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The Inside Guide to Funding Real Estate Investments

Book Description

Because financing can make or break the deal.

Finding great financing is the Holy Grail of real estate. Whether it’s your first deal or 50th, it can be the most daunting — but most important — challenge you face.

The good news is that today there are more ways to finance a property than ever before. If you know where to look, you can find nearly unlimited supplies of funding for your real estate deals.

The Inside Guide to Funding Real Estate Investments introduces you to the range of options available — from traditional mortgages and asset-based loans to crowdfunding and private money. Plus you’ll gain an insider’s perspective into the funding process and the way lenders think. Whether you’re planning to fix and flip…or buy and hold, you’ll learn:

  • Which funding sources and strategies are best for which types of investments
  • What lenders are looking for
  • How to close with confidence
  • How to maintain sufficient liquidity and protect your credit position for future deals
  • How to avoid costly borrowing mistakes
  • What to do when deals go south
  • And more

With its laser focus on the single most important aspect of your deal, this book sets you up for real estate success like no other. Find the right financing and the riches will follow.

Table of Contents

  1. Cover
  2. Half title
  3. Title
  4. Contents
  5. Foreword
  6. Introduction
  7. 1. The Big Picture of Real Estate Investing
    1. The Vehicle and Strategy
    2. Three Common Real Estate Investment Exit Strategies
    3. More About Exit Strategies
    4. A Path to Success
  8. 2. An Overview of Funding Options
    1. Traditional Mortgage Lending
    2. Asset-Based Loans
    3. Private Money Loans
    4. Crowdfunding
  9. 3. An Introduction to Asset-Based Loans
    1. Is Asset-Based Lending What You Need?
    2. The Good, the Bad, the Ugly, and the Facts of Working with Asset-Based Lenders
  10. 4. An Introduction to Hard Money Lenders
    1. Can Hard Money Lenders Be a Good Source of Funding for You?
    2. Who Uses Hard Money Loans?
  11. 5. What You Need to Know About Private Money Lenders
    1. Can Private Money Lenders Be the Answer for You?
    2. Who They Are
    3. Two Types of Private Money Lenders
    4. How to Find Private Money Lenders
    5. What Lenders Want
    6. The Importance of Relationships
    7. The Benefits of Private Money
  12. 6. How to Take the Mystery Out of Private Money
    1. Is It Really Possible to Borrow from Private Individuals?
    2. The Components of a Private Money Loan
    3. A Sample Deal
    4. Putting It on Paper
  13. 7. Thinking of Crowdfunding Your Deal?
    1. The Basics You Need to Know
    2. The Basic Model
    3. When Does It Make Sense to Crowdfund a Deal?
    4. What About Debt vs. Equity?
    5. The Cost to Raise Capital Through a Crowdfunding Platform
  14. 8. The New Kid on the Block: Crowdfunding
    1. Is Crowdfunding a Good Option for You?
    2. Why Do It?
    3. How to Participate in a Crowdfunded Property
    4. When Are Returns Received?
    5. How Do Investors Earn Returns?
    6. Due Diligence
  15. 9. Partnering to Get the Funds You Need
    1. When Should Property Investors Consider a Partner to Obtain More Funding?
    2. Real Estate Partnerships 101
    3. Advantages of Partnering Up
    4. Potential Cons of Partnering Up
    5. Smart Times to Partner Up
    6. Who Can Investors Partner With?
    7. What and Who to Avoid When Pitching Potential Partners for Money
    8. How to Make It Work
  16. 10. Using Banks to Fund Real Estate Investments
    1. Are Banks and Traditional Lenders a Viable Option?
    2. What It Takes to Fund Investment Property
    3. Why Traditional Lenders Have Turned Away from Funding Investors
    4. Pros and Cons
    5. Alternative Strategy
  17. 11. How to Find Asset-Based Lenders
    1. Who Makes Asset-Based Loans?
    2. The Traditional Method of Finding Asset-Based Lenders
    3. The New Way to Find Asset-Based Loans
  18. 12. Inside the Mind of Asset-Based Lenders
    1. What Do You Need to Know to Get Your Deal Funded?
    2. The Six C’s
    3. What Scares Lenders Away?
    4. What If You Can’t Repay?
    5. What’s Your Next Step?
  19. 13. Asset-Based Lenders: A Peek at Their Cards
    1. What More Do You Need to Know About How They Operate?
    2. How Asset-Based Lenders Make Money and How It Works to Fund Your Deal
    3. Key Areas Where Asset-Based Lenders and Their Capital Partners Make Money
  20. 14. Dealing with Down Payments
    1. Five Ways to Secure a Down Payment for Real Estate Investment
  21. 15. The Dirty Truth About Some Real Estate Lenders
    1. Are You Ready for the Truth?
    2. The Unstoppable Money Machine
    3. Eight Common Lender Scams
    4. Overpromise and Underdeliver
    5. Tips for Finding Lenders You Can Trust
  22. 16. Hard Money Lender Scams and How to Avoid Them
    1. Fees
    2. Johnny Come Lately
  23. 17. How to Successfully Get Funded as a New Investor
    1. Specific Challenges Facing Newer Real Estate Investors
    2. What to Look for in a Real Estate Lender
    3. How to Improve Your Funding Success as a New Investor
  24. 18. How to Land the Best Loans for Your Deals
    1. Finding the Best Financing for Investment Property
    2. What’s So Important About Finding the Right Loan?
    3. How to Match Loans and Lenders to Your Needs
    4. Financing a Real Estate Investment Using Different Real Estate Strategies
    5. Comparing Loans for Your Real Estate Deals
    6. Quick Tips for Quickly Homing in on the Best Loan Programs
  25. 19. Is Your Baby Ugly?
    1. The Due Diligence Steps Every Real Estate Investor Should Take
    2. Everyone Thinks Their Baby Is Beautiful
    3. How to Screen for Money Makers
    4. Rules of Thumb
    5. Confirming Property Values
    6. Is There a Lender for This Deal?
  26. 20. Estimating Your Project’s Costs
    1. How Much Is Your Property Renovation Project Going to Cost?
    2. Knowing Your Customer and Your Exit Strategy
    3. Inspecting and Evaluating the Property
    4. General Rules of Thumb
    5. Avoiding the Traps
    6. Funding and the Numbers Game
    7. The Scope of Work
    8. Tales from the Trenches
    9. Collaborating with Partners
    10. Coordinating Contractors
    11. Running Out of Money
    12. Seven Steps to Your Scope of Work
  27. 21. The Time Value of Money
    1. Don’t Underestimate the Value of Your Time
    2. The Time Value of Money
  28. 22. What Every Investor Needs to Know About Terms, Cash Flow, and Formulas
    1. Do You Know What You Don’t Know?
    2. MAO or the 70 Percent Rule
    3. The Wholesaler’s Formulas
    4. An Alternative to the 70 Percent Rule for Flippers
    5. Net Operating Income
  29. 23. The Hole Poker: The Devil’s Advocate
    1. An Important Part of Your Real Estate Investment Team
    2. Emotional vs. Fact-Based Real Estate Investment
    3. The Value of Second Opinions for Funding
    4. The Hole Poker
    5. Where to Find a Good Hole Poker
    6. How to Get a Great Hole Poker to Help You
    7. Knowing When to Go Your Own Way
  30. 24. Next! Know When to Walk Away from a Real Estate Deal
    1. The Bite Test
    2. Taking a Hit
    3. Living to Fight Another Day
    4. Plenty of Fish in the Sea
  31. 25. Dealing with Detours
    1. The Power of Plan B
    2. Ten Detours to Take When Things Don’t Go as Planned
    3. Important Considerations for a Successful Venture
  32. 26. What Comes First? The Deal or the Dollars?
    1. Getting Ready to Be Ready
    2. Putting the Horse Before the Cart
    3. Finding the Right Funding Sources for Your Deals
    4. What You Need to Get Going
  33. 27. Preparing to Get Your Loan Funded
    1. Failing to Plan Is Planning to Fail
    2. Planning for Success
    3. What You Need to Fund Your Deal
    4. Mortgage Forms and Documents
    5. Scope of Work
    6. Closing Documents
    7. Quick Tips for Setting Up a Smooth Funding Process
  34. 28. Who to Take with You
    1. The Real Estate Professionals You Need to Close the Deal
    2. Seven Real Estate Pros to Have on Your Side
  35. 29. Estimating Your Time of Arrival : How Long Does It Take to Fund and Close a Real Estate Deal? And What Can Real Estate Investors Do to Streamline the Process?
    1. How Long Will It Take to Close?
    2. Steps Involved in Closing a Real Estate Deal
    3. Things That Will Slow You Down
    4. When You Close—Watch the Calendar
    5. Three Roadblocks to Watch For
    6. Preparing for Closing Day
  36. 30. Avoiding Costly Borrowing Mistakes
    1. Understanding the Underlying Costs of Funding
    2. Earnest Money Deposits
    3. Real Estate Contract Contingencies
    4. Due Diligence Costs
    5. Buying Property Sight Unseen
    6. Sabotaging Your Loan Application
    7. Title and Lien Searches
    8. Accurately Forecasting Closing Time Frames
    9. Failure to Hit the Ground Running
  37. 31. Investment Property Loans: Everything Is Negotiable, Right?
    1. The Toll Booth—How Much Will It Cost to Get Your Deal Funded?
    2. The Power of Leverage
    3. Borrowing Costs + Investment Strategy
    4. Common Borrowing Costs and Fees
    5. Everything Is Negotiable, Right?
    6. Negotiating Smarts
    7. Quick Tips for Negotiating Better Loan Deals
  38. 32. How to Choose the Best Funding and Investment Property Lender to Meet Your Needs
    1. Taking Different Paths to Reach the Same Destination
    2. Picking the Right Lender for Your Project
    3. The Importance of Investor-Lender Relationships
    4. The Reality of the Lender Relationship
    5. Investment Property Lenders Need You Too
  39. 33. High-Performance Property Financing: Understanding the Mechanics of Your Loan
    1. How to Keep Your Loans Rolling Through till Closing
    2. Just How Much Does It Matter?
    3. How the Loan Process Works
    4. Managing Your Loan
    5. What to Expect at the Closing Table
    6. Being Prepared to Close: A Checklist
    7. Post-Closing Considerations
  40. 34. Fix and Flip Strategies to Get Your Investment Property Sold
    1. What Smart Tactics Can Help Real Estate Investors Go from Flip to Flip with Ease?
    2. Tips for Fixing and Flipping Fast
    3. Renovate to Your Target Market to Sell Fast
    4. When to Start Marketing for Resale
    5. Choosing the Right Real Estate Marketing Formula for Your Deals
    6. Reselling the Property
    7. The Buyers List
  41. 35. Buy and Hold Real Estate Investment
    1. Maximizing Income Property Opportunities
    2. Refinancing and Optimizing Financial Leverage
    3. What’s the Best Leasing Strategy?
    4. Intelligent Tenant Screening
    5. Property Maintenance and Management
  42. 36. Keep Fueling the Journey
    1. Lap After Lap
    2. Performance-Boosting Analysis
    3. Quick Tips for Tuning Your Engine
    4. The Reality of Deal Flow
    5. Tips for Improving Deal Flow
    6. Relationships
    7. Curated Real Estate Deals
    8. Get Help
  43. 37. When Your Lender Takes the Exit
    1. When Lenders Bail
    2. Why Lenders Bail
    3. How to Recognize the Signs
    4. What to Do
    5. Preventive Maintenance
  44. 38. When Your Rehab Goes South: What You Can Do When Your Rehab Takes a Wrong Turn
    1. Why Rehabs Go Wrong
    2. Coping with Over Budget Issues
    3. Where to Save
    4. Where Not to Skimp
    5. When Investors Need More Money
    6. Working with Your Lender When You Need More Money
    7. Other Capital Sources
    8. Four Strategies for Turning Your Rehab Nightmare into Cash
  45. 39. What If You Can’t Make Good on Your Investment Property Loan?
    1. Why Investors Can’t Pay Their Loans
    2. Knowing Your Options
    3. What Happens When Investors Don’t Pay Their Loans?
    4. Alternatives to Foreclosure
    5. Effects of Foreclosure on Real Estate Investors
  46. 40. When the Wheels Come Off Your Real Estate Investment Venture
    1. It Happens to the Best of Us
    2. Why Do Real Estate Investors Fail?
    3. Tips for Preventing Failure in Real Estate Investment
    4. Tips for Getting Back on the Road to Real Estate Riches
    5. Opportunity Is Knocking
  47. Index
  48. About the Author
  49. Sample Chapter from The Real Estate Investor’s Pocket Calculator, 2nd Edition by Michael C. Thomsett
  50. About AMACOM
  51. Copyright