Tag Archive for: #investment property

The Fundamentals of Real Estate Investing: Buy Your First Deal

Today we are going to discuss The Fundamentals of Real Estate Investing: Buy Your First Deal Real Estate Investing Starts with Understanding the Numbers. It begins with understanding one simple truth: real estate investing is a numbers game. Many people focus on finding properties, fixing them up, and selling them for a profit. However, there is another side that is just as important. You must understand where the money comes from, how lenders work, and how to keep a project funded from start to finish. The good news is that you do not need to be rich to get started. In fact, most successful investors started with little experience and limited resources. They simply learned the process, followed the numbers, and kept improving with every deal.

Why Anyone Can Invest in Real Estate

Many new investors believe they need perfect credit, a lot of cash, or years of experience before they can buy their first property. Fortunately, that is not true. Every successful investor had a first deal. Every experienced flipper started as a beginner. The difference is that successful investors take the time to learn before they leap. For example, imagine two people looking at the same property. One gets excited and buys it immediately. The other studies the numbers, checks the repair costs, reviews the market, and creates a funding plan. The second investor usually has a much better chance of making money. Therefore, your goal is not to know everything. Instead, your goal is to understand the process and make smart decisions.

The Two Sides of Real Estate Investing

Many beginners think real estate investing is only about finding a great property. However, there are really two sides to every successful deal. First, you must buy the right property. Second, you must fund the property correctly. In other words, finding a good deal is only half the battle. You also need the right financing, enough available funds, and a plan to complete the project. As a result, investors who understand both sides often move faster, avoid surprises, and make more money.

The Four Things That Create Profit

Successful real estate investors focus on four key areas.

1. Buy the Property Right

Everything starts with buying below market value. You want a property that has room for repairs, carrying costs, selling expenses, and profit. If you buy too high, everything becomes harder.

2. Fund the Property Right

Next, you need the right financing. The goal is to maximize leverage while keeping costs reasonable. Good financing helps protect your profits.

3. Stay Properly Funded

Many projects slow down because investors run out of money. Contractors need deposits. Materials need to be ordered. Unexpected repairs happen. Therefore, you need enough available funds to keep the project moving. Remember, speed matters in real estate investing.

4. Sell the Property Right

Finally, you must understand your market. The right price, the right finishes, and the right timing all matter. Holding a property too long often costs money through interest, utilities, taxes, and insurance. Therefore, successful investors focus on selling efficiently rather than chasing every last dollar.

The Team Behind Every Successful Deal

Real estate investing is not a solo sport. Instead, it is a team effort.

Your team may include:

  • You, the investor
  • Real estate agents
  • Wholesalers
  • Contractors
  • Lenders
  • Title companies

Think of yourself as the quarterback. You bring the team together and make sure everyone is moving toward the same goal. As your experience grows, your team will become one of your greatest assets.

Where Does the Money Come From?

Many new investors wonder where the funding actually comes from. Fortunately, there are several options.

Fix-and-Flip Lenders

These lenders specialize in investment properties. Typically, they fund up to 90% of the purchase price and up to 100% of the rehab budget. Because they focus on investors, they understand ARV, rehab budgets, and timelines.

Hard Money Lenders

Hard money lenders offer flexibility. If a property falls outside traditional guidelines, hard money may be a solution.

For example, unusual properties, rural locations, or special situations often fit better with hard money lenders.

Local Banks

Local banks usually offer lower rates. However, they often require more documentation, larger down payments, and stronger financial qualifications.

Private Money

Private money comes from individuals. These could be friends, family members, business owners, or people looking for a better return on their money. As investors gain experience, private money often becomes easier to access.

Understanding the 75% Rule

One of the most important numbers in real estate investing is the 75% rule. Most lenders limit their total loan amount to approximately 75% of the property’s After Repair Value, also known as ARV.

Here is a simple example.

If a property’s ARV is $200,000:

$200,000 × 75% = $150,000

In this example, $150,000 is typically the maximum loan amount available.

Why does this rule exist?

Because lenders know that investors still need room for:

  • Selling costs
  • Realtor commissions
  • Holding costs
  • Interest payments
  • Profit

As a result, the 75% rule helps protect both the lender and the investor.

Can You Really Get 100% Financing?

This is one of the most common questions new investors ask. The answer is yes—but usually not from a single lender.

Most fix-and-flip lenders provide:

  • Up to 90% of the purchase price
  • Up to 100% of the rehab budget

However, investors still need money for:

  • Down payments
  • Closing costs
  • Insurance
  • Utilities
  • Monthly payments
  • Unexpected expenses

Therefore, successful investors often build what many call a funding stack. A funding stack combines multiple sources of money to fully fund a deal.

How Much Money Do You Need?

A common guideline is the 120% rule. Take the purchase price plus the rehab budget. Then make sure you have funding available equal to approximately 120% of that amount.

For example:

Purchase: $100,000

Rehab: $50,000

Total Project Cost: $150,000

Target Funding Capacity: $180,000

This extra funding helps cover costs that occur before closing, at closing, and after closing.

In addition, available funds do not always have to be cash.

They may include:

  • Business lines of credit
  • HELOCs
  • Business credit cards
  • Partners
  • Private lenders

The Three Biggest Mistakes New Investors Make

Falling in Love with the Property

Successful investors focus on numbers. Unsuccessful investors often focus on emotions. Always fall in love with the deal, not the house.

Not Understanding the Flow of Money

Many investors understand repairs but do not understand funding. As a result, they create delays and reduce profits.

Running Out of Money

Unexpected repairs happen. Old wiring, plumbing problems, roof issues, and hidden damage are common. Therefore, build a reserve before you start.

Should You Find the Deal or the Money First?

The best answer is both. While you are learning how to find deals, you should also be talking with lenders. At the same time, learn how to analyze properties, estimate repairs, and understand financing. That way, when the right deal appears, you are ready to act. Preparation creates opportunity.

Do Lenders Say No?

Yes, lenders sometimes say no. However, the reason is often the deal—not the investor.

Common reasons include:

  • Unrealistic ARVs
  • Weak budgets
  • Poor planning
  • Missing documentation
  • Lack of available funds

Fortunately, most of these issues can be fixed. Therefore, present a clear plan, verify your numbers, and show lenders that you understand the project. The stronger your preparation, the easier it becomes to get approved.

Your First Deal Starts with the Numbers

Real estate investing can create income, wealth, and freedom. However, success does not come from luck. Instead, it comes from understanding the numbers. Buy the property right. Fund it correctly. Keep enough money available. Sell it efficiently. Most importantly, do not let emotions drive your decisions. When you focus on the numbers, good deals become easier to spot, lenders become easier to work with, and profits become easier to protect. That is why The Fundamentals of Real Estate Investing: Buy Your First Deal always begins with understanding the money side of the business.

Watch our most recent video to find out more about: The Fundamentals of Real Estate Investing: Buy Your First Deal

The Fundamentals of Real Estate Investing: Buy Your First Deal explains how new investors can find properties, secure funding, understand the 75% rule, build a funding stack, avoid costly mistakes, and confidently purchase their first investment property.

Airbnb Investment Property

What exactly is an Airbnb investment property and is it the right choice for you? Today we will be taking a closer look!

What is an Airbnb?

An Airbnb is a vacation rental as opposed to a long-term rental property. Think about a small cabin in a popular hiking town or a beachside condo. People are able to book short stays, which can bring in more money than a traditional rental. 

How can an Airbnb help me?

Airbnb properties also give you flexibility. You can use the property yourself or rent it out when you want. Some investors start by renting their home part-time, testing the waters, and seeing how much they can make. A well-located and nicely furnished space can attract guests, especially if you offer extras like a guide to local spots or cozy decor.

Check out an Airbnb as an investment property! 

There are challenges, of course, like dealing with cleaning, guest management, and local regulations. But with the right setup, many investors find it worth it. And since you’re earning nightly, the income adds up quickly, giving you cash for future investments. In short, Airbnb properties can be a solid way to build wealth through real estate.

Contact Us Today! 

Is a Airbnb right for you? Contact us today to find out more about investment properties!

Free Tools For You! 

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

Learn more!

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

The Beginner’s Guide to Hard Money Loans

Hard money basics you need to know before real estate investing.

We’ve been in the hard money loan business for 20 years. Half the calls we receive are still beginner real estate investors trying to learn the money side of investing.

If that’s you, you’ve likely applied for, heard of, or thought about using hard money lenders. But maybe you don’t fully understand the private lending world yet. How does a hard money loan work? How much interest do private lenders charge? Do hard money lenders require a minimum credit score? Should you just wait until you qualify for better bank loans?

This guide will help answer:

  • What is hard money?
  • What do hard money lenders look for?
  • How is hard money different than other loans?
  • How do you qualify for hard money?
  • Is hard money better than banks?

Becoming hard money proficient will put you miles ahead as an investor. 

Ready to nail the basics?

What is Hard Money?

Hard money is a short-term loan designed for real estate investors. Hard money lenders focus on lending money on undervalued properties in need of rehab.

Hard money loans are short term – usually around six months or a year – and are designed to help buy properties to fix up.

While “easier” than traditional bank loans, hard money loans are also more expensive due to higher interest rates. Which brings us to the most important quality of hard money loans: they’re fast.

In real estate investing, discounted properties typically require fast-closing deals. Hard money loans can help you take advantage of prices while they’re low, and: 

  • Save on the property cost to begin with
  • Get more from selling or refinancing the property.

These savings more than cover the costs of a hard money loan for most investors.

The speed of hard money makes it valuable for newbie and seasoned investors alike. Hard money loans are made for real estate investors.

How Does A Hard Money Loan Work? 

What do hard money lenders look at? There are two main factors lenders of hard money consider.

Loan-to-Value Ratio

An important number a lender takes into account is the cost of the property. The ratio of the loan they offer and the cost is important for you to know.

Let’s say you have a property with a current appraisal of $200,000. Then you get a loan for $100,000. The loan is half of the value of the home, so your loan-to-value is 50%.

After Repair Value (ARV)

ARV, after repair value, is another important factor hard money lenders consider. The properties targeted by real estate investors are undervalued. They need work to be brought up to the standards of the surrounding community.

So, lenders look at not only the current value of the house, but also the future value of the house, after it’s all fixed up.

Many hard money loans are based on after repair value rather than loan-to-value. Your lender might offer you up to 75% – not of what you’re buying it for, but what you could sell it for by the end. 

What Does ARV Cover?

A key factor to ARV is that lenders will lend not only for the initial purchase, but for the fix-up costs. 

Many lenders will put money aside in escrows to use throughout the project to pay contractors and cover other renovation costs. 

If your loan considers ARV, it’s possible for you, with ZERO money down, to:

  • Buy a property.
  • Fix it up.
  • Either sell it (fix-and-flip) or refinance it (BRRRR).

After selling or refinancing, you use that money to pay the loan back.

Hard money is designed to build value into real estate. Understanding the role of the after repair value will help you immensely in your hard money investments.

How Is Hard Money Different from Other Loans?

Interest rates on hard money are between 2-5% higher than what you’ll find at banks. You can expect origination fees to be about twice as much. Appraisals will be close to the same.

So on paper, the rates and fees are higher, so it feels like you’re spending more. Which you are! But with hard money loans, you’re paying for:

  • Accessibility
  • Convenience
  • Flexibility
  • The opportunity to purchase properties you’d never be able to while relying on bank loans.

While hard money costs more than other loans, the potential value is also way higher. When sellers have discounted real estate, they want it sold fast. Banks can take 25-30 days to close. You can receive hard money in a matter of days.

Every week, we see hard money work to save people money.

When a recent client of ours bought a property, he saved 10% – just because he could close faster than the other five bidders. His savings on that purchase were $30,000: much more than double what he’ll spend on the loan transaction.

How Do You Qualify for a Hard Money Loan?

There are two kinds of hard money lenders. They each have different qualification requirements.

National Hard Money Lenders

National lenders lend in almost every state. They are larger organizations, backed by hedge funds and private equity.

National hard money lenders require:

  • A credit score check, and a good score.
  • Experience – at least five deals in the last three years. 
  • Properties to be in specific larger communities.

So if you’re new to investing, need to improve your credit score, or are looking at more rural properties, you may need to look into local lenders.

Local or Private Hard Money Lenders

A local, or private, lender will specialize in your state or area. Local lenders are much more likely to:

  • Not ask for a credit score.
  • Not require experience.
  • Lend for rural areas.

Local lenders are focused on the deal itself and whether it has good value.

When deciding which lender to use for hard money, always shop around to see what fits your situation now. And be aware that another lender may fit you better in the future.

Are Private Lenders Better Than Banks?

It’s impossible to say whether hard money lenders or banks are “better” for real estate. It all depends on your deal and where you are in your investment career.

When to Use Bank Loans vs Hard Money Loans

Bank loans will have lower rates and may be the better route if you:

  • Have had a successful investment business for over two years.
  • Make a lot of money at a W-2 job.
  • Have 3-4 weeks to close.

Hard money loans will be easier, faster,  and may work better if you:

  • Are newer to real estate investing.
  • Don’t have money up-front to invest.
  • Don’t want to put your own money into a deal.
  • Need to close within a week or two.

As long as a property promises income, hard money more than makes up for its higher rates with the speed and greater potential savings. Starting in hard money paves the way for you to work up to bigger funding opportunities.

Ultimately, your investment career should always have a mix of funding types. Bank loans, hard money, and OPM all have their place to work for you in real estate investing.

Where to Go from Here

Understanding money is key to successful real estate investments. When you put time into understanding money, you get control of it. With control, you can multiply your investment earnings four times over.

It doesn’t stop here. We want to help with your hard money education:

Introducing Flip It, Pro-Fit, a Contractor Partnership Program

Introducing Flip It, Pro-Fit, a Contractor Partnership Program

Today, we’d like to introduce our new contractor partnership program. Because we want you to make more money doing the work you love.

And with our Flip It, Pro-Fit Contractor Partnership Program, you can.

https://youtu.be/sB9TZ-vvk4Y

This special program is designed for any contractor who’d like to stop doing work for flippers, and start doing work for themselves…but who might want help on the business side.

That’s why it’s a partnership. Our company will handle all of the funding and paperwork, while you’ll handle all of the renovations.

Basically, we fund. You flip.

It’s as easy as that!

And, no. Right now, we do NOT charge commitment fees or anything else like that. This is truly a partnership program.

And when you partner with us, you can expect:

  • Less paperwork
  • More Money
  • No payments
  • And help creating a “bank worthy” portfolio.

Best yet, we’ll find the properties for you.

All you need to qualify for the Flip-It, Pro-Fit program is:

  • 3-5 years of experience as a contractor
  • A crew or team
  • Properties that sell for $250K or less AFTER they’re repaired
  • And a no BS attitude!

If you love fix and flips, but you don’t like seeing someone else get all the profits for your hard work, then here’s your chance to take control.

With the Flip-It, Pro-Fit program, you can keep doing the work you love, but make A LOT more money.

Ready to chat? Our team is always here to answer your questions and get your cash flow moving in the right direction.

 

What is the Difference Between Wholesale and Wholetail?

What is the Difference Between Wholesale and Wholetail?

The difference between wholesale and wholetail is actually pretty easy to understand. It all comes down to your buyer, and what needs to be done to sell the property to that buyer.

What is Wholesaling?

With wholesaling, you need to find a heavily discounted property and sell it to someone who is also looking for a discounted property. So, usually a fix and flipper.

Unlike wholetailing, you don’t need to do ANYTHING with a wholesale property. Because you won’t own it for more than a couple of days or weeks. All you need to do is assign the contract to your buyer; or complete a double closing (buy the property, turn around, and sell it the same day).

You’re in and out FAST.

But you might not make as much as you’d make with a wholetail deal. Why? Well, let’s take a closer look at wholetailing.

What is Wholetailing?

Unlike wholesaling, you have more types of buyers with wholetailing.

  1. Fix and flipper. Just like with wholesaling, fix and flippers aren’t going to pay very much because they have to go in and completely renovate the property. They’re looking to make money, so they’re not going to pay more than what you would’ve paid, minus the assignment fee.
  2. Landlord. This buyer will pay a little more than a fix and flipper because they still have to go in and fix the property up so it’s rent-ready. But their renovations won’t be as extreme as a fix and flippers, so the purchase price can be higher.
  3. Retail consumer. These buyers are on the MLS, and they’re looking for a good deal. But they’re not looking to make a profit like a fix and flipper or landlord, so you can charge a higher purchase price. Therefore, they’re the most profitable.

Now, with retail consumers, the purchase price probably won’t be as high as comparable homes in the same neighborhood because the property will still need work. But it’s in lendable condition, so you can still make a good profit. For example, if the going rate in the neighborhood is $300,000, then you can probably charge between $250,000 to $260,000.

Other Differences

Wholetailing also differs from wholesaling because you might own the property for 3 months or longer. Why? Because if you sell to a retail buyer, that buyer might need to get an FHA loan, and FHA loans (aka, bank loans) require certain “seasoning” (meaning you have to own the property for a certain length of time before you sell it). And when you own a property for more than a few days, you’ll need to think about taking good care of it.

No, that doesn’t mean you have to fix it, but you will need to keep it in good, livable, lendable condition. So getting a vacant home insurance policy to protect it against things like fires would be a good idea. Another good idea is putting the utilities in your name to keep the heat and plumbing on, especially during the winter months when pipes freeze and burst.

Yikes!

So, there you have it. Like we said, the difference between wholesale and wholetail is pretty easy. Just think about the type of buyer and what that buyer is planning to do with the property.

Ready to talk about your cash flow options? Great, our team is here to help.

Happy investing!

Florida VRBO: Rental Property Spotlight

Florida VRBO: Rental Property Spotlight

Why rent a Florida VRBO when you can reap the benefits of renting out your very own vacation home?

 

 

 

 

 

 

 

 

 

 

 

 

One of our clients just purchased this value-add property in the tropical vacation hot-spot of Florida. They took advantage of our quick and easy financing to purchase this home. They plan to fix it up and start renting it to generate positive cash flow.

We always love helping clients across the country fund their real estate investments. Whether it’s fixing and flipping, wholetailing, or closing a financial gap (bridge loan), our team can help. We even assist with long-term/traditional loans.

Ready to get started? Great! Our team is eager to set you on a path that helps you make the kind of money you need, to live the life you want.

Ohio Fix and Flip: Before and After Spotlight

Ohio Fix and Flip: Before and After Spotlight

Today’s Before and After Spotlight is a fantastic fix and flip property that one of our repeat clients in Ohio completed.

The whole team at Hard Money Mike thinks he did a wonderful job. He transformed an eyesore into a moneymaker for himself and the rest of the neighborhood.

This property is a shining example of what the real estate investing community is all about.

Check out the fix and flip transformation for yourself!

Before and After Fix and Flip

Before and After Kitchen: Ohio Fix and Flip

Before and After Kitchen 2

Before and After Living Room

Before and After Ohio Fix and Flip: Bathroom

Before and After Bedroom

Ready to chat about your next real estate project? Great, our team is here to help.

We’re a Colorado-based lender who lends money on all types of commercial/value-add properties. So, whether you want to invest in fix and flips, rentals, land, or wholetailing, we can discuss your funding options. We even offer bridge loans for those who need to close a financial gap.

Happy investing!

How to Buy a Value-Add Property with No Money Down in 4 Steps

How to Buy a Value-Add Property with No Money Down in 4 Steps

Do you know how to buy a value-add property with no money down?

Because, believe it or not, it only takes 4 steps.

Let’s take a closer look at these 4 steps:

#1: Buying discounted properties

It’s pretty rare to find a discounted property on the MLS. You’d have far better luck finding cheap deals through a wholesaler or investor-friendly realtor. And buying a discounted property is very important to making a profit. If you pay full retail value…well, you’ll make far less. In fact, you might not make any money at all.

#2: Setting up a loan properly.

When you want to buy a value-add property like a rental, then you should consider our 2-Step Process. Because it’ll save you a lot of time, money, and stress.

What is the 2-Step Process?

Well, it’s strategic funding method. The first step is buying a property with a hard money loan. The second step is turning around and quickly refinancing with a long-term loan. When you do this, you’re able to qualify for the highest loan amount possible. Plus, you have a much better chance of getting out of a hard money loan fast and into a cheaper traditional loan.

#3: Use rate and term, NOT cash out.

Take a deep breath.

And don’t panic, because we’re not going to dive deep into these hefty mortgage terms. But we are going to highlight the significant differences.

It can be really tempting to set up your loans as cash outs, because you get money at closing. But did you know when you use a cash out loan, you end up:

  • Paying higher costs
  • Taking longer to refinance out of hard money loans (which come with pricy rates)
  • Qualifying for lower loan amounts

Doesn’t sound so good anymore, does it?

So, let’s talk about the benefits of a rate and term refinance instead. With a rate and term, you:

  • Spend less money upfront
  • Refinance faster out of hard money loans. Like, months faster than a cash out refinance.
  • Enjoy lower rates

Better yet, when you use a rate and term refinance, your cash flow will multiply because you get to do more with your money when you pay less for your loans.

This is actually a simple process if you work with someone who can help you with both your hard money and long-term loans, like our sister company the Cash Flow Mortgage Company.

#4: Put $0 down by finding the right lender

The last and most important step is to find a lender who can handle 2-Step loans.

The truth is, there aren’t many real estate lenders out there who are qualified to provide both hard money and conventional loans. That’s why we do.

So if you’re ready to take your real estate investments to the next level and put less money down on your deals, then reach out to our team. We’re always eager to set you on a path the helps you make the kind of money you need to live the life you want.

Happy investing.

Thursday Tips: How To Analyze Investment Properties

Thursday Tips: How To Analyze Investment Properties

Ready to learn how to analyze investment properties?

In this great Bigger Pockets article, you’ll learn the nuts and bolts of evaluating real estate deals.

You’ll also discover how to get the information you need to complete a comprehensive evaluation of a neighborhood. That way you can determine which neighborhoods and properties will give you the best return.

And getting the best return is what this business is all about. Because generating positive cash flow is the answer to your financial independence.

But the only way to produce strong income is to put your money in the right properties. And the right properties depend on your analysis.

If you fail to evaluate your deals correctly, then the numbers won’t add up. And that means you might lose money.

A lot of money.

Yikes.

Yes, we’ve said it once and we’ll say it again: Numbers don’t lie.

How To Analyze Investment Properties

Before diving into real estate investing, make sure you understand how to compare markets and properties. Whether you’re trying to decide between investing in Boise or Sacramento—or you’re just comparing two similar homes—this guide will walk you through all the numbers you need to know. From calculating cash-on-cash return to running a comparative market analysis, the experts at BiggerPockets demonstrate the steps you need to follow and the statistics you must know with The Beginner’s Guide to Real Estate Market Analysis.

Ready to learn more about evaluating your real estate investments? Great! Check out the entire Bigger Pockets article here:

Or if you’re ready to chat about your fix and flips, rentals, and other value-add properties, give our team a head’s up.

Happy investing!

The Quick Deal Analyzer: How to Guarantee Positive Cash Flow

The Quick Deal Analyzer: How to Guarantee Positive Cash Flow

Have you heard of the Quick Deal Analyzer?

Because it’s an excellent tool to use BEFORE you buy a real estate property. Quick Deal Analyzer

The Quick Deal Analyzer helps real estate investors decide if a property is worth their time, money, and effort.

It’s an easy-to-use tool that allows you to quickly evaluate a fix and flip, rental, or another value-add property to see where the numbers land. Because, why bother negotiating with a seller, finding a lender, closing a deal, and renovating if the numbers don’t make sense from the start?

Why bother with all of that work if you’ll end up making little to nothing?

Quick Deal Analyzer

The Quick Deal Analyzer also lists some important questions that will, again, impact your cash flow and profits.

For example, how many months will it take to complete the project? The longer a project takes, the less money you’ll see in your pocket. Because you won’t be collecting rent or selling the property. Instead, you’ll be making payments to your lender and contractor.

Just remember, the Quick Deal Analyzer only works if you answer everything as honestly and accurately as possible. If you fudge the numbers or make false assumptions about your timeline and costs, then the profits you expect won’t be there when you go to rent or sell.

If you utilize this financial tool as you search for real estate deals, then you should be able to decide if you should walk away and find a different property. Or if you should stick with it and walk away with the kind of money you were looking to make.

Are you ready to try the Quick Deal Analyzer? Great! It’s here to download at any time. We also have other real estate investment tools you can download, like our Loan Optimizer. Because our main goal is to help you succeed and start living the life you’ve always wanted.

If you need help with the analyzer, or would like to run through your numbers with our team of experts, then reach out to us. We’re always happy to help!

Happy investing.