Revealing the most effective way to fund your deals
I have received hundreds of questions on Private Lending in the survey we sent out. I want to than you for your responses. Keep em coming. I have had my staff transferring some of them over to the blog as well so I could answer them directly. If you have more please post them.
I also created 3 videos to answer most of the big questions so watch them here.
Categories: Uncategorized |
I have been talking to many investors over the past 8 to 12 months and they have shared many of their frustrations regarding Private Lenders. I want to hear more. Call me a glutton for punishment but the more I hear the better we can serve you.
Most of the frustrations have been along the lines of; how to find them or how to secure them. I am sure that there are many more out there that you can share. Let’s hear em. I will post my replys in each of the comments so take a look often.
Categories: Investing, Private Lending Questions |
I get asked this all the time. People figure that private lenders are either optional or a luxury. In my opinion they are a necessity in the real estate investing business. Without private lenders you have either to use your own money, rely on banks or partner with other investors.
There are some real limitations to all of them. What do you think? What has been the biggest hurdle in your business without private lenders?
Categories: Investing, Private Lending Questions |
As real estate investors we have had the opportunity to talk to and learn from many people. I know that I have spent my share of money on educating myself and the people in my office on investing and private lending.
I can tell you that I have picked up so many things that I took home and implemented only to have them fail miserably. I have taken and tweaked everything and through constant testing made it work in my market.
What have you found during your implementation that just plain didn’t work for you. Either because of the market, the material or there was a fatal flaw in the concept. Let me know what you tried that worked and what did not work.
I am working to finalize my new Private Lending Product “Cracking the Private Lending Vault” and want to answer as many questions as I can for you all. So share what you know. I will answer these questions on the blog as well so you will receive an answer quickly.
Categories: Private Lending Questions |
With the current state of the economy, private lending has become an even more viable option for consumers seeking to borrow money.
Chris Larsen, CEO of Prosper.com, says the credit crunch has been great for the online private lending business. His company went from making $26 million in 2006 to $81 million in 2007. Talk about a huge increase!
Not more than a few years ago the idea of person to person lending was limited to working through an agency or private capital broker. Now, with the advent of improved technology, private lending has become more capitalistic and more like an open market. Companies such as Prosper.com have created an eBay® for money, where lenders and borrowers can place “bids” on the amount of money to borrow or lend at specific interest rates.
One of the biggest testaments to the current economical situation is the increased number of prime borrowers looking for people to lend them money. These prime borrowers, until recently, have been able to qualify for traditional loans, credit cards, etc., but are now turning to other Americans for financial help.
In the end, it ends up being a win-win situation for both parties. The borrowers are getting lower interest rates on their loans, and those lending are getting a higher return on their money than they would if their money was in a bank account.
Additionally, prime credit borrowers that are going to not only Prosper.com, but other private lending institutions, make people feel more comfortable lending money in this peer-to-peer kind of way. The problem with investing money in Wall Street is the amount of disconnect from people. You can’t see the borrower or the lender, but with private lending you can see the people who are lending and borrowing. There is a better established connection between the two parties.
As a lender, you can see what assets your borrowers have available to secure the loan they are receiving from you. The chance of lenders getting their money back is much more likely with private lending. Borrowers, and especially prime credit borrowers who turn to private lending, are doing so because they are unable to receive traditional financing for the purchase of a new home, car, business, etc. Most borrowers plan to and do pay off their loans – the potential risks of losing their home, other property, and/or ruining their credit are great incentives to pay off lenders.
Categories: Private Lending Questions |
You probably heard that General Motors, Ford Motors, and Chrysler, the 3 giant auto makers are asking congress to bail them out in the tune of $25 billion. What do you know, even big companies are struggling to get loans from banks. Why is that? Well as I’ve mentioned last week, the financing guidelines have changed in the last 18 months and have gotten even tighter in the last 90 days. We all know how these got started.
Now what are the ripple effects of these stringent financial guidelines? Millions of people have lost their homes to foreclosure, banks have gone bankrupt or have been merged with another bank, investors have lost millions of dollars of their investment portfolios, government bailouts; I could go on and on. That is in the real estate industry, so what’s going to happen to the auto industry if they don’t get the funding that they need?
Let us look at what the ripple effects would be if these auto makers closed their doors. The companies that would have the biggest impact are the suppliers and the dealerships. This is because the auto makers, suppliers, and dealerships provide jobs to millions of people, not to mention the jobs created by other businesses that provide products and services for them. The people who have invested in these companies, as well as the people who have pension plans and retirement accounts with them, will be impacted in the event of a motor industries bankruptcy. This will create a much bigger affect to our economy. Why am I telling you this? Because more than ever, now is the time to educate yourself on How to Be a Private Lender or How to Find Private Lenders.
People are losing money left and right and are scared of what’s going to happen to our economy. I was listening to a talk show on the radio last night while driving and there was a man that came on the show and said that he has 350,000 shares of Ford Motors stock. He said that just 6 months ago the stock was worth $8.26 a share and now it is worth $1.70 a share. If you do the numbers, he lost $2,296,000 in that 6 month period. I don’t know about you but could you sleep at night if you lost that kind of money? Especially if you are planning to retire in the next 5 to 10 years and you are counting on that investment?
So what else is there to do? If you have money to invest but are unsure of how to invest it for the best rate of return, then you need to attend my FREE 1-day event in December (visit www.REI-Success.com/essentials.php for more information). Becoming a private lender enables you to invest in something that not only will give you a higher rate of return, but also a sense of control and security. It’s going to take us years before our economy goes back up again, and I know it will go back up, however some of you are probably in the stage of life where you need to do something with your money NOW. And putting your money under the mattress or burying it in your backyard isn’t gonna do you any good.
On the other hand, for those of you who are struggling with “Where” and “How” to find private lenders then this event is also for you. Uncertainties send investors scrambling for safe harbor. You need people that have money to fund your deals, and people that have money need someone like you with whom to invest their money, so it’s a win-win situation for both parties. The problem is NOT where to find these private lenders but rather what to say and how to talk to these people. Am I right? Because if you know what to say to them, everybody that you meet everyday is your potential private lender. You don’t need to find somebody wearing a suit or working in the corporate world; Most are just Average Joes and Janes.
I told you that this week I would talk about what to say to these people and how to get them to open up to you. In today’s economy, financial crisis is in everyone’s mind so you could start by asking questions like “What do you think of all the government bailouts?” “I am worried about my and my children’s future. How are you preparing for your future?” “How are you doing your investing nowadays?” “Are you happy with the return that you are getting on your invested money?”
These are some of the ice breaker questions. Once you have the conversation going, then you can tell them your “30 second commercial”, if you will. Explain what you do and how they will benefit from investing with you. Some of them will be thrilled that you asked them.
Last week I was visiting one of my private lenders and he was telling me that his colleague kept telling him about how he needs to find something to put his money in, begging for him to find the perfect investment opportunity. My private lender’s response was that there is tons of people (Real Estate Investors & Small Business People) looking for money out there; you just need to know how to find them.
Now, wouldn’t it be nice if you could have access to those funds?
Categories: Economy |
If I had a nickel for every time someone asked me that question I would have an extra million dollars just lying around and would be able to give it to someone to buy their house. Financing is really the key to opening up your investing business right now.
Over the last eighteen months or so the financing picture has changed drastically. In February of 2007 you could get a 100% LTV non-owner occupied loan with a mediocre credit score, no proof of income or assets and just a signature. Now if you can get funding at all, you have to have a great credit score, fully documented assets and income and a large down payment. Not only that but you need to have seasoned money for the down payment and reserves. The pendulum has swung back the other way almost to the extreme.
If you or your buyers are going to use conventional funding sources, you need to make sure to have your act together. Ensure that everything is documented perfectly. This is the main reason why it is much tougher to sell your rehabbed properties. Buyers are not prepared. The good news is that if you buy the house right, you are sitting pretty to sell your properties creatively and to make a great profit.
This brings me back to financing, it is more important than ever to use private lending in your business. Learning the ins and outs of Private Lending can be the difference between thriving in this economy or shutting your doors and missing the best opportunity for wealth creation in our lifetimes.
Unfortunately most people don’t understand how to find Private Lenders, or how to be one for that matter. Investors are afraid to talk to people about what they do and ask them if they are happy with their investments. It is amazing what happens when you talk to people. You can find money coming out of the wood work. The other night I was flying home from St. Louis and chatting with a college professor about our lives and jobs. At the end of the 3 hour flight I had a potential new private lender and had sold one of my new courses about how to be a private lender.
Most people are in a position where they just lost some significant money in the stock market. Their mutual funds are stagnant or have gone down as well. People are afraid, very afraid. They don’t see any options available to them except a T-Bill that earns less than 3% annually.
I show them how they can earn a safe and secure return by lending me money that will be secured by real estate. I talk with them to find out their goals and determine if what I do will fit their criteria or not. I never try to force anyone into an investment. It will never work for either of us if I do. I am careful to stay well within the SEC and State department of securities guidelines.
I am careful to only approach people when I have a relationship with them rather than hitting someone up when I first meet them. I get to know them and their goals. I am not a financial planner. I do not present myself as one on TV or through what I say to people. By building a relationship you understand their needs better. You also stay well within the law, which is always a big thing for me. I really don’t look good in stripes.
Your assignment this week is to talk to people about your investing business and discover if they are happy with their investments. Find out what they earning from their investments. Don’t push them to reveal everything to you immediately; you can follow up with them later. Next week I will talk about what to say to get them to open up to you.
Categories: Closing Properly, Investing, Private Lending Questions |
I hear all the time Investors and Private Lenders comparing today’s industry to the Great Depression of the early 1930’s. I am hear to tell you, along with all of my successful mentoring students and colleagues, that this is definitely NOT the Great Depression all over again.
A recent MSN Money News Video revealed why this current economy is NOT an imitation of the Great Depression…
1. The Federal Reserve triggered the stock market crash in the 1920’s and 30’s and kept tightening the money supply which caused the economy to get into even more trouble.
2. President Hoover and Roosevelt of the 20’s and 30’s as well as the (current and incoming) Presidents both wanted to balance the budget.
3. International policy was enforced– A new law called “Beggar your Neighbor” went into effect as a result, adding tariffs to get more world trade to come to us. The goal was to protect our economy and slow down world trade.
4. The world economy is very different now than in 1932 and 1937. The rest of the emerging world has some very strong economies and can pick up some slack. For example China and India.
5. We already had a depression and know the mistakes we made. The resident knows that we need to stimulate economy, not tighten budget. There is more understanding of how the economy works through trial and error.
You are probably wondering why I am telling you all of this… I am telling you this because now is not the time to tighten up your money, hold on to your cash, and hope that it lasts as your security in the future. This is the time you need to get your money out there and start making it work for you. CASH is KING. People who hold cash in today’s market, or have access to cash, have a huge advantage in the industry. It creates an opportunity to put the cash into action, invest it, and receive a huge return as a result.
Categories: Economy |
Most people are looking for a place to put their money where it will earn a return. Right now any return will do. There are some common misconceptions involved in preserving capital and creating wealth.
I am hear to tell you that after losing almost 60% of my retirement account in the stock market during the Dot.Com crash of 2000-2001 I was not ready to put the remnants into the stock market again. I remember the feeling of watching my stock portfolio rise and fall. I was as nauseous as if I was on a small boat during a typhoon.
Not long ago I had many friends bemoaning the fact that they lost a large portion of their retirement. All in one day. These are the same people that I was talking to about being my private lenders. They were concerned with the real estate market and was bound and determined to try to remain confident with where there money was currently at.
Categories: Private Lending Questions |
As you know there has been some interesting news in the financial markets over the last couple of weeks, which reached a crescendo last night with the Fed bailing out AIG Insurance. I am not going to repeat all of the information that you can readily read in newspapers, on the internet or hear on the evening news shows.
What I am going to talk about is how this is going to affect the Creative Real Estate Market and what will we be seeing as a result.
Yes, this is my Crystal Ball Posting!
Taxes will be raised by whichever party gets into the White House. Be prepared. The Federal Funds Rate will go down a quarter point and stay there for another 4-6 months or so and then begin its steady climb back up. Right now the Feds Fund Rate is at 2%. The last time it remained below 2% was from November 2001 until December 2004. The Inflation rate will go past 6% and then decline after the election. The unemployment rate increase will remain steady over the next 6 months or so. Oil will hit $100 per barrel and then retreat to the $90 range for the remainder of the year.
The Federal Reserve is watching the interest rates very closely because they are concerned about inflation. But with the Housing crisis they are concerned about the adjustable rate mortgages that are out there that are tied to the Fed’s Fund Rate. By raising this it could expand the mortgage defaults and trigger another big foreclosure storm.
People are loosing money in the stock market at a rapid rate. Just the Dow is down around 675 points since the opening on Monday morning. Banks are failing; the Government is bailing out major insurance and trading firms or arranging mergers with others. Why? The Powers that be are working to instill confidence in the market and the economy. And protect themselves from failure when they should have acted years ago when this crisis was foreseeable.
Many of these banks made a killing on Subprime Mortgages; they sold them off to insurance companies and pension plans. (Look for pension plans and retirement accounts to start looking for a handout from the government as well.) The speculator attitudes of people working on Wall Street and in companies are now receiving their just desserts.
I have been out of the stock market for a long time. I do not have speculative real estate holdings either. I have my money tied up in my businesses or in a secure place. Right now Cash is KING. If you have cash you will be making a killing. If you know creative real estate investing you will make a killing. Get as many private lenders as you can and get their money out of the stock market and into secure real estate notes that are valued accordingly. Do not over leverage them. If you are a private lender, be careful about substitution of collateral provisions. Make sure that you have the right to approve the collateral in all of the notes.
Now is the time to be aggressive in your business but conservative in your own finances. You need to take control of your destiny rather than just looking at quarterly bank statements that tell you how much you lost over the last 3 months.
Getting educated is the only thing that will save your derrière over the next 12 – 24 months. Stay Alert!
Categories: Economy |
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