When it comes to Texas hard money loans, one of the big factors banks will look at is your debt to income ratio or DTI. But what if you want to buy into rental properties to improve your income situation? If that is your case your pretty much SOL if you rely on the bank. But there is another way.
There is another way to finance rental properties called hard money. With hard money, if a deal is good enough, you can qualify even if you don’t earn a “steady,” paycheck.
Of course, hard money doesn’t come cheap. These loans come with double-digit interest rates, so you need to pay them back quickly.
Given hard money’s short term nature you might think hard money, and long term rental investments don’t mix. But if you plan ahead and aim to refinance, hard money can be an excellent way to finance the purchase of a long term rental investment.
There’s a simple, profitable method to secure long term rental properties with hard money.
• Buy: buy a discounted property. Look for decrepit properties that need some work, and take on short term hard money financing which covers both the cost of purchasing the rental and most of the cost of,
• Rehab: Schedule any rehab work on the property within the term of your initial loan. Your goal here isn’t a quick resale, as if you were flipping a house, but you want the property to appeal to potential long term tenants because the next step in this process is to,
• Rent: After the property is in decent condition seek out high-quality long term tenants. You should try to get them to agree to a long term lease because having a long term tenant is essential so that you can,
• Refinance: Having a renter on board and having a steady income from your rental property, will finally allow you to qualify you for a long term conventional loan.
Refinancing is the most critical step of this strategy. After you buy the rental, rehab it and get a renter on board you need to refinance before your initial hard money deal comes due.
So this strategy isn’t exactly risk free.
But, that bit of rehab you did should have boosted the properties appraised value enough so that refinancing covers your outstanding loan balance and any interest payments. After you refinance and pay back your initial loan, if you play the numbers right you can basically secure properties for free using this method.
In short, using hard money to finance rentals is as simple as BRRR. If the banks giving you the run around because of your income situation consider using hard money to:
• Buy a cheap property
• Repair it to boost its value
• Rent it out so that you can
• Refinance to pay off the initial hard money financing.
If done right you could pay nothing for your next rental property.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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