HardMoneyHome.com Private Lending Blog -

Written by Shawn Patterson

September 16, 2020

Investing in real estate can be quite profitable, but like any investment it requires capital in advance in order to enjoy the benefits it offers. This capital is essential to keep your real estate business moving in the right direction. From purchasing your first duplex to paying for the upgrades on your previous fix-and-flip, without the proper funding, you cannot call yourself a real estate investor. Luckily, there are many options for investors to raise the capital they need to fund their real estate projects. Below are three smart ways for raising the funds you need in order to be successful.

  1. Secure funds from a private lender

Know someone who is interested in investing money and wants to receive a higher return than simply having their money sit in a standard bank saving account? Getting a loan from a family member, colleague, or friend is one smart option before going to a bank to fund your latest real estate project. While you will need to pay the loan back with interest and guarantee a certain return on their investment most of the time; you can typically get the funds you need much faster, and with less red tape than going through a financial institution.

  1. Find a highly rated hard money lender

There are many hard money lenders nationwide who are happy to fund a loan if the terms are right. It is important that you do your research ahead of time on any hard money lender you go with and select a reputable company to do business with prior to signing on any dotted line. Directories such as hardmoneyhome.com are great resources because consumers are able to leave reviews of their experiences with different lenders, making it much easier for you to research and find the best company to meet your needs. While higher interest rates are usually standard with most hard money loans, there is less red tape and it is easier to qualify for these loans. Hard money loans are best suited for quick projects such as fix and flips or bridge loans to float you in-between real estate projects.

  1. Partner up with someone you can trust

Partnering with someone you can trust is a great way to share the responsibilities and workload of investing in real estate. It is important that each partner is clear on the expectations of each deal and any potential profit or loss on an investment prior to moving forward with a partnership. While partnering with someone is not without its own obstacles, it can be a great way to share the risk and reward on investments. Dividing and conquering your responsibilities is also a great way to gain a competitive edge on your competition.

Regardless of which method best fits your needs when securing funds for real estate investment, few investors have all of the capital needed to fund their investment projects. Researching all financing options and picking which option is best for you is critical to you being successful within the real estate industry. Hopefully, using one or all three of the above options will benefit you in all of your future investment endeavors and help you to grow a diverse and profitable portfolio.

Written by Shawn Patterson

September 3, 2020

Many experts agree that purchasing an investment rental property is a sound strategy to grow wealth or as a secondary source of income. Real estate has produced great wealth for many throughout the country, however, like any investment, there are certain pitfalls one must consider before jumping into and committing to purchasing a rental investment property. Below are four tips every first-time investor should consider before buying their first property specifically for leasing to renters.

  1. Pay Down Debt

Before purchasing a rental property, it is important to pay down your personal debt and reduce your financial liabilities. It is critical to consider paying down any outstanding medical bills, student debt, credit card bills with high interest rates, and child support.  Also, consider if you have any dependents who will attend college in the near future if you are going to be successful in purchasing a rental property investment. It is always important to have a cash cushion for unexpected expenses to ensure you always have the funds available to make your payments on time.

  1. Watch out for High Interest Rates

While interest rates are lower in 2020 than in previous years, typically rental property investments come with a higher interest rate than owner occupied primary residences. It is important to compare available interest rates in the geographic area of the rental property to ensure you are getting the best possible rate and not decreasing your prospective margins by paying unnecessarily high rates when repaying your loan to a private lender or financial institution.

Once you acquire a new rental property, it is important to keep an eye on the ever-changing interest rates to guarantee you are paying the best rate and maximizing your return on investment. Many seasoned investors may decide to refinance their loan if a significant decrease in interest rates becomes available and you should consider doing the same.

  1. Calculate your Profit Margins

According to top real estate investors, they aim for a 5%-7% return on their investment properties due to added overhead costs such as staff.  As an individual investor without staff, it is reasonable for you to estimate a 10% return on your investment. There are many factors that must be accounted for when purchasing a rental property such as homeowner’s insurance, property taxes, homeowner association fees, as well as monthly expenses such as lawncare, pest control, and pool services to name a few. Tack on maintenance and repair costs for unexpected events like needing to replace an old AC unit, roof or broken fencing and the cost can add up quickly if you are caught off guard and have not done the proper research and planning when calculating what a reasonable return on your first rental property should be.

  1. Know your Legal Obligations as a Landlord

It is critical that you research and understand your obligations as a landlord prior to purchasing your first rental property. Landlord laws can vary widely from state to state so it is important to learn the specific legal requirements you will be obligated to fulfill once you have tenants renting a property you own as an investment. Some key items to keep on your radar are eviction rules, security deposit obligations, and various leasing requirements in the property’s location. Doing your homework on these requirements ahead of time can save you from numerous legal headaches down the line.

As with most investments, rental properties will not typically produce an immediate large return. However, while it is not without its challenges, investing in a rental property can be a great way to build up your personal investment portfolio and grow substantial equity for your future. Setting realistic expectations and doing your research ahead of time will help ensure you make the best decision and pick the proper rental property to maximize your investment opportunities.

There are so many people out there who are interested in investing in real estate and starting with their own fix and flip property. However, if you are looking to do more than just a single fix and flip—and really looking to take your investing efforts to the next business with a fix and flip business, then this is an entirely different undertaking.

This is a big decision and a big adventure, but there are a few tips that can help you get started with your venture so that you can set yourself up for success:

Get a Real Estate License

Before you go all-in with your fixing and flipping business, you want to get a real estate license. It can open up more opportunities for you as a flipper and it can be a major asset as you go through the process as you will understand all of the processes and terminology involved. Plus, if you can act as your own real estate license, you can save a lot with real estate fees.

Get Access to the MLS

Not everyone has access to the MLS, but if you are a real estate agent, you will be good to go. The MLS, or Multiple Listing Service, is the best place to go for accurate information on properties. It is much more reliable than other online sites. You will need this before you buy, before you price and before you sell. The MLS is going to be your best friend and essential for finding comps.

Partner with a Brokerage

You may not have plans to work full-time in a real estate office, but you should be partnering with real estate brokers as they can provide you with some valuable support, information and insights. They can be a valuable resource for helping your find potential buyers and learning the ropes of the industry.

Purchase and Renovate Your Own Home

Everyone has to start somewhere, and if you are looking to begin with a fix and flip business, you will want to start with your first fixer upper. It, of course, will go easier with your real estate license. Make sure that you do your research and know the comps in the area. Don’t go with too big of a home on your first fix and flip. It is important to start small both when it comes to financial commitment and the size of the house.

Your first fix and flip will have a lot of bumps in the road and you will probably make a few mistakes along the way, but it can be a great first step to building a reputable business.

Keep these tips in mind as you make the big decision to move forward with your upcoming fix and flip business. Starting an entire business like this can be a big undertaking, but it is one that can help you make a great deal of money in your future if you take your time and do it right.

If you are interested in getting in to the fix and flip industry and excited about the potential income that investing in this property can bring, you will quickly find out there is a lot to learn. While so much of finding success is about trial and error and learning as you go—it doesn’t mean there aren’t some major pitfalls to be aware of first.

Here are six of the most common pitfalls that you should avoid when getting in to the fix and flip property—they can end up saving you a great deal of headache and a great deal of money.

  • You Don’t Know What You’re Doing- Watching a lot of HGTV doesn’t make you the idea candidate to take on a fix and flip. If you aren’t an actual contractor, chances are you don’t have the experience necessary to handle this type of project—so make sure to get a pro on your team from the start.
  • Over-Improving The Property- You need to know your comps before you even buy a property in question. There are so many eager first-time investors who will over-do it when it comes to home renovations and ultimately create a property that is too expensive for the area and won’t sell. Just because you can make a high-end improvement, doesn’t always mean you need to.
  • Creating the Home YOU Want to Live In- The key to a successful fix and flip is making a property that appeals to a lot of buyers. Just because you love the color purple, it doesn’t mean that everyone else is going to want purple tile in their bathroom. Keep things neutral, flexible and appealing to all types of buyers.
  • Not Screening Contractors- The biggest horror stories you will hear from any new investor always have to do with bad contractors. Take the time to really screen the contractors you bring in to you home so that you don’t end up with someone that does more damage to your house than good.
  • Overpaying for a Property- When it comes to buying a fix and flip property, you need to take emotions out of the equation. There is nothing that will get you to overspend on a property like being emotionally attached to it. Set a budget and if the house goes over that budget, you need to be able to walk away.
  • Under-Improving the Property- We’ve already talked about sticking to your bottom line and not going over budget with repairs or investments. However, there are many new fixers and flippers that take the opposite route and ultimately under-improve. Don’t cut corners, don’t leave areas unfinished or available for people to “renovate later.” Those interested in buying fix and flip properties want a finished product not a project for down the line.

Get yourself started off on the right foot with your upcoming fix and flip endeavor by keeping these common pitfalls in mind. The more you can do to avoid these potential setbacks, the better off you will be.

A good investment portfolio can be the key to a more financially secure future and a better sense of security. While there are many different beliefs and approaches when it comes to investment options—there is no denying that investing in the stock market is one of the most common solutions for those looking to make some serious money.

However, if you have been thinking about investing in stocks—we are encouraging you to stop and take a step back and consider investing in real estate instead. This is why we have listed a few of the many reasons why you should invest in real estate instead of stocks.

  • Most people are more familiar with real estate. The average person isn’t as familiar with the complexities of stocks or the different companies that they will be investing in. However, it is much easier for the average person to understand real estate. After all, most of us live in, own or have purchased a home before.
  • Real estate doesn’t fluctuate as much as stocks. While real estate can fluctuate a great deal over the long-run, it does not fluctuate very much over the short term. This is something you need to worry about with stock investments and something that can be difficult for inexperienced investors as stock prices can fluctuate on the daily.
  • A real estate investment is tangible. If you are an investor who wants to be able to see and touch your investment—then real estate is for you.
  • You can make a great deal in a short period of time. Most stocks (unless you get the real, rare unicorn) take a long time in order to earn interest. However, if you are able to invest in the right fix and flip property, you can make a lot of money in a matter of months.
  • You have more control. When you make any investment, you are investing your hard-earned money. When you invest in real estate, you have much more control over the decisions regarding your investment. When you invest in stocks you are part of a very, very small percentage of the controlling state of that investment. This is a great way to make sure you know how your money is working for you.

This doesn’t mean that stocks are a bad investment—we are just encouraging you to take a look at real estate instead if you are looking for an investment that can lead to better gains. If you are looking to make a smart investment with your money, consider investing in real estate to start making more for your future.

Fix and flip properties seem to be all of the rage right now. There are endless TV shows out there all about fix and flip properties and so many pros out there who swear by investing in fix and flips as the best way to make a serious return on investment.

There are many people out there, with a DVR full of HGTV shows who think that they too may be able to take on fix and flips. However, it isn’t always as simple as it seems on television. And it isn’t always a guarantee return on investment. In fact, a majority of people who try out fixing and flipping for the first time, end up losing their investment and losing their money.

If you are thinking about getting into the fix and flip market, you should consider asking yourself a few questions first, to determine if you are really ready to make the jump into fix and flips.

  • What is your plan to find the best deals? It is always important to have a serious plan on how you are going to find potential properties and what your maximum budget is.
  • Do you know what area you are planning on flipping in? It is always important to focus on location, location, location. Look for up and coming neighborhoods where flipped houses are being sold so you can buy low and sell big.
  • Do you have a contractor? The right contractor is key to a successful fix and flip.
  • Do you have a realtor or a realtor’s license? You should either plan on getting your own realtor’s license, or make sure you are factoring in a realtor fee.
  • What is your minimum break-even amount? You need to realize how much you need to make from a fix and flip in order to pay your bills and make enough income to stay afloat.
  • Do you have a backup plan? If things go south with your fix and flip and you aren’t able to return your initial investment? Is it going to crush you financially if you lose money on this deal? If you are, then it isn’t a smart option.
  • How are you going to finance? When it comes to financing your fix and flip, remember there are other options than a traditional mortgage, because this isn’t a traditional real estate transaction. Consider whether you are going to borrow funds or use a popular loan option like a hard money loan.

Sit down and really ask yourself these questions. If you are confident in your answers, then you may be ready to get started with a real estate investment. However, keep in mind that your answers may highlight that you aren’t quite ready for this type of big commitment. Either way, you need to make sure that you really think about your decision before jumping into fix and flips.

If you are planning on investing in a fix and flip property—this can be a great way for you to make a substantial amount of money. Fix and flip real estate investments have a lot of potential to make you a lot of money. However, it all depends on how the process goes, how low you can keep your costs and of course, who you choose as your contractor.

The right contractor can make sure that your project goes as planned, that you stay on budget and that you end up with a quality finished product that will get you the most money possible when you go to sell that property. The wrong contractor, on the other hand, can end up costing you a lot of money and end up causing issues in your fix and flip that can prevent you from getting the most money possible on your investment.

Here are some tips on making sure that you find the right contractor for your property:

  • Make sure you have a contractor that can work in your time frame. Most common financing options for fix and flips, such as hard money loans, are on a deadline—and it is important that you are working with someone that understands, respects and will work with you to meet your deadline. With fix and flips—time is money.
  • Make sure to find a contractor who works on fix and flips specifically. Working on a fix and flip is very different than working with an individual who is renovating their personal home. You want to work with a contractor who specifically is well-versed in fix and flips and who knows how to work within a tight budget, a tight deadline and how to create properties that are universally appealing to buyers.
  • Always use contractors that have references. You want to make sure that you can call a contractor’s references or see verified reviews from people who have worked with the contractor in the past to get a better idea of what working with this individual will be like.
  • See their work in person. Any contractor that is willing to work for your business should be willing to show you examples of their work.
  • Get everything in writing. Once you have everything written out compare bids line by line to make sure that you are making the best choice for your fix and flip.
  • Know how they communicate. You want to find a contractor that is easy to communicate with—and one that will communicate with you in a way that you prefer—whether that is text, email or phone call. After all, communication is key with any contractor—investor relationship.

Keep these tips in mind if you are looking to hire a contractor for your upcoming fix and flip. Remember, while staying on budget is important, there is more to finding the right contractor than just finding the cheapest one out there. If you keep these tips in mind you can end up with a contractor that will help you make the most of your upcoming fix and flip.

If you are planning on investing in real estate and want to fix and flip a home in order to make a profit, chances are people are going to be telling you all types of things and giving you all types of tips on what you should do and how you should do it. Some of these tips will be great—others, not so much, but one of the many “rules” you will likely hear when it comes to making a profit with your investments is the “70 Percent Rule.”

This is one of the most important and universally agreed upon rules when it comes to fixing and flipping a property?

So, what is the 70 percent rule when applied to fix and flip properties and how can you use it to your advantage?

The 70 percent rule states that an investor should pay 70 percent of the ARV, or the After Repair Value, of a property, minus the repairs needed to get the home ready to sell. This ARV is what the home is worth after it is fully repaired and ready to be sold.

So, for example if a home’s ARV is $300,000 and it needs $50,000 in repairs, then the most you should pay for the home is $160,000. Sure, it may seem as though buying a house that cheap means that you are going to make a huge profit, but after you go through closing costs, unexpected expenses (and there will be some), staging and every other cost that unexpectedly comes your way—you want to have this much potential profit margin to make sure you even end up making money at all.

It can be so tempting to try and “cut it close” when buying a house to fix and flip, but if you are new at fixing and flipping and don’t really know what you are doing, you are going to be really happy you kept to this rule. Otherwise, you can end up losing money on your first flip and ending your fixing and flipping career before it ever really gets off the ground.

Remember, if you want to make sure you are making a small amount or breaking even on these first few fix and flips so that you have enough money to keep your efforts going and to keep fixing and flipping properties moving forward.

Keep the 70 percent rule in mind and do your math before you decide to invest in a property. Keeping this rule in mind as you make your financial decisions will only help you get off on the right foot when investing in any property that comes your way.

If you are getting ready to get into the fix and flip market, and are looking to make some serious money from your upcoming flip—then you need to take some extra steps to make certain your flip really stands out. If you are anything like us, then when you are planning on financing and selling a flip, there is nothing as fun as binge watching some HGTV to help you feel more inspired.

HGTV can be great, and a lot of fun to watch. However, sometimes HGTV sets some very unrealistic expectations for those who are interested in actually flipping a property to make money. There are many precautions you should take when turning to HGTV for advice—but there are also some great pieces of inspiration that you can take from HGTV.

Here are a few updates that you can actually take from HGTV, and inspiration from Love It or List It and other shows that will help your flip really stand out.

  • Don’t underestimate a fresh coat of paint. If there is one thing that the teams on these HGTV shows always do, it is painting. A fresh coat of paint on the interior and exterior of the home can make a major difference in the way that property looks. Choose neutral colors and don’t underestimate hiring a professional in order to get a professional finish.
  • Don’t forget windows and doors. Windows and doors are expensive to replace—there is no denying. But this is another one of those things that you will see the professional flippers always pay attention to. You won’t see a professional home renovator skip replacing windows and doors—so you shouldn’t either. It’s going to be worth the investment anyway and it is a great fact to include on your listing details.
  • Refinishing hardwood floors. If you are restoring an old home (as many flippers do) then don’t get too replacement happy. You can restore old hardwood floors for a fraction of replacing them and many times buyers love historic restored floors even more than new tiles or laminate.
  • Don’t forget about lighting. Light fixtures are like adding accessories to a great outfit, they can take a home up to the next level and really make it shine. You don’t have to spend thousands on expensive light fixtures, but putting a few statement making fixtures throughout the home can really help it stand out from other flips.
  • Faucets can be fun. A new trend you are going to see right now in fix and flip properties is statement making faucets. Instead of buying a builder’s-grade faucet from Home Depot for $20, spend a little more and get a quality, statement-making faucet for say $70 to give the home a higher-end look. The extra $50 won’t break the bank, but it will help your home stand out.

So, next time you are binge-watching Flip or Flop or Fixer Upper, pay attention to the aforementioned tips if you really want to make your flip stand out so that it can sell quickly and help you earn a profit.

When it comes to investing in real estate, one of the first and biggest questions that people tend to have is how they are going to finance this endeavor. However, after the dollars and cents get all worked out, it is time to figure out where they are going to be putting that money.

There is some dispute among real estate investors on whether or not they should invest in real estate in smaller towns or in big cities. So, what is the right answer? Well, it may be more complicated than you think.

We are going to take a look at the difference between buying in big cities or small towns, so you can make the most of your real estate investment.

There are many people who think about investing in real estate in bigger cities, and ultimately this is usually the best answer, and for a simple reason. There is more opportunity for growth in larger markets. You want to invest in a property that has a high growth potential. You can’t invest a small amount and fix and flip a property for big gains in an area that doesn’t have a big growth potential.

However, that doesn’t mean that there aren’t smaller towns that have big growth potential. Smaller towns that are located in close proximity to large cities or those that have seen bigger businesses open locations within this community. Many times, large companies will open warehouses or factories in small towns—and if you can get in before these bigger businesses make their way to small towns, you can end up making a smart investment that will really pay off.

Another thing to keep in mind is that while big-city growth can be great for real estate investing—investing in big cities with big growth potential also means big competition. You are going to have to compete for affordable properties in up-and-coming neighborhoods, you may have to out-bid other investors and work to get the property, and you are likely going to pay more for contractors work as well.

So, while in most situations, you are better off investing in big cities, there are caveats to both big city and small-town investing. You need to be able to run the numbers, be patient and find the right property in the right location for you.

Now that you have a little more insight on the difference between investing in properties in big cities or small towns—you have the information that you need in order to make the best investment possible for you and your future.