By Dave Miller
Easy money is a thing of the past. Financing real estate was a breeze a year or two ago but is now equivalent to a circus dog jumping through hoops of fire. You must be careful or you’ll singe your well-groomed hide.
Banks are more stringent. They turn up their nose at things where they usually would have licked their chops. They now ask for items never mentioned before such as vacancy, debt service coverage ratios, additional collateral, etc.
In the past I could easily have financing – with merely a half-dozen questions – in thirty days or less. Now it takes up to sixty days and I must answer a couple inquiries every week.
Until the banks loosen their tight lending standards, the money supply will not increase. The printing presses have been running rampant but the banks are constricting, thus holding back the looming inflation. This is temporary. The banks must eventually lend in order to survive.
So far the banks have not showed any hope of changing their standards. This is bad news – for them. It will bankrupt them.
I find it ironic that when the savvy investors were getting cautious, the banks were encouraging the inexperienced to get in or be left behind. Now with all the post rapture blood on the streets the savvy are seeing opportunity again. But the banks stand there wagging their heads.
What shall we say then? Shall we be broken and allow the opportunities to pass? No. We must improvise. Adapt. Many times have I said these words – “adapt or die” – and they still hold true today.
Many investors are discouraged with the meager returns they get at the bank. Often these people are older individuals who accumulated their money over time. They have seen many ups and downs. They have seen real estate be a solid rock surrounded by shifting sand. Most do not want to hold real estate but like the stability it has. They do not want the hassles, just the concrete, higher return on investment.
If you help them solidify their capital with a better than average return – you are in business. You make money while they do the same. You are happy. They are happy. These are the crucial ingredients for an outstanding long-term relationship.
To keep them happy you must seek to understand them – your lenders. All will vary in needs but most just want a check on the date it is due. They want you to fulfill your promises. Build an honest, trustworthy relationship with them. They will ask you to come back.
The more you use private money the more you will want to make it priority over dealing with a bank. Private money investors tend to be uncomplicated, down-to-earth people who are easy to work with.
There is no comparison between banks and private money investors. If you treat your investors right you will have a waiting line. They will call you asking if you are in need of money. Has a banker call you offering money?
You are better equipped with a list of names to call. Otherwise potential people will be missed. Start building your private investor list today. This list will become your lifeline, your most valuable asset.
With a little work it’s back to easy money.
Quotable quote: I’ll be more enthusiastic about encouraging thinking outside the box when there’s evidence of any thinking going on inside it. – Terry Pratchett:
Post note: If you are an investor wanting a solid, well-paying investment please contact me. I will gladly add you to my list.
If you are a buyer in need of financing, feel free to contact me. I will be thrilled to assist you – if I am able.