Do you want get more deals funded by private money lenders in PA?
Running a successful real estate investing business is a juggling act between cash coming going out and cash coming in. Flipping businesses don’t generally fail from a lack of flips, but rather because they run out of cash. Real estate investors who build up cash reserves are better able to deal with project overruns, drops in housing prices and tenant vacancies. Cash in the bank is also the secret to getting more deals financed by private money lenders in PA.
You’re more likely to weather the storms you will encounter in your real estate investing business if you have put away money in the bank. Cash reserves buy you more time if things go wrong and give you more opportunities to acquire greatly discounted properties. If you were a hard money lender in Pennsylvania, wouldn’t you be more likely to lend money to this kind of real estate investor versus the flipper trying to run rehabs using 100% other people’s money?
How to build up your cash reserves
Three months of cash reserves is a minimum if you’re wanting to scale your flipping business and become a serious a player in the housing industry. Given the indications that housing values could be turning downward in 2019 or 2020, it’s a good time for real estate investors to work on increasing their cash reserves from three months to six months (or more).
1. Optimize the selling price of your flips
Rehabbers don’t always get all the money they could out of their flips. Rehabbing houses to sell to other investors to rent out can give you a quick return, but it’s important to minimize your expenses and rehab only to rental level quality. Stop designing each home and standardize your colors and finishes.
On the other hand, if you’re rehabbing to resell to new home buyers, would spending an extra $2,000 on the kitchen rehab raise the retail price by $8,000? Improvements to finishes can often pay for themselves three or four times over. If staging the house for showing can increase the resale value by 8 to 10%, doesn’t that make it worth doing?
2. Sell under-performing rental properties
Are all the rental properties in your real estate portfolio cashflowing? How many of them are close to break-even and could even cost you money if they had a vacancy or required a major repair this year?
Sell these under-performing properties and you will be freeing up cash to build up your reserves and scale your flipping business.
Getting loans from private money lenders in PA is going to leverage your capital and enable you to do more deals, but the surprising secret to getting even more deals funded by lenders is to build up your cash reserves. Give lenders confidence that you’re running a solid operation that will be scalable as they fund more of your flips.