Many buyers are in the process of  purchasing a home.  Some are purchasing properties from builders who aren’t ready to close or from banks via short sales.  If you have any experience with short sales, you know that they can take a significant amount of time to get approved.  Extending the tax credit closing deadline will allow for 180,000 buyers to take advantage of this opportunity.  This will also allow 180,000 sellers to sell and create some cash flow in the economy.  However critics of the extension have said that they believe that the extension will open the door to fraud.

What do you think of this extension?

Below is a list of active hard money lenders.

  1st Quick Funding

Blazevic Funding Group

BlueWater Funding, LLC

Brookview Financial, Inc.

Equity Development Corporation

Lighthouse Capital Funding, Inc.

SDI Funding

Valuation Mortgage Capital

These are a few hard money lenders that can fund your closing.  You can also network at investor club meetings, search in financial newspapers and newsletters, talk with people with money in IRA’s, 401K, mutual funds, stocks or bonds, or anyone with equity in their property.  Most hard money lenders will outline their payment options, but the best option is to allow the interest to accrue until the house is sold and they get one check for the principle and interest. 

With this information, you should be able to fund your next rehab or great deal.  Happy Investing!

In order to meet this demand for owner financed homes, I’ve created a new website where I advertise my owner financed homes to the general public to view.  There are interior and exterior pictures, details of the home, and buying options available. 

The homes that I offer with owner financing are available to those that have some type of down payment.  We are willing to work with anyone but must get some upfront funds to secure the deal.  We have several selling programs available for buyers, this includes owner financing and rent-to-own.  We also provide you with a credit repair specialist to assist you with getting your credit in order and removing those negative marks so that you can qualify for a loan or refinance down the road.  If you are seeking a home for your family, contact me so that we can work together to get you the home you deserve. 

You can get more information here www.HomesCashorTerms.com.  I look forward to hearing from you soon.   Happy New Year!

In a typical seller financing or agreement for deed, the seller/owner sells the property to a buyer for an agreed upon amount of money.  In essence, the seller is the bank.  The buyer makes a down payment then the monthly payments to the seller.  The seller does not transfer the title until the loan is refinanced or paid in full, thus the name “Agreement for Deed”.

The seller may have an underlying mortgage on the property, but it can still be sold via seller financing.  A wrap-around mortgage is where the seller owes money on the property.  This amount should be less than what the buyer has agreed to pay, so the buyer must pay for the mortgage amount, plus an amount to the seller each month. 

The seller signs a contingency in escrow that he will not place additional liens on the property.  Also the seller agrees to keep an insurance policy and pay the taxes through escrow.  Most loans today have the taxes and insurance escrowed through the lender. 

All “Agreement for Deed” purchases should be closed with an attorney to protect both the buyer and seller.  If you keep the insurance policy in the owner’s name and hire an attorney for protection, seller financing via agreement for deed is a great deal. 

Seller financing offers benefits for sellers.  If the seller does not mind getting the money in small increments, they would gain the interest on the payments instead of the bank or mortgage company.  Sellers can sell their property very quickly vs a normal conventional purchase.  A number of sellers may be falling behind on their payments and can’t wait for a buyer to get qualified for a loan, which could take up to 3 months to close.

I predict an increase in the number of seller financing deals in 2010.  The number of foreclosures will increase which will make it more difficult for a seller to compete with banks.  We also plan on increasing our number of purchases and sells via owner financing.  It is the best buying/selling instrument in the business.

• Recently Sold Home
• Family member to buy with them: Use same list to identify where the family member may have there money available.
• Retirement Vehicles: IRA, Roth IRA, SLP
• 401K: Most 401K’s allow the clients to borrow large percentages for purchasing a home.  The money borrowed must be paid back.
• Credit Cards
• Gifted Money: Family, Agencies, Charities, Fund Raisers
• Inherited
• Large Bonuses/Commissions
• Stock Market: Selling your stock
• Personal Loans: Bank, Family, Friends
• Personal Money Saved: Savings account, CD account
• Equity in existing Home: Old home going to be a rental
• Equity in rental Homes
• Trade Lazy Assets: Lazy assets includes anything they are not using that has value.  This can be silver (chinaware & silverware), gold, Jewelry (Rolex, diamonds, pearls), cars, boats, antiques, collectibles (baseball cards, sports memorabilia, stamp collection, coin collection)

Using this list to stimulate your buyers can create more of a down payment for your owner financed and lease option deals, thus earning you more cash upfront.

There are many ways to fund real estate deals.  You can either buy real estate to hold long term in your portfolio or you can quick-turn houses for fast profits.  Whatever you choose to do you are going to have to fund these deals to start the money making process.  There are tons of ways to fund and close real estate purchases.  Here are a few of them:

• - Private Money
• - Hard Money
• - Lines of Credit
• - Banks
• - Partners
• - Credit Cards
• - Your Own Cash
• - Subject-to Financing
• - IRA

Private Money

What is Private Money?  Private Money is considered any money that an individual has pledged they will loan to you for the purpose of financing real estate deals.  Sources of Private Money include friends, family, business contacts, referrals, other investors, and others.  Anyone who has cash in a savings account, checking account, mutual fund, Certificate of Deposit, stocks, IRAs or any other financial instrument could be a potential private lender.  The best sources of private money are older, retired individuals.  Private Lenders are by far the very best source of cash to fund and close real estate deals.  Private lenders will loan money to you based on their trust in you and the collateral that secures their funds which is the property.

Here are the reasons why private money is the preferred method of funding real estate purchases.  You set the rules, you can close quickly, no points, no loan origination fees, no lender fees, no having to prove your income, no credit checks, nothing shows up on your credit report, & it’s cheaper then bring in partners.

Hard Money

What is Hard Money?  There are companies out there who make a business out of loaning money to investors like us.  They recognize the need for investors to have access to cash to fund deals.  Run a GOOGLE search for “Hard money lenders” to find sources of cash or look up the ”Scottsman’s Guide” for sources of hard money.  Go down to your local REIA meeting and talk to other investors.  There’s sure to be a hard money lender in your local REIA group. 

 These companies are similar to private money lenders in a few ways and different in other ways.  Hard money lenders make their own rules, charge points, have prepayment penalties, and normally control rehab payout.  The great thing about hard money loans is that if the property falls within the lending guidelines you are assured of getting a hard money loan.

Lines of Credit

What do I mean by lines of credit?  Lines of credit can be secured or unsecured.  They can be attached as a lien against a property or they can be just an outstanding revolving amount of money like a credit card.  Lines of credit have advantages and disadvantages alike.  Secured lines of credit carry a lower interest rate because the bank has an asset that backs up the line of credit.  The bank views this as a less risky loan because of the collateral the bank has in the property.  Another advantage is that lines of credit can be used, paid off and re-used over and over again.  This gives an investor a lot of flexibility to use and re-use the funds over and over.  Secured lines of credit also usually carry little or no costs. 

Banks

Regular banks are a source for funds to buy properties.  You can walk into any bank on most busy streets and get a regular bank loan if you have perfect credit.  Due to the restraints banks have on lending these days, you must be a perfect candidate to qualify for these loans. 

Partners

The concept of bringing in Partners are pretty simple to understand.  If you do not have the credit, private money, hard money, or cash you probably know someone who does.  If you find a real estate deal that you absolutely cannot pass up and do not have the resources, find someone who does and give them a cut of the profit.  You found the deal and know how to fix it up and sell it for a profit.  Without the financing the deal will not get done.  You need a partner and a partner needs you.  You found the deal.  He has the cash or credit to get it done.  So what’s a reasonable split?  50/50 is the industry norm but deals are done differently all the time.  Just remember to be fair in any deal and remember 50% of something is better then 0% of nothing.

Credit Cards

If you have a credit card, this is probably the easiest source to abuse.  They typically have way too small of an available balance to be of any real use to you.  Even if you have 20-40K available credit on your card what good long term is that going to do for you?  You are going to pay between 10 – 29% interest on those.  You have to make a minimum monthly payment.  You cannot use the cards for more then one property at a time because the available balance is so low.  My advise would be to simply keep the credit cards in your pocket.  If you routinely use credit cards then I would suggest you are simply not working hard enough or being creative enough with finding other sources of financing.

Your Own Cash

Cash is king right?  Absolutely.  Other people’s money (OPM) is even better.  I know investors who routinely use their own cash and their own credit to buy and sell property.  This is fine but the problem I see with what they are doing is that there isn’t an unending source of Cash.  They only have the cash to do one , maybe two deals and then their resources are tapped out. 

My thoughts are these.  If you do the work of raising the funds from other sources you can leave your own money in the bank.  Does having money in the bank give you a sense of peace?  A sense of confidence?  Now what if you go spend all your cash on a rehab and the darn thing isn’t selling.  That would give you a sense of helplessness, a sense of insecurity, a sense of “Oh S%!t”, especially in this volatile market.  Someone is better off having no money because then they are forced to pursue private money, hard money or partners.  Having money makes people lazy.  Do not use your own CASH.  Find other sources.

Subject-To Financing

The concept of buying properties subject-to the existing mortgage is a great way to finance real estate deals.  This is one of the preferred methods of financing long term buy and hold properties.  The concept of subject to basically works like this.  A seller calls and wants to sell their property.  You want to buy it but cannot buy it low enough to buy and quick-turn it for a profit.  By analyzing the loan you realize the loan amount is low when compared to the property valued and also that the mortgage payments are reasonable.  By comparing the mortgage payments to the potential rent payment you may be able to collect you realize there is a positive cash flow each month that could be made.  The next step  is to convince the seller that you’d like to buy their property but that you cannot buy it outright and make money.  What you will do is take over their payments.  The seller agrees.  The seller would then deed the property over to you in the form of a land trust.  A land trust would be created to hold the real estate and the seller would deed the property into the trust.  Now you own the property and all the benefits to that property.  You also have committed to making the payments.  The next step is to find a lease option tenant or a renter to make the payments.  The rent payments cover the mortgage payments plus a monthly positive cash flow.  This is the best and most productive financing strategy to purchase real estate to buy and hold.

IRA

You can get a loan for up to 65% of the purchase price of a property in your IRA using what is called a “non-recourse” loan.  This type of loan is not personally guaranteed by you, it is only secured by the property within your IRA account.  IRAs are a great resource to have and use in real estate.   

Within your IRA, you will have many options for real estate investments.  The most common is purchasing property directly and getting fee simple title.  The title will be held in the name of your IRA, not your personal or business name (with or without leverage or loans).  Another option is buying into ownership of LLC’s or Limited Partnerships that own and operate income property.  Your IRA may also be a lender that holds a mortgage on a property that pays interest to your IRA that is secured by real property.  This is called investing in notes (promissory notes).  In the first two examples, your IRA is the owner of a property, and the last example your IRA is a lender to an owner of the property.  Any of these can be good investments for your retirements funds, all of them have risks and should be only undertaken after careful consideration.  After all, these are your life savings!

Conclusion

There are many options you have to finance real estate deals that there is no excuse to not having the resources to buy and sell tons of houses for crazy profits in the next 12 months.  You should have so much money and so many resources that every deal that comes across your desk should only be a matter of if you like the deal or not.  My most preferred methods are private money, hard money, subject to financing, and lines of credit.  The others sources don’t make investing sense to me and I can’t capitalize like I want with them.  Ask yourself these two questions:  Do the numbers make sense?  How much money can I make on this?  It shouldn’t be a matter of funding.

The number of troubled banks rose to 416 at the end of June from 305 at the end of March.  This is the largest number of banks on its “problem list” since June 30, 1994, when 434 banks were on the list.  This brings the total assets at troubled banks to $229.8 million billion, that’s right with a “B”, the highest level since Dec. 31, 1993 according to the FDIC.

Keep in mind that the total reserves of the Deposit Insurance Fund  stood at $42 billion, with the contingent loss reserve falling to $10.4 billion from $13 billion over the second quarter.  Some analyst have been warning that growing bank failures could put pressure on the FDIC fund.  (FDIC: Number of troubled banks rises to 416)

This confirms to me that there are a lot more bad loans than the banks are portraying.  Most likely these loans are being covered by accounting fraud.  Therefore it is logical to believe that the problems are worse than we are being told and 400 is a hopeful number, not a realistic number.  I wouldn’t be surprised if bank failures reached 8 – 12 /week. 

What does this mean for real estate investors?  It means that you need to continue to buy wholesale real estate!  With banks in the process  of recognizing loan losses and cleaning up their balance sheets, properties will continue to be available for wholesale prices through foreclosures, short sales, and FSBO’s, due to the fact that they will be unable to compete.  Investors need to continue to buy wholesale real estate.

Seller financing is my most preferred exit strategy for homes that I purchase via cash or subject to.  Seller financing offers more advantages to the seller and buyer.  Not to mention that the current market is full of wanna-be buyers that would like to take advantage of the income tax credit before November 30, 2009 but can’t obtain financing. 

First you need to know what is seller financing (owner financing or seller carry back)?  Seller financing is when the seller agrees to lend money to the buyer to purchase and close on the property.  Essentially, the seller plays the role of the banker and carries back the loan.  Seller financing is more attractive in a buyer’s market, similar to the one we are in today. 

Investors should consider selling their investment properties using owner financing vs. renting them out as an exit strategy.  I’ve been a landlord and it isn’t fun.  The problem with being a landlord, besides repairs, is management.  Unless you have a qualified and proficient management team, you property will likely be cash flow poor.  I ran into this problem and from doing an analysis, I was able to see that if I sold the property using seller financing, I would net more cash upfront and each month while receiving a lump sum payment when the balloon became due.   

Here is an example of a Seller Financing deal:
Current ARV:                    $90,000
Purchase Price:                 $55,000
Repairs:                           $10,000
Sell Price:                         $100,000
Down Payment:                 $8K
Finance terms:                  $92,000 at 10% amortized 20 yrs w/ 10 yr balloon
Monthly payments:            $887.82  (This is principle & interest to seller)
Total Payments:                $106,538 in 120 months
Balloon payment:              $67,182 in 10 years.

Total Invested:               $65,000
Total Return:                   $173,720

ROI is  167% (these figures are approximate)

Selling your investment property with seller financing offers a number of benefits to you as the investor.

• You have a larger pool of potential buyers:  If tough for buyers to qualify for conventional financing.  The self employed aren’t capable of navigating all the lending guidelines. 
• Seller financing may result in a higher sale price.  Offering seller financing may put sellers in a position to ask full list price or even more.
• Seller financing may offer tax breaks.  While tax consequences depend on specific circumstances, a large capital gain may result in a big tax bite.
• Seller financing provides recurring income.  Mortgage payments that come to the seller may increase his or her cash flow, resulting in spendable income.
• Seller financing may result in a higher interest rate.  Seller financing can carry a higher rate of interest than a seller might receive in a money market account or other low-risk types of investments.
• Seller financing may sell a house more quickly then searching for a tenant.  Offering seller financing can help your listing stand out from the pack and move a difficult to sell property.
• Seller financing normally closes quickly then closings requiring conventional funding.   
• Seller financing can be a relatively safe investment.  If you’ve found a responsible and reasonably creditworthy buyer who puts a substantial down payment into the property, the investment should be fairly secure.
• Seller financing usually relieves the seller of tax, insurance, and property management responsibilities. 
• Seller financing creates a mortgage note.  If you form a mortgage note, you can sell it to note buyers for cash.  This is a great source of funds for new deals, emergencies, or other general expenses. 

When you lease out a home, you still have to pay taxes & insurance, make repairs, manage the property, and deal with vacancies.  These task can be over stepped when you sell the property using seller financing, you pass all these things on to the buyer and simply collect a check every month. 

I will be beginning a new challenge in January to buy and sell 5 homes in one month using seller financing as my purchase and exit strategy while making an average of $3,500/deal.   Sign up for our VIP Buyers list so that you can receive more information and be kept up to date on the entire process.

Happy Investing…

TAYLOR BEAN MUST CEASE ALL ORIGINATION OPERATIONS EFFECTIVE IMMEDIATELY

“TAYLOR, BEAN & WHITIKER MORTGAGE CORP. (“TBW”) RECEIVED NOTIFICATION ON AUGUST 4, 2009 FROM THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD), FREDDIE MAC AND GINNIE MAE (THE “AGENCIES”) THAT IT WAS BEING TERMINATED AND/OR SUSPENDED AS AN APPROVED SELLER AND/OR SERVICER FOR EACH OF THOSE RESPECTIVE FEDERAL AGENCIES.  TBW HAS UNSUCCESSFULLY SOUGHT TO HAVE THE TERMINATION/SUSPENSION DECISIONS OF EACH OF THOSE AGENCIES REVERSED.  AS A RESULT OF THESE ACTIONS, TBW MUST CEASE ALL ORIGINATION OPERATIONS EFFECTIVE IMMEDIATELY.  REGRETTABLY, TBW WILL NOT BE ABLE TO CLOSE OR FUND ANY MORTGAGE LOANS CURRENTLY PENDING IN ITS PIPELINE.  TBW IS COOPERATING WITH EACH OF THE AGENCIES WITH RESPECT TO ITS SERVICIN OPERATIONTIONS AND EXPECTS TO CONTINUE TO SERVICE MORTGAGE LOANS AS IT RESTRUCTURES ITS BUSINESS IN THE WAKE OF THESE EVENTS.  WE UNDERSTAND THAT THIS COULD HAVE A SIGNIFICANT IMPACT ON OUR VALUED EMPLOYEES, CUSTOMERS, AND COUNTERPARITES, AND ARE VERY DISAPPOINTED THAT A LESS DRASTIC OPTION IS UNAVAILABLE.”

The closure follows actions taken by HUD on August 4, 2009, in response to Taylor Bean & Whitiker’s,  TBW’s, failure to submit a required annual report and to disclose “certain irregular transactions that raised concerns of mortgage fraud.”  Mortgage fraud is one of the constituents that has lead our housing market into a slump.  HUD also proposed to bar two members of senior management from dealings with the US Government for 18 months owning to HUD’s allegation that two submitted false information to the agency.

My personal opinion is this, if TBW has been partaking in acts of mortgage fraud, they are getting what they deserve.  This will set an example to other lenders to be careful with your lending practices and be mroe transparent with your internal affairs.  Even though it isn’t the entire company that’s committing these acts, it’s the key players that should be dealt with. 

How does this affect wholesale real estate buyers?  Well most of the buyers I work with have all cash or a private source of funds.  Most wholesale properties need extensive repairs and banks won’t loan on these properties.  But this will have an impact on your business if your exit strategy is to sell to end buyers who are obtaining financing.  The best financing for the current market is through local banks.  They understand and are more in tune with the local market, therefore allowing them to lend funds to purchase properties within the area.