Part 1 in a series

I come into frequent contact with people wanting to make the jump into real estate investing, but not knowing where to start.  I’m on the Board of several Real Estate Investor Associations, and co-founded one of them, so my network includes many new investors.

Sometimes they ask where they can find deals. (That’s the mother lode, by the way.  It’s sort of like asking Coca-Cola for their formula.)  Finding deals- really good deals, I mean – is the skill that investors need to cultivate.  Great deals are found off and on market.  They are frequently found by speaking with sellers directly, some of whom don’t want to list their property conventionally with an agent for many reasons.

If you have the personality and the persistence to seek out sellers directly, this will probably be your best source of good deals.  You will need to make possibly hundreds of contacts per actual deal realized.  There are many trainers who teach these skills, and I am not the expert in this arena.

If you can find the deal, and have no funds, there are huge networks of investors who will buy your deal without your ever having to close.  Selling the deal is easy, finding the deal is the key.

Good deals can be found on the MLS if you are working with an investor-friendly agent.  But remember, if that agent has been in the business for a long time, they have a huge buyer’s list of real estate investors ready to snap up the best deals, and they call these investors first if they have proven they can perform.

Sometimes they ask if we lend their purchase price plus the fix up money. A new real estate investor frequently comes into the game with little to no cash.  They find what they think is a great deal on the MLS, and want to buy it, but have no cash for purchase or repairs.  They are told by the “gurus” that a hard money lender will lend them 100% of the purchase and rehab costs.  While that may have been true 5 years ago, it ain’t happenin’ now.

If you are determined to buy a property and rehab it for resale, but have no cash, you should partner with someone you know who does have cash but doesn’t want to manage a rehab.  Hard money will seldom lend out the full amount for a project, but if your partner puts up the needed downpayment, then you can use hard money for the rest.  If you are one of these people who have the funds but don’t want to manage a rehab, then read on.

Sometimes they ask if I will lend out their money, because they want to be involved but are not sure when to pull the trigger on a deal, and aren’t sure they want to be a landlord, or do a rehab and flip.  So this series will discuss what you should know before you decide to lend out your funds, either directly to a real estate investor, or through a hard money company.  Here are some of the issues we will be covering:

Do you need to be an accredited investor?

Should you buy into a pool or lend directly?

How do you choose the deal you will lend on?

How do you find these good deals to lend on?

Should you ever lend in second position?

What about business loans instead of real estate loans?

How does the SAFE Act impact your lending?

How do you protect yourself from fraud or incompetence?

How much of my portfolio should I allocate to lending?

What happens if the borrower stops paying?

Should I form an entity to lend?

Should I lend outside of my geographic area?

Covering all this is beyond the scope of one post, so I’m going to write a series.  If you have additional questions you’d like me to address, please, by all means, jump in and let me know.