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

I got this response from Craig Nichols to one of my posts:

“In your email message, you made the following statement ‘the mortgage mortgage meltdown which was caused by greedy banks, ripping off the Wall St investors’.  The banks were fulfilling a mandate of Congress. Congress caused this mess. The Community Reinvestment Act of 1995 was revised/written to relax the underwriting standards, so that more people could qualify for loans to purchase houses.”

Craig, I agree that whenever Congress passes any law, there are usually “unintended consequences” that usually do more harm than good.  So, the less Congress does, the better.

And, in the case of the mortgage meltdown, what brought the situation to the “tipping point” was not simply relaxing underwriting standards.  A chief culprit was collusion by the banks in how they decided to underwrite ARM’s (adjustable rate mortgages). 

In particular, as most readers know, an adjustable rate mortgage starts out with some really low interest “teaser rate”.  Sometimes the rate is also interest only which lowers the monthly payments enormously.  Now, if the loan underwriters use this low introductory monthly payment to qualify potential borrowers, you get borrowers who only earn say $30K/y qualifying to buy $300,000 to $500,000 homes. 

Of course when the rate re-adjusts in 1 to 5 years, the interest rate jumps to double digits, and starts to amortize.  a $750 monthly payment jumps to almost $3300 which is more than their entire salary.  Obviously, foreclosure is inevitable.  This is now the fate of 100,000’s of homeowners.

And as I mentioned in my last post, the “Economic Recovery Act” just passed by Congress does nothing to address the problem.  It’s simply a hand out to Fannie Mae and Freddie Mac. 

What really has to happen is that the banks need to loosen their credit policies and only surgically correct those practices that got them in trouble in the first place–e.g., the underwriting of ARM’s and stated income loans. 

Maybe this is something we can write our congress-people about.

Posted to Business Lines of Credit, Buyer Financing, Money & the World
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This may sound a bit presumptuous.  And after investing in all levels of real estate for the last 10 years, I believe these insights will be very helpful to the general public suffering from the tightening of credit guidelines and especially our legislators, who could really stimulate the economy by acting on the suggestions in this article.

First, let’s be clear, that the “credit crisis” or “mortgage meltdown” was caused by institutional lenders gaming their own underwriting system by the way they approved adjustable rate mortgages or ARM’s.

You see, one of the primary determinants of whether a borrower gets approved for a mortgage is whether the borrower can afford to make the monthly payments, which in turn depends on income, debt payments and the amount of the monthly payments.  With fixed rate mortgages, the monthly payment is the same from the first payment to the last.  With ARM’s there’s a very low “teaser” rate for the 1st 6mos to 2 yrs, then the rate jumps enormously. 

So, when the banks decided to qualify the borrower based on the “teaser” rate, you had a situation where couples earning as little as $30,000 per year were qualifying to buy a half million dollar house!  Of course, when the rate adjusted, the monthly payment became almost as much as their monthly take home pay and foreclosure was inevitable.

The banks initially got away with this sleight-of-hand, because all these loans were packaged and sold to Wall St, before they defaulted.  It was the “meltdown” of these mortgage-backed securities that threw the market into turmoil.

The banks, decided to look like they were acting more responsibly by “tightening their credit requirements” across the board - basically making much, much harder for individuals, businesses and other credit suppliers to obtain loans.

Predictably, all this did was turn a problem into a huge crisis that is hurting the entire economy, and in particular is actually worsening the problem, the banks need to solve.  That problem is the accumulation of billions of dollars of foreclosed homes in the banks’ inventory–also known as non-performing assets.

Why did the credit tightening worsen the foreclosure issue? Because the only way to get rid of the banks’ inventory is to sell the property.  The tightened credit requirements have greatly shrunk the potential buyer pool for these properties.  And if you think about it, the foreclosures were and are being caused by lack of borrower income to pay the note, not their credit score!

So, what’s the solution that will get all these foreclosed homes off the banks’ books, and return the property to homeowners and relieve the burden on the economy.  It’s not going to be a government bail out, or the ludicrous Economic Stimulus Act, which is just a hand out to Fannie Mae and Freddie Mac.

What needs to be done, is for the banks to sell the properties they’ve accumulated at a sufficient discount so that investors will buy, fix them up, and then sell them to ender users.  Investors are, and have been a massive source of private money for this type of real estate acquisition.  And this is a common practice at most banks that has been going on for years. 

Now, what needs to be done, is that banks need to instruct their Loss Mitigators to sell these properties at whatever discounted price it takes.  And Corporate Management should incentivize them by giving them bonuses based on the number of properties sold.

Second, the banks need to roll back their credit requirements to the pre-2008 standards and tighten up the underwriting of ARM mortgages so that the adjusted payment (based on current interest rates) is used in the calculation of the debt ratio.

Why should the banks agree to do this?  First, they’ve written off these loans already.  Second, divesting themselves of these non-performing assets will increase their borrowing power.  Third, they are not going to recover any amount of their investment any other way, because these unoccupied homes are rapidly declining in value due to vandalism, and neglect.

This is a Perfect Solution, because it would remove the non-performing assets from the lender’s books and restore them to solvency.  Second, loosening up the credit requirements (which did not cause the problem in the first place), would stimulate commerce, and loan approvals which would increase the banks’ income.

And Best of All, it would stimulate the economy by restoring credit availability without costing the government or taxpayers a dime!

Posted to Business Lines of Credit, Buyer Financing, Institutional Lending, Money & the World, Uncategorized
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I saw an article in a recent issue of Forbes about guy who is buying foreclosed properties at the steps.  The article relates how he bought 2 properties worth $725K for $400K each using $120K in savings and $680K from a line of credit.  He sold the homes 6 weeks later for $689K each, and netted $485K from the total transaction. 

Not bad for 6 weeks work.  Now this guy had a credit score of 819, which allowed him to get preferential treatment from the bank offering the 680K mortgage.  The article didn’t say what his income was.  However, you can see what a really good credit score can do for you.   Now, most folks don’t have credit scores in that range, but I know where you can go to raise your score to that level and you don’t have to do a thing except fax in credit reviews that you recieve in the mail (you also have to stop doing any stuff that’s ruining your credit, like paying late, etc.).  For those of you that want to check it out, go to: http://www.investorwealth.com/credit.

Now, as big money goes, the $800K that this guy used, sounds like a lot, but it really isn’t.  Let’s suppose you really wanted to flip houses in bulk.  After all, most real estate investors know how to do this.  They just don’t have the money.

Well, suppose you found some private lenders, that you agreed to pay 15% for the use of their funds and that money would be paid back in 3-6 months.  That’s a pretty awesome return on their investment.  Furthermore, why buy properties on the steps?  It’s hot, sweaty, takes a lot of time, and your carrying around big cashiers checks you may or may not use.

Better, call the banks directly and ask for the REO department.  Now, if you want to buy a single house, they may not be interested.  However, if you want to buy say 10 per month, that will not only get their attention, you can probably get an even better discount.  In fact, a colleague of mine is doing exactly that, and picking up homes at 40 cents on the dollar.

Now suppose after all is said and done, he makes $100,000 per house and is selling them well below market.  That would net him $1 Million per month!  Great plan–yes?  If your buying 10 homes at $200K each, that’s $2Million per month of funding.  So all we need is the money.

Unless you’re fantastically wealthy this is not a game you’re going to be playing with your own resources.  You’ll want to be talking to high net worth individuals like angel investors, private fund managers, and financial planners with high net worth clients.  For some this would still be too small an investment.  And there are others that would be excited to participate in the opportunity.

Want to get stared.  There’s some groundwork and preparation you’ll need to establish yourself as a credible investment option to these sophisticated investors.  Doing so, is a pretty straightforward process.   

To get started I highly recommend you get your hands on my “Show Me the Money” training manual.  There are several chapters devoted to raising private money, including millions from high net worth individuals.  Just use this link or click on the icon on the right side of this page.

Do this right and the current foreclosure crisis will make you one the high net worth individuals your desiring to borrow from right now.

Posted to Angel Investors, Business Lines of Credit, High Net Worth Lenders, Multiple Funding Strategy, Private Lending
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This credit crisis is really hitting home with real estate investors and other business owners.  Even though the banks caused it by making ARM loans to borrowers who they knew couldn’t afford it.  Instead, they’ve tried to shift the blame by coming down hard on the very people who could help the situation.

Unfortunately, as business people we must remember the Golden Rule of Financing: “He who has the gold, makes the rules.”  In other words, it’s a waste of time and energy to try to convince a loan officer to bend the bank’s rules–it ain’t gonna happen.

Instead, let’s imagine we’re playing a real life game of Monopoly.  You can’t change the rules, but you can come up with a winning strategy.  Well, I have found out about a winning strategy, that you are going to just love!

I was talking to some friends of mine about the situation, where deserving business could not even obtain lines of credit, even with good credits scores.  And they told me about a “back door” around the credit crisis problem.  I don’t know how long this “back door” is going to stay open.  As more businesses learn about it, the lenders may crack down on it.

Anyway, I’m going to let you in on it, because anything I can do to help legitimate business raise money is my mission.  So, if you’re needing some spendable cash for your business, you should really check this out.

Now, before you click the link below, I want you to read this carefully.  There is a very specific and precise system for getting around this back door.  So, when you go to this site, you must follow the steps exactly.  Don’t try to take any short-cuts.  And once you start filling out the applications, you must complete them within 24hrs–otherwise you’ll lose out on the potential of having $10,000’s or even $100,000’s by next week!

And some of these cards offer interest-free grace periods for up to a year.  So, if you are interested in obtaining Business Credit click this link.  And Good Luck.

Posted to Business Lines of Credit, Institutional Lending, Uncategorized
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Every real estate investor with half a brain, knew that when the banks started giving out ARM’s (adjustable rate mortgages) like candy, somebody was going to have to pay the piper someday.  Well that day has come!

But instead lambasting the banks who are now causing some much suffering throughout the economy, the Feds and Congress are devising “bail out” plans. Never mind the strapped homeowners who banks refuse to do workouts for… Nevermind the investors who can’t get lines of credit or investor home loans because of “tightened” credit requirements.

Just read the following sweet deal that the 2 largest mortgage lenders are getting, even though they’re losing massive amounts of money, and the equity from their stock price is in the toilet:

“The Fed said it granted the Federal Reserve Bank of New York authority to lend to the two companies “should such lending prove necessary.” They would pay 2.25 percent for any borrowed funds — the same rate given to commercial banks and big Wall Street firms.
The Fed said this should help the companies’ ability to “promote the availability of home mortgage credit during a period of stress in financial markets.”

Secretary Henry Paulson said the Treasury is seeking expedited authority from Congress to expand its current line of credit to the two companies and buy shares of the companies — if needed.”

Do you think maybe these institutions could extend investors (who really are the creative engines in the real estate market) increased lines of credit at lower interest rates?

Especially since real estate is really a good deal now for those who know how to choose wisely.  If you’d like to start choosing more wisely, and be able to convince private lenders of that fact, you should check out my Expert System called the Deal Evaluation Tool.  In not only precisely calculates your profit and income for 10 years down the road, it also quantifies the risk so you know what to avoid, BEFORE you sign the contract!

Posted to Business Lines of Credit, Commercial Lending, Institutional Lending, Money & the World, Private Lending
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You know what really stops real estate investors from making a fortune.  It’s not finding most of the funding for a deal–it’s finding that last bit.  For example, almost anybody can get an 80% LTV mortgage.  But the next 20%–there’s the rub. 

Oh and you “subject to” investors where the seller is giving you their house or apartment?  Isn’t it true that more often then not, there’s additional cash required for mortgage arrearage the seller left you with, or minor (sometimes major) repairs, other liens, marketing expenses, etc?  You can easily go broke doing subject to deals without an additional source of money.

There are actually quite a few other sources of money, and they work quite well with primary funding strategies like institutional loans.  I call it, the multiple funding strategy.  These days with credit tighting, institutions lowering the loan to value ratios they’ll fund, and looking for more security from the investor, a multiple funding strategy is practically a necessity.

This is an especially good strategy to use with private lenders who expect a high return on their investment (20%+).  Just do the math.  If you use an investor’s money to buy a house worth $200,000.   And let’s say you end up paying $160,000 for acquisition, repairs, etc.  You put a tenant in the house for 3 years on a lease option which the tenant exercises for $230,000.

Okay, your profit is approx $70,000.  However, if your investor put up the entire $160,000, what’s his return if you gave him the entire profit?  It’s about 44%–that’s over 3 years.  The investor’s annual return is only 14.5%.  If the investor expected 20%, he’d be pretty disappointed.

And what do you get in this scenario?  Just the cashflow from the property.  Now with no mortgage, let’s say that’s about $1000/mo.  You net $36,000.   However, if you owed the investor the 20%/y interest, $26K would come out of your share to the investor, netting you only $10,000.

Now compare the same scenario with getting an 80% institutional loan at 7% for the $160,000 purchase price.  Now, you’d only have to borrow $32,000 from the investor.  3 years at 20% would amount to $19,200.  The investor is happy, and you’d net $50,800, plus the net cashflow from the property!

Which scenario would you prefer?

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 Business Lines of Credit, Institutional Lending, Multiple Funding Strategy, Nothing Down, Private Lending
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I’ve gotten a number of comments about my “Show Me the Money” Manual.  And I wanted to take the opportunity here to respond to them.

First of all, this manual is not just for experienced investors.  In fact, most of the techniques I teach in the manual work great even if you are a rank beginner.  For example, buyer and seller financing, private lending with family and friends, unsecured business lines of credit, equity exchange… In fact the only areas where a beginner will have a significant learning curve is with commercial loans, and million dollar funding.

Secondly, don’t let the low price decieve you.  This is not just a teaser, that requires you to buy something else, in order to do anything worthwhile.  Anybody, can follow the procedures I describe and be successful in having funds for real estate purchases.

So, if you want to own this one-of-a-kind deal funding manual, click on the “Show Me the Money” icon on this page or Use This Link Now.

For beginners with good credit I recommend you Immediately read the chapter on getting unsecured business lines of credit, and take action.  You could have access to hundreds of thousands of dollars in a matter of months.

Posted to Business Lines of Credit, Buyer Financing, Friends & Family, 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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