Since the beginning of time, people have looked for ways to quickly double their money. We can all think of ways to accomplish this, but most often the risk is in line with picking red on the roulette wheel. Real estate, though, provides an opportunity to double your money through the power of leverage. Almost all real estate investing strategies employ this mechanism in some form and they've allowed new entrants into the industry to make significant returns on their investments in short periods of time.
But simply knowing what is possible doesn't help you get there. At The Hard Money Co., we want you to reach your investing goals and will work with you to create a roadmap to accomplish them. No matter your investing strategy, you can set a path toward wealth creation in real estate.
Can you Double your Money with Real Estate Investing:
The most important thing to understand about 'doubling your money' is that it does not require selling something for twice what you paid. In simple terms, your profit is the product of the margin you make on the sale of your goods or services. If you buy a widget for $1 and sell it for $2, you've doubled your money. But markup like that doesn't exist in the real world, and it definitely is not readily accessible in well-researched, competitive fields such as real estate. It's highly unlikely that you'll be able to buy a house for $200,000 cash and sell it for $400,000 without substantial investments in renovations, repairs, or additions.
But we don't need to double the price of the property, we just need to double our personal investment in the project. This can be done through the use of leverage. Leverage is a term that many people aren't familiar with despite the fact that they are well-versed with how it works. It is the use of outside capital to amplify the potential returns of your investment. For personal use, we know this simply as a loan. To acquire and control an asset we put some money down and finance the rest at agreed-upon terms. This gives us control of the asset to use, rent, or sell. When the asset is for investment purposes, the 'loan' is referred to as leverage.
A Real-World Example:
So how does this work in practice? Imagine you have $20,000 in cash savings to jumpstart your real estate investing career. You can't buy a property outright for that price so you have to explore financing options. Typical institutions will require 20% down and they don't like to lend to investors anyways. But private lenders such as The Hard Money Co. are willing to go as low as 10% down on the purchase price and will lend up to 65% of the after repair value (ARV) of the property. They also specialize in working with investors and have terms in place designed to get you financing quickly and efficiently.
For this example, let's assume you found a distressed property that just hit the market for $150,000. You see some significant potential and, with an additional $50,000 dollars of repairs, believe that it will sell for at least $275,000. With your $20,000, you make a down payment and finance the $130,000 remaining on the purchase price. With additional funding designated for repairs, your total loan amount is $180,000.
After six months of renovations and property improvements, you are able to sell the property for $275,000. Even with Hard Money interest rates of 15% ($13,500), loan origination, closing costs, title charges, and attorney fees ($13,300) you still manage to net $48,200 on your original $20,000 investment. This more than doubles your money for an ROI of 241%. Not only is this an entirely realistic scenario, its one that we see play out time and time again for our investors
This is all possible through the power of leverage.
Where Can I Start?
The beauty of this example is that it can happen with a $5,000 or $500,000 investment so long as you put in the legwork to identify properties that are ripe for investment. You can begin today by searching out available properties from MLS sites, Sheriff Sales, or by simply pounding the pavement in your community. It may also benefit you to connect with other real estate professionals in your area that may give you an inside track on opportunities before they hit the public market.
When you feel like you've found the property worthy of investment, put together a tentative investment strategy and see what a loan might cost using our hard money loan calculator. Finally, when you're confident in your research, fill out an application to apply for your financing. There are no strings attached to the application, but it will get the ball rolling on your project. The Hard Money Co. will be happy to walk through the specifics of your strategy.
What if I don't have cash savings to invest?
It goes without saying that the biggest barrier to investing is having the funds to get started. Doubling your money doesn't get you too far when you have nothing. This doesn't have to stop you from getting started, though. In 2022, there are countless ways for you to get actively involved in real estate without contributing a dollar of your own money. We have borrowers who have bootstrapped their way through wholesaling and others who have built large portfolios by using "other people's money". The opportunities are endless so long as you have the drive and hustle to find them.
If you need help getting started, reach out to The Hard Money Co. today.