Today, I have a great article to share with you from Kyle Kroeger on how to invest in real estate. He has a goal of reaching $5,000,000 in rental property value, and is sharing his plan today.
The prospect of retiring early on real estate is highly intriguing to me. It should be for a number of people and I’ll highlight a bit more below.
For millennials, like me, we don’t have it easy. Despite the mainstream media’s thoughts, millennials have faced a Great Recession, massive student loans and a global pandemic already at a young age.
We’ve seen a lot but that can be used to our advantage for financial planning and life goals.
That’s okay if things are a bit harder for millennials financially. It’s a bit more fun when things are hard.
Here I’m ready to show you why real estate investing can be a great asset class.
- How This 29 Year Old Is Building A Real Estate Empire
- How This 34 Year Old Owns 7 Rental Homes
- 20 Ways I Saved a 20% Deposit To Purchase My First Investment Property At 20
- 11 Tips For Renovating An Abandoned 115 Year Old House On A Budget
I’m the prototype millennial that loves buying expensive coffee, avocado toast, iPhone apps, blah blah.
So what? Life is short, so enjoy what you love.
I went to a large public university for undergrad and come from a very much middle of the road family in the Midwest. I knew I wanted to study finance in undergrad as I had more of an analytical mindset and liked numbers.
When I graduated from college, I had a decent amount of student loans. The total amount was somewhere over $60,000 worth of student loans. While I was at school, I really didn’t realize how much student debt I had and how that would impact my financial future.
My family has always had a hardworking mentality, so I worked part-time while attending undergrad (each year).
The problem was that money went to keeping the lights on and paying bills. Not tuition.
Upon graduating, I landed a job in investment banking in Chicago. It was tough to crack into, but the pay was intriguing and the opportunity to get some great experience was invaluable. Even if it meant dealing with unique personalities and long hours.
If I could slug it out for 3 years, I knew I could focus on working, saving and paying off my student loans. I followed a disciplined approach of prepaying my loans as much as possible.
After 5 years of working in finance, I was able to successfully extinguish my $60,000 of student loans. Following my student loan repayment, I quickly saved to purchase my first house. That became my first foray into my comforts of using real estate to build wealth.
Why Invest in Real Estate?
Working long hours and being chained to my desk made me realize quickly that there is so much more to life than work and making a ton of money. After my first house purchase, I realized that investing in real estate is very straightforward and manageable.
I believe the minor fixes, capital costs for repairs, etc. are generally overblown.
If you do it right, you can manage through those costs and use low cost of capital (mortgages) to build wealth over the long-term. The key thought here is long-term.
Real estate investing is a marathon, not a sprint. Multi-generational wealth can be built through real estate. There are plenty of case studies to back it up. The fact that real estate is illiquid actually works to your benefit.
If a macroeconomic event occurs, you simply can’t panic sell. You’ll have to stick it out and work through the issues firsthand. The best part is you are in control, so you can control your destiny in a way.
When you invest in index funds or stocks, you have no control. You can analyze and make decisions that may improve your odds of generating an attractive return, but you are not making the day to day decisions.
To me, the pros outweigh the cons on whether or not you should invest in real estate.
Here are some pros of real estate investing:
- You maintain full control of your holdings.
- There are multiple types of real estate (single-family, multi-family, apartment).
- There are income-oriented markets like providing options for low-income, suburban and urban communities.
- You can invest in specific markets. So specific that you can invest on a particular street that piques your interest.
- Real estate is simple. We aren’t investing in the next Facebook or Instagram.
Here are some cons of real estate investing:
- It can be time-consuming.
- The debate is out there whether real estate outperforms alternatives.
- It requires a learning curve. Even the most experienced investors are still learning.
Finally, there is no one-size-fits all approach to real estate investing. In fact, there are plenty of strategies out there that can tailor to your risk tolerance.
Related content: Renting or Buying? What’s the better decision?
Real Estate Investment Strategies
Here are some general investment strategies to help you understand the risk profile (in order of least risky to most risky). Generally, higher risk can lead to higher expected returns.
1. Core Real Estate
Think of core real estate as purchasing a property for cash flow. The property is in great shape, needs limited repairs and is fully leased. This is one of the most common forms of passive real estate investing. Core investing will end up being the least risky and lower returns.
2. Core Plus
Core plus has a little more risk. Think of core real estate as a base, but it requires you to provide some additional value to the property. For example, you are looking at a property that has 50% of the units in a 4-plex that are renovated. The other units need to be renovated and leased out at higher rates.
You can come in and provide additional value by renovating and finding new tenants. This is the in-between on the risk scale. There is an opportunity for improvement albeit at not too much risk.
3. Opportunistic / Distressed
For simplicity, I’ll group opportunistic and distressed together. This is usually the higher risk and higher return investing within real estate. You’ll likely need some significant expertise in real estate and some sort of angle. A common example is a fix and flip strategy. You seek out properties that are dormant and attractively priced. You already know plenty of contractors and resources to fix the property for an eventual sale.
There are plenty of other strategies and subsets of these but the above should give you a general feel for high-level strategies.
For me, I like core plus because it’s straightforward enough and offers attractive risk/reward. You don’t need to know how to fix a water heater or know every nut and bolt of a house. You simply look for cash flow improvement opportunities in high-demand markets.
Journey to $5 Million in Real Estate Value
The main goal with direct real estate investing is to make cash flow passive while still maintaining as much control as possible. You can do things like real estate crowdfunding or invest in REITs, but you’ll lose control and have less flexibility if you are trying to create generational wealth for your family.
If you own a ton of stock and want to pass it down to your family, what’s stopping them from selling? If you do real estate investing right, you can pass a full-fledged business down to your family that also provides consistent cash flow.
Why $5 Million in Value
$5 million isn’t a hard number but rather a goal. This number also seems like a lot on it’s face and it is. But this is a total aggregate value of property. Not equity.
It doesn’t happen over the course of a year or two. It’s a multi-year process that takes time and patience. This amount of property value presents a great opportunity for income and scale without too much hassle.
You can remain a “small business” in the real estate space and not overload your life with stress.
The math of real estate investing for beginners
The math to why $5 million in rental property value is pretty straightforward. I’d like a six-figure ($100,000) income into perpetuity as a baseline. This would allow me to live comfortably from real estate only while also holding a substantial equity position.
So, the math is as follows:
Targeted Income divided by Cash Yield = Equity Value in Real Estate
Targeted Income = $100,000
Cash Yield = 8%
Cash yield represents the annual cash flow from rental properties relative to your equity position. For example, a rental property earning $8,000 per year of income to you on a $100,000 downpayment would equity to a cash yield of 8%.
This would equate to an equity value of $1.25 million in a real estate portfolio ($100,000/8%). So, if you can meet that bogey of a cash yield you are in good shape. If you exceed it (8+%), you can potentially reach your income goal faster.
So how do I get from $1,250,000 of equity in real estate to $5,000,000?
Well, for investment properties you should have a downpayment of 25% to purchase the property. So, $1.25 million of equity implies $5 million of real estate value ($1.25M/25%).
I built a rental property spreadsheet to help me stay accountable when pricing out real estate transactions. The model serves a number of purposes. Most importantly, I use it to:
- ensure I’m putting an offer on a property that meets the above criteria (realistically), and
- use it as a budget to track my forecast to what was actually received. The model can become a glorified 5-year forecast for each investment.
I walk through how I use the rental property spreadsheet here while walking you through an exact case study.
I hope you find the complete walkthrough helpful.
How to Get There / How Long It Takes
$1.25 million of equity is a lot of money. Absolutely, but you can get there over time. People do it everyday with their 401(k) and Roth IRA contributions.
It will absolutely take time.
Like your retirement contributions, you should have a full roadmap of how you plan to get there. I have 3 real estate properties right now so I’ve already gotten started on the plan.
With much more work to go, however.
Here is a plan for 8 years to get to the desired income goals and a $5 million rental property value. The assumptions include:
- Starting income of $120,000 with a 5% income increase each year.
- Focus on saving 35% of your pre-tax salary each year for real estate investing.
- Reinvest any cash flow earned from existing rental properties.
Financial Wolves’s Retire on Rental Income Plan:
These are not my exact income and checking account balances but they are a somewhat close representation.
So, as a 31 year old millennial it should take me about 8 years of hard work to eventually retire on real estate. That would put me in a position to earn a steady living from real estate before I’m 40 years old.
There are a few interesting things that stand out from this plan:
- Income is very important: Increasing your income is crucial with real estate investing. Without a continuous flow of reinvestable cash, it becomes harder to acquire more real estate.
- Compound interest is no joke: Compound interest from the cash flow of your properties is a huge value driver. When you are in property acquisition mode, you should harvest as much cash as possible to continually make acquisitions. The sooner the better as the cash flow snowball benefits are massive. Finally, you can see at the tail end of the investing cycle you can start investing in larger properties. Once you start dealing in larger dollar amounts, you are in the big leagues.
- Rental properties cash flow can be substantial: If you can do real estate investing as a side hustle to your ordinary income, the cash flow benefits can be exponential. Look at the cash balance build up during the back end years (years 5-8). You simply can’t acquire enough property.
Once you achieve scale, you’ll have a ton of financial flexibility. Plus, the above assumes no amortization on the loans so your equity balance will likely be compounding along the way. This will give you extraordinary residual value to work with.
Tips for Getting Started In Real Estate Investing
Here are some tips for getting started with real estate investing.
1. Just Start
One of the best pieces of advice I received was from a savvy real estate investor. They said you simply just need to give it a go. It’s true.
If all goes wrong or you don’t like it, at least you can cross it off your bucket list… Hey, I was a real estate investor once.
Not only should you just start. You should start by trying to manage your real estate properties without an asset management firm helping you. This will help you understand your properties. You’ll get used to the ins and outs of repairs, requests and leasing.
With technology now, you should be able to efficiently manage everything. As you scale, start thinking about how an asset management firm can help you. Yeah, back to the reduce time without sacrificing too much income point.
2. Use Technology
Technology continues to be a very underrated component of real estate investing. Back in the day people would have to manually account for everything.
Some old-time real estate investors still think that you need to take 2 am calls about a leaky pipe… Or, you need to manually collect checks from tenants to bring them to your bank. Reduce your time by using resources like Landlord Studio to do all the required bookkeeping.
Or, a tool like Cozy to manage rent payment with multiple tenants in one unit. You’ll get paid instantly and Cozy even sends out rent payment reminders. What’s not to love?
3. If You Struggle That’s Okay
If you struggle with your property and it requires capital contributions from you right away, that’s okay. Let’s be honest. No one invests to lose money. A property can require a ton of work one year but then nothing for the next 5 years.
Just because something bad happens in the short-term doesn’t mean you completely messed up the long-term. At the end of the day, things can get resolved. When I sold my first property, I realized that anxieties and the stress that I had about the property at the onset were definitely not worth it.
Conclusion – Is Real Estate Investing Worth It?
At the end of the day, real estate is not for everyone. However, you can use this as a baseline for whatever asset class you are interested in. To me, real estate provides the optimal solution for building long-term wealth that requires limited time.
You can build a fully operating business out of your real estate holdings that will give you the flexibility to do the things that you enjoy in life. Here are a few tips that I will try to follow along the my real estate investing journey:
- Stay disciplined with your investing. Stick to one strategy and be excellent at it.
- Focus on the long-term.
- Scale your time and don’t be afraid to outsource.
- Build a team of people you trust.
- Retire early and enjoy life.
It’s not that simple and will take a ton of work to get there, but my early estimations is that it will be totally worth it. Between blogging income and a small real estate business, I should be able to work where I want and when I want.
Have you or will you try real estate investing? Let me know in the comments below. I’d love to answer any questions.
Author Bio: Kyle Kroeger is the owner of FinancialWolves.com. Financial Wolves is a blog focused on helping you make more money to achieve financial freedom. After repaying student loans, I’ve shifted my focus to make more money from side hustles, real estate, freelancing, and the online economy. Follow us on Pinterest, YouTube, Twitter, and Facebook.
The post A 31 Year Old’s Journey to $5,000,000 in Rental Property Value appeared first on Making Sense Of Cents.
If youâre like us, you have a drawer filled with lotions and creams that are doing nothing for your dry hands and feet. Itâs one of lifeâs mysteries.
But as much as we want some relief, weâre not interested in spending a ton on products that may or may not be worth the money.
We spoke to dermatologists to better understand what heals dry, cracked skin and identify the best cheap moisturizers. (Spoiler: You can find many of them in drugstores.)
Moisturizer, Lotion, Cream: Know the Difference
These actually arenât interchangeable terms, regardless of how people use them. A moisturizer is a mixture of water and oil-soluble components that tackle the outermost layer of your skin. Typically, petroleum jelly, mineral oil and waxes are used in moisturizers. Lotions are more watery and have many ingredients. The higher the water content, the easier it is for bacteria to get in, thus the greater the need for preservatives such as parabens, salicylic acid and benzyl alcohol. For that reason, lotion should be used on parts of the body that arenât very sensitive. (Never use it on your face.) Cream is simply a thick moisturizer designed for very flaky areas, such as elbows and heels.
Tips and Habits to Live By
Follow these good practices for keeping your skin moisturized.
Apply at the Correct Time
The lotion, cream or moisturizer you choose isnât going to do any good if itâs applied onto dry feet, says James Beckman, a board-certified plastic surgeon and founder of Therapon Skin Health. Beckman suggests applying after showering but before drying to allow an even spread while your skin is still damp.
Also make sure to apply moisturizer at least 20 minutes before going outside to allow maximum penetration, he says.
Avoid Vegetable Oils
Steer clear of moisturizers that contain mineral or vegetable oils, Beckman says.
âThese only coat the skin surface, and easily disappear as soon as the skin is washed,â he says.
Expensive Doesnât Mean Better
âI always say to my patients that the difference between an inexpensive and expensive moisturizer/ lotion/cream is not necessarily the ingredients included, but the branding and the marketing behind the product,â says Vikram Rajkomar, a dermatologist with Pall Mall Medical.
The key is to buy a formulation which agrees with your skin, as everyone reacts differently to each cream.
Look for These Ingredients
Susan Bard, a New York-based board-certified dermatologist, suggests looking for humectant-based moisturizers containing ingredients that pull water into the skin, such as hyaluronic acid or glycerin, without leaving behind a greasy residue.
âThick, emollient moisturizers tend to contain occlusive ingredients such as dimethicone, beeswax, lanolin, ect. That helps prevent moisture loss from the skin,â Bard says. âThey can feel sticky and also clog pores leading to folliculitis and miliaria on certain parts of the body.â
But humectants arenât all you need, says Fayne Frey, a dermatologist and founder of FryFace. Moisturizers that are formulated with humectants and occlusives are preferable, Frey says. Effective occlusives include petrolatum, mineral oil and silicone-based derivatives like simethicone. Effective humectants include glycerin, hyaluronic acid and propylene glycol, she says.
Best Cheap Moisturizers: Our Expertsâ Favorites
You can find many of these at drugstores.
Beckmanâs must-have moisturizers for winter use are Theraderm Extreme Dry Skin Therapy ($16.95 at Theraderm.net) and Theraderm Body Restoration Creme ($16.95 at Theraderm.net). âTheyâre designed to restore function as well as feel, replenishing deficient skin oils with natural lanolin, a true skin oil, from Sheepâs wool,â Beckman says.
Bard has similar favorites. For dry hands, she likes Neutrogena Norwegian formula hand cream ($3.99 at Target), OâKeeffeâs Working Hands ($6.99 at Bed Bath & Beyond) and Aveeno Eczema Therapy Itch Relief Balm ($16.56 at VitaCost).Â
Petroleum jelly â aka Vaseline â is the gold standard occlusive, preventing 98 percent of water loss from the skin into the environment, Frey says. Many users find it to be too greasy. âBut it works,â she says.
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Relieve Dry Skin with These Habits
According to a report from Harvard Medical School that was updated in 2019, there are some free ways to deal with dry, winter skin. First, turn down your thermostat, as hot air tends to be drier than cool. Then, pop on your humidifier.
And while you may think that youâre helping your skin by taking the hottest shower possible, you should actually be taking a warm shower. Hot water removes the fatty substances in your skin that retain water. When youâre in the shower or bath, close the door, as this will get the humidity factor really going, but limit the time in the shower to 5 or 10 minutes. Blot your skin with a towel instead of rubbing it dry, and apply moisturizer immediately following the shower.
Wear loose clothing â binding clothing may rub and dry out your skin â and bundle up to protect from the cold, windy air outside. While we hate this advice, according to the American Academy of Dermatology, you really should stay away from the fireplace, as this can dry your skin.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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Hey, welcome back for another segment! This is the 3rd and final segment that I wanted to share with you from my recent live event called the Thankful Real Estate Investor. We hosted this live right before Thanksgiving and it was an interactive event. Our 3rd speaker is Mr. John Martinez, the top real estate investor sales trainer! Let’s get started!
If you’re not a member of the FlipNerd Private Facebook group yet, you can join here: www.flipnerd.com/pro-event, and get access to lots of upcoming live and interactive content like this going forward.
Resources and Links from this show:
- Investor Fuel Real Estate Mastermind
- FlipNerd Professional Real Estate Investor Network: Join for Free!
- Investor Machine Real Estate Lead Generation
Listen to the Audio Version of this Episode
FlipNerd Show Transcript:
Pack your suitcase and fill up your gas tank because on this episode of the podcast, weâre talking to Jim Ross of American Fleet Support and Jason Vitug of Phroogal to make sure you and your car are road-ready.
For this podcast about hard money loans I sat down with Kay Battle of Common Sense Capital Solutions. During the podcast we discussed investing in real estate, hard money lending, and how hard money loans can help investors. If you want to learn more about hard money loans and how hard money lenders operate this is a great pdocast for you.
I hope you enjoy the podcast and find it informative. Please consider sharing with those who also may benefit. Listen via YouTube: You can connect with Kay on LinkedIn. You can reach out to Kay for more information on their lending products by emailing her at firstname.lastname@example.org and check out the company website Common Sense Capital Solutions.
You can connect with me on Facebook, Pinterest, Twitter, LinkedIn, YouTube and Instagram.
About the author: The above article “Podcast #12: Hard Money Lending” was provided by Luxury Real Estate Specialist Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you. Contact me today!
I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.
Paul: Hello everybody, this is Paul Sian real estate agent with United real estate home connections licensed in the state of Ohio and Kentucky and with me today I have Kay battle, she’s an investor herself and she also works for a hard money lending company and is part owner.
So, we’re going talk about a about her background and hard money lending, so Kay, thank you for being on, how are you today?
Kay: I am doing great, thank you for having me call
Paul: Thank you. So, you tell us a little bit about yourself, your background, how did you get started, I guess how did you get started investing first off?
Kay: Yes, I actually mentioned I am a real estate investor, I actually started in 2008 which was right after the market crash and so I we all know there were tons of deeply discounted and foreclosed properties on the market and so I just saw an opportunity to kind of jump in low risk not, much to lose so I tried it and it worked out great and so ever since then I’ve been actively investing
Paul: Very nice, yeah that was a great time to invest, I wish I had, we had actually sold a property at that time that just wasn’t performing well and it was distance-wise us it was too far for me, you tell us how many units do you have currently?
Kay: So currently we have 35 units, they range from single families all the way up to nine units of types of properties total of 35 doors.
Paul: Okay, are they all in these Cincinnati, Cincinnati area?
Kay: Yes, we are all in Cincinnati
Paul: You are still acquiring properties, what are your strategies or goals now?
Kay: Yes, I’m currently acquiring properties and actually have a property under contract at the moment, mostly what I’m focused on now is rehab, so flips just to build up my cash reserve and then I’ll probably purchase something for holding next year.
Paul: Okay and how are you identifying your flips are you finding all in market deals off-market deals?
Kay: Well, so I use on market and wholesalers to look for off-market deals as well, so it’s a combination
Paul: Okay, yeah, this market it’s a lot on market deals are highly competitive don’t make sense
Kay: Yes very, very different from 2008
Paul: Why don’t you tell us about your company the company that you work for that’s a hard money lender what’s the name and how long have you been with them?
Kay: Yes, so as you mentioned I’m part owner of common sense capital solutions, we provide alternative funding for real estate investors and also small businesses and we’ve been in business for about a year and a half, now so I’ll start it at the beginning of 2018 and we just help people find solutions basically
Paul: Okay, so primarily you’re doing mostly hard money loans, you don’t do anything conventional?
Kay: Well, actually we do both, so I couldn’t do anything from you know months all the way up to 30-year times depending on the situation
Paul: The primary focus of this podcast is more than hard money loans not everybody’s familiar with that anybody most people are familiar with a 30-year mortgage 50-year mortgage, so tell us about a hard money loan, I mean what exactly is a hard money loan?
Kay: Yeah, the hard money loans are typically used by real estate investors who either can’t obtain conventional financing or conventional financing doesn’t make sense for the situation, so maybe they have a property that the only one I hold for a short period of time and they don’t want to be tied down to a 15-year or 30-year mortgage that might have a prepayment penalty. So, generally speaking hard many miles are short-term either they are use of bridges and to more permanent onions and or for a situation where you’re only going to hold the property for a short period.
Generally the interest rates are higher because the risk is higher or the property is going to be the loan is only going to be held for a short period of time and also in most situations the loans are interest always so you’re only paying in terms of paying a monthly interest payment, which means the principal balance isn’t decreasing, over time and so as you go to either refinance or sell the property you will still owe the full balance of whatever your loan is.
Paul: Okay, and you mentioned short term what are the I guess what’s the shortest term and we’ll see the longest terms?
Kay: Generally, you know you can go from anywhere three to three months all the way up to three years, so usually beyond three years you won’t likely see a hard money loan
Paul: Okay, presume you take into account the property itself, it’s floors can you tell us a little bit about that?
Kay: Yeah, so in general terms hard money loans are what is goods that are in accident they flown so a lot of emphasis is put on the property in the deal itself, however a lot of lenders are still going to want to get a little bit of information about the farmer so usually the credit requirements are fairly low but credit will be still taking into consideration also the person’s experience, so it can have you know a hit to your credit score heart many wells are definitely an option because there is still a lot of emphasis on the packet in the deal itself, so as long as the numbers make sense and they deal usually something can be worked out
Paul: Okay, what kind of down payment are you looking for most properties?
Kay: Down payment can range anywhere from ten to twenty-five percent, depending on the type of property in a situation, there are certain situations where a down payment may not be required, I have seen those situations as well but it’s kind of rare so it leaves plant for its investment
Paul: Somebody were to apply with your company how fast does it take you do a similar process like a pre-approval so how long would that take?
Kay: Yes, in most situations we won’t need to do like a pre-approval we’ll just go straight into underwriting, so simple for Hard money loans it doesn’t take very long to actually close, I mean it’s run situations we can close in a few days and it can go two or three weeks
Paul: Okay, so in terms of pre-approval, you’re still like we’re looking at credit somebody needs to you know they need a letter of intent from you or so that’s they could get that?
Kay: Yes, so usually we can do that whole process in a few days
Paul: Okay, all right you mentioned the example of you know having a zero down payment loan that’s pretty interesting, can you elaborate on that, what sort of examples have you seen of that?
Kay: Yeah, generally I’ve seen those and the loan amount is fairly high, so we’re looking at plus a million but usually in those situations we’re taking into account what the after repair value is going to be, so if someone is doing a large rehab project or have a construction project where they’re adding a great level of value and equity into a situation, in those types of conditions the down payment you require because we’re going to take actually count the equity that is being filled into the deal
Paul: So, that’s even equity that the person let’s say they are they’re doing sweat equity or they’ve got contractors who are going to that’s even that equity to you’re not considering already existing equity where it’s a great deal already it’s you know 50% LTV loan the value and then you also look at what they’re putting into the into the deal
Kay: Yeah, so that’s a great example so if someone has seen after repair value that’s going to be four million and they want to land fifty percent loan to value can be two million and so that’s kind of how we look at the situation
Paul: Okay, you’re also taking a primary lien position?
Kay: Correct. Yes
Paul: Okay and you mentioned we talking about two million four million or do you have any upper limits, minimum loan amounts, upper low amount?
Kay: Usually, for residential properties we’re looking at a 50k minimum, for commercial we’re looking at 100K minimum, and really the upper limit is pretty high looking at the several millions of dollars
Paul: Okay and then we you know it’s a good segue into the you’re talking about commercial residential and the in a conventional space, I mean you’ve got your commercial loans they’re quite different than your residential loans so than residential two to four units, you know do you have that distinction or it’s the same type of loan product upfront applies regardless of commercial and residential?
Kay: Generally speaking all of the month that you are still considered commercial even if you’re doing you know working with residential properties because we require that they are in an entity, and so they’re going to be loan in a business, the terms and everything are going to be very similar, the only difference is that because many I’m wrong about
Paul: Okay so you mentioned in an entity you mean like an LLC S corporations in a corporation, so that’s even another helpful thing for investors to I mean a lot of with your conventional loans, generally the conventional lenders don’t want LLC, they want you to individually on the deed but this case that’s an extra advantage for that.
Kay: Yes, exactly.
Paul: You had mentioned repayment terms we talked about interest only, I guess it’s optional on the buyer to they want to pay more if they want to pay down the principal as well, I mean are you able to you calculate that upfront or you just as they you know they get to do that however they want to do that?
Kay: It’s a case-by-case situation, we can’t look into that if there someone is interested in doing that generally most people like the interest-only payments because it helps keep the payment low while you’re in this transition phase and so you’re not having to pay additional money if you’re plenty the cells of property or if you’re playing so you’re in finance it into something that’s more than conventional most investors like to keep they’re paying it as well as possible during that time period
Paul: Okay let’s say someone does start off with the intent of you know I’m looking alone when I’m looking for a fix and flip, but then they look at the property later and you know based on the value add and they think they can get better rents are you able to refinance them into a conventional loan that you no longer term 15-year, 20-year or 30-year or how does that work with your company?
Kay: Yeah definitely, so we can do finances, we can even cash out refinance and so if someone has built equity into the property and they were planning on selling it but then they change their strategy and once they hold it, we can refinance it and let them cash that equity out and then we of course maybe purchases as well.
Paul: So, the cashing out those include 20-year loan, 30-year loan?
Kay: Yes, even up to 30-years, yes.
Paul: Okay, do you hold all the loans on your books or do you already also broker some of these loans?
Kay: So, most of your loans are going to be held by the actual lender so we broker those out an they work with the paper
Paul: How many lenders do you work with private lenders?
Kay: So, we do real estate loans and also small business loan, so total we have about 15-lender that we work with on a real estate track, I would say it’s about 15/20
Paul: Okay, very nice you mentioned small business loans here to share some information about that?
Kay: Yes, on a small business side we have a wide range of moms as well, we can do asset based loans where a company can use their invoices as collateral also inventory and equipment we can do equipment finance, we have some unsecured lines of credit for businesses and a few other things with over some general loan that we are offering.
Paul: So, talking about the loans, you mentioned interest rates are higher earlier in terms of your short term your hard money loans welcoming interest rates are we looking at there?
Kay: Generally speaking, they start in the high single digits so maybe seven and eight percent and it can go well into the teens, so twelve fourteen percent
Paul: What’s the reason for you know a low interest rate and the high interest rate, is there you know it’s based on the properties are based on the borrower?
Kay: Yeah, generally speaking it’s going to be based on leverage, so long to value also borrower experience plays a role and sometimes FICO score, not all, not in all situations but those are the key elements of determining what that interest rate is going to be.
Paul: So, you can get a loan to like it you know if I wanted to go I found a property that’s an ideal fixing flip and I can get the money to buy the property, are you also lending so I can you know pay contractors hire contractors to do repairs and if so then how is that done, how does that handle over time, do you think about all that money up front, do you draws?
Kay: Yeah, so we can find the purchase and the rehab in that situation and generally we go up to ninety percent, so we’ll do ninety percent of the total project cost which is the purchase list or we have. The purchase clients are dispersed for the seller at closing and then whatever you have to set aside for your construction or rehab will go into an escrow account and you work on a draw system, so as the worth of being included you can request a draw and get that money for that particular piece of the work
Paul: Okay, for each draw you acquiring invoices, are you requiring some sort of milestones or just?
Kay: No invoices, we just we have an inspector come out just to make sure the work is completed and don’t require that in the use you know specific contract, there’s anything like that you can do it work yourself you just want to know that the work has actually been completed and then you can have the draw
Paul: Great when it comes to the actual loan approval process, you mentioned underwriting before is there a committee, are you part of that committee or how does that work in your company?
Kay: No, I’m not part of the committee I do like a pre-assessment, so I’ll collect all of the documentation and kind of look over the deal, make sure that numbers and everything makes sense and then I submit it to the underwriting team and they actually do a full assessment, so they’ll pull the credit they’ll run the numbers and make sure that everything’s okay. In most situations we do require an appraisal so that will be ordered and generally I was saying it usually takes a couple to close everything
Paul: Okay, you mentioned appraisals and who pays for the appraisals and I guess out of their other upfront costs that the buyers should need to expect?
Kay: So, the only upfront cost generally is the appraisal and the flyer is responsible for that in most situations, there are some situations where the lender will pay for the appraisal so that’s the only thing that would need to be paid paint privates are closing. At closing for hard money loans usually they’re going to have to pay fees which are loan origination fees a point for the hard money loan, I mean those can rent anywhere from one to, I have seen it at five. So…
Paul: Five points?
Kay: Yeah, it a percentage point of whatever the loan amount is.
Paul: Okay, and the reason for the variance and the loan points do that based on risk as well too?
Kay: Well, it’s based on race it’s also based on lender and situation depending on the long sides major advantage, you are at a lower loan amount, your points are likely going to be higher versus this to add you know a million plus or like your higher loan I’m not you okay a lower percentage point but of course if you’ve going to be higher in general because the loan amount is higher.
Paul: Okay, you handle all your loans and closings or deal with the title company?
Kay: We allow the borrower to choose their title company, so they can choose whatever they want to work with
Paul: Do you service all 50-states as their in limits where you do not service?
Kay: Yes, so in most we can definitely learn in most states, there are certain situations that are a little bit more difficult one of those on the top of the head is like North Dakota, so some you know random states you have some restrictions and for the most part you can you can live in any of the states
Paul: Okay great, and how can buyers get in touch with you if they will be interested in chatting with you and finding out more about your loan products and company?
Kay: Yeah, so you can reach me at email@example.com you can visit the website which is www.cscapitalsolutions.com
Paul: Great and if you are listening to this podcaston my website, i’ll definitely provide your contact information there and leave a couple of your social media profiles too.
Again, thank you for being on our podcast and enjoy the rest to day.
Kay: Yea, thanks for having me
Paul: Thank you
Relationships, Debt, Taxes, Home Buying
As heard on this episode:
- Zander Insurance: daveramsey.ramsey.libsynpro.com
Lauren from L Bee and the Money Tree wrote recently about how her dog, Murray, decided to take a little jaunt around the neighbourhood at 11pm in the middle of the rain storm, leaving her a nervous wreck until she found him.
While this story ends well, it’s one we’ll all familiar with. I’ve been a victim of it myself. My dog Molly pulled the same trick on me last summer, except she was a full half mile away when she was found.
Dogs and cats disappear every day. Some estimate that 10 million are reported missing every year. If you own a pet, odds are, it’s going to give you the slip at some point in its life, and go missing. Hopefully your story will have the same happy ending mine and Lauren’s did, but to improve those odds, here are some ways you can keep your pet keep your pet from escaping, and help ensure it’s found quickly.
Secure Your Parameter
Many, many dogs will take any opportunity to go exploring their neighbourhood, and an open backyard gate the perfect temptation. To help protect against this possibility, install an automatic closing device on your gates to ensure that if they are left open for any reason, they’ll close on their own.
In addition to this, consider installing an underground electric fence, which will deter against fence digging and wandering out of an open gate. I have one installed around the parameter of my property, and my dog Molly has rarely wandered off. The cost of one of these fences can be as low as a few hundred dollars, and is money well spent. There are even options available for cats!
Register Your Pet
In most cities, dogs are required to be registered, and will receive an ID tag to attach to their collar. This ID tag will contain a ID number and toll free number to call. Anyone who finds a dog with an ID tag, will have a way of getting in contact with the owner.
One caveat to this method: Don’t forget to update your pet’s info when you move! Otherwise, your contact information will be out of date and the people who found your pet will have no way of getting in contact with you. Registrations are typically inexpensive, renewable yearly and often required by law.
Microchip Your Pet
This is a great option for both cats and dogs, and is widely available at your local vet’s office. Instead of an ID tag, the vet will insert a small microchip underneath your pet’s skin. The chip will be readable by a scanner that most vet’s offices and animal shelters are equipped with. This is particularly beneficial if a pet is found by animal control.
It also has the benefit of always being with your pet, even if they slip out of their collar and have no tags on them. As I mentioned above, don’t forget to update this information when you move! This isn’t typically expensive, it cost me $10 to have my dog Molly microchipped at the SPCA.
Have a “Go” Plan
Sometimes, despite your best intentions, your pet ends up missing. In these situations, having a plan in place to recover your pet could mean the difference between a few hours of searching and a few weeks. Have a “Lost Pet” poster prepared and saved on your computer, so that you can easily and quickly print out several posters to put up around the neighbourhood. Become acquainted with the local lost pets Facebook groups and message boards so you can quickly and easily get the word out to the local community. Finally, don’t forget to call your local shelter and vet’s offices with a description of your pet, in case animal control or a concerned citizen turns him or her in. By quickly publicizing the fact that you are looking for your pet, you increase the number of people keeping an eye out, thus increasing the chances your pet will be found.
No one likes to think about the fact that some day, you might be trudging the streets of your neighbourhood, calling your pet’s name. By taking these simple and inexpensive precautions you can minimize the chance of harm coming to your pet, and increase the odds of a happy ending to your pet’s adventure.
Have you ever lost a pet? I want to know!
The post Easy Ways to Keep Your Pet Secure appeared first on Making Sense Of Cents.