Tom Berry, Co-founder and CEO of Investor Loan Source, appeared on the Real Estate Power Play Podcast. He shared his thoughts on the current market and gave advice to real estate investors.
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.
When evaluating a real estate deal, you should always start with the end in mind. For example, with a single-family Fix and Flip, the end goal is selling that house. When you’re looking at a single-family deal you want to flip, always ask yourself, “What can I get out of this house and what is the end value going to be?” This is where real estate investors may make a mistake. Some investors will look at comps in the general area of the subject property. However, they are usually comparing their house to houses that are at a different level. You want to use comps that are of similar size and similar nature to determine what your house is going to sell for when it’s done.
Additionally, some investors use comps with a high-end fit and finish, but use their rehab budget or a very low-end fit and finish to calculate the value. You can’t put vinyl laminate floors in a house and expect to get the same ARV as a house down the street that has travertine or expensive wood floors. This also goes for kitchen countertops, appliances, etc. Use houses that are similar to how you’re going to make yours.
House Construction Framing Gradating Into Finished Kitchen Build.
The next step is evaluating the rehab budget. A huge challenge I see often when real estate investors look at their deal is that they calculate the ARV and then look at their rehab budget to find that the numbers don’t work. At this point, they don’t want to walk away from the deal, which they could do, and they don’t want to go back to the seller and try to renegotiate a better price on the house. Instead, they just cut the rehab budget and try to make the deal work. If you cut your rehab budget, you’re never going to reach your expected ARV. Cutting the budget just to try to make the numbers work on paper, might work on paper but it is not going to work in practice. Understand that the rehab will need to reach a certain level to hit your expected ARV.
After evaluating the price of the home and the rehab budget, most people think we’re done with an evaluation. The truth is that we are not done! There are other costs that we call hidden costs. A great example of hidden costs would be the holding cost. The holding cost includes the cost for an investor to own this project until it is sold. These hidden costs include interest, property taxes, property insurance, utilities, and lawn care. As a real estate investor, you must pay those bills the whole time you hold that property. All these costs add up. Before buying a house, it is important to calculate the monthly holding cost. This is done by adding up the monthly cost and dividing by 30 to get the daily cost of holding a property.
What does this do? It puts a sense of urgency on the investor to get in and out as quickly as possible.
Lastly, it is important to ask yourself the following questions:
Are you going to need permits?
Are you going to need plans?
When can contractors start?
When will you be ready for contractors?
It is important to realistically evaluate how long it will take to rehab, market, and close on the project. There are a lot of steps to take, and those steps take time and money.
Hopefully, this gives you greater insight into what it takes to evaluate a single-family fix and flip deal. As always, if you have a project and you’d like for us to help you with your hard money and private money needs, reach out to us today at 409-735-6267.
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.
A buy box is a tool real estate investors use to determine the types of properties they want to purchase. The buy box is usually broken down into columns and details the criteria a property must meet to be considered for purchase. This tool helps real estate investors focus on their goals when analyzing potential real estate deals.
The buy box can consist of standards that are important to the investor. Common criteria may include, but is not limited to location, prices, property type, size of the property, or age of the property. This simple tool helps real estate investors focus on certain properties. If a property does not meet the criteria in a buy box, the investor knows to move on to another project.
The buy box is used as a filter to focus on properties that a real estate investor is truly interested in. Defining the criteria of a buy box also helps investors avoid being overwhelmed by an abundance of real estate opportunities.
The image above shows an example of a buy box. In this example, the real estate investor wants to focus on acquiring small apartment complexes in Houston, TX or Galveston, TX. If a deal presents itself for a property in Dallas, TX our investor may pass on the opportunity because it does not fit the criteria in the buy box.
While a buy box is a useful tool, it can be changed as the investor maneuvers the real estate market. It can be adjusted to redefine goals as a business or investment portfolio grows. Creating a buy box is a great way to stay focused and possibly achieve real estate investing success.
Need help creating a buy box? Download your buy box template HERE!
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.
Investor Loan Source offers short-term purchase loans to real estate investors. Finding a lender that understands the value of a fix & flip property is very important. A fix & flip loan can provide the cash you need to grow your real estate portfolio.
Click the video below to hear Tom Berry explain how valuable fix and flip loans are for real estate investors.
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.
Integrity is a word that many people are familiar with, but not everyone understands what this means when it comes to doing business with others. Integrity is important because it builds trust and enhances your relationship with business partners and potential clients.
In the video below, Tom Berry shares his thoughts on what it means to have integrity in business.
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.
This is a question I have heard over and over every year since I started investing in real estate. And this question comes in many forms. My favorite is the negative form that goes something like this: “With home prices going up every year for the last decade, why would you want to get in real estate now?” Real estate, like any other investment asset, does fluctuate in price. However, this happens much slower than most other assets. When real estate falls in value, it tends to be for a shorter period, and then up it goes again.
And of course, all real estate is local. Some high-growth areas didn’t even see price declines in single-family homes during the great recession. Others saw modest short-lived decreases. For these reasons, real estate has been seen as a great long-term investment for centuries. But there are other reasons why I always answer our original question with a resounding YES.
When someone thinks of investing in real estate, they typically think of flipping or holding rentals of single-family homes in their town or neighborhood. When I think of real estate investing, I divide it into five columns. Then I pick one or two from each column. Here are the categories: Asset Class, Investment Strategy, Market / Sub-Market, Price Point, and Target Profit.
Here are a few options that I may pick from each category. But understand, some of these columns could have dozens of options to choose from.
Again, this is a very short list to show examples of what each list would have. What we are doing here is creating something the professional investors call a buy box. This buy box. Is used as a tool of discipline and efficiency. The buy box helps with discipline because you have set the criteria for what you will buy before ever looking at the first property. Now, all you need to do is stick to your own rules. The buy box helps with efficiency because the second I see a potential property that doesn’t meet my buy box, I discard it and move on to the next one. This allows me to analyze large numbers of potential deals in a short period.
How many times have you heard someone say, “I think we can make it work if we just…?” You can fill in the blank for yourself. This is undisciplined investing. How many times have you heard someone beating that same project up for months trying to make something out of nothing? This is a time-waster and is incredibly inefficient.
Now, taking this conversation full circle, I would also argue that using a buy box allows us to be profitable investors in any market. All we need to do is pick different options from the columns above for the market we are facing at the time.
Let me explain, in 2008 when I first got into real estate investing full time, we were fixing and flipping single-family homes in greater Houston. We found out quickly that our geography choice was way too large for a two-person team, and we re-adjusted to focus on Galveston County, TX. Mid 2008, as our flips sat on the market, we quickly realized we needed to change direction and switched to single-family homes and traditional rentals in Galveston County, TX with an after rehab value of $120,000 or less with $30,000 equity or more.
After piling up 28 of those, we changed again in December 2010 to apartment buildings and apartment complexes in Galveston County, TX. This included traditional rentals: $25,000/ door all in or less, 12% CAP Rate or higher. I know! I haven’t seen those numbers since then either. 22 months later, the apartment market started going up again and we stopped buying and went back to houses.
After accumulating around 425 houses and apartment units, we changed direction again and started selling off the apartments. A couple of years ago, we started selling off the rental houses. Some on owner finance terms and some outright. In the years between, we have bought office buildings, self-storages, single-tenant commercial buildings, a mobile home park, and shopping centers. As the market changes, I change strategy and asset class. This gives us the maximum opportunity to make money at any time.
Make no mistake, I consider myself a buy & hold investor. I like to hold long-term and rent assets. This allows me to capture appreciation and let my tenants buy my properties for me through rent payments. BUT, if someone offers me more than what I think my property is worth, it’s SOLD! I am not going to hold a 70’s vintage apartment complex for 20 years. I’ll take the upside, and when the market gets hot, I’ll let someone else take on the ownership risk. Then, I will move my chips (equity) to a different table.
So, should you get into real estate investing right now? I don’t care if you are reading this in 2022 or many more years from now; the answer is YES! Although, the HOW you invest may be completely different answers in each case.
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.
Many real estate investors are familiar with how we can provide funds for residential projects. However, Investor Loan Source can help developers with larger commercial projects. In the video below, Tom Berry explains how we provide funding for investors who seek to expand their business.
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.
Your property is a valuable asset. Many investors are constantly looking for ways to increase its value. In the video below, Tom Berry shares practical ways to add value to your property during an inflationary period.
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.
Have you thought about becoming a real estate investor? Tom Berry, CEO of Investor Loan Source, provides three important tips on becoming a successful investor in the real estate industry.
For more tips and advice, follow Tom Berry on Facebook and Instagram.
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.
Tom Berry, Co-Founder and CEO of Investor Loan Source, recently shared his thoughts on the importance of due diligence. He shares tips and stories to help real estate investors make better decisions when it comes to purchasing investment properties. Click the video below to view the entire presentation.
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.
