Thinking about the community impact of hard money lending in local real estate markets is a multi-faceted and exciting exercise in hope. Real estate investing takes many forms: from wholesaling to flipping, demos to renos, a hard money loan can be the springboard for a wide variety of projects that bring stability and uplift to those involved. While we often talk about the benefits of using hard money in local area real estate investing to develop personal financial freedom, real estate investing also serves a broader purpose. By investing in the buildings which comprise our neighborhoods, we are also investing in our neighbors.
In particular, there are two aspects of real estate investing with hard money that are revealing to think about from the perspective of community uplift: how the properties themselves can be a domino effecting positive changes in the families residing in and around them; and how the money used to improve the properties reaches the lives of those surrounding every aspect of renovating a property. FasterFunds Lending is dedicated to Improving, Serving, and Supporting our community and our borrowers; here’s how you can bring the same mindset to your real estate investment endeavors.
Hard Money Makes Improving Neighborhood Outlook Possible
We have often discussed that hard money loans for real estate investing are ideal tools for use in scaling a portfolio of rental or commercial properties in order to yield long term financial benefits to the borrower. This is certainly true! However, the impact of a hard money loan is felt by many other people in the process, and with the right mindset, a hard money borrower can truly use this loan to the advantage of his or her community.
Where some might view a fix and flip as a standalone investment situation, we see each fix and flip as a stepping stone towards neighborhood improvement. The increased property values of renovated homes will be reflected in the recent sale comparables, meaning that flipping not only increases that individual property’s value—it incrementally builds up the neighboring property values as other properties are flipped as well.
It is also extremely satisfying to bring order and beauty to a run-down space. Whether a property needs simple changes in curb appeal, or has larger scale damage requiring a full renovation, like dangerous wiring or a sagging roof, improving these spaces immediately impacts quality of life. Improving the appearance and safety of a residence will improve how it feels to be in that space.
The feel of a space makes a huge difference for the mindset of a tenant. How a property is maintained can affect if a tenant feels safe in and around their home, if they enjoy being part of the neighborhood, or even simply if they like where they live. If you are a landlord, you are in the unique position to foster and maintain this feel for your tenants. We believe that a good landlord cares for their tenants by caring for the property and remaining attentive to its upkeep. Improving the beauty of the exterior and ensuring the interior is a clean, pleasant space to live will not only attract good tenants but keep them there – which is a win-win solution for the tenant seeking a place to live and the real estate investor hoping to develop a cash flowing property.
In addition to investing in neighborhood fix and flips using a hard money loan, you can also work to improve neighborhoods by helping inspire a collective effort between investors, borrowers, landlords and tenants to maintain the quality of life in the area. This is a great mindset to carry into your investments if you are more interested in renovating and developing rental properties rather than flipping. Great property management inspires tenants to also take ownership/responsibility for maintenance, and therefore, builds up community pride. In these scenarios we can see the impact that real estate investing has on preserving and nurturing communities: good residents need good shelters, and the use of hard money loans makes it even more possible to conduct the sorts of property investment projects that would keep families and tenants content, safe, happy, and emotionally invested in their neighborhoods. Providing clean, safe, beautiful, comfortable residences adds value to the community not just by delivering a beautiful product: it also mitigates blight.
Using Hard Money for Neighborhood Revitalization Improves Community Safety
One property can be the catalyst for improvement on a wider scale as well. Investing in one rental and transforming the structure often leads to improved property values. Improved property values play a role in improving the neighborhood at large.
Revitalizing neighborhoods takes a few forms, with renovating dilapidated properties being the most easy to spot. Hard money is a great tool for acquiring run down properties at a discount, such as from a wholesaler or foreclosure. Investing in foreclosed, vacant, or abandoned properties carries unique challenges yet provide critical enrichment to the surrounding area – a win win for real estate investors with a mindset that improving properties improves community safety.
Vacant houses can impact the health of a neighborhood: they pose structural danger, foster unsafe social environments, and drag down everyone else’s property values. They can fester with mold, invite copper stripping, brick theft or other vandalism, and even introduce new risks for fire into the block. Real estate investing in some neighborhoods has a direct impact on the safety and financial stability of that neighborhood block.
If you are new to real estate investing or interested in learning more about how you can use hard money to start a process of community improvement, click here to learn about one way to get started on scaling your portfolio using the BRRRR method.
Real Estate Investing Helps Support the Local Economy
It may seem fairly obvious that investing in real estate improves and supports the surrounding community, but we would like to stress one perspective in particular: that investing in real estate offers logistical support to everyone involved in the process.
Since hard money loans usually offer some provision for costs associated with construction, using a hard money loan for investing in your local real estate also directly supports the local economy in a powerful way. The contractors you hire to perform essential tasks such from framing and insulating to cabinetry and flooring are in turn able to support themselves and their families. Keeping your construction-related hires local adds financial security and healthy competition for bids in your local economy. Utilizing local companies also fosters and supports community pride.
The community support offered by investing in real estate also trickles up to the municipal level. Municipal coding and permitting is an essential part of making sure your properties are safe and livable; the revenue your municipality earns through this process will then be used to support your area through allocations for infrastructure and community services. The economic impact of investing in a property will continue after the renovation is completed. If you sell your finished property, that of course stimulates the real estate market. Or, if you chose to retain it as a rental, you might wind up hiring a property manager, thus adding to the job market. Each person plays a role in maintaining the health of this financial ecosystem.
Investing in Rental Properties Offers Renter Stability
It is also important to remember how investing in real estate properties serves unstable renter populations. Everyone needs and deserves a nice place to live, but there are many groups who, for various reasons, aren’t in the position to own their own property and care for it well, which can come to bear on their financial and physical safety and quality of life. Maintaining a rental property as a responsible and responsive landlord serves young people establishing foundations for their future, adults and families building stability for themselves, and those who are elderly or otherwise unable to perform major maintenance.
Think of rental properties in college areas, for example. Students and young people are probably not ready to own a home. But renting can teach young people responsibilities like taking ownership of caring for what is within your capability and being reliable with paying the rental bill. Similarly, the nature of renting offers security and stability to people getting on their feet or who are experiencing a season of transition. This is again where fostering a homey feel is important. Owning a home comes part and parcel with expensive upkeep. But, when renting, it is the duty of a good landlord to handle big ticket repairs that might otherwise devastate a financial unstable homeowner. By taking on the financial responsibility for a rental property, a good landlord provides a stable, livable place for good tenants to be focusing on their other financial needs and preparing for a more secure future for themselves.
Investing in rental real estate also serves those who are physically unable to take on or continue being responsible home owners. Things like cleaning the gutters, fixing a roof, maintaining curb appeal, or making big internal repairs are often outside of folks’ physical abilities, and make the homes of the elderly especially liable to fall into disrepair. Rental properties are often a wonderful respite for those needing to pass the baton on involved upkeep. Renting often offers a unique peace of mind, which a community-minded real estate investor would hope to offer their community.
Real estate investing using hard money provides so many avenues of community uplift and we hope to inspire you to view your investment projects with broader purpose. In many ways, being a good landlord is as much about customer service as community service. Embracing a mindset of improving, supporting and serving fosters relationships with tenants and underscores the power of a good landlord to care for community members with kindness and dignity. To invest in real estate is to ultimately invest in those around you, and with a single fix and flip, you can start to flip an entire block towards a better future.