Dallas/Fort Worth: 214.219.0360 • Austin: 512.423.5220 • San Antonio: 210.303.2425 • Houston: 832.506.8837

Keys to Getting Started In Real Estate Investing

One of the hardest things to do in life is to get started. Whether it’s a new job, a new business, or a new relationship. All of these involve challenges because of the unknown, the unforeseen, and a general lack of knowledge and experience. This can create anxiety and fear, which prevents you from moving forward on a path to success. The same is also true for getting started in real estate investing.

I want to help anyone struggling with those first steps, so they can get started in real estate investing. I have outlined what I believe are four keys for putting you on a path to success. So let’s dive into them.

KEY #1: KNOW YOUR REAL ESTATE INVESTING STRATEGIES 

In the single-family real estate investing world, there are basically three investing strategies: wholesaling property, flipping property and owning rental property. Your job is to consider which one(s) you want to focus on, and put a plan together to execute on them. For example, if you want immediate income, wholesaling is the way to go. If you are looking to make large profits, consider finding a deal with enough equity where you can rehab and flip it. If you are looking to build long-term wealth and generate passive income, then you need to buy rental properties.

KEY #2: GET A SPECIFIC GOAL DOWN ON PAPER 

The biggest key to getting started is setting a goal and writing it down on paper. I know I’m preaching to the choir with some of you, however, others might be thinking, “I just don’t need to do that.” Really? How will you be able to measure if you are reaching your target if you don’t really have one? Do you really want to leave it up to chance? Wouldn’t it be better to take charge and have a plan? Write your goals down.

KEY #3: NETWORK WITH OTHER REAL ESTATE INVESTORS

Other real estate investors are going to be your best resource for networking, creating a mastermind group, and building the rest of your team. You want to reach out to them, learn from them, and discuss your ideas with them. If you want to get to the next level with your real estate investing, networking is a must-do.

KEY #4: TAKE ACTION! 

All that is left at this point is for you to take action. How do you do this? Go find a pen and paper and write down your action plan.

If you are still struggling with this, go to YouTube and watch “How to Take Action” by Tony Robbins. That will help put things in perspective for you and help you get started.

Now get moving! Identify the next steps and TAKE ACTION! Want to wholesale properties? Find a wholesaling group on Meetup.com and attend their next meeting.  Want to buy a flip or rental property? Contact a wholesaler, talk to them about what you’re looking for, and get on their buyer’s list. Need financing for your deal? Give us a call!

Never Confuse These Two Things About Real Estate Deals

When it comes to investing in real estate, there are just some deals you are not going to be able to acquire. Best to know this from the start and get over it quickly. Someone else is going to get the deal instead of you, either because they were focused on solving the seller’s problem, beat you to getting it under contract, or more often than not, offered more money than you. Whatever the case may be, you didn’t get it. Also, it certainly won’t be the last time either, unless of course, you completely stop making offers.

Hey, it happens to everyone. I hear investors all the time say they lost a deal to another investor who was willing to pay more for it. And if that’s why you didn’t get the deal, stop thinking you “lost” it. You didn’t lose it. If you did your due diligence, and offered the right purchase price (i.e., one where you can make the profit you want), get over it and move on to the next deal.

Are you questioning whether you offered the correct purchase price? If so, that is totally normal, and you need to ask yourself the following questions:

  • Did I determine the correct ARV?
  • Did I do enough due diligence to determine the complete scope of work?
  • Did I offer the right price based on these factors along with the profit I wanted to make?

If you answered “YES” to all of these, then you should feel good about your offering price, and not confuse losing a deal with someone else making a mistake that’s going to cost them money. However, if you low-balled the seller, then we are talking about a completely different situation. In this market, there’s no room for being too greedy. Whatever the case, don’t beat yourself up over it.

Most of what we are seeing right now is investors paying too much just to get a deal. Why are they doing this? They are very new and don’t have enough experience yet. Emotions are taking over their decision making, especially when pressured from a wholesaler to buy the deal before someone else does.

If this sounds like you, don’t get sucked in. No matter what your deal flow looks like, it’s a dynamic market. This means that deals are happening all the time. Real estate deals happen every day and that’s not going to change. Be patient and find the one that works for you.

You have a Real Estate deal in Texas and looking for someone to help you with hard money loans? We can help! We have a three-time award-winning hard money lender, with offices in North, Central Texas, and South Texas

Did You Know There Is An Over-Under In Real Estate Investing?

You may have heard of the over-under in sports gambling. That’s where you bet on whether the combined score of both teams will be either higher or lower than that number. But did you know there is an over-under in real estate investing? That’s where an investor overestimates the ARV, underestimates the scope of work required, and basically pays too much for the property.

You might be asking what’s the similarity here? The answer: Whether you are gambling on football or gambling on your deal, you can lose money doing both. And with real estate, the losses can be much greater than some insignificant football wager. Still, many investors don’t even realize they are doing this, let alone think they are gambling. Let’s break down how this happens so we can understand how to avoid it.

Overestimating the ARV

Here are the most common things that contribute to inaccurate ARV’s:

  1. Taking the wholesaler’s word for the value without doing any due diligence.
  2. Looking at the comps and picking the highest one.
  3. Using the tax assessed value for the ARV.
  4. Thinking the appraisal is “too conservative” and this deal will actually sell for more.

If these sound familiar, beware that there are huge risks associated with these approaches that involve losing money.

Underestimating the Scope of Work

Even more than ARV, the scope of work required often falls short due to the following three reasons:

  1. Prior to purchase, major items were overlooked or unforeseen due to improper assessments. Things such as foundation work, roofing, HVAC, and plumbing, are the most common and have the most significant impact on increasing the overall costs.
  2. The investor believes they can get the work done for a much lower cost than is actually possible.
  3. Believing the wholesaler’s rehab estimate without doing your own due diligence.

Avoiding These Pitfalls

An accurate assessment of the value of the property starts with getting an appraisal. Using any other approach will only lead to problems. If you have been on the I.M. Blog section of our website, you know that this is something that has been emphasized since the beginning. The appraisers we use are experienced with investor deals and know how to evaluate a property that needs to be rehabbed. Also, they are never told to be conservative with their assessments.

If you are not experienced in determining the overall scope of work required to reach the ARV needed, get with an experienced contractor to help you understand the true cost of the project, so there are no expensive surprises. There’s always going to be something that pops up unexpectedly, but missing major items can be avoided. Be realistic and don’t gamble with your investment.

Have a Real Estate deal and want a hard money loan to flip? We are a 3-time award-winning hard money lender, with offices in Dallas, Austin, San Antonio, and Houston.

Five Costs Real Estate Investors Typically Forget

New (and even some experienced) real estate investors often think there is more money in a deal than there actually is because they are focusing on gross profit and incorrectly calculating their net profit.

For example, a house with a $100,000 ARV that needs $20,000 in repairs and purchased at $50,000, yields an average net profit of around $13,500. While the net profit may appear to be higher, as it looks like there is much more equity in the deal, let’s discuss why this is not the case.

There are five costs incurred at the sale of a property that goes into a formula we will use to calculate the net profit. These costs are:

  1. Seller’s Closing Costs: This includes the title company escrow fees, title insurance, recording fees, and any other title company costs.
  2. Carrying Costs: This would include utility ex­penses such as water, gas, and electric, as well as any interest expense if you borrowed money to purchase the property.
  3. Seller Concessions: If your buyer doesn’t have enough money to bring to closing, they can ask you, the seller, for some assistance. This assistance means they want you to pay for some of their closing costs and/or lender costs. Many lending products allow for up to six percent in seller concessions. Although a buyer will seldom ask for this high of an amount, just know that they can.
  4. Commissions: If you are listing the house on the MLS (which you should be doing), you are going to have to pay your agent or broker a commission. In most markets, six percent is the norm.
  5. Pro-rated Property Taxes: As a seller, you will have to credit the property taxes to the buyer for the current year up to the date of closing on the sale. So if you sold the property on May 31, you would have to credit exactly five months’ worth of property taxes to the buyer at the sale closing.

Keep these costs in mind when you are making your decision to buy a deal you are planning on flipping, and use them to determine what you are going to net at closing. Remember, your costs will vary based on the value of your deal, as well as how long you own it before it sells.

If you have Real Estate deal in mind and looking for an experienced hard money lender in Dallas, TX, contact us today or call us at 214.219.0360.

The Dos and Don’ts of Going to Market for Sale

A realtor friend of mine once told me, “As soon as a house is listed on the MLS, it’s the belle of the ball.” If it looks good online, agents in the area will want to show it to their prospective buyers. As the saying goes, “you never get a second chance to make a first impression.”

To make sure your house is ready to go, be sure to consider the following Dos and Don’ts to get your house sold as fast as possible:

  • Do make sure that there are no punch list items remaining, the property has been cleaned and staged if necessary, and all of the landscaping looks great. Don’t list it early or ahead of it is 100% complete.
  • Do a thorough review of the comps with an appraiser or experienced broker that knows the area, to determine what the property can be sold for based on the current market value with the improvements you have made. Don’t overprice the property! Doing this can have a negative impact on activity.
  • Do hire an experienced agent that understands the market in your area, and meets the following criteria stated in this blog here.
  • Do make sure your agent uses CSS (Centralized Showing Service) so the showings can be automated and tracked. This makes your property easy to show. Don’t hire an agent that has to be called directly to set up a showing at a specific time. This makes it difficult to show the property and receive offers.
  • Do follow up with your agent within a few days after your house goes live on the MLS to see how many showings you received. Showings indicate that you are priced correctly. If you have no showings, you are probably priced too high.
  • Do follow up with your agent to hear what the feedback is from the showings (i.e., everyone liked the house and said they were submitting offers, bedrooms were too small, etc.).
  • Don’t drop the price by a large percentage of you are not getting showings or offers. Large price drops can give the impression that something is wrong with the property, and not just that you are priced too high. You and your agent should determine the process ahead of time regarding price reductions. Use an experienced agent to help you with this.
  • Do try to make that first offer work. 

If you follow these steps, rest assured that you’re bound to get the highest possible offer in the shortest possible time in your market.

If you are in Texas looking for an experience Hard Money Lender Near You, contact us today!

The Seduction of Cheaper Hard Money

Over time hard money lenders come and go. Which ones stay? The lenders who survive in this business are the ones that understand they must charge enough to operate, service loans, and most importantly, service customers who are in most cases, making one of their largest investments ever. They understand that they are not loaning the money over a 30-year time period, where there is long term cash flow, and so they must price their product accordingly. Without boring you with any other details, let’s skip to what’s important for you to know.

As the real estate market remains strong, more lenders are entering the space and want to put their money to work as quickly as they can. In order to do this, many of them advertise what appears to be a lower cost hard money loan, when in fact, it is a much more expensive product.

While this may seem innocuous, the reality is the consequences this brings to the investor. Failure to disclose the other fees and/or structure of the loan puts borrowers at risk of not knowing their true costs and is absolutely deceptive on the part of the lender.

Many of these lenders are not real estate investors and do not understand flipping, buying a rental property, or even wholesaling, putting themselves and their customers at risk of losing money.

Recently, rates have been advertised from 2.99% – 10.99%. When you see anyone advertising rates below 12%, read the fine print, and look for the “catch.” What’s the catch? Any attempt to trick someone with a bait and switch loan. Here are eight examples to keep in mind:

  • The borrower needs the maximum FICO score of 850 (which is very unattainable) with $100K cash in the bank to qualify.
  • The borrower must do a “specified” number of loans with the lender to qualify for the lower rate.
  • Interest is charged on the full note amount when the repairs have not been borrowed yet is a lending practice by most lenders, but is not advertised upfront. Also, if the repair holdback is a large amount, the borrower is paying additional interest on funds they haven’t used yet!
  • The lower advertised rate is for a short initial period in the loan (i.e., 30 days) and then it increases to a normal rate. Of course, the borrower is also being charged on the full note amount, even though the repair funds have not been drawn.
  • The loan term is for 90 days with expensive extension fees built into the note.
  • Junk fees that make up the difference in the lower points and/or interest being advertised (underwriting fee, admin fee, evaluation fee, etc.).
  • An offer of 100% financing, or anything that is not based on the ARV in the offer. This is designed to make the borrower think that no matter what their purchase price + repairs are, they are going to get all of it financed, irrespective of the ARV.
  • A lender who advertises no application, no credit check, no appraisal, etc. Be suspect anytime there is no due diligence being offered on the part of the lender. It is for the benefit of the buyer and the lender that all the numbers are verified on a property.

As a member of the Ethics Advisory Committee for the American Association of Private Lenders (AAPL), I helped create the guidelines for what all lenders must follow as members of this organization. AAPL bans bait and switch lending practices as well as false advertising.

So, just as you would perform due diligence on your investment property, be sure to do the same for your lender. We disclose everything regarding our hard money programs on the website. If you are looking for a hard money lender within your area, contact us today!

Skip to content