Tag: private lending

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Wealth Acceleration Strategies for Real Estate Investors

We will all agree that real estate is the best way to build wealth. Using real estate helps by using one key method that almost every other investing strategy does not offer. That being Leverage or borrowing against your property to control something more valuable than the amount of money invested. I can hear you yelling; “What about trading stocks on margin?” Yes, you are right that with a trading account you can trade limitedly on margin or only putting a fraction of money up for the stock. But that is very limited compared with real estate. I have done a 100% LTV mortgage on an investment property before. Now since the Sub-prime melt down you will not be able to do that for a while. But still, people routinely buy property with less than 20% of the purchase price down. Assume you are going to buy a single family house to rent out for 5 years and then sell my house. So you buy a $400,000 single family house purchased using a 80/15/5 conventional mortgage. What does that mean? 80% LTV first mortgage, 15% LTV second mortgage and 5% down payment. You bring $20,000 plus closing costs to the escrow company when you buy my house. So for $20,000 you control a $400,000 piece of property. Your monthly payments on your mortgages are $2,100 including your taxes and insurance. You receive $1,800 rent on the house. And it is vacant for 1 month out of every 12 months because of finding new tenants. Now this is a very conventional deal but very realistic in our current market. Let’s take a look at the numbers:

	Monthly	Annually	Total
Costs	$2,100	$25,200	$126,000
Income	$1,800	$19,800	$99,000
Net	($300)	($5,400)	($27,000)

So looking at the numbers this way it does not look like a very good investment. Paying someone to live in your property $27,000 for 5 years. Remember this does not take into account any repairs or tax implications these are just the raw numbers. But let’s look at it a different way. We are going to assume for the sake of argument that the property appreciation is 10% annually using round numbers. This a absolutely achievable in the Seattle market but will vary depending upon area.  Here is really what you are controlling: Purchase Price: => $400,000   Future Value 60 Months 10%annually: => $644,204   Total Equity Growth: => $244,204   Total % => 61% total growth   So your investment of $20,000 plus your additional expenses of $27,000 of holding cost will bring you an additional $197,204 over that same 5 years. How many of you would spend $47,000 to make $244,204 bringing you a rough profit of around $190,000. That is really the true path to wealth in real estate investing. The use of leverage is really what makes this happen for you. If you were to just invest the same $10,000 at a 10% annual interest you would only make $6,105 instead of the more than $190,000. So using the leverage only found in the real estate make you very wealthy when used over time. Now most of you know that I am a big proponent of creative real estate investing and may think that there is something hypocritical about talking about going and getting a loan and investing for the long term. Remember. This is tactics that I use to make money to invest long term for growth. So this is very true of all real estate. So please take the time to develop a strategy to use the best of both worlds.

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The Grunt Work of Motivated Seller Marketing

When I am asked by new and experienced investors about how to find deals I stun them when I tell them that I have motivated sellers seek me out. They are at a loss because either they are not getting any leads or those leads that they are getting are by people who do not need to sell my house quick they just want to sell. I have never understood why people would do their marketing in such a general manner. They are getting leads from all over the place. Worse yet they are getting people who are really just kicking the tires, rather than serious people who need to do business the way that we do business. I know the reason that most investors do their marketing in this way is because that is what they see other investors doing or they were told to do that from a seminar speaker. I always have been asked about using the “Yellow Letter”. This is a letter that is hand written or appears to be hand written on a yellow legal pad of paper so that it looks like an investor actually took the time to mail each one individually. This is a good technique used in the proper neighborhoods. It does get people calling in and it makes the investor seem very busy. I spoke with several speakers about this mailing and one confided in me that he teaches this method because the investor gets responses from it and that it makes him, the speaker, look good. The funny thing about it is that this speaker knows that the number of useful leads is actually below average from his other mailings. When I do my marketing I do it in such a way that I only talk to motivated sellers rather than every Tom, Dick and Harriet that wants to sell their house. I would rather direct them to my website or automated information line rather than talking to all of these people. Recently I had a mentoring student who used the Yellow Letter call me frustrated. She mailed out thousands of yellow letters and had over 200 phone calls in less than two weeks. Her days were spent trying to get the answers to her questions from these people. At the end of the exercise she swore that she would be happy with just buying a single house from those leads. Frustrated at spending over a week following up and tracking down she had come to realize that there was not a single motivated seller in the bunch. All wanted full retail; a few others wanted more than the house was worth and a few figured that by discounting $10K was enough for an investor to make a profit on the deal. She finally realized that putting people through some prequalification before she spoke with them is much better than dealing with all of these phone calls.

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Economic Recovery in a Pigs Eye

If you turn on your television, pick up your paper or listen to the radio you will see mixed headlines. One person says that the recession is over. The TV talking head says that the worst is yet to come. You listen to the politicians and depending upon which party you hear they are making the same types of predictions. Just which way is up? The problem is as a person that has some money in your retirement account and maybe some savings waiting to figure out what you can do with the money? You can put it into the rollercoaster that is the stock market and panic everyday that you see what the market is doing. You can buy T-Bills or government bonds because they are safe, oh wait a minute what about the downgrade from Wall Street? Right now what are you earning on your savings? Wherever it is I would say that unless you are a stock market genius you are not earning much if anything at all when you take into account inflation. What is a person to do? I can tell you that for people like you there is always a way to make money. There are programs available where you can earn good rates of return on your capital no matter whether it is in your retirement account like an IRA, or just sitting in the back bedroom under the mattress. We will sometimes use private capital that is a loan secured by real estate that for the right person could earn a rate of return that will allow you to retire the way that you want to. If you rely on social security you will be in trouble. The same can be true if you rely on your 401K that just a couple of years ago turned into a 201K. You need to look at all your options and consider putting your money into something that earns a better rate of return than most of its counterparts. We always close with professionals and always purchase property under market value as well as where we can put in sweat equity to increase the value in this down market. We always ensure that you the investor is in a strong position. Private investing with us allows you to take worry free, hands off approach to investing in real estate. Take a look at some of our case studies so you can see how private lending may work for you. If you turn on your television, pick up your paper or listen to the radio you will see mixed headlines. One person says that the recession is over. The TV talking head says that the worst is yet to come. You listen to the politicians and depending upon which party you hear they are making the same types of predictions. Just which way is up? The problem is as a person that has some money in your retirement account and maybe some savings waiting to figure out what you can do with the money? You can put it into the rollercoaster that is the stock market and panic everyday that you see what the market is doing. You can buy T-Bills or government bonds because they are safe, oh wait a minute what about the downgrade from Wall Street? Right now what are you earning on your savings? Wherever it is I would say that unless you are a stock market genius you are not earning much if anything at all when you take into account inflation. What is a person to do? I can tell you that for people like you there is always a way to make money. There are programs available where you can earn good rates of return on your capital no matter whether it is in your retirement account like an IRA, or just sitting in the back bedroom under the mattress. We will sometimes use private capital that is a loan secured by real estate that for the right person could earn a rate of return that will allow you to retire the way that you want to. If you rely on social security you will be in trouble. The same can be true if you rely on your 401K that just a couple of years ago turned into a 201K. You need to look at all your options and consider putting your money into something that earns a better rate of return than most of its counterparts. We always close with professionals and always purchase property under market value as well as where we can put in sweat equity to increase the value in this down market. We always ensure that you the investor is in a strong position. How to get a good return on your money? Private investing with us allows you to take worry free, hands off approach to investing in real estate. Take a look at some of our case studies so you can see how private lending may work for you.