Where is all the Financing now?

It's there, just not in the usual locations.  Most of the time, you'll find it where you'd least expect it...and would normally shy away from.  In a word...

Private Investors.  

They have always been out there, in many forms.  The most common and most familiar form has been "Hard Money".  Hard because it is hard to get, hard to use and hard to pay back.  It is, in my humble opinion, just a form of "legalized extortion".  You don't need it, if you know where else to look.


There are many, many other private sources available that will give you credit for almost anything, with good terms...sometimes better terms than the bank.  Qualification for this credit can be hard, or easy.  I've come across both...which one do you think I use?


Shelf Company's...Do They Work, and Why?
One of the most common now, and also one of the "shadiest" in terms of delivery is the Aged "Shelf Company" with the Credit Lines to follow.  You will find many that don't deliver...some for legitimate reasons, some for questionable ones.  Most of the ones I have come across, and worked with, that delivered...and then their funding vanished, sourced their funds through traditional sources.  As we know, currently most traditional sources have pulled back and are waiting for our "elected officials" (probably the least qualified to get involved with this) to get their act together.  Not going to happen any time soon. So what are we left with?  Again, it will cone back to the Private Funding sources...which is OK by me.


I mentioned one source above that I have found to be pretty good...if you find the right ones.  Aged Shelf companies actually do work...at least I've come across ones that have.  The ones that do work are investors that use their own funds, and don't rely on traditional lenders as a source for the credit these private individuals "sell".  Since they use their own money, and as investors themselves they understand how money works (a huge problem in society and government today), they are able to continue to make this happen.

Let me make one important point here though.  The closer you are to the actual source of the funding (you'll NEVER talk to the actual source), the better off you'll be...and the less risk will be involved.  For me, I only work with groups that are no further away then "once removed" from the actual money source, for a number of reasons:

1. Less people involved means less commissions, thus less cost for the funds.
2. Faster response
3. Better communication
4. If the funds are on hold, you will be the first to know
5. If the funds dry out, you won't be buying...and find out later you bought from an empty "money barrel"
6. Private investors are less critical (Hard Money excluded) with credit issues
7. Funding can be in much larger amounts than expected (how does $500k+ sound?)
8. ...and most important, if you are eligible for a refund, since your money spent wasn't split between a number of "agents", it will be easier to get your money back.  I have found this to be true.  These Private Investors want to continue to do this (hopefully with the person that gets the refund), so if they don't refund the money, they are out of business.

As in all cases, you should always do your due diligence before spending money to get money.

Private Investors can be the Best Source for Funds
As I said, there are a number of private sources for funding everything from business cash flow, business startups (I have been working on funding bio-fuel and even residential development deals recently) and real estate.  Real estate is probably their most favorable since most of them are also real estate investors...this means they have a better appreciation for the numbers than most...even banks.  Banks are not interested in adding to their portfolio of foreclosures.  Banks are not in the real estate business...they are in the credit selling business.  They don't want your property.  Private investors on the other hand, know what to do with your property if it comes down to that, so they don't shy away from deals that are on "the edge".

There are a number of sources for private investors, the internet is one, but be careful.  Do your D.D. and don't spend money on funding upfront unless you are spending it on Underwriting fees that you pay AFTER you get a conditional LOI...the condition being that the deal passes underwriting. An exception to this is if you are getting a Shelf Company with funding to follow.  You can expect to pay for the company first, then pay for the funding as delivered.  You may be able to use your own/existing Corporation, in which case you may end up paying an underwriting fee just before actual funding, but AFTER funding approval (LOI)...in writing.

Using Credit Lines for Real Estate
As a side note, I love to use credit lines for real estate since there would be no lien able debt on the property...it's like buying it for cash.  This means you can buy bulk deals using just one pre-approved, and quickly accessible funding source...and split/sell off the properties individually without having to "break" the original funding...like you might have to do with a bulk mortgage.

Another great source for private funding can be found through business clubs and seminars...especially real estate seminars.  The seminars not only get you closer to the private funds, but you pick up a a great deal of knowledge and networking with others that are looking for the same things as you.

Yes, the money is out there...you just need to know who has it, and how to find them.  I've always said, "If you don't know, know who does".


Joe Villeneuve
www.thepowerofrealestatenow.com
joe@thepowerofrealestatenow.com

Using Real Estate to Retire

How to Retire from Real Estate

 I have had a number of questions regarding the retirement side of my program...specifically using the Triple Net rental homes.  (See this Blog, December 19, 2009)  In this article, I will try to elaborate on the previous posting.  As in all money and legal matters, you should consult your legal and money professionals before you proceed with any program...but this is a good one.


The most important item to remember in this is retirement depends completely on cash flow.  If you have a lump of money, no matter how much, and you think you will be able retire on it, you better have that money working for you or you WILL run out.  The size of the "lump" effects the size of the return since the interest paid on that return is multiplied by the principle...the "lump".


The rewards
If the one lump is all you have, then you have a finite amount of return.  If that lump can replenish itself as it pays interest, then you have the perfect system.  It also means the lump can be smaller...much smaller, to get the same or better returns.  I like to describe the perfect system as when,

"The front part touches the back"

This way, you can use the same principle over and over again.  This is great for real estate investing since you will need to finance each deal on an individual basis.  So. if you can replace the source/principle with each deal, then each deal that follows will be using the same money...over and over again.  This is a key.  Money is tight, so the fewer times you need to get approved, the better.

Creative Sources
If you can find a source, like your insurance policy or Self Directed IRA, then you have the ability to reuse that source over and over again simply by repaying the loan.  How do you do this you ask?

First, understand that in the case of using your insurance policy, in most cases you don't need to define what you are using the money for.  This means there is no direct link to the real estate.  In other words, you are buying this for CASH as far as the purchase is concerned.  This means right from the start you will have 100% equity in the house.  You will have "associated debt" from the I.P., but no lien on the property.  This should make refinancing easier after the house is seasoned enough to use the appraised value instead of the purchase price when calculating the LTV.

Once the house is seasoned, repay the loan from the I.P...and start the process all over again.  See, you are using the same source of funds from the insurance policy for each purchase.  If you have any other source that will do the same thing, then use it.

This is only the beginning since this will get you a number of properties under your control, but each house will bring you income equal only to the cash flow of each house.  This may only be around $100-150/month.  That's not my idea of a retirement plan.  Then, you have to deal with the tenant, repairs, vacancies and so on.  If you want to retire on at least $80k a year (before taxes), then you are going to need around 50 houses.  I don't know about you, but my idea of retirement isn't managing 50 rental houses.

Triple Net SF Homes are a Great Option
This is where the next step comes in.  Don't buy houses you have to manage.  Let me repeat this,

"Don't buy houses you have to manage!"

Yes they do exist.  This is where the Triple Net houses come in.  With this program, the lease company does all the management for you, including handling the tenant and their problems, paying all the bills except the debt service (that's you only responsibility)...and, the payment to you is GUARANTEED.  If the house is vacant or needs repairs, the lease company is responsible for the repairs (including the cost) and guarantees the monthly payment to you...each and every month, vacant or not.

You also retain all the deductions, and reap the benefit of the equity as it appreciates.

"What a deal!"

This makes it much easier to own 50 houses, but you really wouldn't need to own that many.  This is where the next part of the system steps in.  Paying off your mortgage in a fraction of the time.  I have mine being paid off in around 10 years, using only the income from these properties.  This is a special program that I use for my own house as well as all of my real estate investments.  The Money Merge Account  It is a great program that I would recommend for everyone to use as I do...on my own house and other real estate.


Once this program pays off the loan, 10 years later in my case, then you can refinance to take cash out (remember, at this point you have 100% equity since you paid off the loan) tax free. This is in the form of a loan that your tenant is paying off, using guaranteed income.


If you have 20 houses, pair them up in groups of 2 per set, refinance one set per year for 10 years (remember, your fast mortgage payoff program is paying them off in 10 years) and refinance $50k from each one (that's $100k per set), and repeat the process every 10 years, you have just set up your retirement program.


The way it ens up is around $100k tax free income every year for as long as you stay with the program...and why would you change if you have no management duties...just check cashing duties.


All of this, from just $120k starting point of principle, used over and over again.


For more information on the Triple Net house program you can contact me at joe@thepowerofrealestatenow.com and I will set you up with the source.