The importance of financing is so great it pays to leave nothing to chance and assumption. Knowing the local lenders and what they like to invest in is critical to finding the right lender for your investment project. Also, presenting a compelling case to the lender is important. These two aspects lay the foundation for creating a successful project.

This goes back to preparation and research. You might also want to research private financing, which entails knowing wealthy people, or knowing someone who knows wealthy people.

Having a good idea of what’s the favored investment in a local area will no doubt play a part in the choice of the investment project. But if you have followed advice and have become knowledgeable of your area, you should have a good idea about trends and the financing possibilities.

You have also, no doubt, become knowledgeable enough to exude confidence when you present a project to be financed. It also pays to have gathered support from influential people you know in the area who can vouch for you. Having references will allay doubt, unless you know the lender personally. It may be a process getting to the right decision maker, so you should be persistent and not give up at a first brush-off. Getting to know the assistant might be the first step, and it might take more than a few visits to get in the right door. Everything you learn from the first few failures will be important in devising a better plan.

Establishing rapport with those along the way will help clear the path — if what you present is compelling, you can advance, but the lower players will not likely stick their heads out if you seem unsure are don’t have a good presentation.

This is where having a good team already assembled helps . If you have chosen a well-known attorney and accountant, and have chosen property management (if it will be needed) and solid, quality contractors, then this shows that work has been done and others have looked at the project — it shows you are prepared and that you are a serious investor.

Having a good resume will be impressive, one that shows your skills and experience and why you would be good at this type of investment. Most lenders want to say Yes, but they want everything in place to be able to say Yes.

Make it as easy as possible for the lender by being co-operative and having others vouch for you — you might be good at selling yourself, but to a lender it will only be self-serving — a lender will be impressed if others who are influential and respected are selling you.

The bottom line is that the more you know about the right decision-making lender, the better you can plan a presentation that will be accepted favorably. Having all the numbers clearly crunched by an accountant, having all the legal ramifications covered by an attorney, all the construction aspects assessed bya contractor, all the management lined up and factored in, will present a strong case for acceptance — much stronger than if you go in alone and brag on yourself and idea and basically ask a lender to go on faith .

When an idea is reasonable, researched and the numbers make financial sense, AND you have a team behind you, the chances of getting financing are greatly enhanced — who knows, you may have lenders competing for the project, which would be even better.

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This Post is from the BiggerPockets Real Estate Blog. Copyright © 2008 BiggerPockets, Inc. All Rights Reserved.

Financing the Investment Project: Leaving Nothing To Chance

Just as a review, buying property “subject to” means buying a property subject to the existing financing.
The seller’s original financing stays in place until either refinanced or sold to a third party. The investor/buyer takes title to the property while leaving the loan in the seller’s name. If we were to take over payments on a property worth $100K and the mortgage payoff is roughly $50K; our offer should be in the $80K range. That leaves a $30K equity payout to the seller. In the perfect world we would love for the seller to agree to accept that $30K when the property is refinanced or sold to a third party.

Assuming that the seller accepted these terms, the seller always is concerned about how they are protected. In these types of transactions we immediately notice that there really isn’t any way to force the investor to make on time payments on a seller’s loan. The seller generally has to trust that the investor/buyer is not going to let the payments go after a few months and leave their credit jacked. The seller realizes that if that happens then their equity payout due is in jeopardy.

So the question is: “How can the seller protect themselves from these types of situations?” The answer on the investor is “we don’t have to take title immediately.”

You may have heard of a Land Installment Contract. There is a pro-seller contract and a pro-buyer contract. In this case you would use a hybrid of the two to give the seller the most amount of comfort possible. In a gist, this agreement transfers the title of the property from the seller into escrow instead of it being transferred to the investor/buyer. Without title to the property the investor/buyer lacks the power of an actual owner and the only way to reap the full benefits of property ownership is to give the seller the equity payout in full via refinance or sale. Sellers love this. And the Land Installment Contract can totally be tailored to the situation. This will definitely help you close some of those home runs that turned sour.

Blessings to Your Real Estate Investing Successes,
Milton B. Yates

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This Post is from the BiggerPockets Real Estate Blog. Copyright © 2008 BiggerPockets, Inc. All Rights Reserved.

Overcoming the Objections from "Subject to" Sellers

A lot of the investors that I work with have some experience investing in single family homes but they want to know more about some of the advantages and disadvantages of investing in apartment buildings. The following lists are not meant to be exhaustive lists detailing every single advantage and disadvantage of investing apartment building and single fa