I’m sure you have heard about the recent shakeup in the subprime lending market.  But do you know how it will affect you and your real estate investing business?

Well… some of you it may not affect at all.  Those of you that have set up your investing business correctly and positioned yourself as a business… rather than a passtime or hobby, should fare quite well. However, those who have relied on high LTV financing (90-100%) may have a bit more trouble finding the conventional financing you need to make your deals work. 

No, 100% financing is not gone no matter what you have heard.  I receive wholesale rate sheets from many of the top wholesale lenders and they still have their 100% financing programs.  But, if you are trying to go:

• Non-owner occupied
• Stated Income
• and have less than a 680 credit score

… you will have a very difficult time finding conventional financing that makes your deal work.  If you can go full document and have above a 700, you will be able to get decent financing still. 

What does this mean to your real estate investing business?

If you are a wholesaler, this shouldn’t affect your business much at all.  You are selling to other investors who are coming in with cash or private financing (if you are trying to wholesale to “investors” who must get bank financing… cut your ties and find a professional investor… someone who can close in less than a week and don’t have to get “approved” first). 

If you are a rehabber you may be affected quite a bit depending on your business model.  Do you finance all of your projects through conventional bank financing? If so, you may have some difficulties.  If you sell your properties to C credit buyers, you may have some difficulties. 

So, how do you build your real estate investing business so a bump in the conventional financing road doesn’t affect your bottom line much, if any at all?  Here’s a few tips on how to do just that:

• Find a core of good private lenders who can fund your deals fast
• Use private lenders to fund your short term purchase and rehab
• Use incentives for buyers when selling your homes. With less buyers out there, you have to stand apart from the competition
• Focus some effort on wholesaling to professional investors.  Professional investors can act fast, pay with cash, and will be much more loyal to you than the fly by nite investor.
• Once you have your business plan done and a track record, go out there and get a working line of credit.  It will most likely start small, but will build as time goes by.  What could you do if you had a $1,000,000 line of credit right now??
• If you are stubborn and won’t try to round up private lenders… team up with or find a good mortgage broker who knows investing up and down. 
• Try to get the seller to carry back the note for as long as you can at as low a rate as you can get.  You would be amazed what sellers will do if you just ask.

There are a ton of ways to beat the financing woes… you just need to work a bit smarter and begin to use some of the more non-conventional financing methods. 

Here’s a quick question.  How many true businesses (successful businesses) do you know of that go to the bank and get personal loans to fund their business operations?  Not many that I know of. 

To truly build your real estate hobby to a real estate investing business you need to kick the “I have to get the loan from a bank with my own credit” mindset and begin to think like a businessman.  Round up private money, be creative, become more efficient to cut costs, partner with people, ….. etc. 

I know this post isn’t anything new, but if your real estate investing relies on conventional bank financing (unless you are a commercial investor), you will be in for a world of hurt.  Here’s an action step for this week. 

• Get out there and meet with 2 private lenders a week.  Place some small ads in the classifieds saying “Wanted: Private lenders to buy low LTV real estate deeds of trust”… or something like that.  Just meet with some lenders and build up that private money pool.

Get out there and take action!

Here's A Few Related Articles...

• How This Guy Has Got Several Million in Private Money for Real Estate…
• Getting financing with poor credit and no money for real estate investing…
• Finding Private Lending In Today’s Market… How Easy Is It??
• Melting mortgage industry - American Home Mortgage shuts down…
• Great Video… Why We Do What We Do… How To Do It Better

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