There’s no shortage of creative financing options available to investors, but one of the most popular methods to finance a real estate investment property is with the use of private or hard money lending. These lenders will look at experience level, financial history, and credit scores when determining if a loan scenario is a right fit for the company.

When lenders check a borrower’s credit score, usually with a hard tri-merge pull, it’s mainly focusing on the borrower’s ability to repay the loan based on their past financial history. Typically, credit score minimum requirements depend on the exit strategy of the real estate investment. For an investor who is fixing up the property for resale, the credit score may not be as big of a determining factor for LTV’s and interest rates. This compared to an investor who’s exit strategy is to refinance out of the hard money loan using a traditional lender, the credit score will be a significant factor in the loan approval process.

Generally speaking, Private Lenders are looking for a credit score above 600 but will consider credit scores around 575 and above depending on the reason for the scores level. So, before diving into the ways to improve your credit score to obtain the best LTV and interest rates, it’s important to understand how your credit score is determined. Credit scores operate on a scale range of 300 to 850, where 850 is the highest credit score that can be achieved.  To achieve any score, credit is comprised of five elements, with some holding more weight (shown as the percentage below) than others;

1.  Payment History (35%)

2.  Amounts Owed (30%)

3.  Length of Credit History (15%)

4.  New Credit (10%)

5.  Types of Credit Accounts (10%)

With the five elements that determine a credit score in mind, here are four simple ways to help increase your credit score;

1. Check the Credit Report and Score

This may sound obvious, but it’s surprising how many people don’t actually know what their credit score is. In particular, when checking your score, it’s important to make sure there are no late payments incorrectly listed, and that the amounts owed (if any) for each of your accounts are correct. If you see any errors on the reports, dispute them immediately.

Before pulling a hard check on your credit that will affect the overall score, Bridge Loan Network offers soft credit pulls. Soft credit pulls have no effect on the credit score and will give the lender a general understanding of the credit score and if this is a scenario that makes sense for their company and the LTV and interest rates they can offer.

When the lender determines the borrower and the deal are secure, the hard tri-merge credit pull will still need to be on file, but if you are in the Bridge Loan Network portal, this score will last 90 days, and will not have to be pulled for every loan scenario you send to the lenders.

1. Dispute Any Errors

Under the Fair Credit Reporting Act, both the organization that provided your credit report and the credit bureau are responsible for amending incorrect information on your credit report.  It’s important to reach out to both parties with the information you believe is incorrect and clearly identify each item you are disputing, explain the facts around the error, and request it be deleted or a correction is issued. Also, in most states, you may be eligible to receive a free credit report from the credit bureau, once a dispute has been recorded, to verify your corrected information is listed.

1. Pay Bills on Time

Payment history makes up 35% of your credit score. Late payments, even if they are only a couple days late, can have a major negative impact on the credit score. Setting up payment reminders with your card provider or adding reminders on your phone can help ensure no payments are missed. Most credit card companies have account settings to send alerts via text messages, emails or phone calls when a payment is coming due. You can also set-up your account to pay your balance every month, even if it’s just the minimum due, so you’ll never miss a payment again.

1. Under-use the Card

Amounts owed is another major contributor, making up 30% of credit scores. It’s important to keep credit balances below 30% of the max limit of the account. Using even less will only help the score more. Some studies show that using your card at a 10% utilization ratio will have the most impact on raising the credit score.

Overall, private and hard money lenders may run credit checks to look for a borrower’s ability to repay the loan and credit score requirements can depend on the exit strategy of the investment itself. It’s important to know where you stand and how certain spending behaviors can affect your score.

Both soft and hard credit pulls are offered to all of our brokers on the Bridge Loan Network software. If you currently have these feature and are unaware of how to use them please reach out to our team for training. If you are interested in adding either of these features to your software, please again, reach out to a member of our team.

Submit a free inquiry and the opportunity will be matched with our qualified and approved hard money lenders. The simple application portal digitalizes the lending process enabling brokers and borrowers to upload needed documents, authorize credit checks and have a full loan package for our lenders to review. Apply now!

When investing in real estate, it’s important to have an exit strategy, in the overall plan. This is especially important when choosing to use a private lender for funding. For example when determining the exit strategy ask yourself; is this a property you want to renovate and sell as quickly as possible, or are you looking to hold the property as a rental and refinance with a conventional lender? These are the questions your lender is likely going to ask when determining if you are a qualified borrower, and how much they can lend on the project.

What is an exit strategy?

An exit strategy is how you plan to pay back your loan at the end of the agreed upon term. It’s basically how you will get out, or exit, from the investment property, earn your return on investment (hopefully) and pay back the loan. With a sound exit strategy in the plan before you purchase the property you will be able to prevent any losses, or at least keep those to a minimum.

The Fix and Flip Exit Strategy

With this exit strategy the intent is to purchase a house that needs repairs, complete the renovations and then relist the home on the market for a profit. This method typically produces the fastest short-term profits for investors who want to then repay the loan and move on to another property to fix and flip. The overall exit strategy is to sell the property.

The Fix and Lease Exit Strategy

Fixing and leasing a property means that you are typically planning on refinancing the property with a conventional lender and holding the property as a rental unit. If you plan to refinance the property you will need to have stronger credit scores than a fix and flip exit strategy. Typically for a fix and lease scenario, lenders only lend to investors with a 660-credit score or higher. Your credit score needs to show your ability to secure another loan by the end of the term.

Do Your Homework!

It’s important to know what you are going to do with a property before you buy it. So do your homework! Experienced real estate investors also have a backup plan or a “Plan B” in their investment plan as well. Having more than one exit strategy gives you options and doing your homework before investing shows you those options. Before you invest do your homework. Plan your exit strategy.

Submit a free inquiry and the opportunity will be matched with our qualified and approved hard money lenders. The simple application portal digitalizes the lending process enabling brokers and borrowers to upload needed documents, authorize credit checks and have a full loan package for our lenders to review. Apply now!

Alright, you’ve done all the hard work and completed your latest fix and flip project. You’ve checked all the boxes on your rehab list, and it’s time to list the property for sale.  Before you do, follow these four home staging tips and tricks to sell the flip quickly so you can get started on the next.

1. Clean, Clean, Clean

Construction zones are messy so first thing first, scrub any and all surfaces in the house. This includes cleaning all the windows (inside and out), light fixtures, ceiling fans, countertops, and appliances. Potential buyers look at and touch everything, so make sure the entire house is spotless.

2. Curb Appeal

First impressions count, and buyers will take notice that when a house looks cared for on the outside, the inside must be maintained to that standard as well. This doesn’t mean you have to go all out with extravagant gardens and lawn fixtures, just keep it simple. Mow the lawn (or add fresh sod), powerwash the walkways and siding, and plant simple greenery and blooming flowers. Also, just by adding a welcome mat to the entrance way can help set the tone for what’s to come inside.

3. Maximize the Floor Plan

Playing up the floor plan and square footage in the house can be done with strategic furniture placement. Arrange the furniture around a focal point in the room, like a fireplace in the living room, or where the bed will be in the master bedroom. If the house has an open floor plan, highlight where the separate room set-ups would go.  If there is no open floor plan, highlight the flow from one room to another with the furniture arranged to create an easy, clear path.

4. Set the Scene

Buyers don’t want to have to imagine how accommodating the home will be for entertaining family and friends, so it’s helpful to set the scene in the house. Set the dining room table with cloth napkins, dishes, and a nice centerpiece. If there is a bar area add some wine glasses and decorative bottles. In the kitchen place matching mugs and bowls, and cookbooks on the counters. You can also play up the bathroom areas by laying out matching hand towels, decorative soaps, candles, and faux flowers.

Other helpful tips;

• Choose a neutral color palette with small pops of color for each room.
• Arranging mirrors in strategic places can help brighten up dark rooms and hallways.
• Check out open houses in your area to see the competition to keep the neighborhood’s personality and buyers in mind.

Submit a free inquiry and the opportunity will be matched with our qualified and approved hard money lenders. The simple application portal digitalizes the lending process enabling brokers and borrowers to upload needed documents, authorize credit checks and have a full loan package for our lenders to review. Apply now!

Now that the spring season is upon us, fix and flip investors are hard at work getting their properties ready. When getting your property market ready, many sellers will focus all their energy on the inside of the home despite the crucial role curb appeal plays in attracting potential homebuyers. First impressions matter whether online or in person, and curb appeal is one of the most important aspects that can determine how fast your flip sells.

When improving the curb appeal of your property it’s helpful to think like a buyer. Take a walk around the property and take notes on what may turn off a potential buyer and then address those items.  By improving your curb appeal not only are you attracting more people to your property, but you are also improving the overall value of the home.

Here are 3 simple tips to improve your properties curb appeal:

1. Clean & Repair

Give your property a nice bath. Wash the windows, garage doors, and power wash the deck, driveway, and siding.  If you don’t own a pressure washer, many home improvement store will let you rent one for the day. After you’ve given the home a nice scrub, you’ll be able to see if any trim, siding, gutters, or doors need repainting or replacing.

2. Landscaping

This can be as simple as walking around the yard picking up sticks and dead foliage, trimming trees, weeding gardens and mowing the lawn. It may also be beneficial to plant a few inexpensive shrubs and flowers to fill in empty spaces and to add color to the yard. Be mindful of the budget, as you don’t want to overspend on landscaping, however, little touches will go a long way in attracting potential buyers.

3. Finishing Touches

Check the light fixtures around the property to see if they need to be replaced or updated. Even though most home visits will happen during the day, having attractive light fixtures won’t go unnoticed by the homebuyers. Also, don’t forget about the mailbox. It’s going to be one of the first items people will notice about the property since it has the street number on it. If the mailbox is still in good shape replacing the house numbers so they are clean and visible can be a simple and easy fix. If the mailbox is dented, broken and falling off its post, it may be best to replace it. This won’t be a costly fix though, mailboxes are sold for as little as $20 at a local Home Depot.

Homes with high curb appeal usually list at a higher price point and take less time to sell. A quick flip and a return on the investment means you can go out and find another project to work on

Submit a free inquiry and the opportunity will be matched with our qualified and approved hard money lenders. The simple application portal digitalizes the lending process enabling brokers and borrowers to upload needed documents, authorize credit checks and have a full loan package for our lenders to review. Apply now!

Do you have some other tips to increase your curb appeal and sell your flips fast?

Leave a comment below and let us know what you think!

In real estate investing, particularly fix and flip investing, choosing the right property to invest in can determine if the project will be profitable.  So, before selecting a property to flip it’s important to know what the value of the home will be after renovations, or the After-Repair Value (ARV).

What Is ARV?

Simply put the ARV is exactly what it sounds like. It’s the estimated future value of a property once all the renovations have been completed. With this in mind, a $200k renovation to a home does not mean the home’s value will automatically go up $200k in value.

How to Determine the ARV?

To determine the ARV an appraiser will first evaluate the distressed property to determine its current ‘As Is’ value.  Second, with the rehab list provided by the investor, the appraiser will also determine the approximate value of the property after those renovations have been completed.  Finally, with the rehab list still in hand, the appraiser will look at similar properties in the surrounding area that are comparable to the distressed property after the renovations have been completed. Based on those comparable properties and the similarities to the investment property, the appraiser will then determine the ARV.

Typically, hard money lenders, like those in the Bridge Loan Network Marketplace, will look into the ARV when determining if a loan scenario is a right fit for their company, and to help determine the max loan amount they can lend by having an appraisal done on the distressed property.

The After Repair Value (ARV) Formula:

ARV = (Property’s Purchase Price) + (Value of Renovations in Local Market)

Why Should You Calculate the ARV?

Determining the ARV is significant because it provides real estate investors with a general idea of a property’s value, the value of the renovations and, the resell value of the home for once the renovations are complete. What all of this really comes down to is to help the investor determine if a project will be profitable and to help the lender determine how much they can lend on the property.

Submit a free inquiry and the opportunity will be matched with our qualified and approved hard money lenders. The simple application portal digitalizes the lending process enabling brokers and borrowers to upload needed documents, authorize credit checks and have a full loan package for our lenders to review. Apply now!

Before starting in real estate investing let’s go over some commonly asked hard money lending questions. 

What is Hard Money?

Hard money loans are a specific type of asset-based loans that are secured by real estate collateral. Hard money loans are generally given through private investors or companies.

Who Uses Hard Money?

The main individuals who utilize hard money loans are real estate investors, developers, fix and flippers, and buy and hold investors.  The ability for hard money lenders to fund much faster than a traditional bank helps those who are trying to acquire a property with competing bids, and sellers who want a quick close. In many situations, hard money lenders can issue funds in as little as 10 business days, while traditional banks have a wait time of 30-50 days for funding.

What is the interest rate?

Interest rates charged by hard money lenders can vary lender to lender and depend on the location of the property.  For example, lenders in California are much more competitive with their rates and will usually offer lower interest rates compared to other areas of the US.

Overall, interest rates for the lenders in Bridge Loan Network’s Marketplace range between 5%-15% depending on the lender’s perceived risk of the loan and the location of the property. Due to the risk involved, hard money lenders have higher rates than traditional lenders.

How long is the loan term?

Hard money loans are generally all short-term loans, ranging from 6 to 18 months.  Depending on the specific lender you choose, you can also find long-term loans in the 3+ year range to 30-year loans.  Typically though, the investors who are using hard money are using them for the quick turnaround times and the ability to acquire, renovate, and sell a home all in a couple months.  For investors who are looking to buy and hold a property, these short term loans are considered bridge loans, where investors refinance the property with a traditional lender who have longer terms.

What are typical Loan-to-Value ratios?

Loan-to-Value ratio, or LTV, is the amount of money hard money lenders can lend on a specific property. The LTV is determined by the ratio of the loan amount divided by the value of the property.  Most hard money lenders can lend up to 60% to 75% of the property’s current value. Other lenders lend based off the After-Repair-Value (ARV) of the property. The After-Repair-Value of a property is the appraised value of the property once repairs are completed. Some lenders can offer up to 55% to 75% of the ARV.

Are there costs associated with Hard Money?

Lenders typically require Title Policy, Insurance, and Appraisal fees which are paid by the borrower, and some lenders may have application fees.  There are currently no lenders in the Bridge Loan Network Marketplace who charge any upfront fees during the pre-approval and approval process such as an application fee. Though, the borrower is responsible for third-party fees such as appraisals or project feasibility studies.

How much does the credit score really matter?

Most hard money lenders do run credit checks, but mostly to look for the borrower’s ability to repay the loan. Typically, credit score requirements depend on the exit strategy of the investment. If the borrower intends to buy and hold rather than fix and flip the property, lenders will pay closer attention to FICO scores.  Lenders may also review the borrower’s history to determine if there is a repeating pattern of poor financial management or if an isolated incident affected the individual’s credit.

Submit a free inquiry and the opportunity will be matched with our qualified and approved hard money lenders. The simple application portal digitalizes the lending process enabling brokers and borrowers to upload needed documents, authorize credit checks and have a full loan package for our lenders to review. Apply now!

Getting started in real estate investing can present you with a whole new vocabulary. Luckily, we’ve compiled the following list of industry terms which you are likely to hear if you jump into the hard money/ real estate investing space.

Terms:

After Repair Value (ARV) – This is an estimate, based on comparable properties near the subject property and the value of the home after it has been renovated using the rehab list and budget.

Appraisal – A professional assessment to determine the estimated current market value of the property as well as the worth after the renovations are completed.

As-is Value – The value of a property as it exists now, without any renovations or improvements.

Bridge Loan – Short term financing which bridges the gap until another financing, typically traditional financing, is acquired.

Collateral – This is a property or other assets that a borrower offers as a way for a lender to secure the loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup its losses. Hard Money Lending is asset/ collateral-based lending.

Commercial Use – A property that is only for business investing purposes and will not have the owner of the property living in it.

Default – Failure to comply with the terms of an agreed-upon loan, including timely repayment.

Distressed Properties – Properties that are in extremely poor condition (possibly even in foreclosure). These properties are great contenders for fix and flip investments.

Draw Schedule – A -re-payment plan for construction or renovation projects. Typically, an inspector will determine the scope of work completed using the rehab list, and the lender will distribute the funds based on that value of the work completed.

Exit Strategy – How the borrower plans to pay off the loan. It’s also important to the lender that the project will also turn a profit. Examples of exit strategies include selling the property and refinancing traditionally.

Fixed-Rate Loan – A fixed-rate loan is a loan in which the interest rate or scheduled principal and interest payment amount does not change throughout the course of the loan.

Guarantor – A person who agrees to take responsibility the loan and for any remaining owed amounts on a loan should there be any.

Hard Money Lender – Hard money loans are a specific type of asset-based loans that are secured by real estate collateral. Hard money loans are generally given through private investors or companies.

Interest Rate – The amount (a percentage) that a borrower has agreed to pay a lender as the price of borrowing money. Typical interest rates for Hard Money Loans are between six and thirteen percent.

Loan Management System (LMS) – The intuitive Broker Loan Management System from Bridge Loan Network digitalizes the process enabling brokers to upload and store their client’s information once for multiple lenders to review.

Loan Origination System (LOS) – Loan origination is the process where a borrower applies for a loan, and a lender processes that application. Origination generally includes all the steps from taking a loan application up to disbursal of funds. The loan origination system is an online portal where lenders can process loans, upload documents and communicate with the broker or borrower.

Loan Points – An origination fee. One point is equal to one percent of the principal loan amount. Typically, Hard Money Lenders earn between 1 and 3 points, and brokers can match the lender with points.

Loan-to-Value Ratio (LTV) – The loan amount for the property divided by the appraised market value of the property.

Mixed Use – A property that has both residential and commercial aspects in it.

Prepayment Penalty – A fee added to the loan for paying off the loan before the agreed end date.

REO (Real Estate Owned) – A process where ownership of the property was transferred from an original owner to the owner’s lender through the foreclosure process.

Referral Fee – A fee paid by one Private Money Lender to another for referred business.    Referral fees are common for commercial loan transactions between hard money lenders, brokers and investors.

Refinance – Replacing an existing loan with a new one. Typically, investors refinance to get a lower interest rate on their loan and/or to leverage real estate value for cash to invest again.

Return on Investment (ROI) – A measure used to calculate the success of an investment. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The ROI is expressed as a percentage or a ratio.

Scope of Work – This is an outline of all the renovations scheduled to be completed before the house is sold, as well as their anticipated costs. Typically, this is considered with the renovation list when applying to a Hard Money Lender.

Simply stated, how your lending process is structured holds a significant role in how efficient, compliant and quick your organization is in processing a loan from application to closing.

Quite often we meet individuals whose main form of a “Loan Origination System” or “Loan Management System” is with many, many excel files and back and forth email chains.  But what happens when a file is deleted, or an email chain becomes so long you can’t find the information you need for the loan file? By having one secure location each team member can access for all loan documents and pertinent information is how you can bring your lending business to the next level.

We’ve built our Loan Origination System (LOS) and Loan Management System (LMS) based on feedback from other lenders and their processes, so we could help streamline them. With Bridge Loan Network’s LOS, we can integrate your loan application right into our software. Additionally, your brokers and borrower can do more than just apply for a loan. They’ll be able to add in required loan documents and authorize a credit and background check before you even look at the file. You’ll also be able to track the loan from beginning to end, without the use of paper documents and excel files.

See the difference for yourself, give Bridge Loan Network a call (860.432.9700) to learn how our Loan Origination System and Loan Management System can improve your lending process.

Many real estate investors are seeing an increasing demand to add technological or “smart” upgrades to their projects. This is attributed to both an increase in desire from prospective tenants or homeowners and to the additional value, these smart upgrades add to the properties.

According to Consumer Reports, smart home features can boost your home’s resale value by 5% and a survey of Realtor’s showed that 42% of clients were interested in smart home devices. Investors can target this market by incorporating smart upgrades to their investment properties.

Below are smart home benefits for both investors and buyers/renters:

Smart Homes are Safer

The most common smart home add-on is a security device. This can include the use of cameras and sensors that can detect a break-in, smoke, fire, carbon monoxide, moisture levels to detect flooding and other items to keep you and your property safe. Smart home security devices can even be as simple as a smart lock, where you can lock your front door with an app on your phone. You’ll never have to wonder now if you forgot to lock up for the day, whether it be your primary residence or flip project. Both of these devices will not only be a selling point for prospective home-buyers but also give landlords a peace of mind about the safety and security of their properties.

Smart Homes Save Money

Smart thermostats allow you to control the temperature in your home at all times, including when you are not on the property. According to a recent study by Nest, a smart thermostat company, smart thermostats can save homeowners an average of 10%-12% on their heating bill and an average of 15% on their cooling bill, which can translate to over $170 saved in a year. Saving money is a huge selling point for many buyers, and as a landlord, you can factor these savings into the total rent cost maximize profits.

Remote Monitoring

With these new smart home devices listed below, home-owners and landlords can keep an eye on their property at all times. Now as an investor you don’t have to check in on a vacant property or your current flip project every day to ensure there is no flooding, freezing pipes, break-ins, etc. Now you can check your phone and connect to the smart devices on the property. Giving landlords, investors, and home-owners a peace of mind.

Types of Smart Upgrades:

Smart Thermostats

Source: https://store.nest.com

“The Nest Learning Thermostat was the first thermostat to get ENERGY STAR certified. It learns what temperature you like and builds a schedule around yours. And independent studies showed that it saved people an average of 10% to 12% on heating bills and 15% on cooling bills.”

Smart Door Locks

Source: http://august.com/products

“Lock and unlock your door, control keyless access, and keep track of who comes and goes, all from your phone. They’re discreet and can be installed inside of your door, so your door’s exterior hardware does not change. Use your existing keys any time.”

Moisture/Temperature Sensors

Source: https://www.wallyhome.com/

“Receive instant alerts via text, phone call, email, and push notifications on your mobile device when a water leak is detected, a temperature or humidity reading is outside a desired range, or if a window is left open.”

Video Doorbell

Source: https://ring.com/

“Ring lets you adjust your motion sensors so you can find the ideal setting for your home. You’ll get instant alerts when motion is detected, allowing you to protect your property from the comfort of your smartphone.”

Bridge Loan Network is a leading, online portal in the asset-based lending space. By providing a centralized platform for submitting deals, Bridge Loan Network is technology that connects the private lending industry. 

Do you have any other smart home devices you would recommend?  Share your recommendations in the comments!