Hard Money Facts

Real estate investors who are consistently moving inventory right now aren’t necessarily spending more; they’re making smarter, more targeted decisions about where to invest their capital.

Here’s what profitable home renovations look like in practice.

From a lending perspective, the answer has evolved. It’s no longer just about the property or even the projected after-repair value. Today, what makes a real estate deal fundable is a combination of the deal, the borrower, and the execution plan behind it.

That’s why many experienced investors are focusing more attention on what some call “invisible inventory.” These are off-market real estate deals that never officially hit the MLS but still change hands every day. For investors looking for fix and flip opportunities or long-term rental properties, these off-market investment property deals make for less competition, greater negotiating flexibility, and stronger potential returns. 

If you are someone who regularly works with real estate investors, partnering with the right lender can elevate the value you bring to your clients. Let’s break down what this looks like.

Is your stomach turning every time the Fed raises their rates? You’re not alone. America is facing an affordable housing crisis; demand for affordable housing is high, but the high interest rate environment created by the Fed is producing gridlock when it comes to supply. You may be thinking it’s a good time to circle the wagons and wait out the storm. A defensive stance like so is not uncommon in times of economic uncertainty. But if history has a way of repeating itself (and it does), then now is the time to hunt for opportunity.

Does this scenario sound familiar?

You find an amazing investment property. Your heart is set on it. You scramble to find a private lender to close the deal—and things fall apart. Perhaps the lender denies you because it’s not one of their target markets. Or you can’t get them on the phone and another investor beats you to the punch. Or maybe—most infuriatingly—a Wall Street market turn makes your lender lose confidence and you’re left at the closing table without a closed deal wondering…. where did I go wrong?

There’s only one way to prevent every one of these scenarios: begin with the end in mind. (This is also one of Stephen Covey’s seven habits of highly effective people.) Select your lender before you look for properties, and do so with scrutiny. Choosing your lender first allows you to position your dominos so you can knock them all down, flawlessly, on closing day.

There are numerous private lenders out there. So how do you begin to compare? Ask the following questions, and the right relationship will become apparent:

Here are some things to consider when budgeting to flip vs. hold.

What is your private lender’s source of capital?

Few investors pay much mind to where their lender’s cash comes from. But you should, because many private lenders are backed by Wall Street sources of capital. So when the capital markets are all up and to the right, these private lenders close a high number of deals. But when the winds of Wall Street change—which they do from time to time—they cancel deals, alter terms or close up shop until the wind blows over leaving you, the investor, stranded.

Look for a private lender that uses their own money: a balance sheet lender. Residential Capital Partners is a balance sheet lender that controls its own destiny as well as yours through use of its own capital on each closed deal. That’s how we thrived during the 2008 housing crisis and throughout the 2020 pandemic. We approved countless deals for investors whose initial lender changed the terms of the deal at the closing table or flat out walked away from the closing table during a bear market.

Rising interest rates and inflation shouldn’t deter you from acquiring long-term rental properties.

In the current market, it can be difficult to determine whether now is the right time to acquire long-term rental properties. Interest rates are still on the rise. According to Bank Rate, the current average rate for a 30-year fixed mortgage is 7.04%, up 12 basis points since September 30, 2022. While inflation appears to be leveling out on some fronts, the buying power of average American families cannot withstand the high cost of money today. This is forcing many Americans to step back and assess the feasibility of buying a home right now.

So, why is it still the right time for the SFR investor to acquire long-term single-family rental properties?