1. Get Real
Don’t expect to walk into a lender with a tiny down payment and have them even pretend to be interested in financing your deal. In hard times, lenders become “risk-averse.” One way to make them fall in love with your deal is to show that you have some skin in the game, that you are putting your own money on the table. Some of you – especially those who have read a ton of get-rich-quick real estate books or are trying to be a “creative” investor – don’t want to hear this, but you can’t expect the lender to take a risk in a tough market if you’re not prepared to do the same.

2. Check Your Facts
Do your due diligence and have it ready to show to the lender. Not only should you verify a property’s income by examining its leases, but you should also get an independent take on your local rental market to confirm that the rents are realistic. Visit rentslicer.com as a potential source of apartment rent data. RealtyRates.com should be able to give you info about prevailing capitalization rates in your market. RSMeans’ CostWorks can help you with construction costs if this is a development project.

3. Join the Pros
Consider joining one of the trade associations for your specialty. There’s NAA (National Apartment Association), and ULI (Urban Land Institute) to name just a few. Yes there are membership fees, but the data and trends you acquire can be a great help in building a successful strategy.

4. Sell Yourself
With investment property, a lender’s first concern is the viability of the property, but they’re going to be interested in you as well. This is where a detailed personal financial statement comes in. You should have it in a profession spreadsheet format and keep it current with all of your accounts, income, assets and liabilities so that it’s ready to update and use whenever to need to seek financing.

5. Make Your Case
I can’t tell you how many emails my company gets that say something like, “I saw a building on LoopNet that is listed for $500,000 and the NOI is $95,000. What kind of financing can I get?” You need to give me more to work with than that. You need to build a professional presentation to show the lender the ACTUAL financial details of the project.

For income-property investments you should provide at minimum, the last two years’ ACTUAL (not proforma or projected) income and expense statements and a current rent roll.

Make sure you write a good, solid Executive Summary. This will give the lender an overview of the deal. As the deal progresses, the loan officer or banker will ask, “How did you come up with this projection?” or “Where did these numbers come from?” That is when you start pulling out detailed reports to support your projections. You’ll not only answer the questions, but you’ll also demonstrate that you have a firm handle on this deal and you know what you’re talking about.

Of course, not every deal is going to qualify for financing, and that’s true even in non-crunch times. Still, you can stand out from others who are competing for limited funds and maximize your chances of success by using the kind of thorough, professional approach I’ve outlined for you.

More information about qualifying deals, running the numbers and preparing executive summaries and financial statements is available in my Finance It Right course.

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I played basketball briefly in high school. I ran track and the coach needed some speed that season so she put me on the team. Soon, she discovered how awful I was (not for lack of trying - I practiced for three hours daily!) and I rode the bench the rest of the season.

For me, I love it even more because I stink at it. I have a huge respect for the women that play the game and the LA Sparks and Tennessee Lady Vols are my teams.

This week, the Sparks were playing Detroit and a bench-clearing brawl broke loose. Not something you typically see in the WNBA so it was big news. The league suspended a bazillion players and Detroit was left with only 7 eligible players on their roster.

Enter Nancy Lieberman.

Nancy is a 50- year old, Hall of Fame basketball player/coach/analyst and Detroit gave her a 7 day contract. She played last night and although she missed her one shot, she did complete one HECK of a no-look pass for an assist. 50 years old. 50!!

So, like I said, score one for the old chicks. You, GO, Nancy!

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Beginning August 1st, Freddie Mac is limiting the number of financed properties an investor can have to 4. Fannie hasn’t yet announced a reduction but some Fannie lenders have voluntarily reduced their max to 6 in anticipation of an announcement.

Yesterday, Wachovia announced that they are no longer accepting loans. Wachovia was the bank that did the residential LLC loan. So, now all those investors that have been calling in a panic in response to the Freddie Mac rule have waited too long. Ix-nay on the efinance-ray. That’s pig latin for “no can do an LLC loan.”

So, what to do now? If you have more than 4-6 financed properties on your personal credit and you want to employ this LLC refinance strategy, your broker can’t help you. I get at least two calls a day from investors that are looking to buy or refinance a property and they are essentially unfinanceable with conventional financing. They always ask me to “be creative.”

Well, my creative solution for those investors ended yesterday. If you are in this boat, you may be able to help yourself by developing a relationship with a portfolio lender on your own. A lender that will loan in the name of your entity and doesn’t sell their loans into the secondary markets. But I can only think that if you could do that, wouldn’t you have done that already?

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This is the recording of the live call. We went for more than two hours and edited out the live questions we took, but the call is awesome! Be sure to leave a comment to let me know what you think. OR feel free to ask your questions here. I’ll answer them and everyone can share in the information.

Be sure to visit Lassiter Mortgage for the full schedule of events!

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IndyMac will reopen under FDIC management and control but this just means more bad news for real estate investors.  I closed millions of dollars of loans with IndyMac both on the residential and commercial side as recently as last month.  As more banks fail less conventional financing options become available to investors which in my opinion will lead to the death of real estate investing as we know it.

If you don’t already see the writing on the wall, here’s the deal:

1. More banks fail leaving less options available for investor financing.

2. The ONLY buyers of mortgages become FHA, Fannie Mae and Freddie Mac.

3. FHA does zero investor financing. Freddie Mac now limits investors to 4 financed properties and nothing can be refinanced if it is or has been titled in an LLC. Fannie Mae is suspiciously quiet but Fannie lenders are voluntarily limiting max properties financed to 6 and adopting the LLC rule in anticipation of Fannie following Freddie. AND there is strong talk in the media about the fact that Fannie and Freddie are on the verge of failure.

What will your strategy be when this happens? Will you be able to qualify for a conventional loan to purchase OR refinance a property? Or maybe the better question is will there BE conventional loans available to real estate investors?

Creative investing strategies are back. Unless you have 30% to put down on a property, a great credit score and a ton of LIQUID reserves to satisfy the conservative guidelines of a portfolio lender that loans outside of Fannie, Freddie and FHA, then you *must* educate yourself about three things:

1. Raising private money.

2. Lease Options and Master Lease Options

3. Subject-To’s.

Then let’s talk about selling your properties. FHA is the new subprime. If your buyers can’t qualify for FHA then you have to know how to sell your properties using seller financing. Wrap mortgages, performance notes and deeds of trust and shared appreciation mortgages have to make an appearance in your investor tool box.

Maybe “The Death of Real Estate Investing” is a little too strong for this situation. Maybe we should call it Real Estate Investing 2.0. Whatever we decide to call it, the bottom line is that you need to do something fast to adapt.

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It shows the ARM resets and it appears that we’ll get some relief late this year and in 2009 but we’ll have a whole fresh wave of foreclosures due to ARM resets in 2010-2011.

Check out the graph here.

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Read more here.

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As banks and lenders tighten their guidelines and heck, even go out of business altogether, it seems that more and more real estate investors are trying to get the crazy deals done with conventional financing. Now, I am all for creative strategies to acquire properties but to expect a conventional lender to go along with it is just foolish.

Earlier today, I received an email from a client that purchased a 12-unit property a few years ago for which I arranged the financing. Today he inquired about a “cashless transaction” where the seller would carry back the 20% down payment, a promissory note for the earnest money and a new lender would place an 80% LTV loan on the property to “cash out” the seller. Oh, and the buyer has no money.

This is a 100% CLTV (combined loan to value) deal to a borrower who not only has no cash available for down payment, closing costs or earnest money, he has no cash reserves in case something happens. Would you loan YOUR money to an investor in this position? I don’t think so.

In my Finance It Right Collection, I say that you must choose your investment strategy based on the financing that you can (or can’t) qualify for. In this case, he cannot qualify for financing so he is wasting his time and the time of the seller and me by trying to put together this impossible deal. Instead, he should be focusing on deals that require no money from the buyer such as lease options and subject-to’s. As an investor the sooner you accept the fact that banks aren’t giving it away anymore and YOU are the one that must get creative, the better off (and richer) you will be.

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