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.

Why is Real Estate Investing Such Low Risk?

Why is Real Estate Investing Such Low Risk?

The answer to the question in the article title is easy, and one word...CONTROL.

It is the only investment I know of that gives me control over all aspects of the investment, mainly because it is the only investment that is so transparent.  Think about.  If you are investing in stocks, bonds or mutual funds, you have no control over your investment...and you also have no idea of the costs associated with them.  They are not transparent at all.  The only thing you do know is you are turning over all of your money to a sales person Financial Advisor (check out the requirements to become one...and compare that to a beautician) who may not even buy the same investment they are selling you.  You are buying for the "long hall", which really means that you won't see your return on investment until the person that sold it to you is retired...or out of the business.  Why would you do that?

Real Estate is Predictable 
Real Estate, on the other hand, is predictable.  You know, if you educate yourself well, before you even buy what your returns will be.  This means you are in control.  You simply need to purchase at the right price, finance it properly, pick the right location, and have it managed well.  Not every property qualifies, which is why you must educate yourself to be able to recognize a good deal from a bad one.

The good deals come with so many advantages that are not found with other "capital gains" type investments, such as:

1. Cash Flow (Income comes in every month like clock work)
2. Leverage (You can get financing for real estate if you learn how to write a business plan...again with the education.  Try to get financing for your next mutual fund purchase).
3. Amortization (If you have cash flow, your tenants pay off your debts.  In fact, you should be able to pay off the debt service faster than you thought...see this site for more information)
4. Depreciation (Isn't it nice of the government to allow us this deduction for the reduced value of our property...even though it almost always goes up in value)
5. Foresight  (Change the value of your property by changing the zoning, or improve/rehab a broken down house)
6. Broaden Horizons (Start with Single Family, move onto Multi-Family, then commercial and development)
   
   
   
   For more information on NNN houses see earlier Blog.
7. Forecast Results (You can predict the future much easier, and control the outcome, with good management in place...this may be you in the beginning.  Invest in NNN guaranteed lease houses or commercial properties and control the management even more)
8. Tax-deferred Income (Many ways this comes into play, not the least of which is through a 1031 exchange.  This allows you to sell, profit, re-invest, and delay taxes until.....?)
9. Appreciation (See #4 above.  Your property, if purchased and set up correctly, WILL go up in value)

Why Cash Flow is King
I prefer to invest for cash flow than for appreciation (flipping) since the tax treatment is far better and I like the idea of steady cash flow and my tenants paying off my mortgage...ahead of time.

Joe Villeneuve, President

The Power of Real Estate Now

www.thepowerofrealestatenow.com

joe@thepowerofrealestaenow.com

NNNHouses

Fast Mortgage Payoff Program

Nevada corporations for your Real Estate Holdings

Nevada corporations for your Real Estate Holdings 

You must Protect your investment and Nevada is the place.
    

Why Incorporate?

Incorporating separates your business assets from your personal assets and protects your savings, home, retirement and other personal assets from having a "bullseye" painted on them just waiting for any lawsuit against your business. In addition, incorporating adds the potential for additional tax deductions that could put money back into your business.

Why Incorporate in Nevada?

For a long time, Nevada has been known as an extremely pro-business state; They have no corporate income tax and no franchise tax. Nevada is one of the few states where the corporate veil has never been pierced, except in instances of fraud. Personally, I would only use Nevada Corporate Headquarters, Inc. for all of my business entities protecting my real estate, and other business ventures. Why Incorporate with Nevada Corporate Headquarters, Inc. (NCH)? There are many other incorporating companies, NCH is a one-stop, turn key, full service incorporator. NCH is the largest incorporating service in Nevada, and their Senior Consultants are certified asset protection specialists. Their Staff support and innovative systems make creating your business and protecting your assets easy, quick and convenient. You can count on NCH to help you grow you business and protect your family's future. WHICH CORPORATE STRUCTURE IS BEST FOR YOU? CLASSIC CORPORATION The classic corporation (C-Corp or S-CORP) has the most flexibility and are a dynamic business entity. It offers huge advantages that generally aren't part of other business structures; this is one of the reasons why the corporation is the most commonly used in business.  It is a legal entity created completely separate from the individual owner and operator which than separates a corporation's debts and taxes from its owners or shareholders; this could be the greatest personal liability protection of all business structures is provided. LIMITED LIABILITY COMPANY (LLC) The LLC is combines the best of both worlds...the best of the D.B.A. type of structure and that of a Classic Corporation.  This type of entity combines the pass through attributes of a partnership with the corporate characteristics of limited liability, distributes profits and losses directly to the individual members of the LLC who are taxed at their personal tax rates. You can use an LLC  to hold property or transact any type of business, and members' personal assets are protected in the event of a business claim. Many real estate investors will use one LLC to hold each property, thus protecting each property from the other.  The LLC also can separate its members from the business itself; that way, there should be no personal liability for LLC debts.   All of this should be discussed with your legal and tax professionals, which is why I use NCH, Inc.  They will take care of the full package for you. They have a free 100 page eBook that will explain all of this.

NNN guaranteed lease houses available

NNN Guaranteed

Lease Houses Available

Here are the details:

1. Each house costs an average of $60k
2. The CAP rate on each house is a set 9.11 so the average income from each house is $5466/year or $455.5/month.  You may say that you can't retire off of this, but you'd be wrong...see below
3. The terms of the lease are as follows:
   
   
   • NNN absolute lease
   • Guaranteed for 10 years, with extensions added to the back end anytime you want. Usually you will wait until year 5 to extend the lease so that both parties see what the effect of a few years makes on the rent's going rate since the extension will include a rent increase.
   • Since this is a NNN absolute lease, the investor is only responsible to make the payments on the debt service. All other payments, including taxes, utilities, insurance, etc., are made and guaranteed by the lease contract.
   
   
   
4. If the property becomes vacant, the lease payment to you is guaranteed
5. If there are any repairs that need to be made, the lease pays for them...as well as making all lease payments to you...guaranteed  to you if the property is vacant during the time of repairs.
6. Investor retains all deductions, like depreciation.
7. Money to you is automatically deposited in your account (of choice).
8. At any time after 60 days, you (and only you) have the option of breaking the lease with the lease company and taking over directly with/to the tenant. This means you will be making more money per month, but also taking on all the responsibilities of managing the tenant.
   
   
   • Vacancies
   • Collecting rent checks
   • maintenance
   • ...etc.
   
   
   
9. The total rent received from resident tenant goes to the lease company to act as manager. The investor receives their lease payment from that amount, and the lease company receives their management amount from that as well.
10. The bottom line is the lease company takes over the problems of residential income property, namely the tenant, while the investor is left with the advantages, such as the cash flow, tax deductions and appreciation.

Now, one house does a retirement make. But, many house will...if you have a plan...and I have a plan.




How to Retire from this System:

1. Buy 1 - 2 houses at a time ($60 - 120k). I like the idea of using a Self Directed IRA, or even better, a loan from the cash value of an insurance policy since you can pay it back and use it over and over again.
2. Hold the property(s) until seasoned for refinancing (6 - 12 months) in LLC or other business entity.
3. Refinance, and pay back original source of funding.
4. Original source of funding is available again to repeat steps 1 to 3.
5. Include my fast mortgage payoff program with each refinance (this is very important as this is what makes this system work so well).
6. Buy at least 10 sets of 2 houses...20 houses.
7. Since refinanced mortgage will be paid off in 10 years or less (see step 5 above), you can refinance again. This time, with no debt service to pay off, so this is all profit/cash in pocket...tax free since it is a loan...that you tenant is paying off.
8. Since you have 10 sets of houses (2 in each set), you can repeat step 7 for 10 consecutive years.
9. In year 11, the refinancing done in the first year in step 7 is paid off, and you repeat the process again. This means that every year, for as long as you want, you can have 6 figure tax free income. Can you say retirement plan?

Let's look at the numbers:

1. Average $60k house, at 9.11 CAP rate gets you $5466 cash flow per year.
2. 100% financing (remember, you control this since you can get this from your IRA or insurance policy), at 4.5% interest rate (you control this too), gets you a yearly debt service of $3437.4/year.
3. Net cash flow of $2028.6/per year.
   
   Here comes the best part.
   
4. Payoff in 10 years.
5. Refinance/cash out equity.
   
   
   • Property has equity built in when you buy it originally. After 10 years, you should have at least 20% equity or more.
   • 20% equity would mean an appraised value (based on average. price of $60k when bought) of $72
   • This means you can refinance, at 80% LTV, the $60k right back out...in the form of a loan...so it's tax free.
   • This time you sill use traditional financing, so let's just take $50k out (you can do the full $60 though) which would be about 70% LTV, at 5% interest making your yearly debt service at $3865.08...for a cash flow of about $1600/year. Oh wait a minute. At this point we will be working with the extension, which will have a rent increase in it, so the lease payment to you goes up, so the cash flow also goes up too.
   
   
   
6. These numbers are based on just one house. If you do this in pairs, each year you can get $50k tax free from each house for a total of around $100k, plus, the cash flow from each of the 20 houses per year.
7. Just a thought: If the rent went up just 10% for the extension per year, that would mean $6012.60 would be your new yearly NOI. That could mean a much larger refinancing amount than the one we've just laid out for you.

All of this takes place at the time of closing. You buy the house and there is a "lease carry back" that takes place at the same time.

If you are interested, just contact me joe@3VEnterprises.ws and fill out this form for more information.  I will put you in direct touch with the supplier.

No monetary or legal commitments are made until you talk directly with the supplier, do your D.D. on them and the houses you are interested in, and are satisfied to move move forward.

Please discuss all of this with your professional advisers before committing to any of this...but I bet they'll love it too.  If you have any questions please let me know.

It all starts...and ends, wtih a system.

Welcome. If you want to make anything work efficiently, it must be part of a complete system. When it comes to real estate investing (any investing for that matter), that means you must have a way in, be able to control your risk (eliminate if you can) and, this is critical...you must have an exit strategy in place BEFORE you start the process. If you don't, you will not be in control..the investment will control you.

I have put in place many investment system for both residential AND commercial. It starts with the financing, and ends with the payoff. If you have both of these items in place, you can make any good deal great.

This blog is to be a sample of my systems as well as those of others as they add them to the mix. Please keep in mind, if there is no control in the system, it will not be posted.