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

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.

How to Get Time on Your Side

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!

Quit Your Day Job

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!

Exit Strategies

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.

  1. 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.
  2. 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.
  3. 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.

Looking to Become a Landlord?

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.