Tag Archive for: Hard Money

Is hard money a trap

Is Hard Money a Trap? How to Set Yourself Up for Success

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.

  1. Go Into the Loan with a Plan to Exit

    Never walk into a hard money loan with no plan to get out. This plan will look different depending on your end-goal for your property.

    If you’re doing a fix-and-flip, make sure to have the bulk of your construction work scheduled before setting up the hard money loan. You’ll need to get the work done and sell as soon as possible before the loan begins to eat into your profits.

    If you’re fixing and holding (renting), make sure to line up a long-term loan alongside your hard money loan. Start the refinance process before you’ve completed the rehab of your property. The longer you have to wait for refinancing, the longer it takes to pay back your hard money loan (and the less profit you’ll get from your work).

    The wrong lender might take advantage of your lack of knowledge and preparation. But if you work with the right lender, like Hard Money Mike, you’ll get personalized help to make a plan, set up the right long-term loan, and get out with your profit.

  2. Focus on Your Credit Score

    It’s important to get a good refinance loan to help you pay off your hard-money loan when the project is over. To make sure you’ll get that good loan set up on time, you’ll need to have a good credit score.

    With a score above 670, you’ll have an easier time getting a good loan from a financial institution. If your credit score is below 640, don’t even take out a hard money loan until you raise your score. No lenders can help you refinance with a score that low.

    If you need tips on raising your score quickly, check out this post.

  3. Don’t Delay Construction

    This is where many investors go wrong.

    They close the deal with a hard money loan. Then they… don’t start work. Or, they start, but hit road bumps they didn’t predict that cause major delays.

    Plan the rehab of your project beforehand. Get your equipment, permits, and contractors in place as soon as possible. Have everything scheduled. Look for problem areas in advance.

    The faster the work is done, the faster you can sell or rent. Which means the faster you can get out of your hard money loan, and the more money you make from your investment.

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.

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.

The impact of your credit score

How Your Credit Score Impacts Your Real Estate Investments

If you want to maximize leverage in your investments, you need to know this key information about your credit score.

There’s nothing more disappointing than this…

You’ve searched everywhere, but can’t seem to find a decent loan.

Money keeps getting sucked away with high interest rates and down payments.

Even when you find good properties, you never seem to come out on top.

…But your real estate investment was supposed to help you start living your dreams.

What’s going wrong on the money side of your investments?

Your Credit Score Matters

Your credit score could be the number one thing holding you back.

A credit score impacts cash flow from real estate investments. It determines interest rates, out-of-pocket costs, and what kinds of loans you can get.

With a low credit score, you’ll have:

  • Higher interest rates
  • Higher down payments
  • Fewer loan options available

What Is a Credit Score?

A credit score is a number between 0 and 850 that tells financial institutions whether or not it’s wise to lend to you.

Your score is determined by several pieces of information about your finances.

But the two most important are payment history and accounts owed.

It comes down to:

  1. Do you pay your credit cards and loans back on time?
  2. And do you use less credit than is available to you?

What Should My Credit Score Be?

With a score of 800, you’re almost guaranteed to hear “yes” from any lender.

At 740 and higher, you’ll still have access to the best loans with the best rates.

Between 670-739 is still a good position, and you can get decent rates.

And a score below 670 will be detrimental to your real estate investing experience.

Lending credit scores

Lending credit scores

But if you’ve just realized you have a low credit score, don’t lose hope.

How Can My Credit Score Maximize My Leverage?

The higher your credit score, the higher your leverage. Lenders look for people with high credit scores. Having a better score will open up doors for you to find:

  • Better loans
  • More quickly than you would with a lower score
  • From a wider variety of financial institutions

Interest Rates

A good credit score will get you loans with better interest rates.

A significant amount of money can leak out of your deal from bad interest rates brought on by your credit score.

To put it in perspective: If you end up paying $500 per month on interest, that becomes $18,000 after three years. That’s $18,000 that could have been your profit that goes directly to the lender instead. With a better credit score, you can find a loan that keeps more of your money in your pocket.

Down Payment

Let’s say you found a great property for sale for $300,000. With good credit, you may only be asked to put 10% down – or potentially even 0%! With a lower credit score, though, you’ll likely be asked for a 20-25% down payment.

For the same $300,000 deal, good credit can mean the difference between paying $30,000 out-of-pocket or $70,000!

What To Do Next

Your credit score determines whether you take the easy road or the hard road with your real estate investing experience.

If you don’t already have a credit score of 800, focus on raising your credit score before anything else. Doing this will earn you:

  • Lower interest rates
  • Lower down payments
  • More loan options
  • A more successful investment!

It’s hard enough to find properties, find contractors, find tenants, find sellers… make it easier on yourself to find lenders.

We want to help you succeed in your investments.

For more help with understanding and improving your credit score as a real estate investor, check out these helpful videos on our YouTube Channel.

You can also download our Credit Score Checklist at this link.

Happy investing.

3 Problems That Cause BRRRR Confusion

3 Problems That Cause BRRRR Confusion

3 Problems That Cause BRRRR Confusion

Today, let’s talk about three big problems that cause many investors to experience BRRRR confusion.

Have you been thinking about investing in real estate using the BRRRR method? But you’ve hit a roadblock?

Unfortunately, you’re not alone.

A lot of real estate investors, both new AND seasoned, have heard about BRRRR, but haven’t used it.

Because they’re confused.

They’re confused about how to buy, rehab, rent, refinance…or all of the above.

So, to help unravel and debunk some of your confusion, let’s address some of the biggest questions we hear from our own clients about the BRRRR method.

#1: Is BRRRR real?

Yes. BRRRR is real.

There’s a reason why our team created this video for you. We’ve helped many clients succeed using the BRRRR method. But, just like you, many of those clients started their journey confused. Because they didn’t understand the entire process either.

And what they did understand wasn’t always accurate or true. Because they were working with bankers, lenders, or realtors who fed them misinformation or were simply out of the BRRRR loop.

#2: “Can you really find properties that work for BRRRR?”

Again, yes. Absolutely.

Even in our current, competitive market, there are properties that work perfectly for the BRRRR method. The trick is to find the right area to invest in. That might mean leaving your own town, city, or even state to find properties that produce solid cash flow.

And, trust us, those areas exist.

You can start your search by talking to wholesalers, investor-friendly realtors, or even other investors to see where they’re buying properties.

Of course, searching for cash flowing properties requires some time, effort, and patience.  But, if you think about it, all you’re doing is looking for one to four properties a year. Don’t you think it’s worth a little work to change your financial future? We think so.

#3: “How much money do I need to make BRRRR work?”

This is possibly the most crucial question we get. Not only is it a crucial question, but it also leads to the most confusion. Because it involves math, and most people don’t like math.

It also involves financing chit-chat, and again, a lot of investors don’t like talking about financing…even though the entire BRRRR process relies on good, solid numbers with good, solid loans.

But here’s the thing: once you grasp how to properly set up your BRRRR deal, then you can spend little to zero dollars on your properties.

Now, unfortunately, most investors don’t believe this, because, yet again, they’ve been fed misinformation by lenders, realtors, or other investors. So many people believe that have to bring a big down payment to closing.

And that’s because cash-out refinancing has been promoted as part of the BRRRR method. This isn’t a lucrative strategy. Not when there are other types of refinances that allow you to put little to no money in your deals.

The BRRRR method is an excellent real estate investment strategy. And, yes, it can be confusing when you get started. Because there’s a lot of chatter and misinformation flying around. Plus, nobody really likes math or financing. It’s true.

But if you’re willing to learn and do some work, then it’ll become easy. Very easy! And, better yet, lucrative. Because if done correctly, the BRRRR method can be repeated as many times as you want, as quickly as you want. Which means you’ll able to make the kind of money you want.

Happy investing!

We Love Small Town Fix and Flippers

We Love Small Town Fix and Flippers

Do you flip or rent properties in a small town or a rural area?

If so, do you have a difficult time finding someone to fund your deals? Because, the truth is, a lot of hard money lenders shy away from smaller markets.

Well, guess what? We love helping small town real estate investors.

Unlike other lenders, we don’t care if loans are under $100k or if the property value is less than $100k. We can help.

Better yet, we can lend on properties without waiting for appraisals. That means we can close deals FAST. We’re talking days instead of weeks.

And our loan requirements are intended to be small town friendly, so all we ask is that the loan:

  • Be secured in first lien position.
  • Close with and through a title company.
  • Be at or under 70% of the after-repair value (not the current value).

Most of us are from small towns, too. So, we understand how frustrating it can be to find timely funding. That’s why we love to focus on small town flippers and rental owners.

So, if you have a property and want to get it funded and closed right now, our team is here to help.

Happy investing!

Hard Money is Scary

Hard Money is Scary

Hard Money is Scary!

So, you just found the perfect house to fix and flip, but the only way your bid will get accepted is if you can close within a week.

That means you need to team up with the much feared and misunderstood creature: Hard Money.

AHHHH!

You’ve heard many rumors of this being, like it’s a big, ol’ fat trap that’ll suck your bank account dry. But fear not! Hard money isn’t as scary as rumor has it, especially if you take three simple steps to protect yourself.

Ignore the rumors and do a little homework.

What is hard money? Really. Understanding this type of loan will save you tons of headaches in the future. Because those who have a scary run in with it do NOT use it correctly. They might treat it like a regular bank loan or accept the first hard money loan offered to them. Both spell trouble.

Understand the REAL costs and benefits.

If you only look at interest rates, then yeah, hard money is more expensive than bank loans. But bank loans come with other costs, like time, contingencies, and paperwork.

For example, if you’re competing against five other investors, you have the power to bid lower and still win. Because sellers of fixer uppers don’t want to deal with banks. Banks take too long to close and require appraisals and inspections. Therefore, cash buyers usually win even if they bid thousands of dollars lower than the next bid.

Learn the difference between hard money lenders.

Hard money lenders come in all shapes and sizes. It’s like buying new furniture. If you only go to one shop, then you get what you get. But if you go to multiple shops, then you can compare different styles, prices, and terms.

Hard money lenders are no different. If you only call one, then you get what you get. And that, again, spells trouble. You need to shop around so you can compare lenders and find out what they offer…and what they require. And if you come across a hard money lender who offers an interest rate that’s too good to be true, then be prepared to face the scary monster that you’ve heard about. Because junk fees might come spewing out of it.

Bottom line, turn on the lights. Hard money is only scary if you sit in the dark and hope for the best.

Happy investing!

Is hard money a trap

Hard Money is a Scam

Hard Money is a Scam

Many years ago, a rumor spread that hard money is a scam.

It all started with a real estate investor who could not qualify for a bank loan, so they turned to a hard money lender. Unfortunately, this real estate investor didn’t understand how hard money worked. So they had a bad experience. Like, really bad.

After that, they told ALL of their friends, “Hard money is a scam.”

And then those friends told their friends the same thing, even though they themselves had never used a hard money loan.

The rumor spread quickly. For miles and miles, investors caught wind of the false news that hard money wasn’t good for them or their wallet. One by one, they turned their back on this loan option and struggled to find another. And they lost a lot of money.

All because one investor had a bad experience. A bad experience that could’ve been prevented had they done just a little bit of homework.

Because here’s the truth. Hard money is NOT a scam.

It’s actually a genuine, honest-to-good option for investors who:

  • Can’t qualify for a bank loan.
  • Need to close deals fast.
  • Want to save money by avoiding extra costs for things like appraisals and inspections.
  • Or all of the above.

So, what gives hard money such a bad rap? Well, most of the time, it’s because real estate investors jump into a hard money loan without understanding it.

So, what is hard money?

Well, it isn’t like your normal bank loan.

Bank loans are usually long-term. Like, 15-30 years. Hard money, on the other hand, is intended to be short-term, like 3-6 months. If you keep a hard money loan longer than a year, then you’re not really using it correctly. Because, yes, hard money lenders charge higher interest rates than banks. There’s no denying that. And you don’t want to pay those rates longer than you need to.

That’s why it’s so important to have a plan to flip or refinance a property before entering a hard money loan.

Another major difference between bank and hard money loans is the closing process. Bank loans take at least a month to close. They also require more paperwork and fees to make that closing happen.

Hard money loans can close in just a few days and require far less, well, requirements. You don’t need to worry about appraisals and inspections and other costs that don’t get taken into account with bank loans.

That’s why they’re perfect for fix and flips, rentals, and other value-add properties. You can find a great property, bid on it, and buy it FAST.

Basically, hard money is an excellent tool to help investors compete in a very competitive real estate business.

It’s not a scam.

And anyone who claims it to be scam has either never used it because they listened to the false rumors that spread many years ago. Or they’ve used it, but they didn’t use it right.

To learn how to use hard money right, check out some of our other videos on our Youtube channel.

Our team strives to help investors understand hard money so they can buy the properties they want, when they want…and without hurting their cash flow.

Happy investing!

How to Fund a Flip

Money Chat: How to Fund a Flip

Money Chat: How to Fund a Flip

During our next Money Chat, lending expert Mike Bonn will discuss “How to Fund a Flip.”

If you’ve always wanted to get into the fix and flip game, but don’t know where to start when it comes to buying properties, then this Money Chat is perfect for you!

You can join other like-minded real estate investors and ask all of your questions to a lending expert.

How to Fund a Flip Property

Want to join Mike’s Money Chat? Then register for FREE here.

Mike will answer common questions like:

  • What are my funding options?
  • What is hard money?
  • How do I qualify? What credit score do I need? Income? Experience?

By the end of the Money Chat, you should have a much better grasp of how to get going in real estate investing.

So, mark your calendar!

When: Tuesday, September 21 @ 11 AM MST

Where: Virtual nationwide.

Register for free at my.demio.com/ref/1j9cO1wJ3Co6QkW1

If you can’t make this week’s Money Chat, don’t worry. We’ll run another chat next week!

Mike and the rest of the Hard Money Mike/Cash Flow Mortgage Company team looks forward to seeing you on Tuesday.

If you have any questions about our weekly Money Chats, then our team is here to answer them any time.

Happy investing!

Money Chat Encore: How to Fund a Flip

Money Chat Encore: How to Fund a Flip

Money Chat Encore: How to Fund a Flip

Attention real estate investors, both new and seasoned! Did you miss Tuesday’s Money Chat with lending expert, Mike Bonn?

It’s okay, because Mike will be hosting an encore Money Chat tomorrow, Thursday, September 2nd at 11 a.m.

During tomorrow’s chat, Mike will answer all of your questions on How to Fund a Flip.

If you’ve always wanted to get into the fix and flip game, but don’t know where to start when it comes to buying properties, then this Money Chat is perfect for you!

This is your chance to join other like-minded real estate investors and ask all of your questions to a lending professional.

Money Chat Encore: How to Fund a Flip

If you’d like to join Mike’s Money Chat tomorrow, then you can register for FREE here.

During the virtual call, Mike will answer common questions like:

  • What are my funding options?
  • What is hard money?
  • How do I qualify? What credit score do I need? Income? Experience?

By the end of the Money Chat, you should have a much better grasp of how to get going in real estate investing…and how to pay for your properties.

Can’t make it to tomorrow’s chat? No problem. Let us know and we’ll set up more Money Chats on how to fund a flip. Or you can reach out to our team and schedule a time for one-on-one call. That way you have an opportunity to ask all of your questions on how to fund a flip (and any other value-add property).

But, better to tune in tomorrow to listen in with other like-minded investors.

When?

Tomorrow at 11 AM MST

Where?

Virtual nationwide.

Register for free at my.demio.com/ref/1j9cO1wJ3Co6QkW1

Mike and the rest of the Hard Money Mike/Cash Flow Mortgage Company team looks forward to seeing you tomorrow!

If you have any questions about our weekly Money Chats, then our team is here to answer them any time.

Happy investing!

How to Make More Money in Real Estate

How to Make More Money in Real Estate: Funding Tips

How to Make More Money in Real Estate: Funding Tips

Do you often wonder how you can make more money with your real estate investments?

Well, when it comes to investing in value-add properties (aka, rentals, fix and flips, etc.) the best way to generate positive cash flow is to focus on the numbers. 

What does that really mean?

It means taking the time to understand your funding options. Because all investors are different. They have different goals, different qualifications, and different strengths and weaknesses.

But all real estate investors also share a few similarities:

  • They’re in the business to make money.
  • They’re constantly searching for a GREAT deal.
  • And they have access to multiple lenders.

Let’s take a closer look at that last similarity, because it’s where the numbers make ALL the difference.

Real estate investors can get funding from a variety of sources. Just look at this “lending staircase”…

Did you know you have 5 different ways to get funding for your value-add deals?

You don’t have to break your back to qualify for a bank loan (the strictest lender you’ll likely come across). And you definitely don’t have to push pause on your investment dreams. You can always get started with a money partner (aka, a family member, friend, or business partner).

Money partners might be unpredictable and dip deeper into your profits than other lenders, but at least they can help you get moving. And if you get moving, you can also start building your real estate portfolio. And that’s key. Because experience will launch you up the lending staircase to other loan options.

Like hard money.

Hard money is great for closing deals FAST. We’re talking lightning speed compared to other lenders. But, it is on the pricier side. That’s why most investors should only plan on getting a hard money loan for 3-6 months. Any longer and it’ll eat away at your profits.

But the further you move up the lending staircase, the less that will happen. Hence, you’ll be able to make more money on your real estate deals, because you’ll be able to obtain cheaper loan products.

So, what’s the bottom line? Well, once again, it comes down to numbers. And those numbers come from the type of loan you use to fund your real estate properties.

Are you ready to start making more money by looking into YOUR funding options? Great! Our team is here to help.

Happy investing!

Money Chat Reminder: How to Fund a Flip

Money Chat Reminder: How to Fund a Flip from a Lending Expert

Attention real estate investors, both new and seasoned! Don’t forget our next Money Chat is tomorrow with lending expert, Mike Bonn.

During Tuesday’s chat, Mike will answer all of your questions on How to Fund a Flip.

If you’ve always wanted to get into the fix and flip game, but don’t know where to start when it comes to buying properties, then this Money Chat is perfect for you!

This is your chance to join other like-minded real estate investors and ask all of your questions to a lending professional.

Money Chat Reminder: How to Fund a Flip

If you’d like to join Mike’s Money Chat tomorrow, then you can register for FREE here.

During the virtual call, Mike will answer common questions like:

  • What are my funding options?
  • What is hard money?
  • How do I qualify? What credit score do I need? Income? Experience?

By the end of the Money Chat, you should have a much better grasp of how to get going in real estate investing…and how to pay for your properties.

Can’t make it to tomorrow’s chat? No problem, because we’re running another Money Chat on Thursday. That way you have an opportunity to listen, learn, and ask all of your questions on how to fund a flip (and any other value-add property).

And if you miss both Money Chat, no sweat. We’ll be hosting many more in the future. Plus, our team is always here to assist you.

So, mark your calendar!

When?

Tomorrow at 6 PM MST

Where?

Virtual nationwide.

Register for free at my.demio.com/ref/1j9cO1wJ3Co6QkW1

Mike and the rest of the Hard Money Mike/Cash Flow Mortgage Company team looks forward to seeing you on Tuesday or Thursday (or both).

If you have any questions about our weekly Money Chats, then our team is here to answer them any time.

Happy investing!