I’ll Have the LOX

How to write a Letter of Explanation

You may know lox as a delicious topping for a bagel and as hungry as we might be right now, that’s not what we’re talking about. In the lending world, LOX has a different meaning. It stands for, Letter of Explanation and is something you might find useful to help improve your credit score.

Lenders are willing to hear you out and might even go the extra mile to help consumers who can explain previous issues, as well as those who can ensure the issues have been taken care of and no longer remain a threat. So, should you find yourself in a bit of a bind, here are a few tips to help you write your LOX:

  1. State only the facts and be honest.
  2. Include the five W’s of what lead to you falling behind on payment of your bills. This includes, who was involved, what happened as you understand it, when it happened, where it happened and why or how circumstances lead up to the situation.
  3. Don’t be a victim, unless you really were, if that’s the case then describe what you did to rectify the situation. However, if it was your honest mistake, take ownership of it.
  4.  Make a promise, then keep it. You likely made some avoidable mistakes, make sure you learned where you went wrong, how not to do it again and then promise to never repeat them.

For additional ideas on how to improve your credit score check out our previously written blog titled, Achieve Financial Freedom.

Buy Property with Property

Buy Property with Property,

Using Home Equity

Did you know, you can use an existing property that you own as a down payment for a separate property? You may have thought you need to tap into your savings or even retirement to purchase an investment property but that’s not the case! Now technically, you’re using the equity you’ve obtained from the first property, to help fund the investment of the second. This method is a convenient, low-cost way to keep more cash in your pocket.

When you use home equity, you’re often offered some of the lowest rates and best terms on the market due to the fact that you’re using a high value form of collateral – your real property. Lenders can usually provide better closing rates as well. Meanwhile, as you focus on the purchase your investment, your original property and remaining assets have the opportunity to continue to appreciate in value.

So how exactly do you go about this method of investing? You have several options. You may seek a home equity line of credit, also known as a HELOC, or a fixed rate home equity loan. The HELOC is an open-ended line of credit while the fixed rate is more like a second mortgage. With the HELOC option, you have flexibility due to the variable rates and with a second mortgage you’ll have set repayments. This is ideal when purchasing a property such as a rental that doesn’t need work or repairs.

Yet another option is what’s called a cash-out-refinance. With this option you’ll be enabled to refinance the remainder of your mortgage at current market interest rate and you’ll be able to request a loan with a balance for a larger amount which allows you to draw cash against the property at a discounted rate. What you’ve done is create a first lien mortgage on one property and given yourself a lump sum to take to closing. Lastly, if you’re at or above the age of 62 and own a large portion of your primary property you can go the reverse mortgage route. This allows you to use your equity as a lump sum or credit line which doesn’t need to be repaid until you leave the property.

For more information and investment strategies please contact Michael Barker by phone: 860-670-4309, e-mail: MBarker@LendSomeMoney.com or via online chat at: www.LendSomeMoney.com.

What Kind of Salary Can You Expect?

Average Salary of a Home Flipper

Most people want to know what their salary or pay grade will be before they accept a position within a company. Often times, when people venture out on their own, they have lofty dreams of working from the beach while earning a breezy six figure salary. While it’s possible, it’s not most entrepreneurs story. For most of us, we get what we give.

That said, we dug up some data from the first quarter of 2019 in an attempt to gain insight on how much the average house flipper is currently making. Turns out, it’s not too shabby.  For starters, more people are jumping on the bandwagon because data shows the number of homes being flipped is up in over half the local markets.

Now we probably don’t have to tell you what this means but just in case, here goes. The increased volume of homes being flipped lead to an increase in loans being given. In fact, it reached a 12-year high and we’re happy to say as a private lender, we contributed to that!

Let’s get down to the nitty-gritty though, shall we? The average flipper made a $60,000 profit per house flipped. Additionally, they saw a 38.7% return on investment. However, the average flip took 180 days. Still, that’s not a bad yearly income especially given the median household income in the US is $52, 145.

In previous blogs we talk a lot about investment strategies and with that is how to move from wholesaling, to flipping, then on to building an entire portfolio. This means multiple projects at once and the potential for big income. Last, you should know that some markets are more lucrative than others. This is where it can pay to be well versed in what’s happening in other areas of the country as well as licensed in multiple states!

Brows our website or chat with Michael for more information on how to build a lifetime of wealth in this fast-paced and exciting industry!

*Attom Data Solutions

*SSA.gov

Why Choose Hard Money

Traditional Vs. Private Lending

Traditional lending is based on your ability to repay loan.  Banks will look at your credit score or debt-to-income ratio.  If your scores are too low, you have debt that’s beyond your income, or below the financial institutions’ safety level of debt-to-income ratio, then you may not qualify to repay the loan.

Hard money lending considers different factors, which is why it can be a great solution. In addition, hard money allows you to continue your projects and focus on growing your empire all while remaining protected.

One of the most attractive features of hard money and reasons people turn to it is because it allows them to close quickly, close with sub-par credit and even close with a reported income that won’t qualify.  How is this possible?

Hard money lenders based their underwriting on the value of the hard asset.  This means that if you get into a situation where you are unable to repay the loan, the lender can take the asset and get their money back, regardless of your income or credit.  Also, in terms of time, they can move exponentially faster because they don’t have the regulations of conventional lenders.

Many hard lenders will still ask you to provide your credit score, income statement and even complete a background check however, these don’t necessarily play a large factor into getting the loan or even the loan terms. In fact, the terms are usually given most favor by experience as a real estate investor.

The more experience the borrower has, the more easily the lender can structure a loan using a higher LTV, in addition to lowering closing costs.”  Many of the conventional financing options available don’t take these strengths of the borrower into account. Meanwhile, hard money lenders like LendSomeMoney.com has limitless capital to get the deal closed and for those with experience

For more information about how we can assist and protect your investments, contact Michael Barker: MBarker@LendSomeMoney.com.

Progressive Investing

Moving from Wholesaling, to Flipping and then to Building Your Portfolio

There are various styles of investing based on the individual investor’s goals, risk tolerance, timing, liquidity and more factors based on the investment vessel they use. This holds true when investing in real estate as well. Here’s an example of two different strategies. An investor who wants to build capital fast will often choose to flip a property; meanwhile, an investor looking for long term income will typically hold property for monthly income from rent.

As we’ve previously mentioned wholesaling is a great strategy to start with. It has a reduced amount of risk involved. In addition to spending less time, (wholesaling a home, typically only takes 15 to 45 days) you’re putting up funds only for the deposit which is paid back when the buyer you assign the contract to, closes on the home.  So essentially, that deposit money is the only risk in wholesaling.

During the wholesaling phase the investor should be focused on building capital, and educating themselves about each style of investing. One way to seek education during this phase in your career is with a mentor. We partner with Joe Barletta, a real estate investment coach who highlights the following process: the benefits of wholesaling first, then progressing into flipping homes and lastly, growing a real estate portfolio. Joe’s strategy allows novice investors to hone in on the skills all real estate investors need to fine tune. He teaches beginners how to start investing with low amounts of capital and he continues to mentor the investor as he or she progresses into the other styles of investing.

Using Joe’s strategy, the natural progression from wholesaling would be to flipping a home.  This allows an investor to make more money on a single deal. However, it may also take longer. By this we mean, days, months even up to a full year. Another risk factor is the investor is now actually owning the home on paper as well. (The investor/flipper takes the title.)  The risk is higher because a flipper is responsible for more cash into the deal. For example, they are responsible for the down payment at purchase, monthly payments, insurance, and title costs.  As a result, the best way to start flipping is to start small.  Look for properties in your price range and ones which require minimal renovations.  When possible, purchase with cash, because cash buyers can get out of the flip faster.  As the investor grows their circle of contractors, appraisers, financing, and knowledge of the market they can start tackle bigger jobs and qualify for better terms in financing.

The end goal is to create a passive income so that we can retire, hopefully sooner, rather than later.  Growing a rental portfolio can be a great way to do this. However, the investor should know the risks involved and how to manage them.

If the investor seeks financing to own the home, it’s a good idea to keep flipping while building his or her portfolio so that they can keep their debt down.  In situations where the renter stops paying rent, an eviction process can be lengthy and the owner can still be responsible for the mortgage.  If a flipping projects can pay off a mortgage, then the investor is only responsible for insurance, taxes, and maintenance.  One way to avoid the eviction scenario is with a preferred tenant who does pay rent on time. This also results in higher profits for the investor from that one property.

When investors fail to continue the job of flipping, they often find themselves owning multiple properties, all with debt and only getting the monthly income that an investor with one rental and no debt receives.  To continue wholesaling and flipping while building a portfolio will allow an investor to quit their job, create a passive income, manage risk, and have control over growing their income.

Be sure to check out how you can benefit from Joe Barletta’s coaching services here.

Creating a Flipping Business Plan

Creating a Flipping Business Plan

If you’re just getting started in real estate creating a business plan can be helpful. Even if you’ve been flipping houses and investing in real estate for a long time, going back and creating a business plan or revamping your original plan could prove wise. In the very least, the plan helps outline your business, provides direction and can even help clarify and put meaning to why you’re in business. When you get stuck or lost, the plan can be a great tool to revisit. We’ve put together a brief outline of items you might want to include in your home flipping business plan.

  1. A Mission Statement. On a deeper level this may touch on your purpose or what they now call in business your, “why.”
  2. Summary of Objectives. This might include what it is you aim to do, or problem you aim to solve and/or what your goals are for your business.
  3. Leads and Sales. This section might include a brainstorm of ideas for how you plan to generate and follow up with leads as well as manage leads through the sales pipeline. This includes leads for both the properties themselves as the buyers once you’re ready to sell the properties.
  4. Timelines. You might consider thinking about how much time you’ll spend or already do spend buying, fixing and selling the property. Once mapped out you may see room for improvement!
  5. Budget. This is a no brainer. However, sometimes business owners forget to include things like marketing and advertising budgets. Remember to consider these areas as well as the cost of property and renovation costs.
  6. Funding. List out any and all funding resources.
  7. Exit Strategy. This one is huge because investors will want to see it. Your exit strategy outlines how you plan to get out of the property. (Usually selling.)

Carve out time to complete your business plan so it’s ready to go when an investor requests it. This will save you time and money! For additional information on real estate investing and private lending please contact our loan specialists, Michael Barker. MBarker@LendSomeMoney.com or reach out via our website chat feature!

Why Wholesaling is a Winning Strategy for the Novice Investor

Why Wholesaling is a Winning Strategy for the Novice Investor

The most common barrier to entry in real estate investing is simply having the starting capital. Full financing doesn’t exist in the hard money arena, and the best terms lenders offer are for the experienced investor. Capital is necessary to start investing in real estate. If a down payment, closing costs, and interest reserves aren’t liquid then wholesaling is the best method to start with. With wholesaling you can begin to build the capital and developing the skills needed to start flipping properties or building a rental portfolio for income.

Many real estate investors use wholesaling as a way to start investing in real estate with little risk exposure. It is a simple strategy where you get a fee for finding a good deal for another investor. There’s no need to qualify for funding, repairing the property, holding costs, and the time should be significantly shorter. It’s also repeatable which investors who only try to build portfolios find that they don’t have capital to repeat the process to grow the portfolio and often receive much less monthly income than expected when they’ve used financing for the acquisition.  After acquisition also tenants are another added risk to the bottom line as they can damage the property, or not pay rent.

The initial capital for a wholesale is much less than of a flip or rental property. In a wholesale deal the investor only needs capital for a deposit on a contract. Since the contract will be assigned to the actual buyer, the wholesaler only needs to put down the deposit to get into contract. This could range from a few hundred to a few thousand depending on the property and market.

It’s often a necessity to start with wholesaling in order to build capital. However, it’s also practical for a novice investor who is trying to build the skills necessary to evolve into flipping and rental investments.  These skills include: learning how to find and analyze a deal (you make your money when you buy the property), finding the buyer for the property, learning  how to negotiate the offer, how to predict expectations of profit, and getting comfortable with contracts and  assignments, are the main stepping stones to moving from a novice to an experienced real estate investor.

Let’s Make a Deal

One Where, Everyone Wins

We want to help fund your investment projects. So, we’re sharing key insight on what lenders look for when striking a deal. Remember, if the lender doesn’t see the value, then it’s a good indicator that you might want to think twice about the viability of making money on that project too! Here’s what makes a good deal through the eyes of the lender:

The down payment compared to the purchase price – The more the merrier in terms of what you have to contribute. When investors are seeking 100% financing it raises a red flag for lenders. It’s to everyone’s advantage for both parties to have some skin in the game. Additionally, it motivates each party to move the project along.

The renovation cost compared to the purchase price – A good rule of thumb is not to exceed 50% of the purchase price. From the lender’s prospective the collateral for producing an asset-based loan should have value throughout the entire project.  The scenario both parties want to avoid is:  an investor attempts a complete gut or tear down of a property, and then can’t finish the project, the lender has to attempt to sell a property that has less value then the loan amount. Smaller projects also pose less risk for those new to investing.

The overall condition of the property – As the lender we’ll evaluate the property from the following point-of-view, would we like to live there ourselves? Not only do we look at the condition of the home but we consider the neighborhood in terms of location and safety. These are questions you should ask yourself too. Remember, even if the end goal is to rent the property, the lender still has to consider its ability to be sold in the event that the investor defaults on the loan.

Location – You’ve heard it before but we’ll say it again; location, location, location. Properties near/on water are the easiest to fund. Properties in major cities are also easier to fund simply because the market is larger making it easier to unload a property and finally, due to the fact that the values of the homes in these areas are typically higher.

We acknowledge there’s many other factors. However, keep these four things in mind as you search for your next investment property. Then, keep us in mind as your private lender! Questions? Contact us today, we’re available by phone (860.670.4309), email or live chat.

Don’t be Jealous, It’s Not a Good Look

Competitive Private Money Rates

You might have noticed that conventional mortgage rates are at an all time low for the 2019 calendar year. Perhaps you’re feeling a little like the green eyed monster as you stare longingly at those offers.

The good news is, LSM is closing the gap with its competitive private money rates. We want to help portfolio builders find low rates for their long term financing too. Contact us today to learn more about how we can help you build long-lasting wealth in the real estate sector.

LSM a One-Stop-Shop

Lend Some Money is Now a Direct Lender

What does this mean and how does it benefit you? Take a look at some of the advantages provided to you by working with a direct lender versus a mortgage broker.

  1. Relationships – Our customers matter and we strive to build relationships that lead to more lending. Meaning, we’ll prove ourselves to be a reliable partner you can trust for each and every transaction.
  2. Access – Using a direct lender means you deal directly with the source of your loan and with our loan officer and no one else.
  3. Savings – By being the originator of the loan, LSM can save you money during the loan process.
  4. Time – Time is money and we want you to have both. Direct lending is the fastest route between loan application and closing.

In order for us to make a deal we are looking for applications which:

  • Start at 75K
  • FICO Minimum of 620
  • Renovations are half the purchase price or less

Our loan expert, Michael Barker is on standby, waiting to hear from you. Visit our website to chat with him or call/text: 860.670.4309 today!

A message to brokers. We understand the value of your role! This is why we have a strong focus on our relationships with the brokers we work with, offer broker protection, and work expeditiously with you so you can deliver the same service to your clients.