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People losing their jobs. Credit drying up. Banks failing. Yes, we're definitely going through a challenging time right now. And, the financial crisis is very real when it comes to real estate investing because it is very difficult to get conventional financing - even if you have A-1 credit. But, the current financial situation also represents great opportunity for purchasing properties and having them cash flow . . . if you're willing to hustle and think creatively. Why do I see opportunity in this market? Because in the old days, you could purchase a three-family in Dorchester for a half million but no way could you have it cash flow.
Now, however, is a great time to be a landlord. Rentals are at a premium due to all of the foreclosures . . . and even the Federal government is saying people should have a place to live.
Surviving this market takes savvy, guts, and connections. What follows is my advice for seizing opportunities where others crisis.
Look for alternative financing
Sub-prime loans are kaput, so don't even go down that road. And, lending guidelines are really tight right now, which can make it really difficult to get financing for foreclosed or distressed properties.
Hard money, which is a loan based on the asset, not your credit score, is one way to finance a deal. Hard money lenders generally base short-term loans on 60 - 65% LTV. Also consider private or "OPM" - other people's money.
Another financing tactic is to purchase the property directly from the owner versus the bank. For example, one of our clients recently purchased a two-family in Hyde Park from a couple who wanted to retire. The entire transaction was "private," meaning the contract was between the investor and the couple, not the bank.
Go knock on doors
People who are in a foreclosure situation are completely overwhelmed and stressed. And, due to not being able to meet their monthly bills, they may not be answering their phone or opening their mail. So sending letters or postcards to these people won't work.
Instead of relying on passive marketing approaches, get out and knock on doors, talk to people, and build relationships. Explain to the homeowner how you can help them using various techniques. Everything you do you should be win-win-win. A short sale, for example, can save someone from having a foreclosure on his record, save the bank lots of red tape, and allow you to acquire an investment property.
Have more than one exit strategy . . . and a great network
It should go without saying that you must have a backup plan no matter what your investment strategy - whether you're buying and holding or flipping. If you used hard money to finance the purchase, you'll need to re-finance the loan, which is a huge challenge right now. Having a great mortgage broker you trust is a must. Ditto for those of you who are trying to sell a property - plan out scenarios of what you'll do next if the property doesn't sell within a specified time-frame. Build your edge as a salesperson by talking to other investors and learning their tricks.
Yes, it's definitely a challenging market no matter what your real estate investment strategy. Yet despite the gloom and doom headlines, savvy investors are still making money because they know how to find and maximize opportunities.
Sub-prime loans are kaput, so don't even go down that road. And, lending guidelines are really tight right now, which can make it really difficult to get financing for foreclosed or distressed properties.
Hard money, which is a loan based on the asset, not your credit score, is one way to finance a deal. Hard money lenders generally base short-term loans on 60 - 65% LTV. Also consider private or "OPM" - other people's money.
Another financing tactic is to purchase the property directly from the owner versus the bank. For example, one of our clients recently purchased a two-family in Hyde Park from a couple who wanted to retire. The entire transaction was "private," meaning the contract was between the investor and the couple, not the bank.
Go knock on doors
People who are in a foreclosure situation are completely overwhelmed and stressed. And, due to not being able to meet their monthly bills, they may not be answering their phone or opening their mail. So sending letters or postcards to these people won't work.
Instead of relying on passive marketing approaches, get out and knock on doors, talk to people, and build relationships. Explain to the homeowner how you can help them using various techniques. Everything you do you should be win-win-win. A short sale, for example, can save someone from having a foreclosure on his record, save the bank lots of red tape, and allow you to acquire an investment property.
Have more than one exit strategy . . . and a great network
It should go without saying that you must have a backup plan no matter what your investment strategy - whether you're buying and holding or flipping. If you used hard money to finance the purchase, you'll need to re-finance the loan, which is a huge challenge right now. Having a great mortgage broker you trust is a must. Ditto for those of you who are trying to sell a property - plan out scenarios of what you'll do next if the property doesn't sell within a specified time-frame. Build your edge as a salesperson by talking to other investors and learning their tricks.
Yes, it's definitely a challenging market no matter what your real estate investment strategy. Yet despite the gloom and doom headlines, savvy investors are still making money because they know how to find and maximize opportunities.
Dan Burke is the manager for Capital Trust, LLC, a Boston, Massachusetts firm that specializes in hard money lending. You can contact Dan by phone at (617) 971-9700 or by email at danburke@ecapitaltrust.com. To learn more about Capital Trust, visit www.ecapitaltrust.com.
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