How to Master Marketing Your Real Estate Business in the 21st Century

Quick! Hand this article to anyone who last updated their business cards when Mr. Clinton was in the White House. However, if that applies to you, keep this checklist and treat it as a survival guide for 21st Century marketing techniques that will help you stand out from the crowd, attract the prospects that you really want and grow your business in unexpected ways.

The way effective marketing and advertising is done is changing. Nowadays, everyone mails postcards, attends networking mixers and posts classified ads. What are you doing to help differentiate yourself and appeal to a market of homebuyers that are becoming younger and younger than you? You can’t just think outside the box. You’ve got to throw the box away! If you aren’t using every one of the four avenues listed below, many of which didn’t even exist when a lot of us got into the real estate business, you likely are leaving money on the table.

1. Free Internet Communities. Blogs, Facebook, YouTube and LinkedIn (among others) are becoming great places to meet new partners and clients all over the country and the world. Heck, sometimes you’ll meet people online that office two blocks from you right now. While these sites might have launched for the “hip” crowd and the college students, they really have a number of worlds within them with room for you and me. Many established professionals are now using these sites to let people know about them and their loan programs. Don’t look now, but MySpace has over 200 Million users as I type this and has become the most visited website in the world over Google and Yahoo! If you don’t know what I’m talking about or think it’s just for kids, you’re missing out.

2. Your Own Web Site. Not just a company web site, even though that is a good start. You need to work on branding YOU. Go find a college student or one of your kid’s friends to design a custom site just to tell the world about you. If you don’t have much to say, just put a page up. You can’t let this responsibility fall on your Broker or company IT guy. They aren’t responsible for your success, you are. Oh yeah, make sure you have developed your Unique Selling Proposition (USP) and use your site to tell everyone about yourself. For example, far more people will remember you as “Duplex David” than will remember David Lowenhauser and “Mortgage Molly” has considerably more cachet than Molly McLaren. A good web site with a good name and really unique loan program information can do a lot for your business.

3. Smile and Say “Cheese!” Do you have recent, professionally shot photos of yourself? If not, get some. There are plenty of starving photographers out there that can do a great job with a small budget for you. Once you get some shots – don’t wait until you’ve lost that extra ten pounds – put your picture on absolutely everything you can find. When people see your picture, they begin to feel as if they know you. They will think about you over the rest of the nameless, faceless masses. (Now you know where that expression comes from.) Besides, you’re going to need some pics for your Facebook page. All your other marketing, such as your business cards, works better with pictures, too.

4. Ego Surf More Often. Believe it or not, your Clients do it before deciding whether to work with you. You should do it, too. Ego surfing is when you go to a popular search engine and type in your name. What do you see? Anything? If you don’t get web hits on your name or your company’s name, it’s time to take drastic action. You have to be online to be seen, so get up and get going. Register and run a 5K. Write an article for a well-read publication. Volunteer for a favorite community group or join a bowling league. Do things that get your name into “print” online somewhere. That normally only happens when you get outside your office, so get to it. After all, you’ll attract a lot of business by being known as the “mortgage woman” in your local Toastmasters group.

Repeat the above often. They work. You’ll be surprised how much business there is out there for you now that people know you exist. Once you’ve done each of the steps above, don’t rest. Circle back and improve your personal pages often and search for new “friends”, update your web site with details about your recent closings (most of don’t even remember our URL) and get new photos once you’ve changed your hair style. Here’s an idea: you might even email your prospect list asking them which photo of you they like the best. People will gladly give you’re their opinion and what could be a more subtle, but fun way of reminding them that you’re out there serving them?

Finally, pay attention to what people outside of your industry are doing to capture new customers. It is said that true marketing genius is in taking successful practices in one field and applying them to another. What do restaurants do to announce their grand openings? How do newspapers get new subscribers? What can you learn from the Girl Scouts with their annual cookie drives? Keep pushing the envelope. You’ll discover an approach that works well for you.

If you do these things, you’ll stand out, grab more attention and customers and close more loans. I wish you all the best. By the way, I can be found at http://www.markanthonymccray.com and at http://www.facebook.com/markanthonymccray and I’ll see you online!

***********************

Mark Anthony McCray is the Founder and CEO of Houston, TX based First Capital Commercial Finance (http://www.dealsdone.net). First Capital is a commercial mortgage banking, development consultancy and brokerage firm that has helped its clients leverage millions of dollars in financing for their real estate acquisitions, developments and investments over the years. Write to Mark at mark@dealsdone.net or markanthonymccray@gmail.com or call 832-566-2001 for more information about the author or First Capital’s services.

Here are some other ways to connect with Mark:
mark@cashoutguy.com
http://www.thecashoutguy.com
http://www.facebook.com/TheCashOutGuy
http://www.twitter.com/thecashoutguy
http://www.twitter.com/markmccray

PS - Also, we have a great educational program available for download for those of you who are looking for guidance in placing commercial loans on your own. It's available here: http://www.dealsdone.net/seminars_materials.php

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Why Use A Mortgage Broker?

A top quality mortgage broker can help you navigate through the ever changing mortgage market and help you to identify and target the best opportunities. This can easily save you much more than the broker's fee. As a result of being "in the trenches" every single day of every single week, a good broker is at the cutting edge of what is being offered, of how far the envelope can be pushed, as well as the specific language beneficial to the borrower that has been successfully negotiated on other transactions, etc.

The key to choosing a broker is the same as for choosing any other professional. Word-of-mouth references, as well as due-diligence on the broker's background, experience and reputation are important. Of course, it's critical that the broker you choose is deeply engaged in the current mortgage marketplace, is a good communicator and a skilled negotiator.

Utilizing a good mortgage broker allows you to tap in to a high level of expertise and experience that can help you to best achieve your goals.


Mark Anthony McCray is the Founder and CEO of Houston, TX based First Capital Commercial Finance (http://www.dealsdone.net). First Capital is a commercial mortgage banking, development consultancy and brokerage firm that has helped its clients leverage millions of dollars in financing for their real estate acquisitions, developments and investments over the years. Write to Mark at mark@dealsdone.net or markanthonymccray@gmail.com or call 832-566-2001 for more information about the author or First Capital’s services.

Here are some other ways to connect with Mark:
mark@cashoutguy.com
http://www.thecashoutguy.com
http://www.facebook.com/TheCashOutGuy
http://www.twitter.com/thecashoutguy
http://www.twitter.com/markmccray

PS - Also, we have a great educational program available for download for those of you who are looking for guidance in placing commercial loans on your own. It's available here: http://www.dealsdone.net/seminars_materials.php

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Seven Biggest Mistakes Borrowers Tend to Make

By Mark Anthony McCray

Sometimes a new client will ask what issues tend to come up again and again during the commercial mortgage financing process and what mistakes they should try to avoid. Here are the top seven mistakes that come to mind. As you’ll see, most of these fall under the general topic of “timing is everything”:

1. Searching too hard for the “bottom” when choosing the moment to lock an interest rate

Focus on the monthly/annual payment being within your target range. DO NOT focus on hitting the absolute bottom.

2. Working with multiple brokers

The myth is that taking this approach benefits the borrower because it generates more market coverage and insures a better result. In the borrower’s mind the math goes something like this: “more brokers means more offers which should result in a better deal for me”.
The fact is that when lenders start seeing the same loan submission coming in from multiple sources they assume that no one is actually in control of the deal. Lenders are less likely to put their best efforts forward in such a fuzzy environment.

The borrower’s best strategy is to do some meaningful due diligence, check references and select a knowledgeable, well-staffed and reputable broker. Exclusively engage that broker for a finite period of time, and allow that broker to work the entire marketplace to obtain the best pricing and structure.

3- Failing to recognize and effectively negotiate significant deal points in the lender’s offer letter right at the beginning.

For commercial mortgages, a lender’s initial offer letter or term sheet is typically short on fine detail. Nevertheless you should bring up any significant points that are important to you at this early stage. Various important deal terms may be much more difficult to modify later on, once the loan has been approved and the commitment letter has been issued. The offer letter stage is the time to address tax escrows, the lender’s calculation method (30/360 or Actual/360), issues of timing (rate lock, closing schedule), and any other points that may be of importance to you BEFORE you’ve posted a good-faith deposit.

4. Assuming (especially in NY state) that the mortgage can be assigned, but waiting too long to see whether:

a) the old lender will cooperate
b) all the necessary original documents are available, and that
c) your attorney prepares a draft assignment in a timely manner.

5. Not considering all of the currently available loan products for your situation

Lots of owners know one or two lenders and fall into the habit of calling the same one or two lenders with whom they are comfortable when it’s time to refinance an old property or to finance the acquisition of a new one. This is a good habit to overcome. The financing marketplace is ever changing. To get the best result you need to scan (or have a good broker scan) the overall landscape in order to determine your best move. There may be players and products that an owner/borrower is unaware of that may turn out to be the most logical fit, and the smartest business move.

For example: Perhaps you own 10 apartment buildings and have always tended to choose typical “5 and 5” type loans. This time, take a fresh look. The marketplace is fluid, as are the interest rates. With the 10-year Treasury currently (as of June 16, 2003) at 3.17%, a 10 year fixed rate deal at 4.25% might be worth a close look. With 30-year fixed rates available below 5%, a long term, fully amortizing loan might well be worth considering. If you’re planning a sale in the near term, a LIBOR-floater might be a good idea, as it will have an amazingly low rate (perhaps below 4%), and no prepayment penalty.

6. Using the wrong lawyer

Sometimes a borrower feels compelled to use a lawyer who is a friend, or perhaps his brother-in-law (who happens to be a matrimonial or estate attorney) to close a commercial Real Estate transaction. My advice is simply: Don’t! Most borrowers will end up saving money and perhaps shaping the terms of the deal far more to their liking if they hire a seasoned pro. Using a lawyer who is inexperienced in this very specialized area will only run up the bank attorney’s bill, and may well cause the borrower to need to extend the time to close, which may result in additional fees and penalties, etc. The best advice to achieve a smooth closing is to choose a real estate lawyer who is a seasoned pro in this very specialized (commercial vs. residential) field.

7. Failing to give adequate notice

One possible consequence of making the wrong choice for #6, or the wrong choice of broker might be failing to give adequate notice to the CURRENT lender that their loan is soon to be paid off. Make sure to check and act upon the notice requirement on the outgoing loan BEFORE locking the rate on a new mortgage.

Half the battle is simply taking the appropriate action at the right time. Good timing can help you win almost every deal point the next time you negotiate a commercial mortgage.


Mark Anthony McCray is the Founder and CEO of Houston, TX based First Capital Commercial Finance (http://www.dealsdone.net). First Capital is a commercial mortgage banking, development consultancy and brokerage firm that has helped its clients leverage millions of dollars in financing for their real estate acquisitions, developments and investments over the years. Write to Mark at mark@dealsdone.net or markanthonymccray@gmail.com or call 832-566-2001 for more information about the author or First Capital’s services.

Here are some other ways to connect with Mark:
mark@cashoutguy.com
http://www.thecashoutguy.com
http://www.facebook.com/TheCashOutGuy
http://www.twitter.com/thecashoutguy
http://www.twitter.com/markmccray

PS - Also, we have a great educational program available for download for those of you who are looking for guidance in placing commercial loans on your own. It's available here: http://www.dealsdone.net/seminars_materials.php

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SECRETS TO CLOSING CONSTRUCTION LOANS

I was reading an industry magazine the other day and came across something very funny. A little shocking, too. A very popular mortgage lending resource aggressively advised mortgage brokers to stay away from construction loans. Unbelievable! Their argument was that you will spend too much time for nothing – that they aren’t closable. This was funny because I NEVER turn away construction loans. They represent a solid 25-30% of my business. Frankly, if I were going to only do one kind of loan, it would easily be construction and development loans!
Why? Keep reading…

Three Reasons Why You WANT to Broker Construction Loans

While real estate investors, small business owners and other types of Borrowers would like to close their commercial loans (note my emphasis), Builders and Developers MUST close their loans. That’s how they make their living…which makes it a good way for you to make your living. As opposed to a good way to earn some income and build long-term wealth, Builders and Contractors need construction activity to put food on their table. Even in this market, construction activity is continuing in most markets; it has shifted to commercial projects and multi-family and away from single-family residential properties. You can be the key to helping them feed their families. That’s where you can profit.

Also, in my experience, most Builders are experienced enough as Borrowers so as to not require a lot of “training” from the Broker. True, many are not accustomed to working with Brokers to raise money for their projects. However, they are experienced as regards to helping you compile everything you’ll need on your Lender’s loan checklist. On the other hand, a lot of commercial borrowers require a lot of time – turning the Broker into a Teacher, as well – because they have only previously been exposed to borrowing for their home loan. I have never had a Builder ask me what an MAI Appraisal is, why they need one or why they cost more. That means that my job is often just a matter of packaging the loan request well and locating a money source. This is much more time-efficient than educating a Borrower along the way.

Finally, closing construction loans for small to mid-sized commercial projects has another benefit: you often get the first opportunity to close the permanent mortgage! There are two approaches to this step. One, you can hope to have earned your shot by having been successful at closing the very difficult construction or development loan. Or, you can ask for a Fee Agreement that covers both phases of the project at the beginning, if you’re confident that you can bring the entire financing package together. This is one of the most exciting aspects of working on commercial loans in my practice.

So, have I convinced you that construction lending makes sense? Good! What’s next?

Where Do You Start?

To be fair, most Brokers can protect their reputations by staying away from construction loans after all. They can be tricky and there’s no reason to ruin your business and someone else’s by performing what I call lending malpractice. However, if you’re going to do construction loan brokering, you will want to know the answers to these three questions:
1 Where can you find the better Clients?
2 How can you determine quickly whether you have a good deal?
3 How can you package a construction loan request so that Lenders will respond?

In this article, I will address each of those questions in a way that I hope will give you tools that you can use to be more successful as a mortgage professional. Now, let’s tackle the burning questions.

Where can you find the better Clients?

I have found the best Builder contacts through three primary sources:

1 – Local builders associations: You can offer to present a seminar to the local builders association. I have done this for builders and for other brokers. As a general rule, you may not get hundreds of people to attend, but those who do will have a deal to discuss with you…usually right after your presentation! Therefore, take someone to help you or be prepared to spend more time after your presentation than your presentation takes.

2 – Local community banks: Contact a local banker and ask for “turn-downs” that don’t fit their programs. In this market, bankers are friendlier about asking for help with loans that are in their pipelines. As Woody Allen said, 90% of the success here is in the showing up. Taking a business card or two to your bank can work wonders.

3 – Project signs: Place a call wherever you see a sign for a project that is “Coming Soon” but where construction hasn’t started for some time. Most of the time, these developers haven’t secured their financing, so they haven’t been able to begin construction. The project has languished and they’re frustrated. Be prepared to prove your determination. After all, they have probably dealt with a lot of disappointment by the time you call. If you can demonstrate some energy, you may be able to win an exciting engagement.

All three approaches will yield fruit for you and teach you something unique about the business. Remember, you don’t need a lot of deals to get your feet wet. You just need two or three in your pipeline on which you can focus and learn your way around these types of loans. It only takes a couple for you to begin to understand what factors make a deal strong. In the mean time, let’s look at a few keys to protecting your time and increasing your chances of success by being able to determine whether you have a loan that can be closed.

How can you determine quickly whether you have a good deal?

Construction money is tighter than ever before. Loans are still being made, but with the competition for the dollars increased, Lenders are scrutinizing the packages more closely. Here are the determinants that I see most often considered:

1 – Builder’s Background – Has your Builder ever completed the type of project that they are working on now? If not, they may not be as familiar as they should be with the material costs and timelines involved and the lender will, rightly, be concerned. This happens a lot when homebuilders begin to take on commercial projects. Sometimes, your Client may have to bolster their project team by bringing in someone who has the needed experience.

2 – Exit Strategy – The most important element of getting something built is getting it sold. In my experience, this is the most forgotten aspect of a Builder’s business plan. Very few plan or budget for sales and marketing. They think “if they build it, they will come.” If your Client hasn’t put real plans in place to market their product, you might have to remind them to get supporting letters from Realtors, local officials, potential buyers, etc. This is even more convincing if the future customers will put down cash deposits.

3 – Construction Budget – Many bankers feel as if they contributed to this real estate downturn by simply approving loans that they should not have. Construction loans were no different. A lot of loans – both residential and commercial – were allowed to move forward at LTV’s and LTC’s that should have been considered out-of-bounds. There are three considerations here as regards to construction budgets:
a) LTV Guidelines
b) LTC Guidelines
c) Elements of the Budget Itself

LTV/ Loan-to-Value – Most construction lenders will provide a percentage, usually from 60% to 80%, of the completed value of the property in the form of a construction loan. This is accomplished by obtaining a trustworthy appraisal during the underwriting and loan evaluation process. Once the value is determined, a Lender will judge that the project can be completed by a reasonable contractor at a percentage substantially below the final value. LTV’s are lower for funded loans than they have been in some time.

LTC/Loan-to-Cost – Along with LTV, some Lenders will constrain their construction loan to anywhere from 80% to 90% loan-to-cost for smaller projects. For larger projects, bankers are approving LTC’s that are even lower. For your Client, it means that, even if they have projected that their project can be completed within reasonable LTV guidelines, the Lender may still want them to have significant “skin in the game” by bringing a portion of the hard costs to the closing table. For the most part, the days are gone where the Lenders are comfortable being “the only money coming to the table” even on the most promising of loan scenarios.
Budget Ratios – When you review the construction budget, the numbers need to be in line as a percentage of the total construction budget. They can vary a little, but be careful that they don’t veer off too much. Any residential builder’s numbers should fit as follows:

Raw Land Cost 14.5%
Lot Improvements 11.5%
Materials 24.3%
Labor 20.3%
Builder Overhead 7.6%
Financing Charges 4.3%
Marketing & Sales 6.1%
Advertising 3.1%
Builder Profit 8.3%
Total Construction Budget 100%

These approximations have been distilled from Various Sources, including “Professional Builder Magazine” and several builders and construction lenders that I have worked with over the years. Or, to look at this in a more simplified fashion, you can follow the “25/50/25 Rule” meaning that you allocate:
• About 25% of the total project for Land and Land Improvements
• About 50% for hard costs including Labor and Materials
• About 25% for all soft costs including overhead, debt service, sales/marketing and builder profit

These numbers can’t be carved into stone…but variances won’t be broad for residential construction loan requests that close either. Generally speaking, if your construction deal doesn’t fit within the boundaries as far as a reasonable LTV’s, LTC’s and internal budget considerations, it won’t close. Even if it would have closed a year or two ago, your likelihood of getting them done for the next couple of years is tremendously low.

Not intimidated yet? Think you have a good loan in your hands? Read on…

How can you package a construction loan request so that Lenders will respond?
Now your task is to craft an Executive Summary that addresses the various risks inherent in construction lending and answers them satisfactorily. The main risks that a Lender will be concerned about are the following:
• Credit Risk – The risk of a borrower not fulfilling his obligations in full on due date or at any time thereafter is a risk that affects all aspects of business.
• Construction Risk – This is the risk that design and construction clients face when performing as design-builders, or participating in design-build joint ventures. The elements of construction risk include, but are not limited to, performance guarantees, faulty workmanship, injury, damage to owned property and contractual liability.
• Rate Risk – The possibility of a reduction in the value of a security resulting from a rise in interest rates. With interest rates as low as they have been, some Lenders have valid concerns about possible rate increases on the horizon. This risk can be reduced by diversifying the durations of the fixed-income investments that are held at a given time or by closing the loan at an interest rate that has a premium or “cushion” built into its pricing already. This is common in construction loans.
• Market Risk - This is the risk to an institution's financial condition resulting from adverse movements in the level or volatility of market prices of interest rate instruments, equities, commodities and currencies. Market risk is usually measured as the potential gain/loss in a position/portfolio that is associated with a price movement of a given probability over a specified time horizon.
• Business Risk - The risk of unexpected losses arising from deficiencies in a firm's management information, support and control systems and procedures.
• Legal Risk - The risk that a transaction proves unenforceable in law or because it has been inadequately or improperly documented. Bankruptcies and corporate insolvencies have been a problem for some construction lenders. Therefore, you will rarely see a lender willing to make a loan to an individual any longer. Most of the time, a single-purpose corporate entity will be required for a sizable project.

Your job is to present the loan package in such a way that shows the Lender that any risk factors can be successfully mitigated. What is the strongest of the facet of your loan proposal? The borrower? The property’s current or future value? The project’s future income potential? The exit strategy? Find the strength and accentuate it. Therefore, you should draft a brief (4-5 pages) Executive Summary that covers the following topics:
• Property location and legal description
• Project details and project type such as multi-family, retail center or medical
• Resume and backgrounds of the people involved
• Current status of the project
• Project plans, permits, entitlements and any completed improvements
• Financial projections for the sales or management/leasing of the finished project
• Pictures and location maps for Lenders who want to inspect the property
• Personal and corporate financial statements
• The marketing plan
• The project budget including all land costs, soft costs, hard costs and documentation for any investments already made by the principals
It will take you some time to do a thorough job the first time, but it will become easier with each loan request you structure. As you become more comfortable, you’ll be able to look at a loan prospect in terms of whether you’d be able to draft a good business plan for them from the very beginning. If you notice a lot of gaps up front, you’ll have to decide if you will want to invest any more time to bring the loan package up to your standards.

In Conclusion

Now that you’ve read my advice, I hope you feel more confidence in the area of construction lending. With the credit crunch continuing and bank money harder to obtain, Borrowers who had been able to walk into a bank and walk out with a construction loan are now turning to experienced Brokers to help them obtain funding. In my view, there is no rational reason to take such a large and potentially fruitful segment of the Borrower population and throw it away or ignore it when you can profit from it.

To your success.

Mark Anthony McCray is the Founder and CEO of Houston, TX based First Capital Commercial Finance (http://www.dealsdone.net). First Capital is a commercial mortgage banking, development consultancy and brokerage firm that has helped its clients leverage millions of dollars in financing for their real estate acquisitions, developments and investments over the years. Write to Mark at mark@dealsdone.net or markanthonymccray@gmail.com or call 832-566-2001 for more information about the author or First Capital’s services.

Here are some other ways to connect with Mark:
mark@cashoutguy.com
http://www.thecashoutguy.com
http://www.facebook.com/TheCashOutGuy
http://www.twitter.com/thecashoutguy
http://www.twitter.com/markmccray

PS - Also, we have a great educational program available for download for those of you who are looking for guidance in placing commercial loans on your own. It's available here: http://www.dealsdone.net/seminars_materials.php

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“14% ?!?”

“I don’t understand paying that rate for a loan!”

Ok. Fair enough. I know our loan products aren’t for every situation. And, if I were to ever forget it, there is always someone there ready to remind me, sometimes very creatively.

Yet, over the past few years, I have originated millions upon millions of private real estate loans for acquisition, construction, rehab, refinance and cash-out. All are happy clients. They are happy because we were able to help them accomplish their goals. Therefore, I am proud to say that we have successfully created creative solutions for a lot of people’s problems.

Could we help you? Here are some guidelines:

Hard money loans are perfect for people who:
* Are unwilling or unable to secure traditional financing because the heavy paperwork, difficult underwriting or stringent credit requirements
* Are seeking a faster close than is usually available from banks and traditional mortgage companies – we have closed land loans in as few as five days before!!!
* Have had a hard time finding another financial partner who can see and believe in their vision.
* Need to expand their business and their land or property assets are more valuable than cash they might have on hand.
* Want to keep more of their own money in their pockets for other expenses
If any of the above describes you or your clients, a hard money loan might be a good match for your financial needs.

If you have a question, just give me a call. For now, let me address some of the most common questions that I receive:

Q: What kinds of loans do we originate?

Well, we do a number of types of commercial and investment property deals from new construction to rehabs to church financing and permanent mortgages on income properties such as retail centers, car washes, convenience stores, etc. However, we really have a lot of fun with hard money lending.

Q: Who are our best clients?

To answer this question, let’s look at some real scenarios in which my team helped provide financing:

* A gaming ranch in South Texas received a cash-out refinance from us
* A developer in Galveston recently used us to secure his subdivision development financing
* A small business owner in Conroe used us to pull cash out of some inherited property to help launch her adult care facility
* A rancher in the Dallas area used us to purchase additional land near his property
* A small business owner in San Antonio used one of our loans to restructure his business debt
* A Houston builder pulled some cash out of a few downtown lots to fund a project in south Houston and pay some past due property
In each of these cases, we proved to be a timely business partner to help the Borrower reach bigger goals.

Q: Can you explain this whole interest rate issue to me?

Back to the matter of interest rate. I would agree that 14% could be a high rate for a typical consumer loan that is fully amortized with principal and interest payments. However, when the Borrower has other uses for the money that will generate much higher returns than 14%, paying such a rate in exchange for lowering your risk and keeping more cash in your pocket, can make all the sense in the world. Further, we are much cheaper than an equity partner, who is typically going to want 20%, 25% or even up to 50% of the profits from your deal.

Now, as regards to cash-outs, forget it! Most banks and traditional lenders wouldn’t think of providing a cash-out refinance on land. On the other hand, with hard money lenders, you’ll have a check in your hand within a day or two of leaving the closing table!

Partial releases? Most banks aren’t going to provide you with a partial release of lien if you want to sell a part of your land or property while you still have debt on it. That’s another feature of most hard money loans that a lot of Clients appreciate. Most hard money lenders are open to any number of creative approaches and structures to helping you reach your goals.

Sometimes landowners think the only way to pull equity out of a property is to sell it. NOT TRUE!!! Why not consider taking a loan against your land, keeping title to the property and pay back the loan later? After all, you can still sell it if the right offer comes along and pay back your loan with the proceeds.

Sometimes our clients will pull cash out of a property just to have the money needed to restructure it and market it for sale. Then they sell the property, pay back our loan and move on to bigger, better and more profitable and relaxing things.

Finally, a common tactic is to use private money to close a deal that is time-sensitive and refinance into another loan structure once you have time to shop and secure something that fits your needs. People use us to close the quick deal all the time.

Q: What is the process for originating one of these loans?

Our process is fairly simple. Here it is entirely:

1. We make sure that the Client has either the title to the property or has a contract to purchase it by ordering a title report and/or asking for a copy of your purchase contract.
2. We need to determine the value of the property. An appraisal or (sometimes) tax records can show this.
3. We will look for the existence and balance of any debts, liens or other encumbrances against the property. The title report usually shows these and we will make sure that they are all paid at closing.
4. We will become familiar with the size and dimensions of the land along with its legal description. We can see this from the survey.
5. We want to feel comfortable with the condition and general marketability of the property. We also want to have confidence in the Borrower’s ability to execute their plan. A site visit and meeting with the borrower will help with each of these.

Reputable lenders – the only kind with whom we do business - are not in the business of taking property. They only want to make good loans and help people reach their goals!

Q: What are our money sources?

I am a banker and a broker. We will broker deals that don’t fit what we do to other Investors and Lenders. However, we specialize in placing our loans within our private network of Investors and individuals. If you have something, please send it!

Q: Tell me again, how fast can most hard money loans close?

We can close most of the purchases and cash-outs within a couple of weeks. We will examine your request and, if we are interested, we will schedule a site visit within 48 hours normally. Development loans can take several weeks, mostly because we’ll need to order more thorough appraisals and other third party reports. I usually tell people that we can close loans as quickly as we receive the documents we need.

Q: What other fees and charges are involved?

Due diligence fee, third-party reports and appraisals and surveys are paid for by the Borrower when required. We charge an Origination and Brokerage Fee along with our lending partner. Altogether, this is normally between 4 and 6 points (percent) of the amount funded.

Q: I might have a loan request for you to consider. What do I do next?

Give us a call. Write us e-mail. I hope this article answers most of your questions about private lending and that you are more comfortable with the product and the process and that you will call me with your next loan.

To your success.

***********

Mark Anthony McCray is a Texas-based mortgage banker.  Write mark@hardmoneyexpert.info or call 281-846-5720.

PS - Also, we have a great educational program available for download for those of you who are looking for guidance in placing commercial loans on your own. It's available here: http://hardmoneymusings.blogspot.com/2011/08/how-to-broker-commercial-and-hard-money.html

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Great Business Books for People Who Want to Be Great

If you’re anything like we are, you’ve always had a desire to do something special. You’ve wanted to stand out from the crowd, be different, shun mediocrity, establish more security for yourself and your family, to contribute more to society. You want to be more than just another person with a long list of dreams deferred.

You may have also discovered after lots of trial and error, like we did, that you needed to develop certain skills to become more successful in business.

In that spirit, we have compiled this Guide – Great Business Books for People on a Path to Greatness.

The purpose of this report is to help you identify the common traits of some of the world’s most successful entrepreneurs, people who have achieved great goals and made unforgettable names for themselves.

This guide is organized to provide a short book review describing how we think each book can help you grow as an entrepreneur by actually helping you envision these traits the way they have been lived out in other’s lives.

You benefit from their wisdom and learn from their mistakes and successes. Each person discussed here becomes a personal mentor for your success! After all, as a learning entrepreneur, who better to guide you through the minefields than someone like John C. Maxwell or Mister Get-Things-Done, Harvey Mackay?

Enjoy!

RICH DAD, POOR DAD
Robert Kiyosaki

Young Robert Kiyosaki told his 'poor dad' that he did not want to be poor anymore. His 'poor dad' gave him the simple advice to make some money. Well, Robert took his advice literally and starting "making money" with the help of one of his friends. The problem was that the method he chose usually lands people in prison. After his 'poor dad' explained counterfeiting to him and that it was illegal, he shut down his first business venture, a failure.

However, fortunately for us, this would not be his last attempt at achieving success and accumulating wealth. He has since gone on to launch several successful ventures and has captured many of the lessons that he learned from his 'rich dad' and subsequently practiced in this book, the first of his "Rich Dad" series.

The author explains some of the principles that the rich use to get richer. For example, Kiyosaki offers these challenging ideas:

1. The rich do not work for money
2. Working is not the solution to gaining wealth
3. Your home is not an asset
4. People can't gain wealth when they do not know the language of money

The author teaches readers about these and dozens of other principles of wealth creation. He explains the differences between how the rich and the poor and middle classes view money. He contends that our school systems do not teach our kids how to become financially independent and, therefore, most of us will never learn.

Rich Dad, Poor Dad is Kiyosaki's attempt to help you establish a new paradigm in your life and learn how to 'make money.' You won't learn the secrets of the U.S. Mint, but Kiyosaki, has succeeded in crafting one of the most illuminating books on business and personal finance to come out in several years. I highly recommend it.

THE MILLIONAIRE NEXT DOOR: THE SURPRISING SECRETS OF AMERICA'S WEALTHY
Thomas J. Stanley, William D. Danko

Amazon.com says: "How can you join the ranks of America's wealthy (defined as people whose net worth is over one million dollars)? It's easy, say Stanley and Danko, who have spent the last 20 years interviewing members of this elite club: you just have to follow seven simple rules. The first rule is, always live well below your means. The last rule is, choose your occupation wisely. You'll have to buy the book to find out the other five! It's only fair.

The authors' conclusions are commonsensical. But, as they point out, their prescription often flies in the face of what we think wealthy people should do. We also understand that common sense is not always common practice. There are no pop stars or athletes in this book, but there are plenty of wallboard manufacturers --particularly ones who take cheap, infrequent vacations!

Stanley and Danko mercilessly show how wealth takes sacrifice, discipline, and hard work, qualities that are positively discouraged by our high-consumption society. "You aren't what you drive," admonish the authors. Somewhere, Benjamin Franklin is smiling.

If you follow the advice in this book, you'll be smiling, too. I think that this book should be required reading in schools, in marriage counseling sessions, in the Cub Scouts and Brownie Troops even! It's that good. If you feel like you're not getting ahead financially as fast as you think you ought to be, check out this book. If you have to sell apples on the street corner to afford this book, you can borrow my basket. Just do what you have to do to read and apply these principles. You owe it to yourself and your family.

SWIM WITH THE SHARKS WITHOUT BEING EATEN ALIVE
Harvey Mackay

Do you often wonder how successful business owners got where they are? Do you wish that you knew the strategies that they used to network, build teams, advance their careers, and manage their corporations? If so, this is a book that you MUST read. It's one of my favorites.

This book is a favorite because the author, Harvey Mackay, a successful entrepreneur in his own right, shares from his innermost thoughts. He doesn't just speak to the reader about theories and general business principles. This book is about tactics...what you should do on a day-to-day basis! That is, if you want to taste more success.

I can't find enough words to share my enthusiasm for this author. Mr. Mackay shares his experiences - both successes and failures - in such a way that would qualify him as a mentor to almost every entrepreneur. If you have had a hard time building mentoring relationships with successful business owners, start here.

Finally, I would like to add that this book has been a personal source of encouragement and education for me. I hope that it will become that for you as well.

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Be the Bank

I would be willing to bet that neither you nor I know many bankers that are at risk of starving. Altogether, they seem to be doing fairly well within a good, stable, profitable business that has been getting better over time. As I have worked in commercial real estate finance for a number of years now, I’ve observed a simple truism that bankers have known since the first merchants sought financing for their next expedition: Lenders don’t lose.

Within lending, making loans to real estate investors and projects is preferred by many creditors. Most great, lasting wealth has been made through real estate investing. Where real estate wasn’t the great driver, such as the Internet and telecommunications booms of the early 90’s, the smartest people redirected cash earned into real estate holdings. Buying-and-holding residential and commercial properties, speculating in land and serving the growing population through construction, have proven to be effective paths to wealth.

Even within that, many smart Investors have chosen a more passive path to real estate riches. Instead of being the landlords, rehabbers, developers and builders, they have chosen to finance those who do. This is often called “hard money lending” or it can be known as “private real estate investing.”

Let’s look at three main reasons why real estate lending works so well for those looking to build long-term wealth.

1. Income. Real estate lending offers you the chance to earn passive income. Unlike your job, where you trade your hours and effort for cash, lending allows you to leverage capital. Your money makes you more money while you do something else – or nothing at all!

2. Asset Appreciation. Another great feature of real property is asset appreciation. That is, the underlying asset that is actively generating income even as it may be increasing in value. This means that the value basis of a loan you make may improve for you AFTER you close the loan draining risk from your portfolio for the same rate of return.

3. Stability. Investing through private mortgages can shield you from some of the fluctuations that exist in the stock and bond markets. While real estate does have cycles (just like any other asset class), demand is fairly consistent, especially in the Sunbelt region. This feature can be tremendous in a well-balanced portfolio.

HOW DOES HARD MONEY LENDING WORK?

When Investors make hard money loans, they usually do so at annual interest rates of 12-18%. This can be invested in a wide variety of income-producing real estate projects, each of which should be thoroughly researched. The loan terms are typically six-months to two years, during which time the Lender receives a spendable income, paid monthly.

The most experienced private lenders almost never exceed 75% of the appraised value on residential properties or 65% of the current appraised value on commercial properties and land. This measure is taken to help ensure a secure loan, one that allows for a strong equity position in the case of a loan default.

WHY PEOPLE USE PRIVATE MONEY

It is our finding that real estate borrowers, even borrowers with flawless credit, are able and willing to pay a higher interest rate because of the fewer time constraints and red tape than they face with traditional lenders. Private lenders can often approve and fund a loan within days of receiving a complete submission. Traditional lenders can often take 30-45 days to approve and fund even a simple transaction. This leaves the borrower a clear choice when attempting to purchase time sensitive, below-market real estate.

Obtaining a private money loan provides the professional real estate investor much greater flexibility when structuring a transaction. Instead of relying solely on their own cash or credit, a borrower is able to utilize the equity (or potential equity) in the property as collateral for the loan. This allows for a profitable and secure transaction for all parties involved. The borrower is able to acquire and/or rehabilitate a piece of real estate at below-market value with little or no money out of pocket, while the Investor is able to gain higher-than-average returns with below-average risk.


WHAT COULD GO WRONG?

Nobody likes to talk about investments that go bad. The fact of the matter is all investments have some level of risk, and some investments simply do not work out. This presents another advantage to investing in private mortgages. When a traditional investment goes bad the Investor simply loses their money. They may receive nothing in return except maybe an apology from the Borrower. However, well-structured private mortgage investments are secured by real estate and in the unlikely event of default, the Lender may choose to retain the property or sell it for a profit.

If the loan was funded at a portion of the appraised value, the Lender might have a 30%+ profit potential in the property.

WHAT COULD GO RIGHT?

Investing in private mortgages also provides a monthly income stream. With a "normal" investment you don't actually receive any income when (and if) your investment performs well. The capital investment stays with the investment and you receive a quarterly statement detailing how much the portfolio gained or lost. This can be a great strategy for long-term growth where the Investor is secure enough to leave the Investment alone. However, many people would like a monthly income from their investments. Private mortgage investors usually structure their notes to generate monthly interest checks, creating a "spend-able" monthly income stream. For example, a $250,000 investment earning 14% could yield you a monthly income of $2,916.67.

The recent shake-up in the mortgage industry, money is still flowing. It’s just flowing in some different directions. Home Buyers are becoming Renters. Sellers are becoming Landlords. And Lenders are still winning. Therefore, I believe that one of the keys to winning in the next few years is to become a Lender.

Lenders never lose.

If you need help evaluating opportunities or financing your projects, contact me today. I have a free “Deal Evaluator” in Microsoft Excel format that I will send you free when you e-mail me. Many real estate investors have found it helpful.

I wish you great success.

Here are some other ways to connect with Mark:
mark@cashoutguy.com
http://www.thecashoutguy.com
http://www.facebook.com/TheCashOutGuy
http://www.twitter.com/thecashoutguy
http://www.twitter.com/markmccray

PS - Also, we have a great educational program available for download for those of you who are looking for guidance in placing commercial loans on your own. It's available here: http://www.dealsdone.net/seminars_materials.php

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10 Keys to Success as a Beginning Real Estate Investor

Ever thought about becoming a real estate investor but weren’t sure where to start? You’ve got company. People just like you have purchased millions of books, tapes and videos from the Robert Kiyosaki’s, Carlton Sheets’ and Robert Allen’s of the world looking for the keys to investing puzzle. However, very few actually get started and even fewer make any money at it. You might still feel as if there are too many obstacles in your way.

Let me encourage you. Just because you might lack a large cash balance, may not have a great credit rating or may not have years of experience as a wheeler-dealer doesn't mean that you can't enjoy success as a real estate investor. I am walking proof. I have helped real estate investors obtain millions of dollars in financing for their projects and, along the way, I think I’ve seen every type of investor possible.

In my job, I’ve had the benefit of seeing many people succeed wildly and many others lose thousands of dollars almost overnight. Here are some ideas that, in my experience, will lead to greater success for you:

1. Determine your goals. Where do you want real estate to take you? Approach your real estate career just like you would any other business by deciding where you want to be in one year, three years or deeper into the future. Knowing where you want to end up helps you choose the right road.

2. Choose the best path for you. What level of profitability do you want to achieve? How much risk can you tolerate? One thing I love about real estate is that there are at least 100 different ways to make money. For example, you could consider
• Rehabbing and reselling single-family properties
• Buying homes and holding them as rental properties
• Becoming a real estate agent
• Brokering or owning office and commercial properties
• Investing through limited partnerships or becoming a private money lender
The thing that matters most is that you find a path that is in line with your lifestyle in terms of how much you want to participate in various investment vehicles.

3. Do your homework. You can lose a lot of money fast if you don’t exercise the discipline to educate yourself and get good advisors. Talk to people about various lending programs, rates and terms in the marketplace. Read some trade magazines or subscribe to wonderful newsletters such as National Real Estate Investor to bolster your understanding of real estate trends.

4. Location, location, location. Learn the makeup of your local market. Buy locations. You can change everything about a property except where it is located. I haven’t seen too many folks make money by having the market bail them out of a bad situation. It usually doesn’t happen that way.

5. Ask questions. When you find a property or project, talk to the neighbors. They will tell you everything you could want to know and more…including why the owner is really selling. Interview Realtors. Some have worked in certain neighborhoods long enough to have brokered the same property several times over the years.

6. Appraisals and inspections are your friends. Unless you are already a millionaire real estate investor, stop listening to your “gut” feeling. If you are a millionaire real estate investor, you probably aren’t reading this article. Therefore, I feel safe in recommending that you always get a second and third set of eyes to look at every investment you’re considering. Better to spend a few dollars to save thousands, right?

7. Line up your professional team. Ask for references and check them. Be willing to fire them and move on if they aren’t performing. You’ll want to establish a relationship with a good attorney, real estate broker, mortgage broker, accountant, inspector, appraiser and a title company along with others that you may work with from time to time.

8. Know your numbers and respect them. You are probably not so much brighter than everyone else that you can rewrite the rules. (Not yet.) Take the time to learn how to analyze debt coverage ratios, local days-on-market, property rental rates, occupancy averages, etc. Respect what your research tells you and…

9. Always be willing to walk away from a deal. It is your money and your time that are at stake. You are making all the ongoing commitments and taking much of the risk. Don’t let anyone pressure you. No one gets paid until you start signing papers; so wait until you are ready before going forward. Once you’re ready…

10. Get started and never give up. You might do a bad deal or two. That’s okay. It’s better to learn early in your career, right? There is a way to breakthrough and accomplish all your dreams. You just have to hang in there until you find it.

In most of the cases, people lose because they violated one or more of the above keys. The more you guide your real estate investing career by these rules, the better off you’ll do. Maybe you’ll be sending me a testimonial recounting your latest success one day? I hope so.

In the mean time, if you need assistance identifying your goals, locating advisors, evaluating opportunities or financing your projects, contact me today for help. In fact, I have a free “Deal Evaluator” in Microsoft Excel format that I will send you free when you e-mail me. No matter where you are starting, the exciting and wealth-building world of real estate investing isn't closed to you.

I wish you great success.

Here are some other ways to connect with Mark:
mark@hardmoneyexpert.info
http://www.facebook.com/TheCashOutGuy

PS - Also, we have a great educational program available for download for those of you who are looking for guidance in placing commercial loans on your own. It's available here: http://hardmoneymusings.blogspot.com/2011/08/how-to-broker-commercial-and-hard-money.html

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