Real Estate Investing: Always Have a Back-up

Over the last two weeks, events have unfolded that have reminded me of an important truism in real estate investing.

“Always have a back-up!”

This was played out in dramatic form with a deal I’m closing tomorrow. A wholesaler friend of mine brought me this great little three bedroom one bath home tucked away on a dead end street where pride in ownership is alive and well. The electric and plumbing is already upgraded and this rehab is cosmetic with the exception of adding a bath.

I’m buying it for $52,500 and the as-repaired appraisal came in at $86,000. Not a bad spread. This is the kind of deal I like!

When I called my hard money broker, she was delighted and we moved quickly toward closing. I was only waiting on the closing time…

That’s when the wheels fell off.

It seems my broker’s money source decided he was only going to invest in property valued at $250,000 or more. Yikes!

So, I went to back-up hard money broker number 1.

The broker took his time…about 5 days…to finally tell me that he only wanted to loan about 60% of the as-repair value. No way. Not when I can do better (70%) with back-up hard money broker number 2.

Back-up broker number 2 is probably who I should have went with in the first place. I’ve borrowed from this source before. It took one phone call, and the money is there and I close in a couple of days. Wham-bam, the deal is arranged.

It looks like it’s time to shift around the players in my core team a bit. Back-up number 2 is now my starter. Back-up number 1 (foot-dragger, doesn’t-loan-the-70%-he-said-he-would) is benched.

I tell this story to illustrate that it’s absolutely CENTRAL to your business to have back-up plans in all aspects of the business.

I strongly recommend having two or three:

- Hard money brokers - Appraisers for quick value assessments - Rehab crew leaders - Plumbers - Electricians - Roofers - HVAC techs - Realtors

In fact, have two or three of any trade or profession lined up, ready to spring into action as a moment’s notice. Sure, I have my favorites in each of these areas, but I am striving to have 3-deep hot back-ups in each. Thing happen. Life happens! Be prepared for it.

Don’t stop there. Have back-ups when you rent or sell a property. A property isn’t rented until the rent and deposit (or lease/option fee) is paid and the keys are in the hands of the new tenant. So, encourage back-ups until the money is in your hands (in cash).

I’ve had appointments set up to sign leases, and the potential tenants never show up, no call, and they quit answering their phone. This is despite being hot for the house an hour earlier! If you are in this business long, you will learn that people will disappoint you and they will fool you. So, establish policies and make one of them “it ain’t rented until it’s paid for!”

Encourage back-up offers to purchase. Deals fall through all the time! Take as many back-up offers as you can.

Having back-ups is a mental frame of mind that fits within being a big-picture thinker portion of the Mind of the Real Estate Investor. In addition, rearranging your core team is thinking big and long term. It’s a constant process of improvement and adjustment. This approach is crucial to your business! Apply this principle and profit!

About the Author

———- Bruce W. Ford publishes the “Nothing Held Back” newsletter, a free service of Rehab Real Estate Central (http://www.Rehab-Real-Estate.com). Get a free copy of his mini-course entitled “The Mind of the Real Estate Investor by clicking here!.”

Why Use Private Money For Real Estate Investing?

There are many reasons a real estate investor might want to have a ready access to private money for real estate investing. This article will explore a few of those reasons.

The first reason to use private money for real estate investing is to protect your credit rating. Think about this… if you borrow the money from a private individual, rather than a bank or lending institution, the loan will never be reported to the credit bureau. It won’t count against your debt-to-income ratio, and no record of the payment history will be kept. No one will ever know about that loan, unless you tell them.

Next, and one of the very best reasons to use private money for real estate investing, is the elimination of paperwork. I have never had to complete a loan application for private money for real estate investing. The lenders I work with all know me and the kind of investing I do. Many of them never even care to see the property. When I apply for a mortgage, on the other hand, the application process itself can take several days, and there are mountains of paper.

Yet another reason to use private money for real estate investing is the ready access to fast cash. Sometimes, when a deal is especially good, moving super-fast is a necessity. With bank financing, that kind of speed is often impossible. Even lines of credit don’t always give you the same speed capability that private lenders do. With one phone call to one of my private lenders, I can tie up a deal that other investors only dream about.

A great reason to use private money for real estate investing is the leverage that it gives you. Think about this… if you have $50,000 of your own money, is it better to pay all cash for a $50,000 property, or to put $50,000 cash down on a $500,000 property and use private lenders to finance the rest?

If you answered the $500,000 property, you’re right- and here’s why. Let’s say the $50,000 property rents for $500 per month, or $6,000 per year. Your Return On Investment (ROI would be 12% the first year ($6,000 divided by $50,000). It’s safe to assume the rent on the $500,000 property might be about 10 times that of the $50,000 property, or about $60,000 for the year. If your payback to your lender totals $4,000 per month, or $48,000 per year, what’s your Return On Investment (ROI) for the $500,000 property? If you answered 24%, give yourself a gold star!

Of course, you would need to take into account the cost of borrowing the money, but even after doing that, you can see there really is no comparison. Using private money for real estate investing gives you something called leverage. Leverage is the ability to move something very large with something very small… a lever. The lever, in this case, is your small amount of cash ($50,000). With it, you can “move” or control a $500,000 property, because the private lender’s money increases the power of your “lever”.

Here I’ve given you a few of the many great reasons for using private money for real estate investing. There are more, but you should have a clear picture of why private money can be so useful in your real estate investing toolkit. If you would like more information, I have written another article on my website titled Private Money For Real Estate Investing.

Now, go make more offers!

Real Estate Investing: Always Have a Back-up

Over the last two weeks, events have unfolded that have reminded me of an important truism in real estate investing.

“Always have a back-up!”

This was played out in dramatic form with a deal I’m closing tomorrow. A wholesaler friend of mine brought me this great little three bedroom one bath home tucked away on a dead end street where pride in ownership is alive and well. The electric and plumbing is already upgraded and this rehab is cosmetic with the exception of adding a bath.

I’m buying it for $52,500 and the as-repaired appraisal came in at $86,000. Not a bad spread. This is the kind of deal I like!

When I called my hard money broker, she was delighted and we moved quickly toward closing. I was only waiting on the closing time…

That’s when the wheels fell off.

It seems my broker’s money source decided he was only going to invest in property valued at $250,000 or more. Yikes!

So, I went to back-up hard money broker number 1.

The broker took his time…about 5 days…to finally tell me that he only wanted to loan about 60% of the as-repair value. No way. Not when I can do better (70%) with back-up hard money broker number 2.

Back-up broker number 2 is probably who I should have went with in the first place. I’ve borrowed from this source before. It took one phone call, and the money is there and I close in a couple of days. Wham-bam, the deal is arranged.

It looks like it’s time to shift around the players in my core team a bit. Back-up number 2 is now my starter. Back-up number 1 (foot-dragger, doesn’t-loan-the-70%-he-said-he-would) is benched.

I tell this story to illustrate that it’s absolutely CENTRAL to your business to have back-up plans in all aspects of the business.

I strongly recommend having two or three:

- Hard money brokers - Appraisers for quick value assessments - Rehab crew leaders - Plumbers - Electricians - Roofers - HVAC techs - Realtors

In fact, have two or three of any trade or profession lined up, ready to spring into action as a moment’s notice. Sure, I have my favorites in each of these areas, but I am striving to have 3-deep hot back-ups in each. Thing happen. Life happens! Be prepared for it.

Don’t stop there. Have back-ups when you rent or sell a property. A property isn’t rented until the rent and deposit (or lease/option fee) is paid and the keys are in the hands of the new tenant. So, encourage back-ups until the money is in your hands (in cash).

I’ve had appointments set up to sign leases, and the potential tenants never show up, no call, and they quit answering their phone. This is despite being hot for the house an hour earlier! If you are in this business long, you will learn that people will disappoint you and they will fool you. So, establish policies and make one of them “it ain’t rented until it’s paid for!”

Encourage back-up offers to purchase. Deals fall through all the time! Take as many back-up offers as you can.

Having back-ups is a mental frame of mind that fits within being a big-picture thinker portion of the Mind of the Real Estate Investor. In addition, rearranging your core team is thinking big and long term. It’s a constant process of improvement and adjustment. This approach is crucial to your business! Apply this principle and profit!

About the Author

———- Bruce W. Ford publishes the “Nothing Held Back” newsletter, a free service of Rehab Real Estate Central (http://www.Rehab-Real-Estate.com). Get a free copy of his mini-course entitled “The Mind of the Real Estate Investor by clicking here!.”

Using Direct Mail Marketing Campaign For Your Real Estate Investing Business

In this ever-growing world of marketing and advertising opportunities many people have begun to let go of the ?old world? techniques, direct mailing and the like. For this reason, and many others, it is necessary for you to jump in to the world of direct mail marketing to get the very best for your advertising dollar. Don?t let the same old things creep into your mind when this pops in there! Don?t believe that it is a waste of time or a shot in the dark, this can really work if you give it a solid try.

One of the very important concepts to remember when you begin a direct mail marketing campaign is that it is imperative to pay attention to the wording of your direct mailer. Don?t simply make some huge advertisement about buying someone?s house because of foreclosure etcetera, tell them in more compassionate ways that you can make their life easier. They already feel strange, embarrassed, or even a little ashamed of their financial situation, you can get a good step in with them by offering to ?take it off of their hands? and take over payments ?Quickly?.

Make sure that you are pre-qualifying or sending to an area where you can make no money. It isn?t worth your time or theirs if you send them information about helping them out of their financial hardships only to let them down in the end. Make sure that you are sending to the right people for that reason and this, by getting in front of the right people you are increasing the opportunity of catching their attention and getting that all-important phone call in response!

In the end it is unbelievably important that you look at this as an opportunity to invest in the future of your real estate investing business rather than just a simple expense for the present. At the very least you are beginning to register your name in the heads of thousands of prospective buyers and sellers, if it isn?t this time that it works it will be next time. Be persistent and it will indeed pay off in the end!

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