Tag Archive for: #Hard Money Mike

Are You Paying Too Much for Your Real Estate Loans?

Are You Paying Too Much for Your Real Estate Loans?

Hey there! Ever wonder if you’re paying too much for your real estate loans? It’s a common concern, especially with all the myths floating around about hard money being a wallet-drainer. But fear not, because we’ve got a nifty tool that can help you cut through the confusion and get a clear picture of what your loan will really cost you. Let’s dive in!

The Loan Cost Optimizer: Your Money-Saving Sidekick

Introducing the Loan Cost Optimizer! This handy tool takes the guesswork out of loan expenses by allowing you to compare costs and fees from different lenders. Think of it like a virtual cost calculator tailored specifically for real estate investors.

How It Works

  1. Input Your Costs:

    Start by plugging in your loan details, such as interest rates, loan duration, and any additional fees.

  2. Compare Your Options:

    The Loan Cost Optimizer crunches the numbers and presents you with a side-by-side comparison of different loan scenarios.

  3. Find Your Best Deal:

    Explore various loan options based on factors like project duration and required down payment to determine the most cost-effective choice for your needs.

Debunking Myths

There’s a misconception that hard money loans always come with exorbitant costs. However, our tool reveals that hard money isn’t always the priciest option. In fact, you might be surprised to find that it often stacks up favorably against other lenders, especially when considering factors like speed and flexibility.

Quality vs. Complexity

When it comes to choosing a lender, quality matters—but so does simplicity. While banks may offer perceived “higher quality” loans, they often come with a mountain of paperwork and stricter requirements. On the other hand, hard money lenders offer a streamlined process with fewer hoops to jump through, making them a viable option for many investors.

The Bottom Line

At the end of the day, what matters most is finding a loan that fits your needs and budget. The Loan Cost Optimizer empowers you to make informed decisions about your financing, helping you save both time and money in the long run.

Get Started Today!

Ready to take control of your loan costs? Head over to hardmoneymike.com to download the Loan Cost Optimizer for free. It’s easy to use, customizable to your specific project, and could potentially save you thousands of dollars. So why wait? Happy investing!

Watch our most recent video to find out more about: Are You Paying Too Much for Your Real Estate Loans?

Hard Money: Why You Have Nothing To Fear

Hard Money: Why You Have Nothing To Fear

Today we are going to discuss why you have nothing to fear when it comes to using hard money. Many believe that hard money lenders are loan sharks who are waiting to take their property from them. However, this could not be further from the truth! Hard money is there for the right investor and for the right property. It can help investors out when other lending options are not meeting their needs. No need to fear! Let’s take a closer look!

What is hard money?

Hard money is based on a hard asset and is not typically based on your income or credit. There is no need to fit into a box either. Hard money is an excellent choice because it may be in a second, third, or even a cross lien on the property. Don’t let the misconceptions prevent you from taking advantage of one of the most flexible lending options available! Just to clarify, a hard money loan is typically referred to as a bridge loan. A bridge loan is a short term loan that is used to quickly get you from where you are to where you’re going quickly. Normally these loans can range from 3 to 12 months.

Flexibility at a better rate!

In many instances, a hard money loan will have a better rate than a traditional loan. This is due to the fact that there is little competition for us as hard money lenders. There are very few people who do this, and there are more people who are looking for hard money. All of the lenders want in return is their money back and the interest on the borrowed amount. Do you need a loan that will fit your unique needs? Hard money loans will provide you not only the flexibility to meet your unique needs, but a better rate as well.

Protection for the investor and the lender.

One of our main goals is to make sure that everyone is protected throughout the process when providing a hard money loan. This includes having loan docs, liens, and everything in between to ensure that it is all written out correctly. Here at Hard Money Mike we also make sure that there is a third party involved in the process. In doing so, it will not only protect the customer, but the lender as well. 

Hard money vs traditional loans.

A traditional loan looks at three factors when investors apply for a loan. These factors include credit score, loan to value, and income. Let’s take a closer look.

Credit Score:

In regards to traditional lenders, if you don’t have a good credit score, you are kicked out. Hard money on the hand doesn’t take into consideration your credit score. Instead, they look at your credit to make sure that you are paying off your debt in a timely fashion.  

Income:

Hard money lenders are also not concerned about your income or if the property is making money. Instead, their main concern is whether or not you have good security for the loan. 

Down Payment:

Another thing we need to take into consideration is the down payment. If you bought a house for $200K, but it is worth $300K, then you got a good deal in the eyes of a hard money lender. Traditional lenders on the other hand are not interested in it being a good deal. They will only lend based on what the property is worth.

Uniqueness:

There are very few lenders who are going to do a second, third, multiple cross liens, or land purchases. Here at Hard Money Mike we call it the 911 credit score. We are giving people a private loan to pay off their credit cards by putting a  lien on a property. This in turn allows them to get their credit score up, and can result in a better loan later on. 

Getting our money back.

Another thing that we need to take inconsideration is whether or not we will get our money back in a timely manner. We don’t want to be involved in a transaction where someone can’t pay us back. This would unfortunately result in a legal process. Therefore, we want to make sure that we set both of us up for success. Keep in mind that as long as you have a good deal, good property, and a good exit strategy, a hard money loan is the easiest loan to get. 

We are here to help!

Hard money loans provide the flexibility you need without having to navigate the rigid criteria of traditional lenders. Contact us today to find out more about hard money and how it can help you get on the path to success. 

Watch our most recent video to find out more about Hard Money: Why You Have Nothing To Fear.

Bridge Loans 2024: Real Estate Investing Must-Know

Bridge Loans 2024: Real Estate Investing Must-Know

Investors wonder what a bridge loan is and how it can help them achieve their real estate investing goals. Today we will discuss bridge loans and what every real estate investor needs to know before jumping in. To clarify, a bridge loan is a short term need for money until some other event happens. This includes selling a property, refinancing a property, and so much more! Start by asking yourself what you can use the money for and how can you make money?

Bridge loans for usage loan.

A usage loan is needed when someone has too much debt on their personal credit cards. Once these cards are paid off, the investors credit score will increase. We did three usages loans last month! For example, one customer used a bridge loan to pay off their credit cards. After their credit score went up, they refinanced with a DSCR. The money from the refinance was used to pay off credit cards. Bridge loans are an excellent tools that will open doors that were previously closed. They will also provide opportunities to get a better rates on long term loans.

Bridge loans for fix and flips.

Bridge loans are a great way to bridge the gap between fix and flip projects. It is important that they keep their crews working and their business going during this transition. In regards to the property that is listed or getting ready to list, it holds the equity that is needed to move onto the next investment. That is where a bridge loan can help. It puts a lean on the property that you’re selling in order to help you buy the next property. Once the property sells, the bridge loan can then be paid off and your next project is helping you to move forward. 

Bridge loans to finish a project.

Investors often need additional funds in order to finish projects. This could include a pop top, scraping, construction loan, or even a fix and flip. Whether the escrow won’t pay out until you hit a certain amount, or you just ran out of money, a bridge loan can help you achieve whatever you need.Once again, a bridge loan is a short term solution to get investors onto the next step. Don’t let your property stall! Remember you still have to pay your contractors, laborers, taxes, insurance, and interest on the first mortgage. We have done bridge loans for $11K to $180K. The loan amount is based on what the property will be worth in the end. Do you need to finish a project before spring season, but don’t have the extra money? Contact us today to find out more! 

Bridge loans to buy a good deal quickly. 

Many investors use a bridge loan to help them buy a property that is a really good deal prior to getting the financing lined up, or delayed purchase financing. In most cases investors are not getting their finances secured before the hard close date. Here at Hard Money Mike we can come in and do a 3 month bridge loan to ensure that they won’t lose the property. In this situation, a bridge loan would allow them to secure the property until they get their financing in order.

Not your traditional loan.

Unlike traditional lenders, we are not looking for appraisals or asking you to validate your income. A bridge loan’s primary purpose is to fill a lending gap to get you to a better spot. Don’t confuse this loan with a DSCR loan. A DSCR loan is a 30 year fixed loan, however, a bridge loan is a 3 to 6 month term. Do you need gap funding or down payment money for your next project? Find out how a bridge loan can provide the funding you need without needing to find a partner. Instead, we can use the other properties you have to get the bridge loan that you need. 

We are here for you! 

Do you need financial flexibility and a loan that can bridge the lending gap? A bridge loan could help you today! Contact us at Hard Money Mike to find out more! 

Watch our most recent video to learn more about Bridge Loans 2024: Real Estate Investing Must-Know.

Real Estate Investing: Busting Hard Money Myths

Real Estate Investing: Busting Hard Money Myths

Today we are going to be busting the hard money myths!. While there are a lot of people who question hard money, it is still considered to be common sense lending. To clarify, common sense lending is a form of lending that does not focus on the same things that traditional lenders do. Instead, all hard money lenders are looking for a good return. Hard money lenders are not the loan sharks that many people make them out to be. Let’s dive in and explore some of the hard money myths that are bustling around the real estate community.

What will hard money lenders focus on?

Hard money lenders are able to do things that traditional lenders can’t. First and foremost, hard money lenders are not concerned with an investor’s credit scores or income. Their main concern is what the income of the property will be. Traditional lenders on the other hand, will be requesting your income verification from the past two years. Another big difference between hard money lending and traditional lending is that hard money lenders will look at the properties ARV instead of the amount that you are buying it for. To clarify, ARV stands for the after repair value of the property. 

Hard money lenders are taking a big risk, they must be taking more.

Since hard money lenders follow different criteria than traditional lenders, it leads many to assume that hard money lenders are taking more. For example, banks right now are charging between 8.5% and 10% on their short term or bridge loans. Hard money loans however are between 10% and 11%. In taking a closer look at origination fees, banks are at 1% or 1 point, whereas hard money can be anywhere between 1.5% to 2.5%. To clarify, a point is the amount that you pay the lender for their services. On a $200K loan at 1% you would pay $2,000. However at 2% you would then owe $4,000 in origination fees.  So while hard money lenders do charge more, they have less restrictions that could prevent you from getting the money you need for your investment.

We don’t want your property! We just want a good return.

While there are good lenders and bad lenders, the majority of hard money lenders just want a return. The last thing that we want is your property, because we would have to fix it up and sell it in order to get our money back. However, on rare occasions we do have to take back the property if investors don’t pay for 6 to 9 months. Unlike banks, hard money lenders are typically real people lending their money. This might be money from their savings or even their retirement plans that they are investing for a better return. They want a return so that they can live the life that they want, and give you the money you need to live the life you want by real estate investing.

Time is money!

Here at Hard Money Mike we have the ability to help more people than traditional lenders, as long as the loan makes sense. If the investor has a good property we won’t have to take 3 to 4 weeks to decide whether or not we will do the loan. Instead, we would be able to close the deal quickly without having to deal with the hassle. Another thing to keep in mind is how long it takes to get the money you need. We give you your money at closing so that you won’t have to wait for the first draw. Don’t wait! Make things faster and easier today by getting a hard money loan! 

Hard money will cost you less in the end!

While there is a slightly higher cost when using a hard money lender, they are able to finance more than traditional lenders can. The speed allows you to get you into a deal quickly by getting you your money quickly, and in turn allows you to finish your project in a timely manner. Remember, if you pay your contractors on time, they will continue to work on your projects and complete them within your timeline..

Which lender is best for you?

There is a use for both a hard money lender, as well as a traditional lender. Banks are a great source for investors who have time, money, experience, and two years of income. By using traditional lenders you would not only be able to save a little money, but you would also have a longer period for repayment. A hard money lender on the other hand is best for quick deals. They also lend based off of the ARV, so you would be able to get more money for your project. Which is best for you? Contact us today to find out more!   

We are here for you!

Do you have a project in mind that you need to price out? We would love to run through the numbers with you and see if the deal will work for your needs. Are there any hard money myths that need busting? Give us a call!

Watch out most recent video to find out more about Real Estate Investing: Busting Hard Money Myths.

DSCR Loans: Is Your Credit Score Killing Your Approval Rate?

DSCR Loans: Is Your Credit Score Killing Your Approval Rate?

Many investors wonder whether or not their credit score is killing their approval rate for a DSCR loan. The answer is yes! Here at Hard Money Mike we see a lot of clients who are struggling with their credit scores and need them fixed. It is amazing how many clients are only 1 to 10 points away from either getting a loan or getting better terms. One of the biggest contributing factors is credit score usage. How can you increase your approval rate? Let’s take a closer look.

The importance of reviewing credit score usage.

Here at Hard Money Mike we require that customers use a simulator first. This simulation can be done through MyFico, Experian, Credit Karma, and shows how your credit score will change if credit cards are paid down or paid off. How can you pay off your credit card debt quickly and easily when you are looking at using a DSCR? The answer is a usage loan. Most investors have used their credit cards to make personal purchases, buy information or training materials, or rehab expenses on personal credit cards. In doing so it not only drives up their balance, but it also drives down their score. This usage problem affects 7 out of 10 investors because they are using personal credit instead of business credit. 

Get into a better long term loan today!

First and foremost investors need to address the areas where their credit score is impacting them the most. They can then pay it down by using another loan in order to boost the credit score quickly and easily. By running a simulation first, investors can see the areas that are impacting their credit score the most. Our main goal is to help investors get into a better long term loan. A DSCR loan is based on your credit score and the income made on the property. If your credit score is low, it will in turn affect your income because you are at a higher rate. As a result of the higher rate, it can often kill your approval rate because the amount could go above the break even point. Don’t let low credit scores ruin your chance to succeed in real estate investing. 

What exactly is a usage loan?

A usage loan is a private loan that is secured with a property in order to guarantee repayment. This loan is used to pay off either all or part of your credit debt in order to increase your credit score. Again, this is where the simulator comes into play. It helps us to determine what needs to be removed from your credit in order to increase your overall credit score. Once the credit card statements cycle, the information is reported to the credit bureaus. This is what will impact your score. For example, we had a client in Detroit who was able to drop his DSCR rate by 2 points in a matter of weeks because he was able to increase his credit score. 

Make the move to business credit cards today.

If you are one of the many investors who are struggling with credit score usage, have no fear. Once you get your credit score under control with the usage loan, and get the DSCR loan that you need. After that, you can then begin the switch over to business credit cards. Business credit cards are the same as personal credit cards, however, they do not show up on your personal credit. If you are new to real estate investing it is important to make this process easier and more profitable from the very beginning. This can be done by setting up your LLC, getting business credit cards, and making sure that your lenders are in line. Those who take the time to set themselves up correctly will have lower rates, better terms, and the LTV will get better as a result.

We can help you build wealth by accumulating assets. 

Here at Hard Money Mike we want to help you succeed in real estate investing. Build the wealth you want by accumulating assets today! Higher credit scores will allow you to qualify for the properties you need for your success. Those who are able to accumulate assets at the best rates possible will create opportunities to build their wealth quickly and easily. Is a usage loan right for you? Contact us today to find out more! 

Watch our most recent video to find out more about DSCR Loans: Is Your Credit Score Killing Your Approval Rate?

DSCR: Will You Be Able to Refinance Your BRRRR Property?

DSCR: Will You Be Able to Refinance Your BRRRR Property?

Today we are going to compare and contrast two properties in order to see how the differences can affect your ability to refinance. Here at Hard Money Mike we do a lot of 100% financing for both the purchase as well as the rehab on a BRRRR property. Before jumping into financing, we also make sure that the property will qualify for a long term loan. One thing that you need to keep in mind is that while you may qualify for a rate and term of 75%, the property may not qualify. Let’s take a look at some numbers to see what that means to you and whether or not you will be able to refinance your BRRRR property.

Look ahead to the refinance before purchasing the property!

More and more people buy a property, get it all fixed up, and then expect to refinance it at 75% to 80%. Unfortunately, when they go to refinance they end up hitting a wall. Oftentimes the property doesn’t qualify for a refinance based on the DSCR ratio. We want to go over a quick example to make sure that you know how to run through the numbers before you purchase that BRRRR. 

What do we mean when we say that the property doesn’t qualify?

It is important to remember that the numbers have to break even when using the DSCR ratio. This will to keep the interest rates lower. Just to clarify, breaking even means that your rents equal your expenses. While your property and credit score might qualify because they break even, your property might break even at a lower LTV. Why would this occur and why is this different in different zones? Let’s look at the numbers!

Property has a valuation or ARV of $200K

You are looking for a rate and term at 75%

That would be a loan amount of $150K

$200K x .75 = $150K

You get into a BRRRR and you are all in at $150K

Rate of 7.5% would be $1,050 per month for principle and interest on a DSCR loan

What are the rents for this property in different areas?

It is important to research the rents in the area to make sure that your property will break even. One property might rent for $1400 while another would rent for $1800. We want to find the maximum LTV before you purchase a property to see if the property qualifies. While you need to consider your mortgage payment, there are other factors that you need to consider as well. This includes the taxes, insurance, flood insurance (when applicable), and HOA (when applicable). These amounts all have to be added to your payment before comparing it to the rents. 

Property A Property B
Taxes $1800 $3600
Insurance $1200 $3600
Flood/HOA None $1200
Annual Cost $3000 $8400
Monthly Cost $3000/12 = $250 $8400/12 = $700
Total Monthly Amount $1050 + $250 = $1300 $1050 + $700 = $1750

 In conclusion,

Before you jump into a BRRRR, or before you find out if you can qualify for 100% financing, make sure that the property qualifies. It is important to find out where your rents are, as well as any additional expenses. These numbers will be helpful to see where the property breaks even. Then you so can make sure you can get the money that you are expecting

If you want to make this easy, reach out to us at Hard Money Mike! We are happy to run through the numbers with you to make sure that you’re able to refinance your BRRRR property. 

Watch our most recent video DSCR: Will You Be Able to Refinance Your BRRRR Property? 

Pre-Approved: Stop Losing Properties and Start Closing Deals

Pre-Approved: Stop Losing Properties and Start Closing Deals

Here at Hard Money Mike we have seen a number of clients who are losing deals because they don’t have the financing they need. Whether you are new, or switching directions on your property type, it is crucial that you are prepared. Stop losing properties and start closing deals today! 

How to get the best deals.

In this competitive world, you need to make sure that you are prepared! Those who are not prepared will loose properties, as well as upset those they work with. Whether you are working with a wholesaler or a realtor, your performance and professionalism will greatly impact your future success. Being prepared from the very beginning will not only create good relationships, but it will also provide more opportunities to find the best deals. 

Find the right lenders.

Many new investors focus primarily on finding properties. Although it is important to find and compare properties, it is imperative that you find the right lender first. What do we mean by right lender? Every investor, property, and situation are different. Find the right lender for your needs. Especially as a new investor, finding a hard money lender will be the key to your success. Unlike traditional lenders, hard money lenders often give you more money, require less money in, and provide the flexibility you need to close deals quickly.  

Example:

Client is all in at $170K 

Property is worth $270K to $300K. 

He needs 100% financing

ARV loan  is 62%

As a hard money lender, it is the perfect situation. 

The importance of pre-approval.

Real estate investors need to make sure that they are not only pre-approved, but pre-approved with the right lender for the current deal. In doing so you will close deals quickly and strengthen relationships with realtors, wholesalers, and lenders. For those who are not using the lenders right away, it is important to keep in contact with them so that they know that you are still out there looking for properties. In regards to wholesalers and realtors, it is imperative that you create a good relationship from the very beginning. Get your funding secured today to get to the top of the best deal list. 

Is pre-approval based on a property?

Normally pre-approval means that you are approved for a certain dollar amount. However, lenders do look at the property to make sure that it fits their guidelines. For example, if someone comes in and says that they are approved for $300K, they still might have to bring in some money depending on the property. Investors also need to make sure that they have the right loan for the right property. If you are pre-approved for a DSCR, you can’t use that for a fix and flip property. By obtaining a collection of pre-approvals, it will allow you the flexibility you need. Whether it’s a fix and flip, rental, land split, construction, combination, 1 to 4 unit, or a larger complex, you have the opportunity to close a deal quickly by securing your financing first.

Embrace the learning opportunities.

By looking at your credit score and working with others in the business, you will be a step ahead. More importantly, if you secure your funding first, you are going to not only create wealth, but you are also going to establish relationships. Throughout the process it is important that you don’t get in your head. Take every experience as an opportunity to learn and grow. In doing so, you will learn what you need to do and the things you need to fix in order to be successful. It will get easier over time! Give yourself a little grace during the process.

Here at Hard Money Mike we want to help you create the wealth you want! Contact us today to find out more about pre-approvals. How hard money can help you get on the fast track to success!

Watch our most recent interview to find out more about Pre-Approved: Stop Losing Properties and Start Closing Deals.

Secure 100% Financing for Your BRRRR Investment

Secure 100% Financing for Your BRRRR Investment

Today we are going to discuss how to finance a BRRRR at 100%.  That means no money out of your pocket for the purchase, rehab, closing or even carry. For the past 14 years we have been helping people get 100% financing for BRRRR. It all comes down to one thing, making sure that the people are purchasing good properties at 75% or less. How can you secure 100% financing for your next BRRRR investment? Let’s take a closer look!

How can you achieve success in this current market?

There are a lot of opportunities for real estate investors right now. Just the other day we had a client who had bought a property in the Denver market for $300K. After putting in $50K in rehab, the property was worth $550K in the end. There are many other real estate investors who have been successful in similar situations in spite of the challenging market. How do they achieve such success? The answer is getting the correct upfront loan. While predictions indicate that there will be more opportunities in 2024 and 2025, now is the time to invest. Now is the time to jump in.

Selecting the right loan for you.

Remember that conforming conventional loans have restrictions that prevent investors from refinancing properties within the first year. However, a rate and term loan, such as a DSCR or conventional loan, allows investors to refinance immediately after getting an appraisal. By having a great hard money lender for your purchase, you will be able to refinance and get cash out of the property quickly and easily.

Find the right hard money lender.

It is crucial that real estate investors work with a hard money lender who can get up to 75%. Just to clarify, the 75% is based on the amount that you can refinance. Here at Hard Money Mike we say 75% because most clients can refinance into a conforming or DSCR at 75%. However, if you’re only able to finance up to 70%, then we will have to match whatever you qualify for on the long term or take out loan. It is important to remember that a BRRRR includes a buy, which is the first loan, and then there is a refinance. The refinance dictates how much a lender on the buy can give you. By finding the right hard money lender you will be on the path to success.

Let’s look at some numbers on the buy side.

The first calculation that needs to be done prior to purchasing a property is determining the maximum loan amount. This can be found by multiplying the ARV by 75% or .75. Once the max loan value is determined, real estate investors can then calculate if the property will be able to qualify for 100% BRRRR financing. 

Calculating Max loan amount.

Purchase price: $120K

ARV: $200K

Max loan: $200K x .75 = $150K 

Will it qualify for 100% financing?

Purchase price: $120K

Rehab: $20K

Closing costs + Carry costs: $10K

It is important to remember that closing costs are not only on the buy, but they are on the refinance as well. Also, carry costs should be added to the total in order to cover a few months of monthly payments, taxes, and insurance on the property until it can be rented. In most cases, investors are able to get the property rented before refinancing, which will in turn lower the carry costs. By keeping the purchase price, rehab costs, closing costs, and carry costs all under the maximum loan amount, real estate investors can finance a BRRRR at 100%. 

Finance a BRRRR at 100% today!

In order to finance a BRRRR at 100%, you need to make sure that all of your costs are less than the max loan amount. It is important to have a hard money lender who understands BRRRR’s. Here at Hard Money Mike we can help you run through numbers to make sure that you are in line to get 100% BRRRR financing. 

Watch our most recent video to find out more about how you can Secure 100% Financing for Your BRRRR Investment.

3 Reasons You Need Hard Money For Your Investments

3 Reasons You Need Hard Money For Your Investments

Today we are going to look at the 3 reasons why you need hard money for your investment needs. In looking over the past few years, changes in the market have caused banks to shrink their lending pools. As a result, real estate investors are being impacted by both the requirement changes, as well as increasing restrictions. How can you accomplish your goals with so many roadblocks? 

First, Flexibility.

Hard money provides the flexibility you need to achieve success. Unlike banks, you are not required to fit into a box.It can be used for all types of projects including:

  1. Fix and flips
  2. BRRRR/Rentals
  3. Multiple units
  4. Commercial properties
  5. Land

Second, Fewer Qualifications.

 Hard money also has fewer qualifications than banks. The biggest determining factor is whether or not the property cash flows. By having fewer qualifications for investors, it can open the door to endless opportunities. Hard money loans are not based on:

  1. Credit
  2. Experience
  3. Reserves/Down payment

Third, Speed.

Traditional loans can take weeks or even months before everything is finalized. However, using hard money helps you speed up the closing process by skipping a few steps along the way. The old phrase “time is money” paints a great picture of how making the switch can help you get on the fast track to success.

  1. Close in days – not in weeks or months 
  2. Skip appraisal delays and take the fast track
  3. Buy unique properties with less underwriting
  4. Close more properties because many sellers choose speed over price

Contact us today to find out more and what you need to do to get on the fast track to success. 

Watch out most recent clip 3 Reasons You Need Hard Money For Your Investments to learn more!

How to Quickly Calculate Must-Know Real Estate Numbers

How to Quickly Calculate Must-Know Real Estate Numbers

Today we are going to go over some simple calculations that review what a point is, how to calculate monthly interest, Loan to ARV, and LTV. These are simple things that you will come across when you are talking to lenders about your lending needs. Here at Hard Money Mike we want to make sure that you not only understand what these are, but more importantly we want to show you how to calculate must-know real estate numbers.

What is a Point?

First of all, you are going to hear lenders say that there is a point on this loan, or two points on the loan. What does that mean to you? A point is a percentage of the loan, This is the fee or charge that they have for the loan that you are taking out. You will see anywhere between 1 and 3 points. Meaning that they are charging between 1% (.01) and 3% (.03)  of the loan amount as an origination fee. It is important to know what this amount is because it will not only come out of your pocket, but it will add to your cost at closing.

For Example:

Loan amount is $200K 

Lender charges 1.5 points (1.5% or .015)

$200,000 x .015 = $3,000 origination fee

How do you calculate simple interest and what does that mean for a monthly payment?

If the lender says they are charging 10% (.10), that means that they are charging that amount as an annual rate. As an investor, it is important that you do the calculations in order to determine the monthly interest amount which is based on the loan amount. As an investor it is very helpful to have this broken down into months, because you may only have the property for 6 months instead of a year.  

For Example:

Loan amount $200K

$200,000 x .10 = $20,000 (annual interest amount)

$20,000 ÷ 12 (months in a year) = $1,666.67

$1,666.67 is the monthly interest amount 

Loan to ARV

Most lenders are going to give their maximum loan based on ARV. Just to clarify. ARV is the estimated after repair value for the property once it is all fixed up. It is important to know what the market estimates the property will be worth after all of the work is completed, and are based on current sales in the area. A lot of the lenders are going to give their loan or a loan max based on the ARV. 

For Example:

$400,000 ARV (based on your comps)

Lender maximum loan to ARV is 75% 

$400,000 x .75 = $300,000

$300,000 is the maximum loan amount that the lender is able to lend you.

What is Loan to Value?

A lot of lenders and banks are going to go off of the value of the property as opposed to the after repair value. When they talk about loan to value, lenders will take two things into consideration. They will look at the appraised value or purchase price, whichever is lower. Then they will lend a certain amount based on the current value.

For Example:

Purchase price $300K

Lenders maxim loan is 80%

$300,000 x .80 = $240,000 

$240,000 is the maximum loan amount that the lender is able to lend you.

In conclusion

As an investor it is great to understand what a point is, how to calculate monthly interest, Loan to ARV, and LTV. By learning how to quickly calculate must-know real estate numbers, you will be able to find the loan that best meets your needs.

If you have any questions or would like us to run through some other numbers, contact us

Watch our most recent video to find out more about how to quickly calculate must-know real estate numbers.