Investing In Real Estate With Your IRA

Using your self-directed IRA to invest in real estate is becoming more and more popular with the recent and continued stock market declines.

With properties at all-time lows and able to cashflow between $300 & $500 per month, it’s a smart place to be.

Watch this episode and learn more about the benefits of this approach.

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The Secret Source

One of the problems that investors are running in to is that it is VERY hard to get conventional funding on investment properties without ridiculously large down payments.  It doesn’t matter if you have stellar credit or not.

Being a cash investor doesn’t help much either.  Even those with cash have limited amounts of it so when you have to put 20-30% down on each and every property and cannot get those funds back out to buy the next one for a year, your ability to buy many homes is chop-blocked.

I recently discovered a loophole that enables those with exceptionally good credit to be able to invest in properties using No-Money-Down "Hybrid" Conventional Financing!  I’m christening this method as my "Secret Funding Source" and will be revealing it in detail in a separate video series due out soon.

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Lines of Credit

Access to revolving lines of credit can be a great way to fund your real estate investing purchases.

With access to enough credit, you can purchase "cheap" homes without applying for a mortgage. Simply draw down the funds from your credit line in order to fund the purchase and/or rehab costs.

A Home Equity Line of Credit (HELOC) or Unsecured Business Lines of Credit are the two main sources of credit lines that are primarily used by real estate investors.

While a HELOC can be set up at your local bank very easily, setting up Unsecured Business Lines of credit can be a little more tricky.

My partner and I purchased an inexpensive course to learn how to do this properly. You can learn more about it by clicking the link below:
http://www.geteasybusinesslinesofcredit.com/

Pros:

Home Equity Lines of Creidt (HELOCs)
Ease of Access - setting up HELOC lines has been a favorite lending medium of banks for the last few years.  Business is still rather competitive for HELOC customers such as yourself among lending instituions.  The "Credit Crunch" has taken  toll on the HELOC market as well, but not as much as other lending avenues.  Many banks have cut back large $300k - $400k available balances down significantly in an effort to  bring things in line with today’s values, but if you are not looking for major credit source like that and you have descent credit, tapping the equity in your home should still be an easy avenue.

Tax Benefits - many homeowners glean tax advantages from the interest paid out on HELOC loans.  This varies from person to person on each individual situation, and it is usually best to consult  a tax professional if this is a something you want to be able to count on.

Unsecured Business Lines of Credit

These types of credit lines do NOT report on your personal credit profile.  Thus their usage does not impact your personal credit score.  And because they do not show up on your personal credit profile, it is possible to assemble many of them at one time in order to build your own "Mini-Bank" for investing in real estate.

They can also be set up rather quickly.  Usually within a few weeks of establishing a new LLC or Corporate entity.

Again, to do this properly you may want to check out the course by Thomas Kish before charging forward in an unorganized search for funds.

Cons:

HELOCs
The single largest disadvantage to investing in real estate with HELOC funding is that you need to actually own a home with equity!

If you’ve got that base covered then the other major disadvantage is that a HELOC shows as a revolving line of credit on your personal credit profile.

Regardless of that fact that payments are made on time, the scoring models consider such activity "higher risk" for personal profiles (not so with business profiles) and can cause a point drop.

If you are the type that worship your credit score, checking it on a weekly basis, and feel that your score is a personal reflection on you yourself, then you may wish to use Unsecured Business Lines of Credit, Hard Money, or Private Money to fund you real estate deals.

Getting approved for a HELOC also require a credit appication, and if you have a poor score, getting approved for one may be tricky.

Unsecured Business Lines of Credit

Again, the only real disadvantage to using Unsecured Business Lines of Credit is that there is a proper way to go about applying for them.  If you take the proper steps, then getting access to Other-Peoples-Money (OPM) using this resource is a snap.  But if you do it the wrong way, you’ll find yourself a bit frustrated.

The good news is that you can lean how to handle the upfront process of getting you access to up to $250,000 in Business Credit, which does not report on your personal credit report, in only a matter of weeks.  Click here to find out how.

Seller Financing

Seller financing is a great way to buy your next real estate investment property…if you can find a seller willing to sell to you on owner-financing.

Most sellers are afraid of selling to someone who may or may not actually keep their end of the bargain.  After all, if they sell a fixer-upper to you on owner financing with a low down payment and you start fixing up the place and decide that you don’t like this whole "real estate thing" after all…they are stuck getting the place back again.

Buying on owner-financing from traditional homeowners is like trying to find a needle in a haystack these days too because pretty much everyone owes too much on their home.  So finding sellers that are willing to work with you and actually have a house that you can make money on is rare indeed.

The good news is that we make many of the hot properties avaiable on The Wholesale Hot List available with owner financing!  So with a small down payment you can be on your way to real estate success regardless of your credit, income, or other factors.

Pros:
Very flexible. If you find a seller willing to work with you, the details are hashed out between you and the seller directly. This method is very fast too.  Pretty much as soon as paperwork can be drafted and you can supply a check is how long it takes for keys to change hands and get you in business on a new property.

Cons:
Rare.  Between the lack of equity most sellers are faced with and the fact that there are very few investors like us who will buy a property then wholesale it on terms vs. cash makes the number of deals you can buy this way severely limited.  So count yourself among the lucky few that have a direct line to properties that can be bought week-in and week-out this way.

Small Local Banks

Small Local Banks are fast becoming the weapon of choice where financing real estate investment property is concerned.

Due in part to the fact that many local banks hold their loans "in-house" and do not sell it on the secondary market, they are restricted by the standards that the secondary market imposes.  This translates into added flexibility where lending to you on your real estate deals is concerned.

This funding source, if engineered properly, can eclipse private money in ease of access but at the sacrifice of flexibility.

Because of the value, we are always working to develop relationships with local banks that we can point those on The Wholesale Hot List to.

Pros:
Not bound by the regulations of the conventional market.  Ability to leverage small amounts of cash into large investment loans when done properly.  Larger amounts of funds can be made available than with other sources with the exception of conventional financing.

Cons:
Relationship based.  Like private money, relationships with small local banks require time invested and a track record established before you can reap the full benefits of a robust local banking relationship.  Sometimes it take an intense search to find the right local bank.  Credit will be factor when lending decisions are made.

Private Money

Private money is the "Brass Ring" of all real estate investment financing.  When one person loans money to another person directly, they are making a Private Money Loan.  So if your rich Uncle Joe gives you $65,000 to buy a house and fix it up, and he takes back a mortgage on a home, you have just entered the realm of Private Money.

It is also known as "Relationship Lending" because most private lenders loan to people they know personally or have come to know over time.

Pros:
Ultimately flexible.  The terms of the loan are forged directly between you and your lender.  You can set payments up however you want.  You can set up the interest rate however you want.  You can get the loan taken care of without a formal appraisal.  You can get the funds in a matter of days (if not the same day) from the time it’s requested.

Cons:
Because it’s relationship based, you need to actually talk to REAL PEOPLE, explain what you are doing, and ask them if they want to get involved or not.  For many people this is a big barrier.  They’d rather borrow from a faceless bank like First Franklin than ask someone they know to loan them $100,000.

Also, Private Money is limited to the amount of funds the private lender has available.  Not everyone has $250,000 in cash sitting around waiting for you to come around and borrow it and put it to work for them.  Some only have $25,000 or $50,000 and you need to match the funds committed to a deal that you bring online.

Hard Money

Hard money mortgages have been the mainstay of the real estate investing world for years.  Just about every guru that sells a course will hold this up at the trump card to everyone that asks, "Great! Now that you’ve taught me how to find great deals, how can I find the money to buy them when I have no cash and bad credit?"

The common answer is simply glossed over as "Go find a hard money lender.  They’ll lend you all the money you need to buy the house, cover your closing costs, and fix it up.  Many will do so without a credit check much less a minimum score." And with that simple answer  and 3 pages in their manual they feel that they have covered their bases on this cornerstone issue.

Unfortunately, Hard Money Loans are NOT the same today as they were in the past.  Most hard money lenders DO require a credit check and they DO require a minimum credit score.  True "equity based" lenders are very few and far between but the way the ‘pros’ talk, you’d think that hard money lenders were as common as flies over a trash can after a church picnic.

The good news is that if you DO fit the profile, Hard Money Lenders WILL give you the funds you need to buy a property and fix it up.

Pros:
Funding available for the purchase price, the closing costs, and the repairs.  Relaxed credit standards.  Possible to build a relationship and get red-carpet treatment.

Cons:
Not available to those with bad credit for the most part.  VERY high interest rates and upfront fees.  Funding for repairs often held in escrow with additional "draw fees" to get access to it when various phases of your project are reached.

Conventional Financing

"Conventional" financing refers to the majority of investments loans that are made available today.

When someone talks about getting a "conventional" investment mortgage they are talking about a loan that "conforms" to Fannie Mae and Freddie Mac guidelines.

Fannie and Freddie are the driving force in the mortgage world today, and regardless of what you hear in the press, will continue to be for a long time to come.  They have very deep pockets where lending is concerned and are able to make funds available in amounts that no other institution can.

Most mortgages today are being hocked as "conventional" loans.  All kinds of organizations from credit unions and banks, to independent mortgage brokers and large hedge funds can loan out money that "conforms" to the Fannie/Freddie guidelines and then "package up" a number of these mortgages and sell them on the secondary market.  They then get their cash back and go try to make more mortgage loans.

Pros:
The benefits of conventional financing is that it’s pretty much a bottomless lending source as long as the mortgages meet the standards that are in place.

No real "work" to get this funding in place.  Just visit your local bank or mortgage broker and they’ll put you on track to get an investment loan.

Cons:
The standards that ARE in place are all most out of control stringent right now.  So while the funding pool is more of a "lake", the powers-that-be at Fannie and Freddie make it very difficult to get access to the funds, especially if you look to buy multiple properties.

Between the large down payments, the seasoning issues involved in most cases, and the restrictions on the number of loans that one person can have, this is not the best source for serious real estate investors to build their business upon.

When used properly, however, this funding source can be extremely useful.  It’s a key component off my "Secret" Funding method which you’ll learn more about later.

Basics of Real Estate Investment Funding

In this video series entitled "Funding Fundamentals" I’m going to go through the 7 major sources of investment funding that you can use to build your real estate investment  empire.

As we go through the various sources you’ll see that some are more attractive than others.  As we focus in on each them I’ll point out the pros and cons of each funding method.

While you watch each of the videos in the series, try to keep an open mind and ask "How can I make this funding source work for me?"  Don’t forget that you can often "combo" up the different methods in order to achieve your goals.

Once you are done with this video series you’ll know without a shadow of a doubt that if you REALLY want to take advantage of the ultra-low prices on investment properties available today you can find all the money that you need to buy as many houses as you want.

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