Real Estate Investing: The "Business Plan" and Developing a Market Analysis

With market analysis, you need to define what your price range is. Don't tell me you're a real estate investor and you buy anywhere from $10,000 to $45 million. That's not meaningful to anybody, and particularly not as a private lender. It doesn't mean very much if that's what your range is.

Define Your Price Range

If you're going to be buying single-family houses, I want to hear, "I'm going to be buying anywhere from $75,000 up to $150,000." That's a fairly nice range. Or, "I'm going to be buying single-family homes in nicer communities for $400,000 to $600,000. I'm not doing the low-end stuff. I'm not doing a little bit of this. I'm going to be buying bread & butter, medium priced homes."

If you really want, that's fine, you can do high-end stuff. Just say, "I'm going to be buying homes in the $1 million to $1.5 million range." Again, you have to define your range fairly tightly. Everyone understands what you're doing, and you become the expert in that area.

What Types of Properties?

What type of properties are you going to be buying? What types of buyers and renters is your focus? You want to focus on the types of properties you're going to be buying and the types of buyers and renters that you might be focusing on.

Are you going to be buying and trying to sell quickly, as they call flipping? That's one way of doing business. I think it's a tough way right now. Are you going to be buying and holding? What's your strategy once you've purchased the properties?

You also need to focus on the types of properties you're going to be buying. Are you going to be buying properties that are in foreclosure or short sales through lenders? Are there any other pieces of the puzzle? You need to think that through and really quantify it.

Again, I would ask and encourage you to spend some time thinking about these issues. It's one thing to be a "real estate investor" - it's another thing to be a real estate investor that has a well thought out and defined plan.

Repair Budget

Another thing on this list, and again you can address some of them, is what is your average repair budget going to be?

60-Second Business Plan

Now, what I'll do is give you in about 60 seconds what my business plan is. I think you'll find it meets quite a few of these criteria. If I was sitting in front of a private investor and the guy says, "Alright, I want to know what your business is." I would say to that gentleman or woman:

I buy in a town called Norristown, Pennsylvania, on the outskirts of Philadelphia. That town is a low to mid economic type of community. It is a town that is struggling but is improving.

It has approximately 15,000 to 18,000 homes. The average home in that community runs from about $75,000 at the low end to about $150,000 at the high end.

We buy houses that are 3, 4, or 5 bedrooms. That's it. We do not buy two bedrooms or less, and we do not buy six bedrooms or more. We are extremely focused on the 3, 4, and 5 bedroom community because once we purchase that home; we can turn around and rent it.

We buy and hold the property. We know the rents are going to be somewhere between $900 for a 3-bedroom home to about $1,200 to $1,400 for a 5-bedroom property. We can buy them from anywhere between $75,000 to $150,000.

We do not do substantial rehabs. We do not do properties that require foundations or major plumbing or electrical issues. We buy properties that need cosmetic work including carpet, paint, maybe kitchens and bathrooms.

Once we have purchased the property, we can turn around and rent it anywhere from that $900 to $1,200 range.

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Focus is the Key

That is my business plan in about 60 seconds. You can see, it's pretty focused and has specifics. I know what prices are in my community. I know the demographics of my community. I know the type of people that are in my community. I know what they can rent for and what they can sell for.

So that's really the Market Analysis.

Source: http://www.directoryarticles.com/

Getting Funded With a Hard Money Commercial Mortgage Loan

Conventional financing through traditional lending institutions, such as commercial banks, Wall Street brokers and major insurance companies, is becoming very difficult to find. Banks and other conventional lenders have tightened their lending standards significantly and are caught up in the credit crunch. In many cases they can't make a loan even when they want to.

There is a very severe lack of liquidity in the major financial markets. One consequence of the banking crisis has been that more and more commercial real estate investors are turning to private, often called "hard money" lenders. Hard money commercial mortgage loans have become a primary source of funding for property owners, investors and developers all over the country.

Borrowers are finding that private lenders are highly professional and very responsive. Private lenders can fund good deals very quickly, sometimes in just days, with less paperwork and documentation requirements. Hard money lenders tend to lend based on the equity in a property; private loans are not credit driven. Many private lenders are "portfolio lenders" who hold the mortgages they write in their own loan portfolios. They are not dependent on the secondary mortgage market and have not been paralyzed by the current problems in the banking system or the bond markets.

Private lenders can be small but some are huge and have more cash-on-hand than many federally chartered banks. Often hedge funds and private equity firms act as hard money lenders, making loans against quality commercial property for the benefit of their investors. In some cases private lenders are wealthy individuals who are looking for higher returns on their funds than banks and government bonds can offer them.

In most cases private commercial mortgages are short term loans that mature in 36 months or less. This makes private money ideal for use as bridge financing while a conventional, longer term loan can be lined up and closed.

Banks are saying no more often than they are saying yes now-a-days. Even good projects and quality buildings are being turned down for financing due to the credit crisis. Rather than let a deal die, commercial real estate investors are taking advantage of private, hard money loan. The rates and points are higher but, unlike banks, Wall Street and the other big players, private lenders have money to loan. Private lenders make their own lending decisions and don't have to consult with distant loan committees or worry about the bond markets. Hard money lenders are making deals and closing loans even in the midst of this very serious financial crisis.

It is possible that in a year or two our credit problems will be behind us, but in the mean-time private lending may be an investor's best chance to get a deal financed.

Article Source: http://EzineArticles.com/?expert=Glenn_Fydenkevez

5 tips when borrowing private money

Real estate investors who want to close deals will learn a handful from this short Chris Yates video. In this presentation, Chris Yates and his securities attorney lay down five essential tips when borrowing private money. Chris Yates, the CEO of CM Yates Companies, will also tell you how documents can actually make you a money magnet. Learn what the mindset of a private money borrower should be and how you can look professional in the eyes of lenders.

If you want to learn what corporate identity is and why you would want yours to be solid, watch this video now.

For more related videos, please visit http://reiwired.com and http://rehab-real-estate.com. You may also visit our Youtube Channel.

Avoid committing Investment Fraud Chris Yates

In this video, veteran real estate investor Chris Yates interviews Gary Garcia, a fraud investigator from the Attorney General’s Office, State of Colorado, to discuss investment frauds, specifically fraudulent cases concerning property investment. The video presents a different angle of discussion because it comes from the point of view of a Securities Fraud Investigator.

It talks about private lending, property securities, and a wide range of other legal issues. Learn how you can avoid committing investment fraud by watching this video now.Check http://www.reiwired.com and http://rehab-real-estate.com/html/lp_media for more details.