How Hard Money Can Make You Killer Profit

Hard Money

Hard Money as a Profit Maker

Using Hard Money as a Profit Maker is fairly easy. It’s running the numbers so it makes sense that isn’t.

If you haven’t gotten a mentor to help you or don’t have calculators, (which by now you should have searched out online; there is a ton of them) you’re shooting blind and your profits will get eaten up quickly.

And it’s not just about running numbers on a calculator either. It’s about knowing your risk and how much you are going to make on the back end.

What’s a good “rule of thumb” for Hard Money

A good rule of thumb as far as profit margins should be about a net of 30% or a cap rate that gives you a good spread on your investment. (GREEK ANYONE?)

Let me explain:

30% net profit is what you have left after paying off your finance and equity partners and counting all costs involved in the transaction of securing the property. The rest of the costs (Title, escrow, commissions if any, other miscellaneous costs) would probably bring you down to about 20% or so. This is really more for rehabbers.

Hard Money

Become a Private Lender

On the buy & Hold side, many look only at the return of a deal rather than the risk. Beware! Just because it says there’s a cap rate of 12%, doesn’t mean that’s what you’ll end up with in cash flow. Using Hard Money is a great way to leverage risk off of you, however it can hurt you as well if you’re not careful on figuring out risk in an investment. (if you’re not sure how to figure on that, we’d be happy to discuss your project and see whether or not you are looking at a viable deal.

Your biggest challenge is to be sure you have something that has a great return after paying expenses, not just great returns.

Know your Hard Money Lender

I see a lot of newbies calling around and asking the same questions as if it’s on the lender that they have to prove their worth working with. (I always get a chuckle out of that) Hard Money Lenders are there to serve you, sure. Remember too though, that they are more like a partner than just your servant. You’re going to have to qualify with them too. And if you don’t know how to figure out the above, it won’t matter how good a lender they are, you’re not getting that Hard Money anytime soon.

Invest in education. It’s a good thing, however, don’t just take that “guru’s” advice and goo out and qualify the lenders, qualify your deals.

When you have a good deal with low risk and great return, you’ll have money knockin on your door. Hard Money that is.

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Hard Money

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