Funding Real Estate Deals: Can You Say Friends And Family

  Funding real estate deals is obviously an important component for any investor that wants to do multiple deals. This is probably even more true today, with the state of lending and the economy. So what is an investor to do? Well there are several means outside of the conventional and one which you may not have considered. I am going to site a very successful investor, you certainly have heard of, and his strategy and how this may work for you, too.

Warren Buffet is an American investor who earned a huge fortune from wise investments. He lives in Omaha, in a house that he has been living in for the last 45 years. He is the second richest man in the United States and recently gave the first richest man in the United States $37 billion dollars to handle for him. He donated it to the Bill & Melinda Gates Foundation to manage.

When he was a young man just home from graduate school a few decades ago, he was convinced that you should always buy based on the fundamentals and not worry about trends, what other people were doing, or even what the buzz on Wall Street was. So he wrote a thesis and mailed it to 272 of his closest friends, neighbors, and relatives. Basically it said, "Here's my philosophy. I'm not going to take a job. What I am going to do is start a fund that will only buy on the basis outlined in my philosophy. I will walk over broken glass to make sure that you don't lose a dime. I will have 100% of my net worth at all times in the fund."

Then he just mailed the letters and waited for people to send checks to him. While he waited, he started calling on people. He signed up a large share of those 272 people at some point or another. If you had been one of Warren Buffet's original investors, you would be quite well-to-do today.

He knew that he couldn't just run an ad in a newspaper since he was a kid hardly out of college. He had to deal with the people he knew best and who knew him best. Many people of good character thought a lot of him and invested their money. Some of them invested just a little money at first and then more later on. But surprisingly enough, over two-thirds of the people to whom he wrote letters became stockholders in that first month.

You need to do that, too. If you can't get an owner or a tenant to invest with you, start with the people to whom you are closest-that know you the best. They are the ones most likely to give you money. Perhaps it seems to be counter-intuitive to ask your best friends for money because you don't want to ruin that friendship, but consider these key points.

Key Points:

If your deal isn't good enough to ask your Mom to invest in, you should not consider the deal. If the deal isn't good enough for your friends or family, it may not be a wise starter deal for you. So get out there and set up the best possible deals. Only show people the deals that are under contract. Otherwise, they'll feel that it's their prerogative to dictate how your deal is structured, and may act like your senior partner. Show them why it's such a good deal, but if they're not convinced, they simply don't have to invest.

Now you may have to get outside your comfort zone to initiate this technique or you may quickly find out 'Who Loves Ya Baby'. However, if you are knowledgeable and confident you can do good deals and prove yourself, then it is likely you will find people to invest with you and most likely more so in the future if they are getting a good return on their investment. So funding real estate deals from external sources will take some leg work and effort, but it is a doable proposition if you approach it in the correct manner and perform on your promise.

One Deal to Financial Freedom? Gary Tharp invites you to get access to ask the real estate experts who are mentors to millionaire

In my opinion, there are two major schools of thought for finding great real estate deals.

First, you can spend time and/or money on marketing to find motivated sellers before they list their house for sale with a real estate agent. Or, you can work with the right type of real estate agent to find the deals that are already for sale with the Multiple Listing Service.

Each one has its advantages and disadvantages which I will briefly discuss here.

In the first case, where we are looking for motivated sellers the advantages include being able to find deals where there is little or no competition and being able to negotiate face to face with the seller and the benefits of that face to face negotiation include better chances of negotiating owner financing and creative, flexible terms.

The disadvantages of trying to find motivated sellers yourself is that you need to put in time and usually money to find these types of deal. So, there is more invested in finding them. Another disadvantage is that you need to negotiate face to face with the seller... and if you are not a good negotiator that could be a huge disadvantage to you.

On the other hand, the advantages of using an agent to find deals is that there are usually more deals to look at, you know the sellers are looking to sell and they have named their price and you can have an agent doing a lot of the work of finding and negotiating the deals for you. Another advantage may be that the agent can tell you the house is worth $X but the seller is only asking $Y. When finding motivated sellers on your own, that is rarely the case.

The downside to using an agent is that you are not usually able to negotiate more creative offers because you are usually negotiating via two agents (one representing you and the other representing the seller). Another disadvantage is that, if the seller's agent is doing their job, there should be a lot of others aware of the property and competing with you to buy it if it is a good deal.

While I market to find deals outside the MLS myself and also look in the MLS for deals, for someone just starting out a great place to start would be finding an investor friendly real estate agent that is already looking for great deals for their clients and begin working with them. This is usually different than just any old real estate agent that can help you buy and sell your house. Investor friendly agents are harder to come by and should be considered a valuable member of your real estate investing dream team.

With the recent spike in home sales, buyers and sellers alike are feeling the pressure to quickly close on their purchase transaction before mortgage rates go up and demand for new homes slip. But before rushing to "ink the deal," understand that real estate professionals are required to provide written disclosures to their clients on a variety of important items necessary to the transaction, as they directly affect the buying or selling decision. Here are 8 areas where written disclosure should be or are required:

1. Affiliate Disclosures. These days, it's common for a mortgage company to have a business interest in a title company or a real estate brokerage to also own a mortgage company. These are called "affiliate" relationships, and the relationship must be disclosed to the potential end users of these services. For instance, a mortgage company must disclosure in writing to its loan applicants that is also owns a title company that will close on the mortgage and purchase transaction. A loan applicant is not required to use the "affiliate" title company and can use another suitable title provider instead. Most importantly, a home seller or buyer cannot be pressured to use an affiliate service or be prevented from seeking a loan or making an offer on a home, just because one chooses to do business with an "unaffiliated" business.

2. Third- party services. Similar to the above paragraph, a home seller and real estate agent cannot require someone to use a third party service in order to purchase a home. A third- party could mean a lender, a title co, an appraiser or inspector. However, one can give better pricing to a buyer who uses their services. For example, a lender can waive fees if the buyer uses one of their "affiliates," however, they cannot prevent you from making a loan application or denying a loan for refusing to use their business affiliates.

3. Real estate agent disclosure. If a real estate agent is selling a home that they own, they must disclose that they are a licensed real estate agent. Some states limit this disclosure to only an agent's primary residence. Other states require the disclosure for any properties that the agent owns.

4. Dual agency. A seller's agent or "listing agent" represents the seller. The seller's agent does not have any professional duty to a buyer who is not represented by their own agent. The buyer should hire their own agent. A dual agent is an agent or real estate broker that represents both parties in the transaction. Agents must provide written disclosures to both a parties when they act as dual agents. In theory this disclosure is supposed to make a dual agent in a transaction neutral. However, a real estate deal is never without some controversy and give and take, and therefore this writer suggests that a prospective purchaser hire their own "buyer's" agent.

5. Title agency. A title company's function is to insure that the ownership to a specific property is valid according to public property records so that a lending institution can provide a mortgage on the property or a purchaser can take proper title from the rightful owner. Title agents represent the insurance companies that provides this coverage. They do not dispense legal advice to buyers or sellers. They do not represent lenders or real estate brokers. Title companies must disclose when they have an affiliate relationship with a property service provider, meaning that they are owned by the lender or real estate brokerage, or even an appraiser.

6. Provide all offers. A real estate agent is required to provide its sellers with all offers. Unless a seller specifically instructs an agent not to bring certain offers, say one below a certain price or time frame, the agent must present the offer. Therefore, if a buyer feels that an offer was not presented, they should contact the agent's brokerhttps://www.penidaland.com/. In some states, it's customary for a buyer or their agent to present the offer directly to the seller. But nothing prevents an enthusiastic buyer from directly speaking with a seller, it's just not commonplace.

7. Terminating a real estate agent. It is a common misconception among sellers that they cannot fire or terminate their listing agent. They can. However, the best way to still market one's property without bad feelings is to approach the agent's broker and have the broker assign a new agent to the listing. Understand that the agent and broker still have a "protection period" that protects them against the seller closing a transaction with a buyer that the agent, through their business efforts, had previously procured. The period is usually for 180 days, but at time of listing a property this period can be negotiated down to 90 or even 60 days. Regardless of the time limits, it is wrong for a seller to take advantage of the agent's efforts and is grounds for legal action.

8. Attorneys. Like a property agent, an attorney cannot represent a buyer and a seller in a transaction unless the attorney discloses the conflict in writing and both parties sign the disclosure. If two parties to a transaction have completely different versions of a transaction, then it's time that one party hires their own attorney.