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How to Get Owner-User Loans For Business And Real Estate

OWNER-USER LOANS ARE AVAILABLE TO all kinds of businesses, including retailers, manufacturers, doctors, restaurants, dealerships, wholesalers, shopping center owners, and service providers.

ALSO CALLED OWNER-OCCUPIED FINANCING, owner-user loans can be used for most business and real estate purposes, such as:

• Acquiring or expanding a business
• Buying, building, improving, and refinancing land and structures
• Purchasing equipment, furniture, inventory and supplies
• Securing working capital
• Repaying existing business and real estate loans

AN ADDITIONAL BENEFIT OF THESE LOANS is that they help a business to respond quickly to changing needs and opportunities such as unexpected large orders, marketing expenses, renovations and improvements, working capital requirements, partner buyouts, increasing cash flow, and new product development.

OWNER-USER LOANS MAY COME FROM traditional banks, credit unions, and private lenders, and they can sometimes come with guaranteed loans from the Small Business Administration (SBA) 7(a) (general business loan) program and 504 (real estate and equipment) program.

BANKS AND OTHER LENDERS LIKE OWNER-USER LOANS because they are low-risk and can be repaid from income the business generates. Additionally, they help the lender form a lasting relationship with the business.

BROKERS LIKE OWNER-USER LOANS because they are relatively simple and easy for eligible borrowers to qualify for.

COMPARED TO OTHER TYPES OF LOANS, owner-user loans often have

• lower interest rates
• higher loan-to-value (LTV) ratios

OWNER-USER FINANCING SHARES SOME FEATURES with hard money loans, but depends more heavily on the business and its owners.

TO PUT AN OWNER-USER DEAL TOGETHER, you need a business that rents more than half of a building's space. Ideally, the business will own the property where it's located. If the business rents out part of the building to someone else, that's even better.

AS WITH ANY BUSINESS OR REAL ESTATE LOAN, the borrower must furnish the lender with personal and business financials, property details, tax returns, a description of the business's products and services, and other standard loan application information.

HERE'S AN EXAMPLE OF ONE LENDER'S owner-user financing offer:

Property Type: Office, Retail, Warehouse,
Light or Heavy Industrial, Mixed Use
Loan Amounts: $500,000 to $100,000,000
Loan-To-Value: Up to 90%
Lending Area: Worldwide
Credit: Mid-FICO
Documentation: Full or Stated Doc
Target Terms: Several Options available, up to 30 year fixed;
Fixed and Variable Rates
Recourse: Full Recourse
Special Notes: SBA 504 and SBA 7a loan programs and Bank Financing available
Close: Fast Closing

ONE BUSINESS SCENARIO that creates an opportunity for an owner-user loan is where a business acquires property to house the business and buys a building larger than it needs.

THE BUSINESS OWNERS CAN THEN LEASE PART OF THE SPACE to third-party tenants to generate additional income. If the business needs to expand at a later date, it can take over the rental space for its own use, or it can use the building and the rental income to help secure an owner-user loan.

ANOTHER ADVANTAGE of owner-user property is that, if problems occur and the business needs to raise money quickly, it can sell all or a portion of the space and, if desired, lease back what it needs for its own use.

EITHER WAY, THE OWNER-USER SETUP makes lenders feel more secure, so they're more likely to make the loan the business seeks.

OBTAINING AN OWNER-USER LOAN usually involves a hybrid approach. It uses the value of the real estate, the rental income, and the finances of the business and its owners.

EACH CASE IS DIFFERENT and presents its own opportunities. Often, the borrower and broker can persuade a lender to make the loan by highlighting the right mix of strengths—whether these strengths reside in the building, the rent, the business or the personal qualities of the business owner. A down payment may be required, particularly if the business is new.

IF THE LENDER LIKES THE PROPERTY WHERE THE BUSINESS is located and the business has money coming in, an owner-user loan can often be arranged.

This article was originally published in the May 2014 issue of Money Watch Bulletin. Subscriptions to Money Watch Bulletin are available in print or downloadable PDF for $95/year (12 issues).

How To Find Or Buy Low-Priced Preforeclosure Real Estate

YOU CAN FIND OR BUY real estate at bargain prices by looking for preforeclosure properties. Preforeclosure is the period of time between when a homeowner has stopped making payments on a property and when the property is sold at auction.

YOU CAN FIND A PREFORECLOSURE HOME at a cheap price for yourself or a client. Then, you can pocket your commission or rent or flip the property for a profit.

THE ADVANTAGES OF PREFORECLOSURE REAL ESTATE ARE:

1. Preforeclosures are cheaper that regular foreclosure properties.
2. During the preforeclosure period, you can visit and examine the property. At a foreclosure auction, this isn't possible.
3. With a preforeclosure, you deal directly with the owner/seller, soon after they've received a foreclosure notice from the lender, city or state.
4. Negotiating with a seller is easier and less competitive than bidding against professionals at a foreclosure auction, and it's simpler than dealing with a lender.
5. Owners wanting to sell a home during preforeclosure are motivated to sell.
6. You or your client can rent the home to the owner after taking it over and sell the house back to the owner or to another buyer for a profit at a later date.
7. You don't need to pay huge amounts of cash upfront like at an auction.

YOU FIND PREFORECLOSURE LISTINGS by taking these easy steps:

1. Call your city recorder’s or clerk’s office to learn which agency handles foreclosures. Foreclosure data from lenders is freely available public data.
2. Contact the agency and ask to be put on their free information list.
3. Read the information on foreclosure procedures for your area. Public records may include a Notice of Default (NOD) from a lender, telling the owner the house will go to auction if payments aren't made. This is when the preforeclosure period begins.
4. Get to know the preforeclosure period and how long the owner has before he or she must sell. Owners are more motivated to sell cheaply during preforeclosure.
5. Get to know the "redemption period"--the time the home owner has to buy back the home after it goes to a foreclosure sale. Look for the shortest redemption time possible. Some areas have zero redemption time; others as long as a year.
6. Before you or your client makes an offer on a preforeclosure property, be sure to inspect it and have a competent real estate attorney review the offer.
7. Consider using a sale-leaseback deal to allow the seller to remain in the house. An attorney can write it for you. With a sale-leaseback, you or your client owns the property and receive regular rent payments from the seller.

IN ADDITION TO THE PUBLIC RECORDS OF FORECLOSURE LISTINGS mentioned above, you can find NODs and preforeclosure notices in local newspapers, where lenders are required to publish this information. 

Check out HUD Homes at www.hudhomestore.com. Other sources include the real estate listing services and websites like zillow.com, trulia.com, homesearch.com, realtytrac.com, and realtystore.com. Also be sure to check your area's business and real estate journals and magazines.

RESOURCES:

Real Estate Books and Self-Study Courses from International Wealth Success, Inc.

Download More Than 850 Community Banks and Lenders

RECENTLY WE BROUGHT YOU A FREE LIST OF 600 MORTGAGE LENDERS. TODAY we're sharing a list of more than 850 community banks, credit unions and private lenders with you. You can download the 45-page PDF to get phone numbers, email addresses, websites and mailing addresses.

THESE LENDERS MAKE PERSONAL, BUSINESS AND REAL ESTATE LOANS and are called Community Development Financial Institutions (CDFIs). 

CDFIs FOCUS ON HELPING LOWER- AND MIDDLE-INCOME PEOPLE in areas where they've been underserved by banks and other lenders. CDFIs are designed to help people and communities become financially healthy. 

CDFIs ARE CERTIFIED BY THE UNITED STATES TREASURY and the Community Development Financial Institutions Fund, which you can find at cdfifund.gov. For more details, you can contact the Fund at (202) 653-0421 or cdfihelp@cdfi.treas.gov.

For more real estate tips and methods, visit the International Wealth Success Website.

CLICK HERE TO DOWNLOAD THE CDFI LENDER LIST

(PDF, 45 pages, file size: 300 kb)

 Allow a few moments for the file to load

Using A Compensating Balance To Get A Loan

TO BORROW MONEY EFFECTIVELY, loan brokers, finders, consultants, and potential borrowers need to understand as many different methods as possible to increase the likelihood that a lender will make a desired loan.

FOR EVERY LOAN REQUEST, the lender weighs many variables, such as type of loan, amount, interest rates, repayment terms, borrower's collateral, job status, earnings, credit score, credit history and other factors. To be an effective loan finder or borrower, you need to know how to use this information to secure the funds you, or your client, need.

THE COMPENSATING BALANCE LOAN

ONE METHOD THAT CAN HELP YOU, OR YOUR CLIENT, get a loan is by using a “compensating balance.” This is an amount of money that a borrower agrees to keep in an account with the lender as a condition for getting the loan. Such loans are most often made to businesses, although they may be provided for real estate as well.

THE ACCOUNT CONTAINING THE COMPENSATING BALANCE usually does not bear interest to the borrower, and the lender is free to use the money as it wants. If the borrower fails to repay the loan as agreed, the bank can take the funds from the account.

A SIMPLE EXAMPLE

COMPENSATING BALANCES ARE TYPICALLY 10%-20% of the amount of the loan.

A SIMPLE EXAMPLE OF THIS METHOD would be where a lender agrees to make a $100,000 loan as long as the borrower keeps a deposit balance of at least $10,000 (10% of the loan) in a savings, checking or certificate of deposit (CD) account. The $10,000 is called the compensating balance.

HOW IT WORKS

IT'S NOT UNCOMMON FOR LENDERS to subtract the interest and the compensating balance amount from the total principal of a compensating balance loan. For example, on a $25,000 loan at 8 percent interest for one year, the interest of $2,000 (8% of the loan) and the compensating balance amount of $2,500 (10%) may be subtracted from the $25,000 principal. Thus, the total amount the borrower receives is $20,500. This is only a general example. Individual lenders and specific loans may vary.

SOME LENDERS PREFER TO OFFER A LINE OF CREDIT rather than a regular loan when a compensating balance is used.

DESCRIBING THE LOAN

THE NAME “COMPENSATING BALANCE” HASN'T CAUGHT ON with all lenders, even though you'll find it in financial texts like the Dictionary of Banking Terms and Dictionary of Business Terms. “Offsetting balance” is another name that is sometimes used.

GENERALLY, LENDERS WILL UNDERSTAND what you're looking for when you describe the method—“an amount of money the borrower agrees to keep in an account as a condition for getting the loan.”

WHEN APPROACHING LENDERS about this kind of loan, be prepared to describe the method and explain the type of arrangement you want. Give an example like the one above if you need to.

SHOP AROUND

AS WITH ANY LOAN, IT'S WISEST TO SHOP AROUND at many different lenders. If one lender turns down a request for a compensating balance loan, the next one might make the loan that you, or your client, need.

TO GET THIS TYPE OF LOAN, YOUR BEST BET is to go to commercial banks or credit unions. A list of commercial banks can be obtained from the Federal Deposit Insurance Corporation (FDIC) at fdic.gov. A list of credit unions can be obtained from the National Credit Union Administration (NCUA) at ncua.gov.

TIPS FOR GETTING A COMPENSATING BALANCE LOAN

1. The larger the compensating balance in the borrower's account, the easier it may be to get a compensating balance loan.
2. To set up a compensating balance loan, the borrower should establish a deposit account with the lender where the loan is requested.
3. Some lenders may offer a line of credit instead of a regular term loan. Borrowers should consider taking a line of credit, as it can be just as useful as a regular loan.
4. Be prepared to describe the method and give the lender an example of the type of loan you have in mind, since the lender might not use the term “compensating balance.”
5. It may be easier to get a compensating balance loan from a commercial bank or credit union than from other lenders, so these are good places to start. A list of commercial banks can be obtained from fdic.gov and a list of credit unions from ncua.gov.
6. Look to large lenders and lenders with locations in your area.
7. Shop around at different lenders. If one turns down your request, move on to the next.
8. Keep the lender happy. The borrower should keep the full amount of the compensating balance in the account at all times. It may be helpful to keep more than this amount in the account, if possible.
9. For the best chance at obtaining a compensating balance loan, apply for the loan through an existing business, rather than as an individual.

IF THE BORROWER CAN MAINTAIN THE AGREED-UPON COMPENSATING BALANCE amount, a compensating balance loan can be a useful tool to help fund a growing business or real estate endeavor. 

For additional money-making tips and products, visit my official International Wealth Success website and browse our real estate and financing pages.

Download More Than 600 Single- and Multifamily Mortgage Lenders and Housing Finance Agencies

DID YOU KNOW THAT HUD AND FHA PROVIDE A FREE LIST OF MORE THAN 600 single-family and multifamily mortgage lenders and housing finance agencies throughout the United States?

TO HELP YOU ACCESS THIS LIST, I've reproduced a version of the list for you below. This list is current at the time of this blog post.

THESE LENDERS PROVIDE MORTGAGE LOANS for single-family and multifamily residential and rental properties. Also included are State Housing Finance Agencies, which you can contact for more information on mortgage loans in any given state.

THE LISTED LENDERS HAVE BEEN APPROVED BY the United States Department of Housing and Urban Development (HUD) to make Federal Housing Authority (FHA) insured loans.

ELIGIBLE PROPERTIES VARY BY LENDER AND INCLUDE: detached homes, manufactured homes, condominiums, fixer-uppers, buildings with five or more units, housing for the elderly, and housing for people of moderate and low income.

TYPES OF LENDERS INCLUDE: banks, mortgage companies, credit unions, public housing housing authorities, community development agencies and non-profit agencies.

DIFFERENT PROPERTIES AND PURPOSES ARE COVERED by different parts of HUD's mortgage programs. For loan details, contact individual lenders, the Housing Finance Authority for your state, or HUD/FHA at 451 7th Street S.W., Washington, DC 20410, Telephone: (202) 708-1112, Website: portal.hud.gov. You can also contact a local HUD Office near you. Local offices are listed on the HUD website under “HUD Local Office Directory" at http://portal.hud.gov/hudportal/HUD/localoffices.

MANY OF THESE LENDERS MAKE LOANS IN ALL 50 STATES. Some serve more limited areas. For the most current details and options with regard to the HUD FHA Lender List, visit the list at http://www.hud.gov/ll/code/llslcrit.cfm. Note: Search results will vary depending on the options selected on the Search form and may not match the results provided here.

For more real estate tips and methods, visit the International Wealth Success Website.

CLICK HERE TO DOWNLOAD THE HUD FHA LENDER LIST

(PDF, 23 pages)

The HUD FHA Lender List Search Form at hud.gov/ll/code/llslcrit.cfm

CLICK HERE TO DOWNLOAD THE HUD FHA LENDER LIST

(PDF, 23 pages)

For more real estate tips and methods, visit the International Wealth Success Website.

11 Ways to Turn Negative Cash Flow Real Estate Into Positive

SOME INVESTORS BUYING REAL ESTATE TODAY find that many properties they look at have a Negative Cash Flow (NCF). This means you have to pay out more money than comes in. For example, a multifamily apartment house with a monthly income of $10,000 and expenses of $10,500 has a $500/month NCF.

TO MAKE THIS BUILDING PROFITABLE, you'd have to (a) reduce your monthly expenses by $500 or more, or (b) increase your monthly income by $500 or more. You can do this in multiple ways. Here are 11 actions you can take:

1. Raise the rent for each apartment in your building. Doing so will increase your income, help to pay your expenses, and reduce your NCF to zero. Figure how much you'll have raise each rent to increase your monthly income by $500.

2. Increase the rent for new tenants. It's easier to get a higher rent BEFORE new tenants move in than after.

3. Reduce your monthly mortgage payment by getting the term of your loan extended from 15 years to 25 or 30 years. This will reduce your monthly mortgage payments, lowering your expenses to wipe out your NCF.

4. Negotiate a lower interest rate on the first mortgage to reduce your monthly costs. Thus, reducing the interest rate by 1% on a $300,000 first mortgage will save you $300 per month in interest costs.

5. Convert your first mortgage loan to an interest-only loan. This will again reduce your monthly payment. You'll repay the principal in the form of a "balloon" at the end of the loan term or when you sell the property.

6. Have the real estate taxes reduced or temporarily suspended. Do this by visiting the local tax board and presenting your case to them. Contact your county or city government for help. The worst they can say is no.

7. Reduce your operating expenses by cutting costs. For example, get a part-time manager instead of a full-time one or collect the rents yourself instead of paying a management firm. Look for additional operating expenses you might be able to reduce, such as advertising, cleaning, landscaping, supplies, telephone, trash, etc.

8. Get your tenants to pay for utilities such as heating, water, electric or gas. This will save you big bucks and reduce your NCF.

9. Make two, or more, income units from one. This can nearly double your income from the area occupied by one unit.

10. Consider charging parking fees. These fees are not uncommon nowadays.

11. Increase your security charge from 1 month to 2 or 3 months. This will give you more cash and higher interest earnings on it.

For more real estate tips and methods, visit the International Wealth Success Website.

Ten Tips For Choosing The Best Rental Income Properties

IF YOU WANT TO MAKE MONEY BY RENTING—as many people seeking income real estate do—your best bet may be to buy multifamily units such as duplexes. You can live in one part while your tenants pay your mortgage. Or you can rent out both parts of the property and make more money.

BUYING A SINGLE-FAMILY HOUSE may not always be the safest choice. If your rental property sits vacant for a few months, you could lose a lot of money.

HERE ARE 10 THINGS YOU CAN DO to buy income property wisely:

1. Think like a business owner or business buyer instead of a home owner or home buyer.
2. Find out about the rental market for housing in the area where you're thinking of buying. Inspect the property and inquire with local government offices about laws regarding rental properties in the area.
3. Prepare to make improvements on the property. Think ahead. Build the costs and time into your plan. If you don't, getting a unit ready to rent could take much longer and be more costly than you expect.
4. Expect to pay more in points and interest for an income property than for a home you live in. Lenders consider a loan on income property to be riskier, so they charge higher interest and/or points.
5. Pre-screen tenants carefully. Don't rent to just anyone who'll give you a deposit. You might have potential renters fill out an application. You can check their credit, employment and rental history if you want to.
6. Stick by the rules you give your tenants. For example, if you say “No pets,” don't make exceptions. Don't invite trouble by letting tenants ignore rules.
7. Choose rental properties that are close to home. Don't spend your profits traveling to manage your property or paying for long-distance repairs.
8. Don't be afraid to make a low-ball offer to the seller. Remember, you must think like a business owner.
9. Look at “competitors” near the property you're investigating. Do they have lower rents, vacancies or amenities like washers and dryers in the units?
10. Insure yourself and your property, not only against fires and hurricanes. You also need to protect yourself against potential law suits from tenants, guests, repair people and other visitors.
    FOLLOW THE GUIDELINES ABOVE to make smart real estate buying decisions for  better rental income.
    
    For more real estate tips and methods, visit the International Wealth Success Official Website.

Everything You Wanted to Know About Collateral

COLLATERAL CAN BE A KEY FACTOR in determining a borrower's ability to get a loan. Although it's not the only factor that a lender will consider, collateral is a concept that every borrower, broker, Finder and consultant must understand in order to obtain loans successfully.

WHAT IS COLLATERAL? Collateral is a form of security for a loan. When a borrower pledges collateral as security for a loan, it reduces or eliminates problems the lender might face if the borrower cannot, or does not, repay the loan as they originally agreed to do. A borrower who doesn't repay a loan as promised is in default.

IF THE BORROWER DEFAULTS, the lender can take the collateral and sell it to get back some or all of the money the borrower owes. Because securing the loan with collateral lowers the lender's risk, the lender may be more likely to make the loan.

COLLATERAL CAN HELP A BORROWER get a loan even if the borrower has a less-than-perfect credit score or a limited credit history. Additionally, a loan secured by collateral may come with:

• lower interest rates
• fewer transaction fees
• better terms
• more favorable repayment periods

COLLATERAL MAY BE COMBINED with other forms of security, such as cash in a savings account or money owed to a business, to show the lender that the borrower has additional ways to repay the loan.

COMMON FORMS OF COLLATERAL INCLUDE:

• land
• homes
• buildings
• vehicles

ADDITIONAL ASSETS THAT CAN SERVE AS COLLATERAL ARE:

• equipment
• jewelry
• stocks and bonds
• business inventory (materials and products)
• accounts receivable

ASSETS MAY BE OWNED BY an individual (personal collateral) or by a business (business collateral).

FOR COLLATERAL TO BE ACCEPTED BY A LENDER, the borrower must have some form of proof (typically called a title) which shows the lender that the borrower owns all or part of the collateral. Thus, collateral may be based on paper assets, often referred to as notes.

PROOF OF OWNERSHIP CAN INCLUDE items such as:

• a Certificate of Title to a building
• a Deed to a piece of land
• stocks in the owner's name
• a receipt showing the borrower “has title” to the asset being pledged as collateral

COLLATERAL CAN ALSO BE BASED ON EXPECTED ASSETS, as in the case of an investment or accounts receivable (money that is owed to a business).

ASSETS FINANCED WITH BORROWED FUNDS can sometimes be used as collateral. For example:

• a property that a borrower wants to buy may itself serve as collateral,
• because the lender can repossess and sell the property if the borrower defaults
• similarly, a building or piece of land may generate income for the borrower
• a loan based on this kind of real estate is often called a hard money loan

IF A BORROWER ALREADY HAS A MORTGAGE on an existing property or a loan on a vehicle, the lender might accept these assets as collateral, but the total value of the collateral may depend on how much of the original loan has been paid (called equity). It's also possible that a borrower might own only a portion of the collateral together with another person or business. This introduces added complexities.

BORROWERS, BROKERS, FINDERS AND CONSULTANTS SHOULD BE AWARE that the borrower risks losing the collateral if they fail to repay the loan, so it's important to carefully review the risks of using certain assets as collateral before pledging them to the lender.

IF THE BORROWER CAN'T AFFORD TO LOSE THE COLLATERAL, such as his home, he should think twice before pledging the asset as collateral. Why? Because if the borrower defaults, he could wind up losing not only the existing property being used as collateral, but also any new property he hopes to buy with the loan that the collateral is meant to secure.

LENDERS TYPICALLY APPRAISE THE COLLATERAL to decide how much they think it's worth. Borrowers should realize that lenders may appraise an asset at a value lower than the borrower expects or believes the asset is worth. It's also possible that the lender's appraisal will be lower than the value set by the city or county for the purpose of collecting taxes on the property.

IF THE BORROWER DISAGREES with the lender's appraisal, she has two options:

1. seek a loan from a different lender or
2. appeal the lender's appraisal and ask for an appraisal review (reappraisal)

IN SOME CASES A LENDER WILL REAPPRAISE THE PROPERTY at a higher value. If the appraisal is too low, the borrower might be able to talk the lender into offering a lower interest rate or adjusting some other aspect of the loan to make it more attractive to the borrower.

COLLATERAL CAN DECREASE IN VALUE due to any number of factors, such as:

• deterioration of the property over time or
• fewer people wanting to move to the area where the property is located

IN OTHER CASES, THE VALUE OF COLLATERAL CAN GO UP, as with investments that earn money over time.

IF THE COLLATERAL DECREASES IN VALUE and the borrower defaults on the loan, the borrower may still have to repay the amount at which the collateral was appraised. For example, a home might initially be appraised at $100,000 and then decrease in value to $75,000 a few years later.

IF THE HOUSE WAS USED AS COLLATERAL to get a $100,000 loan, the borrower must still pay back the $100,000, even if the house is now worth $75,000. If the lender sells the house for $75,000, the borrower owes the lender $25,000. This can put the borrower in hot water if he or she doesn't have the $25,000.

IT'S USUALLY WISE TO BORROW LESS than the full value of the collateral to avoid the problem just described. If the amount of the loan is less than the value of the collateral, the borrower and lender are better protected and the risk of losing money is lower for them both. This makes it easier for the lender to make the loan.

IF A BORROWER HAS MADE PAYMENTS ON A PROPERTY reliably over a period of time—usually for at least a year—the collateral is said to be seasoned. Lenders prefer seasoned collateral because it further helps to assure them that they'll get back the money they loaned out.

A LENDER WON'T NECESSARILY REFUSE TO MAKE A LOAN just because a borrower lacks collateral. If the borrower has money in the bank, a history of paying bills on time or is willing to accept a higher interest rate on the loan, the borrower might still have a chance of getting the loan they want.

BEFORE GOING TO A LENDER FOR A LOAN, make a list of all the borrower's assets that might be offered as collateral. Carefully assess the value of each item. Look up the value given in sources such as the city's tax assessment and on real estate websites, the “Blue Book” value (for vehicles), and the ticker tape price and earnings (for stocks and bonds).

THESE ARE JUST A FEW OF THE MANY POSSIBLE KINDS of collateral and the ways of judging their value. With a good knowledge of all the assets that the borrower might be able to pledge as collateral, the borrower and his agent can approach lenders with confidence while increasing the chances of getting the loan that the borrower seeks.

The article was previously published in Money Watch Bulletin.

For more real estate tips and methods, visit the International Wealth Success Official Website.

Testimonial: Real Estate Income Despite the Economy

Unlike all the talk of a troubled economy, we still see great success stories from our readers, telling us how well they're doing with income real estate properties. Here's one testimonial we received by letter from Illinois.

Dear Mr. Hicks,

“I read [your book] ‘How to Make Millions in Real Estate in Three
Years’ two years ago, and I started using your methods immediately. My
first two deals weren’t so hot (I was too eager to close and didn’t do
enough up-front due-diligence), but I’ll make money on them all the same.
These were two small commercial strips in Chicago. Bought them with
basically no money down (for one the seller held paper; the other was
financed through SBA).

It was on my third try that I really hit a home run. This was an industrial
center we acquired through a construction loan. I renovated it, and leased
it up within 8 months (a year ahead of schedule). For this deal I raised most
of the equity from friends and family, after negotiating the bank down to a
10% equity requirement.

So here’s where I am at, barely two years after reading your book: Total cost
of 3 properties = $4,670,000; current value, based on
rent roll = $6,730,000.

That’s about $7-million bought with only $150,000 of my own
money—all borrowed with 2nd and 3rd mortgages on my house. After paying
all monthly mortgages and expenses, I’m clearing about $20,000 a month.
Thank you warmly for your encouragement and advice in your books,
newsletter and phone calls.” By letter, IL.

QUICK INTRODUCTION TO PRIVATE MONEY LOANS

BELOW YOU’LL FIND INFORMATION THAT CAN INCREASE YOUR CHANCES of getting private money funding. Understanding the ins and outs of private money could make the difference between getting money and not getting money. However you don’t need to memorize anything and there will be no test on this material).

WHAT MAKES A LOAN A PRIVATE MONEY LOAN?

1. Traditional institutional lenders like banks, trusts, pension funds, or credit unions are not private lenders, although some have units that deal with private money.

2. Private lenders may be individuals, corporations, venture capital firms, limited partnerships or certain other types of business entities.

3. Private money loans are typically non-conventional commercial real estate loans secured by real estate. They are often called hard money loans.

4. Hard money lenders make private money loans. Many private money lenders make hard money loans.

TWO MAIN TYPES OF PRIVATE MONEY FUNDING ARE:

5. Loans for business or real estate , which must be paid back over time

6. Investments in a business or real estate project, which do not have to be paid back.

Investments come from wealthy private individuals (“angels”) or groups such as venture capital (VC) firms. Investors may take part ownership of a business to earn a return on their investment as the business grows.

POTENTIAL ADVANTAGES OF PRIVATE MONEY include:

7. Private lenders are less bogged down by bank paperwork, government regulations and institutional protocol

8. Time from initial loan request to funding is faster

9. Private money loans are more flexible. For example, private lenders and investors are more likely to offer funding to “high risk” business or real estate deals.

BORROWERS CAN USE PRIVATE MONEY LOANS for many business and real estate purposes, although lenders can restrict loans to specific uses. Common purposes of private money loans include:

10. Rehabbing a property

11. Acquiring bridge money

12. Providing short-term operating capital

13. Equipping an office or research facility

14. Making a down payment on real estate

15. Buying real property

16. and more

PRIVATE INVESTORS

Business Angels are wealthy individuals who invest a portion of their money into real estate or a business in the hope of making a good return on their investments. These investors may come to the rescue of a new and promising business that finds it hard to obtain financing. They generally seek companies or projects that:

 Show great profit potential

 Will grow fast

 Are more than small “mom and pop” types of businesses

CREDIT UNIONS—THE UNKNOWN AND UNTAPPED LOAN SOURCE

IF YOU’RE LOOKING FOR A REAL ESTATE OR BUSINESS LOAN, be sure to include local Credit Unions in your search. Why do we suggest this? Because, Credit Unions:

• Have not suffered from bad real estate loans in the current crisis.
• Have loads of cash they want to put into good loans.
• Have understanding boards of directors who want to “put money out.”
• Have a history of lower interest rates on loans than many other lenders.

CREDIT UNIONS MAKE MANY DIFFERENT TYPES OF LOANS. But the types that would
interest you most as a business person are:

• Commercial and residential real estate loans.
• Business loans for startup, expansion, renovation, etc.

TO GET EITHER TYPE OF LOAN, the borrower must meet certain minimum, low- or no-cost needs, namely:

• Be a member of the Credit Union from which you want to borrow. There’s NO charge to you to join a Credit Union.
• Fill out the Loan Application for the type of loan you seek.
• Agree to the repayment schedule the Credit Union sets.
• Sign all needed documents—which usually are fewer than with a bank.
• Receive your loan check and start making P & I (Principal and Interest)
payments one month after you get your money.

THE “WAY TO GO” TODAY IS “WHERE THE MONEY IS” and that’s what you’re doing when you seek your real estate or business loan at a local Credit Union. You’ll get a friendly reception and utmost cooperation when you submit your Loan Application in a businesslike way and treat the CU staff courteously.

Find Your Niche—Learn About Loans To Buy Or Rehab Apartment Buildings

APARTMENT OR MULTI-FAMILY LENDERS can be found in most urban and suburban
areas. Even so, many wealth builders looking to acquire an apartment building can use a good loan Finder to steer them in the right direction. And many potential borrowers will pay a good commission to a loan Finder that helps them find the best loan possible.

A MULTI-FAMILY BUILDING IS ONE THAT HAS FIVE OR MORE UNITS. The most common purpose of most apartment building loans is to fund the purchase or refinance of a multifamily building. Loans for rehabbing buildings are just as important, however. A large number of commercial lenders make this type of loan. Look for lenders that offer loan packages for rehabbing apartment buildings. Here are your steps:

1. Gather all the information from your client as to what financing he or she needs. This might include loan applications, summaries of the proposed purchase/rehab, plans to produce an income from the building, and so on.
2. Draw up a “C” list (long list) of all potential lenders from a source such as the list below.
3. Sift through each lender’s information, one at a time.
4. Pay special attention to basic data such as the geographic areas, loan purpose, loan type, and loan requirements and details of each lender.
5. Based on Steps 2 and 3, narrow your “C” list to a “B” list (middle list) of lenders to examine more closely. For example, you can eliminate “C” lenders that don’t make loans in the area where the building is located.
6. Compare the types of funding that each one offers.
7. Make note of each lender that might make the size and types of loans you seek in your area
8. Select your “A” list (short list) of lenders to study further and to contact for more information or a loan application.
   

AS A FINDER, YOU CAN DO EACH OF THESE STEPS for your client, who willprobably be busy on other projects. Your client may offer to work together with you in drafting your “A” or “B” lists. If your client doesn’t suggest this, suggest it to the client. With a little experience and motivation, you and your client can make a winning team.

Special Funding for Financial Brokers

You Can Become the Loan Expert for Special Loans

If you or a client of yours has a small business in need of funding,
you may have looked at common sources of money—business
partners, family, conventional bank loans, even SBA 7A guaranteed
loans from banks and non-bank lenders. If you’ve tried these
and met with little or no success, don’t give up.

There are many “niche” or special financing programs
for small businesses throughout the United States.
Some niche loan programs are targeted to help specific
industries grow in a particular area. Some are targeted
to improve the economy in a region, state, or local area.
Some are targeted to specific groups of people. Nearly
all niche loan programs have a social, economic development
or community development purpose.

Tips for Financial Brokers

If you are a commercial loan broker or you want to
become one, finding good niche markets that can
give you great broker income may mean focusing on
commercial loan deals. Without limiting yourself
to any specific kind of loan, you can turn your focus
to one or more of the available niche markets in
commercial lending to increase your immediate and
long term income. Take another look at the niche areas
of commercial lending above to see what a wide range
of commercial lending exists.

By concentrating on commercial loans that require
hard money loans, you can find a niche within a niche.
The more focused you get, the smaller your potential
market, so be careful to keep enough commercial loan
niches in your sights to keep the loan requests flowing.

The advantage of taking the time to specialize in a niche
commercial loan market is simple. Once you put
in the legwork to identify, contact and establish a
relationship with direct commercial loan funding sources,
regardless of whether they are hard money lenders or
non-hard money lenders—you can establish yourself
as the expert in those kinds of loans in the area where you work.

You will have a ready source for funding the niche commercial
loans you’ve chosen to specialize in, and you’ll not only get direct
requests from borrowers, but also from other brokers who’ll call
you and ask you to cooperate on this kind of loan.

To be successful, promote yourself on Internet forums, through
email and advertising to your target groups, and by offering your
thoughts on your commercial loan niche market to newspapers,
magazines, and Internet e-zines.

Write articles about such things as your specialty, how to
prepare a commercial loan package for best results, what to look
for to help ensure which lender best suits the loan request and
more. Don’t be afraid to educate your fellow brokers. By doing so,
you’ll show your expertise in more areas than the ones you share
in your commercial loan specialty articles. Other brokers, as well
as borrowers, will still come to you—after all, you are the expert
in your commercial loan niche market.

Niche Lenders Can Get You Your Money Now

WHEN MONEY IS HARD TO GET, niche lenders can be your answer to
finding the money you need for business or real estate quickly and easily. Here’s
how to get the money you need for your niche business or real estate:
1. Name your niche. You MUST know your niche if you want to
apply to lenders who serve that niche. Thus, your niche might be
lenders that loan on Gas Stations, Tennis Courts, Used Car Dealers,
Golf Courses, Hotels, Motels, Bowling Alleys, etc
2. Get the names of suitable niche lenders. You can find such
lenders in the IWS “Directory of Niche Lenders,” in reference books
at your local Public Library, or on the Internet
3. Contact your selected niche lenders by phone, postal mail,
fax, or email. Ask for full data on the loans they make. Get the
Amount, Purpose, Interest Rate, Term (length of the loan), Credit
Requirements, etc
4. Carefully go over the info you’re given. Compare the offers from
various lenders to see which gives you the best deal. Look carefully for
deals that do not charge points (1 point = 1% of the loan amount; for
a $100,000 loan, 1 point = $1,000). Some lenders charge as high as 8
points. Avoid them!
5. Get a copy of each lender’s Loan Application. Study each Loan
Application carefully. You’ll see that the Applications are similar. But
some ask for less information than others. Pay close attention to parts
of the selected Application that give you a challenge. If you have any
questions on how to fill out these parts of an Application, call Ty Hicks
at IWS if you have the “Directory of Niche Lenders.” He’ll try to help
you with advice on your questions. REMEMBER AT ALL TIMES:
You MUST be completely accurate in every statement you make on
a Loan Application. The advice you get from Ty Hicks will include
a reminder that every statement on a Loan Application MUST be
completely accurate in every way
6. Be certain your Loan Application is typed. In business and income
real estate niche lending your lender expects a business- like approach
Typewritten (or computer-printed) Loan Applications are standard
Only the signature is hand-written
7. Accept the loan offered you if your business or real estate can repay
the niche loan and ALL other expenses and show a Positive Cash Flow
each month. Niche lenders get you money!

Find the Loan You Want At A Niche Lender

A NICHE LENDER IS A LENDER that specializes in loans to a narrow group of
businesses, or to just one type of business. Thus, a niche lender might focus on loans
to:

• Gas stations, auto repair shops, tire stores, etc
• Sports facilities—tennis courts, bowling alleys, swimming pools
• Health care facilities—nursing homes, rehab centers, hospitals
• Education centers—schools, colleges, universities, etc
• Multi-family real estate, apartment houses, condos, etc


TO FIND A NICHE LENDER you can take a few easy steps. These steps are
quick and direct, namely:


1. Define your niche. You must know your niche clearly so you can focus on
the lenders that make your type of loan. You have a number of typical niches
above. If you can’t figure your niche, call Ty Hicks and he’ll do it for you on
the phone

2. Look for lenders serving your niche. You’ll find them in many different sources,
such as: (a) Magazines and newspapers serving your niche business or real
estate; (b) On the Internet at sites that cover the news of your niche; (c) In IWS
lender books and in the IWS newsletter, or via a special search we do for you at
your request. Such a search will typically find from 3 to 12 lenders

3. Get your niche lender’s paperwork—its Loan Application, Loan Guidelines,
and any other documents they normally supply. This could include forms for
releasing info, checking income, etc. These will be sent to you free of charge

4. Fill out the Loan Application. Don’t be careless about your Loan Application
Make it neat and clean with no cross-outs or messy corrections. The best way to
achieve this is to type your application throughout. If you have to submit your
Loan Application via the Internet, do it yourself. Or have an Internet person do
it for you

5. Call, e-mail, or write the lender if you have any problems filling out the application
Ask “What do you want to see as an answer for Question 7?” for any
question that puzzles you

6. Send your Loan Application to the lender along with a letter explaining how
much you need for your business, for what purpose, and how you’ll repay the
loan. You’ll get your money!

7. Use this method and your Loan Application has almost a 100% chance of being
approved. Being organized will get you to your money sooner!

Go For the Top Finder Fees to Earn More

WHO PAYS THE BIGGEST FINDER FEES? In general, it’s the people, or their companies, who are looking for financing of a business or real estate project. Why are the largest Finder Fees paid by people seeking money for business or real estate? Because:

• “Money is the universal solvent”—every business needs money sooner or later. Find it and you’ll be paid!

• Money answers almost every need a business may have.

• Money allows a business to start, expand, pay debts, or sell itself.

With money in the bank, a business can soar.

SO IF YOU WANT TO EARN THE HIGHEST FINDER FEES, try looking for money for businesses. Why do we suggest looking for money for businesses? Because:

• Businesses usually have fair to good credit, often have assets that are usable as collateral, understand that you’re entitled to a fee for your work. They need you and want your skills.

• Businesses respect you as a professional and seldom argue over your fee; they enjoy paying for results!

• Businesses appreciate you finding money for them and are ready to reward you for your work.

“SO HOW CAN I GET STARTED FINDING MONEY FOR BUSINESSES?” you ask. Here are good steps you can take:

1. Set yourself up as a Financial Broker, or Financial Consultant- Finder in your own profitable business.

2. Decide what types of businesses or real estate you’d like to work with. It helps if you’ve had experience in the field you want to work in. You’ll earn money sooner!

3. Run ads, make phone calls, use the Internet to tell people you’ll look for loans for business or real estate for a fee based on the loan amount. Be their money “bird dog”!

4. Contact local, and distant, lenders who make the types of loans you’ll be looking for. Get details of their loan practices from them so you can use the data for your loan clients.

5. Help your clients fill out their Loan Application so it meets the lender’s needs. Be sure to have the application typed, or fill it out on the Internet, if the lender prefers this method.

6. Get money for business or real estate and you’ll prosper!

Success in Two Businesses

One reader's success story. This is an unsolicited comment we received by letter at our office in January.

SUCCESS IN TWO BUSINESSES: “As I said in our phone talk, I’m very active as a commercial real estate investor. I currently own 84 apartment units in the Bronx, NY. My monthly income is about $8,400 net after all expenses and mortgages are paid. My income alone on this building is about $100,800 per year.

“I only buy owner-financed buildings and I get great interest rates and terms. I’m currently negotiating with the same owner for his other building having 97 units. This building will net $9,700 a month, giving me a combined cash flow of $18,100 per month. I learned all my skills through your real estate books.

“I get my due-diligence money for real estate investments by specializing in hard-money loans as a Financial Broker. I closed on a recent deal last month which was for a $2,700,000 loan and my fee was 1%, or $27,000. My family lives on my real estate income so all my Financial Broker fees go straight into my bank account for future real estate deals. I am now working on a $9-million deal and my fee will be 1%, or $90,000. I get great results advertising in the IWS Newsletter.

“Right now I see my Financial Brokering business doing $25,000 to $30,000 a month. This is not bad for an ex corrections officer who resigned after 9 years on the job, even though all my friends thought I was a fool not to stay for the full 20 years to get a tiny pension. These same guys call me to say they have to take a job to support their families, after they retire. I ask myself: ‘Who was the fool?’” By letter from New York

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Earn Big in Real Estate Without Owning It

OWNING REAL ESTATE HAS MANY ADVANTAGES. One of the best advantages is that it can make you a millionaire sooner than you think. But some people prefer not to own real estate. Instead, these people:

• Lease real estate at the lowest price they can get.
• Lease the same real estate at the highest price they can get.
• Earn their profit on the difference leasing prices.

ONE OF THE BEST EXAMPLES of this method at work is that used by a successful real estate wealth builder:

He leased trade show exhibit space for 25 cents per square foot. Then he turned around and leased the same space to trade show exhibitors for $25 per square foot! His income from the exhibitors to whom he leased a total of 150,000sq ft = $25 X 150,000 = $3,750,000. The cost to him of this space = $0.25 X 150,000 = $37,500; profit = $3,712,500!Of course, he had NO ownership of the real estate he leased and then sub-let to others. This didn’t bother him since he had the immediate profit from sub-letting his leased space.

YOU CAN ARRANGE SIMILAR DEALS with many different kinds of real estate. Thus, you can:

• Lease residential apartments and sub-let them to others at a higher rent than you’re paying.
• Lease commercial space for stores and sub-let it to groups of merchants needing a minimum amount of area.
• Lease open land and use it for parking or temporary storage of large construction equipment.
  

YOUR WHOLE KEY IN EARNING FROM REAL ESTATE you don’t own is to have a sub-let clause in your lease. Write the lease so there is no restriction on your sub-letting of the space you rent. Then you can:

• Sub-let your space to anyone of your choice.
• Sub-let at a rent YOU set based on the tenant YOU find.
• Sub-let to as many tenants as you choose.
  

SUB-LETTING REAL ESTATE can give you instant income when you receive your security deposit and first month’s rent. Try it and see!

Make Big Money in Real Estate in a Down Market

WE ALL HEAR TALK ABOUT the "sub-prime mess" and the foreclosure fallout. Does such talk mean that real estate is no longer a good investment? No! Real estate is still the best investment you might make! Thus:

Two years ago one of our readers bought a vacation home in an upscale area. He paid $700,000 for the vacation home, using all borrowed money. For 49 weeks of the year he has a local real estate agent rent the house to vacationers, giving him an excellent income that more than covers his mortgage payments. Just this month, 24 months after buying the house using borrowed money, he was offered $1.4-million for the house he bought for $700,000, using borrowed money.

THUS, IN 2 YEARS, THIS BWB earned a gross profit of some $700,000. That's $350,000 a year, or $29,166 per month, or $972 per day for a 30-day month. And all of this took place while this BWB held another job. So what lessons can you draw from this?

Here they are:

1. Real estate in wealthy areas is holding its value because buyers of such properties have not been affected as much by any economic downturns.
2. Real estate in wealthy areas continues to rise in value because desirable properties have an ongoing appeal to buyers who have money.
3. Real estate in wealthy areas is much easier to finance with borrowed money because lenders are happy to loan on properties in well-known upscale communities.
   

TO LOCATE FOR-SALE PROPERTIES, in upscale areas, take these easy steps as soon as you know what types of property you want to handle:

1. Contact upscale real estate brokers in the area. Tell them you're interested in buying higher-priced properties. Ask them to see if you can get into some properties with owner financing. This will help you get into good deals with zero cash.
2. Get the word outto wealthy people that you're interested in making quick deals for properties they want to get away from.

Surprising as it may seem, wealthy people DO, occasionally, want to get rid of properties in a hurry. That's where you come in! You take over the property with a low-cost Option and make every effort you can to sell it before your Option expires. What you're doing is building your wealth on the wealth of others!