Tag Archive for: #real estate investing tip for success

I’m Stuck in a Hard Money Loan: How to Get Out

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I’m Stuck in a Hard Money Loan: How to Get Out

Today we will discuss the common reasons why investors get stuck in a hard money loan and provide practical strategies to break free. From exploring refinancing options to making timely decisions, we’ll guide you toward regaining control of your investment journey. 

Two main reasons:

  1. Project Delays:

    Construction or permit delays extend project timelines far beyond what was initially planned. Since most hard money loans have fixed terms, borrowers are faced with the option to either secure additional funding to complete the project or sell the property.

  2. Property Not Selling:

    This is due to either overpricing or market conditions. By continuing to hold onto the property without adjusting the price, it results in significant financial losses.

How to Get Out:

  1. Refinance with Another Hard Money or Bridge Loan:

    Secure a new loan in order to provide the necessary funds to either complete the project or aid in  the sale of the property. This option allows investors to regain control and momentum in their projects.

  2. Sell the Property As-Is:

    Sometimes, the best course of action is to sell the property in its current condition to another investor. While this may result in a loss, it also prevents further financial bleeding caused by holding onto the property.

  3. Refinance into a Long-Term Loan:

    Investors can refinance into a long-term loan, such as a permanent loan or a traditional bank loan. This option also allows investors to transition the property into a rental, which can decrease monthly losses or potentially create a profit.

Save Your Deal:

  • Don’t Get Stuck:

    Don’t fall into the trap of continuing to invest in a project solely because you’ve already sunk money into it. Assess the current market conditions and make decisions based on realistic projections rather than past investments.

  • Quick Decision Making:

    When faced with a stagnant property, make timely decisions to either adjust the price for a quick sale or pursue refinancing options. Don’t risk losing time and money because of indecision.

  • Seek Professional Guidance:

    Reach out for expert advice and assistance today. Consulting with experienced lenders or real estate professionals can provide valuable insights and help navigate challenging situations.

Get Help Today!

Contact us today! There are solutions available to help you regain control of your investment. Reach out to HardMoneyMike.com for expert guidance and support. Whether you need refinancing options, project advice, or assistance with navigating your loan terms, we’re here to help.

Watch our most recent video to find out more.

 

Reach Your Cash Flow Goals

The Way to Get Cash Flow for Your Real Estate Investments that You’ve Never Thought About

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How can OPM benefit your real estate investments? Here are the basics to get you started.

OPM. Other People’s REAL Money.

Not money from a broker or mortgage company or hard money lender. Money from real people to fund your flips and make your investments faster, easier, and more profitable.

OPM vs Private Money

What’s the difference between private money and Other People’s Money? Aren’t they the same thing? Yes and no. They’re related, but there are a few key differences.

Private money is often called “hard money.” It involves going through a broker or a company like Hard Money Mike that lends you private money.

OPM does the same thing, but it’s strictly peer-to-peer, person-to-person. It is private money because it’s a loan outside of a bank. It’s not hard money because you’re not going through a formal company or filling out applications.

What is OPM?

OPM is simple: one person has money and needs a smart place to put it, and one person has a promising property investment but no money to put into it. They form a peer-to-peer transaction.

Both people have the chance to benefit more than they would if they went through a bank. The person with the money gets a simple investment with typically a much higher return than the banks would pay. And the person who needs the money can get it cheaper, faster, and keep it more fluid. Both can end up more profitable and successful.

Taking the OPM route may feel non-traditional from a modern perspective, but historically, it’s the way things have always gotten done. One person has something, another person needs it, so they create a deal where they both benefit.

The Flipper’s Perspective

If you’re the flipper and you have an established relationship using OPM, funding purchases becomes simple. You find a property, and all you need to do is contact your OPM lender and give them details.

“I found a great property, but I need $100,000. We close in a week. Here’s the title company’s information. Please send the money, and we’ll get this taken care of.”

No applications, no appraisals, no middleman. It’s an easier way to borrow money, and usually less expensive than more traditional loans.

The Lender’s Perspective

If you’re the one with the money, you’re probably already looking for a smart place to put it.

Loaning the money to a flipper or other real estate investor will typically give you a better interest rate than a bond, CD, or other interaction with a bank.

How to Make It Work

It’s extremely important that OPM deals are set up to be win-win for both sides. The main reason people avoid OPM is the fear of deals going bad. This system breaks down if one side or the other feels the deal becomes unfair or unsafe.

Let’s talk about how to create a win-win environment.

Priorities for Each Side

Each party has to keep the other party’s interests in mind.

For the flipper, OPM needs to be easy, reliable, and quick. The flipper’s responsibility is to make a good and profitable deal with the other person’s money. If you do that, your OPM lender will always be there to help with your next deal. However, the second you “play games” with their money, the relationship ends, and you lose that source of fast, simple funding.

For the OPM lender, deals need to be secure and detailed. As long as their money is taken seriously, they will be there for the flipper. If you’re the OPM lender, you have to always fund a deal when you’ve agreed to. Don’t leave the flipper high and dry at the closing table.

Setting Up a Proper OPM Relationship

Using OPM may “feel” more casual, but it’s absolutely vital that you get everything in writing. Visit a lawyer, and lay out all aspects of the deal. Everyone will come out more successful if you’re diligent with this step.

Some of the things you’ll want to set up in writing are the following:

  • What is the repayment schedule?
  • What are the interest rates?
  • How long is the loan?
  • What’s the plan with the property?

The clearer, more open, and more detailed you can be with each other, the better the deal and your relationship will be.

The goal is for OPM to be mutually advantageous. People who have money want to find deals that will earn them interest. Flippers need money that flows better and is faster to qualify for. OPM is valuable, so take the time to set it up right.

Want More Details on Setting Up OPM?

Hard Money Mike doesn’t need to be involved with your OPM deals to offer help. We have resources to help you learn how to best set up OPM deals:

  • What should closing look like?
  • What are proper terms?
  • What documents will you need?

We want to keep things flowing in the real estate community.

You can check out more great info on OPM on our Youtube channel, or download our OPM Checklist. Happy investing.

Credit score mix

The Must-Know Basics About Your Credit Score

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What a credit score is and why you should care (if you care about your investments).

There’s a magical triple-digit number that seems to decide your fate in this world.

It can determine what car you drive, where you live, and how much money you can have at your disposal.

And in some cases, it can make or break your success as a real estate investor.

It’s your credit score.

But it’s not as magical as it seems. There’s a logic to your score, and you have the power to change it.

So let’s break it down.

What is a Credit Score?

A credit score is a way for lenders to determine your “creditworthiness.” In other words, your “you-can-trust-me-to-pay-back-your-money”-ness.

Because you know whether someone can trust you with their money. But financial institutions don’t know you like you do.

Lenders need a way to decide if you’re safe to lend to. So your score tells them the story of your financial habits.

How Is My Credit Score Calculated?

There are a couple different types of credit scores, but the numbers we’ll use here reflect FICO scores (the most widely used credit score for most lenders).

Credit scores range between 0 and 850. More than 740 is great, and a score of less than 700 begins to limit your options.

This number is calculated by looking at five main pieces of information:

  • Credit mix
  • New Credit
  • Credit History
  • Payment history
  • Amounts owed

Credit Mix

Close to 10% of your score is based on the mix of credit you already have.

Do you have seven credit cards?

Or zero?

Do you have a car payment, a mortgage, student loans, personal loans?

Typically, the more diverse your lines of credit are, the better it is for your score.

New Credit

Around 10% is based on “new credit,” or how often you get credit inquiries or open a new line of credit.

New credit can temporarily lower your score. So for example, if you buy a new car, you’ll probably have trouble securing a loan for a property right away.

Length of Credit History

About 15% of your score is calculated based on how long you’ve had your lines of credit.

If you opened your first line of credit less than 5 years ago, you’ll have a lower score than someone whose credit is 40 years old.

Amounts Owed

These last two categories are the most important. They make up two-thirds of your credit score.

About 30% of your score is determined by something called amounts owed. Amounts owed is about your debt. More specifically, it’s about how much of your available credit you’re using.

For example, let’s say your credit card has a max of $1,000. You buy a new set of tires and brakes, so now you owe $1,000 on your card. You’re using 100% of your $1,000 limit – you’re maxed out.

The story creditors see when they look at you is that you’re not managing your credit well. They’ll assume you won’t manage other loans well either, so you get a lower score.

But let’s look at another situation.

Say you got a different credit card with a max of $5,000. That same borrowed $1,000 has a way different effect on your credit score. You’re only using 20% of your credit line, and you’re leaving 80% at your disposal. Creditors like that story. So you get a higher score.

Payment History

The biggest amount of your score, up to 35%, is based on your payment history.

Payment history is exactly what it sounds like:

  • How are you paying your bills?
  • Do you always pay on time?
  • Have you had any bankruptcies?

Financial institutions can see this information, and it’s the top factor they consider. At the end of the day, lenders want to know: Will you pay them back? On time?

Need More Information?

Your score is incredibly important to keep on your radar. Especially when you’re investing in real estate.

It’s not a made up number that has no effect on your life. But it’s also not as difficult to understand as it may seem at first.

For more tips on building good credit and maximizing real estate investment leverage, check out these helpful videos on our Youtube Channel.

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

Happy investing.

10 Rules of Successful Real Estate Investing

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