Welcome to Real Estate Divas! I’m Jay Lee Thompson, here with my co-host Kristin Gerst, and today we’re diving into why you should use other people’s money (OPM) in real estate investing. We sat down with Will Dyer from Bay Mountain Capital to shed some light on this important topic.
The Basics of Hard Money Lending
Hard money lending may sound intimidating, but it’s far from it. Simply put, hard money lenders are private lenders who offer short-term loans based on the value of the property you’re buying. These loans are perfect for real estate investors who want to fix and flip properties.
Hard money lenders like Bay Mountain Capital specialize in seeing the potential in your project. Instead of looking at your credit score or your income, they focus on the property’s value after repairs (ARV). This means they can offer you a loan that covers not just the purchase price but also the rehab costs.
Why Use Hard Money Instead of Your Own Cash?
A lot of new investors balk at the higher interest rates of hard money loans, preferring to use their own cash. Here’s why that’s a mistake.
Maximizing Your Return on Investment
Imagine you want to buy a house for $100,000, put $50,000 into renovations, and sell it for $200,000. If you use your own cash, you’re tying up $150,000. Your return on investment (ROI) in this case might be decent, but it’s limited by the amount of cash you have available.
Now, if you borrow $140,000 from a hard money lender and put in just $10,000 of your own money, your potential returns skyrocket. Even after paying a higher interest rate, the ROI on your $10,000 can far outpace the ROI on your $150,000. This means you can take on multiple projects simultaneously, diversifying your investment and increasing your overall returns.
Reducing Personal Risk
When using a hard money loan, you’re not putting all your personal cash on the line. This diversifies your risk. If something goes wrong with the project, the lender shares some of that risk. It’s a safety net that can keep you from financial ruin if a deal goes south.
The Two Products from Bay Mountain Capital
Bay Mountain Capital offers two straightforward loan programs: a 12-month loan at 11-12% interest with two points up front, and a preferred borrower rate of 10.9% for those with a 680+ credit score or solid track record with the company.
Upcoming Rental Product
Exciting news for buy-and-hold investors: Bay Mountain Capital plans to launch a rental product soon. This will allow you to convert your fix-and-flip loan to a rental loan. The rental loan will have a lower interest rate and a longer term, giving you the flexibility to keep the property as a rental and generate steady income.
The Benefit of Working with Experienced Lenders
One of the perks of working with experienced lenders like Bay Mountain Capital is their commitment to transparency and their extensive knowledge of the real estate market. They run feasibility studies on each project to ensure your budget is realistic, protecting both you and them from potential pitfalls.
Real Estate Markets in Texas and Georgia
Both Texas and Georgia offer fantastic opportunities for real estate investors. While Texas markets like Dallas, Austin, and Houston are hot and competitive, Georgia’s Atlanta market offers ripe opportunities, especially for those willing to navigate its unique challenges.
Bay Mountain Capital has boots on the ground in both states, ensuring you have local support and insight into these bustling markets. Whether you’re a newbie or a seasoned investor, having a lender familiar with your market makes a massive difference.
Wrap-up
Using other people’s money (OPM) through hard money lending is a strategic advantage for real estate investors. By leveraging loans from experienced lenders like Bay Mountain Capital, investors can maximize their return on investment, diversify their projects, and reduce personal risk. With tailored loan programs and an upcoming rental product, Bay Mountain Capital is poised to support both fix-and-flip and buy-and-hold strategies.
Their expertise and local market knowledge in Texas and Georgia ensure that investors have the support and insight needed to navigate these lucrative markets successfully. Embracing hard money lending can be the key to unlocking greater opportunities and achieving long-term success in real estate investing.
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