Great news. Real estate is on sale throughout the country. Inventory of distressed housing is way up, and we are experiencing the great real estate wealth transfer of our generation.
What is holding you back?
For most investors today, the answer is the lack of bank financing. That’s why I believe 2012 is the year that you should fire your bank and set yourself free.
Just a few years ago, we had the opposite problems. Inventory of distressed housing was low, prices were high, and bank financing was loose and easy to obtain. Which market would you rather operate in?
Today’s market provides much better opportunities for investors IF you are ready to fire your bank and look elsewhere for financing.
Instead of just having the skills to rehab a house, today you need to have the skill to rehab your financing. This requires a shift in your thinking about how to invest today.
Here are three reasons why you should fire your bank in 2012.
1. You’ll Never Run Out of Money
Even though real estate prices have come way down compared to a few years ago, houses still take a lot of capital to purchase. You can buy houses as cheap as cars in today’s market, but that is still a lot of money if you are paying cash or having to make 20% down payments to get bank financing.
It is imperative to learn to use other people’s money (OPM) to ensure your success in real estate. Otherwise, you will eventually run out of funds.
When you fire your bank, you will find that you do not need to make a down payment or even pay for your closing costs.
As a real estate investor, your returns will be infinite if you do not have any of your own money in the deal. An infinite return is a great goal for your next transaction and will allow you to continue buying more properties without running out of funds.
2. You Can Close Your Deals Much Faster
Purchasing houses that are in distress situations often require a very fast closing. If you are relying on bank financing, you will find the process to be full of hurdles that continue to slow down your closings. These hurdles come in the shape of credit applications, loads of personal financial documentation, rent rolls and leases for other properties you own, credit reports, and appraisals.
Each of these hurdles represents an opportunity for delays in closing. When you are buying distressed real estate you must be able to close on time and without hassles. Each of these bank-financing hurdles can lead to a lost transaction.
When you use private financing, you avoid most of these standard delays and hassles.
3. No One to Say “No”
Today’s mortgage regulations have led to increased underwriting guidelines that can become problematic for many investors. Each underwriting requirement can lead to a bank saying “no” to funding your real estate deal.
How many houses would you like to buy this year if you did not need any of your own money and did not need to be concerned with getting a bank mortgage?
When you eliminate bank financing from your investing strategies, you will be liberated to buy as many houses as you want without using any of your own money. Freedom to buy as many houses as you want will get you off to a great start in 2012.
I hope you’re wondering how to begin to purchase homes without a bank, because this blog series will answer your questions and take you through the process of finding and using private lenders. Stay tuned for more! [Part 2: Show Me the Money - Create Your Own Bank with Private Lenders]