Now that the mortgage market for buying investment real estate is all but dead - investors need to have other sources available or go out business. Fannie and Freddie will no longer be available for investor mortgages, traditional banks and saving and loans will not touch investors loans for many years to come and hard money lenders, when available, can have total cost over 25%.
The answer is private money raised from people, not banks, through a process called private lending. Here are the four top ways to attract and develop your group of private lenders.
Private Lending Group Presentations
A private lending presentation involves getting 5 to 20 people into a room and doing a group 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 a group of people. But there is big advantage of doing group meetings. 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.
One-on-One Meetings
If you are not comfortable with group meetings - one-on-one meetings are a great alternative. I generally recommend a breakfast meeting in a quiet restaurant where you can have 15 to 45 minutes of time with your prospect. Like the group meeting you need to lay out your private lending program's details and benefits.
Out of Town Prospects - Creditability Kit
If the potential prospect is out of town you will need a good creditability kit you can send in the mail. It is very important to follow up two or three days after you send the package to see if they have any questions. Even if they do not participate right away, keep in contact and they may invest some time down the road after a number of follow up contacts.
Existing Private Lenders
If you already have a private lender, or lenders, be sure to keep asking them if they would like to participate in more deals. You will be shocked that most investor only give a very small investment to start and wait to see how things turn out before giving you more money. So keep asking and do what you say you are going to do they will develop a better relationship and trust level with you. As the relationship grows they will invest larger and larger sums to grow your real estate investing business.
And I invite you to learn more about Private Lending and get FREE instant access to a 60 minute audio and 20-page eBook titled "Discover the Secrets of How to Fund Your Real Estate Deals with Private Lenders!" by going to http://www.learnrealestateinvestingblog.com/
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 Kit
Saturday, October 1, 2011
Sunday, July 31, 2011
Investing in Real Estate Without Using Your Own Money
If you have no money of your own and you still want to invest in the real estate business. Don't be disappointed. There are various innovative and created methods that you can employ to become a real estate investor even if you have no money at all. First of all you will have to become pro-active since real estate is a highly charged game. Timing is everything. When you enter the real-estate world you will come to know several people who do not invest a single penny in a deal yet they make several thousand dollars on a single deal. These people know the mechanics of the real estate business. They are also smooth talkers and great negotiators. You must train yourself f to become one of them.
There are many venues open for people who have no money but they want to invest in the real estate business. Some of them are listed below:
Assuming an existing mortgage
This kind of investment does not need a down payment of any kind. What you have to do is take-over the existing mortgage on a property. If you go for this option of real estate financing, make sure that you have taken care of the original lender who has mortgaged the property since the deal cannot go through without his approval. Also be ware that the mortgage agreement does not contain the due-on-sale clause which can give you headaches later on.
Short sale
A short sale is a great way of making money in the real estate market without down money. Let us first understand what short sale means.
When a mortgage company realizes that a certain property is going to default, it agrees to accept a slightly decreased amount for it than the actual loan amount. The reason for such clemency is that the banks do not want to go through the foreclosure process because they are very costly. What you can do is negotiate these loans that are going for short sale. Sellers usually opt for short sale when they are in urgent need of money. You have every chance of closing short sales and make good profits for yourself in the process
Flipping
Flipping means buying a home for a price lesser than its market value, getting it repaired, remodeled and refurbished - and then selling it at a profit. If you choose to flip houses, you must find a house that is situated in an area that has a high resale value.
Make an offer for the property less than its market price. Before you offer to buy a house, be sure to check that the house has strong foundations. Also check if the house needs some major repairs in which case you might lose more money on it than you are ever going to make by selling it.
After getting hold of the property use your credit card to pay for the contractor who will get the house remodeled for you. When you have completely remodeled the house, start marketing. Make the sale when you get a good offer. Don't wait for a lucrative offer. Sell the house as soon as you get a reasonable offer.
I invite you to learn more about Real Estate Investing and become a member of our FREE weekly tele-seminar class where we teach tips and strategy on how to grow your real estate investing business and how to raise Private Money by going to http://www.learnrealestateinvestingblog.com/
Mike Lautensack is a full-time real estate entrepreneur, coach and mentor 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 eBook go to Real Estate Investing Blog.
There are many venues open for people who have no money but they want to invest in the real estate business. Some of them are listed below:
Assuming an existing mortgage
This kind of investment does not need a down payment of any kind. What you have to do is take-over the existing mortgage on a property. If you go for this option of real estate financing, make sure that you have taken care of the original lender who has mortgaged the property since the deal cannot go through without his approval. Also be ware that the mortgage agreement does not contain the due-on-sale clause which can give you headaches later on.
Short sale
A short sale is a great way of making money in the real estate market without down money. Let us first understand what short sale means.
When a mortgage company realizes that a certain property is going to default, it agrees to accept a slightly decreased amount for it than the actual loan amount. The reason for such clemency is that the banks do not want to go through the foreclosure process because they are very costly. What you can do is negotiate these loans that are going for short sale. Sellers usually opt for short sale when they are in urgent need of money. You have every chance of closing short sales and make good profits for yourself in the process
Flipping
Flipping means buying a home for a price lesser than its market value, getting it repaired, remodeled and refurbished - and then selling it at a profit. If you choose to flip houses, you must find a house that is situated in an area that has a high resale value.
Make an offer for the property less than its market price. Before you offer to buy a house, be sure to check that the house has strong foundations. Also check if the house needs some major repairs in which case you might lose more money on it than you are ever going to make by selling it.
After getting hold of the property use your credit card to pay for the contractor who will get the house remodeled for you. When you have completely remodeled the house, start marketing. Make the sale when you get a good offer. Don't wait for a lucrative offer. Sell the house as soon as you get a reasonable offer.
I invite you to learn more about Real Estate Investing and become a member of our FREE weekly tele-seminar class where we teach tips and strategy on how to grow your real estate investing business and how to raise Private Money by going to http://www.learnrealestateinvestingblog.com/
Mike Lautensack is a full-time real estate entrepreneur, coach and mentor 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 eBook go to Real Estate Investing Blog.
Monday, May 9, 2011
The Importance of Screening Tenants and How to Do the Screening Process
Let's go through tenant screening. Let's say you prepared the property. You've done all the things you've talked about. You've gone through your marketing plan. You've advertised and done all that.
Now people are calling you and even expressing interest in terms of filling out an application. How do you go through and screen your tenants? How do you eliminate the bad ones and hopefully find good tenants?
I guarantee you if you can find a good tenant it will make your life so much easier. If you eliminate the bad tenants it will make your life a lot easier. There's no guaranteed system to figure out who's good or who's bad, but you'll find out real quick the underbelly of real estate investing that there are a lot of problems you can have. I know a gentleman that has 51 properties and I'm sure he's got stories to tell you.
Screen Out Tenants
Let's go through a screening process. You want to try to screen out tenants and do it in a way that's fair and meets the Fair Housing rules and regulations. You cannot screen out tenants based on sex, family status, or religious status. All of those things you cannot be screening tenants on.
There are two exclusions to Fair Housing rules and you need to know what they are. You can screen a tenant that has pets. You can make a decision of I will take you or I will not take you based on whether they have a pet. Pet owners are not a protected class.
The other persons that are not protected are smokers. You can refuse an applicant solely on the fact that they smoke. You are not required to accept that person. I'll be honest with you, that's about it. Other than that you cannot make decisions - except economic of course - based on other factors of sex, religion, all those types of things.
Consistency with Policy Making Decisions
Make sure you have consistency in your policy making decisions. If you want to do it in writing, that's fine. There are some people that use point systems. They have applications and then they give them points.
If your income is above this you get so many points, if your rental history is this, your job history is this you get points. They add them all up at the end and if they're over 30 points they're approved. If they're under 30 points they're not approved. That's not a bad system. It certainly is a fair system. You could do it consistently.
Exceptions
We tried it and we didn't have any luck with it because what will happen is there are always exceptions. There are exceptions to this, exceptions to that, there are explanations for this. We found we were spending more time trying to figure out people that didn't have enough points really were good because of this, this, or this. People that had enough points really weren't good because of that. I was not particularly happy with it.
In the end, whatever system you use, I guarantee you that the number one way to determine this thing is pure gut. Guys, go out and meet the people. Just go out and make sure you've met them.
If you've got somebody working for you that does a lot of the pre-screening and a lot of the sales work, that's fine. I would suggest that you go meet the final candidates. Give them your smell test. There is something about doing this business over the years that you'll develop a gut sense of when somebody is good or bad.
I guarantee I've got a pretty good gut. It's not perfect by any means. When you place 200 people in houses in a year you make some mistakes, but it's pretty good. I can smell when something doesn't quite seem right to me. You need to develop that sense as well.
I invite you to learn more about Property Management and get a free 60 minute audio titled "Learn the 10 Success Secrets of Property Management Every Real Estate Investor Must Know to Maximum Profit and Avoiding Tenant Headaches" by going to http://www.realestatewealthtoday.com/PMS.html
Mike Lautensack is the owner of Del Val Property Management LLC, a FULL service residential property management company located in Philadelphia, PA.
Now people are calling you and even expressing interest in terms of filling out an application. How do you go through and screen your tenants? How do you eliminate the bad ones and hopefully find good tenants?
I guarantee you if you can find a good tenant it will make your life so much easier. If you eliminate the bad tenants it will make your life a lot easier. There's no guaranteed system to figure out who's good or who's bad, but you'll find out real quick the underbelly of real estate investing that there are a lot of problems you can have. I know a gentleman that has 51 properties and I'm sure he's got stories to tell you.
Screen Out Tenants
Let's go through a screening process. You want to try to screen out tenants and do it in a way that's fair and meets the Fair Housing rules and regulations. You cannot screen out tenants based on sex, family status, or religious status. All of those things you cannot be screening tenants on.
There are two exclusions to Fair Housing rules and you need to know what they are. You can screen a tenant that has pets. You can make a decision of I will take you or I will not take you based on whether they have a pet. Pet owners are not a protected class.
The other persons that are not protected are smokers. You can refuse an applicant solely on the fact that they smoke. You are not required to accept that person. I'll be honest with you, that's about it. Other than that you cannot make decisions - except economic of course - based on other factors of sex, religion, all those types of things.
Consistency with Policy Making Decisions
Make sure you have consistency in your policy making decisions. If you want to do it in writing, that's fine. There are some people that use point systems. They have applications and then they give them points.
If your income is above this you get so many points, if your rental history is this, your job history is this you get points. They add them all up at the end and if they're over 30 points they're approved. If they're under 30 points they're not approved. That's not a bad system. It certainly is a fair system. You could do it consistently.
Exceptions
We tried it and we didn't have any luck with it because what will happen is there are always exceptions. There are exceptions to this, exceptions to that, there are explanations for this. We found we were spending more time trying to figure out people that didn't have enough points really were good because of this, this, or this. People that had enough points really weren't good because of that. I was not particularly happy with it.
In the end, whatever system you use, I guarantee you that the number one way to determine this thing is pure gut. Guys, go out and meet the people. Just go out and make sure you've met them.
If you've got somebody working for you that does a lot of the pre-screening and a lot of the sales work, that's fine. I would suggest that you go meet the final candidates. Give them your smell test. There is something about doing this business over the years that you'll develop a gut sense of when somebody is good or bad.
I guarantee I've got a pretty good gut. It's not perfect by any means. When you place 200 people in houses in a year you make some mistakes, but it's pretty good. I can smell when something doesn't quite seem right to me. You need to develop that sense as well.
I invite you to learn more about Property Management and get a free 60 minute audio titled "Learn the 10 Success Secrets of Property Management Every Real Estate Investor Must Know to Maximum Profit and Avoiding Tenant Headaches" by going to http://www.realestatewealthtoday.com/PMS.html
Mike Lautensack is the owner of Del Val Property Management LLC, a FULL service residential property management company located in Philadelphia, PA.
Sunday, March 20, 2011
Renters Beware: Double-digit Rent Hikes May be Coming Soon.
(CNNMoney) — Renters beware: Double-digit rent hikes may be coming soon.
Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years.
“The demand for rental housing has already started to increase,” said Peggy Alford, president of Rent.com. “Young people are starting to get rid of their roommates and move out of their parent’s basements.”
By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode.
Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years — to a national average that will top $800 per month.
In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years, according to Lesley Deutch of John Burns Real Estate Consulting. In San Diego, she anticipates rents will rise more than 31% by 2015. In Seattle rents will climb 29% over that period; and in Boston, they may jump between 25% and 30%.
This is a sharp change from the recession, when many Americans couldn’t afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Deutch. Many others doubled up together.
As a result, landlords had to reduce prices and offer big incentives to snag renters.
We paid cash for our million-dollar home
Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, the foreclosure crisis continues unabated, and the millions losing their homes are looking for new places to live.
Apartment developers many not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends.
“There will be an envelope of two or three years,” said Macke, “when the rise in demand for rentals will exceed the industry’s ability to meet it.”
Plus, Alford added, “there’s been a shift in the American Dream. We’re learning from our surveys that a huge proportion of people are choosing to rent.”
They’ve experienced the downsides of homeownership — or seen friends and family suffer — and don’t want to take the risks or pay the higher costs of homeownership.
Where homeownership costs are particularly high, there are many more renters than owners. In Manhattan, for example, only about 20% own their homes; in San Francisco, about of third of the population does; in Los Angeles, less than 40%; and in Chicago, about 44%.
There’s one factor that could rein in rent increases: the huge number of foreclosed homes that could hit the market over the next few years.
In many markets, like Phoenix and Las Vegas, there are neighborhoods filled with recently built, single-family homes going for fire-sale prices. When the cost of owning homes falls well below the costs of renting them, more people will buy.
“That’s always been the biggest competition for rentals,” said Deutc
Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years.
“The demand for rental housing has already started to increase,” said Peggy Alford, president of Rent.com. “Young people are starting to get rid of their roommates and move out of their parent’s basements.”
By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode.
Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years — to a national average that will top $800 per month.
In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years, according to Lesley Deutch of John Burns Real Estate Consulting. In San Diego, she anticipates rents will rise more than 31% by 2015. In Seattle rents will climb 29% over that period; and in Boston, they may jump between 25% and 30%.
This is a sharp change from the recession, when many Americans couldn’t afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Deutch. Many others doubled up together.
As a result, landlords had to reduce prices and offer big incentives to snag renters.
We paid cash for our million-dollar home
Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, the foreclosure crisis continues unabated, and the millions losing their homes are looking for new places to live.
Apartment developers many not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends.
“There will be an envelope of two or three years,” said Macke, “when the rise in demand for rentals will exceed the industry’s ability to meet it.”
Plus, Alford added, “there’s been a shift in the American Dream. We’re learning from our surveys that a huge proportion of people are choosing to rent.”
They’ve experienced the downsides of homeownership — or seen friends and family suffer — and don’t want to take the risks or pay the higher costs of homeownership.
Where homeownership costs are particularly high, there are many more renters than owners. In Manhattan, for example, only about 20% own their homes; in San Francisco, about of third of the population does; in Los Angeles, less than 40%; and in Chicago, about 44%.
There’s one factor that could rein in rent increases: the huge number of foreclosed homes that could hit the market over the next few years.
In many markets, like Phoenix and Las Vegas, there are neighborhoods filled with recently built, single-family homes going for fire-sale prices. When the cost of owning homes falls well below the costs of renting them, more people will buy.
“That’s always been the biggest competition for rentals,” said Deutc
Sunday, March 6, 2011
Real Estate Landlords - Learn the Top Ten Tax Deductions
Learn about the many tax deductions available to rental property owners. Every year, millions of landlords pay more taxes on their rental income than they have to. Why? Because they fail to take advantage of all the tax deductions available for owners of rental property. Rental real estate provides more tax benefits than almost any other investment.
Often, these benefits make the difference between losing money and earning a profit on a rental property. Here are the top ten tax deductions for owners of small residential rental property.
1. Interest
Interest is often a landlord's single biggest deductible expense. Common examples of interest that landlords can deduct include mortgage interest payments on loans used to acquire or improve rental property and interest on credit cards for goods or services used in a rental activity.
2. Depreciation
The actual cost of a house, apartment building, or other rental property is not fully deductible in the year in which you pay for it. Instead, landlords get back the cost of real estate through depreciation. This involves deducting a portion of the cost of the property over several years.
3. Repairs
The cost of repairs to rental property (provided the repairs are ordinary, necessary, and reasonable in amount) are fully deductible in the year in which they are incurred. Good examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows.
4. Local Travel
Landlords are entitled to a tax deduction whenever they drive anywhere for their rental activity. For example, when you drive to your rental building to deal with a tenant complaint or go to the hardware store to purchase a part for a repair, you can deduct your travel expenses. If you drive a car, SUV, van, pickup, or panel truck for your rental activity (as most landlords do), you have two options for deducting your vehicle expenses. You can:
* deduct your actual expenses (gasoline, upkeep, repairs), or
* use the standard mileage rate (51 cents per mile for 2011; up from 50 cents per mile in 2010). To qualify for the standard mileage rate, you must use the standard mileage method the first year you use a car for your business activity. Moreover, you can't use the standard mileage rate if you have claimed accelerated depreciation deductions in prior years, or have taken a Section 179 deduction for the vehicle.
5. Long Distance Travel
If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other expenses. If you plan your trip carefully, you can even mix landlord business with pleasure and still take a deduction.
However, IRS auditors closely scrutinize deductions for overnight travel -- and many taxpayers get caught claiming these deductions without proper records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you need to properly document your long distance travel expenses.
6. Home Office
Provided they meet certain minimal requirements, landlords may deduct their home office expenses from their taxable income. This deduction applies not only to space devoted to office work, but also to a workshop or any other home workspace you use for your rental business. This is true whether you own your home or apartment or are a renter.
For the ins and outs on taking the home office deduction, see Home Business Tax Deductions or Every Landlord's Tax Deduction Guide, both by Stephen Fishman (Nolo).
7. Employees and Independent Contractors
Whenever you hire anyone to perform services for your rental activity, you can deduct their wages as a rental business expense. This is so whether the worker is an employee (for example, a resident manager) or an independent contractor (for example, a repair person).
8. Casualty and Theft Losses
If your rental property is damaged or destroyed from a sudden event like a fire or flood, you may be able to obtain a tax deduction for all or part of your loss. These types of losses are called casualty losses. You usually won't be able to deduct the entire cost of property damaged or destroyed by a casualty. How much you may deduct depends on how much of your property was destroyed and whether the loss was covered by insurance.
9. Insurance
You can deduct the premiums you pay for almost any insurance for your rental activity. This includes fire, theft, and flood insurance for rental property, as well as landlord liability insurance. And if you have employees, you can deduct the cost of their health and workers' compensation insurance.
10. Legal and Professional Services
Finally, you can deduct fees that you pay to attorneys, accountants, property management companies, real estate investment advisors, and other professionals. You can deduct these fees as operating expenses as long as the fees are paid for work related to your rental activity.
Did You Know?
* Landlords can greatly increase the depreciation deductions they receive the first few years they own rental property by using segmented depreciation.
* Careful planning can permit you to deduct, in a single year, the cost of improvements to rental property that you would otherwise have to deduct over 27.5 years.
* You can rent out a vacation home tax-free, in some cases.
* Most small landlords can deduct up to $25,000 in rental property losses each year.
* A special tax rule permits some landlords to deduct 100% of their rental property losses every year, no matter how much.
* People who rent property to their family or friends can lose virtually all of their tax deductions.
If you didn't know one or more of these facts, you could be paying far more tax than you need to. For more information, see Every Landlord's Tax Deduction Guide, by Stephen Fishman (Nolo).
Thursday, December 30, 2010
Real Estate Investors: Why Private Money is the #1 Option for Financing Your Investments
There are so many misunderstandings related with private money lending for real estate investors. In fact, most real estate investor do not understand or participate in private money because they do not understand what it is or how to get started. There is a long a history of private money lenders investing their own money in real estate investments. Like many things, private money comes and goes depending largely on interest rates and the demand from real estate investors and other investors.
Traditional lenders always gave loans based on two things: collateral and your personal pledge to repay. Lenders wanted to lend to about 70% to 80% of the assets values (collateral) and wanted you to be trust worthy based that on your credit score and salary. Private money is different in that the loan is almost entirely based on the collateral and not your personal pledge to repay. This does not mean private lenders do not do some background checking and if you have a history of not repaying things it is unlikely you will be participating in the private lender market.
The definition of a private lender is an individual that you can negotiate directly with on a personal basis to borrow money for real estate investments. The money can be used to purchase rental real estate investments or to supplement funds borrowed from a bank to cover down payments.
Private money became very popular as interest rates on tradition Money Markets and CD's dropped below 5%. Entrepreneurs and other people with extra cash started looking for higher interest rates (north of 12%). If they could get the high interest rate and enough security (collateral) they were willing to do loans without personal credit or the need to be worried about credit scores. That started the revolution that you see today where private money lenders are as big and popular as hard money lenders were 10 years ago.
This trend toward private money will remain as long as traditional interest remain low and traditional mortgage and hard money remains hard to get.
Finding private money is not nearly as difficult as people think. We utilize a number of low key person to person marketing techniques to attract potential lenders. However, I strongly urge you not to use any large public sources of advertising, such as Craig's List, or you may get a call from the SEC and you do not want that.
Here’s how it works …first, you do some simple marketing to find individuals interested in earning 9% to 15% interest on investments secured by local real estate. You will find these prospects everywhere. They belong to your local real estate investor clubs, church’s, civic clubs, parent organizations, friends, family or even neighbors.
You will be surprised how easy you’ll locate them and soon, they will be searching you out. Just let everyone know that you pay high rates of interest for loans that are secured by local real estate.
As prospects express interest, you explain that the investments are secured by local real estate and do not exceed 75% of the after repair value of each home. Each investment is based on a specific property, and they can decline any property which they are not comfortable with. All you require is that they approve quickly and can fund within 7 to 10 days.
I invite you to learn more about Private Money and become a member of our FREE weekly tele-seminar class where we teach tips and strategy on how to grow your real estate investing business and how to raise Private Money by going to http://www.realestatewealthtoday.com/TuesdayTipsSignUp.html.
Mike Lautensack is a full-time real estate entrepreneur, coach and mentor 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 eBook go to Real Estate Investing Blog.
Traditional lenders always gave loans based on two things: collateral and your personal pledge to repay. Lenders wanted to lend to about 70% to 80% of the assets values (collateral) and wanted you to be trust worthy based that on your credit score and salary. Private money is different in that the loan is almost entirely based on the collateral and not your personal pledge to repay. This does not mean private lenders do not do some background checking and if you have a history of not repaying things it is unlikely you will be participating in the private lender market.
The definition of a private lender is an individual that you can negotiate directly with on a personal basis to borrow money for real estate investments. The money can be used to purchase rental real estate investments or to supplement funds borrowed from a bank to cover down payments.
Private money became very popular as interest rates on tradition Money Markets and CD's dropped below 5%. Entrepreneurs and other people with extra cash started looking for higher interest rates (north of 12%). If they could get the high interest rate and enough security (collateral) they were willing to do loans without personal credit or the need to be worried about credit scores. That started the revolution that you see today where private money lenders are as big and popular as hard money lenders were 10 years ago.
This trend toward private money will remain as long as traditional interest remain low and traditional mortgage and hard money remains hard to get.
Finding private money is not nearly as difficult as people think. We utilize a number of low key person to person marketing techniques to attract potential lenders. However, I strongly urge you not to use any large public sources of advertising, such as Craig's List, or you may get a call from the SEC and you do not want that.
Here’s how it works …first, you do some simple marketing to find individuals interested in earning 9% to 15% interest on investments secured by local real estate. You will find these prospects everywhere. They belong to your local real estate investor clubs, church’s, civic clubs, parent organizations, friends, family or even neighbors.
You will be surprised how easy you’ll locate them and soon, they will be searching you out. Just let everyone know that you pay high rates of interest for loans that are secured by local real estate.
As prospects express interest, you explain that the investments are secured by local real estate and do not exceed 75% of the after repair value of each home. Each investment is based on a specific property, and they can decline any property which they are not comfortable with. All you require is that they approve quickly and can fund within 7 to 10 days.
I invite you to learn more about Private Money and become a member of our FREE weekly tele-seminar class where we teach tips and strategy on how to grow your real estate investing business and how to raise Private Money by going to http://www.realestatewealthtoday.com/TuesdayTipsSignUp.html.
Mike Lautensack is a full-time real estate entrepreneur, coach and mentor 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 eBook go to Real Estate Investing Blog.
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