Month: April 2009

Another way Kathy Kennebrook uses to fund her deals is to use private lenders. Hard money lenders and private lenders are distinctly different in their approach to lending you money.

A private lender is a person who will fund your deals usually with no points and a much lower interest rate. There are usually no pre-payment penalties and they are usually more flexible with regard to the terms of the loan. For example, they may allow you to pay part or all of the interest payments at the end of the loan. So the cost of the money is a lot less in the long run. Kathy Kennebrook knows that working with private lenders offers a lot more flexibility, so if a private lender will allow her to pay all of the interest at the end of the loan for example, she will offer them a higher interest rate to do this. Kathy Kennebrook understands that if she can pay all of the interest at the end of the loan, then the property cash flows at one hundred percent each month.

Kathy Kennebrook suggests several ways for you to find private lenders for your business. One way is to simply check with people around you (relatives or friends) who may have funds available that are not drawing a very high interest rate in a CD, IRA or money market account. In today’s market that shouldn’t be too difficult. Another way to find private lenders is to check with doctors, dentists, or attorneys you may know, or other professionals who may have money available to lend or who know someone with money to lend. You can also check with your local real estate club, mortgage brokers or with people you meet at real estate seminars you attend. You can also work with your Realtor to locate private lenders. Often they have clients who are both investors and private lenders. Kathy Kennebrook has successfully implemented several of these strategies to locate private lenders in her own business. One of the best ways Kathy has found to find private lenders is with her Attorney letter which is one the direct mail campaigns she also advocates to find incredible deals none of your competitors know anything about.

    Another way still that Kathy Kennebrook suggests to fund deals is to simply ask your sellers if they are willing to owner finance part or all of the sale amount of their property. Many of them may be looking for a monthly income and may be willing to hold a mortgage for you. Many times they will only require a small down payment or no down payment at all. If you are working with motivated sellers, very often it is easy to find sellers who will be willing to owner finance the sale of their property.

Kathy Kennebrook also knows that sometimes sellers will simply deed you their property for what they owe on it. This way, you take over their mortgage payments and continue making the payments each month. Taking a property this way means you didn’t have to go to the bank for a new loan. And, the original loan you are making payments on stays in the name of the seller until it is paid off so it doesn’t affect your credit score.

If the seller has equity in a property and they want some cash out of the deal, very often they will hold a small second mortgage for you. Usually when they are motivated sellers, they are flexible on the terms of this loan as well. Kathy Kennebrook has had sellers hold small second mortgages for her with no payments and all of the principle and interest to be paid at the time the loan balloons, which is usually five years or at the time she sells the property. This gives her time to gain cash flow and sell the property before the balloon comes due. By structuring a deal this way, Kathy Kennebrook ended up having no cash out of her pocket involved in the deal.

For even more information on finding ways to fund your real estate deals, join Kathy Kennebrook on this website for part 3 of this article. In the meantime, check out Kathy Kennebrook’s website at www.marketingmagiclady.com for your real estate investing tools for buying and selling your properties quickly. While you are visiting the site, be sure and sign up for Kathy’s free monthly newsletter. When you do you will receive an additional 149.00 in real estate investing information absolutely FREE.

Kathy Kennebrook believes that one of the greatest challenges to any real estate investor is raising the money or finding creative ways to fund deals. Going to the bank for money can be a long and arduous task, and while you are waiting weeks for approval, another investor with ready funds just bought your deal. Plus, the bank is going to insist that you fund the deal in your own name which can be damaging to your credit. In fact, taking properties in your own name can be outright dangerous. In addition in our current market, it’s nearly impossible to get funding from banks to purchase great deals. And if you already have more than three loans in your name, you won’t get the money at all. So, where do you get the money or what creative ways can you use to fund your deals?

Kathy Kennebrook has several good ways for you to find money to fund deals and end up with all the money you will ever need. The fastest and easiest way to locate funds is to find hard money lenders. So what is a hard money lender and where do we find them?

A hard money lender is a person who will not require a credit check or long drawn out approvals like a bank would. What they will require is that you pay them an interest rate of usually 12-15%. They may also charge points on the front of the deal, usually between 3 and 8 points. These fees are sometimes negotiable and will vary depending on what part of the country you live in. They will also probably charge a pre-payment penalty if you pay the loan off early.

A hard money lender will require that the loan be no more than 65-70% of the after repair value of the property. If there is enough room in the deal, they will also let you fund the repairs from the amount you are borrowing. Their interest is guaranteed by a first mortgage against the property and the insurance you carry on the property.

Kathy Kennebrook believes that using hard money lenders in your business is an easy way to get the money you need quickly. Using a hard money lender comes in handy when you are going to buy, rehab, and retail a property. Even though using a hard money lender is expensive, if there is enough profit in the deal for you, it is well worth the investment. Remember, it’s the availability of money that is important, not the cost of money, especially when there is a big profit check in it for you.

    One of the questions that Kathy Kennebrook most often hears is “So how do you find these hard money lenders?” There are several ways to accomplish this. One way to find them is to simply check with your local real estate club. There are usually hard money lenders there waiting to loan you money for your deals. Another way is to check with mortgage brokers where you live. They will generally know of people who are looking to lend hard money. You can also run an ad in the real estate section of your local newspaper. You can talk to people you meet at real estate events or seminars you are attending. These are all good ways to find hard money lenders to fund your deals. Your Realtor may also be able to help you find sources for hard money. In addition many times you can find hard money lenders through local mortgage brokers. Mortgage brokers usually have some hard money lenders available when they can’t get deals funded any other way so they are a good resource for you to use to locate funds you need for your deals.

    For more information on finding all the funding you need for your deals read part two next week. In the meantime feel free to check out Kathy Kennebrook’s website at www.marketingmagiclady.com for all the real estate investing tools for your business. While you are there be sure and sign up for Kathy Kennebrook’s free monthly newsletter and receive an additional 149.00 in real estate investing tools absolutely FREE!!

1. If your buyers are using city or county funds to supplement their loan, there will need to be another inspection done by the city or county. This is a stipulation of their program. Make sure this gets done quickly in order to address any issues that could come up with the inspection. If your buyers are having a home inspection done, make sure it is done right away. Not getting it done in a timely manner can hold up your closing.
2. Does the lender have your information in order to be able to order a payoff on any underlying loans on the property? Have they received the payoff yet and have you reviewed it to make sure it is correct? Don’t just assume that just because they have been given figures that those figures are correct. Make sure they fax you a copy of the payoff for you to review. Double check the per diem amounts and make sure you aren’t being charged a prepayment penalty if there isn’t one due. Make sure the most recent payment has been credited against the amount due. These are problems I have had to deal with. If the loan is with a private lender, sometimes it takes even longer to get a payoff from them. Some of them don’t know how to prepare one, so they need the help of the title company or their real estate attorney for this. This is also the time you might be able to negotiate a discount with them. This works especially well if it was a seller held mortgage. We have gotten private lenders and sellers to negotiate discounts on loans on several occasions which just made our paycheck bigger.
3. Has the buyer’s loan been approved? If not find out what the problem is and how to fix it if it can be fixed. If the loan has been approved find out what the proposed closing date is going to be. Has your buyer ordered insurance yet? You need to check this out and it needs to be done as soon as possible. This is another area where you could have a glitch. Sometimes the age of the property or the location of the property becomes an issue. For example, here in Florida where I live, if there is a hurricane brewing, we end up in a “box” which is a period of time where you can’t buy insurance until a hurricane passes. This can hold up a closing for several days unless the insurance is already in place. A buyer must purchase a homeowners policy for one year and it must pre-paid at closing.
4. If you are selling a condo or a home with a home owners association, make sure the lender and the buyers have a copy of the home owner association rules and documents and that the buyers have set up their appointment for their meeting with the condo association or home owners association. If they are not approved by the condo association or homeowners association, the rest of the closing is a mute point. You need to make sure your buyer’s get through this process successfully.
5. So now we have a set closing date. Make sure you contact the closing agent to make sure you get a copy of the HUD or closing statement before the closing takes place and before you arrive at a closing. Very recently we had a closing that didn’t take place because once we got the HUD all the figures including the asking price and seller assisted closing costs had all been changed. The closing price listed on the HUD was several thousand lower than the contract had called for. I have never seen anything like it and the deal never closed. Check the numbers! If there is a Realtor fee involved make sure the percentages are correct. Check the pro rated amounts you are being charged for property taxes or association fees. When you close on a property during the year, say in June and property taxes are due in October; you have to reimburse the buyer for the property taxes from January until the closing date in June since they didn’t own the property during that time period. The same would go for any association fees there might be. You will have to reimburse the buyer for the period during the month that they did not own the property. Double check to make sure these figure are correct. In my contract, if we are assisting the buyer in any way with closing costs, the buyer can’t walk away from closing with more than five hundred dollars. So this is another figure we check. Any amount over the five hundred dollars is credited back to our side on the closing statement.
6. Call your buyer and make sure they have gotten a cashiers check for any monies they have to bring to closing and make sure they know where it is and what time the closing takes place. Make sure they bring a photo ID with them. The lender will require this. Believe me when I tell you that these are all lessons learned from experience.
7. Now, Show up at the closing and don’t forget to bring the keys or garage door openers. Take several deep breaths and try to relax. Once you get through the closing take another deep breath, call your spouse and go out to dinner to celebrate.

Here is another point for you to consider. In my business, it is rare that I go to closings anymore since all this is handled for me. If I do go to a closing, I usually don’t go at the same time as the buyers. I usually go right after they are done with all their paperwork. The paperwork on a closing for a buyer is fairly time consuming and needs to be explained to the buyer by the title agent. I don’t like sitting at closings for an hour or more until I need to sign my documents. If you have done your due diligence and followed all the steps in the closing process, there isn’t really anything that can go wrong at the last minute, so breath easy but expect the worst.

Then when you get through the closing, cash your check and go to dinner to celebrate!! For more information on automating your real estate business go to www.marketingmagiclady.com. While you are there be sure and sign up for Kathy’s free newsletter, when you do you will receive an additional 149.00 in Real Estate Investing information absolutely FREE!!

[audio:Kathy_Kennebrook_Interview_with_Ted_3-15-09.mp3]
Kathy Kennebrook Interview with Ted Thomas

Okay, so your property is under contract, you’ve pre-qualified your prospect; they are working with the lender and everything is moving right along, right? Not necessarily. There are several steps to a successful closing and we are going to cover those one by one. Now remember, once you have your dream team in place, you will have the people available who will handle all of the details for you. In the meantime, you still need to know what all the steps are so you know everything gets handled properly.

1. Make sure you get a big enough deposit from your buyer so they have some real dollars invested in the deal. Even if they are going for one hundred percent financing I still get as much as I can in order to secure the deal better. If your buyer puts down a larger deposit they are usually more committed to going through with the closing, so this is a requirement for me. I won’t even consider a deposit less than $1,000.00, but I always try for as much as I can get. The higher dollar the property is, the more deposit I require.
2. Make sure that the lender or the mortgage broker orders credit and an appraisal on the property immediately. Usually, I will not consider a buyer who has not already been pre-qualified, so usually the credit check has already been done. Many lenders will try to wait until they get the contracts and other paperwork in before ordering the appraisal. This is a no-no. If you wait on the appraisal, it can hold up your closing by two to three weeks. Plus, if this buyer doesn’t end up buying the property, the appraisal can be used for the next buyer. Most appraisals are good for six months and now you have an appraisal that has already been paid for.
3. Follow up with the loan processor to make sure the appraisal has been ordered and that the other parts of the closing are moving along. Many times your title agent or your Realtor or your sales person will do this for you, after all they want to get paid too. Make sure they have everything they need from the buyer regarding loan documentation.
4. Follow up and make sure that title work has also been started. You want to make sure that everything is done in a timely matter so that there are no holdups when you go to close. Every once in awhile you may discover some small glitch in the title work that needs to be addressed, such as a deed that wasn’t done correctly. There would need to be an additional quit claim deed done to correct the mistake. Make sure the title agent understands the contract paperwork and what entity the funds are to be paid to. You also want to make sure they do the 1099 correctly so the right entity gets taxed. You will also want to provide the title company with a copy of the existing title policy. This means that they will be able to come forward from the date of your policy which takes less time and this may make the title search cheaper. Make sure the title agent understands who is going to pay for what regarding closing costs.
5. Call the loan processor to make sure the property appraised for at least the amount of the contract. Make sure your buyer has ordered a termite inspection, a survey, a radon inspection or whatever else is required by the lender in order to close. Is there anything you can do to move things along? If you have a copy of a fairly recent survey, you can provide a copy. This will also save time and move you closer to the closing. Has your buyer’s deposit been credited? Have they gotten the paperwork they need to the lender including employment verification and rental history? These are all things you need to stay on top of.

To Read Steps 6 through 12 be sure and catch the balance of this article next week. In the meantime for more information on automating your Real Estate Investing business and your closings, visit Kathy Kennebrook’s website at www.marketingmagiclady.com. While you are there be sure and sign up for Kathy’s free newsletter and receive an additional 149.00 in Real Estate Investing information absolutely FREE!!