In my last blog post I talked about 2 ways that a newbie real estate investor could get financing. One of those ways was by having 50 – 50 partner with a money partner who will finance the transactions.

In this article, I’m going to share how a newbie can get a money partner to finance your deals.

The real question becomes how do you convince that person who has the money and the credit to become your partner. When I was starting in real estate, I partnered up with with a CPA who became a money partner for us. Prior to our introduction to this guy, we had already done several deals. We could show him that we had real experience under our belts.

We put together a presentation with our success complete with what we paid for our properties, what we had to fix them up, and what the cash flow looked like.

It’s not essential that you know the individual personally. In fact, I was introduced to that person by a mutual friend who put us together for a fee. Was the fee worth it? Absolutely.

I don’t think we would have been able to put that partnership together if we hadn’t had experience under our belts already.

You can use this approach if you already have that type of experience. All you need to do is put together a presentation like I did that shows people you know what you talking about.

If you don’t have that experience, does that rule out this approach? Absolutely not. You can still put together a deal like this.

It’s definitely not going to be a little tougher sale, but it’s not an impossible sale. I’ve seen my clients put together this type of deal and make money doing so.

What you have to do put together a good presentation. It will need to show the types of the properties that you would be Buying. You will need to put down specific information like purchase price. What you plan to do to rehab the property. You will need to show what the cash flow will be. Get tons of specific details worked out before your meeting. For example, have your contractors already lined up and ready to go.

The one thing that’s different is that if you don’t have a track record it’s going to be a lot easier to approach someone who is family or a close friend who really wants to see you succeed.

If you go in with this type of information and a lot of certainty that you can pull this off – YOU CAN. You’ll have a good chance of convincing your potential money partner to actually become your 5050 Partner.

One question I get asked all the time is “Scott, if I’m just getting started in real estate, How do I get financing?” That’s a really good question, especially now given the difficulty in borrowing money from banks and mortgage companies.

In this article I’m going to give you my two top tips for getting financing if you are just starting out.

1) Find a Money Partner
The first tip I’ve got for you is to get into a partnership where you are doing all the work involved in the real estate transactions. You find the properties. You supervising the rehab. You provide for the property management.

The other party, your partner, will be responsible for all of the financing. That means they will put up the money and credit to fund the project.

But at the end of the day, you are 50% owner of these properties. The down side is that you are giving away half of the deal.

When I was just starting, for a whole year I bought ten properties with a partner in this manner. These properties were long term rental. I still on those partners those those properties in partnership.

2) Borrow from Friends and/or Family
The second tip is to rely on friend or family as a private lenders. Private lenders are cheaper than 50-50 partners in the long run.

However, most of the time it’s a great for you AND a great deal for the private lender. If they’re looking to make a good return on their money you can be an excellent opportunity for them. For example, if they’re going to the bank to buy a CD, they might only be getting 3% or less. But if you are borrowing that money from your private lender on real estate you can offer them 8% to 10% interest secured with a mortgage.

My private lenders have been critical to me since the banks have tightened up their lending standards.

Are either of these easy? No way. But if you are just getting your start as a real estate investor and want to buy properties for the long term, they represent a great avenue for you to get the financing you need.

The next question is how to approach a prospective private lender or money partner. I’ll leave that to another blog post.

The federal government is putting together “sweeping” new regulations for the banking sector. What does that have to do with us as real estate investors? Plenty. Let me explain.

One clue that the feds are serious about this is the recently suit filed against Goldman Sachs. Goldman Sachs is the largest of the investment banks. The are trying to fan public anger against the banks in a time when Goldman just announced that it is shelling out $5 billion to its top executives.

To get a better context on what’s really going here, let me give you a little background.

The banks have always had lots of money. With money comes political power. A powerful, out-of control banking sector led to the great depression.

After the great depression, the federal government had enough leverage to put laws in place that greatly limited the amount of risks that banks could take. For example, it took banks out of the investment and securities business. The result of these regulations was a relatively stable financial market from the 1930’s through the 1970’s evidenced by very few bank failures during that period.

Starting in the 1970’s, their was a trend toward deregulating the banking sector. Arguments were made by banking sector advocates that laws put in place after the great depression were now “out of date” with the new technology.

The banking crisis of the late 1980’s, which resulted in huge numbers of bank failures, was a direct result of the deregulation of banks.

Even though we faced period problems like the S&L bailout in the 1980’s, congressman and senators who were heavily backed by the banking sector quietly put laws in place that gave banks the ability to grow much larger. For example, some of those changes included the following:

1. Removing restrictions on interstate banking,
2. Allowing commercial banks to get into the investment banking business, and
3. Prohibited the Federal government from regulating most derivatives.

There is a long list of other changes that could also be added.

In addition, these banks were adding all sorts of creative new investment products beyond making loan. One example was the mortgage loans which were bundled together and sold as securities. The banks wrote the loans, but were not on the hook if the borrowers failed to pay back the loans.

These financial products were complicated enough to make assessment of the risk very difficult for the consumers of these investment products to understand. Investors continued to pump massive amounts of cash into the market into investments that were much riskier than they understood them to be.

The net effect of these activities was to create a massive bubble in the housing market fueled by these investment products and the companies that created and sold them.

As you will recall, the fall out from the financial crisis was a loss of some 8 million jobs in the US. The Federal Government created the $700 million TARP fund to bail out big banks.

Oh yes. And many ordinary people like you and me will remember it best are those who lost a large portion of their retirement nest egg.

I will admit I had nothing riding on the stock market at the time, so I had no direct losses through investments.

So what does it all mean for the ordinary real estate investor?

First, there are incredible purchase opportunities right now. If you are like me, you’ve been buying up foreclosed homes that were once part of those bundled mortgage securities products. Those who have the cash and/or credit to buy bank owned properties have made some excellent buys in the last couple of years. Those deals are still coming in, and will continue to do so.

Even though “the economy” shows some signs of improving, you will continue to see great purchase opportunities that resulted from the economic crisis for next few years.

Second, these are anything but normal market conditions. Don’t expect the great purchase opportunities we’re seeing right now to last forever.

The federal government is going to pass new banking legislation. Their lobbyists supporters in the congress and the senate will be fighting “real” reform tooth and nail, but the financial sector is not going to be like the wild west when this thing is over and done with.

It’s likely that the federal government is going to be successful in putting the brakes on the risky tactics of the largest banks that created the current financial crisis. I think it’s going to be a very long time before risky banking practices create conditions for another housing bubble and collapse. Recall that after the great depression, reforms put in place created a very stable financial system for decades.

So what are we left with? Great purchase opportunities now. Movement toward slow and steady growth in the future.

Decades of slow, steady growth would favor a strategy of buy what you can while the buying is good…and hold onto it. I’m putting my money where my mouth is, because that is my strategy right now and for the coming years.

I remember watching Wayne Gretzky when I was growing up. I’ve always been a big hockey fan, and I loved watching the great one play. Let me toss in few highlights for those of you who might want to jog your memory.

The great one had some excellent advice for anyone who was striving to achieve more. I’ve included two of those in this article below.

1. Focus on the Fundamentals
The great one once said, “The highest compliment that you can pay me is to say that I work hard every day, that I never dog it.” He was an absolute master with the puck, and one of the things that made him so great was his focus on the fundamental of the game.

Real estate investing is not so much different from the game of hockey. The great ones focus in on the fundamentals of their game, and never get away from those fundamentals.

I’ve noticed that when I get away from the basic things that make you money in real estate investing, my bottom line suffers because of it. The basis of real estate investing is having a deal to work with. One of the most basic principles in real estate investing is that you make your money when you buy properties. You get paid when you sell the property.

That makes the offers you make very important. When I get away from doing marketing to generate leads so that I can make offers, I don’t make money. It’s that simple.

Lately, I’ve had a lot of the cash I typically roll from deal to the next tied up in rehabs and properties ready to be fixed. In the past, I would have just stopped making offers until I had my projects finished up, but they up and down is not healthy for my business.

2. Make Offers Especially When the Timing is Bad
The great one also once said, “You miss 100% of the shots you never take.” True, so true. I’ve learned to discipline myself to go out and make offers regardless of my cash situation.

It’s actually a healthy habit to develop because the lower my cash reserves are at the moment, the harder I push sellers to give me very favorable financing terms. In fact, I’m doing a purchase on a 6-unit property right now in which includes:

1. Most of the financing from a zero-interest loan I’m getting from the seller,
2. Taking over a loan subject to the seller’s existing financing, and
3. Taking out another loan to pay for repairs and a small down payment to the seller.

I think you call that a hat trick.

Earlier this week I caught a story that National Public Radio (NPR) ran on a California family that had a dream of buying a house. Up until now, it had always been out of reach financially. However, with four bedroom properties close to $200,000 in some of the areas where they were looking, their dream was now within reach.

But the problem they were facing is that they were being outbid by local real estate investors. Interestingly, NPR was referring to them as “vulture investors”. They seemed to take issue with real estate investors buying the properties to renovate and resell for a profit.

So help me understand this. NPR has a problem with investors going in and buying properties that the banks clearly want to sell – and fixing them up? What would they prefer – these properties sit vacant until they rot away to the foundation?

It occurs to me that many of these properties are likely so run down that no one other than a real estate investors who specializes in rehab will buy the property. Also, owner occupants get all sorts of bidding advantages on, for example, foreclosed FHA homes. They usually get 2 weeks or so to bid on properties until the bidding opens for investors.

Oh, and let me mention that as the reporter covering the story pointed out, the family did end up find a house for the good price they were looking to get.

It just makes you wonder if some do-gooder in Washington isn’t dreaming up some type of special government program to punish “vulture” investors for trying to make a profit. Perhaps a 100% tax on profits which could be redistributed to some housing subsidy program. Don’t thinks it out of the question…stranger things have come out of Washington lately.

Almost all the real estate investors I know have a common complaint: They don’t have enough time.

I could remind you that we all have same amount of time, but I know you’ve heard that one already. But it’s true…and we all possess an equal share of this resource. But what is not shared equally is the skill to utilize that time to the fullest.

So what is the biggest difference maker? How are some people able to be extremely productive, while others work hard but just don’t seems to get anything accomplished?

There is a ton of training stuff, techniques, all out boot camps, and you name it on the subject of time management. In fact, if you do a google search for the term “time management”, google returned 880,000,000 search results for me.

But I believe there are two keys to getting the absolute most out of your time.

1) The ability to focus on priorities. Everyone reading this is almost certainly familiar with the 80-20 rule. You’ve probably been told more than once that you should focus on that 20%. But are you doing it? Have you actually created a list of those items that are the biggest difference makers in your business. And, do you keep that list in mind when you are creating a plan for your day?

2) Consistency. I’ve lost count of the number of times I’ve started some new “program” or “technique”, only to give up after some period of rime. I’ve done the same thing with many different planning systems. I’ve used the Franklin Covey planner, Tony Robbins “Rapid Planning” system, etc.

Something happened along the way with each one of these that resulted in me either moving to another system, or just stop worrying about daily planning. Sometimes it was because the system was too complicated. Sometimes I just got distracted.

The bottom line is that I didn’t consistently use a planning system day-in and day out.

You won’t get consistent results if you don’t consistently adhere to a daily planning system. It might sound boring, but consistency is boring. Consistency may be boring, but addiction to excitement can lead to inconsistency.

I’ve always been something of a health nut.

I recently recommitted myself to my exercise program. For me, that consists of a short “wake up” set of exercises in the morning.

I also commit to jogging at least 4 times each week at a bare minimum.

I had been cruising along well with this program earlier in the year, but them I hit a patch that broke up that routine. After a few weeks off, my routine wasn’t quite a routine anymore. Now I’m back trying to pick up the pieces again…

I’m back to trying to get back to the habit of physical exercise. But I’m fighting a little voice the whole way. I’ll lay there in bed, and that little voice is urging me to stay in bed – to get just 10 more minutes of sleep rather than do my exercise routine.

I have to fight that little voice telling me “I don’t have enough time to get the jogging in today”. To do it later. But deep down, I know if I don’t get it done right then and there, it’s not going to get done.

What it’s taken is what Chet Holmes calls “pigheaded discipline and determination” in his book “The Ultimate Sales Machine”. It’s taken pigheaded discipline and determination to ignore that part of my mind that is fighting me all the way. That little voice that keeps trying to derail my progress.

What has made the most difference to me is just getting started. If I can’t get started, I can finish. I’ll get get dressed and started on my run. What I tell the little voice is that I’ll just get started, and I can decide whether or not to go my usual distance or cut it short. Once I get started, I’ll almost always go the distance. The trick is to get myself started.

I’ve been trying to apply that same pigheaded discipline and determination to my real estate business goals. I’m not talking about old hat…I’m talking about new projects and initiatives. It takes lots of energy and commitment to start something new in business, whether that’s a new avenue in marketing, or some new project. It requires consistent focus and determination over time.

What’s happened with me in the past when I’ve tried to get new projects off the ground is that most times I’ve failed miserably. Many times, I’d set something as a priority, but never actually done anything. Or, something I’d do something for a few weeks (or less), but then stop. Just give up and never look back.

But according to Chet’s philosophy of pigheaded discipline and determination, this is where your pigheaded determination needs to kick in. Pigheaded discipline and determination is all about taking action in spite of what the little voice is saying.

Your pigheaded discipline and determination needs to help you get moving, get started, regardless of what your little voice is judging the plan or your actions.

It needs to help you ignore that little voice that’s telling you things aren’t working out, so you may as well just give up. It needs to keep you going when things get tough.

Just like what I discovered from my exercise routine, the secret is to just get started with the first step so you begin to develop some momentum. Once you’ve gotten started, it will be easier to keep yourself going. The other secret is to remain committed and consistent in your efforts. It may take you weeks or months before you start getting the results that you are expecting. But if you keep after it, it’s going to happen for you.