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How to Buy a Rental Property: 5 Ways To Fund Your Real Estate Deal

Do you want to know how to buy a rental property? Then check out these 5 ways to fund your real estate deal.

If you’re interested in generating positive cash flow with a rental property, then it’s important you know how to actually BUY a rental property. Like, where does the money come from? Because most real estate investors don’t have hundreds of thousands of dollars sitting around.

Most will need a real estate loan.

So, let’s take a quick look at the various types of real estate lenders you can rely on to fund your rental properties. Just like fix and flips and other value-add properties, you have 5 different options, and each of these options have various pros and cons.

Hard Money.

Hard money is a great option when you need to close a deal fast. We’re talking days instead of weeks or months. Plus, most hard money lenders offer 100% financing.

The downside is hard money can be expensive. Rates tend to be higher than other lenders. But this type of loan is intended to be short-term. If used correctly, you only pay these high rates for 6 months or less.

Non-Traditional Loans

Another option to buy a rental property is using a non-traditional loan. These are excellent for those who don’t have—or don’t want to use their tax returns. Unfortunately, they also come with high rates, so they’re more expensive than some of your other real estate funding options.

Banks

Banks are useful for those who can make the cut. They offer lower rates and allow you to keep your real estate loan in your LLC or business name.

But banks also have the strictest requirements, and if you don’t meet those requirements, you’ll get rejected. Worse, they require 3-5 year terms, so you can’t get in and out of them as fast as hard money and other loan options.

Traditional Loans

Traditional loans are one of your cheaper options because they offer the best rates. But be careful, because these types of loans have stricter requirements. And, unlike banks, you can’t put the loan in your LLC or business name. You have to keep it in your personal name.

OPM (Other People’s Money)

Compared to all the other real estate lenders, OPM offers the lowest cost and highest flexibility. You only pay interest, so there are no points or other random fees. Better yet, you and your lender can set the terms together.

The only downside to 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 go. If you’re interested in buying a rental property, one of these 5 options can help you actually BUY it. Which one is the best? Well, there’s no right answer to that, because every real estate investor has a different path. What works for you might not work for someone else.

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!

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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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Mortgage industry is showing signs of recovery.

The Mortgage Market is Showing Signs of Being on the Mend.

What We Know:

The mortgage market is finally showing signs that it is starting to recover and heal. As states begin to lift travel and business closure restrictions and reopen for commerce, lenders appear to be relaxing some of their restrictions in-kind.  Last week, we welcomed back a few lenders offering loans outside the standard conventional box.

This week, we see even more positive progress, such as lenders expanding the LTVs up to 70% on their investor cash flow loans (based on credit score and lease.)

We are noticing the lending requirements are a little more restrictive than before Covid-19, but at least additional options are making a comeback. Hopefully, this upward trend will continue over the following weeks.

What You Can Expect:

A return to business-as-usual won’t happen overnight, of course. The lower credit scores and higher LTVs will more than likely take some additional time to return to their pre-COVID closure state. Lenders will want more data on the unemployment and rental payment front before expanding.

Real estate investors may have to be more patient for normalcy to return to their lending markets.

Rates in the standard-conforming market are coming down.  For investors, 30-year rates are in the mid 3’s for purchases and no cash-out refinances.  Cash-out refinances are still a big challenge for investors, and will more than likely continue to be so for the next few months.

Expect to find the expanded requirements (up to 6 months reserves for each property) to be in place with underwriters through the end of the year.

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

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Non-Conventional Mortgage Loans Are Making a Comeback…

Non-conventional loans are closing again

Non-conventional mortgage loans are getting funded again.

What We Know:

Finally, we’re seeing an influx of non-conventional mortgage loans being funded. Hopefully, this positive change is bringing some relief to both investors and their buyers who don’t fit neatly into the conventional mortgage lending box.
 
Mortgage loans in this lending bucket typically do not require tax returns but rely on bank statements or leases for income.
 
Even though some are back, requirements for securing these loans have increased and are a little harder to obtain.  The majority of the lenders have a starting point of a max 65% LTV and a credit score of 700+.  The good news is the rates have not skyrocketed. There are now lenders lending who had previously been turning away would-be investors.
Light at the end of the lending tunnel

There’s a light at the end of the lending tunnel again.

 

The Takeaway:

We are on the road to lending opening back up. The economic restrictions and resulting uncertainty appear to be lessening. Apparently, to the point where lenders are feeling confident enough to begin closing riskier deals again.
Make no mistake, it will be a slow process. But there appears to be a light at the end of the COVID lending tunnel. Stay tuned as we provide continuing outlook updates over the course of the coming weeks.
In the meantime, if you’d like to review your financing options for investment properties, feel free to reach out! We’re always happy to run your numbers with you.
*All non-commercial and construction loans offered by TNS Loans NMLS #1719349
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investment power player

Be a real estate investment power player by harnessing the power of OPM funding.

You don’t have to be a bench warmer in the real estate investment world. Transform yourself into a power player! 

 

It’s easy to think that with the COVID-19 shutdowns, stay-at-home orders, and lasting economic uncertainty that now is an okay time to sit idle and just see what happens in the real estate investment world.

 

And that would be your first mistake.

 

By many standards, there’s never been a better time to go all-in for your real estate investment business. Mortgage rates are low, making previously out-of-reach properties insanely affordable. Showings are still under a good deal of restrictions and safety precautions. But this just means the buyer pool is limited to the extremely serious. Great news for fix-and-flip investors looking to turn a quick profit!

 

It’s true, the banks have been saying no, but that doesn’t mean the game is over. We’re here to tell you that there are other ways to play besides begging the banks to fund your deals.

 

Put your future in your hands: Make the switch to OPM (Other People’s Money) funding and stop waiting on the bank.  When the deals start popping up (and they will,) you’ll be able to buy the properties you want when you want, and for what you want to pay. 

Instead of sitting on the bench, you can be actively working to build that dream life, even in times of uncertainty.

 

Questions on how to go about making this transition? Luckily for you, we’re hosting an Intro to OPM Webinar where we’ll be covering all the critical details of how to make this crucial switch for your investment business!

 

Get signed up >>>

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Remote Closings And You: How COVID-19 Has Redefined the Real Estate Closing Process

 

What We Know:

The financial side of real estate has been stalled on many fronts these past few months due to the economic lockdown.

 

Offices are closing, and would-be buyers are losing their jobs. Appraisers aren’t allowed into properties, title companies are limiting closings. There are also complications of safely converting everyone’s office jobs to work-from-home positions.  This influx of rapid-fire changes puts a strain on the mortgage process and adds stress to closing on properties.

 

But, things are improving. We are beginning to see some positive changes thanks to the introduction of remote and online closings.  

 

What Is Changing:

For starters, buyers and sellers are no longer required to physically drive across town at a prescribed hour that works for everyone and suit up with masks and gloves for a closing.

Closing from Home

Systems are now in place for closings to happen 100% from the comfort of home or office ( or really, anywhere you need to be.)  Remote closings are real and they’re happening, along with simple remote notarizations. These simple adaptations eliminate so many hurdles to the closing process and help speed things along, especially in these unique times.

 

Fidelity, one of the largest title companies in the industry, is all-in with the remote advancements and allowing clients to choose how they close.

 

What the Future Holds:

We could be heading for a time when remote appraisals are standard and virtual showings become the norm.  It’s not as far-fetched as it sounds. We’re inching closer to that reality by the day.

Remote Closings

Just imagine the mortgage process taking place in a week or two, and not months!

 

Of course, this is good news for investors selling SFR properties and/or refinancing.  Landlords owning commercial properties may see values drop. After all, more people are working from home without having to physically come into an office.

 

On the rate front, we’re seeing very stable numbers. However, we’re still staring at a wall when it comes to refinancing.

 

As states open up and lift restrictions, let’s hope people run out and get back to work and start spending like we are all used to.

 

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New-home construction sees its largest monthly decline since March 1984, as COVID closures take a toll.

 

According to March’s economic report by MarketWatch, new-build housing starts and permits have fallen to their slowest pace since last July.

Builders started construction on new homes in the U.S. at a pace of 1.22 million in March, representing a 22% decrease from a revised 1.56 million in February. However, even with this decrease, the figures were still 1.4% higher than a year ago.

It’s the largest decline we’ve seen since March 1984.

Permitting activity, however, had a little less dramatic of a slowdown. Privately-owned housing unit permits were authorized at a seasonally-adjusted rate of 1.35 million. That was 6.8% below the revised pace of 1.45 million set in February, but still 5% above last year’s rate.

This news isn’t all doom and gloom, however.
Yes, housing starts are down and inventory is very low, but these conditions create some interesting market conditions.  With the lockdown and the rise in unemployment, one would start to think we may have a housing crash on our hands (and it’s still possible if closures and stay-at-home orders continue much longer.)
For now, with mortgage rates so low (buyers still mainly purchase on payments they can afford) and inventory shrinking, it is keeping home prices high. There’s not enough inventory to meet buyer demand, and therefore, prices remain stable.
What this means for the future will all come down to how long our economy is closed.
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Don’t be controlled by banks. It’s time for you to take control!

That noise you just heard? That was the sound of conventional lenders across the country slamming the door and walking away from the lending on investment properties. For those of us who make our living through fix and flips, fix and holds, and other real estate investments, it’s not exactly a GREAT sound.

But if you listen carefully, you might also be able to hear the rumblings of coming change. Just because the banks are currently the bearers of bad news, doesn’t mean it’s time to give up. Take back control of your financial future by disrupting the chain and breaking the bank’s monopoly. And the good news?  It’s actually easier than it sounds.

How, you ask? Simple. Start funding your own deals with 100% OPM – Other People’s Money. Cash from your mom, your neighbors, your golfing buddy—really, this source of capital can come from anyone who has money and is looking to invest it. 

This easier-than-it-seems solution really can help you thrive now during a period of economic uncertainty, as well as far into the future. No matter the economy, you’ll never have to worry about being controlled by what the banks have to say. If they shut the door to funding on you, you’ll have a way to keep investing and continue turning a profit for you AND your lending partners. 

 

Want to see just how easy it can be to transition your current real estate investment business model? Join us for our next informative webinar session!

Just remember: Keep it legal, keep it safe, keep it honest. 

 

Establishing trust is KEY in this funding model. When you’re dealing with other people’s cash to fuel your investments, it’s critical to stay transparent and protect everyone’s best interests.

 

Want to know more? Sign up here for our next session. >>>>

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Everyone knows that you kill a business by cutting off their credit/finance. Once the credit is cut off, we are all in trouble.

 

Or, ARE we?

 

Did you hear the lending markets just explode/implode in on the investor market?  What felt like overnight (within mere weeks,) the traditional funding faucet was virtually turned off. Lenders across the country are pumping the brakes on loans for investment properties due to COVID19-related closures, job losses, and resulting economic uncertainty.

 

What does this mean for folks who rely on that normally steady stream of capital for investment real estate funding? The existing and would-be landlords? The fix-and-flippers? The fix-and-holders? The short answer: Without credit or funding, investing in properties becomes problematic. Therefore, MAKING money becomes much tougher. 

 

Notice that we said ‘tougher,’ and not ‘impossible?’ There IS another way…

 

Now is the perfect opportunity to create your very own banking system.

 

“What does that even mean,” you may find yourself asking? It means finding PEOPLE, not banks, with money—money that they would be willing to invest. This could be your mom, your best friend, your neighbor, or anyone else who has some extra funds that they want to put to work for their future financial benefit.

 

Don’t allow the banks to socially distance you from your investment income! Learn how to keep your business running steady now and in the future by having a consistent stream of OPM- or Other People’s Money- funding. 

Join us for our next weekly Webinar, where we’ll be going over market updates and the basics of how to transition your lending stream from traditional lenders to OPM funds, all while keeping it legal, keeping it safe, and keeping it honest for you AND your funding partners!

 

Get signed up here >>>>

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Friday Fun: Down Payment

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Friday Fun: Down Payment

Friday Fun: Down Payment

With our two-step loan program, Quick to Buy, Quick to Refi, you don’t need to spend months or years saving up for a down payment. You can start your investment journey today. Our team is ready to show you how. Contact us today!

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