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