When it comes to real estate investing, a thorough understanding of the capital stack is essential for success. The capital stack is the collective term for the various sources of capital used to finance a commercial real estate project. Understanding the different parts of the capital stack and how they work together can help you make informed decisions when investing in commercial real estate. In this blog post, we’ll discuss the components of the capital stack and how they come together to fund a development or redevelopment project.

What is a Capital Stack?

The “capital stack” refers to the different types of financing used to fund a given CRE (Commercial Real Estate) investment. It is the combined set of all financing instruments that investors use to acquire and develop CRE investments with mention to their risk and return profile. The capital stack for any real estate transaction typically involves numerous parties and a variety of structures, offering investors creativity and freedom in how they structure the deal. The instruments used in the capital stack are commonly referred to as common equity, preferred equity, mezzanine debt, and senior debt. Understanding the potential and risks for each layer can help investors understand how to build wealth by adequately funding their commercial real estate deals.

Senior Debt

Senior debt is a critical component of the capital stack in commercial real estate investing, with secured debt providing lenders a sense of security and investors an opportunity to build wealth. Senior debt is secured by a mortgage or deed of trust on the property itself, making it the base of the capital stack. If the borrower fails to pay, the senior debt holder can take over the property and recoup their investment by selling the property or selling the non-performing loan. However, this lower level of risk comes with a lower yield than all other positions on the capital stack.

Mezzanine Debt

Mezzanine debt comprises the next layer of the capital stack and follows the senior debt in payment priority. After the developer has paid operating expenses and senior debt, the borrower must pay the mezzanine debt. Because mezzanine debt sits above the old debt in priority of payment, this higher risk to lenders leads to higher returns, as borrowers typically pay higher interest rates for mezzanine loans. 

For mezzanine loans, if a borrower fails to pay and defaults, the lender can also take possession of the property, typically agreeing with the senior debt holder on how each entity’s rights will be protected.

Preferred Equity

Because of the creative potential of preferred equity investments in the capital stack, it is impossible to define one shape it may take. Preferred equity is very flexible, allowing investors to take different positions. For example, a “hard” preferred equity position functions similarly to a mezzanine loan with a fixed maturity date and payment schedule. A “soft” position will likely include returns based on the project’s performance. Understandably, hard preferred returns range similarly to mezzanine loans and share similar rights in case of default. In contrast, soft preferred equity holders have fewer rights but the potential for higher returns –especially for projects that perform better than anticipated because this equity is “preferred.” It is paid before any common equity distributions can be made.

Common Equity

At the top of the stack and the riskiest position, common equity is the most profitable position on the stack. Typically, the lender or other equity investors require the borrower to invest some portion of their own capital in the project, thereby having skin in the game and a vested interest in seeing the project succeed. In addition, common equity positions also require that every other capital investment be repaid before common equity sees returns. However, if the property performs well, common equity investors often have no limit to potential returns. Common equity returns can also be creatively divided between investors, but often the developer or sponsor of the project sees considerable common equity returns.

---

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loan products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.Categories

Securing funding for commercial real estate deals is an essential part of the process. Knowing the ins and outs of the various financing options available can make the difference between a successful deal and a failed one. In this blog post, we’ll discuss the fundamentals of financing commercial real estate deals and what you need to know to make an informed decision.

Commercial Financing vs Residential Financing

Regarding real estate investing, there is a significant difference between commercial and residential financing. Residential loans are typically assigned to individual borrowers, while commercial loans are typically granted to business entities. As for loan-to-value ratios, residential loans allow high loan-to-value ratios of up to 100%, while commercial loan-to-value ratios range between 65% – 80%. When it comes to the length of the loan, commercial loans range from 5 to 20 years, while the most popular residential loan is a 30-year fixed mortgage. Understanding the differences between commercial and residential real estate financing is important for any investor looking to get involved in real estate investing.

Types of Commercial Financing

Understanding commercial real estate financing basics requires knowledge of the different types of financing available to investors. There are many financing options for commercial property and construction projects, each with its unique requirements, benefits, and drawbacks. Here we will detail only a few options.

Bridge loans are a type of short-term real estate financing that can be used to cover cash flow gaps when financing is needed but not yet available. These loans are typically used when a company must repay one loan but hasn’t received the new, permanent loan yet. Bridge loans are typically for a short period, up to one year or less, and are not meant to be a long-term funding solution. Bridge loans can be used to cover the costs of purchasing a property, as you wait for another property to sell or for another type of capital influx to kick in, or to smooth over the refinancing process, as you wait for funds from your new loan to deposit.

Conventional Bank Loans are another option for real estate financing. These loans usually offer competitive interest rates and can be used for the purchase of a commercial building or the financing of any improvements or renovations. It often requires a larger down payment and has stricter credit requirements, as well as qualification requirements that vary based on the lender. Securing financing from a bank can be more difficult than other avenues.

Hard Money Loans are another type of commercial real estate financing that offers fast access to capital with minimal paperwork. These loans are backed by the property itself rather than by the borrower’s creditworthiness, making them a viable option for investors in need of a short-term solution.

Finally, Joint Venture Loans are another type of commercial real estate financing that can be used to fund larger projects. Joint venture loans involve two or more parties working together to finance a real estate project, often with one party taking a majority stake in the project. This type of financing can be an effective way to secure funding for larger projects without using personal assets or taking on debt. 

Important Loan Ratios

When it comes to investing in commercial real estate, understanding the key loan ratios is essential. Two of the most important ratios are the Loan-To-Value-Ratio (LTV) and Debt-To-Service-Ratio (DSCR).

The Loan-To-Value-Ratio (LTV) is calculated by dividing the amount of the loan by its purchase price. Those with lower LTVs will generally qualify for better financing rates. The LTV ratio is also used to determine how much capital will be required from the investor. For example, the LTV for a $70,000 loan on a $100,000 property would be 70% since $70,000 ÷ $100,000 = 0.7.

The Debt-To-Service-Ratio (DSCR) is calculated by dividing the property’s annual net operating income (NOI) by its annual mortgage debt service. A DSCR of more than 1 indicates that the property has positive cash flow, while a DSCR below 1 means that the property has negative cash flow. When it comes to real estate financing, lenders usually seek a higher DSCR to ensure cash flow. For example, a property that has $100,000 in NOI and $70,000 in annual mortgage debt service would have a DSCR of 1.42 since $100,000 ÷ $70,000 = 1.42.

---

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loan products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.

Commercial real estate may deliver the appreciation and stable returns most investors are looking for, even during economic uncertainty. The volume of capital invested in commercial real estate further demonstrates its proven worth as an asset. It also may offer investors a more diversified, balanced, and scalable approach to real estate investing. Whether you’re considering investing in an apartment complex, office space, light industrial, or a self-storage facility, here are a few tips to get you started in commercial real estate investing.

1. Establish Your Goals

When it comes to investing in commercial real estate, it’s important to establish your goals beforehand. Consider why you are investing in commercial real estate – are you looking to build long-term wealth or seeking a shorter-term return on your investment? Additionally, think about what kind of returns you are expecting and the level of risk you are willing to accept. These are all important questions to ask yourself before making a commitment to a commercial real estate investment. Taking the time to answer these questions will help you make an informed decision that is tailored to your financial goals.

2. Make a Plan

A successful long-term investment strategy requires careful planning. By mapping out your plan, you can ensure that you stick to your goals and don’t make decisions impulsively. This includes deciding what your buy box looks like – what types of assets you want to focus on and invest in. Knowing this ahead of time can help you stay focused on the right investments while also making sure you are not overextending yourself financially. Planning your strategy out in advance is key to creating a successful and sustainable investment portfolio.

3. Find Deals

When it comes to finding commercial real estate deals, relationships, and networking are key. Developing trust and credibility is essential to any successful real estate investment, so build strong relationships with brokers. You can start by following through on what you say you’re going to do and running your business professionally. Building a reputation with brokers as someone who does what they say and keeps their word will ensure you’re always at the top of the list when it comes to new deals. Take the time to nurture these relationships, and you’ll be sure to find the best deals for your commercial real estate investment.

4. Perform Due Diligence (or Find Someone Who Can Help)

Performing due diligence on a property requires a great deal of education, training, and professional opinions. It is important to remember that the investment may be portrayed in a positive light, but it is up to you to assess it with clear eyes and decide if the value is truly there. This can include research into local markets, investigating the area’s future development potential, understanding the building’s history, inspecting the property for structural integrity, and consulting with local experts for their opinion. Taking the time to perform due diligence is essential to ensuring that you are making a smart and informed investment decision. But what do you do if you find a deal where the due diligence is beyond your abilities? This is where networking is key. Partner with someone who is knowledgeable or brings in an expert to show you how it’s done. 

What is next?

Finding the right financing for a commercial real estate deal is critical to making your project a success. In our next blog post, we will discuss different types of funding available to real estate investors and entrepreneurs, as well as provide insight on how to secure financing. With the right financial support, you can tie all the pieces of your deal together and take your project to the next level. Stay connected with us to learn more about the different types of commercial real estate funding available and how you can secure it for your own projects.

---

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loan products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.Categories

What comes to mind when you think of real estate investing? For many, it’s rehabbing single-family homes or managing rental properties. And while these are great investments, many investors may be missing out on opportunities in commercial real estate. 

Why diversify into commercial? Here are three reasons why you may consider this asset class.

Income Generation

Commercial real estate (CRE) has the potential to offer consistent income, often higher than traditional rental properties. The earnings potential is one of the most alluring reasons investors transition from traditional real estate investments into commercial properties. Where single-family homes see annual returns between 1% to 4% (at best), commercial properties often see annual returns off the purchase price between 6% to 12%, far outperforming smaller asset classes. 

Hands-Off Maintenance

When you rent a single-family property (or even a multifamily apartment complex), repairs and maintenance of the property’s condition are always the investor’s responsibility. With a large enough rental portfolio, maintenance management can be costly and time-consuming, continually pulling investors into the daily management of their assets. While there are variations, CRE often operates under Triple net leases. With a triple net lease, the business renting the property is held responsible for remodeling, repairs, and general maintenance, while the investor is only left making the mortgage payments. Even common areas of the property can be improved through CAM charges (common area maintenance fees), making the expenses and the process of maintaining a property simpler for CRE investors.  

Hedge Against Inflation

Defined as a decline in purchasing power over time, inflation has driven many investors across asset classes to consider how they can best protect (and grow) their hard-earned cash. CRE has been known to generate consistent cash flow, making it a reliable hedge against inflation. Why does commercial real estate continue to perform, even during economic instability? Commercial properties are closely tied to consumer markets, where rising consumer prices quickly correlate to rises in rents and values in CRE (lease agreements can even include annual base-rent adjustments tied to CPI). Commercial real estate is built to be quickly adaptable to consumer markets, making it historically a cushion against inflation that investors can count on.   

These are only a few of the benefits CRE can offer. Despite the increases in economic uncertainty, commercial real estate provides exciting opportunities to earn more cash, spend less time and money on repairs, and hedge against inflation. These key differences may help investors take their business to the next level. 

---

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loan products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.

Although uncertainty remains in the real estate market and broader economy for years ahead, there are opportunities for real estate investors to stay active in the market while investing wisely. As the market continues to correct from the highs of a seller’s market in prior years, raised rates and falling affordability are likely to continue to soften demand for housing, bringing prices down. No one has a crystal ball for what is to come, but investors want to know how to protect their businesses during uncertain times. What strategies can you utilize to remain active and profitable as the market softens?

1. Buy Deep

For most investors buying deep has always been an important strategy. However, the seller’s market of the past few years made buying discounted properties rare in some markets, leading investors to pay higher prices — banking on above-asking offers and bidding wars to turn a profit. But as fewer buyers enter the market and sellers lose power over their pricing, investors are better positioned to negotiate deeper discounts. Regionally, many factors will drive how that local market responds, so investors should study the market they are investing in. What changes in pricing are you seeing? Is there more opportunity to leverage with sellers and pay less for an investment property? Paying too much for investment may lead to loss as regions shift away from a seller’s market. If you buy deep, even if the market declines, you could have purchased at a price that allows you to turn a profit.

2. Flip with Caution

Flipping is a risky proposition, even more so during times of uncertainty. While there may be large profits in rehabbing properties, there’s also a chance that you could lose big, especially during market shifts. Experienced rehabbers know that completing a project on time and on budget is essential, no matter what the market, as unforeseen repairs and additional holding costs will burn away profits. This is especially true during market changes, as the rapid appreciation of prior years is less likely to be seen. While there is always opportunity in rehabbing, extra caution and conservative underwriting are prudent when markets shift.

3. Invest in Less Volatile Markets

While some heated markets like Austin or Phoenix saw high post-pandemic appreciation, these may also be areas where prices fall off faster as the market shifts. Avoiding overheated markets may help protect investors. Where, then, should investors look? Many factors drive a real estate market, including population growth, wage growth, economic diversity, and average income. Rather than following the excitement of the hottest markets, consider investing in smaller, less well-known cities with a predictable history of growth factors.

---

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loan products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.

One of the most common questions from people considering real estate investing is whether they should focus on residential or commercial properties. There are many factors to consider when making this decision, but here’s a quick breakdown of some of the significant differences and benefits of both real estate investing avenues.

What Is Residential and Commercial Real Estate? 

Residential real estate is all single-family homes and one to four-unit rental residences. Duplexes, townhomes, and quadruplexes all make up residential real estate. These properties are typically leased and sold to individuals and families and often have less tenant turnover. This means that residential real estate can be more predictable but also tends to see lower returns. 

Commercial property is anything with five or more units. Retail, industrial, office, self-storage, larger multifamily (of 5+ units), hotel, and others are considered commercial real estate. Commercial properties are typically leased to businesses or corporations and see higher returns at greater risk. 

Benefits of Investing in Residential Real Estate

1. Cost to Get Started

Residential real estate is generally more affordable than commercial real estate, allowing anyone the opportunity to invest. This lower cost of entry means investors can develop their businesses and grow their wealth while not taking on a project that requires more capital or experience than they have. Investment clubs allow investors to learn and grow without taking too much risk. 

2. Stability

People will always need somewhere to live, right? Investing in residential real estate may let you reach buyers and renters from a large pool to find the best tenant for your rental or the highest bidder for your rehab. With an excellent tenant screening and rental management system, your property can stay rented and cash flow for the long term. And while every investment carries risk, residential real estate performs better than commercial real estate during an economic crisis, as housing is always in demand.

Benefits of Commercial Real Estate Investing

1. Better Returns

The greater the risk, the greater the reward, right? Commercial properties tend to have higher acquisition costs and are more at risk during economic downturns. Properties tend to be larger and more complex, with the success of the investment tied to the success of the businesses that occupy them. However, the opportunity to add value to properties through re-tenanting or redeveloping may generate serious returns through just one deal. 

2. Qualified Tenants with Triple Net Leases

Anyone who owns a rental knows that finding tenants who will care for a property like theirs can be a challenge in residential real estate. A commercial property attracts business owners and corporations with a vested interest in their place of business looking its best and tends to respect a property. Commercial real estate lease contracts are often Triple Net Leases, which means the lessee must handle nearly all property expenses, including real estate taxes. This takes the burden of maintaining a property off the plate of the commercial investor. 

Bottom Line

Deciding between residential and commercial real estate investing is a big decision requiring thoughtful education and planning to succeed. Consider the time you are willing to invest and the risks you can take as you evaluate which investment type is right for you today. Ultimately, residential and commercial real estate are excellent investments that may bring you closer to financial freedom.

---

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loan products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.

As the new year brings changes and uncertainty to the real estate market, it can also bring opportunities. An ongoing challenge for all real estate investors is finding investment deals, whether off-market or not. Will a changing market mean changes to the way investors find deals? There is no doubt that we will see changes in the market as a result of rising interest rates, inflation, and new technologies. Even so, marketing for deals in 2023 can include some tried-and-tested strategies as well as new, creative ways to reach potential sellers.

1. Online Marketplaces

The MLS is always an option, even with the market changes occurring nationwide. Work with a knowledgeable realtor who can send you updates from the MLS when a property that fits your criteria hits the market. Browse expired listings, and you might find a great deal. The MLS is always changing, so be sure to check regularly for new listings and updates on the status of existing listings.

LoopNet, CREXi, and other niche marketplaces are all online locations where you can find properties for sale as well. While they might not have the same selection as a traditional MLS, they can help you find commercial assets that you may want to invest in. If you’re looking to diversify your portfolio, you can find many different types of properties here. You can also search marketplaces that allow investors and brokers to connect, giving you a wider network of professionals to reach out to as you build your business.

2. Participate in Real Estate Clubs

Every week Real Estate Networking events are hosted nationwide, and you can find them easily by following other investors you know and trust as well as searching online for local REIAs. The next time you see an event, go! You will learn a lot from others in your field who have been doing this for years. Networking events offer opportunities to pitch deals, hear case studies, and learn about real estate services that can help you grow your business. You can also meet other investors and learn from their mistakes and successes. If you’re not sure how to get started with your first deal, talk to everyone you know who has experience in the field. Networking is key when investing in real estate because it helps you find out what’s going on in your area as well as connect with professionals who are willing to help you out along the way.

3. Ask Property Management Companies

Although it is not a widely used way of finding deals, connecting with property management companies is just one strategy that can prove profitable in a changing market. These companies already have insight into the asset, the tenant (or tenants), and the condition of the property. Due to their professional relationship with the owner, property management companies may know if an owner is willing to sell and can connect you if the asset fits your buying criteria. They may also be able to give insight into the lease terms and the current owner’s financial situation. Property management companies may also be able to give you a better understanding of changes they see in the local market that will help you decide about investing in the property. As always, building a network of knowledgeable real estate professionals is key to finding deals in every market. 

Bottom Line

There are many more ways to market, such as driving for dollars, direct mail marketing, and more. Having a network of real estate professionals, as well as tools and marketing strategies to find deals, are an essential part of building your real estate business. Investors will want to know how you are finding deals in 2023.

---

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.

For those looking to start investing in commercial real estate properties, basic foundational knowledge is necessary to know where to begin and how to manage such lucrative investments. Here are the four fundamentals investors should look for to find sound, sustainable, and profitable commercial real estate investments.

1. Finding the right strategy

Like residential real estate, investing in commercial properties requires due diligence. Before investing in any property, you must prepare a plan to ensure the purchase has a beneficial impact that aligns with its objectives. These complex real estate transactions will help you understand if the potential property fits the right investment strategy for your financial needs and goals.

2. Conducting the right amount of due diligence

Another significant barrier to entry when considering commercial real estate investing is not performing enough due diligence. Due diligence includes looking into the property’s financial background, the property demographics, the property class it falls under, and how many times it has been resold in prior years.

Follow commercial trends closely and learn to predict better which types of properties will be sought after. This will help you get the best bang for your buck and increase your success in real estate investing. Also, always look for new vacancies and use commercial trends to determine rent prices.

3. Understand Value Add Opportunities

One of the best advantages of commercial real estate investment is the ability to influence the value of your investments. Look at the potential for adding value by determining whether there is room for improvement.

A few questions that should be asked to determine potential value-add opportunities include:

• Can additional leasable square footage be added?
• How can rents be increased?
• How can expenses be decreased?

4. The role of property management for commercial buildings

The role of property management in commercial real estate is different from residential property management. A commercial property manager will have other responsibilities depending on the property type. 

Additionally, how much is expected from a property manager will significantly influence their pay rate. If you take a wholly hands-off or passive approach, then the cost of property management will be higher.

Bottom Line

Investing in commercial properties for beginners can be a daunting process. However, it offers several advantages, including higher income potential, lower vacancy rates, steady cash flow opportunities, and high-grade tenants. With the help of an expert and performing your due diligence, you’ll be well on your way to earning passive income through commercial real estate.

---

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can lend more money to investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loan products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.Categories

A good location can’t be overlooked in real estate, and it is one of the most important features determining the property’s value. However, many factors come into play to make a location good or bad. Let’s look at the different factors real estate investors should consider when choosing a location for their investment property.

1. Financial stability

Look for cities or neighborhoods with stable economies and low unemployment rates. These areas can offer more returns than others, making them the best locations for investment properties. Investors should also look for signs of growth in real estate values. Knowing the cash flow of rental properties in the area can help decide if it’s a wise financial decision.

2. Access to Public Transport

Good public transportation is one of the major factors to consider before choosing a location for property investment. If the area is easily accessible from all parts of the city, it is a good choice for investment. It benefits tenants who commute to work or school and those who need access to recreation and entertainment venues. A great public transportation system may increase the appeal of a city or neighborhood to a renter, making it an excellent option for property investors looking to maximize their cash flow.

3. Safety and Crime Rates

There is no denying the fact that people prefer living in secure neighborhoods. When choosing a community to invest in, we cannot stress enough how important it is to look at the area’s crime rate and overall safety. Real estate investors should inspect the area and ask the residents if any robbery or theft has occurred recently. A secure and safe neighborhood is often a significant factor that can impact the success of an investment property.

4. Presence of Quality Schools

Check out the quality of schools in the area. People sometimes search for an area where well-reputed good schools are located. Remember that properties near schools might be more expensive to buy, but investors would be compensated well if they generate a good rental income. 

---

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loan products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.

In real estate investing, cash flow is the profit you bring after collecting all income, paying operating expenses, and setting aside reserves for future repairs. Depending on the case, the cash flow can be negative, break even, or positive. A real estate investor should always aim to reach positive cash flow, and here are three ways to achieve it.

1. Add New Amenities

While rental properties are vacant, they are not producing cash flow. Still, owners can undertake projects to make the property more attractive, and it may generate more monthly rental income. As you research your local rental market, find out what amenities will bring you the best long-term returns. These include replacing flooring, renovating the kitchen, and renovating the bathroom. Also, installing a washer and dryer or a dishwasher may cost some money upfront, but most renters are willing to pay more monthly for these conveniences. The improved cash flow may mean the projects pay for themselves over a measurable amount of time. Improvements in kitchens and bathrooms generally have a better return on investment.

2. Increase the Rent

Owners of rental properties that provide an excellent place to live shouldn’t shy away from steady rent increases. Many rental property owners fear that residents will leave if they raise the rent, but if the increases are reasonable, residents may find that moving outweighs the costs of staying. If you already have tenants, don’t change the rent for all of them at once. Wait to make increases until it is time for each tenant to renegotiate their lease. If you can, avoid making significant increases during holidays or trying times. This will help you to stay on good terms with your tenant and keep your property occupied and earning income.

3. Decrease Expenses

In addition to increasing income, decreasing monthly costs will also keep your cash flow healthy. Examine your budget for what you are willing to give up to save money. To do this, it is necessary to identify the highest expenditure items and to reduce them. You can take action on the rental charges that are not billed to the tenant. This could be the heating, the electricity or the internet. It is also essential to compare the prices when choosing a craftsman for repairs, as the expenses caused by the work affect the amount of your cash flow.

---

Investor Loan Source, a private money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loan products designed to serve a variety of investors and property profiles, including private money lending for properties to sell on owner finance. 

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.