Finding Money For Real Estate Deals

Author: Michael Moreno

Real estate investing can be a surefire road to financial freedom -unless you lack the capital to do deals! This one item -albeit a major one, holds back investors from achieving their dreams more than any other. Most people think that lots of cash on hand is required in order to do deals, but this is simply not the case. There are many other sources of cash for real estate deals available -even in this down market.

One source of funding is called Hard Money. This funding is usually provided by private individuals who will fund the purchase and rehab of investment property. Loan terms are usually 6-12 months. These lenders will charge anywhere from 3-8 points and 10-18% interest for making the loan. (Hence the term “Hard” Money) Care must be taken when using this type of funding, as the property must be rehabbed and sold within a relatively short period of time. The lender is not required to provide extensions, and may simply foreclose on the house at the end of the term.

Wholesaling real estate is a technique where the investor places a house under contract with the seller, and then “sells” the contract to an end-buyer. The investor has none of his own cash in the deal. This technique can be repeated over and over in order to raise cash to purchase real estate to rehab or hold for rental.

Another source is to utilize a home equity line of credit from a bank. These interest rates tend to be lower, and there is no specific end date on the loan term.

Converting an IRA into a self-directed IRA would allow one to borrow money from their IRA to use in real estate transactions. The benefits of this technique include the ability to defer taxes on capital gains, and the possibility of earning far more return on your retirement money than in the stock market.

Borrowing from friends, family, and private individuals is another way to raise the cash for your deals. Most people would be thrilled to earn 8-10% return on their money. If you have experience and can show them some positive results, they would be happy to lend. This technique is similar to using hard money, but there are typically no points paid and the interest rate is usually lower. There are plenty of courses and boot camps out there teaching investors how to raise private money. Because of the difficulty in obtaining bank financing nowadays, this technique is very important.

Seller financing for your deals is a terrific way to get in with no money down. A desperate seller might be willing to finance 100% of a purchase or even delay monthly payments until the deal is rehabbed and sold. Be creative in how you structure your deals with seller financing!

Websites like Prosper.com and other peer-to-peer lending sites can also be great sources of money for deals. Many people are interested in real estate but do not have the knowledge (or courage) to attempt to do a deal. Sell yourself and your real estate prowess on these sites, and people will be interested in lending on your deal.

These are just a few of the possible sources of money for your deals. Real estate investing is all about creativity. Don’t give up just because you do not have the cash!

Michael Moreno
www.cashflowdealmakers.com
mmoreno@cashflowdealmakers

What Is Real Estate Wholesaling?

Author: Christopher Seder

Wholesaling is seeking out affordable properties and put them in the hands of other investors or buyers. For your trouble of marketing and finding the property you get paid a nice profit that is almost like a finder’s fee. The process of wholesaling houses is one of the most simple and straight forward investing practices out there.

Why in the world does the world need wholesalers?

It seems like the buyer or investor could easily search out cheap properties on his own or her own with no need for the wholesaler. These buyers often do seek out and find some properties but cannot always find the best deals out there or don’t have the time to. Buyers who seek out wholesale deals are usually always on the lookout for more properties. As a wholesaler you have to become a monster marketer. This is what separates wholesalers from your regular investors. Regular investors doing want to do the dirty work and sort through the 50 sellers calls and non motivated leads that come in a week.

Wholesalers do the dirty work of searching in every little crack and crevice to find the deals. As a wholesaler you have to be proficient in marketing, negotiating, rehabbing (because you will be flipping to another investor), if the property cash flow and knowing the market. Learn everything about real estate investing you can.

Here is the wholesaling process the simple version.

Find a motivated seller and negotiate a sales price around 40-65 percent of the after repair value (the value of the house if it were in perfect condition). We have to buy properties at this low price because we consider in rehab costs, carrying cost, closing costs, wholesale fee, and the rehabbers profit. Put the house under contract at a price that will work out with all these expenses added in.

Take the contract to a title company. Let the company know that you will be bringing in an assignment document and another copy of the purchase agreement at the time of closing.
Take the price you agreed on and mark it up anywhere from $2,000 to $100,000 (it will take some time to get a feel for what you think you can wholesale the house for quickly).
Market the property to all investor buyers, landlords and wholesale buyers you know.

Once you find your buyer, simply assign the contract to them with your profit documented as an assignment fee.

Attend the closing deal with the buyer and make sure everything is running smoothly.

Collect you check and then move on to the next deal.

The process is simple enough and can be a great place to build up cash for other investing strategies.

Keep your priorities straight.

As a real estate wholesaler you always have to keep your sellers and buyers best interests first and foremost. This helps the homeowner because you are the one doing the legal work of and saving them lots of time. The reason you are buying from the homeowner is because they were unable to sell on traditional markets and the house is in need to some tender loving care. You are helping them move the property and get rid of the burden.

Homeowners willing to wholesale property are people that have old rundown homes they cannot sell on the market without first fixing up the place. People who have inherited a house and literally have no desire for it or the carrying costs needed to keep the place. Just people who need to or want to get rid of a property. Never take advantage of anyone of these people, figure out what they want out of the transaction and help them get that.

Christopher Seder is a real estate investor in Montana.
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