Tag Archive for: Real estate investing

What Is Hard Money?

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Today we are going to answer the question, “What is hard money?” Hard money is a quick and flexible way for real estate investors to get funding. It’s different from traditional loans. Instead of banks, private lenders provide the cash. The loan is backed by the property itself, not your credit score or income.

Think of hard money as a bridge. It helps you close deals fast or fix up properties when traditional lenders might slow you down.

For example, let’s say you find a fixer-upper with huge potential. A regular bank says no because the property needs repairs. A hard money lender, on the other hand, sees the property’s future value. They offer you a loan based on that. This gives you the chance to buy the property, renovate it, and either sell it or refinance with better terms later.

The trade-off? Hard money loans often have higher interest rates and shorter terms. They’re not meant for long-term financing, but they’re a powerful tool when used wisely.

If speed and flexibility are key, hard money can open doors that traditional loans keep shut. It’s about making the deal work, even when the numbers seem tricky.

Ready to learn how to use hard money the right way? Stick around for more tips and insights!

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Hard Money vs Private Money: Do You Know the Differences?

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Today we are going to discuss hard money vs private money. As a real estate investor, you’ve probably heard terms like hard money and private money thrown around. While they may sound similar, these two types of loans have important differences that can impact your deals. Therefore, by knowing which one is right for you can save time, money, as well as stress.

What Is Hard Money?

Hard money loans are usually offered by local institutions or individuals. To clarify, these loans focus on the property’s value as opposed to your credit score or experience. Here’s how they work:

  • Asset-Based Lending: Hard money lenders care more about the deal rather than your financial history.
  • Flexibility: Hard money loans offer flexible terms, therefore making them ideal for unique deals like cross-collateralization or projects needing 100% financing.
  • Quick Approval: If you need fast funding in order to close a deal, hard money loans are your best bet. Approval can happen in days, not weeks.

Example

You find a great fix-and-flip project but need 100% financing: A hard money lender might offer that if the deal makes sense. They focus on whether the property has enough value, rather than your credit score.

What Is Private Money?

Private money loans usually come from larger lenders backed by Wall Street funds. These loans have stricter requirements, however they often offer lower rates for those who qualify. Here’s what you’ll find:

  • Stricter Criteria: Private money lenders look at your experience, credit score, as well as liquidity.
  • Lower Rates for Experienced Borrowers: If you’ve flipped several properties or have solid financials, you may get better rates.
  • Fixed Guidelines: Private money lenders have specific loan programs you must fit into, such as 90% purchase financing and 100% rehab costs.

Example

You’re an experienced investor looking to fix and flip a property. A private money lender could offer better rates if you have a high credit score as well as some money to put down.

Key Differences Between Hard Money and Private Money

Feature Hard Money Private Money
Focus Property’s value and deal strength Investor’s credit, experience, and liquidity
Flexibility Highly flexible, deal-specific Strict guidelines, fits into specific boxes
Approval Time Fast approval, often within days Longer approval process
Down Payment Can offer 100% financing for strong deals Typically requires 10% or more down
Best For New investors, quick closings, unique deals Experienced investors with time to qualify

When Should You Use Hard Money?

Hard money loans are perfect if you:

  • Need fast funding for a time-sensitive deal
  • Have little experience but found a solid investment
  • Require creative financing, such as cross-collateralization
  • Are dealing with smaller or unique properties

When Should You Use Private Money?

Private money loans might be your best option if you:

  • Have experience with flips or rental properties
  • Have a strong credit score and liquidity
  • Want lower interest rates
  • Can wait longer for approval

What’s Best for You?

At the end of the day, hard money and private money both have their place in real estate investing. However, if you need flexibility, quick approvals, or 100% financing, hard money is the way to go. On the other hand, if you have a solid track record and can fit into stricter guidelines, private money may save you some costs.

Need Help Finding the Right Loan?

At Hard Money Mike, we offer tools like our Loan Cost Optimizer to help you compare hard money and private money rates. Whether you’re looking for 100% financing or need a specific loan for your fix-and-flip, we’re here to help you get the deal done.

If you have questions or need guidance, leave a comment below or contact us for more details. We’re here to help you find the best option for your next project!

Watch our most recent video to find out more about Hard Money vs Private Money.

Small Town Investing: How to Energize Your Real Estate Deals

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Small Town Investing: How to Energize Your Real Estate Deals

Why Invest in Small Towns?

Today we are going to take a closer look at how you can energize your real estate deals when doing small town investing. Small towns often get overlooked by big banks and private lenders. However, investing in these communities can be a goldmine. Most importantly, you’ll help the community grow as well. Here at Hard Money Mike we have the flexibility to help you accomplish your real estate investing goals! Let’s take a closer look! 

Financing Options for Small Town Investors

1. 100% Financing

If you find a great deal, you might not need any money upfront. We can finance up to 100% of the purchase as well as the rehab costs.

2. Fix and Flip Loans

These loans cover both the purchase and renovation costs. Therefore these loans are perfect for properties that need a little love.

3. DSCR Loans

Don’t have a high income or perfect credit? No problem. DSCR loans instead focus on the property’s income, not yours. We offer these loans for properties for as low as $50,000.

4. Finish-a-Project Loans

Stuck with an unfinished project? We provide loans to help you complete it.

Example: A Success Story from Oklahoma

Imagine buying a house for $40,000, putting $30,000 into renovations, and then having a property worth $120,000. This isn’t just a dream. We helped an investor do just that in a small town in Oklahoma. She bought several properties, renovated them, and either rented them out or sold them. In just 18 months, she turned her initial investments into a thriving portfolio.

Steps to Start Investing in Small Towns

First, Find the Right Property

Look for undervalued properties. These can be homes that need a little TLC or rentals ready to go.

Second, Get Financing

Don’t worry if big banks turn you down. Look for lenders who specialize in small town investments. They offer flexible options and don’t always require perfect credit.

Third, Renovate and Improve

Fix up properties to make them attractive. A well-renovated home can bring new residents to the town.

Finally, Rent or Sell

Decide whether to keep the property as a rental or sell it for a profit. Both options can be lucrative in small towns.

Making Money While Helping Your Community

Fixing up homes does more than fill your pockets. It revitalizes the community. Updated homes attract new residents, which boosts the local economy. Plus, it brings life back to once-vacant houses.

Why Choose Us?

We understand small towns because we come from them. We offer:

  • Flexible Loans: Not based on your credit score or income.
  • Quick Approvals: Get your project moving fast.
  • Personal Touch: We’re here to help you succeed.

Ready to Invest?

If you’re ready to start investing in small towns, reach out to us at The Cash Flow Company. We have tools like the Deal Analyzer to help you find and finance the best deals.

Watch our most recent video to find out more about:Small Town Investing: How to Energize Your Real Estate Deals

Why Do Lenders Sometimes Reject Your Real Estate Investment?

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It’s important to learn about what lenders consider ‘bad deals’ so that you can avoid those pitfalls and get the money you need for your real estate investment!

As a lender, our #1 goal is to make sure our investors are putting money into strong projects with relatively guaranteed returns. It’s in everyone’s best interest to be critical of questionable deals so that no one ends up in the hole.

Especially if you’re a new investor, you can learn a lot by talking to your lenders about what they’re looking for and how they determine the strength and safety of a real estate investment. 

Today, let’s dive into some of the red flags that could get your investment rejected by a lender:

1. Tight Margins

Lenders look for a minimum 15% profit margin. 

This means you’ll ideally need a loan for somewhere between 70-75% of the After Repair Value (ARV). That gives you a 25-30% buffer to cover interest, closing costs, and maintain that 15% profit margin.

A loan that crosses into 80-85% ARV territory is too close for comfort. With that large of a loan, your margins are slim, and the likelihood you’ll turn a profit gets increasingly unlikely.

Especially if you’re a new investor, you can feel a lot of pressure to get in the door and get moving. However, our 25+ years of investing experience has shown that it’s far better to do 1-2 good deals a year than 4 bad ones that could potentially lose you money. 

Be patient and critical. Selecting projects with a comfortable profit margin of 15% or higher is a much safer investment than one that needs a 85% ARV loan.

Lenders want to see you make money. If you’re not making money, then your investment career will be short lived, and lenders want to see you set up for future projects.

2. Fuzzy on the Numbers

When you meet with a lender, you need to demonstrate that you understand how the numbers and money fit together. Show your lender that you understand…

  • ARVs
  • Scope of the project
  • Purchase price

If you’re fuzzy on the numbers, it’s a red flag for lenders. 

The less you know, the more risk your lender takes on by giving you money. Even if the deal has a good profit margin or ARV, if you can’t articulate and explain that, it’s a bad deal for your lender.

Take time to understand your own numbers. Be able to defend it as a good real estate investment! 

It’s okay to ask questions and do research—you’re always welcome to reach out to us with your questions! 

But do all that learning before you’re in a meeting, asking to borrow money.

3. Dishonesty

If you lie to your lender about anything, expect them to decline your deal the moment they find out.

It’s far better to be honest—about bankruptcy, foreclosure, credit card debt, savings, etc.—than to wait for us to find out.

Lenders need to be able to trust you, so don’t hide information from them.

If you’re a new borrower, it can be tempting to inflate your expertise, even to pretend you’ve done this before. Be honest that you’re starting out, but then show them that you understand the numbers and are prepared.

Dishonesty can ruin your reputation and relationship with a lender. 

Even if there’s information you’d rather sweep under the rug, it’s better to be 100% honest.

The Bottom Line

At the end of the day, most lenders (including us!) want to work with honest people who know their numbers as they build wealth through real estate invesment.

In the current economy, banks are offering fewer loans, so building good relationships with smaller lenders is increasingly critical for successful investing.

If you have a deal you want us to look at, reach out to us at Info@HardMoneyMike.com. We also offer many tools and loan options that can help you learn more about investing.

Our goal is to partner with you so that all parties come out on top.

Visit our YouTube channel for educational videos about real estate investing.

What Makes a Good Real Estate Investment for Lenders?

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As an investor, you should know what your lender is looking for when they’re looking for a good real estate investment. 

Recently, we discussed the 15% rule and why that 70–75% ARV is so important to ensure a profit on your deals. 

We want to make sure you’re prepared for all the ins and outs of real estate investing so you’re not surprised by any fees or payments. 

Part of that is understanding what a good deal looks like from the lender’s perspective.

What is Your Lender Looking For?

When we look at deals, we’re looking to fund 70–75% of the ARV. The final 25–30% are taken up with your profits, closing costs, and other fees.

However, when determining our numbers, there are three things we look at:

  • Purchase Price
  • Selling Price (ARV)
  • Rehab Costs

These three elements and the way the numbers balance between them tell us a lot about a property and an investor.

If an investor is looking for an ARV of $200,000, then we’re going to look at the moving pieces under the rehab proposal to make sure that’s a reasonable ask. 

Additionally, a $200,000 market is very different from a $1M market, and your lender wants to make sure all the numbers and features of the property line up for the target market.

As lenders, we also want to know that you understand the relationship between how much you’re going to need, how much we’ll lend, and how much you’ll sell for. Understanding all of this is critical if you want to be profitable.

Returning to our example, here’s where the numbers stand:

  • Purchase Price
  • Selling Price (ARV): $200,000
  • Rehab Costs: $30,000

75% of the ARV would be $150,000, the maximum loan most lenders will offer. 

When your lender looks at a deal like the one above, we want to see a purchase price of no more than $120,000. Combined with the rehab costs, that maxes out that $150,000 loan. Any higher than that, and it will be very difficult for you as an investor to turn a profit.

An unprofitable deal for an investor is a risky deal for a lender.

Of course you could dip into your profit margin and spend more. However, protecting that 15% is what lets you keep going in the real estate game. 

So What’s a Good Real Estate Investment?

A good deal is one where you put all these numbers together and prove that you’re going to make a profit.

Show your lender that you understand what it takes to bring this property up to the market conditions required for your ARV.

Especially if you’re a new investor, don’t feel pressured to take risks. It’s always better to do fewer deals if that’s what it takes to protect your profit margins.

Where We Come In…

We understand that numbers sometimes get confusing. But that’s why we’re here. We’re always happy to run through these numbers so that you understand your project before approaching a lender.

We also have free resources that can help you learn more about your investment options.

If you have any questions, reach out to us at Info@HardMoneyMike.com or fill out a contact card.

Happy investing!

How to Finish the Project With a Hard Money Loan

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If you have a property that’s draining your cash, look into a hard money loan that can help you finish the project and get it off your plate.

A lot of clients reach out to us who have started a project – a flip, a rental, etc. – and are struggling to reach the finish line. 

Delays in the real estate world can quickly cost thousands of dollars, so how can you avoid those issues with a hard money loan?

The Problem With Stalled Projects

Stalled projects cost money in a few different ways.

1. Payments: 

You have taxes, insurance, and loan payments for as long as you are in charge of that property. The longer you hold onto the property, the longer those payments are coming out of your pocket.

2. Missing the Market:

Real estate markets move fast. Although a delay of a month or two can feel small, missing the market often makes it difficult to sell the property. 

The most common way around this is to lower the asking price by a few percentage points… which is then more money that you’re not making in that deal.

Why Should You Get a Loan to Finish a Project?

Let’s look at some real numbers you might encounter if you were struggling with a stalled project:

For even a two month delay, a project can easily cost $5,700 in payments alone. 

Let’s consider the fact that this investor also likely missed the peak market. If they were hoping to sell this property for $400,000, then decreasing the asking price by 5% would immediately result in a $20,000 market loss. 

That is both discouraging and super costly… but it’s also avoidable with the right kind of loan.

How Does Hard Money Help?

If your project is 60-70% complete and you just need a loan to help you cross the finish line, hard money loans might be right for you.

These loans are flexible. Because you’re not looking to pay off the full amount, only cover the last leg of the project, it’s typically easy to work out a deal with a lender.

A Finish a Project loan does not take over everything. It doesn’t refinance the project. They’re designed to help you complete what you’ve started as quickly as possible. That way you don’t miss out on the market or get stuck with months of additional payments. 

Looking for a Finish a Project Loan?

If you’re interested in a Finish a Project loan, reach out to us! You can check out our page about these particular loans or contact us at Info@HardMoneyMike.com.

We’re more than happy to discuss your options and help you find the right path towards your success.

Happy investing!

Top 5 Hard Money Loan Options

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What types of hard money loan options are out there for real estate investors?

Hard money (sometimes called private money) loans are often the key to getting started in real estate investing. 

Most hard money lenders have a lot of options and many even have particular specialties. This article explains what’s out there so you’re equipped to have discussions with lenders.

Here are the top five loans that you’ll encounter in the hard money industry.

1. Fix and Flip Loan

The nice thing about a fix and flip loan is that it has everything to do with the property. Even if you’re less experienced as an investor, if the property has potential, hard money lenders will listen.

If the value is there, hard money lenders could fund up to 100%.

2. Bridge Loans

You’ll typically use a bridge loan to either purchase or refinance a project. There are a few places where they generally show up:

Bridging Gaps Between Projects

If you’re currently working on a project but you come across another great deal, a bridge loan can tap into that equity. You can use this money this as an opportunity to efficiently line up your next project.

A bridge loan would put a small lien on a property that’s about to go up for sale (or is currently being sold) which gives you money to purchase your next project.

Finishing and Buying Properties

Hard money moves more quickly than large, standard bank loans. If the clock is ticking and you need to either pay or lose the deal, a hard money bridge loan can save the day.

Wholetailing

Bridge loans can also work as a crucial part of wholetailing. Wholetailing involves anything from purchasing a discounted property and performing basic fixes to outsourcing renovations altogether. 

Typically, wholetailing only requires simple funding, often 60-90-day loans.

3. Gap Loans

You can explore gap funding to cover all sorts of money holes that might show up as you go through a project:

  • Down payments
  • Getting a project started (consider funding for escrow draws)
  • Completing a project
  • Carrying project expenses (like HOA fees)

You can even use gap loans to pay off old investors if you have someone who’s ready to move on. Treat your investors well and make sure you have the financial flexibility to let them out if they need.

4. Usage Loan

A usage loan is a private non-reporting loan that helps you pay off your credit card balances. If you’re using your personal credit card for business, this can be an important way to raise your credit score.

Real estate investing is all about leverage, and a lot of banks see your credit score as a reflection of your ability to use leverage well. 

The higher your credit score, the better terms you’ll often find for loans. 

5. BRRRR “Buy” Loan

The two big ticket items in the BRRRR method are 1) the purchase, and 2) the refinance.

Hard money loans come into play on the purchase side of a BRRRR. Because hard money is so flexible, it can also often fund a good portion of the rehab. 

Questions?

These are the top five hard money loan options, but if you’re looking for something else, just ask! Remember, hard money lenders are often smaller companies and individuals. They all have preferences and specialties, so get to know them and let them get to know your project.

If you’re interested in learning more, check out the free tools on our website or our YouTube channel where we discuss other tips and tricks for successful investing.

You’re always welcome to reach out to us at Info@HardMoneyMike.com if you have any questions or would like to discuss a deal.

Happy investing!

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!

How to Get Approved by Hard Money Lenders

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Knowing what hard money lenders look for is key to winning the real estate investment game.

Real estate investing is all about creating wealth and income by leveraging other people’s money. 

Hard money loans (also sometimes called private money loans) are a crucial part of that money.

What is a Hard Money Loan? 

A hard money loan is a loan based mainly on the property or the investment that you’re working on. It’s less focused on the investors themselves, as hard money lenders tend to look more at the property and LTVs (loan to value). 

Hard money lenders look for great deals. If a project is a good deal for you, you’ll likely find lenders willing to back you up.

Another benefit of a hard money loan is its flexibility. Hard money lenders allow higher loan to values and, depending on the property, sometimes will lend up to 100% of the total cost.

This is super important for new investors who need money to get started.

When to use a Hard Money Loan?

There are all sorts of loan options out there, but hard money is particularly useful in a few scenarios:

  • Closing quickly: Hard money loans are a lot faster to come by than traditional bank loans.
  • Unique Projects: Private lenders aren’t bound by the same restrictions as large firms.
  • Higher Loan to Value: If your deal needs a higher LTV, hard money can be the best deal.
  • Credit Score Trouble: Hard money lenders are more concerned with the value of the property than your personal credit score. You can also use a hard money loan as a usage loan to raise your credit score. 

How to Find the Perfect Hard Money Lender

Since hard money lenders are often smaller, private individuals or companies, it can take some work to find the right fit for you. 

If you’re starting with a Google search, know that local lenders likely won’t appear on the first page with the paid promotions from large banks. Click through a few pages of results to find what you’re actually looking for.

1. Look For Local Hard Money Lenders

Hard money lenders gravitate towards local markets in smaller communities. You can check out our location pages to learn more about resources we’re connected to in your local area. 

Finding local real estate investment groups can be a good way to start making connections.

Also, engaging with online forums like ones on BiggerPockets can help you find other investors and lenders in your area.

Local connection goes a long way in the hard money game, and you’ll need to take time to network in your area.

2. Create Relationships

Private money lenders are often very relational. 

Because of this, you’ll need to take time to call and talk to them. Make sure they know that you know what you’re doing.

Learn the language to help build their confidence in you and your project. 

Additionally, some lenders may even ask to see the property you’re asking them to invest in. Making sure you give them all the information they ask for is critical in your relationship with them. 

Similarly, just like they’re trying to determine whether you’re the right fit for them, you should also look at multiple lenders. The relationship between lenders and investors is a two-way street, and it’s important both of you feel confident about the deal.

3. Make Them Feel Comfortable

Remember that hard money lenders are typically individuals or small companies. Each loan is important to them.

Let them see your numbers. Let them see an example deal. Even if you’re just starting out, show them an example of potential loan to values, and be prepared to show your work.

The more you know about your contractors, purchase price, rehab costs, etc., the more you’ll ease their concerns.

Although it takes time to prepare this information, it can make a huge difference. This is your business, and doing that preparation shows your lenders that you’re competent at your part of the job. 

4. Make it Easy for Your Lenders

Finally, don’t make your lender chase you down to follow up. Have everything ready before they ask and pass it along early in the process.

Prepare a package ahead of time that has all the necessary information enclosed to the best of your ability:

  • Comps
  • ARV info
  • Scope and timeline of work
  • Team members
  • Contractors
  • Realtors
  • Insurance agent
  • Title info

The easier you make it for your lender, the more likely they’ll offer you a great deal.  

Show them that you know exactly what and how to break down a property and that the equity is there. This lets them know their loan is protected by a solid property with a good plan for generating income.

Questions?

Hard money lending is all about relationships. If you build a good relationship, you’re far more likely to find the lenders you need.

We have a few tools that can help you shop around for the perfect hard money loan. The first is our location pages. You can use these to find resources in your area.

The other tool we recommend is our free Loan Cost Optimizer download. It’s easy to use, and it can help you compare different lenders to find the best deals.

If you’re interested in a hard money loan or have questions about how to find lenders in your area, feel free to reach out to us at Info@HardMoneyMike.com.

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.