Question from a new investor - Posted by Marty

Posted by john on March 11, 2001 at 09:55:29:

At the bank I work for we have 3 different reduced documentation programs. For those with assets that are comfortable with stating their income and signing a 4506 we have reduced documentation. The requirements are that you can prove self-employment for 2 years, and that you can verify 2x your stated income with money that is liquid,(stocks,bonds,mutual funds, checking, savings etc.) We will also count 60% of your retirement accounts. For example, if you state that you make $10k a month I need to verify $20k. Our next program is one of my favorites and is called a no ratio loan, simply stated you can be self employed or have an employer. The requirements are much simpler, 2 years verifiable employment and 2-6 times the house payment in reserves based on the down payment. There is no 4506 to sign and no income is stated on the application. The last program is a true no doc program with no income or asset verification required.
We lend in all 50 states and are able to offer instant approvals. Recent rates that my customers have been receiving on this programs have been as low as 6.875% with 2 points to as high as 8.125% with 3 points. Minimum credit score is 620 and higher, minimum down payment is 10% or more depending on your situation. For more information feel free to e-mail.

Question from a new investor - Posted by Marty

Posted by Marty on March 11, 2001 at 07:08:36:

I’ll try to nutshell this. I am new to REI in April of last yr. Took Russ’ courses (Still have one camp and my mentor)–I am one the few here who seem to support Russ, but I have learned and learned and learned from him.
Summary: Husband is a laborer–concrete for 20 yrs. in a family business (which was sold to a big concrete co. that is a state wide co. in Jan 2000= New employer after 20 yrs.) I am a medical assistant of 16 years–had 3
mo.premature child (who is now in school-which freed up my
time as he does have some residual problems that will remain with him). I quit my medical career to care for my child. Have been doing daycare at home until this past fall when I quit to pursue REI. My husband suffers from chronic pain (no relief ever) and we have aggressively been trying to get help. I saw the light and knew we were going to lose his job due to the pain and medication–thus I started with Russ. In October my husband lost his job. In Sept. I started paying myself from our RE co. I had formed. So the paycheck goes right back in the acct to pay myself again in two weeks. Am trying to show income to the banks. I began working on disability for my husband. This was successful in a 60 day period we rec’d an approval with no denial the first time through(this is an act of God). Now I have bought some property in August which has a cash flow of 300–not bad for a 23,000 investment that is NOT a
dump. I bought this property on my home equity line of credit. I have not refinanced it yet due to the medical problems (this has been a full time job). We also are building new construction which is not complete yet. My problem is this–now that I cannot show long term steady income, my husbands disabilty does not start until May (are on
unemployment now), I only have 20,000 more open on my line of credit. I want to refinance so I can have my whole line of credit open for down payments when necessary. I don’t want to apply due to the work situation and I feel they will deny the loan due to the income to loan ratio. I don’t want the bank to check my credit if they are going to deny as it will bring down my Beacon as another inquiry
-right? Early in my shopping for RE last summer another investor checked my credit when I was looking into a house of his and our beacon was the highest he had ever seen. So I don’t want to lower that any as I’m sure I already have with the new construction and line of credit I have now.
What should I do? Look for a hard-core lender if I need more than 20,000 soon? Or go ahead and chance it with a bank? I don’t know how much emphasis a bank puts of income to loan–if the deal shows a cash flow. I need to find a flip if I can due to the length of time we have been off of work and are using our savings now. The new construction is almost done and hopefully is will sell quickly and we won’t have to lease it. Any suggestions other than owner financing–that is what I am looking for now, but they tend to want 20% down and that would be fine, but then I will be out of credit, except my credit cards. I have kept 3 cards with large lines of credit. Have my training on one card at 0% int. until Dec. All the other listed on my credit report I closed. Won’t this bring my Beacon up alittle? What else can I do? I appreciate any input. TX

Re: Question from a new investor - Posted by Jim Kennedy - Houston, TX

Posted by Jim Kennedy - Houston, TX on March 11, 2001 at 11:30:35:


I’m not sure I understand everything you’re trying to say in your post, but I’ll try to help if I can.

By Russ, are you referring to Russ Whitney? Is so, what do mean when you write, “Still have one camp and my mentor”?

Congratulations on your property acquisition in August. Obviously you didn’t go into much detail about the deal, but based on the information you did provide, it looks like an OKAY deal. If the cash flow of $300 is monthly AND if it’s net cash flow after ALL expenses (including vacancy and replacement reserves), AND if the $23,000 is the amount of cash you have into the deal, you are getting a 15.6% return on your $23,000 investment. . While that is not a bad return, you can definitely do MUCH better.

Part of the challenge that you face as a cash investor is that you have a finite amount of cash. Once all of that cash is invested, you basically come to a standstill. UNLESS, of course, you learn to invest without using any of your own cash. There are several ways to acquire or control property that require little or none of your own cash or credit.

Wholesaling, Lease/Options, and buying “Subject To” are probably the three most common ways to do real estate deals without using any of your own money or credit.

These topics are discussed at length on this web site. Start by reading all of the “How To” articles. Then do a search of the archives. Currently the archives only cover December 1998 through January 2000, and the most recent posts. The posts from February 2000 through January 2001 aren’t yet available in the archives. The owners of this web site have promised to update the archives but apparently they’re having difficulty. Regardless, you should be able to find plenty of information about no money/no credit required deals in the archives that are available.

Once you have read the “How To” articles and searched the archives, you will probably want to purchase a home study course or two that deal specifically with no money/no credit deals. There are many excellent courses offered through this web site.

If you haven’t already done so, make arrangements to attend the CREOnline annual convention in Atlanta at the end of this month. This will be my third convention. I didn’t learn about this web site until after their first one. I’m a full-time investor and I found the last two conventions very worthwhile. All of the newbies that I know got tremendous benefit from attending.

Marty, in summary, I would recommend that you save your capital for marketing and education and learn to do deals without using your own money or credit.

Hope this helps.

Best of Success!!

Jim Kennedy,
Houston, TX

Re: Question from a new investor - Posted by BillW.

Posted by BillW. on March 11, 2001 at 10:03:42:

Marty, Have you learned from Russ’courses how to take control of property with none of your own money? (Not the bank’s money on your credit card either). You’ll need to develop some hard money lender sources (they are everywhere). Use these sources to get money for deals right now. Forget the banks until you’re back into good cash flow. They look first to how you will repay the money and your current sources are not what they will want to see. If you find MOTIVATED sellers, you won’t need to put this 20 percent down you are talking about to get owner financing. May will come soon and, with the cash flow from the disability payments starting, it will help. Is your husband capable of doing any supervisory type work, or hurt too bad to do any at all? Construction work takes a heavy toll on the body. Finish up the new construction and put a heavy effort into getting it sold ASAP.
Good luck and keep posting.