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.
- A Mission Statement. On a deeper level this may touch on your purpose or what they now call in business your, “why.”
- 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.
- 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.
- 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!
- 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.
- Funding. List out any and all funding resources.
- 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
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.
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.
Quick Loan Approval
We all know that hot properties move quick. Sometimes they sell before they’ve barely hit the market or spend less than a day on MLS. What should you do when find yourself scrambling to scoop up a property other people are interested as well? First, you’ll need to make sure you’ve got a partner that can provide you quick and reliable financing so you don’t have to worry about missing out on the investment.
We spoke last month about the average time it takes to close on a loan. Two weeks, but what if you don’t have two weeks to wait around to see if you’re financing will pull through? One thing that can help is by building a rapport with one lender. At Lend Some Money, we can close on loans faster with those who have borrowed from us in the past. Some of the reasons behind this are, because we know the investor has experience and we likely already have their credit, background and LLC information on file.
Additionally, the hotter the property and the more potential the investment has, the easier it is push the deal through and to close at a quickened pace. We also mentioned last month that who you choose to use for the appraisal can help get a little more time on your side. By using a lender, verified appraiser you know you’ve partnered with someone who understands that the turnaround time needs to be immediate.
When you think about building your investment business, carefully consider who is on your team. Starting with trusted partners from the beginning can help move your career along smooth and faster. Our goal at Lend Some Money is to earn your trust and help you do business over and over again. Contact us today, let’s chat and get this party started!
Start Living Your Best Life
Whether you’re 18, 38 or 78, years old, it’s never too late to chase after your dreams. No matter if you’re seeking to make more money, be your own boss or, own your own company, all you have to do is, start. But where exactly is a good place to start? Ask anyone who has found success in any type of business and they’ll tell you they didn’t do it alone. Just like hiring a coach to get in good physical shape, you could consider hiring a coach or mentor to get in great “business shape.”
No experience? No problem! While we often cater to experience investors, we also teamed up with expert real estate investing coach, Joe Barletta in an effort to help your if you’re just getting started. Michael Barker, a loan officer for Lend Some Money recently teamed up with Joe to create this helpful segment for real estate newbies.
Click here to listen.
You can visit the coaching page on our website to learn more about hiring an investment mentor or even to chat with Michael live! You can typically catch him during business hours for immediate assistance and answers to your lending questions.
Happy New Year! We hope 2019 is your best yet!
Three Options for Paying Back Your Hard Money Loan
When you apply for a hard money loan you’ll be asked what your “exit strategy” is. What that means is simply, how do you plan to pay back the money you borrowed? In this blog, we’ll explore some of your options.
- Use the income you make from selling the property to pay off the loan. This strategy is ideal for fix and flip loans where the investor often purchases the property for a much lower price, fixes it and then sells it for a pretty profit. Hard money lending is perfect in this situation because it will provide the investor access to fast funding. The faster the transaction and flip, the less interest the investor pays and the more money they walk away with.
- This is often the strategy used for income/rental properties. Again, hard money loans are ideal because they provide the investor the quick funding needed to purchase when the right opportunity presents itself. The refinance option also allows the investor time to transfer the hard money loan/short term loan after they’ve lined alternative, long-term financing often from a traditional lender.
- Alternative Source. You might choose to use funds from another sale, investment, or even hard money loan. This often an investor’s fallback plan because it alters the course of funds from its original, intended use. It does however; buy the investor more time to find the right buyer or even more time to further the income potential on an investment.
Having an exit strategy is important. Ideally the investor wants to be able to cover the cost of the loan using the profits from the real estate deal. Experience, careful planning and matching the right exit strategy with each unique real estate transaction will help investors be more successful. Contact us to apply for funding or to speak to a hard money lending expert today.
Becoming a Landlord
So, you’ve decided you want to try your hand at landlordship. We don’t blame you; even though there’s a lot of work upfront, the long-term return can be quite lucrative. We’ve put together this list of things to prepare and research before you purchase your first income property.
- Your Finances – Make sure your own finances are in order. It’s wise to have a little cushion in the bank because the fact of the matter is, it might be a few months before you start profiting.
- Property Selection – It’s not just about the neighborhood. Renters especially families will also consider the local schools, job market, crime rates and even amenities. This is especially true if you want to attract good, long-term renters, they’ll be looking to live and work in a safe area where they can easily access conveniences such as shopping and nightlife.
- Competition – Be sure to look into what future developments might be happening in the areas you’re looking to purchase your rental property. New construction could mean new competition.
- Vacancy Rates – These rates can affect your ability to generate income. High vacancy rates often force landlords to lower their monthly rent in order to attract tenants. Meanwhile, low rates often mean a landlord can increase the rental price.
- Additional Costs – Remember, you going to need to factor in the cost of insurance, taxes, legal fees, months where a unit or units are vacant, maintenance and a property management company among other things.
So before you begin, do your research, carefully manage your finances and plan ahead as best you can for both the expected and the unexpected expenses. If you’re ready to get started, click here to apply for financial assistance on your buy to rent property.
Women of Real Estate
At the ripe age of 26-years old Sissy Knopps decided to leave her nine to five and embark on a real estate career. Married with two children at that time, she was inspired by both the ability to create her own schedule as well as help couples find a home to make lasting memories in, similar to what an agent had done for her in the past when she and her husband purchased their 3-bedroom (plus office), 2-bath, ranch style home on a half acre lot in Wisconsin.
Fast-forward four years and Sissy is mere 30-years old, still happily married and now a mother of three. She’s come a long way since the beginning of her journey and she’s experienced great success. Some of her accolades include: top sales agent of the month, multiple times for her Coldwell Banker office and in 2017 she was recognized globally and became member of the International Sterling Society. Her husband Mike is a Realtor as well, as of late their total sales volume looks like this: 2015, $7.9 million. In 2016, $8.1 million and in 2017 they reached a combined $12.3 million with Sissy being solely responsible for 9.2 million of the total.
In 2016 she and Mike took on their first flip project. Here are some things she wanted to share that might help you as you embark on your real estate investment career.
- In terms of overall property selection – “I try to steer clear of really old homes but overall you want good bones and a solid foundation.”
- In terms of renovating – “The key to finding a good flip is being able to envision what it could be. You have to look past a lot and imagine what it would look like completed. [This includes] “Things like moving walls, types of flooring and finishes, exterior and landscaping.”
- In terms of financing and budgeting – “It can be tough, make sure you look at the comps and are making a smart investment.”
- In terms of saving money – “Doing the demo yourself can save money and so can doing some of the renovations however, never cut corners, or do shoddy work to just save a few dollars.”
- Overall advice – “Be smart, stay within your budget and treat it as if it were your own home.”
If you’re looking to get your start in real estate investing and need a strong financial partner or would like to speak to an experienced hard money lender, contact us!
Flip & Investment Property Checklist
In a previous blog we reminded investors to consider the cost of landscaping in their overall evaluation of the property. Remembering to do this helps determine the renovation cost, loan amount, property list price and the potential profit. There are however, a few more things flippers and landlords often forget to inspect or consider prior to the purchase, here’s a helpful list of things to remember.
- Exterior features such as siding, brick and stucco
- Septic, well and indoor plumbing
- HVAC system
- Foundation and concrete work
- Decking/railings, banisters and other features which may pose a safety concern
- Any back taxes owed on the property
- Homeowners association fee
Additionally, if you’re going to rent the property or you are a landlord to the property you’ll want to factor in these things as well:
- Heating and cooling costs
- Routine maintenance
- Legal expenses (should you have to evict a tenant, etc.)
Have an eye on your next investment project? Join the hundreds of other investors who are applying for and receiving funding right from our website! Call or text today if you have questions or would like to speak to a hard money lending expert. 203-974-3322.
Why It’s Important to Factor in Exterior Landscaping
If there’s one thing you can count on it’s, first impressions matter. When you’re assessing a property’s “flip-ability” don’t forget to evaluate the current state of the landscaping. Sometimes flippers and real estate investors will only focus on the cost of the repairs inside the property. However, it’s also wise to consider budgeting for the cost to spruce up the look and feel of the exterior as well.
In addition, it will be easier to determine what kind of offer you want to make on purchase of the property when you consider both the interior and exterior rehab costs. It also makes it easier to calculate what your potential profit will be. Here are six some things to look and budget for.
- Replace (if necessary) or power washing siding.
- The planning of or removal of trees and shrubs.
- Painting and color coordinating exterior features like the shutters.
- Driveway and walkway maintenance.
- Incorporating landscaping and planting flowers where necessary.
- Pull weeds, add mulch or rocks, pull weeds and get the grass as green as possible.
When it comes to recouping your money on your investment property the curb appeal will make a world of difference. A standard evaluation is to invest 10 percent of the homes value on landscaping. Some experts say that you can count on curb appeal to increase the overall value of the property anywhere between 5 and 20 percent. Contact one of our lending experts for additional assistance determining the cost of your hard money loan request.