Archive for January, 2010

Why private money is important in real estate investing

Sunday, January 24th, 2010

With the economic meltdown and tighter lending regulations, real estate investors are finding themselves with less and less money to do business. Both traditional mortgages and hard money are no longer so easy to get, making private money lending the easiest option to finance your real estate investing deals.

Private money is  the type of mortgage obtained from private individuals who have money to invest and are looking for higher returns than they can get in traditional investments such as banks or CDs. The investment is usually secured by the real estate property being purchased and not you as the borrower.

So why is private money the way to go in real estate investing?

1) No credit restrictions

The credit of the borrower does not arise in private money lending – the investment is secured by real estate. The terms and conditions of the loan depend on you and the lender

2) Easier and faster to obtain

It is easier to get a private money loan than it is to get a traditional mortgage or hard money. There are no tough under-writing procedures, and in most cases, the lender is the only under-writer. As such, you can have the money in a few days.

As long as the real estate investment makes sense to the private money lender, your deal will be funded. If it will make enough residual income to make interest payments and it secured by a real estate property worth more than the money invested in it, your deals will most likely get funded.

3) Less expensive

Private money is much less expensive than a business partner. While most partnership transactions will be split 50/50, private money lenders will ask for 8% to 15%. There are no points or origination fees that you get in hard money.

4) Few restrictions

No traditional or hard money lender will lend you their money if it involves creative financing. This is where most real estate investors get stuck. For example, if you take over existing mortgages, your real estate investing deals can only be funded with private money.

How do you convince private money lenders?

First, it is important to understand that nobody will trust you with their money if they do not trust your capabilities. As such, it is important to have a real estate investing website for seeking private money. The website should be simple and serve to convince potential private money lenders that your real estate deals are the best to invest their money with.

The website should also offer a way for them to sign up to become a private money lender.

Secondly, a business plan and success kit is important for convincing private money lenders. Any private money lender will want to see the type of deals you have done. If you do not have an impressive credibility in past deals, you must prepare a precise business plan for each deal showing all the numbers such as comparable sales, inspections, repairs cost estimates, rents, profit potential and so on. The clearer you can make this information, the more likely that your deal will get funded.

Ultimately your real estate investing business will flourish with more supply of readily available, cheap cash for your deals with private money.

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Posted in Private Money Websites, real estate investing, Real Estate Investing web sites | No Comments »

How to get motivated seller leads for real estate investing

Sunday, January 24th, 2010

As in any business, the success of any real estate investing business is locating deals that can make you a profit. These deals mainly come from motivated sellers, or home owners who really need to sell.

Such motivated sellers are driven by circumstances beyond their control, and sometime they can lose the house if they do not sell. Such circumstances include

Foreclosure

  • Bankruptcy
  • Divorce
  • People with liens
  • Burned landlords with defaulting tenants
  • Job transfer – hence they own more than one home
  • Expired listings – homes that just don’t sell
  • Inherited property (and sometimes debt)
  • Property that needs repair, so is not marketable
  • And so on

The key to locating motivated sellers is locating people in trouble who own real estate.  Identifying sources of these leads will give you an almost unlimited number of leads that could become profitable deals.

There are several sources of such leads that exist in most places:

1)  Subscription newsletters

In my surrounding counties there are subscription newsletters that list every record in the local county court system. Even though these may not exist in your local market, they are valuable sources of good leads.

I check people in bankruptcy, divorce, liens, probates, etc, then check if they own real estate. If they do, they get into my mailing list

2) County records

From most counties, you can get information such as filed notice of default, foreclosure notices, probate notices, etc. These are valuable sources of leads for your real estate investing business

3) MLS listings

People trying to sell their houses for a long time unsuccessfully quickly become motivated sellers. These expired listings can be valuable source of leads for your real estate investing business

4) Burned landlords

Landlords filing for eviction in the local courthouses are fed up with their tenants and properties, and may be looking to sell as motivated sellers

 5) Compiled leads

Even though these might be over-shopped, you may find people that compile lists such a foreclosures, bankruptcies, etc for sale. Sometimes these can yield good leads for your real estate investing business

6) Absent home owners

People that own property, but their mailing address is different from the property address means they have more than one home. It’s likely these can be motivated sellers for your real estate investing business

Once you have identified the best leads for your real estate investing business, the next step is to send them marketing mail pieces whether post cards of letters.

Preferably, send them more than one mail piece spaced maybe 30 days apart. This will drastically increase response rate.

Always make sure that you provide a web address for your real estate investing website as well as a phone number. Your website should take the role of convincing them that you are the best buyer for their property and pre-screen and pre-negotiate the deal for you.

If they call instead, make sure you have a scripted series of pre-screening questions that will tell you if it is a deal or not quickly without wasting time.

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How to make quick profits in real estate investing

Saturday, January 16th, 2010

The fastest way to make money in real estate investing is buying and selling houses at wholesale prices to other real estate investors wholesale real estate investing, also popularly known as flipping houses.

It is also the business model that requires the least amount of cash invested into any deal. Sometimes I spend no money of my own at all. Here is how it works.

1)      Identify houses well below market value

The best way to get houses below market value is to target motivated sellers. These are people who really need to sell their houses. People in some kind of trouble and own real estate always get into my mailing list of motivated sellers. I target people going through divorce, have liens, have inherited properties, in foreclosure, etc. I also target expired listings from the MLS – these are really looking to sell but they are not successful.

Secondly, I try to target only those people who have owned their house for at least 6 years, meaning they probably have some equity. This is necessary in wholesale real estate investing.

2)      Mail out marketing pieces to your leads

I generally send two postcards spaced 30 days apart to each of my motivated sellers. If they have inherited property, I send them a series of letters for about 8 months. This is because the probate process can take time and I need them to think of me first when it is time to sell.

In my marketing pieces I always include my website address more conspicuously than my phone number. I want them to visit my website so they can find out about me and my business without having to ask so many questions. My real estate investing website is built to convince motivated sellers that I am the best person to buy their house and solve their house needs.

It also convinces them to submit their house information right there on the website so that I get a fully pre-screened and pre-negotiated deal that only needs a few minutes of my time to decide of it s a deal or not.

3)      Make reasonable offers

All my offers for wholesale deals are less than 65% of the full market value minus estimated repair costs. This is why this business model needs houses with equity.

4)      Sign contract to buy

Once we have an agreement, we execute the contract. I then fax it to my title company so they can begin title work.

5)      Identify a wholesale buyer

This is the fun part of wholesale real estate investing. I have built a big lists of real estate investors looking for wholesale deals in my area.

I usually list my property on my real estate investing website, then send out an email to my buyers list. They can view all the pictures and video virtual tours along with all any documents (like comparable sales, etc) right from my website. They can also share these deals with their friends on social networking media like Twitter, Facebook, etc. The website always offers them and their friends the opportunity to join my investor buyers list so that they will be notified when new deals become available.

I also target real estate investor buyers from Craigslist and the local newspapers. In all cases, I always send them to my real estate investing website instead of a phone number.

6)      Sign contract to sell

Once I identify a buyer with cash, we then sign the contract. This can be a simple assignment of contract where I assign my contract for a fee, say $5000. It could also be a full contract just like I own the property if there is enough money in it for me. The title company closes both transactions on the same table where I buy from motivated seller then sell to my investor buyer and cut me a check for the difference.

I walk home with a check without spending any of my money. This process usually takes 2 to 4 weeks from the time you get the deal to the time you have a check in your pocket.

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Posted in House Flipping Website, real estate investing, Real Estate Investing web sites | No Comments »