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Wisdom Wednesday: What's a Good Investment

Wisdom Wednesday: What’s a Good Investment

On this Wisdom Wednesday, we want to focus on what a good investment looks like.

Because, the truth is, good investments are pretty simple. It all boils down to cash flow.

Good Investment

As long as you have more cash flowing in than flowing out, your investment is a good investment. ~Robert Kiyosaki

Yep, it’s really as simple as that. This concept might seem pretty obvious to most investors. Unfortunately, we’ve seen too many clients fail to evaluate their deals in a way to ensure they generate positive cash flow.

What are some of the most common mistakes we see? Here are just a few:

Fail to shop around for the right lender.

Maybe an investor gets comfortable using the same lender over and over again, or they only call one lender and decide to go with their product. Whatever the case, when real estate investors fail to shop around for the best loan with the best rates and terms, then their cash flow can take a major (and unexpected) hit.

Use their heart more than their head.

Too many investors fall in love with a property and refuse to accept it’s not a good investment once they crunch the numbers. Remember, this is a business. You’re not buying a house for you or your family. You’re buying an asset that’s intended to make you money. So try to use logic rather instead of emotion.

Calculate bad numbers.

Real estate investing comes down to numbers. Pure and simple. But when investors use the wrong numbers, then they use the wrong math. And the wrong math means big consequences for their cash flow. Some common missteps with math include inaccurate comps, underestimated renovation budgets, and hidden lender junk fees. (If a lender promises amazing rates and terms, then it’s probably too good to be true. Ask them about additional fees after closing. For example, will they charge you to withdraw money from your escrow account?)

Those are just a few of the common mistakes new and seasoned real estate investors make. And those mistakes can make a dent in their cash flow. So, their good investment is suddenly not-so-good.

Ready to talk about your next deal to ensure it’s a good investment? Great, our team is always here to chat.

Happy investing!

Take Charge Tuesday: Numbers Game

Take Charge Tuesday: Numbers Game

Take Charge Tuesday: Numbers Game

On this Take Charge Tuesday, we want to talk about the numbers game.

At Hard Money Mike, we say it all the time: Real estate investing is all about the numbers.

Because, if done correctly, numbers don’t lie.

But in order to use the “correct” numbers, you have to research and evaluate your real estate deals and loans. That means using honest comps, being honest with your renovation budget, knowing your market and its going rates, and researching lenders.

When it comes to real estate lenders, we always recommend shopping around. Because every lender varies with their points, rates, and…hidden junk fees.

Yes, hidden junk fees.

There are many lenders who promise amazing rates and points, but then sneak in extra costs throughout the process. For example, some lenders will charge you to take money out of your escrow account (your escrow account is where lenders hold back funds for renovations). That’s like your bank charging you to withdraw money from your savings account.

So, we always tell clients and prospects to be careful. Ask lenders what other fees might pop up along the way so you know EXACTLY how much money your loan will cost.

Because, again, it’s all about the numbers. And you can’t take charge and claim a hefty reward if you don’t do your due diligence and research both potential properties and lenders.

Ready to take charge of your real estate investments? Great! Our team is always here to help you crunch the numbers, evaluate real estate deals, and decide if a value-add property is worth your time, energy, and money.

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

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.

The Truth About Hard Money: 3 Steps to Make Hard Money Cheaper

The Truth About Hard Money: 3 Steps to Make Hard Money Cheaper

The Truth About Hard Money: 3 Steps to Make Hard Money Cheaper

Have you ever wondered you can make hard money cheaper? Or have you always assumed there’s no such thing as “cheap” hard money?

Well, it’s time to explore the truth about this investor-friendly lending option. Because one of the biggest misconceptions about hard money is it’s took expensive.

Spoiler alert…This assumption is false!

Here’s the truth. Getting a hard money loan doesn’t mean automatically paying 12% interest or higher. Actually, if you take these 3 steps, you can pay a lot less for it.

Experience is everything

That’s right. If you can prove you have real estate experience, a lender will feel a lot more confident giving you money. And when a lender feels confident about a client, they will offer lower rates.

How can you present your experience to a hard money lender? Well, the best method is to create a real estate portfolio. This portfolio should include things like:

  • Before and after pictures
  • Budgets
  • Profits earned

Put SOME money down

If you’re willing to put money down at closing, then a lender will see you’re serious about your deal and lower the cost of your loan. Because it helps lower their risk.

How much of a down payment should you make, you ask? The ideal amount would be 10% or more, but even 5% would ease the cost of your loan.

Manage your credit score

We know you’ve heard it once, but it bears repeating. Your credit score matters, especially when it comes to qualifying for a competitive loan. Because the higher your score, the lower your interest rates.

But, let’s say your credit score is lower than 670. Well, don’t get flustered, because you can quickly raise it if you follow some of our credit boosting tips, including these 3:

  • Keep your credit card in your wallet and, instead, focus on paying it down (or off). This method is simple, but effective. Just remember when you whittle your credit card balance down to $0, keep your card. Do NOT close your account. Closing an account that’s in good standing is anti-productive in keeping your score healthy.
  • Keep your card balance low. By that we mean only use 30% of your total maximum credit line. So if you have a  $1,000 maximum, don’t let your balance rise above $300. Pay it down every week or month to keep it under the 30% range. The credit bureau likes to see that.
  • Pay your bills and pay them on time. Again, simple, but effective. If you make your payments on time for the next 12 months, your score WILL go up.

Look, hard money can be pricy, but you can make it cheaper by following these 3 easy steps. In fact, we promise if you adhere to these steps, you will greatly reduce the cost of your next hard money loan.

Want more truths about hard money? Then stay tuned for our next video where we discuss the myth of getting trapped in a hard money loan.

Ready to chat about your hard money and other lending options? Our team is always here to help.

What is hard money? Learn more on our YouTube channel!

Happy investing!