How to Get Private Lenders & Lines of Credit to Fund Your Business

So with all the negative media about real estate, how do you convince a potential private lender, that his or her money is safe being invested with you?

First, the “good news” is that people don’t have any good alternatives for investing their money right now.  The stock market is very volatile, and has been performing poorly for quite a while.  Start up companies are as risky as they’ve ever been.

In fact, it is really a good time to buy real estate because prices are depressed and sellers are motivated.  However, how do you convince your potential investors that their money is safe with you and things won’t get worse.

Here’s something to consider: What if you could show your investor that you had an objective means of evaluating properties such that you could show them, that even if things got worse, they’d still make a profit?

That would certainly set you apart from the crowd, and make your appeal more convincing.  Fortunately, there is such a tool, that I’ve created and that we use in all of our real estate deals.  It’s called the Deal Evaluation Tool.  It’s basically an expert system that analysis the financial returns and quantifies the financial risk of any kind of real estate transaction, with any kind of terms.

I personally think that no investor “should leave home without it”.  With proper due diligence, and this expert system, you being doing killer deals in any kind of market, every time.  Check it out yourself by using this link.

Posted to Angel Investors, Friends & Family, High Net Worth Lenders, Marketing in Real Estate, Private Lending
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Sherril wrote a comment on my previous article of “private lending - the best times are the worst times”, saying that us investors will just have to wait until the market becomes more positive.  Well,
I don’t like the idea of waiting til the market does something.  Rather let’s respond creatively to the current market negativity to make some money.

First, let’s recognize that the truth is that home values a falling in many areas of the country.  This is definitely not good for people who want to sell their home.  Despite the fact that this particular downturn has been triggered by the adjustable mortgage debacle, it is really just part of the cycle of real estate values that occurs with a period of 8-15 years.  We’ve been in a up cycle so long, most investors haven’t a experienced a down period.  And values will eventually come up again.

But what is the investor supposed to do now?  First, let’s go back to the first principle I believe every investor should live by: “You make your money when you buy”  This means that your profit is built into the price and terms of the offer your willing to accept.

For example, if you are flipping houses, start with the calculation of what your investor buyers are willing to pay for these properties.  It may still be 70% of after repair value (ARV) - repairs, but what is the percieved ARV? 

In a falling market comps are deceptive.  They are a backward looking measure of value, of people were paying for similar properties 6 mos to 1 year ago.  The trick is to be able to project with some safety margin how low the price will be 6 mos to a year from now!    In some places the depreciation rate is 5%.  The percieved depreciation rate of your potential buyers may be higher.  And that’s the real value of the ARV.

Start with that value, factor in your costs and profit, and you’ll get the maximum about you can offer to pay your seller. 

By the way, if you want to know how to fund every deal you do, I’ve created the absolute best and most comprehensive funding manual you will ever see called “Show Me the Money“.  It contains step by step instructions on how to get money from private lenders, high net worth individuals, lines of credit, financial institutions, buyers, sellers, notes, and much, much more.   And, it’s a ridiculously low investment (for now!).  Click here and Get in NOW.

Posted to Buyer Financing, Marketing in Real Estate, Uncategorized
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Real estate is a great investment, right? And a lot of investors I know are making a killing.  So, why all the negative press?  The answer is very important to you, because your potential private lenders are reading and watching this very same media, and thinking it’s a smart move Not to invest in real estate.

Well, first of all, the press is partially right–real estate values are falling in many (but not all) parts of the country.  And people with ARM mortgages are getting foreclosed on right and left!  In 2007, Atlanta had over 70,000 foreclosures!  And, of course, this whole crisis was brought on by greed.  Greed of the banks and mortgage brokers that qualified people for mortgages they couldn’t possibly afford once the rates re-adjusted. 

And now, in a move that gives hipocracy a whole new meaning, the banks are tut-tutting over the “shock” and tightening credit so it’s even harder for legitimate borrowers to buy property.  This is really bad news for many sellers, because with fewer buyers and more foreclosures, prices are being driven south.

And this is what the public and your potential private lenders hear about.  However, the other side of the story.  It’s a great buyer’s market where you can pick up property at huge discounts.  And this has to be the core of the story you tell your private lenders. 

Now, you also need to provide a story about how you’re going to protect their money from all the negative news and other things that might happen.  So, when you tell them you can get property at a deep discount, let’s be clear about what price is a “discount”.  First, a discount does not mean, a price lower than it used to be a year ago.  A discount means a price very much lower than the current market value.  In other words, a price below what the house would sell instantly by any qualified buyer where you would still make a hefty profit after paying off your loans and your investors.  This is what I call, “making your money when you buy!”

In other words, your acquiring property for an amount that even if things didn’t go as planned you’d still come out ahead.  If you don’t know how to figure that, you really should own my Deal Evaluation Tool.  It’s an expert system that will perform the “what if” calculations for you and give you a thumbs up or a thumbs down on any real estate purchase.  I wouldn’t consider any property without it!

Posted to Angel Investors, Friends & Family, High Net Worth Lenders, Private Lending
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How would you like to learn a game that could bring you hundreds of thousands, even millions to buy all the property you wanted.  Yes, well then you’re gonna love learning the real estate investor version of the bank financing game.

Truth is borrowing from banks is probably the easiest and cheapest money you’ll ever find.  Why? Because you don’t need to make a presentation or convince anybody to give you money.  You just fill out forms, follow the rules and play the right strategy–and voila the money comes rolling in!

Remember playing ‘Monopoly’ as a kid.  That game was all about the real estate acquisition and income game.  Let’s call this game ‘Financing Mogul’.  The goal is to acquire as much financing as possible for buying property.  So, set a goal: $100,000, $500,000, $1million, $10million, and let’s play.

Now, I know that most real estate investors are freaked out about going to a bank to borrow money–fear of rejection, fear of liability.  That’s because they don’t know the rules and they don’t know the winning strategies.

Banks based their lending decisions on set of fixed guidelines and rules.  So to win the ‘Financing Mogul’ game, you need to learn the rules, and play a winning strategy.   Now, I devote 3 chapters to this game in my “Show Me the Money” training manual (scroll down the right side of this page to get it). 

Now, here’s the first rule - you need a good credit score.  These days, that means a 680 to 700.  Now, don’t get all discouraged if your not at that level.  This is actually easily fixed with virtually no effort on your part.

First, stop doing stuff that lowers your credit–like paying late on bills.  The easiest way to do this is to arrange with your vendors to automatically draft amounts out of your bank account.  Or bank online and set up automatic monthly bill paying.

Second, invest in a credit repair service.  Doing this yourself takes a tremendous amount of time and effort, and it’s not that effective.  Now, I know a lot of credit repair services are total scams, or simply can’t deliver–like removing liens, judgements, bankruptcies, etc.  So, I’m going to give you a link to the ‘gold standard’.  Aside from all their testimonials, this service has personally raised the credit of both Michelle and I well over 100 points each.  And it’s worth every penny of the investment.

And even if your credit is in the 680-700 range, you’ll get even more money, more easily and more cheaply if your credit is in the 750-800 range.  So, if you want to win the real estate financing game, run, don’t walk to boost your credit with this link.

Posted to Business Lines of Credit, Commercial Lending, Institutional Lending, Uncategorized
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Even if you’re just starting out in real estate investing, building a group of private lenders and other funding sources for your real estate deals is absolutely critical to your success. 

Oh, yeah, I know all about getting “free” houses from owners that will give up their house “subject-to” the current mortgages or are willing to owner finance the sale.  However, beware because acquiring these properties is usually Not Cost Free!

There are holding costs (the mortgage, utilities, maintenance, etc.) until you get tenant or a buyer.  There may be some repairs, back payments, etc. that you’ll need to deal with.  In any case - promise yourself that the money is not going to come out of your pocket!

So, it’s time to start building your property funding program.  There are 10 basic ways to do this.  I’m only going to talk about one (the rest you can get in my”Show Me the Money” training manual at www.privatelendingguide.com).

Let’s talk about one important way: Private Lenders.  These are individuals with IRA money or significant investment capital who are willing to lend you thousands of dollars for a great rate of return and some assurance they’re going to be paid back. 

The easiest place to start is with your own family and your friends.  Next post, I’ll talk about how even beginners can raise hundreds of thousands in capital!

Posted to Friends & Family, Private Lending
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Anybody that’s been awake for the past 8 months knows that the public perception of the real estate market has taken a dive.  Now, it’s true that single family home prices in many parts of the country have leveled off or declined in value.  However, this is just part of the real estate market cycle. 

In fact, if you believe that to make money, you should “buy low” and “sell high”, now is definitely the time to buy.  The public of course believes just the opposite.  They’re holding their money in savings accounts or CD’s or worse, believing their stock broker or financial advisor can figure how to make money in a chaotic and unproductive stock market.

The challenge for the real estate investor is to show people with IRA’s and other investment capital the real estate right now is really the ideal investment.  To do so, you have to be prepared to address their fears and concern about losing money.  If you are flipping or rehabing and selling, you have to make convincing arguments about why you can sell for a profit while their is a glut of homes on the market and others are losing their shirts.

Prepare yourself with the facts of your market, and listen to the concerns of your potential investors.   Put yourself in the position of offering a sound financial alternative to their current investment situation.

By the way, if you want to know how to fund every deal you do, I’ve created the absolute best and most comprehensive funding manual you will ever see called “Show Me the Money“.  It contains step by step instructions on how to get money from private lenders, high net worth individuals, lines of credit, financial institutions, buyers, sellers, notes, and much, much more.   And, it’s a ridiculously low investment (for now!).  Click here and Get in NOW.

Posted to Friends & Family, High Net Worth Lenders, Million Dollar Slush Fund, Private Lending
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This isn’t about private lending, but this scam is so dangerous, I felt I had to warn you about it.

I recently heard a webinar about investing in the Gulfport-Biloxi area of Mississippi.  The marketing story is that the US Treasury is providing generous tax breaks for investors that buy property down there (true).  However, remember that you have to Make Money Before you can Pay Taxes on it!  And the truth of the matter is  that Biloxi is being sold by desperate speculators and developers to the unwary investors.

Here’s how the scam goes.  The developer is offering very attractive terms to purchase the property and build a townhouse.  10% cash down and the rest financed.  Once the property is built, it will be managed by a local management co. and all the investor has to do is pick up the check.  The only “fly in the ointment” is that these properties cannot be sold for the cost of the build out, and cannot be rented to anything close to the mortgage payment, operation costs and management fee! 

For example, I saw a developer claim that a $250,000 townhome could rent at $2050 a month! Really??  I don’t think you’d get that in Florida in it’s heyday–in Mississippi, one of the poorest states in the country–come on!  In fact, students tell me that getting even $1000/mo for rent would be a stretch.

And oh yes, even if you were in fairy land and got $2050/mo, your net cashflow would only be $67/mo!  Heck, if your home went empty for 2 weeks you’d be in the red for the entire year!

Bottomline: the developer has unloaded his massive debt and the investor is stuck paying a large fee on an empty property until he is forced into foreclosure!

Here’s the hard evidence as shown in the 2 graphs: the first is an inflation adjusted home price index.  I shows that home prices have peaked and are starting to fall. 

The second-the more telling one plots the home price appreciation index.  This graph clearly shows that appreciation rates peaked late in 2006 and have been falling precipitously ever since.  In fact, home values are now depreciating.

We also have gotten reports from students who have gotten burned by swallowing the hype and are now stuck with big mortgages and property they can’t rent or sell!  This is the classic losing scenario–buy high, sell low.

My advice, stay away from the Gozone - it looks pretty, but it will kill you financially.  If you really want to invest in this area, wait about 18-24 months, then pick up these newly built properties which will now be in foreclosure with a short sale from the lenders, and then flip them or rent them out.

Posted to Institutional Lending, Marketing in Real Estate, Seller Financing
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I read an article where Donald Trump was quoted as saying:

“The problem that I see with the United States is that we’re no longer respected, we really aren’t,” lamented Trump, pointing out that there is plenty of blame to go around, starting with the political leadership. “I think that [perception] can be changed. We have the greatest people, the greatest businesses”

Now, Trump may be correct about less foreign investment in US real estate, but it’s not because we’re “no longer respected”.  That’s complete crap.  Whether we are respected or not, is not what determines how an investor invests.  It really has to do with Poor Marketing.  Now, the US government is certainly to blame for part of it.

For the rest, if you want to sell your property, you have to market.  And in a time of tight credit, you have to market harder.  That means understanding in detail  your target market.  And then with laser like accuracy, inundating that group with super-effective marketing campaigns.

So, stop worrying about what everyone else is doing or thinking.  Focus on increasing the power of your marketing.

Posted to Commercial Lending, Institutional Lending, Marketing in Real Estate
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There are 2 key things you must remember when dealing with private lenders:

1) Never come from “needing the money”–always present as investment opportunity

2) Be ever patient and never give up.

You will have the experience of a person telling you they’d love to invest, but when it comes to actually writing the check… well, something always seems to come up, and you find yourself talking more and more to the voicemail.

“Why this is?” as my 2 yr old granddaughter would say.  Well, there is still some lingering doubt about committing the money.  Or, now is just not the right time for the individual.

Here’s how patience wins:

1) lingering doubt - the more you communicate–voicemail and email, you start becoming familiar.  (Why would he still be asking me, if it wasn’t a good investment).

2) right time - you’ll be there when time becomes right.  That could be tomorrow or a year from now.  If you’re no longer communicating you’ll miss out.

Bottomline - hang in there.  The first one’s the hardest.

By the way, my comprehensive funding manual called “Show Me the Money” has step by step instructions for raising money from private lenders, high net worth individuals, lines of credit, financial institutions, buyers, sellers, notes, and much, much more.   And, it’s a ridiculously low investment (for now!).  Click here and Get in NOW.

Posted to Angel Investors, Friends & Family, High Net Worth Lenders, Million Dollar Slush Fund, Private Lending
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Developing sustainable energy sources and reduction of greenhouse gases is a laudable goal that many share with the “green movement”.  Now, whenever trends become popular, marketers jump on the bandwagon to try to profit from it.  The latest addition to this trend is “green loans”.

Some banks (mostly community banks), and some larger institutional lenders are making noises about funding “green” commercial developments. What does this mean, aside from the press it’s designed to generate for the bank.

The answer is –not much.  If you and your project doesn’t qualify with the current restrictive criteria–credit, cash, debt coverage ratio, etc, no amount of green is going to help you get funded.  Now if you’re a A type borrower, going green may get you a marginally reduced interest rate.

Is it worth it?  Well remember, going green will help the environment and may marginally reduce operating costs, but the building cost is definitely going to be higher.  Are the green bank going to loan you more money?  Not one penny more than the underwriter’s LTV dictates.  And will appraisers recognize an increased value in a green development–nope.  Nobody’s changed the appraisal standards to bump the value of green construction. 

So if you’re looking for an edge, build green if it will help you sell or rent your property.  But don’t hold your breath for the banks to come running to help. 

By the way, if you want to know how to fund every deal you do, I’ve created the absolute best and most comprehensive funding manual you will ever see called “Show Me the Money“.  It contains step by step instructions on how to get money from private lenders, high net worth individuals, lines of credit, financial institutions, buyers, sellers, notes, and much, much more.   And, it’s a ridiculously low investment (for now!).  Click here and Get in NOW.

Posted to Commercial Lending, Institutional Lending
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