Avoid the Downside of Real Estate Investing
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Message #1786
Thursday, July 20, 2006
WEALTHY:
6 bad financing options; 1 great one (Alan Cowgill)
HEALTHY:
Stop dying like a man (Dr. Al Sears)
WISE:
Earl Warren on banks
ALSO
IN THIS ISSUE:
The
Ostrich Theory of Internet Marketing" (Rich Schefren)
A
thought-provoking question (Michael
Masterson)
Add "inchoate" to
your vocabulary
He'd
Have Called Them Crazy -Or Worse!
With
the Internet, it's now possible to spend no more than a few
dollars, write a couple of very basic ads, and have instant
access to millions of potential customers all in a matter of
minutes
If
anyone had told Jim Sheridan he could bank thousands in just
24 hours… without any product of his own… without spending
a penny on getting it or promoting it, he'd have justifiably
said they were nuts.
But
Jim made a decision that he would overcome his skeptical nature
and give it a go. Boy, is he glad he did! That one deal alone
banked him $187,296 in one day.
The
great news is – you can copy Jim's plan exactly. The program
is called Instant Internet Income and I guarantee it does exactly
what it says it does.
Take
a look at how Jim brought in over $175,000 in a single
day!
-
Patrick Coffey
"I
hate banks. They do nothing positive for anybody except
take care of themselves. They're first in with their fees
and first out when there's trouble."
-
Earl Warren
Avoid
the Downside of Real Estate Funding
By
Alan Cowgill
There
are two difficult aspects of real estate investing. The first
is finding the right property to invest in. The second is determining
the optimal source of financing to buy it.
Today,
I'd like to discuss the financing with you. I have found that
most real estate investors (particularly new investors) find
this to be the more intimidating, unpleasant, or confusing
part. Especially if they have recently changed jobs, have poor
credit, or have other "issues" that traditional lenders
frown upon.
And
the truth of the matter is, even if you have perfect credit
and a long history with a high-paying job … there are financing
obstacles that can block your ability to be profitable – especially
as you become more aggressive with your real estate investing.
The
Pitfalls of Your Typical Financing Options
There
are six avenues most real estate investors pursue. (Note that
I say "most" investors. Personally, though I have
used most of these sources in the past, I rarely do today.)
And all six have disadvantages.
1.
BANKS
Loans
can be difficult to get if you've recently quit your job
(or sometimes even if you've changed jobs).
You
need a down payment.
You
need decent credit.
You
can lose time trying to close the deal – which translates
into lost deals and lost profits.
You
often have no relationship with the bank. You're just a
series of numbers.
Banks
can change their rules instantly.
You
have to deal with mountains of paperwork.
The
loan goes on your credit report.
You
must provide stacks of documents.
You're
bound by the bank's rules, so you have to jump through
their hoops.
You're
not in control.
Some
banks require monthly payments that cut into your cash
flow.
Often,
banks require you to pre-qualify the property, making it
difficult to purchase fixer-uppers
Let's
face it, investment properties can be some really nasty stuff.
I work mainly as a rehabber – and beyond the trash and that
horrible smell, some of the houses I buy don't have roofs,
or windows, or furnaces, or plumbing. Fixer-upper investors
buy trash and turn it into cash. Banks don't seem to
understand that. A bank actually refused to loan me money
on a house for four and a half months, because it didn't
have a furnace. (Gee, I thought the idea of being a rehabber
was to buy an ugly stinky house and fix it!)
2.
HARD-MONEY LENDERS
They
are very expensive.
Your
credit score may still factor into whether they'll loan
you the money.
You
need a down payment with some of these lenders.
You
only have one exit strategy: Sell for cash.
You
don't have any control.
You
won't have any up-front fix-up money.
3.
LINES OF CREDIT
You're
required to make monthly payments, which cuts into your
cash flow.
You
have a limited amount of available money.
Your
loans can be called back … and you're cut off.
You
don't have any control.
4.
YOUR OWN MONEY & CREDIT CARDS
You
have a limited amount of available money.
You
could make more by loaning your money out.
5.
CREATIVE TECHNIQUES WITH THE SELLER
These
opportunities can be difficult and time-consuming to locate.
You
don't generally find the cash needed to rehab.
6.
PARTNER(S)
You
must share/lose a large portion of the profits.
You
may have to share decision-making power.
A
Financing Alternative
I
started my real estate business by using banks, savings,
credit cards, lines of credit, creative techniques with sellers
(like land contracts and lease options), and partners. But,
once I was self-employed, it was harder to get loans to purchase
properties.
That's
when I started pursuing private
money lenders. These are individuals, with cash available
to invest, who choose to loan me the money for my real estate
projects, rather than investing in a low-yielding CD or other
vehicle.
Private
money lenders can be personal friends or colleagues, but
they certainly don't need to be. My first private lender
was my mother (back in 1989) – but since then, I've found
an entire network of investors through some simple
marketing techniques.
Two
of the best reasons to work with private money lenders are:
1.
Speedy and constant access to funds
With
private lenders, my funds are available all the time. When
a good deal comes my way, I can grab it, because I know the
money is waiting for me. While my competitors are scrambling
around applying at the bank, I've made an offer and closed
the deal. My rehab crew is all over the property like ants
before the competition knows what happened. I love having
private lenders for my business.
2.
No monthly payments required
As
my use of private lenders increased, I learned that some
of them didn't require monthly payments. That's when I started
to structure my loans so I don't need to make a single payment
until I sell the property.
This
is a huge benefit. Imagine what it has done to improve my
monthly cash flow. Of course, my mom will always get monthly
payments from me, because she is retired and depends on that
income. BUT when I'm dealing with anyone who can wait for
their money, I let it accrue.
Today's
Action Plan: In my next article for ETR, I'll
go into more detail about private money lending, and how
you can use it to propel
your investments. Meanwhile, you now have two reasons
to consider working with a private money lender – the SPEED
it gives you to purchase a property, and the improved CASH
FLOW (because you don't have to make monthly mortgage payments
while you let your interest accrue.)
[Ed.
Note: Alan Cowgill is a speaker, author, and real estate entrepreneur
who has bought or sold over 200 investment properties. He will
be speaking to a select group of Early to Rise readers about
private money lending later this month. Learn
how you can become a part of this discussion.
You
Can Get All The Money You Want From People, Not Banks....And
Get It Faster, Easier And There's No Limit To How Much You
Can Borrow.
Getting
money to do real estate deals needn’t have anything to do
with going to a bank, filling out an application, putting up
down payments or waiting to be approved. Assertive investors
don’t need to go near banks that want to control their lives
and tell them what they can or can't qualify to borrow.
Learn
how to get all the money you want now.
-Kam
Weiler
How
Can You Tell If a Customer Is Still a Customer?
By
Rich Schefren
Just
because someone buys something on your website doesn't make
him a customer.
Most
Internet entrepreneurs don't really understand that their customer
list is perishable. Without putting future offers in front
of their customers, they become accomplices in degrading their
business's number one asset
So,
how can you tell if a customer is still a customer?
One
way is to understand customer lifecycles and how to use customer
behavior metrics (such as latency, frequency, recency, and
monetary value) to conduct predictive modeling. The concept
here is that you can predict a customer's future behavior by
comparing his current behavior to what you know about the aggregate
behavior of your former customers. Then you can take preventive
action to keep him as a customer.
Predictive
modeling also lets you know in advance when a customer is displaying
hyper-responsive tendencies (i.e., by responding quickly to
your marketing attempts). This way, you can make sure you put
offers in front of this customer fast enough ... so he doesn't
go elsewhere to quench his thirst for whatever it is you're
selling.
If
you've never considered the "How can you tell if a customer
is still a customer?" question, you are practicing "The
Ostrich Theory of Internet Marketing." This is where you
operate under the false assumption that your customers are
customers for life - unless they specifically tell you they
are no longer interested in buying from you.
To
make sure your customers keep buying from you, get your head
out of the sand, and take these three steps:
1.
Get an understanding of the customer lifecycle for your particular
business.
2.
Define the latencies between each desired customer action.
(A "latency" is the average amount of time between
two of these actions - like buying a product and then visiting
a customer service website.)
3.
When customers deviate from the customer lifecycle, create
an irresistible offer that lures them back.
[Ed.
Note: Rich Schefren, arguably one of the world's best small-business
strategists, currently coaches many of today's top Internet
gurus and service providers on streamlining their businesses
while exploding their profits. Don't miss your chance to learn
the secrets of Internet marketing from Rich at this year's Information
Marketing Bootcamp ETR internet marketing.]
Simple
Tests to Help You Live Longer
By
Al Sears, MD
More
than one million men will die this year, with the leading causes
of those deaths being heart disease, cancer, injuries, strokes,
and lung disease. And, with the exception of injuries, I can
trace them all to changes that have been made to our environment
(like the addition of chemical preservatives to our food and
many other products we use every day).
Getting
the right blood tests is your first step toward countering
this threat. They can identify the effects it has had on your
chemistry, and give you a chance to take positive steps toward
becoming healthier.
Problem
is, very few doctors will order these blood tests. And here's
where your awareness plays a critical role in your health.
In
my book The
Doctor's Heart Cure, I recommend the following tests, once
a year:
Coenzyme
Q10
Homocysteine
Insulin
Testosterone
Total
Estrogens
HDL
Cholesterol (Forget total cholesterol.)
Triglycerides
PSA
(Prostate Specific Antigen)
In
future ETR articles, I'll be telling you much more about how
to use these tests.
[Ed.
Note: Dr. Sears, a practicing physician and the author of The
Doctor's Heart Cure and 12 Secrets to Virility, is a leading
authority on longevity, physical fitness, and heart health.]
Notes
from Michael Masterson's Journal: Something to Think About
Today
In Message
#1781, I asked you, "What would you do with your
money if you had all you could ever need?"
Here's
a similar hypothetical question: "How would you live your
life if you could see into the future and knew you were going
to die in 5 or 10 years?" (I'm not talking about dying
from any sort of debilitating disease. You'd be perfectly healthy
to the end.)
Write
to me at ReaderFeedback@gmail.com and
I may print your response in a future issue of ETR
Creating
Your Own Destiny
Imagine
a job in which you set your own hours, and live where you please:
at the beach, in the mountains, in Paris. As a copywriter,
you can. Learn
more about this rewarding career.
"Inchoate" (in-KOH-it)
describes an initial or early stage of something. It is derived
from the Latin for "to begin."
Example
(as used by Thomas Maier in Dr. Spock: An
American Life "Mildred Spock believed that, at about
the age of three, her children's inchoate wills were to be
shaped like vines sprouting up a beanpole."
Michael
Masterson
Copyright ETR, LLC, 2006
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a Question for Michael Masterson?
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business problem? ETR welcomes your thoughts. Post
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