Tag Archive for: Real estate investing

What Is Bad Debt Versus Good Debt?

What Is Bad Debt Versus Good Debt?

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What Is Bad Versus Good Debt?

So, what is bad and good debt?

Well, before we jump into that, did you know there are two types? Because most of us were raised to believe ALL debt was bad.

But no. That’s not true. At all!

In fact, good debt is necessary to build your credit score. Without it, you can’t boost your FICO score and obtain low-rate loans for things like fix and flips, rentals, and other value-add properties.

So, now that you know there is such a thing a good debt, let’s look at the difference between the good kind and the bad kind…

As you can see in the image above, bad debt is essentially any kind of consumer good. It’s something that doesn’t create cash flow. So, think about your vacations, cars, TVs, clothing, etc. They’re fun to have but not helpful to your bank account.

Good debt, on the other hand, pays for itself AND generates a profit. The best example is a real estate property. If done right, you’ll gain equity on most of the properties you purchase. It can be instant equity (aka, a fix and flip) or long-term equity (your personal home that has a 15-30 year mortgage). But, as long as you pay your monthly mortgage, owning a home tends to be a great investment.

So, the next time you hear the word “debt,” don’t cringe. Instead, ask yourself, “Is this the kind I want?”

If it’s bad (because nobody can get through life without having some bad), stop and ask yourself this: “Is this something I need?” Or, more importantly, “How quickly can I remove this from my credit history?” In other words, how can you pay for it without using a credit card? Because as long as you pay your bills and maintain a healthy credit usage (under 30%), even bad debt can be okay.

It’s all about balance and healthy finances!

Have questions? No problem. Our team is always here to chat.

Happy investing!

How Your Credit Score Can Make You Thousands of Dollars

How to Make Money with Your Credit Score

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How to Make Money with Your Credit Score

Today, let’s chat about how to make money with your credit score.

Your credit score is kind of like a baseball game. With it, you can knock it out of the park and enjoy great success with your finances. Or you can strike out, and–well–lose (ouch).

 

When you “win” the credit score game, you win countless opportunities. These include:

  • The best interest rates
  • Affordable loans
  • And, in the end, hundreds of thousands of dollars.

Yes, you read that last one right. Hundreds of thousands of dollars. Because a good credit score means cheaper rates. Which means cheaper bills. Which means you save A LOT of money over the years.

Before we go on, let’s talk about what a “winning credit score” look like.

Winning Credit Score

Most lenders like to see scores in the 700’s or higher. Anything lower will likely lead to rejections and expensive rates.

But what if you have a score under 700? Nobody wants to walk up to the plate and strike out, right?

Well, let’s take a look at 3 strategies to help you prepare for this financial ballgame.

Increase Your Available Credit

Pick up the phone and call your credit card company so you can apply for a higher limit. Why? Because then it’ll be easier to keep your credit usage at or below 30%.

What do we mean by that? Well, let’s take a look.

If your credit card balance is $8,000 and you have a maximum credit line of $10,000, then creditors can see you’re using 80% of your available funds. Yikes! In their critical eyes, this means you’re a risk–a BIG one–and you might not be able to meet your financial obligations (i.e. you won’t be able to pay them back).

Not good.

Now, if your credit card balance is $3,000 and you have a maximum credit line of $10,000, then creditors see you’re only using 30% of your available funds. That’s much, much better. In fact, it could be a home run in the eyes of lenders.

Because when you manage your credit usage, creditors will think you’re financially responsible. AKA, you pay your bills. And that will lead to more loan approvals and lower rates.

Yay!

Pay Extra

A large chunk of your credit score revolves around your monthly reported balances to the credit bureaus.

So, it always helps to pay extra on your credit cards before your next statement. If you do this, the credit bureaus will be happy with you. Very happy! That means your score will rise.

Now, if those first two strategies don’t work for you, then you can always take a more creative third approach (one we’ve recommended to many clients).

Get a 60 to 90 Day Note

Basically, you can get a loan to pay down or pay off your credit cards. You can get one from a bank, a family member, a friend, or a private lender. This way you can keep your real estate projects moving along and your cash flow, well, flowing.

Make Money with Your Credit Score

If you take one, two, or all three of these steps to boosting your credit score, then you’ll have a much better chance of getting lower rates and generating thousands of dollars over time.

And if you play the game right, you can knock it out of the park and make hundreds of thousands of dollars!

Happy investing!

Investing in Real Estate with Zero Down

How to Buy a Value-Add Property with No Money Down in 4 Steps

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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

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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!

How To Buy a Fix and Flip: The First Key Steps

How To Buy a Fix and Flip: The First Key Steps

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How To Buy a Fix and Flip: The First Key Steps

Do you know how to buy a fix and flip? Because if you’re new to investing in real estate, there’s a chance you’re not sure where to begin this process.

You might think, “Well, I’ll just get a loan.” But do you know what “getting a loan” really means?

That’s why today we’re going to take a look at the different real estate lenders you can rely on—and which ones you might have to rely on until you boost your credit score, build a real estate portfolio, or complete one of the other qualifications that some lenders require.

To begin, there are 5 popular real estate lenders. Each one has various pros and cons, so let’s start with the most simple and basic lenders.

Friend or Family Member

The upside to asking a friend or family member for a loan is, well, you’re asking a friend or family member for a loan. You know them, and you probably know them very well…well enough to ask them for money.  The only qualification you really need is a decent relationship.

The downside is, well, you know them. They’re your friend, your dad, your sister, or someone else you have deep roots with. That makes the entire loan process way more personal, which means there’s a lot of potential for drama—both now and in the future.

Business Partner

Instead of going through a family member or friend, you can get a business partner. A business partner can lend you the money to buy a value-add property with very few if any qualifications. The big pro here is they take on most—if not all—of the financial risks. It’s their money, not yours.

On the flip side, it’s their money, not yours. That means some business partners get greedy. Rather than splitting profits fairly, they demand the lion’s share. To them, it might not matter if you were the one who did all the actual work. They took the risk, so they should get a bigger reward at the end of the day.

Hard Money

If you have some basic qualifications, you can skip the first two lenders we’ve talked about and get a loan through a hard money lender. Hard money loans (aka, Fix and Flip loans) are great when you need to close a real estate deal FAST. We’re talking days instead of weeks or months.

Unfortunately, hard money can be expensive. Rates tend to be higher than other lenders. But every hard money lender varies, so it’s absolutely worth shopping around. Plus, hard money loans aren’t intended to be long term, so the high cost can actually save you a lot of pain AND money in the long run.

What is hard money? Check out our truth revealing series on YouTube!

Banks

Banks are the most traditional lender out there. In fact, most real estate investors look to this type of lender before they consider any other. And, why not? Banks usually have the lowest rates available.

Unfortunately, banks also have the strictest requirements, and if you don’t meet those requirements, you’ll get rejected. Worse, the application process is a lot more in-depth, which means closing can take A LOT longer. Which means that perfect investment property you wanted gets snatched up by someone using a faster lender.

OPM

Aka, “Other People’s Money.” This is exactly how it sounds. You use other people’s money to buy a property. This is different than asking a family member, friend, or business partner for financial help because there are more boundaries. With OPM, a lender charges interest. That’s it. There aren’t points or profits involved. It’s simple and easy.

The only downside of OPM is finding those who are willing to lend their money to you. But that’s where gaining experience and knowledge in real estate investing helps. The more you know, the more you can prove you’re worth the investment.

So, there you have it. Those are the 5 ways to buy a fix and flip property. Each one has its pros and cons, but each one is a viable option. It just depends on YOU and your financial situation.

Bad credit? No credit? You might have to start with a family member, friend, or business partner

Great credit? Solid income? Extensive real estate portfolio? You probably can jump straight to hard money or a bank loan. Or, better yet, OPM.

Each investor has a different path.

Ready to find out what your path is? Great! Our team is here to help. We’re excited to set you on a path that helps you make the kind of money you need…to live the life you want.

Happy investing!

Fun Friday: Flipping Humor

Fun Friday: Flipping Humor

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Fun Friday: Flipping Humor

It’s Friday, and that means it’s time for some fun with a little flipping humor.

So, this past week, it’s probably fair to say that many of us learned a valuable life lesson, right? Even if it was just a small one.

Well, one of those lessons might’ve been the discover that sometimes it’s better to do a job yourself.

For example…

As funny and ridiculous as this is, it’s probably cringe-worthy for some of you. Because we’ve all had our fair share of “what the heck?” moments with contractors.

But we hope those laughable (and, uh, very frustrating) moments are in the past for you. And that you’ve found a trustworthy, reliable, skilled contractor to help you complete your fix and flips, rentals, or other value-add properties. Or you’ve simply learned to do the work yourself.

Because nobody wants a door that has the handle on the hinge-side (doh!).

Wishing you all a great, relaxing, and satisfying weekend. If you’re ready to start next week off with a bang, give our team a call. We’re always here to help you succeed in real estate investing and generate positive cash flow.

Happy Friday and happy investing.

Reach Your Cash Flow Goals

Hard Money Mike: Reach Your Cash Flow Goals

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Hard Money Mike: Reach Your Cash Flow Goals

So, why do you need Hard Money Mike?

Well, our company goes far beyond providing quick hard money loans for your value-add properties. We also strive to help you reach your cash flow goals.

We think it’s fair to say that in real estate investing, cash flow is king. Right?

Generating positive cash flow is probably the key similarity among all investors. Whether you’re interested in fix and flips, rentals, or another value-add property, it’s likely main reason you risk your money, dedicate your time, and shed your tears is to make money.

A lot of it.

And the Hard Money Mike team gets that. In fact, we make it our main focus here. Because we know that cash flow means everything. It also means different things to different people. Such as:

  • Freedom from a 9-5 job
  • More time with family
  • Extra vacations
  • A safer, happier retirement
  • A comfier lifestyle
  • Daily Starbucks
  • A new house…Or, you know, a second house that you can escape to when winter hits. Because wouldn’t you’d rather spend the winter sipping piña coladas on a sandy beach than drinking hot cocoa in an ice-covered city? Well, to each their own, right?

Anyway, there are a million reasons why you might want more money in your life, and we want to support you by helping you create specific goals. And then a plan to reach each goal as quickly and efficiently as possible.

Because no matter what kind of real estate investing you’re interested in, it all comes down to numbers. If the numbers don’t work, then the real estate deal doesn’t work. And if the deal doesn’t work, then you won’t be able to generate extra income.

Then it’s bye-bye to those piña coladas. Or, you know, whatever your reason is for investing in real estate and making money.

So, if you’re ready to talk about your goals and creating a strategy to achieve them, then go ahead and reach out to us. Our experienced team is always here and eager to assist you.

Happy investing!

How to Fund Your Fix and Flips in 3 Easy Steps

How to Fund Your Fix and Flips in 3 Easy Steps

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How to Fund Your Fix and Flips in 3 Easy Steps

Do you know how to fund your fix and flips?

Let’s say you come across a fixer upper and you’d like to buy it. Well, the best way to quickly purchase a value-add property before another real estate investor can is with a fix and flip loan (aka, a hard money loan).

But what do you need to do to ensure you get the best fix and flip loan?

Today, we take a look at the first 3 steps of the process. Because if you want to make the biggest profit you can on a deal, then you need to make sure you’re working with the best lender.

For you!

 

Different Lenders, Different Outcomes

Just like properties, real estate lenders come in a variety of shapes and sizes. Some lenders require extensive real estate portfolios, excellent credit scores, and a hefty down payment. These are typically the larger national companies.

On the flip side, some lenders are willing to work with newer investors who have little to no money to lower the risk. And some charge higher rates and less points, while others sneak in hidden junk fees.

It all depends on what works best for you. If you want flexibility, then you should prepare yourself to pay more for your loan.

One of the smartest and easiest ways to find the best lender is to shop around in your area. That’s right. You’ll need to pick up the phone and make some calls. But, trust us. Those calls will be worth it because you’ll end up saving yourself a lot of time, stress, and MONEY!

What Do You Bring to the Table?

If you make things easy for lenders, then you’ll have many of them competing for your business. How can you do that? Well, here are some basic, but valuable tips:

  • Maintain a high credit score
  • Complete projects on time
  • Pay lenders on time
  • Create a real estate portfolio that presents completed projects and team members (contractor, insurance agent, title company, etc.)

What Are You Looking For?

Are you okay working with a lender who requires a down payment? Or do you need to find someone who’s okay with little to no money at closing? How about experience? Low rates? Fast closings?

Understanding what you need is vital to a successful real estate deal. So, create a must-have list before you shop around. That way you’re prepared and can find the best fix and flip lender for you and your bank account.

If you complete these 3 easy steps, we can promise your hunt for the perfect lender will get your the results your hope for.

Ready to chat about your next fix and flip deal? Our team is here and ready to help you find the right loan for you!

Happy investing!

Thursday Tips: How To Analyze Investment Properties

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Thursday Tips: How To Analyze Investment Properties

Ready to learn how to analyze investment properties?

In this great Bigger Pockets article, you’ll learn the nuts and bolts of evaluating real estate deals.

You’ll also discover how to get the information you need to complete a comprehensive evaluation of a neighborhood. That way you can determine which neighborhoods and properties will give you the best return.

And getting the best return is what this business is all about. Because generating positive cash flow is the answer to your financial independence.

But the only way to produce strong income is to put your money in the right properties. And the right properties depend on your analysis.

If you fail to evaluate your deals correctly, then the numbers won’t add up. And that means you might lose money.

A lot of money.

Yikes.

Yes, we’ve said it once and we’ll say it again: Numbers don’t lie.

How To Analyze Investment Properties

Before diving into real estate investing, make sure you understand how to compare markets and properties. Whether you’re trying to decide between investing in Boise or Sacramento—or you’re just comparing two similar homes—this guide will walk you through all the numbers you need to know. From calculating cash-on-cash return to running a comparative market analysis, the experts at BiggerPockets demonstrate the steps you need to follow and the statistics you must know with The Beginner’s Guide to Real Estate Market Analysis.

Ready to learn more about evaluating your real estate investments? Great! Check out the entire Bigger Pockets article here:

Is That Neighborhood Up-and-Coming? Here’s How to Tell

Or if you’re ready to chat about your fix and flips, rentals, and other value-add properties, give our team a head’s up.

Happy investing!

The Real Deal: Colorado Springs 2-Step Process

The Real Deal: Colorado Springs 2-Step Process

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The Real Deal: Colorado Springs 2-Step Process

In today’s Real Deal spotlight, we’d like to share a project that one of our clients in Colorado Springs completed. He used the 2-Step Process to add a rental property to his real estate portfolio.

And boost his cash flow.

The Real Deal: Colorado Springs 2-Step Process

But, first, let’s chat about the 2-Step Process. What is it? And why is it so important to use when it comes to funding your deals?

Well, essentially, the 2-Step Process is how investors interested in BRRRR (Buy, Rehab, Rent, Refinance, Repeat) buy their houses. It allows them to quickly buy a value-add property with a hard money loan, and then quickly refinance into a cheaper long-term loan.

The Real Deal: Colorado Springs 2-Step Process

By using this funding method for his short-term and short-term loan, our client was able to:

  • Save money
  • Invest more by using ARV equity
  • And boost his cash flow.

Furthermore, if our client hadn’t used the 2-Step Process, he might’ve missed out on this great deal. Because he might’ve had to wait weeks or months to close, and when it comes to discounted properties, waiting isn’t an option. If you want to buy, then  you have to buy FAST!

Hard money loans allow you to do that. And we can help you get a hard money loan.

Better yet, our sister company, The Cash Flow Mortgage Company, can help you quickly refinance. Because nobody wants to keep paying high interest rates, right? The faster you can get a long-term loan, the better!

Ready to chat about funding your next rental property? Great! Our team is here for you at any time.

Happy investing!