Category Archives: Real Estate

Deal Making

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Learning to negotiate is critical to investing in real estate. Although this is not a full class on business negotiating, or even a brown-bag lunch seminar, I found this list of tips on negotiating on the Forbes website, and it is helpful. The article, “15 Tactics for Successful Business Negotiations” is by Richard Harroch and was written in 2016. The techniques, or tactics, are worth considering.

It is very likely you will naturally have some negotiating ability or you wouldn’t be in the real estate business. However, your skills may not be evenly distributed, and it is good to reflect on a comprehensive list so you can bring to mind skills that you might need to work on. For example, perhaps you are not shy at all, but you hate paperwork. As you will see from the following list, both of these traits, no fear and paperwork, will have a place in your negotiating tool box.

The 15 tactics include:

Listen and understand the other party’s issues and point of view.

Key: Do not do all the talking.

Be prepared.

Key: Review the business’s website and do Google and LinkedIn searches to learn all you can about the other party, the person you will be negotiating with, past deals, and what you competitors have offered or their pricing.

Keep the negotiations professional and courteous.

Key: “Don’t be an asshole.” Establish a good long-term relationship.

Understand the deal dynamics.

Key: Who has the leverage, time constraints, alternatives available to the other side, who is getting the payment?

Always draft the first version of the agreement.

Key: This lets you frame how the deal would be structured. Balance is key.

Be prepared to play poker.

Key: Know your walkaway price and stick to it. Walkaway if you cannot live with the offer.

Avoid the negotiating by continually conceding.

Key: the other party will learn your tactic and keep producing unreasonable demands, knowing you will concede. The deal will not get done.

Keep in mind that time is the enemy of many deals.

Key: be prompt and turn documents around quickly. Keep the deal moving.

Do not fixate on the deal in front of you and ignore alternatives

Key: Alternatives let the other party know they have competitors.

Do not get hung up on one issue

Key: Set aside hot issue for later so you do not get stuck on it and maybe can think of a creative solution.

Identify who the real decision-maker is.

Key: You cannot get anywhere if the other party cannot say yes or no. If you have the leverage, ask to speak to the person who has the power.

Never accept the first offer.

Key: Counteroffers and some back and forth will most likely lead to both parties being satisfied with the deal.

Ask the right questions.

Key: Do not be afraid to ask questions.

Prepare a Letter of Intent or Term Sheet to reflect your deal.

Key: The letter reflects your view of the key terms of the deal.

Get the help of the best advisors and lawyers.

Key: It is often worth the money to hire an investment baker or real estate attorney in a complicated deal.

As a broker, I can help you make the funding contacts and fill out the applications. But, in the business of real estate investing it is worth your time to learn to negotiate so you are satisfied with the deal you end up with.

To read more from Richard Harroch who is a venture capitalist in the San Francisco area.

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The entire article appears at https://www.forbes.com/sites/allbusiness/2016/09/16/15-tactics-for-successful-business-negotiations/#7ac99a025281

Pat St. Cin

Patrick@InvestorsLendingSource.com

512-213-2271

Austin, Texas

 

Handshake picture courtesy of EU2016 SK [CC0], via Wikimedia Commons.

 

A Town with a Trail

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Fort Worth

A good real estate property hunter follows the flow of people. And, like the birds that love the water, people too are flocking to the rivers and bayous of Texas. As they follow the new jobs and other opportunities opening up in Texas, they are especially drawn to the waterways and trails that offer walking, biking, boating, and horseback riding. I think of trails as places of freedom, where one can move about, rehabilitate, breathe fresh air, see new things, and even talk with a cousin as you walk along.

Young professionals and families who have lived in the really big cities like New York and Los Angeles are seeing Texas trail towns as good places to call home. According to an article in the wsj by Alina Dizik, they are buying homes in Fort Worth to get better prices on larger luxury homes, walkable neighborhoods, and a yard for their dog. In Fort Worth, they also can get access to the Trinity River Trail and proximity to the city’s cultural district if they so choose.

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The Trinity Trails System

The Trinity Trails are a system of trails along or near the Trinity River in Fort Worth. There are over 40 miles of trails along the river and its tributaries. The trail network connects with 21 parks, the Fort Worth Botanical Garden, The Japanese Garden, Log Cabin Village, the Fort Worth Zoo, the historic Stockyards, and downtown. You could disappear for a whole weekend on that trail and never be bored.

The Trinity Trail also offers 17 trailheads for picnics and rest stops, five boat launches for canoes, kayaks, and sculls, a water-ski slalom course and fishing in a number of spots. For a map of the trail, visit

http://www.trwd.com/wp-content/uploads/trinity-river-trail-map.pdf

Fruitful Hunting

You might want to consider looking for flip-n-fix properties in the areas along this trail. Although the Wall Street Journal article was talking mostly about luxury homes, it did mention a rehab that the owner undertook themselves. Your hunt for the perfect, or at least interesting and profitable, fix-n-flip property might bear fruit in this area.

If you find a deal, give me a call for a quick gap loan to secure the property or for a full fix-n-flip rehabilitation loan. You can e-mail too. I can help with loans in the DFW metro area.

Pat St. Cin

Patrick@InvestorsLendingSource.com

512-213-2271

Austin, Texas

References:

Dizik, A. As Homebuyers Flock in, Fort Worth Embraces its Cowtown Reputation. WSJ, January 17, 2019.

Nashua River Rail Trail 3 photo by Photo by White, Michael A. at English Wikipedia [Public domain], from Wikimedia Commons.

In-a-Hurry Loan to Cover the Gap

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There are several reasons why a fix-n-flip investor might want to secure a fast loan to cover a gap. A gap loan, as the name implies, is a loan that bridges a span of time. It helps you gain control of a property quickly even if you are still scrambling to get all your paperwork done for a full rehabilitation loan.

A Buyer in a Hurry
At some time or other, you might face a seller in a hurry. One situation that puts a seller in a hurry is foreclosure. Many property owners in this situation are in denial so they wait until the last week or so, or even days, before the foreclosure sale to act on saving their credit. To save their credit, they must pay the bank all they owe on the mortgage right now. The house might actually be worth much more than what they owe if they have been paying on the loan a long time or put a large payment down on it. But, a foreclosure on their record will ruin their credit. So, for them, it is better to sell at a discount and survive to buy another house another day.

In this scenario, an owner in foreclosure has agreed to sell the property to you at a steep discount, but they need to close the deal quickly. You, the investor, want to buy this property and you make an offer. However, the competition is extremely stiff, and another investor is sitting in the wings waiting to obtain the property. Your offer locks up control of the property temporarily. You need to move quickly to secure a loan. Normally the loan process takes a minimum of 7 working days and typically takes 10-15 working days.

A Nonrefundable Deposit

Another reason you might need funding in a hurry is that you have stumbled upon a wholesale purchase with a tight deadline to close, perhaps 2 to 5 days. The property is ideal for your purposes and you want to make an offer. However, if you don’t get the deal closed by the deadline, you will lose the nonrefundable deposit you are required to put down and control of the property you are seeking.

 

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Getting Control of the Property

Here is where obtaining a gap loan is useful. A gap loan allows you to purchase the property as is while you are in the process of obtaining a rehab loan. The gap loan can be secured in 2 to 3 days typically. Your strategy is to obtain control of the property through this gap loan, begin paperwork to refinance the loan immediately and eventually complete the rehab and offer the property for sale.

REI Capital Resources has funds available for fix-n-flip loans with terms up to 6 to 9 months with a minimum of 3 months.

Fix-n-Flip Option 2

E-mail or call for more information on minimum and maximum loan amounts, interest rates, terms, and fees for specific project. I can help you with first liens only and these loans are limited to the Austin, DFW, Houston, and San Antonio Metro areas.

Pat St.Cin

Patrick@reicapital.cash

512-213-2271

Austin, Texas

A Tangible Asset

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A tangible asset is one that is capable of being appraised at a particular value. It can be touched. It can be identified. It is real. There is no guesswork about it. Hard money loans are based on the value of the asset or property used for collateral.

The stock market is impossible to control. If you read Investopedia or the Wall Street Journal, you know already that It will soar and dive and stall. However, it is just one option for an investment. Real estate is another choice you can make. Real estate would put some diversity into your investment portfolio. However, it takes a little more hands-on work and patience. In the stock market, all you do is decide how much you want to invest and put your money down and sell when you are ready.

In real estate, you have more choices to make. You decide how much time you want to invest as well as how much money. You should of course do the research upfront yourself and find a great real estate agent to work with, but you can choose the location of the property, pick the quality of the house or apartment complex, do the remodel yourself if you have the skills, find the occupants for a rental through internet advertising, and/or manage the rental yourself by collecting rents and providing landlord services.

A rental produces cash flow even in an economic downturn. In fact, in economic downturns, it might give you more income as people may have to rent instead of buy and occupancy rises. A rental property also builds equity. On the other hand, real estate takes longer to sell than stock and income requires occupants. There are also taxes, insurance, and utilities to pay whether the property is occupied or not.

If you are looking at buying real estate as an investment option, to add diversity to your basket of investment eggs, you need to do your due diligence assessments and be ready for competition. It would be a good idea to get prequalified for a loan so you can have the money on hand fast if you find a property you want to invest in.

 

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Ask yourself:

How much money do I need?

How much collateral can I offer a lender?

How much will the repairs cost?

How long will the repairs take?

Add a 15 % cushion

As a broker, I would be happy to talk over the options with you and can help you find a funding source for a fee. I give advice, do the paperwork, and make the phones calls involved in the transaction. I have contacts and experience in bringing lenders and borrowers together. I’ll help you find the best rates and pass the completed loan package on the lender.

I would love to give you a hand.

Follow this link for a quick prequalification form:

http://investorslendingsource.com/pre-qualification-program

Or, please call or e-mail.

Pat St. Cin

Patrick@InvestorsLendingSource.com

512-213-2271

Austin, Texas

No Hammer Renting

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I was reading an article by Ryan Dezember in the wsj about house renting companies that are starting to see a benefit in buying suburban houses to rent rather than remodeling older homes in the city. The article summarized some interesting points and strategies that are worth considering.

The rationale for buying a new house to rent out arises out of evolving situations that home buyers are facing. When housing prices go up in the suburbs, young families cannot find homes at entry-level prices that they can afford. Many of them are burdened with student debt and don’t have the credit standing to buy the higher priced new homes. So, they are willing to rent to make sure their kids get to go to good schools and live in safe neighborhoods.

Steady Income

Renting houses (old ones or new ones) is a promising investment for those who want a steady income instead of a big single payoff. New single-family homes, versus older ones, can be expected to attractive to renters, stay occupied, and provide steady income.

There seems to be two ways to make this investment work: 1. Buy a new house and rent it out yourself, or (2) buy a new house, find occupants for it, and then sell them to a big housing rental company. According to the wsj article, there are quite a few rental home companies starting to look at buying rental houses in the suburbs.

Buying new has benefits:

  • Save on sales commissions,
  • Save on remodeling costs,
  • Charge more rent for a new home,
  • Outfit the house with the preferred fixtures to rent them faster, and
  • Save on maintenance costs for 10 years or so

Since this idea is starting to get around, getting the money quickly so you can squeeze out the competition is something that I can help you with. For rental properties, I offer loans at low interest rates, for terms of 3 to 7 years, with low closing costs, quick closings (15-20) days, and a loan that is based on the asset rather than on your personal credit record so there is less personal paperwork to do.

So, talk to a builder near you who is willing to sell cheap to clear the books at the end of the fiscal year and find occupants, and prepare for a steady income for years to come.

For a quick pre qualification application, follow this link: http://investorslendingsource.com/pre-qualification-program

I would be pleased to have you call or e-mail too.

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Pat St. Cin

Patrick@InvestorsLendingSource.com

512-213-2271

Austin, Texas

Photo by Pixabay on Pexels.com

 

The Perfect Fit

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Quick Closings to Beat the Competition

As competition for houses to fix-n-flip tightens, the ability to get money quickly based on the value of the asset is an important tool in your box.

Private lenders, not banks, are willing to help you fund your project based on the value of the property you are looking at remodeling and the value of the project when it is complete. They have money to lend and you need money quickly. A perfect fit is out there.

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As a broker, it is my job to bring you together, to make the transaction easy for both the borrower and the lender. This means minimal paperwork, no credit check, no appraisal, and a quick closing. Together, we can get a quick closing because the loan is based on the property, a known entity of solid value, and because the loan is for a short duration.

There is a market out there for fixed up homes. As the price of new houses go up, there are fewer and fewer available at a price a young family can afford. Millennials have college debt to pay, but still want their children to go to good schools. So, they are looking for homes in the suburbs, older homes that have been remodeled.

So if you love to fix up older homes, have your eyes on homes that need some TLC but will be gems when they are cleaned up, updated, and remodeled, give me a call. The competition is stiff for these homes and you will need the money quickly to snap up that property.

I would love to give you a hand.

Follow this link for a quick pre-qualification form: http://investorslendingsource.com/pre-qualification-program

Or, please call or e-mail.

Pat St. Cin

Patrick@InvestorsLendingSource.com

512-213-2271

Austin, Texas

 

Photo by Pixabay on Pexels.com

Houston Adds 114,400 Jobs

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Good New for Houston Jobs Up 3.7%

 According to the U. S. Bureau of Labor Statistics, Houston-The Woodlands-Sugar Land was one of the nation’s largest metropolitan statistical areas showing an increase in the rate of job growth between November 2017 and November 2018.

In November, 54 metropolitan areas had over-the-year increases in nonfarm payroll employment and 334 were essentially unchanged.

The largest over-the-year employment increases occurred in Houston-The Woodlands-Sugar Land, TX (+114,400), New York-Newark-Jersey City, NY-NJ-PA (+113,000), and Dallas-Fort Worth-Arlington, TX (+94,700).

Good News for Reno, Midland, and Colorado Springs

Nationally, the largest over-the-year percentage gains in employment occurred in

Reno, NV (+5.9 percent),

Midland, TX (+5.7 percent), and

Colorado Springs, CO (+5.0 percent).

Good News for Texas

In Texas, the 10 cities with the largest over the year percentage gain in employment occurred in

Austin, up 35.2 or 3.3%

Beaumont-Port Arthur up 35.2, or 3.3%

Dallas-Fort Worth, Arlington up 94.7 or 2.6%

Houston, The Woodlands, Sugar Land up 114.4 or 3.7%

Killeen-Temple up 3.3 or 2.3%

Lubbock up 3.9 or 2.6%

Midland up 5.6 or 5.7%  ——Highlight Midland: According to Trulia, the average listing for a home in Midland is 342,280. There are 567 home for sale and the median rent is $2.500 per month. 

San Antonio, New Braunfels up 14.3 or 1.4%

Sherman-Denison up 1.8 or 3.8%

Tyler up 4.3, or 4.1%

Texas overall up 360.0, or 2.9%

 

Patrick@InvestorsLendingSource.com

512-213-2271

Austin, Texas

 

References

https://www.bls.gov/

https://www.trulia.com/real_estate/Midland-Texas/

BE AWARE: Part 2

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What does a Horny Toad Have to Do with It?

In Part I of Be Aware, I discussed performing a due diligence assessment with regards to past and present environmental hazards in the vicinity of the property you may be considering. In this part, I want to point out another aspect of the due diligence research you do that revolves around the plants, animals, and habitats that may be on or near the property you are considering making a loan on, developing, or remodeling. The animals and plants that inhabit that property need to be accounted for, not only because we value them, but because their presence may affect the dollars we need to spend on a project. As I have said before, hard money loans are offered based on the value of the property. So, you want to look carefully at anything that affects the property value now and in the future.

In Texas

As a landowner, you will be obliged by law to work around habitat or vegetative species that are considered endangered. According to the Texas Parks and Wildlife website, endangered species are plants or animals that will likely become extinct within the foreseeable future. Threatened means that a species may become endangered within the foreseeable future.

In Texas, plants or animals may be protected under the authority of state law and/or under the Federal Endangered Species Act. Examples of federally listed species in north Texas are the black-capped vireo, golden-cheeked warbler, and the Texas poppy mallow. Some of the state listed species are the Texas horned lizard (horny toad) and the Texas kangaroo rat.

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The Texas list deals only with the status of the species within the borders of Texas. The Federal listing means that an animal is in trouble throughout its entire range which may cover several different states. Federal law not only protects the individual animal, but also protects its habitat. While TPWD enforces regulations pertaining to state listed species, the U.S. Fish and Wildlife Service enforces regulations pertaining to federally listed species under the Endangered Species Act.

Real Estate as Habitat

In the business of real estate, habitat is the concern. Loss and/or fragmentation of habitat is the number one cause for species declines in Texas. For example, the black-footed ferret is one of the rarest mammals in North America, yet it inhabited prairie dog towns in North Texas as recently as 1963. While prairie dog towns still exist, they are too small and too few in number to support a population of ferrets.

To sum it up, just as you would review the local area of your planned real estate transaction for hazardous concerns that will affect the property, you need to research the animals and plants that live on the property and their habitats that might be nearby.

Don’t forget to look for wetlands and ponds when you walk around the property or when you look at the topographical maps. Working around wetland and rivers requires special permits and special protective construction measures that need to be worked into the cost of the construction or remodeling projects.

A County by County List

Visit the Texas Parks and Wildlife website for a county by county list of endangered and protected species in the area you are planning to work in. Each county’s list can be downloaded onto an Excel Spreadsheet. See https://tpwd.texas.gov/gis/rtest

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The Texas Parks and Wildlife Department also offers private landowner tools for things like habitat conservation plans, safe harbor agreements, candidate conservation agreements, and landowner incentive programs at

https://tpwd.texas.gov/huntwild/wild/wildlife_diversity/nongame/listed-species/landowner-tools.phtml

Remember. I’m not giving legal advice, just pointing out areas you should research  before you buy a property or loan money and put your name on a deed. Be sure to be aware of the physical reality of the property itself.  Look at it in real life and on the internet.

Patrick@InvestorsLendingSource.com

512-213-2271

Austin, Texas

References

Texas Parks and Wildlife website at https://tpwd.texas.gov/

Photo Ben Goodwyn [GFDL (http://www.gnu.org/copyleft/fdl.html), CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/) or CC BY 2.5 (https://creativecommons.org/licenses/by/2.5)%5D, from Wikimedia Commons

How to Use a Hard Money Loan to Get Your Real Estate Property Ready to Sell

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How Much Money Do You Need?

There are some basic things you need to know before you can get a hard money loan. First, you need to know how much you need to borrow and how much collateral you have. You begin by finding out how much your real property (house or apartment complex) is worth as is.1 Note the words “as is.” You can get this information from a real estate appraiser. Then you ask them to make a second estimate about how much more the property will be worth if obvious repairs are made.

IMG_00003652Next, get a remodeling contractor to give you a bid on the repairs and a plan or time frame the repairs will take. You might want to get several bids and choose the one that looks best to you.

How Much Collateral Do You Have?

Second, find out how much you owe on the property. The difference between the amount you owe and the appraised value of the property is your equity. It is the equity that will determine how much the lender will lend you.2 Compare the amount of the cost of the repairs to your equity after the repair is make. If your equity is larger than the repairs, you might be able to make a profit after paying off the loan.

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The amount of money you need to borrow is the amount the repairs will cost plus a cushion of maybe 15 percent. The amount of collateral you can offer the lender is the equity in the real property. If the equity value of the real property is larger than the amount it will take to fix the property up, you have collateral to get a hard money loan.

Who Are the Lenders?

Hard money loans are typically issued by private investors (individuals or groups) lending their own money to borrowers with real property. The real property is their protection for making the loan and will be taken if the loan is not repaid. The primary basis for making a hard money loan is the liquidation value of the collateral backing the note.3  While the bank on the street corner will check basically everything before issuing a loan, including your credit scores, your income, the stability of your income, any missed payments, the amount of outstanding credit you have, and how the internal revenue service feels about you, the hard money lender will be are more interested in the value of your collateral than in your credit history. The hard money lender will determine the value of the property by getting an independent appraisal.

How Much Will It Cost Me?

Interest rates on a hard money loan will start at about 7.7 percent.1 The rate will depend on several things, including the liquidity of the asset. If the house you are repairing is in a bad neighborhood, it might be hard to sell even after it is remodeled and thus the interest rate on the loan will be higher. Broker fees also apply if a broker helped you find the funding source.

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The broker offers personal service to the borrower and administrative service to the lender. They give advice, do the paperwork, and make the phone calls involved in the transaction. They will also have the day-to-day experience and contacts to find the best rates for you. They then pass on the completed application to the lender.

Summary

In summary, if you are in a bad credit situation, have equity in real property you own, anticipate a project that will not take too long, and need money quickly, the hard money loan is probably for you.

If you find a deal, give me a call for a quick closing fix-n-flip rehabilitation loan. You can e-mail too.

Patrick@InvestorsLendingSource.com

Austin, Texas

512-213-2271

References

1. Hard Money Loans: A Complete Guide. California Hard Money Direct. Available at https://californiahardmoneydirect.net/2017/04/21/hard-money-loans-guide/. Retrieved November 2018.

2. Justine Pritchard, Hard Money Basics, How Hard Money Loans Work. Available online at https://www.thebalance.com/hard-money-basics-315413. Updated October 31, 2018. Accessed November 2018.

3. Wikipedia. Hard Money Loan. Available online at https://en.wikipedia.org/wiki/Hard_money_loan/. Accessed November 16, 2018.