How to get an Unlimited Supply of Money for All the Residential and Commercial Real Estate Deals You Can Find
by Tony Seruga, Yolanda Seruga and Yolanda Bishop
As an investor one of the most important things that you'll want to realize is that banks are not the only place that you can turn for loans. In fact, there are many people who are willing to invest in the idea that they, too will profit financially from the investment. If you are seen as a good investment, in other words, they feel that you can give what you're promising; they will be willing to invest in you without the traditional hassles of going to the bank for such a loan.
A private lender may be a wonderful source for money for your investment idea. The biggest difference between a private lender and a bank is the fact that a private lender is looking into the investment more than your credit history. A bank sees the idea, but is really more interested in your credit standing and your debt to income ratio. If they feel that you, the person, are a good credit risk; that you will pay back your debt regardless of the success of the business, they will approve you for the loan and this will be the beginning of a long process. A private lender on the other hand will like to see a good credit rating and debt-to-income ratio, but they will place their focus on your business idea. If they feel that your idea will bring large profits, even if your credit isn't perfect, they may be willing to invest in that idea. If they decide to invest, they can usually get you the money within a few days. This is much shorter than the process you'd have to go through with the bank.
Another tremendous benefit to a private lender is the fact that through discussion with you the amount that will be borrowed will be decided upon. If you find later that you need more money for some unexpected problem with your investment such as re-wiring a house or something along those lines, a private lender can do that with a little conversation rather than another long drawn out loan process. The terms for paying the loan back will be more flexible with the private lender as will the flexibility of those terms. If you run into trouble in the repayment you can speak to the lender and work out some short term solution until you are able to resume full payments. All decisions of repayment and terms will be between you and the lender.
The main benefit to the private lender to some is the ability to avoid a hard money loan. This type of loan (hard money) is one that caters nicely to those that are having financial difficulty. They are willing to loan money to those that have credit trouble or have had credit trouble in the past. The good part of that is quickly dwarfed by the downside. A hard money loan will have very high interest rates and a strict repayment term. If the loan is defaulted on, the hard money lender will have the right to claim the property and sell it in order to recoup the loss of the loan. You will be putting yourself and the property you're investing in at great risk through a hard money loan. The term of a hard money loan will come to maturity much faster than with a private lender. A private lender will not be as worried about your credit and they will be willing to work with you to stay in good standing with the payback of your loan. In some cases, you may be able to borrow the entire amount of investment into the property including any necessary repairs or updates and pay the entire amount of the loan back when the property has been sold. No bank or hard money loan will allow this type of term.
Some may think that this all sounds great if you can find a private lender willing to work with you. There are more places to look than you may think. A good place to start is with the local investor's association. Most areas should have some association made up of local investors. Since these people have been in the investing game for some time, probably, at least some of them may have had dealings with a private lender. If you can find some that have, they can also give you some tips as to how to appeal best to the lender. They will know what's important to the lender and what things they would like emphasized. This will help you to land the loan you're looking for.
Some other places you may want to ask around about private lenders are your local professionals. Local doctors, lawyers, or dentists, may be private lenders themselves, or they may know people that are. They may be able to again tell you exactly what they or their acquaintances are looking for in a business proposal. They will give you tips as to how to present your business plan and what kind of things included will get you the loan you're looking for.
Friends and family would be the next area that you may want to investigate. You may think that you'd know if they could help you, but you may be surprised. Your aunt's cousin's sister-in-law's little girl may have had a teacher that does private lending. It's always possible so if you're thinking of putting together a business plan and investing in some real estate, commercial or residential, be sure that everyone you talk to knows about it. You may find that there are people among those that you know that can help you get exactly what you're looking for.
A Google search will also help you when you've exhausted all other avenues. You can do a search on "local private money lenders" in your area and the internet may just be able to give you a place to start. You can start calling around from there and through talking to the first on the list, you may be able to find the others.
Wherever you find your investor, know that they are there to help you and themselves with the profits you are both looking for. Be sure that there is paperwork between you and your lender and make sure you have only one lender per property. That will help avoid confusion and may build a lasting relationship between you and your chosen lender. This will keep your profits coming and make your lender money at the same time.
About the Author
Tony Seruga, Yolanda Seruga and Yolanda Bishop of Maverick Real Estate Investments, Inc. work with builders, developers and other players in the commercial real estate industry to acquire and develop properties. They use progressive investment strategies that have proved extremely profitable. In addition to their own deals, they teach both seasoned and inexperienced investors how to be big players in the game. Visit the website for more info.
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How to Increase the Value of Property and Make More Money From It by Martin Chandra
In the '70s, real estate values increased dramatically, but not in the early '80s. In the '90s and 2000s, there were periods of both appreciation and decline in property value.
There are many investors who firmly believe that the appreciation rates of the '70s are normal and the low appreciation rates of these days were only a temporary aberration.
I doubt that low appreciation rates are a temporary aberration. It's more likely that the high appreciation rates of the '70s were the aberration. I, myself don't know that I don't have to hope the value of my property will go up. I can make it go up.
Almost all typical real estate investores are buy-and-hold guys. They buy a property, hold it for 5 to 9 years, then sell it. They expect to make their return from tax benefit, general appreciation, and cash flow. Since 1970, those three have produced decent returns.
But, you don't have to settle for only those returns. If you pursue a strategy of making the value of your property increase--instead of hoping that it increases--you can earn annual overall returns in the 50% to 100% range. Higher in some cases, of course.
I will give you a quickie course on real investment returns. There can be as many as four:
Appreciation: Increasing value of a property.
Tax shelter: Tax savings you get grom depreciation deductions--period. Depreciation is the only deduction which is tax shelter, because it's only a paper expense but it's a real deduction.
Cash flow: Before-tax difference between your income and outgo. In other words, rent and other income less operating expenses and mortgage payments.
Amortization: The paydown, if any, of the mortgage, if any.
Most very successful investores have a formula. William Nickerson, was an value-increaser, and his formula was:
- buy well-located, structurally sound building
- raise the rents
- exchange up to another, similar building
One of the underlying principles to make more money in real estate investment is find a property with unrealized potential, buy it, make the changes which are necessary to realize that potential, and exchange up to do it again on a bigger building.
You can divide properties into three categories:
- no unrealized potential
- unrealized potential but not economical
- unrealized potential which can be realized profitably
The third group is the smallest. The third group is also the only kind you can buy if you want to make serious money in real estate investment.
Then you have to further investigate over three variables:
- how much unrealized potential
- how easy it is to realize
- how probable realizing it is
Real estate investment is similar to the sponge game. You have a very limited amount of time. And you want the highest percent return. Like the sponge game, you want to accomplish as much as possible in each year.
In the sponge game, there's plenty of water to be had. But some water is harder to get than others. You get the most water in the time allotted by focusing on the easy-to-get water.
In real estate, you can increase the value of virtually every property. But some value increases harder to come by and smaller than others. You make more money by focusing on the easy-to-get value increases.
Martin Chandra has over years experience in real estate investment. Go to http://martinchandra.com/lease-purchase.php to learn how to buy, sell, and invest in real estate
Always Enough Money For The Right Deal
By: Kalinda Stevenson, PhD
You can always get money to fund a good real estate deal.
If you think about money with a consumer mindset, you might assume that the only way to buy investment property is to buy it with your own money and your own credit. This is based on the belief that money is scarce and you have to pay for your investment by yourself.
Where do consumers go for money? They go to banks. And what happens at the bank? If you are a consumer, the bank will require you to provide a vast amount of personal information. You might feel that you have to beg to get the money. And after providing all of the personal information, it is up to the bank to decide if you are worthy to borrow the money.
If you are a consumer who goes to the bank to borrow money, you have to deal with banks who decide whether or not you deserve to receive money from the bank. At the heart of the matter is the idea that the most important issues are your money and your credit. Many people who want to borrow get the distinct impression that the bank wants to loan money only to people who already have money. If you don't have money, the bank doesn't really want to loan any money to you.
In fact, you don't ever have to ask a bank for money to fund your real estate transactions. This is because there are private lenders who have plenty of money for real estate investments. This is one of the major differences between consumers and investors. Investors know that they can use private investors while consumers think that they must get funding from banks. If the deal makes sense, investors can find all the money they want from private investors.
If you want to buy a property, and you need $10,000 as a down payment, someone with a consumer mindset might say: "The only way I can buy this property is to pay $10,000 as a down payment. But since I don't have $10,000, I can't buy the property." Investors don't think this way. An investor's first thought would be: "Since I don't have $10,000 to buy the property, I'll use other people's money. I know that some one else has the money I need to buy this property."
If you have an investor and a consumer looking at the same property, the consumer will very likely say: \"I can\'t buy this because I don\'t have enough money and the bank won\'t loan me the money because I am not credit worthy.\"
In the same situation, the investor will say, "I know that this is a good deal. I'll find a private lender willing to fund this deal so that I can buy the property." The investor knows that private lenders first of all want to know if this is a good investment. They don't decide whether or not to fund the deal based only on your money and your credit. The fact is, if the investment really is a good deal, you will be able to find a private investor willing to provide the money.
Article Source: http://www.superfeature.com
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