Tag Archive for: new investors

Real Estate Investing: Busting Hard Money Myths

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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.

Pre-Approved: Stop Losing Properties and Start Closing Deals

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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.

How to Get 100% Fix and Flip Financing

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The key to real estate investing is leveraging other people’s money to cover your fix and flip financing.

Getting your fix and flips covered 100% comes down to 3 things:

  • Finding the right money 
  • Striking at the right time 
  • Understanding hard money

Especially for new investors, hard money (also called private money) loans are usually the key. Hard money is flexible and often has less rigid requirements than more traditional loans. This makes them perfect for fix and flips.

3 Ways to Get 100% Financing for Fix and Flips

Especially in today’s real estate climate, using hard money is a crucial link in the chain of building wealth. 

Rates are high and a lot of banks are offering fewer loans. So where are you going to find the money?

There are three strategies that help you leverage hard money to build wealth by covering 100% of fix and flip financing.

1. Find Great Deals

This may seem obvious, but it’s more important to be strategic than ever before. 

Look for properties that have a minimum 70% ARV (After Repair Value). Take your time to make sure you’re finding properties that are going to have a solid return. Don’t take risks on properties that aren’t likely to flip.

Remember: it’s better to have 2-3 solid deals than 6-8 bad or marginal deals.

So look for those 70% ARV properties.

2. Cross Collateralize

Sometimes called “crossing,” this strategy lets you use one property to get another at 100%. 

If you have another rental, a home, or a fix and flip that’s hit the market, you can use that property as leverage to get the next property. 

You will need to have a mortgage on both properties. Doing this basically gives the lender more protection. If you’re confident that you’ve picked good properties with high ARVs, then cross collateralizing is a fairly low-risk move on your part.

As long as you get that flip done and paid off, then both liens are released once you sell the new flip. 

3. Find a Cosigner

Again, this strategy helps lenders feel more secure on their end. If you’re a new investor, it can be helpful to find a guarantor with the assets who’s willing to cosign on a loan. 

As with crossing, as long as you’ve selected strong properties, this is a low-risk strategy that simply allows you to get 100% financing that you can pay off when you resell the property. 

Your guarantor should never need to pay a cent, but it makes it easier for the lender to approve financing. 

Fix And Flip Financing Made Easy

The market is gearing up to be great for real estate investors. Don’t be afraid to start your investment journey. Just remember:

  • Find great deals
  • Cross collateralize 
  • Find a cosigner

Hard money loans are a great place to start. They’re flexible, and you’re more likely to find 100% financing through a hard money lender, especially as a new investor.

If you do end up needing DSCR or other traditional loans, you can check out our sister company, The Cash Flow Company. 

If you’re interested in discussing a deal, reach out to us at Info@HardMoneyMike.com. We’re always happy to run through deals and answer questions.

Hard Money Lending: 9 Things You Should Know

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What should you know about hard money lending before looking for your first deal?

The real estate investing world revolves around using other people’s money strategically to build wealth for you and your family. If you’re new to the table, it can be tricky to get Wall Street companies to back your deals, but hard money lending is a different game. 

If you’re new to real estate investing, chances are hard money loans (also called Private Money Loans) are going to be the key to your success. 

Here are 9 ways that hard money lending is a unique and great option for new investors. 

1. Hard Money Lenders Tend To Be Relational and Local

Most hard money lenders are relational. Hard money lenders are frequently either individuals or smaller companies, so personal connection really does matter.

They like to invest in their local communities in projects that will help build the local economy. Even if you’re a new investor, by building a good relationship with small, local lenders, you can still find the finances you need.

2. Loans Are Not Score-Based

Unlike large banks, hard money lenders aren’t tied to particular credit scores. 

You should still be honest with your lender, but the score typically matters less than the type of project and the LTV (loan to value).

3. Terms Are Not Based on Experience

In hard money lending, deals aren’t usually based on experience. Instead, lenders look closely at the individual deals. 

If a particular deal has a good chance of creating wealth, you’ll likely find an investor.

4. Hard Money Lending is Flexible

If you have a unique property or project that falls outside of what larger banks will back, it’s probably a good option for hard money.

Flexibility is one of the most important distinctions with hard money lending. If the LTV is good and that lender wants to invest in that area, you’ve got a good chance of making a great deal.

5. Hard Money Can Fund More

Hard money loans can actually fund up to 100% of your project depending on the LTV. 

If you’re strategic about the projects you take on, you can increase your leverage by choosing good properties and going through a hard money lender. 

6. It’s Fast!

Hard money lending is fast. 

Typically, you can close deals in days instead of weeks. Because the real estate market moves fast, this can be a great option to make sure you’re not missing out because of slow lenders.

7. You Can Do a Lot with Hard Money

You can use hard money for all sorts of things. From gap funding to purchasing costs to usage loans that raise your credit score, hard money isn’t limited to only one aspect of investing. 

It’s good to find multiple hard money lenders in your area because a lot of them have expertise in particular areas.

8. Use it to Pre-Fund Escrow

One of the great things about hard money is that you can use it to help get projects moving. Because escrow typically works as a reimbursement system, you usually need to personally fund your first (and sometimes second) escrow draw. 

Especially as a new investor, the first few escrow draws can be a huge strain financially. 

With the flexibility of hard money lending, you can use that loan to cover those draws. Then, once you’re able to access those escrow funds, you can pay off the hard money loan. 

9. Hard Money Lending Comes in all Sizes

As mentioned earlier, hard money lenders are sometimes willing to fund up to 100% of the purchase cost. 

They’ll frequently fund $50,000 or $110,000 loans whereas a lot of the big equity firms don’t really like this size loan. 

Time to Invest!

If you’re new to investing, remember that leverage is king. Leverage—the way you use other people’s money—is how you generate wealth and income.

Reach out and find the local hard money lenders in your community. 

We have a few tools on our website that can help you find resources in your area. Check out our location pages to find hard money resources in your area. You can also download our free Loan Cost Optimizer to help you compare different loan options.

As always, feel free to check out our YouTube channel or reach out to us at Info@HardMoneyMike.com for more information.

Happy investing!

BRRRR Strategy: Successful Real Estate Investing with Hard Money and DSCR

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How can you combine a BRRRR strategy with hard money and DSCR loans to win in the real estate game?

It’s amazing that there are options out there that let you build a real estate portfolio using little to no money. Using the BRRRR strategy with resources like hard money and DSCR loans lets even new investors get ahead. 

Using BRRRRs, hard money, and DSCRs together lets you do your fix and flips with little to no money in. 

Although this takes work, it is a tried-and-true method of generating wealth with solid resources and hard work. 

What is the BRRRR Strategy?

BiggerPockets launched this acronym a few years ago. BRRRR (Buy, Rehab, Rent, Refinance, Repeat) centers around fixing and flipping discounted properties.

BRRRR is all about buying properties with built-in equity that can be renovated to raise the value. We’ll likely start seeing more discounted properties in 2024 as foreclosures rise. This will provide a perfect landscape for BRRRRs. 

We recently helped a client buy seven properties this year thal all fit in these guidelines. They bought the properties with private money, and they’re refinancing them with a DSCR product. 

But it all starts with the Buy: look out for discounted properties. Yes, it takes work to rehab, rent, refinance, and repeat. However, by using the BRRRR strategy, you and clients like the one above are able to maximize profits in your real estate investment journey. 

Where Does Hard Money Come into Play?

Beginning the BRRRR process with buying a new property typically requires a lot of money. But don’t panic!

At the beginning of the article, we told you that you could use the BRRRR strategy with little to no out of pocket costs, and we’re about to tell you how.

Hard money loans are the key to making it all happen. Hard money is super flexible so you can use those loans to not only purchase, but also rehab or even cover closing costs. 

At Hard Money Mike, we specialize in hard money loans.

Hard money lenders typically look at your loan to value (LTV). It’s great if your LTVs can be close to 75%, but you’re welcome to reach out if you have any questions or concerns about whether you might qualify for a hard money loan.

Using DSCR to Refinance Your BRRRRs

Getting your property refinanced is a crucial step in the BRRRR strategy. 

DSCR (Debt Service Coverage Ratio) was specifically developed for real estate investors. The benefit of DSCR is that lenders aren’t concerned with your business’s income. 

Instead, they look at the specific property to see if it has positive cash flow. If it does and you have good credit, you’ll likely be able to refinance your hard money loan 75%-80% of the current appraised value.

If you bought at a discounted rate but rehabbed the property, the new value should be closer to everything else in the neighborhood.

BRRRR Strategy + Hard Money + DSCR = Success!

You need all three of these to really be successful at building your real estate wealth from little to no money.

Beginning your real estate investing journey can be a slow process. The first year, you might only complete the BRRRR strategy for one or two properties. 

But the longer you do this, the easier it gets. As you understand more, you develop contacts, and everything gets easier. 

Realistically, if you’re looking to build wealth from real estate investing but don’t have extra cash on the front end, you could likely use the BRRRR strategy on up to ten properties over the next three years.

By using the resources available (like BRRRRs, hard money, and DSCRs) you can build up your portfolio and wealth with hard work.

Time to Make Some Deals

Remember, it all starts with buying discounted properties with hard money loans. Then, keep using hard money for rehab, and refinance with DSCRs. 

If you want to learn more, we have a ton of free tools that can help you in the real estate game. 

If you have questions about hard money or want to discuss a deal, just reach out to us at Info@HardMoneyMike.com. 

You can also check out our YouTube channel for more real estate investment strategies and tips. 

Happy Investing.

What Can You Do With A Hard Money Loan?

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Hard money is so versatile! Understanding how much you can do with a hard money loan can open doors for your projects.

As long as the deal you’re looking for is backed by real estate for investment or business purposes, hard money is one of the most flexible options out there.

Unlike a lot of other options, hard money lenders aren’t confined by the same restrictions as traditional loans. This means you can use hard money for a wider variety of real estate investment projects.

Fix and Flip Hard Money Loans

Hard money loans work exceptionally well for fix and flip projects. Here at Hard Money Mike, we specialize in hard money loans for fix and flips. 

Hard money loans can often be specialized for your individual project which makes them ideal for real estate investing and renovations. 

Similarly, if you’re looking to renovate and rent (instead of sell), you can look for a hard money loan to help cover the cost of rennovations.

Gap Funding with Hard Money

Gap funding is a term used for a variety of loans that cover the “gaps” in a larger loan. This is often simple to find through hard money loans, provided there’s good equity in the deal.

One type of gap funding is bridge loans. If you need temporary financing or are looking to buy one property before selling the other, look for bridge loans from hard money lenders.

Similarly, gap funding also covers usage loans. With usage loans, lenders pay off the investor’s credit cards which helps their credit score go up. This lets real estate investors get the funding they need to focus on their project.

We also strongly encourage our investors to have a separate business credit card to keep their scores high.

Project Completion Loans

If a property is sitting stale or taking too long to get money out of escrow, hard money loans can play a huge role in project completion. 

The faster you complete your project, the lower your overall project cost. Also, the better chance you have of hitting a good selling window in the market.

Land Purchase and Development

The flexibility of hard money can work well for investors and business owners who want to buy property to develop. While big companies are often less interested in rural areas, hard money lending doesn’t have those same hang-ups.

Additionally, because hard money lenders can adjust for the client’s needs, it’s easier for you to buy large plots of land to later split into multiple parcels. It’s also easier to use that money for things like modular home development.

A good hard money lender will be able to help you get money in order to purchase and begin development quickly.

Hard Money Loans for Business Needs

You can use a hard money to buy out a partner who owns real estate or to expand their business by buying equipment or other needs. 

If you’re a business owner, you also might be able to use a hard money loan to cover payroll expenses thanks to its flexibility. So long as some level of real estate is involved, hard money lenders are able to support.

First Time Investors or Poor Credit Scores

If you’re a first time investor looking for a good deal, hard money is likely the way to go. 

Depending on how good the deal is, hard money lenders will sometimes give up to 90% to 100% even if your credit score is less than 600.

Hard money lenders are able to be more understanding regarding credit scores and are often more willing to lend to people with lower scores. This in turn really helps out newer investors who are trying to build capital.

Unlike large Wall Street-type companies, hard money lenders care more about the loan to value and the property’s value.

Hard Money for Unique Projects and Situations

Hard money is ideal for unique situations and real deals that can make investors money. 

If you find yourself stalled in the middle of a project and pressed for money, hard money lenders are flexible. Even in the middle of a mess, a good lender will try to help you find a solution.

Refinancing during a project can be tricky, but it’s significantly easier with hard money.

Similarly, strange situations happen all the time that can leave investors high and dry. If a bank is bought out and your loan is due when you’re not ready, hard money loans can bail you out.

Hard money also works well for mixed use commercial projects. 

Wholetail and Transactional Deals with Hard Money

If you’re looking for a short term wholetail deal, hard money works well. Hard money can even work for loans as short as 30 or 60 days. 

Transactional deals refer to when you’ve found an amazing deal and you plan on buying and selling within a week.

Hard money is perfect for those kinds of deals because they often have a higher loan to value than private lenders like.

The Benefits of Being Outside the Box

Hard money lenders don’t have a box we need to fit into which lets us help you out in a wide range of situations. 

Especially in 2023, banks are walking away from certain deals which makes hard money even more important.

If you’re interested in looking at more traditional loans, check out The Cash Flow Company. However, if your project is outside of the box, hard money might be the way to go.

If you have questions or want to talk about your project, contact us at Info@HardMoneyMike.com.

You can also check us out on our YouTube channel.

Happy Investing.

Hard Money Loans for New Investors

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Hard money loans open doors for newer, smaller investors who are looking for a way to enter the real estate game.

Our goal is to make it as easy as possible for new investors to find the right information so they can be successful.

What are hard money loans? 

Hard money loans are short-term asset-based loans secured by real estate. These loans are typically provided by private investors, small companies or individuals in your local area. 

The main advantage of hard money is they provide quick real estate financing based mostly on the asset and not on your credit score. 

Hard money loans can be used for many things:

  • Funding a fix-and-flip
  • Financing the front-end of a BRRRR project
  • Overcoming credit limitations often experienced by new investors
  • Purchasing land for development
  • Funding some construction projects

Pros of Hard Money Loans:

1. Speed

Whereas Wall Street companies or banks may take two to four weeks, getting approved for a hard money loan typically takes five to seven days.

Speed is critical in investing, and quickly getting your money upfront is crucial in the real estate game.

2. Upfront Financing

Hard money loans also give you money upfront. This allows you to get your escrows out to start the project. Most large companies want you to put money in first. This can be a particular problem for new investors, and hard money lets them get their foot in the door. 

3. Flexibility

Large companies often have very strict lending criteria. If your project is unique, if it’s outside of the box, hard money lenders are more likely to consider it.

4. Higher Financed Amounts 

If you find a deal that has a good loan-to-value ratio, hard money lenders may lend up to 100% of the financing. This lets you keep more of your own money in your pocket and use the lender’s funds for your project.

5. Property-Focused Approvals

Finally, approvals for hard money loans are mainly based on the property itself, the exit strategy and the planned renovations or improvements. Hard money is often a good fit if you’re an investor with limited credit history or a unique property or area.

Cons of Hard Money Loans

1. Higher Costs

While interest rates on hard money are typically similar to other lenders, costs can be anywhere from 1% to 1.5% higher. However, faster closing times often offset the higher cost and can get you better deals than Wall Street companies.

2. Shorter Terms

Typically, hard money lenders offer financing ranging from six to twelve months. Therefore, if you’re looking for something longer than twelve months, Wall Street companies or a local bank may be a better fit. 

3. Limited Availability of Hard Money

Additionally, it’s important to remember that most hard money lenders are individuals, small companies, or private institutions. These lenders only have a finite amount of money to lend. It’s often necessary to build good relationships with local hard money lenders to ensure access to funds.

Hard Money Resources for New Investors

It can be tricky to determine what option is best for you. Because of this, we’ve compiled some resources to help you shop around for the right fit for your project.

Sites like Connected Investors help you network with other people in the business. Get plugged in with your local realtors, wholesalers, and lenders. Talk to other people in the industry to make sure you’re getting the best deals. 

To help you shop around, we also have a great tool called the Loan Cost Optimizer that helps you find the good lenders. It’s free to download and to use!

If you’re still not sure if hard money loans are right for you, no problem! Check out the Cash Flow Company website or YouTube channel to learn about other, more Wall Street-style options that have the same personal connections as hard money loans. 

Additional Questions and Research

Hard money is a very important tool, especially for new, small investors. However, you should always shop around, look around and talk to other experts so you know your options. Also, experts can help you better understand the terms and conditions of hard money loans so you know exactly what you’re getting into.

If you have questions about hard money loans, contact us and we’ll be happy to help you out!

Additionally, you can check out this video on our YouTube channel.