Larry: Welcome to the Wednesday Night Brain Pick a Pro ...



WENDY SWEET

FINANCING OPTIONS FOR INVESTORS

LARRY: Welcome to the Wednesday Night Brain Pick a Pro Tele-conference. Tonight we have the world famous Real Estate Financing entrepreneurial mogul live from Lake Wylie, South Carolina, Wendy Sweet. Say “hello” Wendy.

WENDY: Hello, Wendy.

LARRY: You have not even been home yet for the day, have you?

WENDY: No I haven’t.

LARRY: You have been closing loans all day, haven’t your?

WENDY: I have been closing loans all day and half the night.

LARRY: Tell us a little bit about yourself, Wendy.

WENDY: I started in this business really about three years ago. Started working with my Brother. He owns a Mortgage Company. Actually he owns a Lender. He is a Lender, he is actually a middle man that sells to people on Wall Street.

LARRY: Like a Net Branch, or something like that, isn’t it?

WENDY: Net Branch, that is correct. I represented his Company as an Account Executive, calling on Brokers throughout North and South Carolina. Our niche market was Investor property. We had some really good Investor loans that we offered and luckily I ran into this wonderful Company called Financial Help Services and met Larry Goins, who happened to be the President of Metrolina REA and I thought, WOW! What a great way to get my foot in the door.

LARRY: You know it is a funny story that I have told a lot of people. You did not know I was involved or even the President of the REA when you approached me about coming to work with us, did you?

WENDY: No, that is correct. When I came up to talk to you, it was so funny, I walked in the office and you know, “Hi, how are you doing? It is good to see you again. Listen, I wanted to ask you, have you heard anything about this Metrolina Real Estate Investors Group? I bet that is a really good way to get business for Investor loans.” You said, “yes, I know a little bit about it, I’m the President.”

LARRY: And the rest is history, right Wendy?

WENDY: Yes, that is right. God was truly smiling.

LARRY: That is true. We have both been blessed over the last year and a half.

WENDY: That is for sure.

LARRY: Well, it has been two years, but we have only been blessed for a year and a half, right? I’m just kidding. So tonight, we are going to talk about some short term money, right Wendy?

WENDY: That is correct.

LARRY: Different ways to structure and finance your transactions. Different types of loan programs and products to basically purchase a property, to rehab the property, to get it ready to either sell wholesale or sell retail or to get ready to re-finance it to put it in a rental fleet, right?

WENDY: That is correct.

LARRY: So what is short term money, Wendy?

WENDY: Short term money, there is actually several different kinds of short term money. A lot of people have heard the term “Hard Money” and that is what I am going to talk about a little bit first. Hard Money is a short term, high interest loan. In most hard money cases you should be able to purchase the house, including the rehab cost and the closing cost, without any money out of your pocket, in most cases. Some hard money lenders do require that you put a little bit of what they call “skin” in the deal. They might want to see 5% or 10% of the purchase price of the house. But hard money is usually based on the after repair value. The other type of money out there is rehab money. Now it is really not that much different from hard money. Rehab money is real similar to what we promote a lot. The rehab money has a little bit more of a stringent guideline to get that rehab money. Meaning that rehab companies do care about your scores, what you do for a living, whereas hard money don’t really care if you have a job or can even repay the loan, as long as you can fog a mirror you can pretty much get a hard money loan.

LARRY: A true hard money Lender is basically looking at, hoping, that you don’t make the payments so they can get the property.

WENDY: That is correct, they want your house. They make everything on that property. Most of them will to will only loan about 60% to 65% loan to value. When I say loan to value, that would be based on the after repair value.

LARRY: Right.

WENDY: The rehab money, because there is a little bit more stringent guidelines that go along with it, we can loan a little bit more, up to 70%.

LARRY: Right.

WENDY: Which is a lot nicer when you are working your numbers and trying to get deals. The other type of loan, that you can get, which is my personal favorite; but unfortunately everybody cannot qualify for it and that would be a Guidance Line or some people call them Commercial Lines or Construction Loans. These are Loans that are made by the smaller banks. Not Bank of America, not Wachovia, or BB&T, these are the much smaller Banks.

LARRY: They are Commercial type Loans.

WENDY: They are Commercial type loans, that is correct. In order to qualify for those you have to have excellent scores, you have to turn in your tax returns. You know, they have this box that they think inside, that is about the only problem the banks have. They have that Banker mentality and you have to fit that mold to be able to qualify for it. If you can qualify for it, they will loan you up to 80% of the after repaired value. Now all of these loans are usually based on a 12 month period. Some hard money Lenders will loan money up to ten years, but paying you know, paying 14%, 15% for ten years is not really exciting to me.

LARRY: That is not a good long term game plan, is it?

WENDY: No I would not say that is a real good investment. Some people hop on that anyway. Those Guidance Loans are definitely, if you can qualify for a Guidance Loan or a loan with a small bank, that construction loan, that definitely the best way to go. Most of those loans are set up on prime +1. They do not charge a whole lot for the closing cost, because they actually make their money off the rate that they charge you. They do not have the extra fees that a regular Lender would have.

LARRY: What kind of rates are those?

WENDY: We are seeing people get them now, at prime +1.

LARRY: Really. On the Guidance Line.

WENDY: Yes, which isn’t bad. They are all interest only.

LARRY: A small bank that is going to give you a Guidance Line, they want to see a little bit of experience to, right?

WENDY: They absolutely want to see experience. Most of them will make sure that you have at least two properties under your belt. There are also probably going to be a little more stringent on looking over the work that you have completed. They are going to make sure, not that anybody does not make sure you haven’t completed the work, but they are going to have a little more red tape for you to hop through.

LARRY: Right.

WENDY: For the rate, it is worth it.

LARRY: It is not as easy as a hard money or rehab loan, but is a goal to shoot for. After you have used hard money or rehab for a while. Is that a good way to put that?

WENDY: Exactly. The perfect scenario would be to have your own cash; and have enough of it so that you really don’t have to dip into a Home Equity Line. I mean that is the point, to be able to have enough cash to be able to buy these houses and then turn around and re-finance them; and get the cash out of them that you need so you can have more cash to work with.

LARRY: Sure. That is another source for short term there as well ,you mentioned.

WENDY: Your Home Equity Line.

LARRY: Right.

WENDY: Unless your sources are really high dipping into your Home Equity Line is not always the best idea.

LARRY: Why is that?

WENDY: It is going to drop your scores. Home Equity, when you dip into your Home Equity Line they tend to drop your scores almost as much as a revolving credit card that is maxed out.

LARRY: Wow, that is a pretty hard hit.

WENDY: No one really knows why; because who can figure the Credit Companies and how they do their thing. That is something we found that when people are dipping into their Home Equity Line you do see their credit scores drop. However; if you are a 700+ score that is not something you really need to be all that concerned about. If your are in the high to mid 600s, then that is something I would definitely be concerned about.

LARRY: Yes, you are getting near the edge.

WENDY: Right. The other thing would be to have a good “Sugar Daddy”.

LARRY: Or “Sugar Momma”, maybe.

WENDY: That is right, an Investor out there who really, you know, has a little extra cash. An in-law, somebody that is willing to trust you and loan you some money out there.

LARRY: Some people are even using private money, you know like you said, just individuals and wanting to get a return on their money or whatever.

WENDY: That is correct.

LARRY: Why does a person or an Investor need to use short term money rather than traditional financing to get into a property?

WENDY: Well, when you are buying a rehab house, obviously it needs work, that is why you are getting it so cheap in the first place. Number one is: Traditional Lenders won’t make loans on houses that need work. It depends on how much work – paint, carpet, that is no big deal. When you are getting into replacing a roof, having to update the kitchen, a bathroom, new windows, things like that, they will not loan money on houses that need work like that. So you have got to go with the short term money, to be able to purchase that. Another reason that you would want to use the short term money is the speed of the closing. Traditional loans tend to take three to six weeks, depending on who the Lender is that you are able to use. Short term money, when you are negotiating a deal if you can tell them, “hey how about if we can get you your cash by Friday?” you can work a better deal. It is a better negotiating tool.

LARRY: I have noticed that with a lot of your Investors that work with us. With that Letter of Credit, that you can provide them, after they have been qualified for a rehab loan, they can make all cash offers, close in ten days. It really speeds up being able to get a lot more offers accepted by the Buyer.

WENDY: The hard money loans and the rehab loans are the quickest. You are looking two days to a week to get it closed.

LARRY: I think two days is the quickest we have ever closed one, isn’t it?

WENDY: No, actually twelve hours.

LARRY: Are you serious?

WENDY: Yes. Twelve hours, we had the appraisal in hand.

LARRY: That is awesome, Wendy.

WENDY: If you have an Attorney that is really, really good; and we did have an Attorney and was able to get Title Work in two hours for it. So that was pretty sweet.

LARRY: That is a sweet deal.

WENDY: Yes, we liked that.

LARRY: Explain to us, if you are doing a rehab loan, whether it is rehab or hard money or Guidance Line, how do you handle getting the home improvements paid for. Whether you have a contract or you are doing it yourself?

WENDY: Do you mean how the draw works?

LARRY: Yes.

WENDY: Okay. When you are doing a hard money loan or a rehab loan or any type of commercial loan, the money that you borrowed to fix the house up with is usually put in a separate account. It may be held by the Attorney. In most cases, it is held by the Lender. As you complete the work, you would fill out a draw request and usually the Lender will send someone out to inspect it. Sometimes they choose an Appraiser, sometimes the Lender has an Inspector on board. They will send someone out to inspect the work, make sure that it has been done, go over any receipts or invoices that you may have on it; and then give you the money, usually within forty-eight hours they will get the money to you.

LARRY: That is fast.

WENDY: It is pretty fast. You have to be limited to, as to how many times you will make a request for a draw. A lot of people would love to do it on a weekly basis, because they pay their Contractors on a weekly basis. However; there is usually a cost for every draw that you do. I know our loans, there is $100 charge.

LARRY: An Inspection fee.

WENDY: Right, an Inspection fee because you have to pay the person to go out and take a look at it. That charge comes out of the money that you are requesting for your draw, so the more draws you have, the more it is going to cost you to request that draw.

LARRY: For example, a typical deal may have $10,000 in improvement and then they want four draws of $2,500 each? So after the inspection, they will get an check for actually $2,400, right?

WENDY: That is correct. So it is going to cost them $400 total in rehab money and $400 can go a long way in rehab money.

LARRY: Oh it can. If they could hold out until the end and just get one draw, they could save some money. It kind of helps both ways. It is kind of like, does the deal work for you as long as the money is in the deal, it doesn’t really matter.

WENDY: So a lot of people, when they are doing these hard money loans or rehab loans, they tend to think it is okay that they have no money in the bank. That is a very dangerous situation, because most Lenders will not let you have money up front. Here they are giving you the money for the house, the money to fix it up. You don’t have to take any money out of your pocket for closing costs. They are going to expect you to at least have enough money to get started.

LARRY: Right. After all you are getting a no money down deal, so you know you at least need to put a little something of your own into it before you get your first draw.

WENDY: That is correct and most of the draws I have been seeing, three to five draws is about average.

LARRY: Is that right?

WENDY: I have had a couple people do one, all in the end. They like it that way.

LARRY: How do you determine how much money is needed for repairs, so you don’t run out of money?

WENDY: The thing that is important, is getting a good rehab person to go out and inspect the properties for you. There is a lot of people out there that I guess offer courses on learning what needs to be rehabbed. You really need to get someone you trust, someone that has been in the business for a while; and always get two to three different people to go out there and give you a price. You will get a different price from every person you send out. It is always best too to walk through the house with them and see what they are looking at and ask them questions, how they are coming up with certain prices. Then you will get to a point where you will really know how to do it yourself. You can at least eyeball it and know how to do it yourself.

LARRY: That is true. It is always good to meet them out there and go through everything with them; because they may something that you don’t. Another line that I like to use to when I am walking through a house with a Contractor or rehabber is: “Here is my list of everything that I see; if you see a better way to do something that I have on the list that will save me some money, you can get the job”.

WENDY: That is a good idea.

LARRY: Yes, it really helps. They are looking around for ways to save money. You get the same results and hey shoot yes, I would like to give them the job if they are saving me some money. I’ll help them out.

WENDY: If you get somebody you can count on, on a regular basis, they are going to know that it is about volume. Not about how much money they can make off of this job. It is about volume that you can give them. They will find ways to help you save money. Do you really need to replace those cabinets or will a good paint job work? Same thing with your appliances; and too, it depends on where the house is located, whether or not you are trying to sell the house or whether or not you are trying to rent the house. You are going to rehab it differently.

LARRY: Absolutely, that is a good point. That is a very good point.

WENDY: Not that you are going to rehab it cheap if you are going to rent it. You definitely want it to hold up, because it is only going to cost you more money if you have to keep replacing stuff. You know you are going to have to have it a little bit glitzy if you are going to sell the house.

LARRY: If you are going to retail it, because you are competing with everything else that is on the market.

WENDY: Exactly, it is all about cosmetics on a retail value.

LARRY: Now what if somebody wants to, you know, is in this process and they don’t really have a Contractor right now. Do most Lenders, whether it is a Guidance Line or rehab or hard money, do they have Contractors that they recommend?

WENDY: I don’t know that a whole lot of Lenders do. Personally, I have found out the best way to do it is stay in touch with these REA Groups and some of the focus groups that are out there. Staying on the Internet with other Investors, finding out who they are using. Personally, when people ask me, I have four or five different folks I can send them to. I am sure that these Lenders will have one or two people that they really, really trust. Unfortunately, a lot of the banks, if they suggest somebody, they are going to suggest someone who is pretty busy. If they are that good, they are going to be really busy. It is real important to keep in touch with other Investors and find out who they are using. Most of them will share with each other, you know who it is that is doing a good job and who it is that is doing a bad job. It is just as important to keep your eye out for that; because one or two bad Contractors can really, they can take away all of your profit.

LARRY: That is true and you have to keep a check on them. You don’t want to get too comfortable. You always want to keep a check on them. Especially if you are using the same guy say for heating and air, you use them on four or five jobs. It doesn’t hurt to after a while when you get comfortable, go back in and have somebody else re-price it because your prices might have gone up.

WENDY: That is exactly right.

LARRY: You know they get comfortable and just let them know that you are not going to be a push over, don’t just lay down and let them do what they want to.

WENDY: Same thing with the shabby work. You will find that they tend to get a little more relaxed with what they do. People do that to me, as they are building their team. Hopefully, they are going to have lots of good team members that they keep coming back to and I as a Mortgage Broker am part of their team and every once in awhile they will shop around on me too. You know, to check it out to see what other people are doing and they will find out that we close their loans.

LARRY: Get it done, right?

WENDY: That is what it is all about, is who can close the loans; cause time is money.

LARRY: Absolutely. One of the things that you and I have often talked about, is putting people and principles before profit. Even though it cost a lot more money to do a rehab loan or a hard money loan, our goal is to get Investors to the point where they can move out of hard money and get a Guidance Line; or move out of hard money or rehab loans and start using their Home Equity Line of Credit wisely. So they can move on and get out of that stage.

WENDY: That is correct.

LARRY: We would much rather have them be successful in what they are doing, so they will keep buying houses, keep doing loans and we wholesale houses too; so that helps. If they buy one or two houses and maybe they don’t structure it right or they don’t get the best deal and they end up getting frustrated and say this Real Estate is not for me then that person has a bad feeling about Real Estate altogether and thinks you cannot make money in this. If we guide them, direct them, and help them get to financial independence, then they will be around for a long time and they will enjoy the business.

WENDY: That is exactly right. If they are enjoying the business, and successful in the business then we pray that they are going to be honest and ethical as well.

LARRY: Absolutely.

WENDY: That is something that I strive to push at people, is it is all about being ethical. So many of the people getting into this business think it is all about jumping in to it, get rich quick scheme. It is not get rich quick. It is all about steady plodding and doing what is right.

LARRY: Get rich slow. You even, with your customers, do a lot of counseling on the phone. If they are telling you about a deal and it doesn’t really make sense with their goals and plans and what they have told you they are looking to do or if it is just plain not a good deal.

WENDY: Absolutely.

LARRY: You will advise them not to, won’t you?

WENDY: Absolutely. I certainly don’t want to see anybody get set up to fail. It hurts everybody involved.

LARRY: Tell me a little bit, Wendy, let’s talk about a formula to use for qualifying a house for a rehab loan or a Guidance Line or whatever type of short term money.

WENDY: The formula that we use, that we like to use, both personally and professionally is the 70% rule. That 70% rule is, 70% of the after repaired value. We do have an Investment Property Analysis Sheet that has all this information I am going to talk about. People are more than welcome to e-mail us and we will be glad to send that out to them tomorrow.

LARRY: We will give our contact information at the end, but actually that is on our website as well isn’t it?

WENDY: Oh yes, that is right.

LARRY: Under the Rehab Loan Documents.

WENDY: That is right, but this 70%. It is based on the after repaired value, we take the after repaired value and we come up with that value by getting a list of all the repairs that need to be done and the cost. We sent that to the Appraiser. The Appraiser does an Appraisal based on those items being complete. So, it is subject to Appraisal. We take that number, we multiply it by 70%. Immediately, with the number we have left over at 70%, we multiply that by 4% because it is 4 points to close a loan. Now this is worse case scenario, hard money loan. So we subtract that 4 points out of that 70% as well. Then we take, the amount that it costs to do the repairs. We subtract that out of that balance. What you have left over is about what you should be offering for that house. Actually, it is what you should be paying for the house. What you should be offering should embarrass you. Because, like we say, if you are not embarrassed when you make your offer, it is not low enough.

LARRY: That is true. I love that line.

WENDY: I do too and it works.

LARRY: Hey, how about the commercial piece we just bought. They were asking $199,000 and I offered them $28,000, they ended up taking $40,000.

WENDY: Not a bad deal. I wish they were all that good; but all they can do is say, “no.”

LARRY: That is true.

WENDY: Once we have worked up with the 70% formula, the reason why the 70% is really so important is what happens on your exit strategy. You should always have at least two exit strategies when you buy a rental property or rehab property. One strategy people have is to turn around and sell it right away. Another strategy is to rent it out. Some people, there strategy is to lease purchase it out to somebody. So whether or not you are going to sell it, that is gravy if you can sell. You never know if you really can, but you need to make sure that you can get re-financed out of that loan, just is case you cannot sell it. The way the Lenders are set up now is, if you have owned the property less than 12 months, the most cash out you can get on that property is 75%. There are maybe one or two Lenders that I know of that will go up to 80% but they are Lenders that tend to really cut up the Appraisal. They just do not give you the full value. In some cases the loan amount has to be at $70,000, which a lot of these won’t quite get to for the loan amount. You know, there are a lot more issues that you can get 80%, and 80% is so rare that I really try to keep people from thinking that they are going to get 80% in their minds. 75% can be had all day long. So, if your idea is to be able to re-finance it at 75%, pay off your 70% loan and then you have cash to put in your pocket and a 25% equity in the property. Not to mention, you are going to have a pretty decent cash flow, if you have a 25% equity in the property.

LARRY: But buying the property at 70% of value, can you find those deals?

WENDY: You find them every day.

LARRY: You make them every day, right?

WENDY: Well put.

LARRY: They are hard to find, but you have to make them. They are out there. That is what we sell them at, if we sell to an Investor in an “as is “condition. We have to buy it cheaper than that really, to be able to sell it to an Investor wholesale at 70% of after repaired, including hard money, taxes, insurance, closing cost and rehab and purchase price.

WENDY: That is correct. In most cases, when we sell them at the 70% value, many times they are coming in in the 65% to 70% range. There is a lot of lead-way in there, which is good when you run into the problem of thinking the repairs that you need, actually misjudging the repairs that you need. You know, you really don’t know exactly what your are going to get into until you really start tearing out a wall and then you find termites or wood rot that you would have never known was there. You have to have a little bit of cushion there just in case you misjudged how much money you are going to need.

LARRY: For the unexpected.

WENDY: That is exactly right and there is always and unexpected. I don’t think I have ever seen a deal go completely smooth, from beginning to end. There is going to be something in there that is going to be a kink. You need to expect it.

LARRY: That is true. That is a really good point, Wendy. You mentioned about the Appraisal. The Appraisal is done subject to the work being done and so there they are taking the amount of work. They actually get a list of repairs and they say this is what the house is going to be worth after this list of repairs are done. Is that correct?

WENDY: That is correct.

LARRY: Now, how do we know or how does a new Lender, say a traditional Lender, we are getting ready to re-finance. How do we convince that Lender that the reason this property was bought thirty days ago for 50% of value is because it had to have all this work done. What is involved in that Appraisal? What do you as a Lender need to have on that Appraisal to convince the Lender that yes this property is really now worth $100,000, even though they paid $50,000 for it a month or two ago,

WENDY: The first thing that I always like to stress, is save your paper trail. Save every receipt. Save every cancelled check, you are going to have to have cancelled checks front and back. Not all Lenders ask for them. In fact, most Lenders don’t, but the one person who didn’t save a paper trail that is the time that we need it. So saving the paper trail is important; but what we do is we send the Appraiser, the same Appraiser that did the original Appraisal, back out to verify that the work was done. In his Appraisal, we make sure that he addresses in detail all the work that was done and the fact that it is complete. He also takes interior pictures of the house.

LARRY: Before and after?

WENDY: No, just after. We don’t get interior pictures before. As long as the Appraiser is backing up what you are saying, work wise then the Lender is going to believe it. I mean seeing is believing. The appraiser has a license that he has to keep in line and rules he needs to stick to, as well. If you Appraiser is really, really sticking to the details, giving details to the Lender, then the Lender has reason to question everything.

LARRY: What about rent comps now?

WENDY: What do you mean, what about rent comps?

LARRY: Doesn’t the Appraisal have to include rent comps, if it is a rental property?

WENDY: When it is a re-fi. Only when we go through the re-fi do we do rent comps. Most Appraisers out there are not real thrilled about doing Investors loans; because they have to do the rent comps. It is a lot of work, to locate the rentals and we get pictures of the rental comps as well. When you are ordering an Appraisal, it is very important to really interview the Appraiser. Ask him how many Investor Appraisals he has done for Investors Loans. You know, see how he reacts to it; because you can tell in their voice when they start hemming and hawing, well. They are not really interested in doing it. It is much better to go with an Appraiser that is used to doing Investment Property. They know where they need to explain things.

LARRY: I know, I used to think, as soon as I got an Appraisal, I would flip to second page and look at the bottom to see what the number is. Unfortunately, all of your Lenders have Appraisal reviews. They have desk top reviews, field reviews. Sometimes they even want to get another Appraisal. You just went through a training course about how to read Appraisals, didn’t you?

WENDY: I sure did.

LARRY: How has that helped you?

WENDY: it has helped a lot, because now I know what all of those little things mean.

LARRY: The adjustments, the gross, net adjustments.

WENDY: That is exactly right. Knowing exactly what a Lender is looking for. One thing that is kind of neat about a Lender that a lot of people don’t realize, is you mentioned desk top reviews. There is actually a program that they send the Appraisal through; they put certain information about this house, if there are comps in the neighborhood that the Appraiser should have used. If you have a certain street and four comps came up on that street that the Appraiser should have used but he didn’t or could have used but he didn’t and he didn’t address it. You know there was other comps in the neighborhood but it didn’t use them because this, this and this. Then that is a red flag for the Lender and he is going to start really going over that Appraisal with a fine tooth comb. Once they see something incorrect or something left out, they question everything. So in an Appraisal situation, it is always better to have too much information.

LARRY: Yes, addendum’s.

WENDY: Exactly. Comments, comments, comments, that is the big thing.

LARRY: Explain it all the way.

WENDY: Another thing that the Appraisal Class helped me a lot. I never really thought about it this way, but it seems so simple. If you look at the pictures of the subject property and you look at the pictures of the comp properties that they have chosen. You look at them and say to yourself, “now which one would I rather live in?” If the subject property is the last one you chose, it is probably not a real good Appraisal.

LARRY: That is very strong, Wendy.

WENDY: I have gotten several that look like that. That the subject property is not necessarily the nicest one there.

LARRY: That is good information.

WENDY: It is important to look at. Another thing too is they like to see what they call bracketing. Bracketing means like if you have a house that is 1100 square foot, that is your subject house. They are going to want to see some of the comps have 1000 sq. ft. and another comp have 1300 sq. ft. They are going to want to see a little bit bigger and a little bit smaller. Same thing as far as picking the location, they are going to want to see a house north, east, south and west.

LARRY: Wow, sometimes that can be tough.

WENDY: It is very tough; and if they cannot find them in those areas, say all the comps happen to be in the northeast area. As long as the Appraiser explain why, it is okay. That is why it is important to pick an Appraiser that is really used to doing these type of appraisals.

LARRY: That is strong, Wendy. There is a lot of good information there about Appraisals.

WENDY: The course that I took was actually offered by a Community College here, Central Piedmont. It was four nights and like $50.00. It was well worth every penny and I am sure there are other Community Colleges all over North and South Carolina that offer it as well. It was well worth it to go through and I would highly recommend it to anybody else that would be interested in doing that.

LARRY: There is some good information out there. So it is not just the bottom number on the second page.

WENDY: That is exactly right. It is all the meat in between. A lot of people think they are all canned phrases or cookie cutter phrases. But if you really get into there and read everything that is written about it, you will learn a lot about the house and the neighborhood it is in and really what the Lender is looking for.

LARRY: It also helps knowing what is on that desk top and field review forms that they are looking for, doesn’t it Wendy?

WENDY: That is correct. We actually, we have an Appraisal Check List too, that I would not mind giving out, if people want to e-mail and request that, we would be more than happy to give that out as well. That will give you some idea of things to look for.

LARRY: Let’s talk about the short term money again. How can we qualify for these loans? What kind of qualifications do you need for each loan?

WENDY: Let’s first talk about what you need to qualify for just about any loan. Some of the things you need to know. The first thing you need that is probably the most important, is a two year job history. You got to have a job. I cannot tell you how many people have called me up and said, “I really like this Investor, I have been doing it for six months, so I am quitting my job next week.” That is all great, find and wonderful. They have good scores, they have paid all their bills, but now they have no job. A Lender wants to know that you can pay their loan. If you don’t have a job, you cannot do it. They do not depend on the fact that you have rental income coming from it, especially if you have only been in it for six months.

LARRY: Because you have to live.

WENDY: Absolutely, they want to see a two year job history. If you have been investing for two years, then absolutely that is a two year job history. Only if you have reported it on your taxes, you have to have a CPA write a letter saying that you have been a Real Estate Investor for at least two years. As long as you have a two job history you are not going to have much of a problem. The other thing is good credit scores. I know I had mentioned earlier that hard money really does not care about a job or a credit score and that truly stands. The thing you will run into is the problem of re-financing it out of there, you have got to have good credit scores to do it. Good credit scores in our realm that we are looking for is a 640 and higher. Now we can re-finance non-owner occupied loans and purchase money loans for people as low as 580, with a 580 credit score.

LARRY: That gives you a cushion though, doesn’t it?

WENDY: But 640 give us a good cushion and your rates will be decent. When you are 580 to 600 trying to do a non-owner occupied loan you need to be prepared to pay the highest rates out there. And you loan to value will not be all that great. That is the loan amount that you will be borrowing versus the value of the house.

LARRY: Right.

WENDY: Where you could normally get a 90%, 95% even 100% purchase loan, you are going to be stuck to an 80%. Good credit scores are real important, as well. Also, your Credit Card, you know it just amazes me the amount of people that have ten or more Credit Cards on their Credit Report. The cards they have are either maxed out or darn close to it. All you need is one. I sound like my Mother. All you need is one Credit Card. It is true, all you need is one. That is one of the things that when we are doing our mentoring and helping people get set up to be able to qualify for loans, when they start buying and flipping houses; our goal is to get them to start paying those Credit Cards off. You just hit them one at a time. You try to get the ones you owe the least amount of money on. Every Credit Card you pay off, if you are making a $200 or $300 payment on a Credit Card and you get that Credit Card paid off, you gave yourself a $300 a month raise.

LARRY: Absolutely. It is similar to what we talk about when you buy property and then you do the cash out re-fi. If you are able to put $3,000 in your pocket on the re-finance and you have a $200 a month cash flow on the property, but over here you took that $3,000 and you paid off a Credit Card or if you paid off a little Installment Loan, that also had a $200 payment, your cash flow is really $400 a month. Plus you have increased your equities, lowered your liabilities and raised your Credit Score.

WENDY: That is exactly right. You really need to get to a point where you have one or two Credit Cards and no more. Another important thing is to close them out. Even if they are zero balances, close them out and get rid of them.

LARRY: Call the Credit Card companies.

WENDY: That is right, you have to call the Credit Card company and make sure that you get it from them in writing. That you have requested that it be closed. Because having open available credit scares Lenders. Because they think as soon as you go out and buy a house, you are going to put all new furniture in it and you know spend money to reap havoc on your Credit Cards. That is just not a good idea. It will hurt your credit. Another thing I like to tell people is to try and stay away from the Home Equity Line if they possibly can. That should be used as emergency money. Unless you have everything else paid for and unless you are credit scores are already high. As I explained earlier, your Home Equity Line can really, really hurt your Credit Report, your credit scores is you start dipping into it. Major, major importance – do not be late on a Mortgage or Home Equity Line loan. You can be late on anything else in the world, but don’t be late on anything that has to do with a Mortgage.

LARRY: It scares the Banks doesn’t it?

WENDY: That is exactly right, even if you had a 700 score and you were late one time on your Mortgage it narrows down from us being able to send it to fifteen Lenders to about three or four. Which is a big difference.

LARRY: Some Lenders even have programs where they only look at the Mortgage.

WENDY: That absolutely right.

LARRY: They do not card what your consumer debt it, how you paid that as long as your paid the Mortgage on time, they will give you a loan.

WENDY: That is correct. Now that usually pertains to owner occupied properties.

LARRY: Right. I just wanted to make that comment in the sense that is how important it is to a Lender.

WENDY: Absolutely. Especially if you are trying to sell one of your lease purchase houses to one of your renters. Making sure that they are aware as long as they are on time for their Mortgage. Or for the rent that they pay you. That even though their consumer credit may be all that great they can still get a loan. If you have somebody in your house on a lease purchase, you want to do all you can to make sure that they are paying you on time. Like making copies of their checks. If they try to pay you in case, do not take it. Take it down to a Convenience Store and have a Money Order made from their name into yours, so you have a paper trail. You have got to have a paper trail, for at least twelve months proving that they paid that payment to you for twelve months on time.

LARRY: Don’t try to make copies of One Hundred Dollar bills, right?

WENDY: Yes. We have had that.

LARRY: I know, that is funny.

WENDY: Not only is it illegal, it is just plain dumb. The other thing that I like to tell people that would be really nice if they had is money in the bank. Money in the bank would be six months PITI, that is called reserves, six months PITI is six months principal, interest, taxes and insurance.

LARRY: For whatever the payment is on the loan you are applying for.

WENDY: On the loan that you are applying for and actually I have got a glossary of terms as well that I will be happy to e-mail. Actually, I think you were going to download it onto our website.

LARRY: I can upload on the website: . I will do that in a couple of days.

WENDY: So we have that available in case you are wondering what all these terms are, but it is good to help explain what they are. Having that six months PITI in the bank is really important. The Lender wants to make sure that you can make those payments for at least six more months. Now what qualifies for the six months, it does not have to be cash in the bank. They will accept an IRA, 401K, Stock, Bonds, they want to know it is something that you can get to if you have to. They are not going to require that you go ahead and cash in it to prove that you have it, but they just want to know. They will want to see your last two statements showing that you have that, at least that amount in the bank. As for yourself, you need to be set up to do that. I certainly would not want to buy a house and not have any money to make payments in case I cannot at least out, because you can bet you are going to have time down on that house. Where it is not going to be leased out. So it is important to have that money available.

LARRY: I am going to go ahead and open it up. If anyone has a question, we have probably about I guess about eight minutes left.

WENDY: I talked too much, sorry.

LARRY: No, that is okay. It was great Wendy, it was some great information. If anyone has a question, please shot it at us. Does anyone have a question for Wendy?

Question from one of participants: Yes, I do have a question for you. You said that ____ _____ Credit Report that I requested not too long ago I find that there was something that, some loan that I do not recognize. When I called the Credit Bureau I was told that I needed to call the Bank. When I called the Bank _____ _____ ____ what do I need to do about it?

WENDY: Here is what I have found when you are trying to fix something on your Credit Report. If you will – first of all you can get online and pull a Credit Report at every single one of the Credit Bureaus. Those three Bureaus are: Equifax, Experian, and Trans Union. I am sure if you put those in engine search you would be able to get the dot com, the exact address for each one of those three. You can pull those three up and you can look at your own Credit Report at no charge. They are not going to show you everything they show a Lender, but they will show you enough information so you know whether or not you have items that are correct or incorrect on your Credit Report. When you pull it up online, there is also a form that you can download for any disputes that you may have; saying whether or not they are incorrect. If you fill out one of those forms and you send it to a Credit Bureau complaining about an account that is incorrect; if you have it to the Credit Bureau in writing. They by law have to notify the Bank or whoever it is that you have a dispute with that Bank has thirty days to respond, if they do not respond, they have to take it off of your Credit Report. It is automatic.

LARRY: That is pretty strong.

WENDY: Have you tried that?

Answer from Participant: No I have not.

LARRY: That would be a good place to start. Which by the way Wendy, I wanted to give a couple of numbers here for the Credit repositories. Experian’s phone number is: 1-800-854-7201, Equifax is: 1-800-879-1025 and Trans Union is: 1-800-777-2066. Okay does anyone else have a question for Wendy?

Question from Another Participant: I have one question for you. Could you repeat the number for Equifax?

LARRY: Sure, Equifax’s phone number is: 1-800-879-1025.

WENDY: Keep in mind when you make a phone call to any of those three numbers, you are going to get a machine and a machine and a machine. They are going to ask you to put in your Social Security Number. You put it in and they will also ask for your address and they will actually just automatically send you your Credit Report and they will send you the forms that you need to fill out. It is very rare that you will be allowed to talk to a person on that first call but when they send you your Credit Report and the forms to fill out, there is an 800 number on there (a different one) that they will give that you can actually call and talk to a person.

LARRY: That is good information Wendy. It looks like we are about out of time. I want to go ahead and give you some contact information from us. If you have any questions for would like to learn more about short term money, there is a lot of information on our website about the rehab loans, the short term, how the draws are handled. In fact there is a tremendous amount of documents, there are property submission documents, there are property analysis documents, there are also a rehab cost analysis, document where you can tell how much it is going to cost to rehab the property, draw document, completion certificates, draw requests so you can use us or anyone else. It is going to be documents that you need to get familiar with, so feel free to download that. It is free and it is on our website: as well as we also have a lot of articles and other information that is helpful to Investors at and if you would like to reach me, my email is: larry@.

Our phone number here at the office, once again if you would like to reach Wendy or myself is: 803-831-0056. Any closing comments, Wendy?

WENDY: Please anybody feel free to call me at any time. I am more than happy to answer any questions and the major part of my job is being able to coach and direct people, so that they can meet their goals and even help figure out what they are. So use me, I am here use me and it is free.

LARRY: Thank you everyone for tuning in tonight and listening and we will be back next Wednesday night at 9:00 pm. Thank you very much Wendy.

WENDY: Thank you!

LARRY: We appreciate it. Good by!

Hi, this is Larry Goins and I would like to thank you for listening to this audio program. I would also like to remind you to please visit our website at: for other information as well as we have a link for freebies, we have articles that you can read. I would like to share with you that we also offer One Day Training Events for basic Real Estate Investing and we also have Three Day Boot Camps as well as the Boot Camp in a Box, which contains the complete Three Day Boot Camp on audio CD as well as DVD Video. Please visit our website for the location and schedule of our One Day and Three Day Boot Camps coming up. We also have a Home Study Course called “The Complete Insiders Guide to Financing for Investors, which consist of over 500 pages in the Manual and 10 Audio CDs as well as two forms discs and other products and services as well. We also offer personal coaching and mentoring, so whatever your needs may be please feel free to give us a call. If you are a Real Estate group, Investor Association, Mortgage Company owner or other organization and would like to have either myself or Wendy Sweet or Leon Humphrey speak at your group about Real Estate and Finance and Investing, please feel free to give us a call. Our direct Office number is 803-831-0056, I am at extension 304, Wendy Sweet is 310. I would also like to remind you that we also offer traditional financing as well as hard money and rehab loans for Investors. Please visit our website there at . Thank you very much for your businesss, we sincerely appreciate it and please remember our mission is to put people and principles in front of profits. When we do that everybody profits. Thank you and have a Great Day!

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