel to learn more about real estate investing and how you can get on the fast track to success! 

How to Use Escrow for Your Real Estate Deals

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If you’re new to the real estate game, learning how to use escrow is a critical step towards success.

Everyone in the fix and flip game is likely going to encounter escrows.

A popular strategy is to use private (or hard money) loans. These can be helpful because they can fund up to 100% of your rehab and are super flexible.

The tricky thing (and where escrows come up) is that a lot of lenders require that you start the project with your own money, reimbursing you later through escrow.

This can become a problem for beginning real estate investors if they’re not prepared to pay that much on the front end. 

Where do you get the money? How and when do you actually access the escrow funds?

How Does Escrow Work?

Think of escrow as a reimbursement program. Lenders lock a certain amount in the escrow fund and you submit draw requests throughout your project.

You’ll likely need an additional $50,000 (from your own pocket) to get the project going to submit the first draw (essentially, reimbursement) request. In order to keep things moving, you should also try to have pocket cash for the second draw as well.

It looks a bit like this:

Week 1:

  • Put your own money in to start project
  • At the end of the week, submit your 1st escrow draw to your lender

The lender might take some time to go through their verification process, so you should prepare for a week two along these lines:

Week 2:

  • Lender begins reviewing 1st draw request
  • You keep moving forward with your project, paying with your own money bucket
  • At the end of the week, you submit your 2nd draw request
  • Lender reimburses 1st draw and begins reviewing 2nd

Hopefully after the first two draws, you won’t need any more out-of-pocket cash. 

Also, remember that those initial draws are covered, you just need the money up front, and then they reimburse you out of escrow. 

How to Get Initial Funds to Access Escrow

You need a full money bucket – a supply of personal funds you can use for those out-of-pocket expenses.

How can you make sure you’re money-prepared before you get into this? 

1. Business Credit Cards

If you can, get business credit cards. Business cards are a great way to protect your personal credit score. Also, if you’re smart about choosing a 0% card, you could go through the whole process without paying any additional interest.

If you have questions about setting up your business credit cards, check out The Cash Flow Company, our sister company that specializes in money-preparedness.

2. Lines of Credit

We recommend business lines of credit or, at the very lest, HELOCs on your home. The most important thing is to keep your projects going, and having a variety of lines of credit is going to help.

To learn more about bank lines or HELOCs, check out this article from The Cash Flow Company.

3. Other People’s Money (OPM)

You can look to family, friends, neighbors, acquaintances, anybody out there who’s looking to put some money to work. 

Even smaller amounts like $25,000 will make a significant difference, and you can offer a better rate than larger banks.

OPM is a crucial piece of filling your money bucket for those initial draws, and it’s also a relatively safe investment for people around you.

4. Gap Funding

Gap funding refers to any loan you get to fill a gap in your project. 

Lenders still look for security in the loan, but if you’re able to show security, gap funding is another possibility for paying for those first escrow draws. 

Hard money loans can often be used as gap funding, and you’re welcome to reach out to use if you want to discuss a deal with us at Hard Money Mike.

You’re Ready to Use Escrow Funding!

Having a full money bucket at the front end makes a huge difference in your success as an investor. Markets move fast, and stalled projects can end up costing more than they’re worth. 

These strategies can fill your money bucket and help you access escrow quickly and successfully.

If you have any questions, feel free to reach out to us at Info@HardMoneyMike.com. You can also contact our sister company at Info@TheCashFlowCompany.com to discuss business credit cards or other aspects of being money-ready.

Also, check out the free tools, calculators, and information on our website. Our only goal is to help you be successful on your investment journey.

Happy investing!