How to lower your holding costs using hard money loans.

Everyone knows the saying “….Time is Money” famously quoted by Benjamin Franklin. In real estate investing that is especially true. The quicker you can do a rehab on a home, find a tenant, or sell a property, the lower your holding costs. Typical holding costs are property taxes, insurance, loan interest and utilities. Hard money loans do have higher rates than traditional loans so here are some tips to save on your holding costs to maximize your net profit.

1) Specialize in only cosmetic rehabs over major rehabs

Cosmetic rehabs require less contractors and less money than major rehabs. Major rehabs can entice you with the profit potential. However, when compared to cosmetic projects, they take longer, and you often find more issues that cost more. Cosmetic projects take weeks. Major projects take months. As an investor if you focus your time and energy on finding not just good deals but great deals, you will have a nice return on cosmetic renovations. The goal is to buy and sell in a short period of time.

2) Partner with a trusted general contractor

A lot of us have a business attitude of rolling up our sleeves and doing everything ourselves. You might have the attitude like Rosie pictured below. I felt that way when I was first doing rehabs. The problem is I had to build all my subcontractor relationships starting with zero. I had to learn on the job how to manage projects. I had to do some of the work if someone didn’t show up. I had to order supplies. I made multiple trips to Lowes and Home Depot. This all consumed my time where I could not focus on finding future deals or running my business. A trusted general contractor has already built relationships and has experience with construction management. Plus, if you have a partnership with him or giving him consistent work, he has an incentive to work on your projects over others. This partnership will allow you to do more projects and you both to be profitable.

3) Formulate Efficient Systems for construction and marketing

There are many resources from courses and online to formulate your own systems for running your business. I used to take different forms I learned from someone else and modify for my needs. It is also recommended to evaluate your systems on a regular basis as technology changes. I recently explained to my new office manager how I organized aspects of my business. I did this so she would better understand how to work as a team. She then recommended a software that she used at her previous employment and it improved my business instantly. Network with full-time investors and ask them what systems they use. It takes time to research the right systems for you but will save you time and money in the long run once implemented.

4) Partner with a full-time real estate agent for marketing

Using hard money as a funding source is easier than traditional banks and lenders. It is also more beneficial than most general partnerships. By implementing these tips, you will lower your holding costs, increase your net profit, and grow your business year over year.