Tag Archive for: real estate funding

Text: 'Primary vs Secondary HELOCs"

Primary vs Secondary HELOCs – A HELOC for Your Rental??

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There are two types of HELOCs, primary vs secondary. Here’s what you need to know about them.

You can get a HELOC from two sources: the house you live in, and, potentially, some of your rental properties.

Primary Home – Primary vs Secondary HELOCs

HELOCs are calculated using LTVs and CLTVs (combined loan-to-values).

To calculate this, the bank looks at the loan balance for your first mortgage, plus what the HELOC will add to it. Then they divide that by the value of your home to get to the combined loan-to-value.

Most banks and credit unions will go up to 90% CLTV, but some do 100% on primary homes.

Using a HELOC unlocks all the equity you’ve established on your home as home values go up over the years.

Rental Properties – Primary vs Secondary HELOCs

Rental HELOCs are a little more limited. They have different LTV/CLTV requirements.

For rental properties, there are some banks, credit unions, and mortgage brokers that will allow HELOCs in second position that go up to a CLTV of 65% to 75%.

Different lenders will limit the amount of secondary HELOCs differently, but most will give you one or two properties.

When To Get a HELOC

Start using your HELOC now, before home prices go down.

If you have a lot of equity in your rental properties or home, you can tap into that now while the market’s still high. This limit will be locked in for 10 years, even as your home value will likely come down 5-10% in the next six to nine months.

If you wait to take out either primary or secondary HELOCs you’ll lose more of your available funds.

Read the full article here.

Watch the video here:

https://youtu.be/MoUp2CAht0A

Text: "What is a HELOC?"

What Is a HELOC for Real Estate Investors?

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As a real estate investor, it’s important to know: What is a HELOC?

It stands for Home Equity Line of Credit. But what exactly is a HELOC?

It’s a Lien

A HELOC is a lien against a property.

It can come as a first, second, or sometimes even third mortgage. If you don’t owe anything on your house, you can put a HELOC in first position. With an existing mortgage, it’s put in second position.

It’s a Line of Credit

A HELOC is set up kind of like a credit card. The bank sets a limit they’ll lend and a term for how long.

A HELOC can pay for almost anything related to your projects. You can go to Home Depot and get materials, you can pay your contractors, you can make a down payment. It can take the form of a bank wire, a debit card, or whatever other option your bank gives you.

At the end of the month or the end of a project, you pay the HELOC off, and all the credit is freed up. You can use it again, pay it down, then use it again for as long as the term is active.

Typically, the bank will set a 10-year term. So for 10 years, you can use and re-use it up to the limit they set. If your property goes up in value during that time, it’s possible to get a refinance for a higher limit.

It’s a Faster, Easier, Cheaper Source of Money!

Any expenses you can put on a HELOC frees up your investment experience. When you borrow from other places (hard money lenders, banks, etc), there’s more paperwork and more cost.

HELOCs are easier, faster, and cheaper. A successful investor uses every leverage tool at their disposal, so it’s important to tap into this one.

Read the full article here.

Watch the video here:

https://youtu.be/MoUp2CAht0A

Text: "When to Use Hard Money"

5 Times You Should Use Hard Money for Your Real Estate Investments

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Here are 5 ways to use hard money right as a real estate investor.

Real estate investing is all about making profit.

And sometimes, to make profit, you need to use hard money loans.

When is hard money your best option in real estate investing? Let’s look at 5 situations where you should use hard money to fuel your investments.

1. Using Hard Money for Speed

The number one way hard money makes you money in real estate investing is how fast they are.

Look at a real example from one of our clients.

He was able to buy a property in Colorado at a $30,000 discount.

Five other people were bidding as high as $330,000 on the property.

But our client was able to close in less than a week, so the sellers accepted his bid of $300,000.

How Much Does a Hard Money Loan Cost?

People can get tripped up with the cost of hard money. Wouldn’t the price of the loan leave our client at a loss here? Let’s compare his hard money loan on this deal to his competitors with a bank loan.

For hard money, he spent $7,500 on origination. A bank loan would have cost $4,500.

Six months’ worth of interest on the hard money loan adds up to $15,000. The same time on a bank loan would accrue $9,900 of interest.

Appraisal underwriting, and processing fees were lower with hard money at $984 (vs $1500 with the bank.)

Overall, our client did pay a lot more for the loan itself using hard money. His hard money loan cost $23,484, and a bank loan would have cost $15,525. That’s an extra cost of $7,959 to use hard money.

Can You Save Money by Using Hard Money for Real Estate?

Despite seeming more expensive, hard money still gave this investor a discount. Why? Hard money enabled him to close fast, so he got a better deal on purchase price.

What was the total cost of hard money? The discounted price of the property ($300,000) plus the hard money loan costs equals $323,484. 

What about the bank loan? The home price of $330,000 plus bank loan costs totals $345,525.

This is a savings of $22,041. Just for closing fast with hard money rather than using the cheaper but slower bank loan.

Using hard money for speed works even when the discount is smaller.

Let’s say our client had bid only 10,000 less than the other investors. He still would’ve saved $1,191 up front on the deal.

Hard Money Savings without a Purchase Price Discount

The option of buying real estate with bank loans is often cheaper. However, in many investment situations, using a bank loan is not a viable option.

If you have to wait 4 weeks to clear your bank loan, but only 4 days for a hard money loan… that becomes the difference between closing on the property or not.

Ultimately, even if using hard money doesn’t get you the lowest price, you still save money in the long run. If the speed of a hard money loan gets you a property, you will still come out on top.

Buying then selling a profitable fix-and-flip will always make more money than never buying and never selling.

2. Use Hard Money if You Have Low Credit

Institutional lenders, private equity, and banks have credit score minimums. If you don’t have a high enough score, you don’t get a loan.

Hard money lenders, on the other hand, are typically not credit-score-driven. Yes, they’ll probably look at your credit, but they won’t base your loan on it.

Real estate investors can have low credit scores for many reasons:

  • Usage – You put your flip rehab costs on credit cards
  • Thin Credit – You have few lines of credit, or young lines of credit
  • One-time Event – You had good credit, then life happened and your score temporarily dipped.

Hard money lenders understand that these issues are not always a reflection of your ability to pay back loans. 

That’s why hard money lenders don’t worry about your credit score, just your credit.

Do you have a history of late payments? Are you defaulting? That will negatively affect you with a hard money lender. 

If you are responsible with credit, but have a score banks won’t accept, a hard money lender will be a good option.

3. Using Hard Money Because It’s Flexible

Sometimes you need an outside-of-the-box lender.

  • Unique Properties – If you have a house or area that’s unique (maybe a dome house, an old manufacturer, etc.), hard money lenders will give you more options.
  • Rural Areas – Most local banks and large hard money lenders don’t lend outside of MSAs. Traditional lenders might not cover thirty miles outside of an urban area, but many small hard money lenders will.
  • Cross Liens – Hard money lenders have more flexibility putting a cross lien on another property. This is useful if you don’t have a lot of money to put down, but do have another property with a lot of equity.
  • Gap funding – Sometimes a mortgage doesn’t quite cover all the costs of your project. Hard money can fill in those gaps.
  • Lot splits – Splitting off a lot can be a headache with a traditional lender. A hard money lender is more flexible with the time it takes to get a survey and everything else prepared. This allows you to split off a lot, sell the house, and keep the lot.

4. Using Hard Money for BRRRRs

Hard money is crucial for successful BRRRRs.

With BRRRR (rental flips), you:

  • Buy undermarket valued properties
  • With a hard money loan
  • Then rate-and-term refinance into a longer-term loan.

If you want to get into BRRRR transactions (rental properties), you have to find a hard money lender or private lender who will loan you 75-80% of the after-repair value of the property you want to buy.

If you get a hard money loan to fund the purchase price and rehab up to 75-80% ARV, you can maximize your refinance. This saves you money, time, and interest.

5. Other Times to Use Hard Money

There are many other reasons real estate investors use hard money. Here are a few:

  • Banks limit you to 2-3 loans. If you’ve maxed out those lenders, hard money can help.
  • Hard money can work as a bridge loan. It covers the down payment of your next property until your other bank-funded property sells.
  • You can keep a project off your credit. Hard money typically doesn’t show up on your credit report.
  • Investment beginners might need help with their first couple projects started before banks will lend to them.
  • Complete a started project. If you end up with a property mid-flip, many banks won’t lend for it. But a hard money lender can easily provide a gap loan to finish the rehab.
  • Hard money has the flexibility to let you come in with other funding sources. (If you want to put repair costs on a credit card, want to use an OPM lender, etc.).

How to Use Hard Money for Real Estate

Want to learn more about real estate funding? Wondering if a hard money loan might be right for your investment? 

Email us your questions anytime at Mike@HardMoneyMike.com. 

Or join our weekly Leverage Up call here, every Thursday from 1:15 PM to 2:15 PM (MST).

Text: "Benefits of a HELOC"

Benefits of a HELOC: Are You Missing Out?

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If you don’t use a HELOC in your real estate investment career, you’re missing out on these benefits.

The uses and benefits of a HELOC for a real estate investor are broad and huge. This line of credit is one of the best ways to tap into your existing money to create more money.

Let’s take a look at a few of the ways you can utilize your HELOC to benefit your real estate investments.

Benefits of a HELOC for Real Estate Investors

Down Payment

You can use a HELOC as a down payment on any loan – hard money or long-term. Anytime a lender requires a down payment, you can take the money off your home equity line of credit, and bring it to closing.

For down payments on rental properties, your lender will still require the money borrowed from your HELOC to be included in your debt ratio.

Construction Costs

For a flip or a BRRRR, you can use money from your HELOC to cover the costs of construction.

Money from a hard money lender or bank comes at a higher price. If you’d prefer to use your HELOC to cover construction costs, you can lower the amount borrowed from a lender.

A HELOC will be some of the cheapest money you can find out there – especially now with money tightening. Using it helps lower your overall costs.

Another benefit of a HELOC is the speed and flexibility. If you don’t have time to wait for your lender’s escrow process to pay your contractor, you can just pull the payment off your HELOC.

Carry Cost Benefits of a HELOC

Carry costs include monthly interest, HOA fees, mortgage payments, some materials and construction, and any other regular cost associated with owning the property.

These costs can turn into a burdensome expense on a flip. You can pull from your line of credit to cover carry costs, and when your flip sells, you can put it all back in.

Buying Properties at Auction

There will be more foreclosures coming up soon. To take advantage of this turn in the market, you can use money from your HELOC to buy a foreclosed property at auction.

The benefit of a HELOC here is that you don’t have to get lender approval or meet lender requirements before placing a bid on a property. You can pull from it, pay for the property (or at least the down payment), and refinance later if needed.

Buying Wholesale Properties

You can also buy properties from wholesalers or the regular marketplace when you otherwise couldn’t. You close with a HELOC, then go back and refinance with a hard money or bank loan.

With this strategy, you can close on a deal faster than anyone else. You don’t have to sift through the paperwork and red tape of a loan; just go to the bank and wire out the funds.

Bridge Loan Benefits of a HELOC

Some investors use their HELOC to bridge between properties.

They have one flip for sale, but they’re ready to buy their next one. They use a HELOC to cover the down payment, then pay it back when the other property sells.

You can create your own bridge loan by using a HELOC.

Lend to Other People

You can also use it to lend to other people in the real estate investment community at a profit.

You can borrow from a HELOC at a rate of 5-6%, and you could charge someone else up to 10-12%. (But of course, always be careful and protect yourself when lending to other people).

Overview of the Benefits of a HELOC

  • Using your HELOC allows you to use your money, without taking anything from your savings or 401k
  • You can tap into the equity that’s already at your disposal
  • It keeps projects going while typical loans are tightening up
  • You can get into properties quickly and refinance a few weeks later
  • You can avoid the higher rates of external lenders by borrowing from your HELOC

Read the full article here.

Watch the video here:

https://youtu.be/MoUp2CAht0A

Text: "BRRRR Lending Options During Inflation"

New BRRRR Lending Options to Consider in a Down Market

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With inflation, typical rental property loans may not do the trick. Here are some new BRRRR lending options for you.

With rates so good over the last three to four years, all BRRRR investors were looking at one loan product – the 30-year fixed mortgage.

With rates increasing, however, you might need to look beyond the 30-year fixed loan to get into good BRRRR properties. Here are some options that can bridge your properties until rates go down.

ARMs (Adjustable-Rate Mortgages) for BRRRR

You can get three-, five-, or seven-year ARMs. Whichever time length you pick, the rates will be fixed during that period. Afterward, the rates become adjustable.

In rising markets, these loans aren’t that great. In declining markets, though, they can be the perfect loan to bridge you into a rental property.

You can get an ARM for .5-2% lower than a 30-year fixed mortgage. These lower rates can cash flow a property until either prices go up and you can sell, or rates go down and you can refinance.

Interest-Only Lending Options

With the interest-only BRRRR lending option, you don’t pay any principal for the first ten years.

An interest-only loan is appealing right now because it keeps cash flowing. Your loan amount doesn’t go down, so it’s not a great option for the long-term. But it is a good lending option to get you into a property during this next market.

40-Year AM (Adjustable Mortgage)

A 40-year AM spreads the loan payments over 40 years instead of the 30 with a traditional fixed mortgage. This adjustable mortgage gives you lower monthly payments… and more cash flow.

What To Keep In Mind with These New BRRRR Lending Options

ARMs give lower rates, 40-year AMs offer lower payments, and interest-only loans postpone the principle.

Keep in mind: these loans won’t help your equity or get a property paid down quickly. But they are good options to get into properties while values are low and funding is tight.

Remember that conditions of BRRRR are ever-changing. Get plugged into the money side of investing, and talk to lenders to see what’s available for you in inflationary times.

Read the full article here.

Watch the video here:

Text: "What is a HELOC?"

What is a HELOC? A Real Estate Investment Must!

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Here’s what a HELOC is and why you should be using it as a real estate investor.

More and more investors have been calling us to ask about HELOCs.

With traditional, non-traditional, and hard money loans, why would a real estate investor need a HELOC?

In times like this with money tightening, it’s hard to get all the money you need for a project from a lender.

Let’s talk about what a HELOC is, how to get one, and what to do with it to leverage your real estate investments.

What Is a HELOC?

It stands for Home Equity Line of Credit. But what exactly is a HELOC?

It’s a Lien

A HELOC is a lien against a property. 

It can come as a first, second, or sometimes even third mortgage. If you don’t owe anything on your house, you can put a HELOC in first position. With an existing mortgage, it’s put in second position.

It’s a Line of Credit

A HELOC is set up kind of like a credit card. The bank sets a limit they’ll lend and a term for how long.

A HELOC can pay for almost anything related to your projects. You can go to Home Depot and get materials, you can pay your contractors, you can make a down payment. It can take the form of a bank wire, a debit card, or whatever other option your bank gives you.

At the end of the month or the end of a project, you pay the HELOC off, and all the credit is freed up. You can use it again, pay it down, then use it again for as long as the term is active.

Typically, the bank will set a 10-year term. So for 10 years, you can use and re-use it up to the limit they set. If your property goes up in value during that time, it’s possible to get a refinance for a higher limit.

It’s a Faster, Easier, Cheaper Source of Money!

Any expenses you can put on a HELOC frees up your investment experience. When you borrow from other places (hard money lenders, banks, etc), there’s more paperwork and more cost.

HELOCs are easier, faster, and cheaper. A successful investor uses every leverage tool at their disposal, so it’s important to tap into this one.

Benefits of a HELOC

The uses and benefits of a HELOC for a real estate investor are broad and huge. This line of credit is one of the best ways to tap into your existing money to create more money.

Let’s take a look at a few of the ways you can utilize your HELOC to benefit your real estate investments.

Down Payment

You can use a HELOC as a down payment on any loan – hard money or long-term. Anytime a lender requires a down payment, you can take the money off your home equity line of credit, and bring it to closing.

For down payments on rental properties, your lender will still require the money borrowed from your HELOC to be included in your debt ratio.

Construction Costs

For a flip or a BRRRR, you can use money from your HELOC to cover the costs of construction. 

Money from a hard money lender or bank comes at a higher price. If you’d prefer to use your HELOC to cover construction costs, you can lower the amount borrowed from a lender.

A HELOC will be some of the cheapest money you can find out there – especially now with money tightening. Using it helps lower your overall costs.

Another benefit of a HELOC is the speed and flexibility. If you don’t have time to wait for your lender’s escrow process to pay your contractor, you can just pull the payment off your HELOC.

Carry Costs

Carry costs include monthly interest, HOA fees, mortgage payments, some materials and construction, and any other regular cost associated with owning the property.

These costs can turn into a burdensome expense on a flip. You can pull from your line of credit to cover carry costs, and when your flip sells, you can put it all back in.

Buying Properties at Auction

There will be more foreclosures coming up soon. To take advantage of this turn in the market, you can use money from your HELOC to buy a foreclosed property at auction.

The benefit of a HELOC here is that you don’t have to get lender approval or meet lender requirements before placing a bid on a property. You can pull from it, pay for the property (or at least the down payment), and refinance later if needed.

Buying Wholesale Properties

You can also buy properties from wholesalers or the regular marketplace when you otherwise couldn’t. You close with a HELOC, then go back and refinance with a hard money or bank loan.

With this strategy, you can close on a deal faster than anyone else. You don’t have to sift through the paperwork and red tape of a loan; just go to the bank and wire out the funds.

Bridge Loan

Some investors use their HELOC to bridge between properties. 

They have one flip for sale, but they’re ready to buy their next one. They use a HELOC to cover the down payment, then pay it back when the other property sells.

You can create your own bridge loan by using a HELOC.

Lend to Other People

You can also use it to lend to other people in the real estate investment community at a profit.

You can borrow from a HELOC at a rate of 5-6%, and you could charge someone else up to 10-12%. (But of course, always be careful and protect yourself when lending to other people).

Overview of the Benefits of a HELOC

  • Using your HELOC allows you to use your money, without taking anything from your savings or 401k
  • You can tap into the equity that’s already at your disposal
  • It keeps projects going while typical loans are tightening up
  • You can get into properties quickly and refinance a few weeks later
  • You can avoid the higher rates of external lenders by borrowing from your HELOC.

Primary vs Secondary HELOCs

You can get a HELOC from two sources: the house you live in, and, potentially, some of your rental properties.

What is a HELOC on a Primary Home?

HELOCs are calculated using LTVs and CLTVs (combined loan-to-values). 

To calculate this, the bank looks at the loan balance for your first mortgage, plus what the HELOC will add to it. Then they divide that by the value of your home to get to the combined loan-to-value.

Most banks and credit unions will go up to 90% CLTV, but some do 100% on primary homes. 

Using a HELOC unlocks all the equity you’ve established on your home as home values go up over the years.

What is a HELOC on a Rental?

Rental HELOCs are a little more limited. They have different LTV/CLTV requirements. 

For rental properties, there are some banks, credit unions, and mortgage brokers that will allow HELOCs in second position that go up to a CLTV of 65% to 75%. 

Different lenders will limit the amount of secondary HELOCs differently, but most will give you one or two properties.

When To Get a HELOC

Start using your HELOC now, before home prices go down. 

If you have a lot of equity in your rental properties or home, you can tap into that now while the market’s still high. This limit will be locked in for 10 years, even as your home value will likely come down 5-10% in the next six to nine months. 

If you wait to take out your HELOC, you’ll lose more of your available funds.

Where To Find HELOCs

There are three places you can look to find HELOCs.

1. Credit Unions

Credit unions will have the best HELOC rates and terms. We’ve found that to be universal state-to-state.

Shop around at local credit unions. Make sure the lender you’re working with likes real estate investors. Each lender has their own niche. One may prefer doing car loans, but another will prioritize HELOCs.

You’ll find the best deal from a credit union, but you should still shop around for the right one.

2. Local Banks

Local banks usually like to work with real estate investors. They’ll have more products available as far as HELOCs for rental properties and HELOCs on multiple properties.

3. National lenders

Now that the refi-boom is settling down, national lenders and mortgage brokers are starting to offer HELOCs. Going through a national lender will open you up to more products, but the cost is almost guaranteed to be higher.

Consider all three of these options to find the best deal you can. For a HELOC, the “best” deal involves not just rate but LTV.

What Is a HELOC and More

You can use a HELOC to take advantage of what’s happening in the market in 2022.

If you need more guidance with a HELOC of your own, reach out to HardMoneyMike.com.

For one-on-one help, send us an email at mike@hardmoneymike.com. We’re happy to coach you through any real estate investment questions.

Happy Investing.

Text: "BRRRR in an Inflationary Market"

What You Need to Know About BRRRR In an Inflationary Market

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How does BRRRR change in an inflationary market? Here’s what to expect.

For real estate investing, including BRRRR, inflation means money tightens up.

Money tightening means there’s less money for all real estate investors. The federal government makes money harder to get to slow down spending.

So how can you expect these effects of inflation to impact BRRRR?

How an Inflationary Market Changes BRRRR Lender Requirements

In the lending world, money tightening looks like lower loan-to-values. Maybe your hard money lender used to give you 75% of the anticipated value of the home, but now they’d give 70%.

LTVs are tightening not just on the front-end BRRRR loan, but the back-end refinance as well. Lenders are:

  • Tightening their cash out requirements
  • Offering lower LTVs
  • Raising income requirements
  • Expecting higher down payments
  • Requiring just plain better deals.

A big qualification to focus on is lenders’ credit score requirements. The minimum acceptable credit score has gone up by 20-40 points.

If your credit is on the border, your main priority should be to raise your score. There’s less money out there. You want to be one of the people who can get leverage once property prices go down.

Lenders and Equity in Inflationary Times

Lenders want to make sure they’re lending to the best of the best. They’re concerned with equity.

Prices are going down. So if they lend at 70% LTV, then in 6 months home prices go down 10%, but then that 70% is no longer 70%.

So lenders will be more conservative with their LTVs. Money in general will be more conservative during this time. Eventually, we’ll land at a “new normal,” and everyone in the money world can work off the same level. For now, things are heading down in an unpredictable way, so money will be harder to get.

If you’re investing in BRRRR in an inflationary market, stay aware of the constant changes. Rates have more than doubled this year, LTVs are going down, and the cash flow on your rental properties will take a hit.

Read the full article here.

Watch the video here:

Text: "Finding Hard Money Bridge Loan Lenders"

Where Do You Find a Hard Money Bridge Loan Lender?

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Does every hard money lender do bridge loans? Where do you find a hard money bridge loan lender?

A lot of people use the term bridge loan interchangeably with gap funding or hard money, but a true bridge loan is slightly different. They’re shorter-term than a hard money loan, and they’re typically less expensive because of that.

Is a Bridge Loan Different from a Hard Money Loan?

A hard money loan is longer and broader than a bridge loan.

  • The average bridge loan lasts 30 to 45 days. Hard money loans can last up to a year or longer.
  • Bridge loans get you from one property to the next. Hard money focuses more on a single project.
  • Bridge loans get paid when your old property sells. Hard money loans get paid when you refinance or sell the property the loan was originally for.
  • A bridge loan is used as temporary funds to close on a house. A hard money loan can be used as a more general budget for a purchase. Many come with the option for escrows to fix up the property over time.

Typically bridge loans are used for 3 situations in real estate investing. When you:

  1. Are buying a new property and already have one listed for sale
  2. Need to cover down payment on a new property
  3. Find a great deal but your bank’s financing won’t be ready in time.

What Lender Give Bridge Loans?

To find these quick, short loans, a small local lender (like Hard Money Mike) will be your best and fastest option. Smaller hard money lenders prefer working with deals that provide good, safe returns. Bridge loans do exactly that.

A bigger hard money lender will do a bridge loan, too. But they may take up to four weeks to close, which often defeats the purpose of true bridge lending.

You can also get bridge loans from some banks. Not big, national banks, but many local banks and credit unions who work with real estate investors may do bridge loans, too. Banks usually offer the cheapest bridge loans, but can take 3 – 4 weeks or longer.

Ask around to hard money bridge loan lenders you know to learn their pricing and see if it’s worth it. You can use our free loan optimizer to find out if you can get a good deal on bridge loans near you.

Read the full article here.

Watch the video here:

Text: "Real Estate Lenders and Loans During Inflation"

Loans for Real Estate Investing (And How Inflation Changes Them)

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Lenders to have on your team, loans to get for real estate investing, and what inflation has to do with it.

Who are the lenders for real estate investing? Here are the basics of each lender and how rising inflation and interest rates will affect your relationship with them as you invest.

In real estate investing, there are three key lenders.

1) Banks and Credit Unions for Real Estate Investing

National banks don’t usually have many options for real estate investors. But local banks and credit unions love real estate investors.

Even so, banks are the most conservative lenders. They’ll be especially tight with their money until they figure out the new normal with updated federal interest rates.

As a real estate investor, bank loans will be increasingly difficult to get. It’ll be more common for banks to lend 60-70% of the LTV with high credit score requirements.

In the last few months, we’ve been receiving four times as many calls as usual from investors who typically go through banks for all their money. Already, investors are getting turned away by banks.

2) Hard Money Lenders

There are two types of hard money lenders: national and local. Each type of lender will approach the change in the economy in a different way.

Much like banks, national hard money lenders will tighten up on their requirements and options. National lenders were known for offering up to 90-100% LTV. Now, they’ll only lend 80% and their credit score range requirements have gone up. The higher your credit score, the higher your leverage with national hard money lenders.

Local lenders won’t change nearly as much based on the economy. Smaller lenders make their income by loaning money, so they’ll never tighten too much. Local hard money lenders don’t typically have any credit score requirements.

Get to know the hard money lenders in your area. They’re a valuable asset to have in your portfolio of lenders, especially now, and especially if your credit score is outside of the range of traditional lenders.

3) Real OPM Loans for Real Estate

OPM is Other People’s Money – from family, friends, neighbors, or other people in a position to lend. You might think that normal people wouldn’t want to loan you their money at a time like this. But you would be wrong.

People with money in the bank are making around a 1% return. So getting a 5%, secured return from you is way more appealing. OPM lenders won’t care about credit – as long as you secure their money and ensure them a return.

All three of these lending sources will be important. You’ll need a mix of all of them. Putting them together in the right way will accelerate your real estate career.

Read the full article here.

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Text: "Commercial Real Estate Investing in 2022"

Basics of Commercial Real Estate Investing in 2022

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2022 may be the year you want to venture into commercial real estate. Apartments buildings with over five units, retail space, office buildings, and industrial areas all fall under commercial real estate.

How Do You Invest in Commercial Real Estate?

One option for commercial real estate investing is to hold or flip just as you would any single-family home. We’ve also seen a lot of people find success with another option recently: buying bigger industrial properties, flipping them, and splitting them up into separate properties to sell.

Cap Rates in Commercial Real Esate

An important number to consider in commercial real estate investing is the cap rate. All commercial properties come with a cap rate, which is the return you can expect on your investment.

For example, if you put $100,000 into a property with a 4% cap rate, you can expect a return of $4,000; this is probably an area that pays lower rent. But a $100,000 investment on an 8% cap rate will have an $8,000 return, so the property will have higher cash flow.

Generally, the higher the cap rate, the lower the value because it may be considered a riskier investment. The lower the cap rate, the higher the value because more people are more willing to put more money in.

People take lower cap rates over higher ones because they believe a lower cap rate market is more stable. It’s like when you put money into a CD – the appeal is the stability, despite the lower rate. People who look for higher cap rates prioritize return over long-term growth or stability.

Cap rates differ city-to-city and within cities. If you’re interested in commercial properties, you can talk to a commercial broker in your area to understand local cap rates.

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