How to Handle Your Investors’ Money
Issue #2312
- WEALTHY: 3 money-handling basics every real estate investor should know (Alan Cowgill)
- HEALTHY: Protect your eyes by eating right (Dr. Ray Sahelian)
- WISE: Ovid on cash in hand
ALSO IN THIS ISSUE:
- When and how to use a pen name (Michael Masterson)
- If you’re not the intended recipient… (Suzanne Richardson)
- It’s Fun to Know… about $1 coins
- Add "sapid" to your vocabulary
How Do You Safeguard Your Nest Egg?
The U.S. economy is headed for a major downturn. Investors are growing more pessimistic as the nation’s biggest financial institutions, including Merrill Lynch, Citigroup and JPMorgan Chase & Co., continue to report dismal numbers from the sub-prime fallout.
This is no longer an issue of what’s going to happen or even when. Even Fed Chairman Ben Bernanke can’t save the economy. Now, the only question remaining is: How do you safeguard your nest egg?
Learn how in this Emergency Video Summit. The panel of experts will lay out a strategic plan you can put into place to not only protect your portfolio from the crisis brewing… but to also make as much as 424% in 12 weeks.
This Video Summit is absolutely FREE to you. You can access it right here.
"How little you know about the age you live in if you think that honey is sweeter than cash in hand."
Ovid
How to Handle Your Investors’ Money for Fast, Profitable Real Estate Deals - Without Bank Hassles
By Alan Cowgill
Many banks and other lenders have overreacted to the sub-prime mortgage scare. As a result, it’s tougher than ever for people to get conventional loans. Even investors with spotless credit have to face new roadblocks that can ruin a great real estate opportunity.
Over the years, I’ve learned that it pays to become your own bank by tapping into the potentially unlimited funds offered by private lenders. Not only can you bypass credit checks and other delays that prevent you from getting the cash you need, you can also make bigger profits by getting the fastest jump on the best deals. At the same time, your private lenders get a better return for their investing dollar in less time than they could with, for example, bank CDs. It’s a winning situation for everyone - except the bankers who get cut out of the middle.
In my last article for ETR, I revealed how you can get private money lenders to trust you. Put those techniques into practice, and you should have potential lenders lining up to give you their cash. But once the money hits your hands, how do you handle it? Here are three basic guidelines.
Touching the Money
When people hear the kind of interest I pay, they sometimes get so excited about loaning me money that they want to hand me a big check right on the spot. This is not the way to do it. For your protection, and the protection of your private lender, that check should be sent to your attorney.
This is the procedure: Go over your disclosure document with the private lender. The disclosure statement spells out the full facts of the investment and your business. Once you have a meeting of the minds, have the private lender send the check to your attorney… to be used for the closing on a specific property. This way, you’ll have a nice, neat paper trail and a well-informed lender.
Co-Mingling Funds
Sometimes you will have two lenders who each have a small amount to loan. With the combined amount, you have enough for a particular property. But you cannot simply put the money together and let them share the first mortgage.
In this type of situation, give one lender the first mortgage. If you need additional funds, give another lender a second mortgage - after explaining that the first mortgage holds a stronger position.
However, if you’re willing to form a new business entity - such as an S-Corporation or LLC - it’s possible to put funds together from two or more private lenders. Laws and regulations vary from state to state, but all states have similar paperwork that needs to be filed.
When Do the Payments Start and End?
Proper handling of private funds doesn’t end when you buy a property. You also need to pay your lenders back in a professional way that encourages them to invest with you again.
The best way to structure payments is to start paying your lenders interest at the time of closing. So if, for example, you’re rehabbing a property, this means you have to make repairs and get the place lease-optioned as quickly as possible so it is producing income to cover the interest payments you’ll be making.
I continue paying interest to my lenders as long as their money is in a property. When the property sells, they get a check at closing for their principal and interest.
I ask them if they want to loan their money on another property. Nearly all will say yes, and their interest payments start again at the next closing table. So they earn interest while the money is loaned - from purchase to sale.
I pay a minimum of 90 days’ interest on all loans - even if I wholesale the property and have the lender’s money for less than 90 days. I just want to be fair.
The lesson here is to avoid the temptation to grab those checks and cash them. Run a professional operation, have your business rules in place, and follow them. You’ll be much better off in the long run.
[Ed Note: Alan Cowgill has bought or sold more than 200 investment properties using funds from private investors rather than banks or hard-money lenders. His Private Lending Made Easy training program is the only one on the market dedicated to private money. To learn more about how you can grow your wealth with private funds, click here.
This April at ETR's Profits in Paradise Wealth Building Summit, Alan will reveal how he created his own "private bank" of over $2,000,000 in ready capital. Get the details here.]
New Automated System Leverages the Internet for Faster, Easier Real Estate Profits
Jeff Adams works full-time as a firefighter… but his part-time job has made him the nation’s leading expert in finding motivated sellers, hungry buyers, and private lenders - 350 deals since 1995, just working part time!
If you want real estate profits without the hassle, setting up automated websites that do all the heavy lifting for you, while all you do is make offers and cash checks… then don’t miss Jeff at this April’s Profits in Paradise conference hosted by Early to Rise.
Of course, that’s just ONE of the things you will learn at this conference. For all the details, click here.
(But hurry, your $100 Early Bird discount ends this Thursday. Don’t wait and pay extra next week! Get in now and save $100.)
Reader Feedback: "I have a lot of good things brewing."
"I received the Instant Internet Income program, and I am currently trying to find a specialty market. I am in the final process of closing my first loan for my friend’s mortgage company. And I am not even a loan officer. But through the help and encouragement of ETR, I have made myself of value to his company, and we have a mutual partnership that makes us both money.
"I am looking at the Total Package website, which I found through ETR, and I am interested in learning more. I don’t know much about copywriting, but it looks like a great way to make money to pursue the real estate market. I have a lot of good things brewing.
"Thank you for helping people like me. The sky is the limit!"
- Chris C.
Woodbridge, NJ
[Ed. Note: Want to get your name and opinions published in ETR? Let us know how reading ETR has helped you - maybe even changed your life. Send your comments to ReaderFeedback@gmail.com. Include your name and hometown... and we may print your e-mail in a future issue.]
Dear ETR: "What are your dos and don’ts when it comes to using a pen name?"
"Michael, what are your dos and don’ts when it comes to using a pen name? I am publishing a book under a pen name. I do not care to register my book with a copyright, because then you have to list your real name.
"I would like to get a mail address for the pen name, but it looks like I need to file a DBA (’Doing Business As’) under that name first - and then it’d only take a quick computer search for someone to find out who I am. Do you have any suggestions for someone who wants to remain anonymous?"
- Michael V.
Pooler, GA
Dear Michael,
There are many good reasons to use a pen name.
1. You don’t like your name or believe it might hurt sales… or simply like some other name better.
In admiration of the pen name used by steamboat captain Isaiah Sellers, Samuel Clemens began using "Mark Twain" as his own. Says Twain in Life on the Mississippi, "I was a fresh new journalist, and needed a nom de guerre; so I confiscated the ancient mariner’s discarded one, and have done my best to make it remain what it was in his hands."
2. You are a successful person in one area and are writing a book in another.
You want to maintain the distinction. (Romance writer Nora Roberts writes erotic thrillers under the pen name J.D. Robb. Science fiction author Robert Heinlein used pen names when writing outside the sci-fi genre.)
3. You don’t want fans phoning you or coming by your house.
Joe Klein, author of Primary Colors, used a pen name to avoid publicity and being publicly linked with the book.
4. You are writing a series of books or a column that is meant to last longer than your involvement.
Ann Landers, Abigail Van Buren ("Dear Abby"), and Prudence ("Dear Prudence") have been pseudonyms for many different writers.
When I began writing business advice in 1999, I used a pen name for all of those reasons. I was at the end of a very successful career as a private businessman and had no interest in becoming a best-selling business author. I had long ago learned that any amount of fame was a burden. More important, I had already started a career as a poet and short story writer using my given name, and I wanted to keep that separate.
My publishers liked the idea of my using a pen name because they were creating products (for AWAI and ETR) that were meant to springboard off me, my story, and my ideas. But the ultimate goal was for them to get much larger and go beyond me. If they tethered their businesses to me, it would be a big loss if and when I retired.
We considered using "Mr. X" for a while, but that seemed hokey. So Paul Hollingshead, one of the founders of AWAI, chose the name Michael Masterson. Everybody liked it, and we went with it - first with AWAI and then with ETR. When I began writing business books, we continued with the pseudonym because we had already established a considerable base of potential book buyers using that brand.
Those are the benefits of using a pen name. There are no negatives, really, except that some readers - ignorant of how common pseudonyms and pen names are in business - may foolishly conclude that you are trying to hide something. You can avoid that minor problem best by ignoring it.
To publish a book, you need a legal business name, and that business name needs to be on the copyright page. You don’t need to list your real name. Look at business books on your bookshelf and you will see what I mean. If you use a legal business name as the copyright holder (i.e., the publisher), there is no reason for a DBA.
Here’s what Matt Turner, Agora’s top legal counsel, has to say on the subject:
"If you prefer not to use your real name on your writing - for whatever reason - no problem. Simply set up a legal entity. Using a legal entity (like an LLC) is easy - and the filing documents do not require you to reveal the owner(s). A person does have to sign as ‘incorporator,’ but that person does not have to be you. It can be an attorney who is privileged not to reveal the owner. Then you write your book and the copyright is in the LLC’s name. And if anyone steals your book, you can still sue them via the entity. There you have it."
- Michael Masterson
[Ed. Note: Send your questions to AskETR@ETRFeedback.com. Include your full name, your hometown and state, and the ETR team may answer you in an upcoming issue.]
Getting E-Mails by Mistake
"Here’s the article we discussed," said the e-mail. It was from a writer I know. But I wracked my brain and couldn’t remember discussing an article with her… ever.
Fortunately, I figured out that she was probably trying to reach another editor we both know. So I passed her article on. Problem solved.
Getting e-mails by mistake happens to me about four or five times a year. I’ve never gotten any that were particularly interesting, but I’ve heard some juicy stories…
There was the boss who got an e-mail from an employee… who was venting about the boss’s bad management tactics.
There was the guy who got raunchy pictures of a bachelor party he didn’t attend… pictures the sender mistakenly sent to his entire e-mail list.
And there was the woman who got an invitation… to a party she wasn’t actually invited to.
When you get a sensitive e-mail that wasn’t meant for you, what do you do?
In an article for MSN, Miss Manners suggests that you make no mention of the specific incident. Merely send a note to the sender that says, "You might want to take me off your group listing - I have been receiving e-mails about matters you may not want me to know about."
Unless the sender keeps e-mailing you by mistake or the information is time-sensitive - like the article I got - you might just consider deleting the e-mail… and never mentioning it.
Glaucoma and Omega-3 Fatty Acids
Over three million Americans have glaucoma, according to the Glaucoma Research Foundation. Although there is no cure for glaucoma - which causes blindness - a simple addition to your diet can help reduce the incidence of this disease.
Just add some omega-3 fatty acids to your meals.
We’ve mentioned the incredible health benefits of omega-3 fats in ETR before. For instance, they can help reduce the risk of diabetes, improve your cholesterol and triglycerides, reduce asthma and allergies, increase fertility and improve sexual function, fight cognitive decline, reduce wrinkles, improve skin tone, increase your overall energy, and much more. Now, research proves they can protect your eyes too.
Researchers at the University of Melbourne, Australia studied the association between dietary omega-3 fatty acid intake and glaucoma. They fed rats either an omega-3-sufficient or an omega-3-deficient diet from conception. The omega-3 diet contained safflower, flaxseed, and tuna oils, and the omega-3-deficient diet contained safflower oil only. Animals raised on the high-omega-3 diet had a decrease in intra-ocular pressure when they got older, meaning the tuna oil reduced their risk of developing glaucoma.
Get your omega-3 fix by eating e ggs, grass-fed beef and wild game, fatty fish, flaxseeds, and walnuts. You can also take a fish oil supplement.
[Ed. Note: Ray Sahelian, M.D., the author of Mind Boosters, is internationally recognized as a moderate voice in the evaluation of natural supplements. Visit Dr. Sahelian's website at www.RaySahelian.com , and read more of his articles about the supplements you should and shouldn't be taking at ETR's free natural health e-letter.]
It’s Fun to Know: About $1 Coins
Why is the government so eager to issue $1 coins… despite the indifference of the general public? Well, the average $1 bill circulates for 21 months and then must be replaced, while a coin can last 30 years or more. And although the $1 coin costs three times more to produce, government accountants contend that switching away from $1 bills completely could save the government $50 million a year.
(Source: Wired )
Give Yourself a Nice Pay Raise - And A Three Day Weekend, Every Weekend
By the end of this week, you can give yourself a pay raise. How does an extra $20/hr sound… and schedule a few days vacation while you’re at it!
After a month or two, how about another raise… to $2,000 a week.
It’s happening everywhere. Ordinary people — including folks who never finished school — starting their own businesses… and making side incomes in the neighborhood of $40,000… $60,000… even $100,000 or more a year.
They’re living the American Dream. Now it’s time for you to start living it too. Read on…
- Patrick Coffey
Word to the Wise: Sapid
Something that’s "sapid" (SAP-id) - from the Latin for "to taste" - has a strong, pleasant flavor.
Example (as used by David William Cheever in The Atlantic): "Chemistry can concentrate the sapid and odorous elements of the peach and the bitter almond into a transparent fluid."
[Ed. Note: Become a more persuasive writer and speaker ... build your self-confidence and intellect ... increase your attractiveness to others ... just by spending 10 VERY enjoyable minutes a day with ETR's new Words to the Wise CD Library.]
Copyright ETR, LLC, 2008