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

In real estate, you don’t get what you pay for.  Instead, successful investors pay for what they get.  This is especially true for buying income properties. 

I saw a recent article with the headline “Office Fundamentals weaken in the 2nd Quarter (2008)”.   The article went on to point out that the vacancy rate in office buildings nationally was increasing due to decreasing demand even with low delivery of new space.  And that surburban offices are feeling the biggest crunch.  In fact, an accountant friend of mine, just gave up his surburban office in favor of his downtown office.

Obviously, this is a symptom of a weakened economy, brought by greedy banks that caused a mortgage crisis and credit crunch that are percolating through the economy.

Does this mean you should not invest in office buidings.  Not necessarily–especially if you only pay for what you are buying. For example, if you are considering a half-empty office building only offer a price based on the income from a half-empty building. In fact, considering the trend in office occupancy is negative, it is crucial to examine the stability of the current tenants in the property.

Also, just like we advise investors in single family homes to build a buyer’s list, buyers of commercial property need to created a “tenants list”. You also need to expect that in a buyers market, your prospective tenants are going negotiate harder for greater concessions, and lower rents.

You’d better take all these factors into your projections and factor them in to your offering price. Now, you may be thinking, “but, Richard, if I do that, who’s going to take that deal?” Hah. The answer is only the sellers who are motivated to do business with you on your terms. If not, NEXT! At least you’ve saved yourself the financial stress of a money-sucking investment.

I know it can be quite a chore to go through the complex analysis of the kind I’m suggesting. Well, I’m happy to say, you can cut the time to minutes if you use my Expert System, called the ‘Deal Evaluation Tool.’ Not only can you project for up to 10 years in the future, the profit, and cashflow of any type of property, and model any kind of scenario of financing, rent, and occupancy changes, etc. You also get expert advice on the amount of financial risk you are taking. A rosy profit picture isn’t worth much if the chance of failure is high. Anyway, if you want to get a copy of this amazing tool, just click here. (or you can get it for Free if you are a member of our Inner Circle).

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Posted to Commercial Lending, Institutional Lending, Marketing in Real Estate, Money & the World, Uncategorized
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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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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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