Loans

Over the past 10 years, Americans have witnessed the explosion of home prices across the country. Subsequently they witnessed the largest collapse in real estate prices of all time. With real estate prices remaining at historically high rates across Canada, many Canadians are wondering if the Canadian marketplace will fall victim to the same collapse as the United States.

To answer this question, we’re going to look at some of the causes of the American real estate collapse

1) Interest Only Mortgages
In the US, interest only mortgages became quite popular early in the new millennium, with many families opting to purchase homes that they really couldn’t afford, with interest only mortgages. Rather than renting, they would spend roughly the same amount on owning their own home. Unfortunately, as soon as the house prices fell slightly, this caused the momentum to continue. With people holding mortgages for more than homes were worth, it was simply in their best interest to walk away from the home and cut their losses. This compounded the problem and drove already falling housing prices even lower.

In Canada: You cannot have an interest only mortgage in Canada. Most mortgages require a 25% downpayment. Therefore, unless housing prices suddenly tumble by more than 25%, this isn’t a risk

2) Failing Economy
There have recently been major issues with the US economy, particularly as manufacturing moves overseas and factories continue to close. The US economy has lagged in recent years and is projected to continue to experience slow growth for at least the next 5 years.

In Canada: While Canada’s economy was impacted by the recession of 2008, the effects have been much more minor than in the US. Canada’s economy is based heavily on natural resources, rather than manufacturing, and therefore isn’t as volatile as the American economy.

3) Failing Banks
American banks have been failing left, right and centre. The financial industry has continued to do poorly since the 2008 collapse. In fact, this is what spurred many of the widespread occupy Wall St protests.

In Canada: Canadian banks are some of the most secure in the world.

If we look at these three triggers for the American real estate collapse, we can see that a collapse in Canada of similar magnitude is highly unlikely. Furthermore, Canada has an incredibly high immigration rate, which continues to push housing prices higher in major centres. For example, in Toronto alone, more than 40,000 new dwellings are needed each year to keep up with demand.

Overall, Canadian Real Estate prices are at an all time high, and it appears that they will continue to rise for the foreseeable future.

photo credit: Graffiti By Numbers

I recently wrote an article about the the best ways to raise private money for real estate Investors where I laid out the top 4 ways to raise private money to grow and develop your real estate investing business. One of the top 4 ways we use and teach to our students is to use group presentations.

A private lending group presentation involves getting 5 to 20 people into a room and doing a presentation where you lay out the details and benefits of your private lending program. This may not be for everyone depending on your comfort level of talking in front of groups, but the advantages of group meetings are very powerful. When people start to ask questions and tell positive stories, a certain level of group think starts to take effect and can be very powerful on the attendees.

We teach our students to focus on the preplanning and marketing, presentation materials and post-meeting follow up as the key to conducting a successful meeting and getting people to invest in your business.

Preplanning and Marketing – We put preplanning and marketing together because they must be done together. (more…)

photo credit: TheTruthAbout…

When considering financing through a private mortgage lender, you must first locate a private lender with an interest in your particular real estate venture. Private lenders are ordinary people who are willing and financially able to fund your real estate venture by means of their own assets. You can locate private lenders through networking with others in the business, asking for referrals, or making a public presentation to a group of potential private money lenders.

Assuming you have located the private mortgage lender, you will need to set up a meeting to negotiate the terms of the private mortgage loan. Keep in mind that the private lender you choose can secure funds for you through a commercial institution or through personal assets such as bonds, stocks, or cash. You will want to negotiate terms that will present a win-win situation for both you and the lender. (more…)

photo credit: Mike Licht, NotionsCapital.com

If you have tried to get a traditional mortgage, or even a hard money loan, to finance your real estate investments you know how hard it is to get loans in today’s post-credit bubble market. It is even harder to get “no money down” loans for your real estate investing business. If you are using traditional mortgage or hard money loans they can take two or three months to close. The problem you will quickly discover is that sellers are not willing to wait that long and get angry at having to continuously extend their contracts or wait for your loan approval.

Banks and mortgage lenders view mortgage loans to real estate investors as a higher risk than loans to home owners. They believe if the home owner is not living in the property and if trouble hits an investor will opt to pay their own home mortgage first and only pay for the investment loan if they can afford to make the payments. This puts the bank in a very poor position. As a result, most banks are looking for real estate investors to put up 30% to 50% down payment to protect their interest in time of trouble. VERY few investors have this kind of cash so it is very difficult or impossible to do deals with traditional mortgage or hard money loans. (more…)

photo credit: epicharmus

f you are a real estate investor and need funds to finance your real estate deals, or are looking for money to cash out of deals, there is really only ONE option in today’s market conditions. That option is a private lending program where you allow private individuals who have extra money to invest in your real estate investing business.

But with the current popularity of private lending, we are seeing our coaching students and subscribers making a number of mistakes and thought we would highlight the top 4 mistakes and what to do to avoid them when borrowing money from private lenders. (more…)

photo credit: lumaxart

Recently I wrote an article about the 4 Ways to Raise Private Money for Real Estate Investors where I laid out the top 4 ways to raise Private Money to grow and develop your real estate investing business. One of the 4 ways we use and teach to our students is one-on-one breakfast meetings.

If you are not comfortable with group meetings – one-on-one breakfast meetings are a great alternative. I generally recommend a breakfast meeting in a quiet restaurant where you can have 30 to 45 minutes of time with your prospect. At these meetings you need to lay out your private lending program and benefits of investing with your company. (more…)

photo credit: lumaxart

Real estate money and access to quick cash is the key for any real estate investor. Having cash to buy properties is the life blood of your investment business. But where does this money come from in the post-credit bubble market place?

Real estate investors are looking for better financing options as the old traditional sources of money are becoming more difficult to find and qualify for than in the past.

Here is a quick look at some of the traditional sources of real estate capital and the pros and cons of each and a new and better source of money in this market place. (more…)

photo credit: sburke2478

Getting a Commercial Mortgage is Tougher Today

We are, indeed, in the midst of a significant and severe credit crunch. Conventional lenders, such as banks, Wall Street investment houses and insurance companies have greatly curtailed their lending activity. Even the very best investors and developers are finding it hard to get projects funded.

The collateralized debt market has dried up. Few bond buyers are interested in mortgaged backed paper today. Big institutional lenders are finding it impossible to turn the mortgages they originate into cash. Put in simple terms; no mortgage buyers, no mortgage loans. (more…)

photo credit: lumaxart

Many of us have heard about private money, hard money, and other types of non-traditional funding sources for real estate transactions. It sounds good but you may not be fully aware of all of the benefits that private lending offers to you and your business. With that in mind, I would like to outline the top ten benefits of using private money in your own real estate investment pursuits.

Benefit #1: You are in control!!

The first benefit of private money that I’ll mention is probably the one that is the most important. Private lending gives you far more control over the buying process than afforded by either traditional lenders or even hard money lenders. How often do you get to negotiate things like interest rate with a traditional lender? These rates are generally predetermined and are dictated by your financial strength and/or credit score. Furthermore, the terms of repayment for traditional or hard money loans are rarely negotiable. They know they’re in the driver’s seat (because they’re the ones lending the money and they have clients willing to accept their terms if you choose not to) and pass along that knowledge to you via terms that they dictate. With private lenders, you negotiate the terms of the loan. Granted, the private lender has a say in it but you are in a stronger negotiating position because you are offering an opportunity they might not be able to find elsewhere. (more…)

photo credit: gcoldironjr2003

Private Lending Topic – I have received a number of email questions recently on very similar issues and thought I would address them as a group versus individual emails. The questions are broken down into general areas and include things to do and things not to do. The Don’ts include advertising on Craig’s List and the use of the word “Guarantee”. The Do’s include what are the best marketing methods. My comments on each are below….

Don’ts

Private Lending Advertising on Craig List – I do not recommend that you advertise on Craig List. It is too public and there are state and federal watchdogs looking for people who may be violating securities rules. I have said on many occasions that I do not recommend any advertising that is on a national scale including your own web site. This kind of advertising will get you into trouble with securities regulators and may be considered a securities offering to the public.

I know this from personal experience. Several years ago a person responded to my Craig’s List ad requesting information about my investment program. After several emails, the individual said he was ready to invest and I directed him to my title company to prepare the appropriate documents. Strangely, I never heard from the individual again after that. (more…)