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How to Finance Your Fix and Flip Project

With market prices still low after the great recession, many people dream of making money fixing and flipping property. While fix and flip projects have been a tried and true way to earn extra money, there is one thing that stands in people’s way: financing. While the return can be great, purchasing a house and paying for the renovations requires a lot of capital up front. This article will help you understand the various funding options that can get you flipping your first house in no time. Hard Money and Private Money Loans If you are a new to the fix and flip world and have a low credit score, your best option would be a hard money or private money loan. A private money lender is usually a single person that loans you money for a relatively low interest rate. They are good to use when funding smaller projects. A hard money lender is usually a group of investors that loan money for larger projects. The reason these loans are especially advantageous if you have bad credit, is that that the main focus for the lender is the potential of the property not your experience or financial history. You will, however, want to make sure you have done your research to be able to prove that your property is a solid investment for the lender.   Real Estate Crowdfunding for You Fix and Flip Project Real Estate Crowdfunding is the fastest form of financing available. While it is fairly new, it is expected to take off as a preferred source of funding for people in the fix and flip community. Real estate crowdfunding platforms use the internet to allow you to connect directly to people interested in investing in property flipping projects. Crowdfunding gives you the option to get […]

September 6, 2016 Blog

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Mezzanine Financing 101: An Overview

In the post-recession world, it can be difficult to find the financing you need for your commercial real estate projects. Lenders are hesitant to take risks, and using other forms of financing such as friends or business partners/investors can still leave you short of the money you need to see your venture through. Mezzanine financing fills in this gap between personal equity loans and outside sources of funding. The following will give you a basic understanding of what a mezzanine loan is and the different forms it can take. What is a Mezzanine Financing? Mezzanine financing is a broad term used for any means of financing that fills the gap between sponsor equity and senior debt. While this can take the form of either equity or debt, it is generally issued by members of the private sector. Mezzanine financiers typically do not receive a return on their investment until all senior debt holders are compensated. While this position does cause mezzanine loans to have a higher risk factor, they still enjoy a lower risk than preferred equity. Basic Mezzanine Loan Structures When a mezzanine deal is structured as debt, it will require one of several forms of collateral: second deed of trust, assignment of partnership interest or a cash flow note. A second deed of trust is the preferred form of collateral for most mezzanine lenders, because it gives them the most concrete form of security. However, the assignment of partnership interest is the most widely used form of debt security. The mezzanine lender essentially becomes the owner of the equity and takes on the obligation to the first mortgage lender. A cash flow note, also called a soft second, gives the lender an assignment of the cash flow from the property in return for the mezzanine loan and a […]

August 6, 2016 Blog

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Making Sense of Bridge Loans

With all the loan options available to consumers, what is it about bridge loans that can make them such a great choice for those looking to buy in commercial real estate? Here you’ll find an overview of how these loans work and what they’re typically used for. How Bridge Loans Work Bridge loans are primarily used by buyers that are looking for a short term loan option for a property on which that they intend to make a profit in a brief amount of time. It’s true that some commercial properties are great investment opportunities but are highly time-sensitive; these kinds of loans are designed for that type of scenario, as they are made to “bridge the gap” between you and the property in question. For example, perhaps you are looking at a property that has a lot of potential but is going for a more meager sum of money. It’s rough, but you know that this particular property can go for double what it’s being sold for if someone did some particular repairs and put finishing touches in some key spots on the property. Say it could theoretically be re-sold in a matter of nine months, and you as the buyer would make a great profit. Power And Flexibility This is where bridge loans come in. These loans are only designed to last up to a year or so, making it the ideal situation for the buyer looking to make an immediate profit, knowing just what to do with the property at hand. In that short time, the buyer may just be waiting to get refinanced after they’ve done the renovations on the property, or waiting for the right tenants to come along and occupy some of the space. Maybe they are even looking to re-sell the property after […]

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The 5 Best Commercial Real Estate Loans

The real estate market is a competitive one, and buyers need to have money ready to go when property becomes available. At the same time, not all commercial real estate loans are created equal, and some can cause more trouble than they’re worth. Make sure you know exactly what type of loan you’re applying for, and consider these five options when you’re looking to invest. 1. Construction Loans The main benefit of this type of loan is that it accounts for the future value of the property. Many banks will lend against land that they undervalue because they don’t factor in improvements. If you’re able to get a construction loan, your design and concepts can help improve the terms. 2. Bridge Loans A bridge loan works specifically for a commercial real estate investor who’s caught between two properties. If you’re in the process of fixing up a commercial lot when another becomes available, you can use this loan option to get the money you need to buy the second lot while using either property as collateral. The interest rates with bridge loans is typically high, but the idea is that you’ll pay the lender back immediately after finishing the first project. 3. Hard Money Loans This option, as with bridge loans, pays out pretty quickly and helps investors jump at a property when it becomes available. Hard money is usually lent by private lenders, which allows the cash to be advanced more quickly. The purchased property often serves as collateral and interest rates may be excessive. Nevertheless, if you’re looking to buy a recently foreclosed commercial space, this option can provide the money you need in a hurry. 4. Commercial Real Estate Purchase Loan Perhaps the most basic option, a purchase loan will use the property as a guarantee and […]

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Rehabbing Your Rental Property

One of the most reliable ways to make real estate investing pay off is to buy properties that are in need of a fair amount of repair. These houses are usually available for well below the average market value for comparable homes in the area, and there are several ways that rental rehabs can be worked out in cost-efficient ways. On top of those tweaks, there are also rehab loans available that can help to reduce costs by giving you a method of financing that is tailor-made to your needs. Know Your Market When assessing the purchase price, remember to figure in the cost of your renovations, and then get to work researching the rental market in the area. Understanding what is available and what the current prices are for other properties will give you a more realistic set of expectations for your property. That will also help you to aim for competitive quality and pricing to better position yourself in the market, and it will show you how long the rental will take to break even. If there is any question about purchasing the property, this assessment will help you to make your decision. Build to Last Remember that rental properties are built for a different audience than sales to homeowners. Renters typically do not take as much care to maintain a property, nor do they have incentive to do so. Most will want durable but not flashy fixtures and appliances, and the same goes for basics like flooring. It is in both of your interests that counters and other surfaces be able to take heavy wear without compromising. If you manage a nice compromise between the cost of materials and their ability to take a beating, you’ll get more out of your rehab loans. Prepare for Sale Most […]

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Tips For Being a Top Small Business

Running a successful business requires a lot of hard work and planning. Every year there are many small businesses launched, and unfortunately most of these businesses go under fairly quickly. Other small businesses are able to stay afloat, but only just barely. There are only a handful of small businesses that become successful early on. Anyone who is currently trying to start up their own small business should utilize the following simple tips if they want their business to be one of the best around. The first step in beginning a successful business is having a solid plan. It is important to decide early on exactly what the company is going to look like, and what it is going to accomplish. Individuals who own a small business need to figure out exactly where their talents lie, and how they are going to use their talents to benefit the business as a whole. It is important to do a lot of research on the market conditions that the business will be a part of, and design a product that is going to be in high demand. Having an accurate estimate of how much it is going to cost to get started, and how much money the business will make will simplify the process of obtaining a loan. The next important tip in beginning a successful business is picking the best location. It does not matter how good a product or a service is if the business is established in a poor location. If the business building is not easily visible, then the chances are low that people will be able to find it and really see what products are available. It is also important that the location has enough space. If the property is cluttered and disorganized then it will send […]

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Why You Should Invest in Real Estate

Since the market crash, investors have become more wary of investing in real estate, but the market has stabilized and there are many good reasons why you should try your hand at real estate investing. Both home and rental sales are projected to grow in the year 2015. A buy and hold strategy is a good option right now because there are still inexpensive properties to be had. A 2012 study by the Federal Reserve revealed that an average American homeowner had a net worth of $174,150 but an average renter only held a net worth of $5,100. Imagine how much higher the potential worth could be for the owner of multiple properties. Millennials accounted for one third of the US population in 2013 and the movement of this group will significantly shape the market. A large number of them are not yet ready to own a home due to job prospects, difficulty qualifying for loans and expensive home sale prices. Therefore, certain markets are great for buying rental real estate. In addition to this, baby boomers are heading toward retirement and might be downsizing to rentals. If you do it right, you could end up first renting to millennials and then selling the properties back to them as start-up homes. Real estate investing builds on future prosperity and cash flow. It is a superb way to tuck away additional savings in addition to a diverse portfolio. It is unique in that it can offer a consistent return as well as possible appreciation. And, it is a simple process to borrow money from a bank, use it for a down payment and increase your overall return. Real estate is easy to leverage and on the whole is less volatile than stock investments. Tax free cash flow is always a good […]

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Franchising Pros and Cons

When you’re starting a business, you come across two choices: starting a franchise or a traditional business. If you’re looking into franchising, you need all the information you can get your hands on in order to make an informed decision. It’s important to have a list of pros and cons to help you decide if this is the business path you truly want to take.   Be Your Own Boss The number one pro to starting a franchise is the freedom you have to be your own boss, make the decisions about your operation and run your show. Although there are district managers and corporate to whom you must report, you still control your individual franchise and your day-to-day operations. On the other hand, the most immediate con is start-up costs. The initial money required getting your business up and running already puts you in debt, and you don’t get any funding assistance from headquarters. With contracts, training and annual conferences, shelling out your own money is done at your own liability. You are taking a huge leap, but seeing benefits come after you hurdle the first obstacle is well worth it.   Established Recognition A huge asset to franchising is that your business is already established. That means that you don’t have to pay for advertising and marketing, and you already come with a set base of customers. Choosing the right, well-established franchise can lend you the business you need to quickly regain the start-up money you spent and start making a profit. Traditional businesses often take several years to see a profit, if ever. Many businesses are no longer open after 10 years due to the difficulties of marketing and brand recognition. None of these is a problem when you open a franchise.   Corporate Has Your Back […]

February 9, 2016 Blog

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What You Need to Know About Buying a Franchise

If you are considering purchasing a franchise, there are several things you will want to consider. The following information can help you navigate the process successfully.   Do Your Research When thinking of buying a franchise, conduct extensive research. Ask at least two competing franchisers for their offering circulars. These documents are lengthy and complicated, but serve up a heap of valuable information, including annual revenues and expectations of the company. Also look into percentage figures on franchise turnover, and be cautious if the figures are in the double digits. Check into the litigation section to see if multiple lawsuits have been recorded, which can be a red flag.   Scope the Site You will need to check out the area in which you are thinking of building. Search carefully for identical units near the site you are considering, and be especially cautious if they have a superior location. Some franchises might offer area exclusivity, but you should still do your own investigation for optimal security in your purchase.   Consider the Cost Don’t be casual when you study the true cost of what you are taking on. You will need to acquire all of the pertinent financial information, including the initial entry fee, royalties, contributions to shared services, equipment maintenance, software, administrative and audit services, training, and all other expenses you will need to cover. You should also look into insurance amounts, store construction costs, and initial inventory totals. You want a realistic picture of what you are responsible for before you sign on the dotted line. Make sure that the success of the business you are associating with will be sufficient to offset expenses and generate a profit.   Negotiate You should be aware that when dealing with a young franchise, you may have the ability to negotiate […]

January 18, 2016 Blog

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Reasons Why a Lender May Turn Down Your Business Loan Request

Accessing the finances required to thrive and grow is one of the biggest challenges faced by a business. Many owners who visit a bank are unable to secure a loan, leaving them to search for other options to gain the funds required to keep their company afloat. Nearly half of the workforce in the United States works in a small business, further proving the importance that they succeed. No matter who the lender is, there are several reasons why a loan may be declined. Here are some of the top reasons why a lender may turn down your business loan request.   1. Bankruptcies Before you apply for alternative funding, it is essential to take care of your outstanding debt, bankruptcies and liens. Most lenders will decline funds from the beginning if they notice you are in a significant amount of debt. They need the assurance that you will be able to pay off your debt, not take on more of it and dig a larger hole.   2. Startup Businesses You may have difficulty getting approved for a business loan if you are a startup business or have only been in operation for one year or less. When given the choice between a huge risk and a safe, sure thing, most people will choose the latter. This is often the case for lenders. A startup is risky to get involved in. They favor companies that have a record of success and a solid track record. Startups, no matter how promising they may seem, have a hard time proving their value.   3. Inadequate Cash Flow If your company has inadequate or low cash flow, a loan will often be denied. A lender seeks a steady and consistent cash flow. If a friend is constantly asking to borrow money from […]

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