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Approaching lenders for financing can be stressful. Here are five useful tips that may help make it a little easier.

1. Do some research ahead of time. Try your best to find a local banker or lender who makes construction loans and understands the business of residential home construction. At the very least, you should look for one that is flexible and open to learning about the industry.

2. Establish credibility early on. There is great value in establishing confidence and trust. Provide the bank/lender with your resume and company history, and make sure to demonstrate past successes. Provide references from satisfied customers and subcontractors with whom you have positive relationships.

3. Come prepared. Before negotiating with a bank or lender, put together a thorough and complete packet of information about your business, including: up-to-date and easy-to-understand financials, a marketing plan for each project that requires financing, marketing collateral material and an accurate estimate of the project cost(s).

4. Negotiate from a position of strength. Knowledge is power, so it’s beneficial to learn about local terms and conditions in the banking community. Know the loan-to-value ratios of your request, as well as the ranges acceptable to your bank. As a helpful guide on financing home construction projects, read Survive and Thrive in Building.

5. Understand your banker’s needs. Know what regulations, requirements and internal management issues affect your banker. How much power or authority does the loan officer maintain? Is there a loan committee that makes decisions or a series of management signoffs? By understanding these needs, you will have a far better chance of success.

Negotiating with a bank or lender can be intimidating. Keep in mind that your banker has a job to do as well. Careful and diligent preparation can help ease the process, and foster positive outcomes.
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The Dream Gets Real
The Great Recession's effects--economic, social, and cultural--continue to weigh on Americans' housing preferences, values, and decisions.

When we hear a long list of words, and we're asked to recall them, it's likely we'll recall the words at the end of the list rather than the middle ones. This phenomenon applies to experiences as well, and psychologists call this the recency effect.

So, why the talk about human psychology in space devoted to trying to be helpful to those who design, develop, and build homes and communities for people?

Well, we know that one measure of collective psychology, consumer confidence, is not only an important bellwether of what's going on in housing, it's regarded as a leading economic indicator. The Conference Board and the University of Michigan each month release survey data tracking consumer confidence and sentiment, and the Conference Board even zeroes in on its respondents' stated plans to buy a home within six months.

Here, National Association of Home Builders senior economist Jing Fu looks at the latest readings from the Conference Board, noting that "despite the monthly volatility the trend in the share of respondents planning to buy a home within six months has been steadily upward since the end of the recession."

Still, if you look at that fever chart, you can see that the indicators since the Great Recession are running lower than they did as a norm prior to the great run-up in the early part of the last decade. That's why it seems appropriate to mention the recency effect.

Now, here's insight from another telling survey, done on behalf of Ikea by the Economist Intelligence Unit, called "Discovering the New American Dream." One of the conclusions of this analysis brings to mind the recency effect phenomenon, because it suggests that the aftermath of the Great Recession still weighs heavily on people's sense of both current conditions and expectations. Here's how the EIU sums it up.

"Americans still overwhelmingly strive for independence and autonomy. A majority of respondents believe a core tenet of the American Dream is the freedom to live as they choose. However, compared with past expressions of the Dream that were defined by physical autonomy—such as a house in suburbs—few survey respondents are now defining success by material signposts, instead focusing on experiences, education and social equality. Americans celebrate achieving elements of their dream in their daily lives, such as everyday moments with family and friends, and professional and educational achievement."

Now, this is not an assertion that the American Dream is definitionally materialistic, with homeownership as a baseline requirement for its achievement. But the Economist survey, we believe, reflects a collective experience still digging out of the damages of the downturn, not just to economic well-being and expectations, but to basic values attached to work and productivity and trust.

At a deep level, the meaning of the American Dream as James Truslow Adams popularized it was multi-generational in scope. The hard work and forward focus of a present generation of working-age adults would elevate the prospects and expectations of their children when they'd come of age, and so on.

Which is where homes and homeownership come in. Owning a home has been, and still is for many, a physicalization of an inter-generational personal financial plan in action. The EIU analysis, a snapshot in time of a respondent base of respondents who remain in early recovery from the black-hole gravity of 2007 and 2008 and 2009, suggests that the American Dream is downsized, chastened of specific financial goals and expectations, and more metaphysical than it once was.

"The focus on quality of life rather than specific aspirations highlights the idea survey respondents expressed that attaining the American Dream is a process. About a third of Americans believe they are well on their way to living the dream today, with another third still on the journey."

What we think is that once people travel beyond the recency effect of the Great Recession, the journey will lead back to an embrace of homeownership and community-making as essential dimensions of the American Dream.
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Marketwatch plots the drop in household wealth due to stock market losses since the first quarter of 2015.
Gyrations on Wall Street remind us of why we picked the reporting business, not the predictions business.

Overnight, global market investors built a solid base of stabilization, and this morning's futures markets surged with news that China's central bank shifted into an aggressive accommodative mode, and our own Fed officials were tamping back talk of raising U.S. interest rates as soon as September.

Since consumer confidence and household spending work as such powerful forces in both the demand side and supply of homes for sale, it's not for nothing that attention and a wave of apprehensiveness should intensify as the markets decide whether they're in correction or bear mode. Will the U.S. recovery stall?

What happens to the dollar vs. other currencies, and other economies' ability to consume U.S.-produced goods and services does tie in this small, flat world to our housing, new home, and development market. But, as mentioned above, we're reporters not prophets.

New Home Sales from the Census Bureau at 10 a.m. eastern is about as far ahead as our brains will allow themselves to go.

We know that the tumble in the stock market--which since the first quarter of 2015 has taken a dive of $1.8 trillion in value, much of that in the past few weeks--materially affects household wealth, and directly affects at least a significant share of the higher-end segment of new-home demand represented by financial services industry pros and other industry execs whose wealth has taken a beating in the stock market rout.

We also know that a "stealth force" in the early recovery, particularly in West Coast markets, has been buyers from China. John Burns notes the extensiveness of the impact those buyers have had and will continue to exert, that is, if their wealth is not wiped out in the financial dislocation occurring in their homeland right now.

That dislocation is either bad news or good news, Burns concludes, with one caveat being policies on the overseas investment cap currently sitting at $50,000.

What we're thinking, though, is that a "correction" in the financial markets, and a limbo period among non-U.S.-based home and property buyers could fix a redoubled focus where it needs to be in the United States housing market, on the "slab on grade" of our housing economy, the entry-level buyer.

If Wall Street volatility and global uncertainty and doubt put the higher-end housing market on pause, then perhaps developers, builders, policy makers, employers, and young prospective buyers will gain clarity and mission around the need to activate that lower-price-tier in the housing market.

We'll stay tuned to New Home Sales at 10 this morning, and let you know whether we're seeing anything in the just-past weeks that can tell us about what may be ahead.

Stay cool headed as the markets find their way.
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The Top 10 Questions to Ask About a Private Lending Program To Save Big Money and Headaches
1.               Is the private money loan being sought by an experienced and reputable real estate investment company? 

Basically, is the real estate investment company you’re working with a “fly by night” operation or are they a reputable company run by reputable investors with a track record for success? 

2.               “Am I writing a check directly to the real estate investor? Or do I write it to an escrow/title company or attorney? “

This is an important question to ask BEFORE you trust your hard earned money in a private lending transaction. Make sure that the company you work with has you write your check directly to the escrow/title company or the attorney handling the closing of the transaction. If the investor asks you to write them a check directly… be wary.

3.               “Do I get a copy of the preliminary title report and other documents before and after the transaction? “

It’s important as a private lender that you do your due diligence just as a bank does when they lend funds on a property.  Ensure there is a title report done on the property and you are able to see the report before the transaction closes. Private lending is a very predictable, consistent, and easy way to make better returns… to make the entire transaction even more secure make sure you receive the proper documents from the real estate investment company you are working with.

4.               “Can I diversify my private lending by lending on multiple properties at the same time?”

When you are working with a reputable real estate investment company, they ensure that they only take on properties that make good financial sense for all parties with multiple exit strategies in place.  It may be a good idea if you have the opportunity to spread your funds out into multiple private loans to further diversify your private money loan portfolio.  Ask the real estate investment company you are working with if this is a possibility.

5.               “What is the ‘LTV’ of the private money loan?”

”LTV” means “loan to value”.  The higher the LTV the higher the risk may be on a particular private money loan.  Many real estate investors work on tight margins and buy properties at 80% and up.  However, our real estate investment company purchases properties typically at 60-70% (or less) of the value of the property.  We will never ask a private lender to loan more than 70% LTV on a particular property.  This drastically increases the “wiggle room” of the overall transaction and ensures that the investor and private lender are protected as much as possible. 

6.               “Can I do my own due diligence on the property and the transaction”

You as the private lender should be able to do your own due diligence on a particular private money loan if you want to… we actually encourage it with our private money lenders and give you the tools to do so. 

If a real estate investment company does not give you the opportunity to do your own due diligence on a property… you may want to evaluate your relationship with them.  Our company provides our private money lenders with a full due diligence package on each property at your request so you can make sure everything is as you want it.  Pretty refreshing huh?

7.               “What is the real estate investment company’s exit strategy?”

There were many “investors” who entered the market over the past 5 years who are gung ho at purchasing properties… but who lack to plan correctly for the exit strategy of the investment.  Ask the company you are working with what the exit strategy is for each private money loan you consider… if the company has no clear exit strategy in place you may want to reconsider your private money loan with them.

Our company makes it a point to purchase properties with multiple satisfactory exit strategies in place BEFORE we purchase the property.  If we do not have at least 3 exit strategies we will reconsider the purchase of that particular property.

8.               “Is my private money loan properly secured and what documents will I receive that show my position in the property?”

This is a very important question to ask before you participate in a private money loan.  Ask the real estate investment company what documents you will get before and after the transaction closes that show you’re protection and position in the property.  Also, ask the company if the proper documents will be filed with the county courthouse that place you as the “mortgagee” on the property.

Working with our company, our private lenders receive a full package of signed and recorded documents before and after the transaction takes place. These include the filed Trust Deed/Mortgage, disclosure statement, promissory note, insurance binder, and more.

9.               “Does the real estate investment company have proper insurance on the property naming me as a lienholder/additional insured on the property?”

This is extremely important and often overlooked by first time private money lenders.  A reputable real estate investment company will purchase proper insurance to cover the property and place you as the private money lender on the policy as the “additional insured/mortgagee/etc.” to protect you and your investment.

Our company places our private money lenders on the insurance policy to protect you and your investment in case of a catastrophic loss of the property and provides you with a copy of the insurance binder immediately after the close of the transaction.  This is peace of mind here.

10.            Has the real estate investment company “guaranteed” your investment?

While the word “guarantee” sounds warm and fuzzy… it is illegal for anyone to guarantee a the returns on a private money loan.  Private money lending with reputable real estate investment companies is a preferred choice of investment for many of the nations wealthy because of it’s higher returns and predictable consistency; however, if a real estate investment company “guarantees” your return you should run the other way.  This law is the same one that prevents financial planners from “guaranteeing” stocks, mutual funds, etc.  While they may be relatively safe investments when chosen correctly… they are not guaranteed.

Our real estate investment company believes in being honest with our private money lenders.  While private money loans cannot be “guaranteed”, they are among the most consistent and predictable ways to earn higher returns and they are backed by low LTV real estate… which provides an extra layer of “security” that traditional stocks do not provide.
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Top 10 Rent Growth Markets of May 2015
Dallas-based research firm Axiometrics notes May's 95.3% occupancy rate is the highest it has been since August 2014 when the number was recorded at 95.2%.

Atlanta is the No. 9 rent growth market of May 2015.
May apartment occupancy hit 95.3% this year, according to a new Axiometrics report.
The Dallas-based research firm notes this increase is 12 basis points above April’s occupancy and a 28 basis point increase compared to last May. It’s also the highest occupancy has been since August 2014, when the number was recorded at 95.2%.
However, national annual effective rent growth was down month-over-month at 5%, compared to April’s 5.1%. Still, the metric is a big improvement on the 3.6% rent growth recorded in May 2014, and marks the fourth straight month where the figure is above 5%.
Oakland, Calif. topped the list of markets with the largest annual rent growth in May for the top 50 apartment markets, with a whopping 14.3% rent growth. In fact, the West once again dominated the rankings, with Atlanta as the only Eastern market cracking the Top 10, clocking in ninth with 7% annual rent growth. 
Here are the Top 10 metros for rent growth in May:
1.       Oakland, Calif., 14.3%
2.       Portland, Ore., 12.2%
3.       Denver, Colo., 11%
4.       Sacramento, Calif., 10.7%
5.       San Jose, Calif., 9.9%
6.       San Francisco, Calif., 9.1%
7.       Riverside, Calif., 8.2%
8.       Seattle, Wash., 7.3%
9.       Atlanta, Ga., 7%
10.   Las Vegas, Nev., 6.6%
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5 Renovations That Offer the Biggest Returns*

1. A new front door. (Return on investment: 96.6%) Refresh your entryway,
and impress potential buyers with a new front door. If your current front
door is in good condition, consider painting or staining it to make it look
as good as new.
2. A wooden deck addition. (Return on investment: 87.4%) Improve the
indoor/outdoor versatility of your home by adding a wood deck.
3. An attic bedroom. (Return on investment: 84.3%) Bedrooms are a versatile
addition to a home. They can serve as a bedroom, a guest room or a home
office. An attic bedroom makes use of this often underutilized space and
adds value to the home.
4. A new garage door. (Return on investment: 83.7%) If your garage doors
are old or dated, replacing them will add value to your home. If they’re
still in good shape, paint them to enhance the look of your home.
5. A minor kitchen remodel. (Return on investment: 82.7%) The
kitchen is one of the most popular renovations that homeowners
tackle. A minor remodel can to update the space and
entice potential buyers.
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Ask any real estate agent when to invest in property. The answer is always the same: “now.” Any investor should ask herself four specific questions before jumping to the "when." What are her real estate goals? What kind of property does she want to own? How long does she want to own the property? Can she afford to keep the property if the market goes down? The answers will come together, answering the “when,” “what” and “why” of a real estate plan.

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Goals are Key

When some people think about real estate investment, they think only of their own home. Others think about a single property to flip or rent. Still others think about amassing a real estate portfolio in Donald Trump proportions. Temper the excitement of asking “when” with a careful consideration of “why.” What are the reasons behind the investment? Goals range from funding a college education or retirement to replacing a monthly job income with a rent stream or leaving a legacy for heirs. Goals go a long way in getting an investor to the when and why.

Home, Apartment, Office and More

A life-long apartment dweller might want to consider dipping his toe into real estate investment by purchasing his first home. After he understands the difference between galvanized and copper plumbing and the advantages and disadvantages of an escrow account, he might consider purchasing another single-family home – this one to rent. After haggling over lease deposits and repairing appliances for a while, he might want to put an offer in on a triplex or small commercial building. Different real estate products tend to have somewhat different price curves over time, a significant influence on the "when" and "what" components of real estate investing.

A Sprint or the Long-Run

An investor who knows he will own a property for 30 years can afford to buy anytime. It doesn’t matter what the market is doing when he buys. Up or down at the purchase, yearly market appreciation has averaged in the high single digits over the long haul. On the other hand, an investor who wants to show a cash profit from sale in a short time frame has to be very careful. He’ll want to time his purchase to coincide with an upwardly trending market and buy at a below-market price to compensate for an unexpected change in market trends.

When Bad Things Happen to Good Property

The Great Recession of 2009 caught a lot of real estate investors off guard. Even many of those who saw it coming underestimated its extent. But it’s not always the market that throws a wrench into a real estate plan. Sometimes it’s the wrench itself: an unexpected series of system failures can tack tens of thousands of dollars in cost to a real estate budget. Sometimes it’s the weather: a hurricane can put your new property in another zip code. The smart investor times his purchase to coincide with a ready ability to weather any future real estate storm.
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Investor Rehab Loan Program

There are many programs for commercial and residential real estate investors to purchase and rehab income producing real estate with low or no down payment. These are generally called hard money loans made by private investment funds. If you want to buy property for investment purposes there may be a program for you. These are general guidelines to help you determine if you qualify for a hard money loan. In these are the criteria that private lenders look for to lend to REI's (Real Estate Investors).

Collateral - The property type and property value.
Capacity - The borrowers ability to make loan payments.
Credit - The history of how the borrower has paid their bills.
Character - The experience as a investor and rehabber.
Assets - cash reserves in case the cost of the renovation are higher or other contingencies.
Exit Strategy - How will the investor repay the loan on the property.


The property type and current plus the after rehab value are the most important factor in if a private lender would make a hard money loan. But, in this market with an unlimited flood of REO and distressed property, no lender wants to own properties. Private lenders want to make quick short term loans that have good security and that they are reasonably assured they will quickly get there money back.


Most funds require interest only payments for the term of the loan. The lender needs to know if the borrower has the means to make those payments. Unlike hard money loans in the past less emphasis is on the property and more is placed on the borrowers ability to repay the loan.


To that end credit has become more important. The credit profile shows the history of repaying debt and the capacity to handle new debt. The credit score is a statistical means to determine the future repayment of the loan. Again the lender wants their money back not to own the property. Many Rehab loans require a minimum credit score of 680 today.


In tradition conventional mortgage programs the character represents the subjective elements of a credit profile to that help an underwriter make a decision not just on hard facts. For Investor Rehab Loans that would include experience as an investor and rehabber. Some private lenders are even running criminal background checks to avoid potential fraud and other issues.


When a file is underwritten for its full merits, a borrower who has a lower credit score and substantial assets is as safe or safer than one with limited assets. This includes down payment and reserves for emergencies and to even pay off a loan if necessary.

Exit Strategy

Now the most important part of the deal. If the borrower has a property with lots of equity and good credit, income and assets chances are good they can refinance the property with a conventional lender to pay the high interest short term rehab loan off. This is the most important aspect of investor rehab lending, will the get their money back quickly. Therefore, some private funds will make loans to borrowers with credit scores as low as 600 if they have a viable exit strategy and assets to cover contingencies.

Rehab Lending Today

In the past the property was almost the only criteria to get a hard money rehab loan. Today the bridge funds are looking at a complete file and underwriting the deals with exit strategy as the first priority. Gone are the days were credit and assets did not matter. The borrow must qualify for a refinance or have a solid verifiable way to pay off the loan by the end of the term. When that is the case it is a win win for everyone, even the economy in general.

Commercial Real Estate Investing is an opportunity whose time has come. Louis Jeffries has been a mortgage banker for over 20 years helping real estate investors achieve their real estate investing goals. Learn more about commercial real estate investing, down payment assistance for commercial properties, conventional and creative financing options. Go to for more information.

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