May 1, 2018
Alan began with, “I’m here to show you how to get the money to do your deals.”
“I have a quarter century in the corporate world but heard that 92% of the people were retiring broke,” he said. “I was driving a car that was always breaking down. I was on a date and once I walked away my car caught fire.”
“One night, I got up in the middle of the night and saw one of those channels that showed you how to buy real estate. I put up the money and then bought two properties and was on my way.”
Life is always about choices. I made the wrong ones for a while, but doing real estate was the best choice I could have made.
He explained that “Now I’m in three nationwide infomercials and have been successful across the nation.”
Alan talked about his family and the successes they have had. He has two daughters and a son. And, “I have a new grandson now.”
Alan talked about his Saturday Seminar where he will come back and speak at length. “I’m going to show you how to get $5 million with only a two-page form and $700. I’ll teach you all the rules in your state, so you will not get into trouble.... Saturday will rock,” he emphasized.
“I started out doing business with banks, but the internal auditors shut us out and we needed to get some more funds. I have a slide showing creative financing, but unless you have the money to give them or to do the rehab, you will probably walk away from a lucrative deal.”
In dealing with banks, you could lose the deal because someone could come in and offer cash. It always takes time to arrange for loans. I had one where the bank took 4 ˝ months to get it funded.
Then, if you have too many properties, they will cut you off. If your credit drops, they will shut you off.
Banks ask for your tax returns, expenses, income, etc. Then you wait and wait. I will show you how to get the money that is not dependent on your income, your credit, etc.
I borrow money from an individual to buy and fix up properties. Then, when you cash out, they get their money back. Normally, they don’t want it; they want you to just keep it working.
With a hard-money lender, you have to come up with a down payment, and then they take points. I had a closing where the lender got $5,100 off the top. Then, it is usually given for 12 months until it has to be paid back. Private lenders do not give me a balloon. I would rather you become the hard-money lender by borrowing at a lower rate than you lend out.
What’s a private-money lender look like? Alan said, “It looked like my mother, because she was the first one to loan me money.”
He continued, “There are only four parts of a real estate transaction: find the property, finance the purchase, rehab the property, and rent or flip it and cash out.”
Alan asked, “Is anybody afraid of making offers because they may get accepted?” You can use private money to purchase and renovate multifamily units, commercial properties, and single-family houses.
There are three ways to pay the private lenders back:
- They loan me money with no payments and get paid when I get paid, so I pay a higher interest rate.
- I borrow the money and make interest-only payments, and they get income all along.
- If I’m going to hold it and rent it, I pay an owner interest and amortize it. You can also do a medium-interest rate for wholesaling.
Alan talked about a deal where he offered the second mortgage holder $4,400 for a $44,000 second, and netted $42,000 on the purchase and flip sale.
Alan cautioned, “Always borrow extra. If I need $38,000 for the deal, I borrow $50,000 so I have a deed and $12,000 at closing.”
My private lender was Libby. She had money in a 401(k) and was now unemployed. If you know someone who quit, retired or was laid off, they can roll their 401(k) into a self-directed IRA and can lend you the money for your deals.
“I used to do a spit deal, either 10% or 12% depending on whether they wanted monthly payments. Now, I have students who are paying 4%, 3%, and even as low as 1%. You get to set the rules.”
Alan warned, “You can get some money up front, but I want you to wait until the end to get the biggest chunk of money, so you won’t have an alligator biting your butt.”
Ordering private money is like ordering pizza. You can get private money with no monthly payments. I buy with private money; I fix with private money. You can then refinance with another private lender, amortizing it over 30 years if you want to hold it.
He instructed, “I had a lady that needed to sell in five days, so I ordered my private money, closed in five days, and walked away with $17,500. How would you like to make that in a week?”
If you can’t get money to the closing table, it costs you time, effort, and money. It costs money to buy the signs, make the calls, etc. and you need to be educated so you don’t waste your time.
Here are some lessons I have learned:
- Don’t prejudge people. You can’t tell how much money they can lend you without asking.
- They test you: a little at first, then more later.
- They become your best sales folks. They will bring you more lenders.
Once you find a private lender and they tell you an amount they can lend, double it and ask them: ”If I find a deal worth [$200,000], should I call you?” It’s called the “Up the Ante” close.
“You win, the buyer wins, the seller wins, and the lender wins. Win, win, win. Wouldn’t you like to live in a world of winners?” proclaimed Alan.
How do I find my lenders? People you know and people you don’t know. That’s it.
Family, friends and associates: They need you worse than you need them. You have to get yourself noticed by them. Don’t beg for money. All they have to do is send money: they don’t go to closings, they don’t help you make the purchases or do the rehabs.
Alan outlined five steps for success:
- “Build credibility by making a credibility kit. I have a page on me, a page on the company, certificates of study showing any classes I have taken, and printed testimonials.
- Find lenders by talking to people. Come up with a script, and follow up. You will find that 60% of the people will loan you money based on your follow-up. I’ll call and ask if they have any questions. Remember: “Some will, some won’t, so what, someone’s waiting.”
- Outline your program: Interest rate, when do you pay, minimum investment, early withdrawal penalty, how long to return the money (I use five years or until it sells or is refinanced).
- You need three scripts: people you know, people they know, and voicemail.
- Use the three methods of re-payment: Monthly payments paying interest only; monthly payment amortized; no monthly payment, just get paid when sold.
Alan explained, “I always pay simple interest: 2% pays $2,000 per year, 6% pays $6,000 per year…. That way, it’s easier to determine the payback to the lenders.”
What tools do I use? PowerPoint presentations, scripts, handouts, audio business cards with info on private lending, and an audio CD describing a great alternative to stock market investments.
Alan emphasized that “All my lenders are IRA owners…. I instruct them in how to convert their stagnant IRA’s or 401(k)’s into Self Directed IRA’s, so they can lend me money to buy real estate.”
Tell your lenders that they are getting in on the ground floor. Alan suggested that “everyone likes to think they are on the bottom and the only way to go is up.”
What are the benefits of using private money? Quick money, no credit checks, saves you more money, unlimited funds, flexibility, cheaper than a partner, can buy at a discount, puts you in control, can borrow extra so you have more cash.
Alan went through the course describing the topics in the course and how it will help you work your business. It includes the audio CD’s and the audio business card, done with a professional announcer.
“More will be discussed on Saturday when we cover more information,” he said.
The course includes 15 different forms, some created by his attorney, so they are legal in every state.
After the meeting ended, Alan stayed around for a while answering questions.