The Inside Guide to Funding Real Estate Investments

ROSS HAMILTON is Founder and CEO of ConnectedInvestors.com,an on line platform that connects real estate investors with funding sources, property resources, and more.

CONTENTS



Forewordxv

Introductionxvii



1. The Big Picture of Real Estate Investing1

The Vehicle and Strategy1

Three Common Real Estate Investment Exit Strategies2

More About Exit Strategies5

A Path to Success6



2. An Overview of Funding Options9

Traditional Mortgage Lending 10

Asset-Based Loans 10

Private Money Loans11

Crowdfunding11



3. An Introduction to Asset-Based Loans13

Is Asset-Based Lending What You Need?13

The Good, the Bad, the Ugly, and the Facts of Working 
with Asset-Based Lenders15



4. An Introduction to Hard Money Lenders 17

Can Hard Money Lenders Be a Good Source of 
Funding for You?17

Who Uses Hard Money Loans? 18



5. What You Need to Know About Private Money Lenders21

Can Private Money Lenders Be the Answer for You? 21

Who They Are21

Two Types of Private Money Lenders22

How to Find Private Money Lenders24

What Lenders Want24

The Importance of Relationships 25

The Benefits of Private Money 26



6. How to Take the Mystery Out of Private Money29

Is It Really Possible to Borrow from Private Individuals?29

The Components of a Private Money Loan 30

A Sample Deal31

Putting It on Paper 32



7. Thinking of Crowdfunding Your Deal?35

The Basics You Need to Know 35

The Basic Model36

When Does It Make Sense to Crowdfund a Deal? 37

What About Debt vs. Equity? 38

The Cost to Raise Capital Through a Crowdfunding Platform38



8. The New Kid on the Block: Crowdfunding41

Is Crowdfunding a Good Option for You? 41

Why Do It? 42

How to Participate in a Crowdfunded Property43

When Are Returns Received?43

How Do Investors Earn Returns?43

Due Diligence44



9. Partnering to Get the Funds You Need 47

When Should Property Investors Consider a Partner to 
Obtain More Funding?47

Real Estate Partnerships 101 47

Advantages of Partnering Up 48

Potential Cons of Partnering Up48

Smart Times to Partner Up49

Who Can Investors Partner With?49

What and Who to Avoid When Pitching Potential Partners 
for Money50

How to Make It Work51



10. Using Banks to Fund Real Estate Investments 53

Are Banks and Traditional Lenders a Viable Option?53

What It Takes to Fund Investment Property54

Why Traditional Lenders Have Turned Away from 
Funding Investors55

Pros and Cons56

Alternative Strategy58



11. How to Find Asset-Based Lenders61

Who Makes Asset-Based Loans?61

The Traditional Method of Finding Asset-Based Lenders62

The New Way to Find Asset-Based Loans63



12. Inside the Mind of Asset-Based Lenders65

What Do You Need to Know to Get Your Deal Funded?65

The Six C's66

What Scares Lenders Away?67

What If You Can't Repay?68

What's Your Next Step?68



13. Asset-Based Lenders: A Peek at Their Cards71

What More Do You Need to Know About How 
They Operate?71

How Asset-Based Lenders Make Money and How It Works 
to Fund Your Deal71

Key Areas Where Asset-Based Lenders and Their Capital 
Partners Make Money72



14. Dealing with Down Payments 75

Five Ways to Secure a Down Payment for Real Estate 
Investment 76



15. The Dirty Truth About Some Real Estate Lenders 79

Are You Ready for the Truth? 79

The Unstoppable Money Machine 79

Eight Common Lender Scams 80

Overpromise and Underdeliver 82

Tips for Finding Lenders You Can Trust 83



16. Hard Money Lender Scams and How to Avoid Them 85

Fees 85

Johnny Come Lately 86



17. How to Successfully Get Funded as a New Investor 89

Specific Challenges Facing Newer Real Estate Investors 89

What to Look for in a Real Estate Lender 90

How to Improve Your Funding Success as a New Investor 91



18. How to Land the Best Loans for Your Deals 93

Finding the Best Financing for Investment Property 93

What's So Important About Finding the Right Loan? 93

How to Match Loans and Lenders to Your Needs 94

Financing a Real Estate Investment Using Different 
Real Estate Strategies 95

Comparing Loans for Your Real Estate Deals 97

Quick Tips for Quickly Homing in on the Best Loan Programs97



19. Is Your Baby Ugly? 99

The Due Diligence Steps Every Real Estate Investor 
Should Take 99

Everyone Thinks Their Baby Is Beautiful 99

How to Screen for Money Makers 100

Rules of Thumb 101

Confirming Property Values 102

Is There a Lender for This Deal? 105



20. Estimating Your Project's Costs 107

How Much Is Your Property Renovation Project Going 
to Cost? 107

Knowing Your Customer and Your Exit Strategy 107

Inspecting and Evaluating the Property 108

General Rules of Thumb 109

Avoiding the Traps 110

Funding and the Numbers Game 112

The Scope of Work 113

Tales from the Trenches 113

Collaborating with Partners 114

Coordinating Contractors 114

Running Out of Money 114

Seven Steps to Your Scope of Work 115



21. The Time Value of Money 117

Don't Underestimate the Value of Your Time 117

The Time Value of Money 118



22. What Every Investor Needs to Know About Terms, Cash Flow, 
and Formulas 121

Do You Know What You Don't Know? 121

MAO or the 70 Percent Rule 121

The Wholesaler's Formulas 122

An Alternative to the 70 Percent Rule for Flippers 123

Net Operating Income 124



23. The Hole Poker: The Devil's Advocate 129

An Important Part of Your Real Estate Investment Team
129

Emotional vs. Fact-Based Real Estate Investment 129

The Value of Second Opinions for Funding 131

The Hole Poker 131

Where to Find a Good Hole Poker 132

How to Get a Great Hole Poker to Help You 133

Knowing When to Go Your Own Way 133



24. Next! Know When to Walk Away from a Real Estate Deal 135

The Bite Test 135

Taking a Hit 137

Living to Fight Another Day 138

Plenty of Fish in the Sea 138



25. Dealing with Detours 139

The Power of Plan B 139

Ten Detours to Take When Things Don't Go as Planned 139

Important Considerations for a Successful Venture 140



26. What Comes First? The Deal or the Dollars? 141

Getting Ready to Be Ready 141

Putting the Horse Before the Cart 141

Finding the Right Funding Sources for Your Deals 142

What You Need to Get Going 144



27. Preparing to Get Your Loan Funded 147

Failing to Plan Is Planning to Fail 147

Planning for Success 147

What You Need to Fund Your Deal 148

Mortgage Forms and Documents 149

Scope of Work 150

Closing Documents 150

Quick Tips for Setting Up a Smooth Funding Process 150



28. Who to Take with You 153

The Real Estate Professionals You Need to Close the Deal 153

Seven Real Estate Pros to Have on Your Side 153



29. Estimating Your Time of Arrival : How Long Does It Take to Fund and Close a Real Estate Deal? And What Can Real Estate Investors Do to Streamline the Process?157

How Long Will It Take to Close? 157

Steps Involved in Closing a Real Estate Deal 158

Things That Will Slow You Down 159

When You Close--Watch the Calendar 160

Three Roadblocks to Watch For 160

Preparing for Closing Day 161



30. Avoiding Costly Borrowing Mistakes 163

Understanding the Underlying Costs of Funding 163

Earnest Money Deposits 163

Real Estate Contract Contingencies 164

Due Diligence Costs 165

Buying Property Sight Unseen 166

Sabotaging Your Loan Application 166

Title and Lien Searches 167

Accurately Forecasting Closing Time Frames 167

Failure to Hit the Ground Running 168



31. Investment Property Loans: Everything Is Negotiable, Right? 171

The Toll Booth--How Much Will It Cost to Get 
Your Deal Funded? 171

The Power of Leverage 171

Borrowing Costs + Investment Strategy 172

Common Borrowing Costs and Fees 173

Everything Is Negotiable, Right? 173

Negotiating Smarts 174

Quick Tips for Negotiating Better Loan Deals 175



32. How to Choose the Best Funding and Investment Property 
Lender to Meet Your Needs 177

Taking Different Paths to Reach the Same Destination 177

Picking the Right Lender for Your Project 177

The Importance of Investor-Lender Relationships 179

The Reality of the Lender Relationship 179

Investment Property Lenders Need You Too 180



33. High-Performance Property Financing: Understanding 
the Mechanics of Your Loan 181

How to Keep Your Loans Rolling Through till Closing 181

Just How Much Does It Matter?181

How the Loan Process Works 182

Managing Your Loan 183

What to Expect at the Closing Table 184

Being Prepared to Close: A Checklist 184

Post-Closing Considerations 185



34. Fix and Flip Strategies to Get Your Investment Property Sold 187

What Smart Tactics Can Help Real Estate Investors Go 
from Flip to Flip with Ease? 187

Tips for Fixing and Flipping Fast 187

Renovate to Your Target Market to Sell Fast 188

When to Start Marketing for Resale 189

Choosing the Right Real Estate Marketing Formula for 
Your Deals 189

Reselling the Property 190

The Buyers List 192



35. Buy and Hold Real Estate Investment 195

Maximizing Income Property Opportunities 195

Refinancing and Optimizing Financial Leverage196

What's the Best Leasing Strategy? 197

Intelligent Tenant Screening 198

Property Maintenance and Management 198



36. Keep Fueling the Journey 201

Lap After Lap 201

Performance-Boosting Analysis 202

Quick Tips for Tuning Your Engine202

The Reality of Deal Flow203

Tips for Improving Deal Flow 203

Relationships204

Curated Real Estate Deals205

Get Help205



37. When Your Lender Takes the Exit207

When Lenders Bail 207

Why Lenders Bail 207

How to Recognize the Signs208

What to Do209

Preventive Maintenance210



38. When Your Rehab Goes South: What You Can Do When 
Your Rehab Takes a Wrong Turn 211

Why Rehabs Go Wrong211

Coping with Over Budget Issues212

Where to Save213

Where Not to Skimp213

When Investors Need More Money214

Working with Your Lender When You Need More Money 214

Other Capital Sources 215

Four Strategies for Turning Your Rehab Nightmare 
into Cash 215



39. What If You Can't Make Good on Your Investment 
Property Loan? 217

Why Investors Can't Pay Their Loans 217

Knowing Your Options218

What Happens When Investors Don't Pay Their Loans? 219

Alternatives to Foreclosure 220

Effects of Foreclosure on Real Estate Investors 220



40. When the Wheels Come Off Your Real Estate 
Investment Venture 223

It Happens to the Best of Us 223

Why Do Real Estate Investors Fail? 224

Tips for Preventing Failure in Real Estate Investment 225

Tips for Getting Back on the Road to Real Estate Riches 225

Opportunity Is Knocking 226



Index 227