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Private Lending for Real Estate
Real Estate Investors:
How to Develop a Business Plan and the Top Four Mistakes to Avoid
Some of the other things to avoid in terms of your business
plan are what to do during a business downturn. If our
environment today doesn’t teach us this, you have got to
plan and understand what happens in a worst-case scenario.
Making the Numbers Work during a Business Downturn
With private lending, the scenario that you have got to
explain to people is what the house is going to rent for,
and if a private lender is involved in it what his interest
payments are going to be each month. Let’s say to make the
math real simple a private investor lends you $100,000 and
let’s just say at 10% to make the math easy, so, $10,000 a
year, $850 per month.
That investor is going to say, “The interest on my loan is
going to be $850 per month.” You need to be able to
demonstrate that once you’ve got that property up and
renting that you’re not only going to be able to afford his
$850, but obviously you’re going to be able to afford to
pay the taxes and the insurance and all of that.
You would be able to demonstrate that the rent maybe is
$1,100 or $1,200, but even if you had to accept a much
lower rent, let’s say $1,000 on that particular property
just by way of an example, but that $1,000 worst-case
scenario still covers that private lender’s interest
payments. You’ve got to bring that home to that person.
You’ve got to be able to demonstrate, “Hey, I think with
the market right now it could rent for $1,200, but I
understand it’s a weak market. Maybe I can only rent it for
$1,100. Maybe I can only rent it for $1,050. Maybe I can
only rent it for $1,000. But even at that number, $1,000, I
can still make your payment, and I can still pay the
property taxes and the insurance.”
You’ve got to be able to demonstrate that, and that’s a
possibility and there’s nothing wrong with bringing it up
and telling them, “Weird things happen, the markets go
crazy, but even in the worst-case scenario I can still
cover your payments.” Be able to demonstrate that as part
of your business plan.
Using Fancy Language
The other thing we see a lot is using fancy language.
Again, your private lenders may not necessarily be real
estate investors. Don’t necessarily assume that. The
private investor could just be a businessperson. It could
be a retired person.
I have retired nurses as private lenders. They don’t know
the first thing about real estate. That’s not what they’re
into. They’re looking for a higher return on their money
than they’re currently getting at the bank or the CD or the
money market, but they do not want to become real estate
experts.
They’re assuming that I’m the real estate expert. They
don’t want to have a business plan that has a lot of lingo
in it and a lot of language about lease options and all
that stuff. Just be careful on how much lingo you use. Keep
the language fairly simple so a non-real estate investor
could at least understand it and appreciate it.
Lack of Attention to Detail
Probably the last thing, which is true of a lot of things
in life, believe me, is attention to details. You’d be
amazed at how many resumes I get. I get a lot of resumes in
my business, and how many misspellings are on resumes and
formatting mistakes are on resumes.
Business plans are no different. We get business plans with
misspellings. We get business plans where the column
numbers don’t add up.
Proof of the Business Plan
You have to believe in yourself and your business enough to
spend the extra time and proof your thing. If you need to,
have two or three other people proof it. Make sure that
enough attention to detail is spent to make sure spelling
and footing mistakes are all removed from your plan.
Obviously, as an investor, if I’m sitting there and your
columns don’t add up, it’s going to concern me that your
attention to detail isn’t going to be particularly high.
Again, don’t let simple mistakes like that catch you. Spend
some extra time.
You can have me proof it. You can have somebody else proof
it, whoever. Just make sure that the whole thing is thought
through and somebody else reads it to make sure it makes
some sense. Those are some big mistakes, or big errors,
that we see quite a bit.
—————————————————-
I invite you to learn more about Private Lending and get my
new FREE 20-page eBook titled “Discover the Secrets of How
to Fund Your Real Estate Deals with Private Lenders!” by
clicking here:
http://realestatewealthtoday.com/FREE-eBook.html
Mike Lautensack is a full-time real estate entrepreneur and
creator of the Private Lending Presentation Kit.
http://realestatewealthtoday.com/Private-Lending-Presentation-Kit.htm
Finding Private Lenders
Real Estate Investors: The 11 Top Ways to Find Private Lenders
I a sure you are aware the mortgage market in this country
has collapsed. I do not mean “it is slow” or “down
slightly”, I mean it has COLLAPSED. It is almost
impossible for a home owner to get a mortgage and down
right impossible for real estate investors to get
traditional mortgages.
The solution for the next couple of years will be private
lenders. But how does a real estate investor find private
lenders. Well, finding a private lender is not nearly as
difficult as people think. Here are the top 11 ways to
find potential lenders for your real estate investing
business.
1. Elevator Speech: Prepare a “60 second” elevator speech
and network with everyone you know including friends,
family and business associates. Spread the word you are
looking for investors.
2. Real Estate Investment Clubs: Join your local REI group
and network and spread the word you are a real estate
investor and looking for private lenders to invest in your
deals.
3. Join professional networking groups: You can join
networking groups like BNI and be sure to join and deliver
your “60 second” elevator speech at opportunity.
4. Postcards: You can purchase lists of high net worth
individuals and send a postcard inviting them to call you
to get free information form you or attend an informational
seminar about your real estate investing business and
private lending.
5. Letters: Send letters to a high net worth list as above
or send it to people that have already called or emailed
you from your postcards.
6. Small Local Newspaper Ads: You can place ads in small
newspapers offering the reader to attend an educational
seminar or request a free report.
7. Flyers: Post flyers at senior centers and areas where
high net worth people attend and traffic.
8. Speeches and Presentations: Offer to give a 30 to 60
minute educational presentation about real estate investing
and private lender.
9. Senior Center Newsletters or Newspapers: Advertising in
senior center newsletters, newspapers or even bulletin
boards can be a productive way to get potential lenders.
Again, be sure to offer free information or invite people
to a seminar and provided good information.
10. Law Journals: Most counties and large cities have
weekly or monthly journals for the local lawyers. You may
want to consider advertising in your county’s journal
offering to help the attorney with high net worth clients
and possible better returns than they are currently getting
on CD’s or money markets.
11. Internet: You can spread the word through social
networking sites like Twitter or Facebook. However, I
strongly urge you to simple offer to provided educational
information and do NOT make an offer to borrow money
through internet sources. Advertising directly through the
internet will attract attention form your state SEC
department and I assure you that this is not the attention
you want to attract.
12. Bonus Tip: Talk, Talk and More Talk: Talk to everyone
and spread the word about what you do and what services you
provided.
—————————————————-
I invite you to learn more about Private Lending and get my
new FREE 20-page eBook titled “Discover the Secrets of How
to Fund Your Real Estate Deals with Private Lenders!” by
clicking here
http://realestatewealthtoday.com/FREE-eBook.html .
Mike Lautensack is a full-time real estate entrepreneur and
creator of the Private Lending Presentation Kit. To learn
more go to
http://realestatewealthtoday.com/Private-Lending-Presentatio
n-Kit.html .
Private Money Loans - Houston Investment Property
The Lending and Borrowing Process of Private Money Loans
The lending and borrowing process of private money loans for real estate is relatively straightforward and simple; however there are certain guidelines and expectations on both the part of the lender and the borrower that renders a private money loan transaction as successful or detrimental.
The needs of the borrower and the criteria of the private lender determine the nature of the lending and borrowing process of the loan. These two elements must mesh together into the scheme of things in addition to the routine necessary paperwork requirements.
The borrower of a private loan should take a self-inventory to determine whether or not he/she meets the requirements for consideration by a private lender. In a typical private money loan transaction, there are considerations on the part of the borrower as well as the lender. It is a good idea to know the basic checklist before you get involved with the loan transaction.
The borrower’s checklist should include the following:
*The type of real estate property for which you are seeking a private money loan. *Get an appraisal to determine the property value and loan-to-ratio percentage. *Assess your current financial situation, credit history, and debt ratio.
*Determine whether or not you meet the general criteria of the private lender you have chosen.
*Hire a property surveyor.
*Get an environmental assessment if necessary.
*Obtain title and hazard insurance.
*For income producing property, access the cash flow statements.
*For income producing property, obtain the rental agreements
*Devise a plan to satisfy the short-term private money loan.
*Appoint an attorney who is qualified to handle your real estate transaction and oversee the correct filing of necessary paperwork.
*Make sure you have the private lender’s contact information for sending payments.
The lender’s checklist includes the following:
* How the borrower intends to exit the short-term private money loan.
* All of the necessary documentation on the loan is signed and notarized.
* Make sure the original mortgage is in your hands.
* Make sure the property taxes are up-to-date.
* Make sure a there is a title insurance policy issued to you.
* The closing statement is received before the funds are issued. * Make sure your money is disbursed into an escrow account.
The lending and borrowing process for a private money loan will vary according to the type of property to which you are seeking financing. The checklist for a commercial property will be different from the checklist for a residential property. In general, for all types of real estate, you will need the basic necessary paperwork of the Promissory Note, Mortgage, Certificate of Insurance, and Disclosure Statement. However, using creative financing may require additional forms of paperwork for different types of transactions.
I invite you to learn more about Private Money Lending and get my new FREE 20-page ebook titled “Discover the Secrets of How to Fund Your Real Estate Deals with Private Lenders!” by clicking here http://realestatewealthtoday.com/FREE-eBook.html . Mike Lautensack is a full-time real estate entrepreneur and creator of the Private Lending Presentation Kit. To learn more about this kit go to Private Lending Presentation Kit.
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Houston and Galveston Investment Properties–
Tips for Investors…
to get through the Real Estate Market
There is little doubt about the fact that a real estate market crash can be frightening for everyone; especially investors. When the market is good, it’s great; but, when it starts to slide it can be more than a little stressful. Many new investors often look to veteran investors and wonder how they are able to make it through the ups and downs of the real estate market year after year and come out relatively unscathed.
The truth of the matter, of course, is that many investors do not come out untouched. Many become frightened at the first sign that the market may be about to slide and quickly exit before they become burned. The real secret to being a successful real estate investor lies in sticking it out through the bad times as well as the good times.
So, what do you do when the market does experience a downturn? How do you make it through it in order to take advantage of all the benefits when the market finally goes back up again?
First, try to avoid selling in a down market. Suppose the property that you have purchased for investment does go down in value. The best approach is to try to hold onto it until the market returns and your property goes back up in value. This can certainly be frightening and stressful at the time; however, if you examine the nature of the real estate market you will discover that it always comes back. The amount of time it takes for it to return can vary; however, real estate always bounces back.
One of the most common reasons that many investors sell when the market is in a downturn is that they are afraid the market will worsen. Of course, there is always that possibility. It has to hit the bottom before it can begin the climb back to the top.
Selling during this particular phase of the market is often an emotional decision and one that is frequently not well thought out. There are even some cases in which investors who sell during a down market find they must scramble to come up with the costs necessary to close the deal. Stop and consider for a moment the anatomy of such a decision.
The market has turned down and you are concerned it will get worse before it gets better. So, you sell the property at a price that is far below what you paid for it and perhaps even what you have it mortgaged for. The person who buys the property waits it out and once the market returns, which it will, they are able to take advantage of the great deal they made and ultimately turn a great profit.
Instead of selling, an alternative option would be to hold onto the property and rent it out. Historically, there are always more renters during a down market than buyers. Why? Simply put, when the market is down many first-time homebuyers find they are frozen out of the market because lenders are more conservative and write fewer loans due to more restrictive underwriting guidelines. Since everyone still needs a place to live, many of these people wait out the market by renting. If you do sell during a down market, make sure that it is because you have given it plenty of thought and not because you are reacting to emotion.
Beyond waiting out the market downturn it is also a good idea to make sure that you put aside some cash when possible. When you are already in the middle of a slump that can be difficult to do; however, when the market turns around again make sure that you put aside a little extra money in the event you experience a turn in the market. The extra money can provide you with a cushion until the market settles as well as ensure that when the market does turn around you have options available to you.
Heather Seitz is a national real estate investor, trainer and publisher and has worked with top advisors worldwide. To get current and accurate real estate investment tips and advice, visit http://www.RealEstateRant.net and find out how you can get $852.90 in FREE real estate investing information delivered to your front door.
Contact Us about Houston and Galveston Investment Property
Opportunity Knocks in the Houston Investment Property
Demand is UP for rental properties. Recent data released by HAR says prices are down and sales are down, but the opportunity to buy rental property is prime. Demand for single family rental homes as increased Post IKE. The cycle is at the point to buy at a lower price! I don’t mean to sound cliche’, but purchasing at the current time is a golden opportunity for Texas investors. The days of the overall sentiment of ‘gloom and doom’ are only temporary!! If you have 1031 exchange or mortgage availability - call me!
