Loans » Real estate

Are Canadian Housing Prices at the Top?

admin — Sun, 27 Nov 2011 23:02:04 +0000

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.

Private Lending – How to Do Group Presentations to Raise Private Money

admin — Sun, 21 Mar 2010 07:45:34 +0000

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. Make sure you have a room reserved that can fit 20 or more people comfortably. It can be a hotel conference room but they tend to be expensive. Other options might include a local library, church or civic groups that allow people to use their meeting rooms. Once you have the meeting room arrangements finalized you can then create your marketing piece with the exact address and time of the meeting.

Now you need to get people to come your meeting. And not just anyone – you need potential investors with extra cash to invest. A couple ways to promote your meeting might include posting flyers in 55%2B communities with retires who might have extra cash to invest. You can also rent a list of local people with high incomes and bank CDs and mail them a letter or post card inviting them to the meeting. You can also place small ads in your local newspaper promoting an “information only” meeting about private lending and real estate investing. Better yet do all of these to help fill the room.

Presentation Materials – In order for the meeting to be successful you need to have a well prepared PowerPoint or presentation handout. It needs to be well organized and show your professionalism. This is no time to “wing it”. Your presentation needs to come off well done and organized where you lay your business plan and why it makes sense for them to consider investing with you. Again this should be “information only” and do not make specific offers to invest or discuss actual projects to invest in at this meeting. Actual offers are done in the follow up to the meeting.

Post Meeting Follow Up – As part of the meeting be sure to gather every ones contact information so you can contact them after the meeting. I recommend a letter 2 or 3 days later thanking them and asking them to contact you if they have further questions. Keep in mind that most will not invest, but if 1 or 2 do become investors from each meeting it is a highly successful meeting.

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 in Philadelphia, PA and creator of the Private Lending Presentation Kit. This powerful done-for-you kit is loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter go to Private Lending Presentation Kit.

Private Lending – How to Finance Real Estate Through Private Mortgage Lenders

admin — Sat, 12 Dec 2009 12:58:39 +0000

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.

Financing your real estate deal through a private lender is not difficult however; it will involve some simple steps with documentation that will include a Promissory Note, Mortgage, Certificate of Insurance, and a Disclosure Statement. It is also a good idea to consider any federal or state security issues (SEC) which occasionally transpire through the private lending process.

The Promissory Note and the Mortgage document: The Promissory Note and the Mortgage document the terms you have agreed upon with the private lender. The Promissory Note explains in detail the terms in which the lender has agreed to fund your real estate venture as well as the terms you have agreed upon to borrow the money. The Mortgage outlines the terms of your performance as the borrower and generally is filed with your local county office by an attorney to insure that the filing process is done correctly.

Certificate of Insurance: The Certificate of Insurance is obtained from the insurance agency of your choice and should be provided to your private lender. The property insurance should include a title to your lender and a title to you as the borrower. It should also outline the exact terms of coverage with regard to property type and causes of loss such as flood, basic, broad, special, or earthquake.

Disclosure Statement: Use of a Disclosure Statement is always a good idea in a real estate transaction due to the fact that investing involves uncertainty and risks. The Disclosure Statement will outline the risks to your private lender, as well as your plans for use of the property and any possibilities for change during the course of the transaction. This statement acts as assurance that both you and the lender are aware of the possible risks involved before you enter into the real estate transaction.

Federal Regulations: You will want to check the federal regulations as well as those for your particular state with regard to what is termed as issuing a Security. In many cases, when you work with a private lender, it is considered issuing a Security under SEC guidelines. To avoid any problems, you may need to register with your state or federal SEC if you do not fall under certain exemptions.

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

So You Need Money For Real Estate Investments – Here is How to Use Private Lenders For Money!

admin — Sat, 05 Dec 2009 11:10:42 +0000

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.

Real estate investors still are not advised to use their own money to do their deals. Even if you have 30-50% saved for a down payment on your investment property, most real estate guru’s warn, NEVER spend your own money on real estate investments. Most beginners start their investment career saving up for a down payment, but the fact is, serious real estate investors do not use their own money to do real estate deals.

So how do you buy real estate investments if it is so hard to get a loan and you do not want me to use my money to apply to a down payment?

Buying real estate without using your own money IS possible, and it’s not difficult. With the right kind of deal, investment property can be purchased without a single penny of your own money.

Enter the world of Private Lenders… Private lenders are individuals with money to lend for investment purposes. They may or may not be wealthy, but they do have excess cash or assets available over and above what they need to live on. These individuals are willing to lend for a higher return than they can get with bank CD’s or money markets. There are no limits on the number of private lenders you can have or the number of real estate deals you can do using private money.

Raising Money With Private Lenders – 4 Mistakes Made by Real Estate Investors and How to Avoid Them!

admin — Sat, 14 Nov 2009 05:42:27 +0000

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.

Mistake #1 – Advertising on the Internet – We have seen many investors get into big trouble with the federal or state SEC regulators by advertising for private lenders through internet sites like Craig List and other bulletin boards. SEC regulators are patrolling these boards looking for advertising violations. You can not be sure that people outside your state may be looking at these ads and that would be the same as advertising across state lines and require a federal filing. We do not recommend any internet advertising for private lenders.

Mistake #2 – Using the wrong words in Advertising – We also strongly advise that in all your written or verbal advertising that you NEVER, NEVER, NEVER us the following terms: Guarantee or Guaranteed, Low Risk, Secured, Safe or Risk-free. All of these terms will attract the attention of the federal or state SEC organizations as potentially false or misleading advertising of securities for sale.

Mistake #3 – Not Using Proper Disclosure Language – I strongly recommend you use a disclosure statement in any advertising material, letters, documents, or other marketing materials as part of your private lender program such as;

“This is not a public offering. This is not an offer or invitation to sell or a solicitation of any offer to purchase any securities in the United States or any other jurisdiction. Any securities may only be offered or sold, directly or indirectly, in the state or states in which they have been registered or may be offered under an appropriate exemption.”

Mistake #4 – Advertising Across State Lines – Most small real estate investor do not want to go to the cost and trouble to file with the federal SEC. So it is very important you only advertise and deal with potential investors from within your state and do use advertising that may cross state lines. That is why we do not use newspapers or internet advertising

As with all businesses, it is very important that you avoid as many mistakes as possible and real estate investing is no different. But with private lending a mistake can have serious and expensive consequences so be careful and avoid these mistakes.

Private Lending – How One-on-One Breakfast Meetings Can Help Fund Your Real Estate Deals

admin — Sat, 17 Oct 2009 00:36:18 +0000

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.

Pre-meeting – It is important that you have a good presentation kit or creditability kit before you go into a private lender meeting. This can be a PowerPoint presentation where you lay out your business plan, your background and why it makes sense to invest with your company. You also need to have some sort of creditability kit where you lay your past deals, testimonials, educational experience or certification and any other information that lays the ground work for why you are creditable and trustworthy. Do not go into this meeting with out some sort of information and just “wing it” as you go. This looks unprepared and will not leave a professional image.

Meeting – During the meeting you need to develop a rapport with the potential lender. Without rapport nobody will do business with you. It is very simple – people do business with people they like so take the time to develop rapport before going into your presentation. At the point where you have developed rapport start going through your presentation and allow questions as they will assist the private lenders understanding and allow the rapport process to continue to develop.

It is important that this meeting is about information not an actual hard sell. You need to educate the other person first about your program and the benefits of investing with your company. I would not make an actual offer at this meeting. Wait to a couple days after the meeting to discuss a specific deal or invest opportunity.

Post Meeting – I would recommend that 2 or 3 days after the meeting that you email, call or mail something to the person to see if they have any follow up questions and start to mention a possible investment opportunity. Even if they do not invest right away continue to send follow up information as you never know when the time is right so stay in touch.

Real Estate Money – Where to Get it in the Post-Credit Bubble Market Place?

admin — Wed, 14 Oct 2009 23:41:31 +0000

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.

Mortgages Loans: Most real estate investor became very accustom to borrowing money from the local bank or saving & loans. Yet in the post-bubble market place these sources of real estate money have all but dried up. Banks are no longer offering subprime loans or no-doc loans. Even when they do loans they want excellent credit scores over 700, sizable down payments in the 30% to 40% range and quality properties with little or no rehab involved. This isn’t always possible for real estate investor and especial if you are just starting out as a new investor. These loans are also very costly for investor with high interest rates and lots of closing cost. Not only do you need the 30% to 40% down but the closing cost can be several thousands dollars and dramatically reduce your profit upon sale of the property.

Hard Money Lenders: Hard money lenders were very popular for real estate money despite the high cost. However even hard money lenders are having problems getting money to lend in the post-credit bubble and as a result many markets no long have hard money lenders in business. Hard money loans have always had several drawbacks including only lending to about 65% of the home’s value and you have to come up with the balance of the money. In addition, the fees to obtain these hard money loans are a crushing at 5 to 10 points up front and generally 5 points on the back end. The net effect of all these coast is real estate money that will cost in the 20%+ range and you still have to come out of pocket for almost 1/3 of the purchase and rehab costs.

Private Lenders: Private lending, through individuals and not through banks, is a much better option for real estate money in this new market place. Private lenders are willing to negotiate with you for both the terms and amount of the loan that will both fit the deal and there needs. This way both parties are getting what they want and need out of the lending transaction.

Private lenders can do either as a first mortgage loan where they put they put in senior dollars or second mortgage where they are subordinate (behind) another bank or other lender. The cost of private lending is very low as they are almost no closing cost and the interest rates are in the 9% to 15% range with no back-end fees.

Do you want to learn more about Private Lending and how it can transform your real estate investing business then please click here ===> Private Lending Presentation Kit.

The Private Lending Presentation Kit is powerful done-for-you kit loaded with tools and techniques to attract and develop a consistent stream of private investors into your real estate business. To learn more about this kit and receive your FREE Real Estate Wealth Newsletter please visit http://realestatewealthtoday.com/Private-Lending-Presentation-Kit.html and join the thousand of happy investors who have already joined.

Private Commercial Mortgage Lenders – Filling The Funding Gap – Investors Turn To Hard Money Lenders

admin — Mon, 12 Oct 2009 23:16:59 +0000

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.

Property owners, investors and developers are left frustrated and without financing.

Good Deals on the Sidelines

The dollar volume of pent-up commercial mortgage loan demand now measures in the hundreds of billions of dollars. Deals that, just a year ago, would have enjoyed quick funding are being rejected by banks out-of-hand. Not because they don’t have merit, but because the banks and their counterparts are caught up in the liquidity crises.

With millions in profit potential at stake, commercial property investors are seeking out non-traditional sources of mortgage funds.

Private Commercial Mortgage Loans; Funding Deals When Banks Won’t

Privately funded commercial mortgage loans are becoming increasingly popular during this mortgage meltdown. Private lenders, many funded by wealthy individuals, hedge funds or other large pools of capital, often lend their own money for their own portfolios. These unique lenders have not been crippled by the breakdown of the collateralized mortgage bond market. They can still originate loans at will without worrying about who may or may-not want to buy them.

Further, private loans (sometimes called “hard money” loans) can close in just days, as-opposed to conventional loans which, if you get one at all, can take 3 months or more to fund.
There are generally no loan committees, stacks of paperwork or complicated ratios to deal with. If they like your deal and you demonstrate that you can pay them back, they can and will close your loan no-matter-what Wall Street is doing.

What Private Commercial Mortgage Lenders Look for

Private lenders are equity based lenders; loan decisions are not driven by the credit of the borrower. It is essential that the collateral property have substantial equity in it. Most hard money commercial lenders won’t lend more than 70% of the purchase price or, in the case of a refinance, the value of the commercial property. So be prepared for large down-payment requests or a good sized 2nd mortgage. Also, borrowers will need to have some cash, typically 10% or more, in any given deal. There is no-such-thing-as 100% financing today. Documentation requirements will be much less than conventional lenders would require but be prepared to back up any claims you make with some proof.
Income producing buildings are favored by hard money lenders but most are willing to consider all property types.

Hard Money Commercial Loans Have Become Indispensable

With the large conventional lending institutions frozen like a deer in the headlights, private, hard money commercial lenders have become indispensable to the commercial sector. They stand ready and willing to lend against quality buildings or well thought-out development projects. Investors should not give up on finding financing for their best deals until they have looked into a privately funded mortgage.

Private Funds Immediately Available for the Purchase, Refinance and Development of all Types of Commercial Real Estate Property and Construction Projects. Apply Online at: http://www.masterplancapital.com/ Simple 1 Page Application. Receive an Answer the Next Business Day. Fast Closings Available.

Glenn Fydenkevez, a 20 year Wall Street veteran, founded MasterPlan Capital, a commercial real estate investment banking firm, to quickly and efficiently provide capital to commercial real estate investors and developers. He can be reached at glenn.fydenkevez@masterplancapital.com

Profit From the Power of Ten – Ten Key Benefits of Private Money for Real Estate Investing

admin — Thu, 01 Jan 2009 19:51:59 +0000

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.

Benefit #2: There is no limit to how much private money you can use on one project.

One of the greatest frustrations in traditional or hard money lending is that of the Loan to Value (LTV). With great credit and a solid income/asset portfolio, you may be able to borrow 100% of the purchase price for a piece of real estate. But what if you have less than perfect credit, limited or “hard to document” income, or desire to purchase land or a commercial property? In these cases, lenders want to see 10, 20, or even as much as 30% down to loan you the balance. This limits your ability to grow your business, even if you’ve found a tremendous bargain that is a sure winner.

Private money does not present the same rigid obstacles. Once again, remember you have the flexibility to negotiate the terms with your lender(s). This means you may borrow enough to fund the entire purchase price of the property if so desired. A private lender will likely want to see how good the investment is first before they will loan this high of a percentage. That is natural and you should be selecting quality investments for your private lenders in the first place. That being said, how cool is it that you can fund 100% of your projects, including repair costs, just by establishing the right relationships with your private lenders?

Benefit #3: Private money is less expensive to borrow.

While interest rates with private lenders may be comparable or slightly higher than with traditional lenders, the absence of third party involvement can dramatically reduce or even eliminate the closing costs and other fees that are normally associated with traditional loans. Furthermore, most private money loans have fixed interest rates and/or are based upon simple interest amortization so you don’t have to worry about floating adjustable interest rates or interest heavy payments in the early stages of a loan. It is also worthwhile to point out that many private lenders will willingly accept either a portion of the profit from the sale of a property or a fixed rate of return upon the sale, effectively eliminating any out of pocket costs during the loan. How many traditional lenders that you are aware of would defer interest payments until you sold a property for a profit?

Benefit #4: Private money is faster than going through banks.

One of the common complaints about traditional lending is that the process proceeds at the lender’s pace. This can mean as much as 30-60 days to close a loan, even if you are in compliance with all the lender’s requests. This amount of time may not seem like a lot but it may mean the difference between securing the deal of the year and not doing so, just by not being able to close quickly enough. In these cases, both you and the seller want to move quickly but traditional lenders will still operate at their own pace, regardless of the urgency at hand. Private lenders can often lend immediately because they have direct access to their own lending capital and thus dictate both when it is used and for what purpose. Once you have established a relationship with a private lender or lenders, you can act on these great bargains and know for sure how quickly you can close, without having to wait on the bank. Remember that a great real estate bargain will look as attractive to a private lender as it does to you so they have incentive to make things happen quickly to cash in on those opportunities you present to them.

Benefit #5: Having a source of cash allows greater flexibility for buying properties at a discount.

You’ve all heard the phrase “Cash is king.” Real estate is a perfect example of this, with the frequency of advertising that offers cash for houses, quick closings, etc. True, cash is a powerful leveraging tool with a seller, particularly one who is highly motivated and needs to sell very quickly. By definition, a cash offer only means that there is not a financing contingency in the contract. It doesn’t mean you have to have the money available yourself. Private money is a perfect example of a readily available source of outside funds. When you have this available to you, you have the confidence and the means to offer cash for some or all of your purchases. Faster closing times and cash purchases should translate into more attractive purchase prices if the seller is properly motivated. Lower purchase prices mean better bargains so this benefit of private money is huge, given its impact on your profit margin for each transaction for which you are able to offer cash.

Benefit #6: There are no lender “seasoning” issues or restrictions on loan amounts with private money.

Many investors are not familiar with lender seasoning issues and the effects these can have on successfully closing transactions. In a nutshell, many lenders will look at a recent purchase and see a sale within a short period of time as a red flag, questioning the ability of the property to have increased in value so quickly. When you offer cash and use private money to fund the purchase, there are no appraisals required, no recent loans issued to compare to, and therefore a bargain remains just what it should be, a bargain. Another lender issue concerns the amount borrowed. Many lenders disallow loans less than a certain amount and you may not be qualified for purchases above a certain amount. Both circumstances can limit you if you are using traditional lending sources or even hard money. The use of private lending removes these issues because the lender is more interested in the rate of return and the quality of the transaction than these other issues.

Benefit #7: Using private money preserves your credit and buying power.

Many investors have solid financial strength and can purchase properties through traditional lending channels. This is true up to a point. Once you purchase a certain number of properties, it can become increasingly difficult to purchase more, even if they all have good equity and are producing monthly positive cash flow. If you plan to purchase many properties, the use of private lenders becomes all the more critical so you don’t hit a wall with your own personal buying power. Another issue to consider on this theme is the impact of multiple purchases on your own personal credit. If you are buying 20 houses per year conventionally, you will have at least 20 credit inquiries, which will reduce your FICO score, even if the impact is brief. Private money requires no credit check and thus removes the proverbial restraints on your purchasing power.

Benefit #8: Using private money makes it easier to run your investment business through your entities.

You’ve probably heard that it is better to run your real estate investments through corporations, LLCs, or other legal entities. This is highly advisable and is all well and good in theory, until traditional lenders and even hard money lenders want to see credit backing a loan. Many lenders are hesitant to issue loans to entities, even if you sign personally as a guarantor on the loan. Since many entities are too new to have a credit rating to back them, most investors must take title to a property personally if they use a traditional funding source. Private money all but eliminates this obstacle and also improves the asset protection aspect of your business. Private money backing means you can offer cash for a property and therefore take title to it any way that you wish. This allows you to keep your investments out of your personal name, which makes more sense for both asset protection and for tax purposes. Additionally, use of an entity like an LLC to purchase a property is a way to secure your private lender’s contribution to the project .

Benefit #9: Private loans require less paperwork!

While the use of private lenders may require some paperwork to make everyone feel secure about the investment opportunity you are presenting, the quantity of paperwork is far less than if you went with another funding route. Cast your mind back to the last time you closed on a traditional mortgage or even a loan through a hard money lender. How many trees were required to produce the stack of paperwork that you had to go through and sign? A small forest, perhaps? These large volumes of paperwork are a necessary evil in the lending business, designed to protect all relevant parties, disclose any number of minute points of interest, etc. etc. The point is that traditional lenders are required by law to have you jump through these hoops. Private lending is not subject to these kinds of laws and restrictions so that means less paperwork for you and your prospective lenders!

Benefit #10: Securing private money gets you in that negotiating frame of mind.

I’ve heard the phrase many times, ‘You don’t get what you deserve, you get what you negotiate.’ This is particularly true in business and especially true when working with private lenders. Negotiation is something of a lost art to many American consumers, as we are socially conditioned to not bargain for things in the same fashion as in other cultures. Think about that. My point here is not to suggest that you are a poor negotiator. Quite the contrary. Negotiation, like any other tool in running a business, is one that can be developed and improved with a little bit of effort. What I’d like to suggest is that you take the time to develop the skills that I know you already possess but maybe just don’t use as often as you could be.

Dr. Matt Fagerness left the academic world to pursue his own dreams of business ownership and doing things “his way”. Today, he is a successful real estate investor, venture capitalist, business consultant, and author who has touched the lives of new entrepreneurs who are looking to build upon their own dreams of success. Focusing on written materials and coaching services for success-driven and business-minded people, Dr. Fagerness has a no-nonsense approach to starting and building small businesses that speaks volumes to the clients with whom he has worked. Dr. Fagerness and his various professional services are accessible by visiting http://www.jakejasper.com

Private Lending – The Do’s and Don’ts of Private Lending

admin — Sat, 20 Dec 2008 04:14:56 +0000

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.

A short time later, I received a “cease and desist” letter from the Pennsylvania Securities and Exchange. The letter had several direct quotes from the emails I had exchanged with this individual. The State did not fine me, but asked that I never advertise on Craig’s List or on my web site. Needless to say, I am complying.

Private Lending Guarantee – Do not use the word “guarantee” in any form in any of your advertising. Do not use the word “guarantee” or ever imply that somehow your investments are “guaranteed”. This is a sure fire way of attracting the attention of the wrong people. You may say your investments are secured by real estate, which is accurate, but do not use the word guaranteed.

Do’s

For Private Lending contacts you should schedule at least one breakfast meeting per week – This simple advice might be the best and almost certain way to attract large amounts of capital. Schedule a breakfast meeting every week with someone who has extra cash available and is interested in your lending program. You will not get everyone to invest, but the chances are you will get enough to support a reasonable real estate buying business. At these meetings, be sure to ask the person for the name of at least one other person they know who might be interested in your programs.

Hand out 5 to 10 business cards per week – Again, this simple but very powerful advice will ensure that you have plenty of people on your prospect list. These are the people you have breakfast meetings or schedule a group meeting with. Everyone you come in contact with may be a potential lender. Do not overlook people just because they do not fit the perfect profile. You would be shocked that people that you would never think of as investors may become one of your best clients.

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