Real Estate Business - Real Estate With Gary Wilson

Screen Your Tenants to Make More Rental Profits

Screen Your Tenants to Make More Rental Profits

MyInvestmentServices.com

Screen Tenants And Make More Rental Profits

Screening is perhaps the most important activity relative to your ability to profit in the rental business, once you have acquired a rental property.

I know. It sounds too obvious. BUT. It has been my experience that is exactly where most rental problems originate. Once you have a decent property in a decent area – a moderate income area, you should be able to turn a profit. This shows up in the form of Net Operating Income (NOI). You would have to really screw up to not make money. The easiest and most common way that people screw up is to lease to the wrong people.

An effective screening process is what is required in order to minimize risks and mistakes and maximize successes and profit. It is better to have a vacant unit than to have a bad tenant. Not only is a bad tenant more likely to not pay rent, on time or at all, a bad tenant is also more likely to be a filthy person and even damage your rental unit. So not only will you likely not collect your rent you will likely lose money due to filth and damage. All the while you will have to pay taxes and insurance, principle and interest if you have a loan, and likely utilities like gas and electric or at least water and sewage.

The negative effects of having a bad tenant can be quite devastating. This needs to be taken very seriously. One of the easiest ways to screen tenants is to use NTN – national tenant network. The bottom line is that if a prospective tenant is not paying other people they will likely not pay you either. Furthermore, if they are getting or have been evicted, it is likely for a very good reason. Believe the current landlord not the tenant when it comes to why they are being evicted. In fact, you not only want to check current landlord references, you also want to find and check prior landlords for the history of the prospective tenants paying on time, being clean and respectful of your property. Sometimes current landlords will give a good reference to get rid of a bad tenant. Beware of this trick from unscrupulous landlords.

I have had prospective tenants give me all kinds of reasons why they are getting evicted. All of them were due to someone else’s fault. And almost every time it was the landlord who was the jerk. They didn’t take care of the place so the tenant didn’t think they should have to pay rent. The tenant started filing all kinds of complaints with every agency under the sun to make the landlord out to be the bad guy. Imagine that – the tenant is behind on the rent and it’s the landlord who is the bad guy!

I have had prospective tenants give me fictitious references. One easy way to divulge this deceit is to ask questions. Remember, before you even entertain the thought of turning possession of your property over to someone, you must get an application and proof of income and residency. This is in the form of paystubs and a current lease. You always want current and previous landlord contact info. This is because you may not want to believe what the current landlord is telling you. Whether you are speaking to the current or previous landlord, use their lease and the application as a guide. If the tenant states they were paying $750 in rent per month, ask the landlord on the phone to verify that the applicant was paying $700 per month and see what they say. By asking questions in this way you can ferret out the phony landlord.

Essentially, what you are looking for is people with jobs and income and a rental history you can verify.

Before any of this begins though you need to do a little marketing and advertising to get the ball rolling. More on this subject in the next blog.

For more information on this subject and others please visit MyInvestmentServices.com, call 1-800-931-2605 or email Gary@WinRealtyAdvisors.com

Written by Gary Wilson, May 21, 2014

How I Did 110 Transactions A Year With NO Assistants…And You Can Too… Get My Case Study Now>> https://www.myinvestmentservices.com/gift

“Guiding You to Massive New Wealth in Real Estate in 1 Year or Less Guaranteed!”

Investor-Realtor, Make More Money, Not More Work

I believe investing in Real Estate is the best path to realizing the American Dream and I was fortunate enough to have a great teacher when I first got started at the ripe old age of 23. I eventually went on to get my real estate license but I only used it for myself. In fact I didn’t want other people knowing I had it! When people would ask if could help them buy or sell a home I said “No”! Ha. I can laugh now.

As I progressed in my investing I was often invited to be a guest speaker at various Real Estate Education seminars. I was even on the radio a few times. That led me to help teach others how to invest. The students I taught always asked if I could be their real estate agent. Once again, I would politely say “No”. I am notoriously stubborn.

After about the third class I decided I would be a nice guy and help two students from each class by representing them in the field. I wasn’t too excited about the money – yet! When I told twenty-five students I could only help two I learned one of the fundamental laws of marketing – the law of scarcity. After I realized how much demand I created by making myself scarce, I decided to command a minimum commission from the investors I taught.

Something very important happened while all of this was going on. I was creating a system for using my license as an income producing asset. My Bachelors Degree in Computer Science and eighteen years in Banking Systems and Operations was paying off big time. This system enabled me to keep on investing and at the same time break all kinds of records in Real Estate sales. One year, 2008, at the height of the great recession when ½ of all Real Estate agents got out of the business, I single handedly serviced 110 clients with no team or any assistant of any kind. In the middle of the worst economy in eighty years my Real Estate Agency business was growing while most others were dying. I promise that if you follow the suggestions in this book that you too could be an “Investor/Agent – Making More Money, Not More Work!”.

A little history about the author Gary Wilson:

Gary has been a Scout Master in troop 194 of the Greater Pittsburgh Region and involved in scouting for more than a dozen years as an adult and was a scout as a boy. He started investing in Real Estate at the age of 23, less than one year after graduating from Old Dominion University, accumulating a 250-unit portfolio while teaching others to do the same.

He ranked in the top 5% of all Realtors in the Western Pennsylvania Market, according to annual Five-Star surveys. He is a licensed broker in Pennsylvania and Virginia. He achieved the Platinum level of service while launching and growing Win Realty Advisors, LLC which he merged with Keller Williams to create the KW Win Realty Team.

Gary merged specifically with Keller Williams because of its Core Values and priorities- God, Family then Business. In fact, no other Real Estate Company has as much in common with the Boy Scouts of America as KW. Gary currently teaches thousands and coaches hundreds of other investors who want to realize the pleasure of Rental Profits Without The Pain, Flip Without The Risk and Wholesale For Profit So Everybody Wins.

For more information on this please call me at 1-800-931-2605 or email Gary@WinReatyAdvisors.com. You can also learn more by visiting MyInvestmentServices.com.

If You’re an Investor who is, or is considering becoming, a Real Estate Agent, or You’re an Agent who is, or is Considering Becoming an Investor, Learn How to Leverage Your Time to Make Much More Money Without More Work.

Written by Gary Wilson 2014

The Goal

Financial Independence

Financial Freedom

Every one of us, including you, wants to be financially independent. You think you know what you want but I can tell you that what you need is to be financially free. This book will give you yet another tool in your arsenal to achieve financial freedom and independence in less time. Let’s get started.

A Tale of Two Roles

Over the years I often thought I was the only investor who went on to get a real estate license. Every now and then I would come across someone who like me was an investor who, usually out of frustration, obtained their real estate license too. And just like me they really didn’t want other people knowing that they had it. In fact, in almost all the investor courses I had taken and investor books I had read, the authors usually created the impression that it really wasn’t necessary for an investor to get a real estate license. Some of these real estate gurus were actually a little anti-real estate agent! In their eyes, real estate agents were very expendable and were simply another tool, and not even really necessary, so real estate agents could be used and not thought of once the investor got out of them what they wanted. No wonder so many investors struggle!

Ironically, I discovered that many of these gurus actually had their real estate license! The bottom line is that investors rarely figure out how to find a great real estate agent who really knows what they’re doing when it comes to investing and investors rarely make an effort to understand real estate agents and the role they can play as a valuable team player on the investor’s team. The primary role of the investor is to invest profitably. In order to do that he needs to run his investing empire as a business. And in order to do that successfully he needs highly valuable players on his investing team.

Real estate agents almost never invest. I have only found a few who started out as real estate agents and then got into real estate investing – I mean in a meaningful way. I have observed in almost every instance that agents who went on to invest invariably applied the rules of the owner occupied world of real estate to the investor world of real estate. It doesn’t work that way. Never has and never will. The two worlds have two completely different sets of rules. I call these the rules of engagement.

I have also observed that most real estate agents really don’t want to work with investors. Real estate agents are taught to work primarily with owner occupants who want to buy or sell their own homes. They are rarely, if ever, taught how to work with investors. In fact, a lot of real estate brokers and experienced agents tell other agents not to work with investors because they waste your time. That’s because they simply don’t understand investors and the world of investing. They are trying to treat investors the same as they would treat an owner occupant. That doesn’t work. Everybody gets frustrated and everybody gives up because they think the other person stinks, or doesn’t listen, or doesn’t know what they’re doing.

I can tell you from first-hand experience that it can and does work. I have been doing it for a long time. I actually prefer working with investors because unlike most owner occupants they usually know what they’re doing. They are efficient and I get tons of repeat business. I don’t have to keep looking for more and more new customers. I have all the customers I can handle. There were times when I was actively practicing with my real estate license that I would have more than twenty contracts going at the same time. And remember, I had no help. And I was still investing myself and even managing several dozen of my own properties! I did it by understanding both roles of investing and real estate agency and I developed a system to make the most money with least amount of work!

What Comes First, The Chicken or the Egg?

I am often asked, “Should I get my real estate license first before I start investing?” or “Should I state investing first before I get my real estate license?” I’m not a lawyer but I have learned to appreciate the stock lawyer answer to almost every question – it depends!

If you are young and just starting out or you are more experienced in life (i.e. – older) and starting over, you may need to generate cash flow like yesterday! If that is the case you likely don’t have cash saved away anywhere either. In this situation I suggest getting your license first. It’s quick and easy. You can then service people you already know (your circle of friends, family, neighbors, etc.) other investors and you can also participate in wholesaling. With wholesaling you control and profit from property without actually owning it. To learn more about wholesaling please read Wholesaling for Profit so Everybody Wins. You can find this on the MyInvestmentServices.com website. You can also call 800-931-2605 or email Beverly@winrealtyadvisors.com. Wholesaling is also a great way to grow your database of investors and future partners in larger real estate investment deals like apartment complexes, shopping centers and office buildings.

So, if you need cash flow and you don’t have cash saved you need to generate commissions asap and save some of those commissions!

If you have some savings and need cash flow then perhaps you should invest in a few rental properties first to generate some passive income. This will give you a more solid base from which to operate. You could also get your license at this time to generate some commission income as well. At the very least you get to earn commissions on your own deals.

If you are already investing I suggest getting your license asap. You are not claiming additional income that you should be claiming. As mentioned above, you can earn commissions on your own deals and if you locate more investment opportunities you can’t take on at the moment you can present them to you clients and at least earn commissions. Of course you could wholesale them too by either doing a net listing (in some states) or a straight wholesale through an LLC where another agent does the work and you can earn a referral fee. These are a few opportunities that we will explore more latey.

If you are already a real estate agent I suggest you get in the investing game asap. I’m not suggesting that every real estate agent should invest but if you are a real estate agent the rest of the world looks at you and asks “If you are an agent then why don’t you own a lot of investment property since you know so much?” How’s that for applying pressure?

A much better reason is that you will be able to leverage your real estate license and use it more as an income producing asset. Moreover, there is no other investment in the history of the human race that has had more impact on more people’s lives. If you are a fully engaged real estate professional then you are by nature an entrepreneur. As an entrepreneur you should naturally gravitate towards real estate investing. If this does not describe you then I assume you view your use of your real estate license as a job instead of using your license fully as an income producing asset that is being run like a business.

The difference is that with the former, if you go away on an extended vacation and don’t work then your production will suffer. I know it will suffer because in addition to not being able to effectively service your clients you will probably not be lead-generating either.

In the latter case, when operating like a business, you will likely have someone executing your lead-generating activities for you and you will likely have team members who can continue to take listings and work with buyers. The bottom line is that if you are a true real estate professional you really ought to be thinking like an entrepreneur and operating like a business.

For more information on this please call me at 1-800-931-2605 or email Gary@WinReatyAdvisors.com. You can also learn more by visiting MyInvestmentServices.com.

Written by Gary Wilson 2014

How I Did 110 Transactions A Year With NO Assistants…And You Can Too… Get My Case Study Now>> https://www.myinvestmentservices.com/gift

“Guiding You to Massive New Wealth in Real Estate in 1 Year or Less Guaranteed!”

Need Money for a Down Payment?

Money

How to Deploy it

Where to get funds for a down payment on a rental property

Where do you get money for down payments?

I am a big fan of using cash to buy real estate. It gives you more advantages than any other means of acquiring property. I know all of the theorist who insist that you never touch principle. If you put things into context, what they are referring to is using principle for non-investment purposes. Deploying investment capital to build wealth and income is a good thing, not a bad thing. Deploying investment capital to purchase items for personal use is foolish. For the purpose of our discussion I want to review the different ways to keep and use money that is kept in the various forms of investments.

Savings – This is probably the least effective way to preserve capital. It is however one of the safest. Funds in a savings account are relatively liquid which means you can access them without penalty. Most banks will allow you to withdraw funds 1 to 3 times per month. Savings accounts are a great way to keep an emergency fund on hand. If you have funds in excess of emergency fund requirements then you can safely use this excess to buy investment real estate.

CD’s – CD’s may pay a little more interest than savings accounts, but not much. They usually have early withdrawal penalties, sometimes you simply forfeit any interest you may have earned. CD’s may have a place in some people’s lives but not in mine. Back in the day when I was a young banker we had CD’s that paid 15% and the terms were as long as 10 years. You can bet your bottom dollar that I would gladly own some of these CD’s now. Unfortunately, owning a CD now will likely cost you money instead of making it. If you have money held in CD’s you may want to consider using it to purchase income producing real estate.

Mutual Funds – There are literally thousands of mutual funds, hundreds of mutual fund companies, and dozens of categories of fund types. I like no-load growth stock mutual funds to hold money long term, over and above my real estate holdings. I like Money Market funds for short term holdings and especially for storing money I will use to buy more real estate. Bond funds are made up of Short term, Medium term, and Long term bond holdings. You have to know what you’re doing relative to the interest rate environment to invest wisely in bonds funds. Short term bond funds are the least risky, but they still do have risks. I generally would not use even short term bond funds to hold money that I will eventually use for purchasing real estate.

Stocks – Investing directly in stocks can truly be risky business. Even seasoned professionals get smoked gambling in the stock market. This is not the place to keep money that you intend to use later to buy real estate. If you are enamored by the idea of striking it rich in the stock market then God bless you, get a lot of education, and tread gingerly into those shark infested waters. If you really want to be in stocks why not consider a mutual fund that invests in stocks. Always look at the management of the fund and the manager’s track record not just the track record of the fund itself. Also, look at their performance in up and down markets. Good luck!

Bonds – The basic rule with bonds is that you buy when rates are high and sell when rates are low. This is because people will pay a premium for high yielding bonds when rates are low. Plus while you own the bond you can make a decent return. If you buy high grade bonds then your risk is reduced along with your rate of return. The bottom line here is how do you know when you are in a high rate environment and a low rate environment? Exactly, even the pros have a hard time with market timing. I do not suggest using bond funds for holding money you intend to use for purchasing real estate.

Whole Life Insurance Policy – Check with your Life Insurance Company. You normally can borrow against the cash value of your Whole Life Insurance Policy. Fees are usually minimal and terms are easy. And you pay yourself back!

Home Equity in your person home or another property you own, possible an investment property – Look for banks that are advertising home equity loans to get the best rates and terms. If a bank is advertising checking accounts then look elsewhere. Banks will tell you in their advertising whether or not they need to make loans or take deposits. They need to be both to be a bank but at any given time they will need one more than the other and their ads will reveal this.

Self Directed IRA – You can build up a portfolio of Real Estate from within your Self Directed IRA. This subject requires an entire class to teach. It is complex and considered advanced. There are fees and restrictions involved that you need to be aware of. If you are interested in this please contact me and I will make sure you get the right education and information from the right people.

401-K – if you have a 401K, you should check with your employer because you may be able to borrow against your 401k an amount up to 50% of its contents. It gets even better when you aren’t borrowing from anyone else. You are borrowing from YOU Inc.! And guess what? The interest you pay on what you borrow is paid to YOU too! And guess what else? It isn’t taxed either. You know, maybe our government isn’t so bad after all. The reality though is that our government does suck, maybe not as bad as other governments but it still sucks. In fact I bet there is one good guy in our government who was an entrepreneur at one time and saw this amazing opportunity to do something really good for a lot of people. The cost of borrowing from a 401K is usually a small administration fee. No application fees, no appraisal fees, and no junk fees of any kind.

If you are just starting out and don’t have a lot of cash lying around like us seasoned veterans, take heart. You would be amazed how easy it is to form a partnership with an individual who does have money lying around. Sometimes a veteran real estate investor will partner with one or more newbies to teach them the ropes, and more importantly have one or more “bird dogs” out there to do the hunting. When they find a suitable prey the investor puts up the money then he and his protégé split the profits. I have seen this work with doctors also. In fact, it could work with anyone who has more time and less money.

Another way to begin acquiring real estate when you are starting out and don’t have a lot of cash is to borrow from a private investor. They usually charge more in interest and fees than a bank but they are also more open-minded and creative. They usually understand the real estate investing game and aren’t interested in forming partnerships or teaching newbies. They will often finance up to 100%. They may also loan you money that you secure with other property you have. They are really not that hard to find either. Some mortgage bankers and brokers keep private investors in their back pockets to keep a deal moving forward rather than watch it die an agonizing death where nobody gets paid. Private investors can be tough, I have used them, but I don’t recommend it although I know some of you will just have to try because you want that sweet deal. I get it, I really do. I ended up being Okay. But it did cost me a lot of money in interest payments.

Still another way to acquire properties when you don’t have cash is to use hard money lenders. They call them hard money lenders for a reason. It is a hard way to do business. They charge exorbitant interest rates and exorbitant fees to get the money. They usually have a very quick term, sometimes referred to as a balloon payment. In other words, you have three to six months to use their money paying interest only, then at the end of the three – or six-month term you have to pay back all of the principle you borrowed. If you can’t pay it back they will take your property, and they will, trust me. Sometimes people use this method to buy a rental property that needs work. They will borrow enough money from the hard money lender to buy the property and rehab it so they can rent it out, then go to a commercial bank to get a traditional mortgage on the property and pay back the hard money lender, and have excess cash from the traditional loan to line their pockets.

For years when money was easy I would pay cash for a property and for the remodeling then borrow from a bank in the form of a traditional first mortgage with easy terms and a low interest rate. This way I would continue to build my rental property empire while at the same time increase the amount of capital I had to work with. Keep in mind that it all has to be paid back and if you are a borrower you have to keep your ratios in check or you will get off and stop growing or borrow from private investors, or worse yet, hard money lenders.

Remember, all you borrower’s out there, to keep your ratios in check. Never owe cumulatively more than 2/3 of what you own and never have debt payments more than 1/3 of your gross rents. If you manage to keep to these ratios the banks will always love you and unless you are a complete moron you should always be making money.

If you borrow, borrow from yourself. Eliminate another party to the transaction and you retain a stronger ownership position and contain the risk to yourself.

In the end Cash is King. If you use any other method to acquire real estate then you are putting yourself at risk, sometimes grave risk. Life happens and when it does remember the old saying: “The man with the Gold makes the rules”. If you don’t owe the banks and other people you get to make the rules. If you owe the banks and other people they make the rules and they aren’t as nice to you as you are. Don’t be a sucker and fall for all that debt crap. Be a man and pay cash.

For more information please visit www.MyInvestmentServices.com, call 800-931-2605 or email Gary@WinRealtyAdvisors.com

Written by Gary Wilson, May 9, 2014

How I Did 110 Transactions A Year With NO Assistants…And You Can Too… Get My Case Study Now>> https://www.myinvestmentservices.com/gift

“Guiding You to Massive New Wealth in Real Estate in 1 Year or Less Guaranteed!”

Writing an offer on an investment rental property? Which form should you use?

Forms to Use

My Investment Services

Always use Association of Realtors Forms when making offers. There are plenty of late night gurus out there who preach you should use 1-page “intent to buy” or some other short form for extending what may or may not be an offer. Don’t do this. You are wasting everybody’s time including yours. Aside from the obvious problem of its validity, especially in a court case should that happen, using anything other than pre-approved Association of Realtors sales agreements puts you at a competitive disadvantage. That is not acceptable; you want every competitive advantage possible.

Just for a moment step out of your buyer shoes and step into the seller’s shoes. Now imagine you as the seller receive multiple offers on your property, which often happens when buying investment real estate. One of the offers is this little one-page “intent to offer” with no hand money check but rather a promise of a hand money check should you accept the short and incomplete terms. The other offer is on the Association of Realtors Sales Agreement form, completely filled out, all terms identified and there is a hand money check as well. This is a legally binding agreement. Which offer are you going to take more seriously? Exactly, you will go much further negotiating with a substantial and official looking sales agreement than you will with one that looks like maybe you don’t care much about the deal. Not only are you in a better negotiating position, you are in a better legal position should trouble arise. With a real agreement of sale there is far less ambiguity. Also, you can still put in your contingencies for financing, should you choose to do so, inspections, appraisals, verification of income and expense data for the property, whatever you want to have in your favor.

Always remember that when you are making an offer on a rental property to always make the offer contingent on seeing the current owner’s financials on the property including all income and expense data for the last three years. No exceptions! The only time you can’t do this is when you are buying a foreclosure property (I know, it’s an exception). You also want to see current leases, any contracts the current owner has for services like pest control, property management, laundry, etc. You also want a contingency on seeing every single unit in the building you are buying. This is especially important in case you didn’t get to see all the units before you made the offer.

When you are making your offer and there are multiple offers or there is a “highest and best” scenario, you can use one of my favorite tricks. Let’s say there is a “highest and best” scenario and your intuition tells you to go full price on the property and the full list price is $99,900.00. You may be tempted to offer the list price or even $100,000.00 even. Go ahead and do that but add an additional amount of say $159.00. In other words your offer will be $100,159.00. This way if you are bidding against others and there happens to be another educated investor who sees the merit in offering full price, you will get the property for $159.00 or less because you outsmarted the competition for only $159.00.

On the first round of negotiating (with you as the only offerer), let them respond to your initial offer. Don’t respond right away. Instead, wait until the last minute to make them sweat a little. Then come back with a counter-offer that moves up only a little. You want to create the impression that you want the property but are already at or very close to your magic number. You leave the door open a little but not much. You don’t want to lose a good deal over pennies. Also, in your counter-offer make it an unusual number. For example, instead of coming back with $120,000.00, come back with $118.743.67. They may think you’re weird but your real estate agent will explain that you have done your homework down to the penny; you know your business, and what the property is worth. If it goes another round then you can waive one of your less important items, like the lawnmower you asked for. I always look for a few odds and ends to throw in my offers that I can then use later as throw away to get the deal done at a price acceptable to me. There are many more negotiating strategies I can share with you. You can read Rental Profits Without The Pain or better yet take the course “Rental Profits Without The Pain”.

For more information on writing offers and negotiating tactics please visit www.MyInvestmentServices.com. You can also call the My Investment Services at office at 1-800-931-2605, or email Gary@WinRealtyAdvisors.com

Choose the right form when writing offers

Written by Gary Patrick Wilson. May 7, 2014.

How I Did 110 Transactions A Year With NO Assistants…And You Can Too… Get My Case Study Now>> https://www.myinvestmentservices.com/gift

“Guiding You to Massive New Wealth in Real Estate in 1 Year or Less Guaranteed!”

How Do You Get The Best Deal When Buying Real Estate?

Just Say No to Debt:

Use Cash

There are several ways to purchase real estate. If you have ever read any of Carlton Sheets material then you know there are at least 30+ ways to buy real estate. Some are very good and some are not so good, depending upon your circumstances. We teach a number of ways to get cash at MyInvestmentServices.com. The bottom line is that the more money you borrow to buy real estate the more you will be at risk. The absolute best way to buy real estate is to use cash, pure cash, and baby!

Oh, I can hear millions of you now shouting “never use your own money!” Yeah, I hear you; the problem with all the no-money-down gurus is that they never mention what happens when life happens. That would be too scary. The truth is that people die, people have babies, people get married, people get divorced, people get new jobs and people lose jobs. It happens. It’s not a matter of “if” but “when”. So you have to ask yourself what will happen to your highly leveraged empire if the economy turns sour. What if there is a real estate bust like what happened in 2008 – 2010? What happens if the pool of decent renters is raided by lenders who need to loan money so they relax their standards like they did beginning in the 1990’s with the Clinton administration and continued until 2007?

I’ll tell you what happens, all of your good renters become homeowners and you get left with unreliable tenants. That’s what happens and that more than anything else will cripple your real estate empire. If it doesn’t then it will certainly put you in a horrible position when the economy spins into a recession and your properties lose a lot of value. Then you’re stuck with all these bad tenants wrecking your properties and not paying you their rent. Then you can’t get another loan to keep things afloat because the banks won’t lend you money anymore. Get the picture?

I can show you mathematically how you can build a stronger, less risky, and more profitable real estate empire by using all cash and only cash. If you graph it out it will look like it takes a while to get going, because it does. However, when your mega cash cow starts to give milk, look out! You will be a juggernaut that can’t be stopped. You will absolutely make a lot of money. No one can stop you, and you will owe no one. Better yet, the next time there is a recession you will be the one everyone is running to buy their properties. You will be King of the world! Who’s Your Daddy Now? Go ahead; take your best shot you no-money-down gurus.

Sorry, I had to take a break and calm down. Now having said that, I know that because you can borrow money now at around 4% that a lot of you will do it. Go ahead, I did it too. I can promise you though that in the end you will regret it and you will see that it will take you longer to build your massive money producing monster. If you do borrow, promise me that you will put down at least 20%. I recommend 25% or more. This way you will get the best rates and terms. Remember, all you borrower’s out there, to keep your ratios in check. Never owe cumulatively more than 2/3 of what you own and never have debt payments more than 1/3 of your gross rents. If you manage to keep to these ratios the banks will always love you and unless you are a complete moron you should always be making money.

Before borrowing from commercial banks to buy real estate, if you have a 401K, you should check with your employer because you may be able to borrow against your 401k an amount up to 50% of its contents. It gets even better, because you aren’t borrowing from anyone else. You are borrowing from YOU Inc.! And guess what? The interest you pay on what you borrow is paid to YOU too! And guess what else? It isn’t taxed either. You know, maybe our government isn’t so bad after all. The reality though is that our government does suck, maybe not as bad as other governments but it still sucks. In fact I bet there is one good guy in our government who was an entrepreneur at one time and saw this amazing opportunity to do something really good for a lot of people. The cost of borrowing form a 401K is usually a small administration fee. No application fees, no appraisal fees, and no junk fees of any kind.

If you are just starting out and don’t have a lot of cash lying around like us seasoned veterans, take heart. You would be amazed at how easy it is to form a partnership with an individual who does have money lying around. Sometimes a veteran real estate investor will partner with one or more newbies to teach them the ropes, and more importantly have one or more “bird dogs” out there to do the hunting. When they find a suitable prey the investor puts up the money then he and his protégé split the profits. I have seen this work with doctors also. In fact, it could work with anyone who has more time and less money.

Another way to begin acquiring real estate when you are starting out and don’t have a lot of cash is to borrow from a private investor. They usually charge more in interest and fees than a bank but they are also more open-minded and creative. They usually understand the real estate investing game and aren’t interested in forming partnerships or teaching newbies. They will often finance up to 100%. They may also loan you money that you secure with other property you have. They are really not that hard to find either. Some mortgage bankers and brokers keep private investors in their back pockets to keep a deal moving forward rather than watch it die an agonizing death where nobody gets paid. Private investors can be tough, I have used them, but I don’t recommend it although I know some of you will just have to try because you want that sweet deal. I get it, I really do. I ended up being okay but it did cost me a lot of money in interest payments.

Still another way to acquire properties when you don’t have cash is to use hard money lenders. They call them hard money lenders for a reason. It is a hard way to do business. They charge exorbitant interest rates and exorbitant fees to get the money. They usually have a very quick term, sometimes referred to as a balloon payment. In other words, you have three to six months to use their money paying interest only, then at the end of the three or six-month term you have to pay back all of the principle you borrowed. If you can’t pay it back they will take your property, and they will, trust me. Sometimes people use this method to buy a rental property that needs work. They will borrow enough money from the hard money lender to buy the property and rehab it so they can rent it out, then go to a commercial bank to get a traditional mortgage on the property and pay back the hard money lender, and have excess cash from the traditional loan to line their pockets.

Visit MyInvestmentServices.com for information, tools and guidance when investing in Real Estate. Written by Gary Wilson, April 25, 2014.

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