Meeting With Millionaires and Making Money With Friends

On September 11 and 12 I spent the weekend in Chicago meeting with millionaires. Really, lil ole me!

I went to an event called Mega Partnering hosted by JT Foxx. Several millionaires stood up on the stage over those two days and each shared the secrets of how they got where they are. In contrast with most celebrity-filled events, they didn't try to sell us anything. With very few exceptions, there weren't any books or tapes available for sale at the back of the room.

In addition to the millionaires up on the stage, there were many sitting in the audience. JT taught us how to network with them and then gave us the chance to do just that.

I met one guy who represents a hedge fund that invests in real estate. I met another who has created a deal exchange where deals and money come together. Some of these folks are looking for deals that start at $2 million and go to $200 million. Others are more in my zone, looking to fund purchases of single family homes.

Some of these are just money lenders. Others are looking to partner with quality people in select markets so that they can work together to make a lot of money in this crazy market.

Why would an experienced real estate investor like me be interested in working with these folks? The reality is that there are many more opportunities in the market right now than I can make happen. So, I need lots of money to be able to buy lots of homes at prices significantly below market so that I can sell them at a discount to people looking to buy a home for themselves but don't want to pay retail.

Why go to a private money source instead of the bank? There are several reasons why a private money source often works much better for buying real estate instead of using a bank.

1. Right now banks aren't lending. I know the newspapers, the ads, and the TV commentators talk about how much the banks are lending. It is largely a lie. The number of loans that banks reject these days is at an all-time high. This means that more people than ever before are jumping through all the hoops the bank puts up only to find in the end that the bank has found some reason not to do the deal. I don't need that kind of frustration only to lose the deal in the end.
2. Banks limit the number of loans they will make to one person, and sometimes they limit the number of loans the person can have regardless of where they got them. As a real estate investor, I have many loans. Don't get me wrong. I understand why banks don't want to make too many loans to one person. It is good risk management on their part. Still, it acts to limit the size and profitability of my business. I am not keen on having someone else tell me that I cannot earn more than a certain amount! I don't like the notion that someone else can tell me I cannot buy more houses than they think I should.
3. Banks are restricted by government regulation. They have to jump through many hoops to lend me money, and in turn they make me jump through many hoops.
4. Private lending sources don't have the limits I mention above. They look less at me and more at the deal. They aren't afraid for me to fail, that will just be an opportunity for them. Because of that, they will fund deals that the banks won't.
5. Private lending sources use common sense - bank employees use policies and procedures.

I could probably go on about the benefit of using private lending sources for pages and pages. Let me leave you with one more reason to use private lenders.

Not all private lenders are millionaires. Most of them are ordinary people with a few thousand dollars in an IRA, a CD, or a 401K with a former employer. Working with these kind of folks, I am usually able to give them a return that is much better than what they are getting from their current investments. I like helping other people to succeed. When I can succeed with them, that is the best.

I have many friends who have let me use their money to buy real estate in my business. They have made tens of thousands of dollars in interest while sitting at the beach, letting me do the work. Private lending is a powerful tool to turn ordinary folks like you and me into millionaires like I met with in Chicago.

Tom ~

Why Buy Retail?

http://www.buyahousebelowmarket.com/

See my latest blog about what we do at The Gold Seal Homes Group: http://www.youtube.com/watch?v=ACJx3wpKezQ

Thomas K Sheppard has been successfully investing in real estate since 2001. A veteran of the US Marine Corps and more than 17 years in the banking industry, he is focused on helping 100,000 families to find quality, affordable homes. He buys, sells, and rents homes in the Charlotte, NC metropolitan area, including Mecklenburg, Cabarrus, Rowan, Union, and Gaston counties. If you are looking to buy, rent, or sell a home, condo, or apartment in those areas, or would like to learn about how you can help 100,000 families find quality, affordable homes, contact him at tsheppard@adbproperties.com or visit his website www.buybelowmarket.com.

Buying a House for Pennies on the Dollar

Can you really buy a house for Pennies on the Dollar?

Yes, you really can, and I have. And yes, there is a catch!

Recently a partner and I purchased a home that is worth about $300,000 for just $140,000. In case you don't have a calculator handy, that is 46 cents on the dollar.

This is a nice house in a nice neighborhood. So, what is the catch? Well, actually there is more than one.

Catch #1) ALL CASH and QUICK CLOSING

When you find a house that you can buy at a price significantly below the market value you must have access to a large sum of money that is available immediately. We had to close in less than three weeks from the time we found this deal.

Three weeks isn't enough time for traditional lenders to even finish determining if they think you will pay them back. Then they need to spend several more weeks scheduling and evaluating the house you want to buy. The bottom line is, a fast close for a traditional lender is six weeks and most won't get done in less than twelve weeks.

So, if you cannot get the money fast, then the deal will get away from you.

Catch #2) Lenders Will Only Consider the Purchase Price

When you find a deal like ours, most lenders will look at the contract price of the property and will only lend a portion of that value. This will still leave you with the need to come up with anywhere from 5% to 20% of the contract price in order to make the deal happen.

Catch #3) Lenders Will Decrease the Loan Based on the Property Condition

When you find a house at a great price, in most cases it is going to require some repairs. If the repairs are too significant, the bank won't lend you anything, regardless of how low the purchase price is. They don't want to end up owning it in case you walk away with their money. If the repairs are within reason, they will decrease the stated value of the home by the amount of the repairs and lend you a portion of the decreased value.

Catch #4) Fixing the Property Requires More Cash

With very few exceptions any house you can buy for 46 cents on the dollar is going to need some repairs and some updating. To do the repairs and updating will require more money.

Our deal was no exception. We had to put on a new roof within days of closing to make sure we didn't have the inside get damaged from rain that would have come through the old roof. Then we had to clean out the house and make several other repairs. Lastly, we had to update the tiny kitchen by expanding it and improving it.

All of this requires a lot more cash, in addition to what we paid for the house at closing.

Catch #5) You Have to Pay While You Wait

When you get a loan to buy and fix a house, you have to keep making payments on the loan even though you aren't living in the house. If you get a loan that doesn't require payments, then you are just deferring payments while the interest is piling up. That is what is known as the cost of capital.

Catch #6) If the Repairs Aren't Done Right It is Still Your Problem

When you are doing it yourself or even having others do it for you, if the repair or upgrade is messed up, you are still on the hook. You will suffer more for it than anyone else in terms of money, time, and frustration.

Conclusion

Every week my team and I find and buy homes for pennies on the dollar. We work with a group of investors who make money with us by lending us the money to buy and fix these homes. We pay cash and close quickly. Then we fix up these homes and make sure they are done up right. When we are done, we want to sell them fast, so we put them on the market at a discount price. That way you save m0ney even while we make money.

While it is true that you can find and buy houses for pennies on the dollar, there are a lot of hidden downsides to doing this for yourself. We know and understand the problems with doing this. We do it every week.

If you buy a home from us, you will save yourself the time and frustration of trying to find one of these deals and you will save yourself the aggravation and disappointment of trying to buy and fix up one of these homes.

Why bother when instead you can let us to all the dirty work and you still get a discount on a beautiful home?

Tom ~

Why Buy Retail?

http://www.buyahousebelowmarket.com/

See my latest blog about what we do at The Gold Seal Homes Group: http://www.youtube.com/watch?v=ACJx3wpKezQ