Tag Archive for: real estate investment

Text: "Are Subject Tos Good Real Estate Investments?"

How To Make Sure a Subject To Is a Good Real Estate Investment

Not all subject tos and owner carries are created equal. Here are some tips on knowing when a property will be a good real estate investment for you.

Good Real Estate Location

In the upcoming market, don’t settle for properties in bad locations. A good real estate investment is a deal in a good area.

As more foreclosures happen, more REITs and investment companies will buy large amounts of rental properties, creating new “rental areas.” Your target tenants might want to avoid those areas. You might have more success buying in “better” areas.

Good Real Estate Investments – Know Your Goals

When you go into a subject to deal, you’ll need to know the terms that will make the investment worth it to you, along with the goals you’d have for the property.

How long do you want to carry this property? Can your seller agree to those terms? What does your seller require?

What’s your plan? What are your options for this property? Will you want to rent out the property, or look at lease to own or contract for deed options?

In addition to a traditional subject to, lease to purchase and contract for deed deals are worth considering. Those buyers will give you a down payment, which is a lump sum you can use to fund the property’s fix-ups, put in a reserve, or just keep in your pocket.

Subject Tos are Good Real Estate Investments, Even with High Loan-to-Value Ratios

Often, subject tos will have a high loan-to-value ratio. It’s often around 90%, but we’ve seen subject to properties with over 100% loan-to-value.

Naturally, this could give you pause, but high loan-to-value properties are okay for subject to deals. They’re still good real estate investments. As a subject to buyer, you know:

  • There’s no money out of your pocket.
  • Rent will cover your payments.
  • The loan will amortize down.
  • Over time, you can own the property free and clear, and when the market’s up, you could sell for straight profit.
  • You can create wealth without even using your own credit.

Subject tos are a good real estate investment if you have no experience or money – or if you do!

Read the full article here.

Watch the video here:

Text: "3 Ways to Boost Low Credit"

How to Boost Your Low Credit Score

It’s one thing when your low credit score is due to a lifetime of bad habits. It’s another thing entirely when a few events knock your score down. Giving a boost to a low credit score is relatively simple – anyone can do it, if they’re willing.

If your credit is just “dinged up,” there are three quick solutions to improve it.

1. Get Your Credit Balances Down

We often see investors and contractors put all renovation costs of a job on their credit cards – especially for BRRRR projects. They use more and more of their credit, which drags their score lower and lower.

This is a tempting yet dangerous pattern as a BRRRR investor. You put your money into the property from your credit card, which you expect to get back with your refinance. But if your credit score is too low, the refinance might not go as planned. With bad credit, you won’t be able to get the refinancing loan as easily or for as much money as you expected. This will make it harder to pay off the card balances you built up during the rehab.

A tip to get around this problem is to go private. If you can get a private loan that won’t show up on your credit, you can use that money to pay down your balances.

A better score will give you better rates for your long-term, credit-based financing. A lower credit score could make your loan rate a point or two higher, which could snowball into you paying an extra $50,000 to $70,000 over the life of the loan.

2. Get Authorized to Boost a Low Score

Another quick fix for a low credit score is using someone else’s good credit to help your bad credit. Find a family member or friend who has good, long established credit, and ask them to add you as an authorized user. Their good credit will show up on your report and boost your low score.

3. Pay Your Bills on Time

If you can’t keep up with your bills, that may be a sign to get rid of some of your credit cards. Some of our clients have over 20 credit cards open! Consolidate your accounts as much as possible.

But when you stop using an account, don’t close it. As long as it has a good history, an open, unused credit account will continually add a little boost to your credit.


Lenders look at credit to see how you paid people in the past as a clue to how you’ll pay them in the future. It could take you up to six months to bump up your score in the long-term. But if you don’t start now, it’ll keep getting harder to raise it. The best time to start fixing your credit is now.

Read the full article here.

Watch the video here:

Text: "Bridge Loans VS Hard Money Loans"

Bridge Loan vs Hard Money Loan: What’s the Difference?

Though similar, there are differences to know in a bridge loan vs hard money loan.

Some lenders will use “bridge loan” and “hard money loan” interchangeably. After all, they are similar concepts, and lingo varies from lender to lender. But it’s important to know the actual definitions so you understand these terms if a lender uses them this way.

When to Use a Bridge Loan

A bridge loan is a very short-term loan – even shorter than the typical hard money loan. It helps you bridge the space between one project and another.

Let’s say you’re just finishing up a flip. The house is on the market, buyers are showing interest, and now you’d like to get another property bought so you can jump right in to your next flip.

Typically, you use the money from selling one property to buy the next one. But if you want to get that next property started before the current one is sold? That’s where a bridge loan comes in.

A true bridge loan covers up that gap between projects. It gives you the money to close on a new property before the first one is completely sold.

A bridge loan lets you overlap from an old project to a new one.

How 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.
  • You pay off bridge loans when your old property sells. You pay off Hard money loans when you refinance or sell the property the loan was originally for.
  • You use a bridge loan as temporary funds to close on a house. You use a hard money loan as a more general budget for a purchase. Many come with the option for escrows to fix up the property over time.

Certain lenders do pure bridge loans, while others lump it all under “hard money.” Keep in mind as you’re learning the real estate investment game that a bridge loan vs hard money loan serves different purposes.

Read the full article here.

Watch the full video here:

Text: "Investing in Real Estate with Bad Credit"

Investing with Bad Credit: How Can You Raise Your Score Fast?

Real estate investing with bad credit is tough. Here’s how you can raise your score.

Loans fuel your real estate investment business. The easier, faster, and cheaper you can get money, the more successful you’ll be. How can you guarantee you’ll get money from lenders easily, fast, and cheap? Having a great credit score is the best place to start. 

But if your credit score isn’t what it should be, how can you succeed?

Why is Your Credit Bad?

First of all, why is your credit bad? Knowing the answer to this question is the key to your investing success.

Who Won’t Succeed in Investing with Bad Credit

Habitual bad credit is a problem. If you’re the type of person who:

  • Doesn’t pay bills because you “don’t want to”
  • Refuses to believe that improving your credit score is important
  • Can’t or won’t keep track of personal finances

…then real estate investment probably isn’t for you.

The money side of investing is huge. If you’re unable to pay attention to the numbers, pay your debts, and prepare your money, you won’t succeed in real estate. And if you aren’t willing to improve your bad credit, it will be nearly impossible to get money to buy properties to begin with.

Who Can Succeed Investing with Bad Credit

However, many people have the potential for a great credit score. But maybe your credit was impacted by a major life event:

  • A divorce
  • Medical bills
  • Lack of credit education

Any number of life events can turn a responsible, willing individual’s credit bad – including never being taught the importance of credit.

Whatever your situation is, now is the time to focus on your credit score. You can come back from any dip in credit if you’re willing to put in the time and effort.

And if you want to invest in real estate, credit is vital. Your credit will either propel you to success, or drag your career down. Let’s get it fixed.

How to Raise Your Credit Score

Improving your credit score is relatively simple – anyone can do it, if they’re willing. All it takes is getting educated, then spending 30 to 90 minutes per week.

It could take you up to six months to bump up your score in the long-term. But if you don’t start now, it’ll keep getting harder to raise it. The best time to start fixing your credit is now.

Lenders look at credit to see how you paid people in the past as a clue to how you’ll pay them in the future.

If your credit is just “dinged up,” there are three quick solutions to improve it.

1. Get Your Credit Balances Down

We often see investors and contractors put all renovation costs of a job on their credit cards – especially for BRRRR projects. They use more and more of their credit, which drags their score lower and lower.

This is a tempting yet dangerous pattern as a BRRRR investor. You put your money into the property from your credit card, which you expect to get back with your refinance. But if your credit score is too low, the refinance might not go as planned. With bad credit, you won’t be able to get the refinancing loan as easily or for as much money as you expected. This will make it harder to pay off the card balances you built up during the rehab.

A tip to get around this problem is to go private. If you can get a private loan that won’t show up on your credit, you can use that money to pay down your balances. 

A better score will give you better rates for your long-term, credit-based financing. A lower credit score could make your loan rate a point or two higher, which could snowball into you paying an extra $50,000 to $70,000 over the life of the loan.

2. Get Authorized 

Another quick fix for a low credit score is using someone else’s good credit to help your bad credit. Find a family member or friend who has good, long established credit, and ask them to add you as an authorized user. Their good credit will show up on your report and boost your score.

3. Pay Your Bills on Time

If you can’t keep up with your bills, that may be a sign to get rid of some of your credit cards. Some of our clients have over 20 credit cards open! Consolidate your accounts as much as possible.

But when you stop using an account, don’t close it. As long as it has a good history, an open, unused credit account will continually add a little boost to your credit.

Turn Bad Credit to Good Today

To get into investing with bad credit, the best step is to focus on raising your score.

It can be overwhelming, but just dive in. Ask for help – from trusted family, friends, or Hard Money Mike.

Or, if you have major credit issues dragging you down for the long-term, you may need to reach out for advice from a professional. Spending a couple hundred dollars now will pay for itself later in your great real estate investments made with a high credit score.

To start working on your credit score today, download this free credit score checklist

Watch our videos on credit here.

Let’s fix your credit score fast! Happy Investing.

Text: "3 Ways to Invest in Real Estate with Zero Money Down"

3 Ways to Invest in Real Estate with No Money Down

These are the most tried-and-true ways to invest in real estate with no money. Some of these methods will sound familiar – but they’ll have a twist to ensure your success in the market we’re about to enter.

Other methods might be unfamiliar to you. They’ve fallen out of popularity the last 15 years, but rising interest rates will bring back their usefulness.

1) BRRRR with No Money Out-of-Pocket

Buy, rehab, rent, refinance, repeat. That process becomes easier the better your deals are. And as we see more foreclosures happen in the near future, and more people are sitting on the market, you’ll have the chance for better deals.

To get BRRRR properties with no money out-of-pocket in this market, though, you’ll need a good deal. What makes a deal good? One of the best guidelines is the 75% Rule. As long as the property costs 75% or less of the ARV, you can get into that property with zero money down.

(Even following the 75% rule, you’ll need to qualify for a bank loan, so you’ll have to be sure your credit’s good.)

We’ve had a lot of success helping people with BRRRRs in down markets. Around 2010, we would often do ten properties every year for couples. They built real estate portfolios with no money from their pockets.

2) Subject Tos with Zero Down

As properties get stuck in the market longer and interest rates rise, subject tos will become a great way to invest using no money.

A subject to is when you go on title, own the property, and take over mortgage payments – but leave the existing mortgage on the property, in the seller’s name.

What good does this do for you as the buyer?

  • Loans on subject to properties were originated two or three years ago, with 2.5-3% interest rates. Much lower than if you were refinancing for yourself in the current market.
  • You don’t have to refinance. It’s not on your credit, not based on your income, and you don’t have to go through underwriting.
  • The loan is probably already a few years into amortization. So every payment becomes lower – all without you needing to qualify for anything.
  • You can accumulate a large portfolio without the hassles of finding the money.

More on subject tos later in this article.

3) Owner Carry with No Money Down

Here’s another way to invest in real estate with no money that has been out of the picture for awhile: owner carries.

An owner carry deal is somewhat similar to a subject to, where the buyer gets ownership of the house without taking out their own mortgage. But in an owner carry, the buyer doesn’t pay the property’s existing mortgage. Instead, the owner owns the home outright, so the buyer gives them mortgage payments directly.

Owner carries can be especially beneficial when you’re the seller. But an owner carry is also a potentially good option to invest without putting much, or any, money down.

Here’s an example of a recent owner carry deal we helped with:

A client was selling their parents’ property. They were planning to put the money in the bank and live off the interest.

Instead of settling for the 1% or 2% interest they’d make in the bank, we helped them with an owner carry. So they:

  • Sold the property.
  • Put a lien on the property so they held the mortgage.
  • Received mortgage payments from the buyer at closer to a 4% or 5% interest rate.

You’ll probably have more luck finding subject tos than owner carries. Not many people own a house free and clear, or take over a property without a mortgage.

Read the full article here.

Watch the full video here:

Hand holding house keys. Text:"How to Start with a BRRRR Real Estate Investment"

Where to Start with a BRRRR Real Estate Investment

The first step in a BRRRR real estate investment happens before you even look at a property. It’s important to sit down and think about what you want out of your real estate investing experience.

Answer questions like:

  • Where am I in life now? Where do I want to be?
  • Why do I want to invest in real estate?
  • Where do I want to invest?
  • Is the BRRRR method the best path for my goals?
  • How many properties do I want?
  • How much cash flow do I want to generate from BRRRR?

Before you take any action, find your answers to all of these questions. This will show you where to start, how to go about it, and when to stop. You’ll get much more out of your BRRRR real estate investment when you know where you’re going and why.

Launch into the BRRRR Method

Buy, Rehab, Rent, Refinance, Repeat. That’s the BRRRR method in a nutshell.

Many investors use this method to generate monthly cash flow and build a real estate empire. Following BRRRR is one of the best ways to build a rental portfolio with little to no money out-of-pocket.

Once you understand your real estate goals, you can follow the BRRRR map to reach financial freedom.

How do you find that map?

Read the full article here.

Watch the full video here:

Text reads "What Is Hard Money." Mike Bonn stands with cartoon coins surrounding him.

The Beginner’s Guide to Hard Money Loans

Hard money basics you need to know before real estate investing.

We’ve been in the hard money loan business for 20 years. Half the calls we receive are still beginner real estate investors trying to learn the money side of investing.

If that’s you, you’ve likely applied for, heard of, or thought about using hard money lenders. But maybe you don’t fully understand the private lending world yet. How does a hard money loan work? How much interest do private lenders charge? Do hard money lenders require a minimum credit score? Should you just wait until you qualify for better bank loans?

This guide will help answer:

  • What is hard money?
  • What do hard money lenders look for?
  • How is hard money different than other loans?
  • How do you qualify for hard money?
  • Is hard money better than banks?

Becoming hard money proficient will put you miles ahead as an investor. 

Ready to nail the basics?

What is Hard Money?

Hard money is a short-term loan designed for real estate investors. Hard money lenders focus on lending money on undervalued properties in need of rehab.

Hard money loans are short term – usually around six months or a year – and are designed to help buy properties to fix up.

While “easier” than traditional bank loans, hard money loans are also more expensive due to higher interest rates. Which brings us to the most important quality of hard money loans: they’re fast.

In real estate investing, discounted properties typically require fast-closing deals. Hard money loans can help you take advantage of prices while they’re low, and: 

  • Save on the property cost to begin with
  • Get more from selling or refinancing the property.

These savings more than cover the costs of a hard money loan for most investors.

The speed of hard money makes it valuable for newbie and seasoned investors alike. Hard money loans are made for real estate investors.

How Does A Hard Money Loan Work? 

What do hard money lenders look at? There are two main factors lenders of hard money consider.

Loan-to-Value Ratio

An important number a lender takes into account is the cost of the property. The ratio of the loan they offer and the cost is important for you to know.

Let’s say you have a property with a current appraisal of $200,000. Then you get a loan for $100,000. The loan is half of the value of the home, so your loan-to-value is 50%.

After Repair Value (ARV)

ARV, after repair value, is another important factor hard money lenders consider. The properties targeted by real estate investors are undervalued. They need work to be brought up to the standards of the surrounding community.

So, lenders look at not only the current value of the house, but also the future value of the house, after it’s all fixed up.

Many hard money loans are based on after repair value rather than loan-to-value. Your lender might offer you up to 75% – not of what you’re buying it for, but what you could sell it for by the end. 

What Does ARV Cover?

A key factor to ARV is that lenders will lend not only for the initial purchase, but for the fix-up costs. 

Many lenders will put money aside in escrows to use throughout the project to pay contractors and cover other renovation costs. 

If your loan considers ARV, it’s possible for you, with ZERO money down, to:

  • Buy a property.
  • Fix it up.
  • Either sell it (fix-and-flip) or refinance it (BRRRR).

After selling or refinancing, you use that money to pay the loan back.

Hard money is designed to build value into real estate. Understanding the role of the after repair value will help you immensely in your hard money investments.

How Is Hard Money Different from Other Loans?

Interest rates on hard money are between 2-5% higher than what you’ll find at banks. You can expect origination fees to be about twice as much. Appraisals will be close to the same.

So on paper, the rates and fees are higher, so it feels like you’re spending more. Which you are! But with hard money loans, you’re paying for:

  • Accessibility
  • Convenience
  • Flexibility
  • The opportunity to purchase properties you’d never be able to while relying on bank loans.

While hard money costs more than other loans, the potential value is also way higher. When sellers have discounted real estate, they want it sold fast. Banks can take 25-30 days to close. You can receive hard money in a matter of days.

Every week, we see hard money work to save people money.

When a recent client of ours bought a property, he saved 10% – just because he could close faster than the other five bidders. His savings on that purchase were $30,000: much more than double what he’ll spend on the loan transaction.

How Do You Qualify for a Hard Money Loan?

There are two kinds of hard money lenders. They each have different qualification requirements.

National Hard Money Lenders

National lenders lend in almost every state. They are larger organizations, backed by hedge funds and private equity.

National hard money lenders require:

  • A credit score check, and a good score.
  • Experience – at least five deals in the last three years. 
  • Properties to be in specific larger communities.

So if you’re new to investing, need to improve your credit score, or are looking at more rural properties, you may need to look into local lenders.

Local or Private Hard Money Lenders

A local, or private, lender will specialize in your state or area. Local lenders are much more likely to:

  • Not ask for a credit score.
  • Not require experience.
  • Lend for rural areas.

Local lenders are focused on the deal itself and whether it has good value.

When deciding which lender to use for hard money, always shop around to see what fits your situation now. And be aware that another lender may fit you better in the future.

Are Private Lenders Better Than Banks?

It’s impossible to say whether hard money lenders or banks are “better” for real estate. It all depends on your deal and where you are in your investment career.

When to Use Bank Loans vs Hard Money Loans

Bank loans will have lower rates and may be the better route if you:

  • Have had a successful investment business for over two years.
  • Make a lot of money at a W-2 job.
  • Have 3-4 weeks to close.

Hard money loans will be easier, faster,  and may work better if you:

  • Are newer to real estate investing.
  • Don’t have money up-front to invest.
  • Don’t want to put your own money into a deal.
  • Need to close within a week or two.

As long as a property promises income, hard money more than makes up for its higher rates with the speed and greater potential savings. Starting in hard money paves the way for you to work up to bigger funding opportunities.

Ultimately, your investment career should always have a mix of funding types. Bank loans, hard money, and OPM all have their place to work for you in real estate investing.

Where to Go from Here

Understanding money is key to successful real estate investments. When you put time into understanding money, you get control of it. With control, you can multiply your investment earnings four times over.

It doesn’t stop here. We want to help with your hard money education:

Wisdom Wednesday!

Wisdom Wednesday!