Flipping Real Estate is for Action Takers

If you love to contemplate on how frustrating life has become for you but do nothing about it, flipping real estate is not for you. This business is made for action takers. In the world of real estate investors, it doesn’t matter if you know all the techniques of flipping houses. What matters is that you take that knowledge and start closing deals.

But, if you belong to the other side of the coin, the Yin and not the Yang if you will, then there’s a chance that you’ll make it bid in this business. Real estate investing pays a lot and that’s something you already know. However, it chooses who to bankroll and if you’re not an action taker, you’re not part of the money list. For those who’d rather bite than bark, there are at least two ways to make money flipping houses.

First of all, a flip is simply a quick resale. If you resell it fast, or relatively faster than conventional wisdom, it’s a flip. Flipping real estate seems like a daunting task because the amount involved in the transactions is huge. But, ponder on this: the presence of such a market already suggests that buyers are there. You simply have to give them what they are looking for. For doing so, you will be rewarded. And rewards from real estate are but sweet.

One of the two methods of flipping houses is known in other areas as wholesaling houses. In some areas, it’s called assignments. In this method, the investor looks for deeply discounted properties and places them under an assignable contract. He will then assign that contract to the actual buyer of the property for a fee. Because you only assigned the contract, you won’t need money to close. You simply acted as the bridge between the seller and the buyer. Some closings, however, require you to pay for the house first. In cases like these, you can use transactional funding, which is easier and faster to acquire than bank loans.

The other method of flipping real estate is actually buying the property and then reselling it. But in between, you’ll carry out some repairs and improvements. You basically rehabilitate the property to make it sellable. In this method, you’ll need the money. Among the best sources of funding for rehab projects are private money and hard money lenders.

These two methods pay well, but as mentioned earlier, you must take action. Nothing will happen if you just keep on lamenting your life right now. Learn more about on how to flip houses at RehabList.com right now.

Compare Credit Cards and Get the Best Deal

The plastic cards issued to the users are used for payment or cash advance. What came first in this field is Charga plate. In this type the person had to pay the full balance money along with interest every month. The new generation device i.e. the “Credit card” allows the person to revolve the money with the interest being charged. These cards are mainly issued by the banks. The cards look like a thin rectangular plastic card similar to the shape and size of Charga plate. A credit card is ISO 7801 standard certified.

Now comes the part of the card holders i.e. a person willing to have a card needs to look out for some features to get the benefit. The credit cards are based on rates, promotions and balance transfer options. The cards are of two to three types under each category.

The Rate based credit card includes zero percent, low percent and fixed rate credit cards, where rate of interest is zero, low (not a two digit number) and a certain fixed amount respectively.

The Business credit cards are of two types namely Business reward card where rewards are given on item purchase. The other type is Business line of credit card used for business transaction.

The third type is Reward and rebate based card. Here in airline credit card points are to be accumulated by the regular passengers, which offer them a free trip or seating upgrade in the future. In case of cash back credit cards a cash back is offered at the end of a year based on the annual expenditure. Third type is hotel/travel reward credit card which allows redemption in the traveling or lodging in a particular chain of hotels.

The fourth type is Cash back credit card in which cash is returned based on the accumulated points and the annual expenditure of a person.

Some features of the credit card which makes it so easy for the consumers to use are:

1.    Credit cards are acknowledged world wide.

2.    These are available with credit limit variety, compensation package and other bonuses.

The modern credit card has descended from various merchant schemes. In 1930s and late 1940s Charga plates have been used but were not in use for very long due to the introduction of credit cards. These had owner’s signature, name, card number and address of the user etc.

Keeping a card has its own advantages like:

1.    You don’t need to carry a large sum of money i.e. only a thin piece of plastic card makes it possible for you to make the payment.

2.    Some times the credit cards are used as ATM cards from which you can withdraw as per your requirement.

3.    The card cannot be accessed by an outsider unless the secret code of the card holder is known.

4.    Money transfer takes place from an account to another.

Now let us see the disadvantages of a credit card:

1.    The card holder will have to pay more interest on the amount of money kept in the account.

2.    The companies are targeting mainly the college students who are already over-burdened with college tuition fees.

3.    A number of fraud cases have come into light due to the poor card security.

So far we have seen the advantages, disadvantage and many other properties of a credit card. Now we will see the process of transaction using the card. It consists of five steps.

They are: Authorization—here a customer pays for the purchase he has made to the merchant. Here the receiver compares credit card, confirms no and the depositor receives a copy of the money he has deposited.

Batching—here the transaction details contains the documents of the depositor’s slip.
Clearing and settlement—here the issuer gets paid for the transaction.
Funding—the acquirer is paid by the merchant for the transaction process he performed.
Chargeback—if there is any problem in the transaction for the merchant the deposited money is held.

For a credit card the security is must. So we have a latest kind of security. When another person tries to access the account of a different person then a security message is sent to the owner of the card. If the owner wishes to stop misuse of the card then he has to tell the bank about the losing of the card then the bank will take some steps and then whoever has taken the card is put behind bars.

Although we saw that the credit card has advantage of its kind that cannot be cut short but some disadvantages are also present. The explanation may prompt a person to take a credit card but he/she should always take note of every thing very minutely and then think about taking the card for his/ her use. No doubt, if you compare credit cards, you are sure to get the best deal.

shortfunding.com Real Estate Investor Video Training Series. Short sale and flip transaction rules and how to manuals. Easy access to private lender capital.
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Short Term Investments For Long-Term Wealth

Money markets are defined as organized exchanges of funds. This allows participants to lend and borrow money for a maximum of a year. Money markets were popularized on two fronts. The first is the individual investor who wants to be able to invest a smaller amount of money while being able to take advantage of considerable safety and liquidity. The second front is that of governments, banks, and other businesses who have found this to be an efficient way to transact funds.

Purpose of the Money Market

The main reason for money markets is to generate money. This is true for both the public and private sectors. The attraction for most investors is the short-tem maturity of money markets that range from 24 hours to a full year. However, the norm is approximately three months. It is possible for investors to sell their investments before the maturity, but they will lose the interest they could have earned if they had waited for them to mature.

Money markets are traded in secondary markets as well. Secondary markets are where investors buy and sell securities and assets from investors as opposed to the issuing organizations. While there is a loose association of these markets in New York City, these centralized markets really do not have a centralized location.

Types of Instruments

Most money market products are specialized which means they are routinely traded with large finance organizations and banks who have a better understanding of the money market. Common money market instruments include: futures options and contracts, discount window, shares in market instruments, federal funds, repurchase agreements, and negotiable certificates of deposits.

Other money market products also include: commercial paper, short-term municipal securities, mutual funds, and bankers’ acceptances.

Short-Term Investment Pools

Short-term investment funds of local government pools, bank trust departments, and money market mutual funds are all included under the umbrella of short-term investment pools. They combine different money market instruments.  As a result, highly specialized money market products available and understandable to traders do not possess the knowledge required for these instruments. One other benefit is that the minimum of 0,000 is not required unlike it is to purchase other money market products.

Money market mutual funds are operated by bank trust departments and are an assessable short-term investment pool. This type of mutual fund is either classified as taxable funds or taxable exempt funds. Tax-exempt funds are free from all federal tax because the money is invested in securities that are issued by local and state governments. Taxable funds are securities investments which include commercial papers and treasury bills; his requires investors to pay federal tax.

Eurodollars

The term Eurodollars is a bit deceiving, because it does not have much to do with Europe. They are actually United States dollars that are deposited in banks outside America. They get their name from the evolution of the market in Europe, but can be held in any country around the world. Banks benefit from them because they can be operated on a narrow margin and are somewhat regulation free. This means banks can circumvent the costs associated with regulations. One of the drawbacks of Eurodollar deposits is that they tend to require millions and it reaches maturity in several months. For this reason, the largest organizations have the ability to attain the Eurodollar market.  This type of investment has less liquidity than other money markets, although they do offer higher yields.

www.flipthiswholesaler.net Wholesaling Real Estate Tips! Real Estate wholesaler, Steph Davis answers the question What is transactional funding? Want to learn how to wholesale real estate? Check out my blog: www.flipthiswholesaler.net to learn how to wholesale houses! Other topics include…

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Accept Credit Cards and Grow Your Business

For a lot of people who are just starting to launch a small business venture, it may seem quite intimidating to start accepting credit cards as a means of payment from customers right away. After all, it takes a lot of hard work to have your company certified for merchant status from a number of banks to be able to accept credit payments.

Even so, what small business owners must take note is that setting up your company to accept credit cards can actually contribute many rewards that could lead to the growth of your business. Here are some of the reasons why accepting credit cards will greatly benefit your company.

1.Increase In Sales

With customers being able to pay through credit cards, you are actually increasing the probability, speed and size of customer purchases. This is mainly because accepting credit for payment basically does not turn away sales. And so, when your customers are in the mood to buy your products out of impulse, then they can readily make purchases even when they do not have cash in their pockets. In this way, you are doubling the chances for people to be able to buy your products by adding options for how they want to make their payments.

2.Contributes to the Convenience of the Customers

This also adds to the convenience of your customers. Take in mind that not all people may always carry cash with them, especially to those who are traveling. In fact, so many people today actuallymay find the use of plastic for shopping very handy and much easier. When customers are pleased with your company’s policies and feel comfortable with your services, you can surely rely that they would most likely buy from you more frequently.

3.Improves Cash Flow & Guarantees Payment

A business owner can also rely on better cash flow upon accepting credit payments because there will surely be money coming in to the company. Unlike other means of transacting cash such as checks, these credit cards have fewer risks and are more reliable since payment transactions do not depend on whether your customer has sufficient funds in his or her account. In addition, this also guarantees you that you will surely be paid at least within a few days. This way, you as the business owner can also give just compensations to your employees and make timely payments for all your dues.

4.Gives the Company an Established Appeal

Doing business with credit cards can also give your company an appeal of professionalism to the customers as well as to other firms that you may want to partner with. Somehow the recognized way of transacting funds through credit cards and banking adds to your business legitimacy even if you are only operating a small business, as it gives a certain impression of trust to the public. Even through reputation, your small business can already appear bigger than it really is and this can largely contribute to drawing the public to your company.

Credit cards can certainly play a very vital role to the progress of your business. Through helping your company increase its sales, provide customer convenience, guarantee payment, increase cash flow and even give an established appeal, accepting credit cards may just be one of your best moves to improve your company’s performance.

In conclusion, no matter how small your business may be at the moment, accepting credit cards from your customers as a regular part of your services will surely help your company grow.

www.backtobackclosingsmadeeasy.com – Click this link to your left and tune in this week to my webinar where I show you how you can have internet marketing DUN 4 U so you can capture buyer and seller leads while you sleep. Click the link in this description and get registered.
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How Accepting Credit Cards Can Help Your Small Business Grow

For a lot of people who are just starting to launch a small business venture, it may seem quite intimidating to start accepting credit cards as a means of payment from customers right away. After all, it takes a lot of hard work to have your company certified for merchant status from a number of banks to be able to accept credit payments.

Even so, what small business owners must take note is that setting up your company to accept credit cards can actually contribute many rewards that could lead to the growth of your business. Here are some of the reasons why accepting credit cards will greatly benefit your company.

Increase In Sales

With customers being able to pay through credit cards, you are actually increasing the probability, speed and size of customer purchases. This is mainly because accepting credit for payment basically does not turn away sales. And so, when your customers are in the mood to buy your products out of impulse, then they can readily make purchases even when they do not have cash in their pockets. In this way, you are doubling the chances for people to be able to buy your products by adding options for how they want to make their payments.

Contributes to the Convenience of the Customers

This also adds to the convenience of your customers. Take in mind that not all people may always carry cash with them, especially to those who are traveling. In fact, so many people today actuallymay find the use of plastic for shopping very handy and much easier. When customers are pleased with your company’s policies and feel comfortable with your services, you can surely rely that they would most likely buy from you more frequently.

Improves Cash Flow & Guarantees Payment

A business owner can also rely on better cash flow upon accepting credit payments because there will surely be money coming in to the company. Unlike other means of transacting cash such as checks, these credit cards have fewer risks and are more reliable since payment transactions do not depend on whether your customer has sufficient funds in his or her account. In addition, this also guarantees you that you will surely be paid at least within a few days. This way, you as the business owner can also give just compensations to your employees and make timely payments for all your dues.

Gives the Company an Established Appeal

Doing business with credit cards can also give your company an appeal of professionalism to the customers as well as to other firms that you may want to partner with. Somehow the recognized way of transacting funds through credit cards and banking adds to your business’ legitimacy even if you are only operating a small business, as it gives a certain impression of trust to the public. Even through reputation, your small business can already appear bigger than it really is and this can largely contribute to drawing the public to your company.

Credit cards can certainly play a very vital role to the progress of your business. Through helping your company increase its sales, provide customer convenience, guarantee payment, increase cash flow and even give an established appeal, accepting credit cards may just be one of your best moves to improve your company’s performance.

In conclusion, no matter how small your business may be at the moment, accepting credit cards from your customers as a regular part of your services will surely help your company grow.

Jason Meets his very first customer for Transactional Funding
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Accepting Credit Cards: How This Can Help Your Small Business Grow

Even so, what small business owners must take note is that setting up your company to accept credit cards can actually contribute many rewards that could lead to the growth of your business. Here are some of the reasons why accepting credit cards will greatly benefit your company.

Increase In Sales

With customers being able to pay through credit cards, you are actually increasing the probability, speed and size of customer purchases. This is mainly because accepting credit for payment basically does not turn away sales. And so, when your customers are in the mood to buy your products out of impulse, then they can readily make purchases even when they do not have cash in their pockets. In this way, you are doubling the chances for people to be able to buy your products by adding options for how they want to make their payments.

Contributes to the Convenience of the Customers

This also adds to the convenience of your customers. Take in mind that not all people may always carry cash with them, especially to those who are traveling. In fact, so many people today actuallymay find the use of plastic for shopping very handy and much easier. When customers are pleased with your company’s policies and feel comfortable with your services, you can surely rely that they would most likely buy from you more frequently.

Improves Cash Flow & Guarantees Payment

A business owner can also rely on better cash flow upon accepting credit payments because there will surely be money coming in to the company. Unlike other means of transacting cash such as checks, these credit cards have fewer risks and are more reliable since payment transactions do not depend on whether your customer has sufficient funds in his or her account. In addition, this also guarantees you that you will surely be paid at least within a few days. This way, you as the business owner can also give just compensations to your employees and make timely payments for all your dues.

Gives the Company an Established Appeal

Doing business with credit cards can also give your company an appeal of professionalism to the customers as well as to other firms that you may want to partner with. Somehow the recognized way of transacting funds through credit cards and banking adds to your business’ legitimacy even if you are only operating a small business, as it gives a certain impression of trust to the public. Even through reputation, your small business can already appear bigger than it really is and this can largely contribute to drawing the public to your company.

Credit cards can certainly play a very vital role to the progress of your business. Through helping your company increase its sales, provide customer convenience, guarantee payment, increase cash flow and even give an established appeal, accepting credit cards may just be one of your best moves to improve your company’s performance.

In conclusion, no matter how small your business may be at the moment, accepting credit cards from your customers as a regular part of your services will surely help your company grow.

Pat Gage, The Opportunity Creator, has over 18 years experience in money and finance, business building, real estate investing and marketing.  The Opportunity Creator is not only a sought-after business coach but he also is a national speaker, trainer, and life-long entrepreneur who himself has started several companies.
For more information, visit Gage’s site at http://www.10steps2moneysystem.com

When Do You Need the Assistance of Hard Money Private Lenders?

Although there are certain methods of investing in real estate that don’t require massive investment capital for you to get started, it is still important to have an access to a good source of funds. It is because there are certain instances that you will require quick cash to complete a real estate deal.

Some of the best and common sources of quick funds for real estate deals are hard money private lenders. Unlike banks, mortgage companies, and other traditional lending institutions, these financiers employ a shorter underwriting process that enables real estate investors to obtain fast cash. In addition, most of them are not particularly concerned if a borrower has less-than-stellar credit rating. This makes hard money lenders ideal money partners for real estate entrepreneurs who are having problems with their credit scores.

Meanwhile, here are some of the instances when you might need the services of these non-traditional lenders:

When buying distressed properties. As we all know, competition for foreclosed, distressed, and undervalued properties has become tougher than before. If you don’t have enough funds to quickly close a deal with a seller, you might miss a great opportunity to make money in real estate as other investors would be jumping all over the house that you failed to buy.
When rehabbing a house. Obtaining the assistance of hard money private lenders can be very useful when doing a rehab project. For starters, you don’t have to worry about paying for the cost of repairs and other expenses since most hard money loans have a loan-to-value ratio of 65%. So if you’re going to rehab a ,000 home with an after repair value of 0,000, you’ll get about ,000. You can spend ,000 for the purchase of the property and use the remaining funds to pay for the repairs and other expenses.
When wholesaling bank owned homes. If you’re going to do a wet closing to wholesale REOs, you’ll need transactional funding to close the A-to-B transaction with the bank. And since hard money lenders utilize a shorter underwriting process, you can quickly get the funds you need and close the transaction with the bank or the lender in a flash.

Hard money private lenders can a great help to a real estate investor like you. So if you want to make your job much easier, get yourself acquainted with these creative financiers now. Meanwhile, for more information on securing hard money loans, go to www.RehabHardMoney.com.

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How To Wholesale Real Estate Owned Properties

If there’s one thing that most real estate investor’s hate about bank owned homes, it has got to be their unassignability. You cannot easily wholesale real estate owned properties, or REOs, because most banks and lenders that own them prohibits buyers from assigning contracts or quickly reselling such properties to other buyers within a certain period of time.

However, just because wholesaling REOs is quite a challenge, it doesn’t necessarily mean that it can’t be done. There are certain strategies that you can use to complete an REO deal. Doing a simultaneous closing is one of them.

Doing a simultaneous closing is one of the best ways to get over a wholesale roadblock. When using such a strategy, however, you will need to enlist the services of a title company that has experience in doing such deals. This can help you ensure that you will complete all the transactions and get your assignment fee.

Going back, there are two common ways to do a simultaneous closing to wholesale real estate owned properties. The first one is called simultaneous double-closing or a “dry” closing. In a simultaneous double-closing, two separate transactions occur at the same day: A-to-B and B-to-C. A stands for the bank or lender, B stands for the investor, and C stands for the end buyer.

In the A-to-B transaction, the bank sells the REO to the investor. After the lender completes the deal with the bank, he then flips the property to the end buyer to close the B-to-C transaction. Take note that the investor is using the end buyer’s funds to close both transactions so if you’re going to use a dry closing to wholesale bank owned homes, you don’t have to bring your own money to the closing table.

The other method of doing a simultaneous closing is by using a true double-close, or “wet close.” Using wet closing to wholesale real estate owned properties is no different from using dry closing except for one aspect. Instead of using the end buyer’s money to close both deals, the investor will have to use his own funds to close the A-to-B deal.

When doing a wet close, most real estate investors secure transactional funding or bridge loans from hard money and private money lenders, especially if they don’t have enough funds to buy the REO from the bank. This way, they can get to close both A-to-B and B-to-C transactions without a snag.

Looking for more tips on wholesaling bank owned homes? Visit www.REIWired.com.

Wholesaling Bank Owned Foreclosures ‘ a Definitive Guide

Beginning investors who find themselves strapped for cash often start real estate investing by wholesaling properties to other investors.

With the market in its current condition more and more investors find that they are coming across hordes of motivated sellers. Unfortunately, all of these potential prospects tend to share one thing in common. They don’t have any equity! This little dilemma is causing many investors to turn their efforts toward bank-owed foreclosures.

The single biggest advantage associated with REOs is the fact that equity can be created instantly either by finding a hot deal or through shrewd negotiation. There’s nobody telling the bank that they owe too much on a property and can’t lower the price a bit. In theory…any house could be sold for as little as a dollar.

In fact, there is only one downside to wholesaling REO properties. Non-assignability. When an investor gets a bank owned property under contract it always comes with multi-page addendums that make the deal non-assignable.

A lot of new wholesalers will consider this one obstacle to be the end of the line where flipping bank owned homes is concerned, never knowing that there are four ways to maneuver around this bump in the road.

Method #1 – Add to Contract, Then Quit Claim

Most banks do not have an issue with adding an additional party to a contract, they just do not want the ORIGINAL parties removed from it at any time. So Ivan Investor can get an REO property under contract for ,000. Ivan calls Louie Landlord and after talking about the deal Louie agrees to pay a total of ,000 for the property.

Ivan calls the bank up and requests that an addendum be drawn up that adds Louie to the contract and title. The Bank agrees and everyone shows up on closing day.

Louie brings TWO certified checks. One for ,000 for the purchase of the property, and one for ,000 made out to Ivan. All parties then show up for closing and both Ivan and Louie then own the home. Louie hands Ivan the ,000 check and Ivan signs a quit claim deed removing him from title on that property. Pretty simple, right?

Pros: The advantage to this method is that there is only one set of closing costs. It’s a rather simple and straight-forward method that works for most deals. It works around the 90-day deed restriction that comes packaged with many Fannie/Freddie properties.

Cons: Here are the negatives that come with this method. This does NOT work for HUD properties because HUD does not allow any changes to the parties that are on the original offer and the end buyer usually cannot be getting a mortgage because a mortgage company won’t allow you to be on title if they are lending someone else money against the home.

Method #2 – Simultaneous Double-Close

The simultaneous double-close (also known as a simul close or a “dry” close) is actually two transactions. An investor is buying from the bank and then instantly reselling to a third party in a separate transaction. It follows a typical A-to-B-to-C deal flow.

The “twist” that comes with this method is that the wholesale investor never actually brings any money into play. The end-buyer’s funds are used to fund BOTH transactions. This is possible because, as long as both closings take place on the same day, it doesn’t matter which one closes first for the title company’s accounting purposes. The second transaction (B-to-C) could take place a 9am with all the paperwork for that transaction taken care of at that time while the first transaction (A-to-B) doesn’t close until 2pm.

What really matters is that the deeds are RECORDED in the proper order when filed with the county. It’s important at that time to have the A-to-B deed filed first with the B-to-C deed following on record.

Pros: This works well for those who have zero cash as long as they have a good title company that will still do these types of transactions. It still works even with end buyers that are getting conventional financing if the end buyer is getting their financing through the right lender.

Cons: This method is NOT an option if the end buyer is getting FHA financing. This method also does NOT work for Fannie/Freddie foreclosures in most cases because these super-banks put a deed restriction in place that prevents you from reselling the property to ANYONE for a full 90 days.

Also, with all double-close deals there are two sets of transfer taxes, recording fees, and other closing costs that cut into your profit. Of course you can just build that into the deal by lowering your offer price in order to circumvent this small annoyance.

The biggest roadblock to getting these transactions closed is the fact that fewer and fewer title companies are comfortable with the “dry” simultaneous close where the wholesale investor brings in no cash to the deal. In fact, they are often refusing to close these deals at all!

Method #3 – True Double Close

The true double close (also known as a “wet” close) is the same as the simultaneous close in that the investor is buying the foreclosure property and instantly reselling it to the end buyer for a profit. However, the wholesale investor is actually bringing in his own cash to fund his end of the deal.

This little difference makes the title companies happy but it doesn’t work so well for beginning investors that don’t have piles of cash sitting around to make the deals work.

Then came Flash Funding. There are “transactional funding” lenders will lend you all the money you need to do these same-day double-close deals…for a price. Most will never run a credit check or request an appraisal on the property.

The pros and cons to this method are pretty much the same as the simul close, except that on the good side more title companies are willing to do business with you if you go this route and on the bad side you have additional costs in the form of Flash Funding fees chewing away at your profits.

Method #4 – Sell The LLC

This last method has been popularized by Steve Cook who’s said that he swiped it from commercial real estate investors who have been using it for years to avoid paying transfer taxes.

The idea is that an investor would submit an offer in the name of an LLC. If the investor was placing an offer on 1221 Sycamore, he may send it in with “Sycamore Group LLC”. If the offer is accepted, the investor immediately faxes in his LLC articles of organization and creates the company to match the Buyer on the purchase agreement.

From there the investor finds his end buyer and they agree that on closing day the end buyer will purchase the entire LLC from the original investor for the amount of the wholesale fee. From there, as the new owner of the LLC, the end buyer is empowered to close on the original transaction and purchase the property.

Pros: The upside to this method is that you workaround the extra costs in the form of transfer taxes and/or Flash Funding fees that come with the two Double-Close methods, and for those who are concerned about guarding their privacy, your name never goes on the deal.

Cons: The major obstacle to this one is that the end buyer has to pretty much be paying cash. Banks do not loan traditional mortgages (either to owner occupants or investors) in company names. You have to buy it in your own personal name to get a mortgage. Other concerns are that if you do this often enough you may attract the attention of state regulators who are confused as to why you start and sell 5-10 LLCs each month.

Armed with these four workarounds, investors nationwide are able to successfully wholesale flip REO foreclosures. None of these methods require the wholesaler to bring his or her own cash into play other than the initial earnest money deposit and none require a credit check. One of these methods will work for pretty much any situation you will come across when flipping bank owned homes.

Buying Bank Owned REO Properties Using Private Investors’ Money

Buying Bank Owned REO Properties Using Private Investors’ Money

Copyright © 2009, Lex Levinrad

Many real estate buyers are aware that there are fantastic bargains available in the real estate market. The huge amount of bank foreclosures has led to a tidal wave of bank owned REO properties which has flooded the market with low priced properties. Astute investors are taking advantage of this situation to scoop up houses at bargain basement prices.

If you are considering investing in bank owned properties then you will need to be a cash buyer. This means that you are required to show “proof of funds” which is usually a bank statement which shows that you have the cash available to purchase the house.

If you don’t have the cash available then you will need to borrow the money from someone that does. If you have a relative or friend with access to cash they might be willing to lend you money to purchase a property in exchange for you giving them a first mortgage on the property. They will effectively become the bank and you will be required to make a monthly payment to them.

There are professionals in the real estate business that make these kinds of loans to people that are not relatives. They are called hard money lenders. The only difference between a hard money lender and a private investor is the interest rate. Borrowing from Aunt Sallie might cost you 8% per year in interest. A typical hard money mortgage in today’s market would be 15% plus 3 points up front.

Why would anyone borrow money at such a high interest rate? Let’s look at an example. Assume that you could purchase a bank owned REO property for ,000 when the house has a true market value to a non cash buyer of ,000. Paying 15% interest on a ,000 loan amounts to a monthly payment of only 0.

Assume that you waited 90 days for seasoning of title and then sold the property to an FHA first time homebuyer for ,900. Assume that you paid a commission of 6% to the realtor and another 6% to pay for the buyers closing costs. You would still net ,000 from this transaction. After paying off the hard money lender the ,000 that you borrowed, you would still be left with a profit of ,000. Even if you held the house for six month before finding a buyer you would only have spent 0 per month in interest for 6 months. Your total interest cost would only have been ,000. This would leave you with a net profit of ,000.

Or expressed another way, using no money down (borrowing all of the money) you could potentially make a profit of ,000. How easy would it be to sell a house like this to a first time home buyer? The answer is it would be extremely easy. The buyers are putting down only ,000 (3 ½%) to buy a house with a monthly mortgage payment which is about the same as their monthly rent. You are paying all of their closing costs. And the government will give them an ,000 tax credit if they purchase before the end of 2009. It is a win/win for everyone. The bank gets to sell their property quickly to a cash buyer. The cash buyer gets to flip the property and make a quick profit and the end FHA buyer gets to own a home for the same monthly payment as rent.

The trick to the above transaction is to find an ,000 property that you can buy for ,000. This is the part that requires training, knowledge and experience. Finding deals like this is an art form and the people that find these deals are known as “bird dogs” or “property scouts”.

Many bird dogs sell their deals to cash investors for a small profit. This is known as wholesaling. For example a wholesaler might contract to purchase the above house for ,000 and then sell it for ,000 to another cash investor. This way, the wholesaler does not need to borrow money from a hard money lender. The wholesaler simply finds a deal, signs a contract to buy it and then flips the contract to a cash investor for a profit. This is known as “assigning a contract” and the profit that is paid to the wholesaler is known as an “assignment fee”.

Banks do not want wholesalers flipping contracts on bank owned properties. For this reason, banks do not allow assignable contracts. This means that a wholesaler cannot assign a bank owned property to another cash investor. The reality is that there are still ways that a property can be assigned. One way is to purchase the property in a Land Trust and then assign the beneficial interest in the land trust. Another way is to purchase the property in an LLC and then assign the membership interest in the LLC. However the problem with these methods is that the end buyer might not want to have a land trust or an LLC.

For this reason, the best way to sell a bank owned property to another cash investor is to have what is known as a double closing.  This means that the wholesaler essentially buys the house from the bank and then simultaneously on the same day sells it to another cash investor. The disadvantage is that the wholesaler will be paying double closing costs.

If a wholesaler has a signed contract and is wholesaling the deal to an end buyer, then if the wholesaler is short on cash they might need what is known as “transactional funding”. Transactional funding is perfect for bank owned properties and short sales that a wholesaler is flipping to an end buyer. Since banks do not allow assignable contracts the wholesaler is going to need to schedule a double closing with the end buyer. Double closings also known as simultaneous closings allow a wholesaler to schedule two back to back closings for the same property on the same day. The wholesaler will need to have a source of funds to pay for the first transaction. This is where transactional funding (also known as same day funds) is needed.

Our company offers transactional funding to all of our Private Mentoring Students. However our students need to schedule both closing with our title company in order for us to offer the transactional funding. We will only offer transactional funding if both closings are with our title company (Independence Title & Escrow).

If you are looking to flip a bank owned property then you will have two contracts and two closings. The first contract is between the bank (seller) and you (buyer). The second contract is between you (seller) and your end buyer (buyer). The end buyer is the person that will ultimately be the long term owner of the property.

Example:

A – Bank
B – You
C – End Buyer

Assume that you have a contract with the bank to purchase a bank owned property at ,000 (first contract). This is known as the A-B transaction.

You market this property to your cash buyers and you find a buyer at ,000. You sign a contract with this buyer with you being the seller and them being the buyer (second contract). This is known as the B-C transaction.

The difference between the two contracts (after deducting closing costs) is your profit which you will walk away with at the closing. Since there are two contracts there are two closings. This means you will pay double closing costs.

The transactional funding fee that we charge is 2% +5 with a minimum fee of ,250. For example if you were to request ,000 your fee would be 0+5=,295. We will only provide transactional funding if you use our title company (Independence Title) for both closings.

To learn more about transactional funding please visit  http://lexlevinrad.com/transaction_funding.html

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