Revenue - Operating Expenses

 

Net Operating Income is used to calculate capitalization rate ("cap rate"), a fundamental quantitative valuation metric for real estate investing.

 

Depending on the type of real estate, revenue can include: 

 

- Rental revenue
- Service fees
- Parking revenue
- Vending machine revenue

 

Operating expenses include:

 

- property management
- vacancy
- uncollectible rent revenue
- insurance
- property taxes
- maintenance

Net Operating Income ("NOI") = Revenue - Operating Expenses. Learn how to calculate NOI.

NOI - Net Operating Income - Real Estate Glossary - OfferMarket

What is Net Operating Income ("NOI") in real estate?

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What if instead of being reimbursed by your private lender for your rehab, you received your rehab funds in advance? 

 

We'll get back to this in a moment, but first let's take a look at the way most private lenders fund the rehab component of your fix & flip loan.

 

## Traditional Draw Request Reimbursement

 

The traditional fix & flip loan consists of an initial component for the purchase of the property and a rehab component for the renovation of the property. While the initial purchase component is advanced at settlement for the investor to purchase the property, the rehab component is typically reimbursed based on the portion of the scope of work that has been completed. 

 

It doesn't take a financial genius to understand that this is not an ideal cash flow situation, since the fix & flip investor needs to "float" the project to get to each draw reimbursement. Even the most experienced flippers and BRRR investors are forced to use credit cards and cash on hand to fund the rehab and then wait for reimbursement. 

 

Unsurprisingly, we see the following negative consequences of traditional draw reimbursement:

 

## Credit Score Impact

 

As real estate investors go through waves of high credit utilization, their credit score suffers. This can cause issues when it comes time to refinance into a DSCR rental loan and the private lender limits the LTV due to credit score below 720 -- the magic number in real estate investing.

 

## Leaving Money In the Deal: Low Cash On Cash Return

 

If your credit score is normally 740 but you just finished an intensive rehab that required using a high percentage of your credit card limit, you might find yourself in a situation where your credit score is now 670. In this scenario, at 740 FICO you'd qualify for 75% LTV on a cash out refi, but at 670 you might qualify for 65% LTV. That could easily be the difference between a perfect BRRR where you don't leave any cash in the deal, and instead leaving thousands of dollars in the deal or even worse: being forced to bring more cash to the refi closing table. In this scenario, your [cash on cash return](https://www.offermarket.us/real-estate-glossary/cash-on-cash-return) is significantly lower than it would otherwise be. Your cash that's stuck in the deal might have been your down payment for your next investment property.

 

## DSCR Loan Refinancing Delays

 

This can lead to delays refinancing out of higher interest, short term interest only fix & flip loans, and can be especially stressful in a rising interest rate environment. If you take time to build back your credit to complete your refi, you might also miss out on your next deal.

 

## Forced Selling

 

Going one step further, low credit score can prevent you from qualifying for a DSCR rental loan, and when you otherwise would have rented and refinanced the property, you're now forced to flip it.

 

Long story short, the traditional draw process is a problem and OfferMarket Capital has the solution: Advanced Draws

 

## Advanced Draws for Fix & Flip Loans

 

Wouldn't it be better if you received a wire of funds for each stage of your rehab? Let's say you're ordering $20,000 of lumber and $12,000 of windows. What if we wired you $32,000 so you never have to carry a balance on your credit card?

 

With advanced draws, we will advance your rehab funds for each stage of your scope of work. We then inspect the work in order to advance funds for your next stage, and so on.

 

## How to qualify for advanced draws?

 

As long as you've completed 5 or more fix & flip or fix & rent rehabs, you are qualified for OfferMarket's **Advanced Draws** program. We think about this a **credit score protection program**, an excellent way to optimize your refi exit strategy and do more deals. 

 

We'd love the opportunity to be your private lender.

Advanced draws allow fix & flip and fix & rent BRRR investors to receive funds in advance for each stage of their rehab. This protects your credit score and helps you optimize your real estate investing business.

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What is advanced draws for fix and flip loans? | OfferMarket

What is Advanced Draws for fix and flip loans?

*Opinion by Daniel Sperling-Horowitz, CEO of OfferMarket. OfferMarket is a private lending platform and investment property marketplace.*

 

We started OfferMarket because we believe that sellers and buyers should be able to connect and transact commission free. OfferMarket is a commission free real estate marketplace for off market deals.

 

Many listings on our marketplace are posted by wholesalers. These are typically assignment of contract listings. If you are note sure what real estate wholesaling is, or you want to brush up on the topic, we encourage you to take a moment to read [Whole Real Estate 101](https://www.offermarket.us/guides/wholesale-real-estate-101).

Is it ethical to wholesale real estate? We'll look at both sides of this divisive topic.

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Is Wholesaling Ethical? | OfferMarket Blog

Is Wholesaling Ethical?

Grow your real estate investing business with the most competitive DSCR loan product. OfferMarket also provides DSCR rental loans, bridge loans, hard money, fix & flip, rehab, ground up construction loans.

Rental Loans

Mortgage loans are repaid over time, usually in equal monthly installments, based on an amortization schedule. Amortization schedules for fixed rate mortgages contain a declining amount of interest and a rising amount of principal repaid each month as the total loan value declines. Read about [PITI](https://www.offermarket.us/real-estate-glossary/piti) (principal, interest, taxes and insurance), the core components of monthly homeownership costs.

 

### Check out our [Mortgage Calculator](https://www.offermarket.us/tools/mortgage-calculator) for a closer look at amortization schedules

Mortgage loans are repaid over time, usually in equal monthly installments, based on an amortization schedule.

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What is Amortization Schedule in real estate?

* Takes 2 minutes, no credit pull

Check out our Mortgage Calculator for a closer look at amortization schedules

* Takes 2 minutes, no credit pull