How To Refinance and Boost Your Cash Flow

Today, let’s explore how to refinance and boost your cash flow.

It’s probably pretty safe to say that in the real estate world, cash flow is KING!  Because cash flow makes life flow.

But what does cash flow mean to you? Because it comes in all shapes and sizes.

What cash flow means to one investor might be very different from another.

Let’s look at an example.

We have 3 real estate investors: John, Jane, and Jack.

John likes to focus on putting less money down so he can keep more money in his pocket.

Jane likes to focus on making consistent monthly income.

And Jack likes to focus on using cash-out refinancing to gain the most leverage.

Today, let’s take a closer look at Jack’s strategy.

It’s a simple one, but popular, especially during a refinance boom.

Essentially, Jack likes to refinance all of his value-add properties every 3-5 years so he can unlock his equity and bring more money into his life. He can use this money for personal or business matters, but it’s usually for something personal.

Now let’s break this simple strategy down a bit more.

So, Jack owns 3 properties.

He bought each one for $100K.

After 3 years, each property gains $25K in equity. So, Jack refinances and takes the $25K out of each property. All because he wants to use the money for…whatever! Maybe he wants to pay off his credit cards, buy another value-add property, or go on an epic skiing trip to the Alps. The sky’s the limit.

Well, mostly.

Once Jack has this money, he relaxes for another 3-5 years. Then, if interest rates drop, or he gains more equity, or both, he’ll refinance again. And, again, he’ll use the money for whatever he needs or wants in life.

The process repeats over and over until Jack decides to sell his properties or find a different cash flow strategy.

Now, Jack’s method of refinancing isn’t for everyone. But it’s definitely a popular cash flow strategy that many investors enjoy using.

Is it the right strategy for you? Our team is here and ready to help you discover the best path for you.

Happy investing!

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Is it better to pay a lender points on a conforming loan or keep closing costs down and take a higher rate?

 

Why paying a point will save you thousands of dollars and make qualifying easier.

 

FYI! On an investment property loan, you will typically see a .75 to one full point higher between the two options.

Short answer is if your plan is to sell or refinance your property in the next two years (this is an estimate and each loan is a little different) then pay the higher rate and avoid points and other fees.

If you plan on keeping your property and/or loan for longer then it will pay for you to take a lower rate and pay the costs.  You can put tens of thousands of dollars more in your pocket by paying the point.

Here is a recent example: We had a client looking to refinance a $400k loan and they had a choice to either pay a point and obtain a rate of 3% or pay no points and obtain a rate of 4%.

The extra cost for the point would be $4,000 for the lower rate of 3%, but the payments were $223 dollars less a month.

So, they would break even after approximately 18 months ($4,000/$223).

For months 19 to 360, they would save $223 dollars every month or $2,796 dollars each year.  If they kept it until the loan termed out (360-18 = 342) they would have an extra $79,686 more in their pockets.

In most cases it pays to pay the point on a loan.

All loan officers should be checking both numbers to insure you are in the right loan for the expected life of your loan.

Bonus, it also helps with qualifying because payments are lower in calculating debt ratio.

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What We Know:

Rates on the conventional side have maintained strong with rates in the low 3’s. If you’re still wondering whether or not you should refinance, we’re going to dive into what we call ‘The Tipping Point Rate.’

This week, we’re seeing more larger non-conventional companies dipping their toes back into the investor loan water. This gentle ease back in helps increase liquidity, but it still comes at a price:  Lower LTVs and higher costs.

What This Means for You:

There is an exact rate where it’s wise to refinance. We call this ‘The Tipping Point Rate.’ This specific rate is the point where you won’t pay a penny more in principal and interest over the life of the loan.

Calculate the tipping point rate on your refinance

Going above this point might increase your cash flow, but it will end up costing you more in the long run. Sometimes this means it’s better to stick with what you have now.  We’re focused on putting more money in your pocket and less in the bank’s pocket.

This is for investors looking to increase monthly cash flow without adding lifetime cost of debt. So, if you’re solely concerned about your monthly cash flow, this probably isn’t the program for you.

So how does this work? Let’s take a look at an example.

Joe is an investor who is looking at refinancing to increase his cash flow every month. But not if it means paying tens of thousands of dollars extra to the bank in principal and interest.

Joe has been paying his current mortgage for 5 years. If he keeps the loan until it’s paid in full, he’ll end up paying $360k in payments over the next 25 years.

Joe wants to know the exact rate that he can refinance to a new 30-year fixed without increasing his amount owed. If it exceeds $360k, then he won’t refinance.

By knowing this exact rate, he can stretch his payments out and lower his interest rate without paying a penny more over the life of the loan.

How do we find Joe’s Tipping Point Rate?

Luckily, we have a handy program that can calculate just that.  If you would like to know your own Tipping Point Rate, send us an email!  We’ll run the report specifically for you and your property!

Note: The Cash Flow Mortgage Company doesn’t currently lend in all states, but we are always happy to help and make sure you understand your numbers!

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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We might be based in Colorado, but that doesn’t mean that as our client you have to miss out on deals in other states! In fact, Hard Money Mike lends on properties in several states, like with this Texas fix-and-flip!

Texas fix-and-flip deal

We love seeing our clients crush their investment goals, even from afar! Take, for instance, this Texas fix-and-flip property purchased by one of our clients. We were able to fund this deal in a week.

Yes, you read that right.

Investors and wholesalers alike will find the short-term loan process at Hard Money Mike quick and easy. We pride ourselves on making it easier to get the cash flow you need for quick property purchases. Who wants to wait around when they’re trying to close a deal and add to their investment portfolio?

In other words, we want to help you make more money even faster!

Hard Money Mike is a lender based in Colorado, lending money on all types of commercial based properties: fix and flip, land, whole tailing, and builder bridge loans.

Have your eyes set on an investment property on the single-family or commercial building side? The Cash Flow Mortgage Company funds investor loans on properties in both of these categories. Long story short: whatever deal you’re trying to fund, chances are, we can help you get it done!

Give us a call:

Hard Money Mike  303-539-3000

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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What We Know:

The markets are stabilizing, and underwriting term times are back in pre-Covid standards.

With rates for single-family investor properties on conforming loans hovering around the low 3’s, it might be time to look at locking in and increasing your cash flow.

What This Means for You:

As an investor, there is money in the money—Your money!

Your credit score is the key to keeping more of your money. No matter your income situation, the better your score, the cheaper the money. Cheaper money equals more cash in your pocket.

Investor Credit Score impact

Last week, we showed you how much money can be saved with a good credit score. Now, it’s time to go over how to increase that score quickly.

How to raise your score and increase your cash and cash flow

Want to save money as an investor? It might be time to crunch the numbers

Do you want to keep money in your life or keep supporting a banker’s life? We’re pretty sure we know the answer to that particular question.

They say that Vegas was not built on the gambler’s winnings. The same can be said about banks. Banks keep popping up everywhere, even when most banking has gone online.

 

Why is that? Because they know there’s money in your money.

 

So how can you better prepare your credit score for an investor loan?

  1. Plan before you apply by checking your score online.
  2. Stop applying for ANY credit at least 60 days before a loan application.
  3. Raise your score with one or two of these simple methods:
    • Use private money when you can and keep it off your credit. If you can borrow from a private individual or entity that doesn’t report on credit to pay off/down your credit, do it BEFORE your next statement date.
    • Don’t close paid off accounts.
    • Pay down your credit cards before due dates. This will take extra cash now, but it will save you tens of millions in the future.
    • Keep balances below 30% of outstanding balances on revolving accounts like credit cards.
    • Dispute any item that should not be on your report.

This list does not include paying your accounts on time. That’s a no-brainer. You should always pay on time. There’s typically no quick fix for late payments.

Stay tuned, because next up, we’ll be covering how to check your credit on your own! In the meantime, if you have questions about your score, what it’s costing you, or what a better score could save you, reach out! We’re always happy to go over the numbers with you!

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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a less than perfect credit score is eating away at your profit.

How much money might a lackluster credit score be costing you over the life of your investment business?

the impact of your credit score

You probably hear a lot of talk in the mortgage industry about your credit score and the effect it can have on your interest rates, but do you really have an idea of how much it’s affecting your bottom dollar?

Do you know how to determine your Return on Credit (ROC)?

Can you crunch the numbers to figure out how much your score is helping your cash-flow (or how much money it’s sucking out every month?)

These calculations can get complicated, but the takeaway here is that a less-than-stellar score can really be costing your tens of thousands of dollars over the lifetime of your loan. And when your loan is on an investment property, (or several,) you may as well be lighting your profits on fire.

a less than perfect credit score is eating away at your profit.

We want to help! Contact our team so we can help you see where you’re currently at, and where you could be going instead.

Let’s get you to your goals faster by trimming some of the fat from your financing!

Hard Money Mike is a lender based in Colorado offering services in several states. We lend money for all varieties of commercial-based properties. So whether you’re trying to finance a fix-and-flip, vacant land, whole-tailing, or looking for a builder bridge loan, we’ve got you covered.

Call Mike Bonn at: 303-539-3000 or email Mike@HardMoneyMike.com

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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to refi or not to refi

To refi, or not to refi: That is the question.

And we get this question a LOT. “Does it make sense to refi if I only plan to hold onto the property for a few more years?”

Earlier this week, we discussed the power of refinancing (and the math behind it.) Do the numbers support taking on extra years of payments?

For some of you, they do. For others, you might be left thinking, “But wait! What if I’m not going to keep the property for 24 or 30 years? At what point does it actually make sense to refinance?”

However, if you are not going to keep the property through the next 30 years, you’ll need to look hard at what the costs will be over the expected period. The key here is determining which path will cost you more money and which one will keep more in your pocket.

GOAL: Keep more money in your life and less in the hands of bankers.

Let’s look at an example:

You’re planning to keep a property for 3 years and then sell it. The question is, what will put more money in your pocket and cost you the least over those next 3 years?

Here is how we figure this out:

Step 1: Ask your mortgage company to run an amortization chart on your current loan and your new loan.

2: Then, pull your principal and interest from your current mortgage company’s website.

3: Next, ask your mortgage broker to give you the principal and interest from the new loan.

4: On each loan, multiply the payments by 36 (the 3-year window before you sell the property) and add the balance of your loan at the end of 3 years.

5. Lastly, compare notes and find out what would be the lowest amount. This is the one that will keep more money in your pocket.

Ultimately, this is just a pure and simple scenario of determining exactly how much the loan will take out of your pocket over the course of 3 years. We’re not looking at monthly cash flow, because true dollars out are pure and simple. This is your true cost out of your pocket.

If you need help, we’re happy to step in. Give us a call, and we can run all the numbers for you and see if it makes sense.  If it does, we can help you out even further by securing low rates and costs on your refi!

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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We’re so impressed with this Multi-Unit Fix-and-Flip in Ohio!

 

While we’ve seen a good share of motivating investor inspo over the past few weeks, we never get tired of seeing the incredible transformations from our clients. Check out these awesome Before-and-After photos of a multi-unit fix-and-flip from one of our clients in Columbus, Ohio!

 

Multi-unit fix-and-flip exterior

Multi-unit fix-and-flip

While seeing these awesome before-and-afters is certainly inspiring, it also requires some cash to pull off similar results. If you’re looking for ways to fund your future fix-and-flips, we have a solution for you!

Give us a shout!

 

Hard Money Mike is a lender based in Colorado. We lend money on all types of commercial-based properties. So whether your dream deal is a fix-and-flip, vacant land, whole-tailing, or requires a builder bridge loan, we’ve got you covered. We offer services in several states, including Ohio.

Call Mike Bonn at: 303-539-3000 or email Mike@HardMoneyMike.com

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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Conventional mortgage rates are showing signs of improving.

Thankfully, it’s looking like another great week for standard conventional mortgage rates.

So far this week, all evidence is pointing towards increasing stability and improvements on the conventional mortgage front.

  • Depending on whether you pay your mortgage person points or you have them wrapped into your loan, rates fluctuate between low 3’s and low 4’s.
  • We’re seeing great rates on the conforming side.
  • Every week, the non-traditional loans are reappearing with increased frequency.  
  • Some lenders have decreased credit score requirements to 680.
  • Rates are still on average above 7%, but signs are showing that they will drop soon.
  • LTVs are inching higher, but not to the degree we have seen them in the past.

In short: conventional mortgage interest rates are really good. But what does that mean for you?

How do you know when it’s smart to refinance your rental (or any) property?

 

Let’s face it: as rates drop, the question of whether or not to refinance runs through all our minds.

Would you like to find out (without the sales pitch from your mortgage person?)

Anyone can crunch the numbers in just a few minutes with just a few items.

Yes. It involves math. But we swear it’s EASY

For now, all you need is a piece a paper, a pen, a calculator, and your mortgage information. (You can pull this info directly from your mortgage company’s website). Then, follow these three steps:

Step 1: Locate the amount you pay monthly for principal and interest. (Ignore everything but your principal and interest (i.e. taxes and insurance).

Step 2: Locate the number of months remaining on your loan. 

Step 3: Multiply your monthly payment by the number of months you have left on your loan. 

That’s it! 

 

Let’s look at an example:

A: Your monthly principal and interest payment is $1,200

B: You have 288 payments left on your loan.  

C: $1,200.00 X 288 = $345,600 

(Scary sometimes to see how much you really owe, isn’t it? Don’t panic.)

Now, let’s say that you have an opportunity to refinance and lower your interest rate with a new payment of $1,100. Should you do it?

 

Let’s take a look:

On your new loan, you’d pay $1,100.00 for 30 years (or 360 months). That’s $1,100.00 x 360 = $396,000.00

If you refinance, you’d increase your monthly cash flow $100.00. However, as a result, you’d pay an extra $50,400.00 over the life of your loan! 

So, is the extra $100/month worth an extra 72 months (6 years) of mortgage payments? Does refinancing make sense for you financially? Well, that’s up to you.

Perhaps cash flow is more important at this time in your business life and paying the extra years is ok with you. That’s a decision only you can make. At least when you know all the numbers, you can make your call an educated one.

 

Try it on all your loans and find out what makes sense for you!

 

Your payments __________________ Months remaining _______________

Total remaining to be paid ___________________

 

Okay, we’re sure a few questions are swimming around in your head, so we’ll see if we can answer some of the most common ones upfront:

Q: “What if I’m not going to keep the property for 24 or 30 years? At what point does it make sense to refinance?” 

A: That’s coming up in the next article.

 

Q: “What if I want to use those savings and pay down my mortgage?” 

A: We’ll be addressing that in a future article as well.

 

Q: “What is my breakeven interest rate?”

A: There are so many paths you can go down and we’ll cover as many as we can. We’ll also provide a tool for you to run all these scenarios.

 

Today, it’s all about knowing your raw numbers.

Want an investor tool that can run these numbers (plus your breakeven rate and many more) in seconds? We have one in the works. Just get on our contact list, and we’ll let you know when it’s ready!

By knowing these numbers, you can save tens of thousands on each refinance.

 

Don’t feel like doing this or worry the math might overwhelm you? No worries! Shoot us an email with your current statement and we can run them for you.

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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Dallas Fix-and-flip exterior

Nobody does fix-and-flip curb appeal like these Dallas clients.

Check out these amazing Before-and-After photos of this Dallas Fix-and-Flip!

 

Dallas fix-and-flip living room

These clients did an amazing job transforming this living room into a much more liveable space.

Dallas fix-and-flip bedroom

From dark and cave-like, to light and inviting, this bedroom looks pretty dreamy to us!

Dallas fix-and-flip kitchen

From cluttered to cool, this kitchen got a pretty serious glow-up.

Dallas fix-and-flip bathroom

Not even the bathroom escaped noticed in this impeccable flip!

We’re still in awe of this amazing fix-and-flip investment deal from our Dallas area clients. A little imagination and some investment capital can go a long way towards transforming a haggard house into an updated future home!

We never tire of watching our clients change the face of their neighborhoods in a positive way. This property is a shining example of what the real estate investing community is all about: improving a neighborhood and enjoying a profitable rehab!

Looking for a hard money loan to fund your own flip? Look no further.

How do you take the guesswork out of getting your deals funded for rehab projects like this one? Simple: By partnering with Hard Money Mike.

Hard Money Mike is a lender based in Colorado. We offer a large pool of lenders so we can be sure to find the right fit for your project. We regularly lend money for all types of commercial-based properties. So whether your project is a fix-and-flip, land, whole-tailing, or a builder bridge loan, we have you covered.

If this flip has you feeling inspired, we want to know about it! Contact Mike Bonn at 303-539-3000 or email Mike@HardMoneyMike.com to start exploring your lending options!

Want even more awe-inspiring investor inspo? Check out what some of our other clients have been up to…

*All non-commercial and construction loans offered by TNS Loans NMLS #1719349

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