I have been spending a lot of time over the last couple of months in the trenches of “show me the money.” Right now, there are no loans for investors with 4 or more houses – period. I did find a bank that is still doing loans for investors with more than 10 homes… but what was the catch? The laundry list of items that you needed in order to qualify left me shriveled up in ball in a dark room sucking my thumb – NAKED! It was funny. I was so excited and told my whole club that I found a bank! Then I had to break the bad news – unless you are God, you will not qualify. Bummer dude!
So here we are. I have to tell you the truth – unless I know that I can sell a home to an end user and they are going to qualify and be able to get a loan – then no go. I have money to buy REO’s. We have the 20-30% down and have the hard money all lined up… but we are still so sketchy to buy these properties! It’s crazy. I think we will feel way more secure if we were using only private money – which is our goal. So this is the plan for us- forget the banks all together. We don’t need no stinking banks. We have moved away from using banks whats-so-ever and focusing on private money completely.
So how do you do this? Listen to me now and hear me later my friends. After you have exhausted your warm list of people you know, there is only one way to raise money. Work your arse off. We are sending out thousands of direct marketing pieces. I am networking up the ying yangby going to all kinds of business networking events. We are giving presentations to small groups and are cross promoting with companies who teach people how to use their IRA’s and 401K’s to invest. Additionally, I have partnered up with an investor who is 20 years experience as a real estate investor, he is successful and very smart and I feel very secure in everything I do with him. This is what I have to do to raise enough capital to be able to accomplish my goals this year. Listen – I’m exhausted – I’m not going to sugar coat it. But what is worse? Looking back on this market without making millions of dollars – or being exhausted for the next 2 years and then looking back and having lots of properties and money?
I cannot swing a dead cat around without hitting another investor who doesn’t know how to raise their own money. So my advise is to do what I did. First learn how! Then hook up with other investors with the same goals and form a partnership with them and then – just do it! When I did my first presentation on Private Lending to a group – I was nervous, sweating, and sick to my stomach. But who cares! To Win It you Have To Be In It!
One thing I know for sure (or at least it is true for me), we cannot do all this without a team. I promise you. I have tried to make it all happen on my own and you get nowhere fast. Even my investor friends who do not have actual partners – have assistants, interns, and volunteers who help them. If you do not have enough experience to raise money and manage the deal on your own - then do what these people are doing – go intern for an experienced investor!
So really the bottom line for me is – be willing to do what it takes to be successful in this crazy market. We might need to hold these properties for a year or two until people can get loans again – so having properties tied up with private money is all good. We can owner finance the deal for a year or two. (There is also the strategy to buy properties subject to the existing loan – but that is a whole ‘nother discussion).
You guys – I know that it is a tough market right now and I’m in the middle of it too. I have friends who haven’t sold properties for months. I have friends who are working 80 hours week in order to make their 10-20K a month to support their family (but they are doing it!). I have friends who have gotten second jobs. My solution has been to partner up, keep working hard, be inventive, be creative, think outside of the box, get support and encouragement from your peers, be tenacious, step outside of your comfort zone, and just do it.
I am the ultimate example of all the above. If I wasn’t relentless and willing to do what it takes all the time- I would still be curled up in ball sucking my thumb in a dark room!
Article Author:
Rosie NietoRosie has written 15 articles for us.
Visit Rosie's Website: http://www.nakedladyrealestate.com
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{ 5 comments… read them below or add one }
Solid post, in particular the need to grind even harder now then ever. One point I might add is that “reasonable” bank financing is out there for for investors owning more than 4 props, but again requires a lot of elbow grease to turn them up. Regional and portfolio lenders are your best bet…they are out there. We have done deals without resorting to high cost private capital (yet) by 1. scouring the planet for aggressive wholesale lenders looking to fill a niche. Terms are 25%-30% down (not a terrible thing) and rates are slightly higher than standard fnma/fhlmc rates. 2. As I mentioned above regional banks can be a realistic solution. Investors should do their homework within the city or region in which they are acquiring properties..these banks are motivated to vitalize their local economies and will better understand the local real estate situation and home value equation, making them better able to understand local risk better than a national lender, etc. 3. Many regional banks have large REO portfolios, especially interesting if they made construction loans to builders. There is more than likely sizable amounts of new home inventory in the markets where investors are researching. These lenders are motivated to sell and in some cases will carry back the financing at attractive rates while also ignoring the 4 prop max rule. All of these solutions requires some serious effort but well worth if it if real estate investing is your game.
HI Dan – thanks for the great info. I’m telling you – if I can find regional or local banks that will fund investors – I would be a hero. You are reminding me that I heard a commercial on the radio the other day for a bank that was promoting “they are still doing loans”. I will have to check them out.
I was talking to one of my partners the other day to strategize how we can 1st – get our hands on an REO that we like that is 65% LTV – then how we can sell it. We had to make sure we had at least 3 exit strategies that would work first – then from there we are deciding how we can buy it, how much we can pay, and the terms of our purchase.
Boy – it sure does teach us all how to be very cautious investors. Which I think is good learning that we will always have! So I suppose that is a good thing!
Thanks for your info!
Rosie
Rosie, another great post! I have to say that I really admire your work ethic, so many people are not successful for the simple reason that they won’t do the work.
I am not any kind of investor at business real eastate and gain never gain any profit from real eastate industry.however all people no Without money I think we need to wait to look back onto condition in which we have the power with,more over since what make the mortgage crisis has fall so many industry behind,for now,I will stay away from this and follow your next post to find it how to survive with the financial crisis
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For what it’s worth, if you have downpayment money, a few places that I have found to be a good source for loans are;
1- Smaller local banks that are presently taking advantage of the demand for and void in available loans for investment properties. These guys need DEPOSITS!
In my area I found one lender that on the surface will commit to no more than 4 portfolio loans per individual investor,( nothing to do with FNMA 10 property limit) 70 to 75% LTV low interest rate
( 6% or something?)recourse loans.
You must prove you know what you’re doing and be willing to open account; the more business they anticipate doing with you the better.( The 4 loan max is flexible depending on ????? several factors, all common sense, like how well they get to know you = relationship building etc.)
2-Remember FNMA Home Path is now offering financing on up to 10 REO’s, some reserve and other requirements, must use their approved lenders,reasonable rates and will include $ for repairs, similar to FHA-203K. Go to homepath.com
DO NOT HESITATE!!! GO GET EM!
Please remember all these financing restrictions will sooner (rather than later) ALL fall away. ALL lenders as well as the Federal Agencies are first and foremost SELF SERVING, when they NEED to they will change EVERYTHING.
As an investor who has experienced a few ups and downs, while working as a Certified General Apraiser in-house for 2 major lenders; I learned you can always rely on a banks ability and willingness to change ALL their policies ASAP, when their greed kicks in.
Personally, I’m moving ahead as if the present ristrictions on lending will in fact dissapear.
I guess only time will tell.
Best of luck to all and thanks for listening ah…reading?