SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

Buying and Financing Properties

Where Do I Put My Money?

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With all of the uncertainty in the country and the economy right now, “Where do I put my money?” is a question that I am hearing more frequently. People are nervous and are looking for a safe and stable place to park their hard earned funds. As a real estate investor you should strive to be that “safe and stable” place.

If you want to increase the size of your real estate portfolio, and are not independently wealthy, you will need funds. Funds from commonly known sources such as a mortgage broker or commercial bank can quickly dry up, be pulled, or come with too many strings attached. Borrowing funds from everyday people like you and me can and should be a key tool in your real estate investing tool box.

The thing is however many people do not realize nor understand that they can lend their money to individuals and have it backed by the security of real estate. They believe that the stock market, bonds or a money market account are the only options available. A stock broker is where they will turn for advice and you can rest assured that the broker will not tell them about the private lending option.

You have to be ready to tell them about the safe and stable private lending option. But how? You can potentially run afoul of securities law if you advertise or actively solicit private funds. So that option is out. You best bet is to be ready when you sense an opportunity. Be ready when someone asks the question “Where do I put my money?”

When you hear that question, answer with “Why not invest with me, earn a nice return and be secured by real estate?” Most will be intrigued but skeptical. You will most likely have to overcome that skepticism and honestly, that can be difficult to do.

Start overcoming it by sounding and acting confident about what you do. Have a succinct elevator speech rehearsed. If you get a bite, be ready with examples and numbers. Of course this all will take some homework on your part. You have to understand your market, your needs, your business and how financing works.

You also have to practice what you intend to say. Do not try to sound pushy, overbearing or too sales like. You want the conversation to flow naturally. You want you potential lender to feel at ease.

Then be ready to follow up with documentation. Be prepared to demonstrate the safety and stability of investing with you, because very few are simply going to take your word for it. If they do you likely do not want them as investors anyway. Be prepared to show actual property examples if you can. Be prepared with an electronic bank book, already prepared and uploaded into Dropbox so that all you need for them to do is click on a link.. Be prepared with sample documents that demonstrate how their money will be secured. Have a sample note and deed of trust, drawn by an attorney, for them to review.

Finally, give them time to make a decision. They will likely have questions. Do your best to answer them and be honest if you do not know something. And never underestimate who has money. Remember Sam Walton, the founder of Wal-Mart, drove a beat up, old pick-up truck. Do not feel too upset if your offer is not accepted. Some simply cannot wrap their heads around private lending. Move on. Others will give you a test run. Use that test run wisely as it could turn into something really great for your business growth.

Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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Buying As Is – How Much Did The Surprises Cost Me?

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Almost every property I have purchased during my real estate investing career was purchased in an “As Is” condition. Purchasing “As Is” is simply the way most real estate investment deals are made. Think about why. Property owners sometimes let their property become a costly burden. They do not have the cash to fix it or do not want to fix it. They just want to get rid of it. You, as the investor will purchase this property (at a discount) and solve the seller’s problem. Those repairs mean profits for you.

As an investor you need to understand what “As Is” means. You need to know what it means when you consider a potential property for purchase and what it can cost you. I can tell you, that in almost every property I have purchased “As IS” that I have missed something that needed to be repaired. Sometimes those misses were small, but other times they were significant and cost me big bucks.

What “As Is” Means

When you purchase a property “As Is” you are purchasing it with all known and unknown defects. The seller makes no warranty on the condition or the systems of the property. As the investor, the name of the game for you is caveat emptor or buyer beware. You have to beware before you make your offer of what it will take to repair the property to either make it a decent rental or offer it for a retail sale.

Knowing what to look for takes some learning, skill and effort. Honestly this is one of the most nerve wrecking things a new investor can face.. But buying a property “As Is” doe not mean that you cannot protect yourself from your lack of experience. Buying “As Is” does not mean that you cannot inspect the property, or have someone with more knowledge inspect the property for you. You can and should always put a clause in your purchase contract that allows you to fully inspect a property over a certain time period. In this way, if you feel overwhelmed about the condition, you can bring in someone to help you.

If the repairs cost way more that you anticipated, than you need a way out of your contract. You need an escape clause or at the very least you need to be able to renegotiate with the seller. In my experience, when you find something seriously wrong and show the seller the issue, most are more than willing to renegotiate the deal. The key of course is to find it before you close.

As I said at the beginning of this post, I have missed a few things over the years that have cost me significant amounts of money. What were some of these items?

  • Collapsed Sewer Lines – Many properties I look at are vacant and the systems have may not been used in years. Until you turn on and start flushing the toilets you cannot know that the sewer line is crushed. This problem has occurred many times and it is often a $5,000 plus repair job. Today I look for depressions in the yard, green grass where everything else is dry or pay the bucks to have my plumber run a camera through the line.
  • Rotten Floor Joists – You cannot see water leaking behind the walls and the evidence of that leak may be hidden as well. These leaks have added $2,500 plus to several rehab jobs over the years. Now I “test” the floors around tubs, sinks and toilets by bouncing on them to feel for any movement. I will also use a 5 in 1 tool to feel and poke at walls to check for evidence of rot. These tests are not perfect, but they catch mot of the problems or make you look closer.
  • Electrical Panel Too Small – Every rehab usually includes upgrades such as HVAC, washers and dyers, etc. But if you do not have the proper circuits for these heavy appliances, they are not going to happen. More than once in my early career I assumed that there was enough power simply because the place had power on. Not anymore. I always check the electrical panel because upgrading it is a minimum of $1,500.

Were the above issues deal breakers? No. But they sure hurt my bottom line. I was able to absorb most of these costs because I include a very important line item in every rehab budget. That line item is an oops. Oops, I missed that. How much should your oops be? At least 10% of the total rehab budget. If you do not use your oops budget, great! But if you need it you will sure be glad that it is there.

Buying investment properties is just going to involve buying them in an “As Is” condition. Investors need to understand what that means, understand their limitations as a property inspector and also understand that you will never catch everything. There will always be something that was missed which makes having a good purchase contract and an oops budget crucial.

Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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Should I Buy During Covid-19?

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With all of the uncertainty related to the covid virus, real estate investors are asking if it is a smart move to buy properties right now or should they wait until things settle down a bit. It is a good question to ask as the future is not quite as clear as it seemed to be just a few months ago. But, despite all of the uncertainty I would answer yes to the question. Yes, that is, if the property is a good cash flowing deal. It is important to remember that real estate investing is all about the numbers, especially the cash flow number. And if the cash flow is positive, then I say buy.

That said, I would add a couple of caveats that investors should consider these days. First, the market for investment properties is pretty frothy right now. Everyone is chasing investment real estate. I have had more people ask me about real estate investing and how to get into it recently than I ever have in the past. Prices are high right now. I am seeing prices for properties here in the Memphis area that I never thought I would see. But then again rents are up as well and investors are pushing into different markets and different parts of town. How long will this party last? Who knows.

Second, a pandemic can definitely affect both prices and cash flow. Obviously, if everyone is locked down and economically suppressed, or even worse become sick and die, then demand is going to slow significantly driving prices and rents down. Plus the pandemic, or at least the fear of it, may cause people to rethink where they want to live, thus affecting market values. People may no longer want to live in a downtown high rise, clustered among several of their “closest” friends. People may opt for perceived safer spaces in the suburbs or in smaller duplex type properties. What the future holds in this respect is not quite known as we are still, as a society, trying to determine exactly how and if this virus will affect us. In fact, some larger investors are already betting on this move to suburbia.

One thing for sure, the future is uncertain and it is hard to plan. So much has happened in recent months and their long term effects on the real estate market remain to be seen. The bottom line however is still all about cash flow. A real estate investor simply must have positive cash flow to be successful. But how does one calculate future cash flow during these uncertain times? Can you continue to plan on increasing prices and rents? When will the music stop and who will be left holding the bag? It really is hard to know right now.

At the very least, investors have to think that they are perhaps seeing the top of the market and become a bit more conservative with their future rent and price projections. I might also utilize a “covid discount” in my asking price to try to mitigate potential future risk. Will I acquire the properties with such a discount? Maybe, maybe not. But then again I was overbid on many properties in 2008 and 2009 only to pick them up at a later date when the music finally did stop.

Keep a close watch on your market. Watch the trends and keep an ear to the ground. And always, always, listen to your numbers. If the future cash flow appears to be in positive territory, even with all of the uncertainty, then by all means go for it.

Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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The SmarterLandlording Podcast – The Real Estate Investor’s Guide To A Stronger Purchase And Sale Contract – With Attorney Joe Kirkland

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Episode 18 is a discussion with Attorney Joe Kirkland on one of the most important documents you will use in your real estate investing career.

Download the podcast here.  Or, check out the SmarterLandlording Channel on iTunes

Order Your Copy of Advice From Experience To New Real Estate Investors Today!

Available in E-Book or Paperback

Free Resources Mentioned In The Show

Kevin’s One Page Purchase and Sale Contract

Kevin’s Estoppel Agreement

Joe Kirkland’s Contract Terms

Joe Kirkland’s Seller/Owner Financing Contract Terms

Links You Should Check Out

National Reia – Find a real estate investors group in your area to network with other real estate investors.

Memphis Investors Group – Visit the the heartbeat of Memphis real estate to network with hundreds of other real estate investors.

Want To Contact Us?

Find Joe and I at the Memphis Investors Group almost every month.  We meet on the second Thursday.  The details are here.  

Contact Joe at 901.333.1360 or by e-mail at jo*@cl*******.com “> jo*@cl*******.com

You can find me at my blog, Smarterlandlording.com

And you can like my Facebook page or connect at Twitter @Smarterlandlord.

Like the Intro Music?  Check out my good friends in the band Kitchens and Bathrooms (Kind of fits right!).  They write and play some awesome, original music from right here in Memphis, TN.

Cash Will Again Be King

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As this great suppression of the economy rolls along, people and businesses are becoming more inclined to hold on to their cash. The world is filled with uncertainty. When will it all end? When can we re-open? Will my employees come back? Will my customers come back? And so on and so on. How does a business person know what to plan or even begin to plan right now?

They do not know. So they wait. They wait and hold their cash.

To me this means that going forward, cash, as it has been in times past, will again be king. Heck, I might even go so far and say it will be emperor in the coming months and years. Thus, if you as an investor have access to cash, either your own or other people’s, you may be in a position to pick up some great real estate deals and build wealth.

Think about it. How do most investors acquire properties? Most seek out some type of institutional financing, either through a bank, credit union or a mortgage broker. While I have no problem with that, those sources of funds seem to be drying up and that trend may continue, just like they did in 2008/2009. I vividly remember 2009. One day everyone could get a loan, the next day, poof, all gone. So what happens when loans dry up? Prices fall and those that have access to cash can pick up some very good deals. Which is exactly what we did in 2009.

As an investor, you need to position yourself now to have access to cash. You need to seek out those that have the cash and cultivate a private landing relationship with them. Folks who have cash will be looking for places to invest as the banks may well trend towards negative interest rates and the stock market may seem too risky. Real estate investors can position therefore position themselves as one of the best and safest places to invest.

How?

First, do not judge a book by its cover. You never know who has money and you should treat everyone you meet like they are a potential future lender. No need to appear and sound desperate or oversell yourself. You are simply offering a product that the person with cash needs.

One of the best ways to find folks with cash is to start the conversation with a quick and succinct “elevator speech.” Think about what you would say to Warren Buffett if he happened to step on an elevator with you and asked “What you do?” Would you be ready to quickly describe what you do and take advantage of the opportunity? Would you say something along the lines of “I invest in real estate and offer 8% to 10% returns to those who invest with me. Interested in hearing more?” You see what I mean. Lots of people you interact with will ask what you do. Be ready with a quick speech and again never underestimate. If interested, they will continue the conversation.

Third, get yourself together financially and learn how to present yourself financially. Sure, some people may invest with you on your word alone but they are few and far between. Most are going to want to see qualifications and experience. Learn how to put those things together and present yourself well.

Finally, a word of caution on being too creative with other people’s money. You can get into a lot of red tape and trouble when you co-mingle funds from different people. To keep things simple I like to go with one lender per property. It just makes things clear and easy. Yes, you can co-mingle other people’s money but doing so starts to trip a lot of state and federal rules. Be careful as you can get yourself in hot water very quickly. Seek competent advice if you want to pool funds.

Going forward, I fear that the interventions by government and quasi-government agencies such as the Federal Reserve will get worse before they (if ever) get better. Demands to “do something” in terms of price controls regarding rents, mortgages and even food prices may lead to further interventions in the market and even further investor and entrepreneurial uncertainty. It is a vicious circle. But there will be folks looking for and wanting to put their cash in a safe place. Prepare yourself to be that safe place now by following the advice outlined above.

Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here. Contact Kevin here.

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10 Hard-Bargaining Tactics to Watch Out for in a Negotiation

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The best hard-bargaining tactics can catch you off guard

From – Harvard Law School by PON Staff

Some negotiators seem to believe that hard-bargaining tactics are the key to success. They resort to threats, extreme demands, and even unethical behavior to try to get the upper hand in a negotiation.

In fact, negotiators who fall back on hard-bargaining strategies in negotiation are typically betraying a lack of understanding about the gains that can be achieved in most business negotiations. When negotiators resort to hard-bargaining tactics, they convey that they view negotiation as a win-lose enterprise. A small percentage of business negotiations that concern only one issue, such as price, can indeed be viewed as win-lose negotiations, or distributive negotiations.

Much more commonly, however, business negotiations involve multiple issues. As a result, these so-called integrative negotiations give parties the potential to create win-win outcomes, or mutually beneficial agreements. Business negotiators can negotiate by brainstorming creative solutions, identifying differences in preferences that can be ripe for tradeoffs, and building trust.

Unfortunately, when parties resort to hard-bargaining tactics in negotiations with integrative potential, they risk missing out on these benefits. Because negotiators tend to respond in the way they are treated, one party’s negotiation hardball tactics can create a vicious cycle of threats, demands, and other hardball strategies. This pattern can create a hard-bargaining negotiation that easily deteriorates into impasse, distrust, or a deal that’s subpar for everyone involved.

10 Common Hard-Bargaining Tactics & Negotiation Skills

To prevent your negotiation from disintegrating into hard-bargaining tactics, you first need to make a commitment not to engage in these tactics yourself. Remember that there are typically better ways of meeting your goals, such as building trust, asking lots of questions, and exploring differences.

Next, you need to prepare for your counterpart’s hard-bargaining tactics. To do so, you first will have to be able to identify them. In their book Beyond Winning: Negotiating to Create Value in Deals and Disputes, Robert Mnookin, Scott Peppet, and Andrew Tulumello offer advice to avoid being caught off-guard by hard bargainers. The better prepared we are for hard-bargaining strategies in negotiation, the better able we will be to defuse them.

Here is a list of the 10 hardball tactics in negotiation to watch out for from the authors of Beyond Winning:

  1. Extreme demands followed up by small, slow concessions. Perhaps the most common of all hard-bargaining tactics, this one protects dealmakers from making concessions too quickly. However, it can keep parties from making a deal and unnecessarily drag out business negotiations. To head off this tactic, have a clear sense of your own goals, best alternative to a negotiated agreement (BATNA), and bottom line – and don’t be rattled by an aggressive opponent.
  2. Commitment tactics. Your opponent may say that his hands are tied or that he has only limited discretion to negotiate with you. Do what you can to find out if these commitment tactics are genuine. You may find that you need to negotiate with someone who has greater authority to do business with you.
  3. Take-it-or-leave-it negotiation strategy. Offers should rarely be nonnegotiable. To defuse this hard-bargaining tactic, try ignoring it and focus on the content of the offer instead, then make a counter-offer that meets both parties’ needs.
  4. Inviting unreciprocated offers. When you make an offer, you may find that your counterpart asks you to make a concession before making a counteroffer herself. Don’t bid against yourself by reducing your demands; instead, indicate that you are waiting for a counteroffer.

Read the rest of the tactics here.

Should You Pay Discount Points?

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In an effort to provide my readers with truly helpful content, I have asked fellow real estate investor, friend and mentor Richard Scarbrough to help out. And thankfully he has agreed. A frequent guest on the Smarterlandlording Podcast, Richard is a wealth of real estate knowledge. His experience in the business totals over 40 years, and it is perhaps best if I let him describe some of what he has done.

“When I started investing in real estate, there was hardly any information available. I had great desire and blind optimism to do a lot of different things such as buying homes, moving them, infill lot development, apartments (8, 24, 40 and 216 unit complexes) buying and selling mortgages. I thought if I could own 100 homes I would be rich, so I bought homes from Northaven to Southaven (communities here in the Memphis, TN area), any type property, anyway I could finance it. I also bought, rehabbed and flipped to retail buyers over 400 homes. Along the way I tried numerous management companies that always seemed to manage my properties in a way that I had no cash flow. Some of the above ventures lost money (which I call “seminars” ). But what was more important and cost the most was the lost TIME, as it took me almost a decade to get to back to even after the “216 unit apartment seminar.”  Now at age 71 looking back at 40 years of investing I realize that about a third and maybe half of my investing time was spent recovering from mistakes, therefore anyway we can educate others to avoid these errors is time well spent.”

So from time to time, I will be publishing some of what I am going to call “Richard on Real Estate.” I hope you will find these posts helpful and entertaining. Let me know what you think or if there is a topic you would like to learn more about by leaving a comment below.

Without further delay then, here is the first in a series of Richard on Real Estate.

SHOULD YOU PAY DISCOUNT POINTS?

Should you pay discount points?  Most advisers say no, but you need to look beyond the initial assumption that it’s not a good idea. When you’re getting a loan from a lender, they usually ask “do you want to pay points?” and most people respond “no”, and that ends the conversation. You might want to consider paying points, especially when you’re refinancing, because they could be rolled into the loan and spread out over the term of the loan. What are points? A point is 1% of the loan.

It’s a math problem for me.  For a real simple example let’s say you’re borrowing $100,000 and the lender asks, “Do you want to pay one point and it will lower your interest rate 1/4 of 1%?”.  Here’s what those words mean, one point is 1% of the loan which is $1,000,  so you pay them $1,000 and it lowers your interest rate 1/4 of 1% per year.  Now if 1% of $100,000 is $1,000 then 1/4 of 1% is $250, so you pay them $1,000 and it will lower your payment $250 a year, divided by 12, or about $21 a month.  So, the question is should I pay them $1,000 to save $21 a month?

I look at the math in two different ways. One, what’s the return on your investment to give them $1,000 to save $250 a year? That’s a 25% return on your investment which is pretty phenomenal. Secondly, how fast will I get my money back? If giving them $1,000 saves me $250 a year, that means I get my money back in four years.  As a bonus, on a 30-year loan I’m ahead for the next twenty-six years!

So, your response to “do you want to pay points?” should be “tell me the choices” and then do the math. You may find that you have two, three, or four choices based on a 70%, 75%, or an 80% loan-to-value if you’re an investor, or terms of 15, 20, 25, or 30 years. EACH possible choice may have three or four options of paying points and reducing your interest rate.

 The main takeaway is you should always respond with “I might want to pay points, what are my choices?” and figure out the math.

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Location – More Than Just Place and Position

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Most are aware of the three most important factors in any real estate deal – location, location, location.  But, many are perhaps not aware of just how many intricacies that location can actually play.  Location means much more to a smarter real estate investor that just place and position.  Knowing these items can really help an investor when choosing where to buy properties.

When thinking about real estate location, most will immediately jump to the large scale positional factors affecting purchase price.  We are all aware that real estate prices are much higher in San Francisco than in Memphis, or in New York City versus Omaha, Nebraska.  Most also understand that the location within those areas can also affect the price.  Real estate fronting on central park will be a bit pricier than something located in Hoboken for example.

National Versus Local

Obviously, place and position, at both a national and local scale, is a major factor affecting the price of real estate.  There are however a number of other items that many may not be aware of which are also affected by location.  These locational items can also affect the numbers on a real estate deal and will therefore affect the price when buying or selling.  These items can be much more subtle and take some very local knowledge of the real estate market.

To highlight my point, there are several examples which exist here in my local market of Memphis, Tennessee.  These examples illustrate the differences between what are termed “sub-markets,” which always exist in the context of the larger real estate market.  How big is a sub-market?  They can range from the fairly large neighborhood or subdivision to the much smaller city block or condo building.  Sub-market size can vary greatly as can the situations found in them.

Sub-Market Differences

One sub-market difference here in Memphis relates to the provision of appliances.  I would be greatly relieved if I never had to supply another appliance in one of my properties again, but the sub-market I work in just will not permit me to do that.  I simply have to provide appliances if I want to have a quick turnaround with quality tenants.

Other Memphis sub-markets are the complete opposite.  In both higher and lower income sub-markets I know landlords who do not supply appliances and seem to do just fine.  Appliances are just not supplied in some sub-markets so tenants expect not to have them.  Or demand for available properties is so high that landlords have the luxury of not having to provide them.  Think of the repairs expenses that I would not have if I did not have to supply appliances!  But on the other hand, think of the difficulties that come with renting those properties and the tenant issues I might have in those sub-markets.  As one might begin to understand, local sub-market knowledge can really make a difference when choosing where to buy investment properties.

Another factor I have noticed relates to repairs.  In some higher end areas around town, I know landlords that require their tenants pay for repairs.  They simply insert a clause in their lease making tenant responsible for anything less that $100, and the tenants sign off on it!  Amazing.  Sounds like a great idea but it is just not something that I could do in my sub-market.  I would never get my units rented as most other landlords do not do make their tenants pay.

Lastly, there are utilities  One has to consider the name that will be on the utility bill.  Will it be the landlord’s or the tenant’s?  It will differ here in Memphis due to sub-market intricacies.  We require utilities to be placed in a tenant’s name so that they are the responsible party.  In other parts of town, that is near to impossible due to the tenant base.  

Understand Your Sub-Market

Location, location, location are the three most important factors in real estate for good reason.  Both large and small scale positional factors come into play in any real estate transaction.  While the large scale factors can be quite obvious, the small scale ones are more easily missed, but they are no less important.  Understanding the sub-market you are investing in is just as important as understanding the larger, area-wide market conditions.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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Making Offers Sight Unseen With Contract Contingencies

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Can you make an offer to buy a property sight unseen?  Yes, you can and sometimes you should.  Can you can do it with confidence?  Yes, you can do that too.  All you need are a few contract contingencies placed in your offer.  These contract contingencies will protect you and your hard earned money if the property turns out to be a dud.  What are these contract contingencies?  Read on to find out.

Buying Sight Unseen?

You might be wondering who would be bold enough to make an offer on a property sight unseen.  Well, a lot of people are and would do so. In today’s hot real estate market, many properties will have multiple offers just hours after they hit the realtor’s listing system if the are priced right.  With competition like that, there is just no way you can see and inspect these properties before they are snapped up by another buyer.

The key these days to acquiring properties is making offers, often sight unseen.  But, that does not mean you should leave your or your money hanging out there unprotected.  There are ways to protect yourself with contingency clauses in your offer to purchase contract.

Inspection

The first of these clauses is what is known as an inspection clause.  Such a clause allows you, or someone you designate, to inspect the property before you close.  There are many ways to word this clause.  The most common is simply “This offer is subject to and approval of an inspection of the property.”  With such a contingency clause in place, if upon inspection, the property is not quite what you thought, or needs significantly more repairs than you anticipated, you can get out of or renegotiate the contract.

Financing

The second contingency clause to protect yourself refers to financing.  Again, something simple such as “This offer is subject to adequate financing” will often suffice.  What is adequate?  That is up to you to decide.  Such a clause is key because you can never be 100% sure of financing, even if it is your own money.  What if you or your private lender get in an auto accident?  Funds may be needed elsewhere if such an event occurs.  You just never know so protect yourself with such a clause.

The Weasel

Finally, you should include what is often referred to as a “weasel clause.”  A clause such as this gives you the ultimate out if you need it.  What is it?  Something along the lines of “This contract is subject to review and approval of my business partner.”  Who is your business partner? Whomever you want.  All you have to do is tell the seller your business partner did not approve and you are out.

These clauses are to be used to protect you.  You should never make an offer on a property that you do not intend to close on.  Doing so is bad business, underhanded and it wastes everyone’s time.  Today’s hot real estate market however demands that we investors take some risk and perhaps make offers before we even see the property.  But, this exuberance does not mean that you have to make offers where you are not protected and have no way to get out of if something major pops up later on

Now go and make offers with confidence.  These contract clauses will allow you to know what you are getting into.  They will also allow you a way out if you need it.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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Being The Bank

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Have you ever used or considered using private lenders for your real estate business?  That is, borrowing funds from private individuals to purchase your real estate investments.  If not, why not?  You should.  Such a strategy can be very powerful for the real estate investor.

Now take those thoughts one step further.  Have you ever considered being the bank?  Have you ever thought about being the person that lends the funds for others to invest in real estate?  If not, why not?  It too can be a very powerful investing strategy and it is something that you, as an investor should learn about.

I recently read Be The Bank by Ben Lyons and I found this book to be a great introduction to the world of private lending.  Mr. Lyons has over 30 years of private lending experience and his book takes you through all the basics and more.

He begins his book with a very good question.

Almost every bank in the United States makes a large portion of their money from lending money secured by real estate. So why doesn’t the individual invest in mortgages as part of his or her investment strategy?

He answers that it is because most simply do not understand how private lending works.  This is why he wrote the book.

Beginning with the history of the mortgage, Mr. Lyons, using his own real world experience, explains:

  • The various types of mortgages available today.
  • Which types of mortgages private investors like you and I should consider investing in.
  • Who would be interested in borrowing private money and why.
  • How a private lender should qualify or underwrite potential borrowers.
  • The returns a private lender can expect.
  • Loan structures, property types and risk.

All in all, I consider Mr. Lyons book to be a very good read for the real estate investor.  Not only will it perhaps get you thinking about different ways of investing, but it will also teach you how private lender view risk and what they are looking for in a borrower.  Either way, this book is a win for the smarter landlord.  Order your copy here.

By ordering this book through Smarterlandlording.com, I will receive a small commission to help with the upkeep of this site.  This commission in no way changes the price of the book for you.  I have no relationship with Mr. Lyons, I simply find his advice and knowledge to be potentially valuable to my readers. Please help support Smarterlandlording.com by ordering a copy of Mr. Lyons book through this link.  Thank you!

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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