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Can’t get a loan from your bank?
By Sal Lentini

There are any number of reasons a traditional bank will deny someone a loan on their investment property.  Low income, low credit score, lack of landlord experience, debt to income levels, tax returns, self employed or lack of W2 income…it’s almost like they are searching for a reason to deny you.  Don’t take it personally.  Even experienced investors with excellent credit scores and large portfolios can have difficulty dealing with traditional banks (ask me how I know).  So instead of taking it personally, you need to change your mindset and realize that it is the banks that have it wrong. Real estate investing is hands down, one of the best ways to create and preserve wealth so don’t let a desk jockey at a bank end your real estate dreams.  You either find the right lenders (on this site by filling out your loan request) or get creative. Partnering: There are lots of people out there with money but not enough time.  You can partner with someone with W2 income (that doesn’t have time) and give them equity in the deal without them having to lift a finger.  Their income gets them equity and your hard work gets you your equity. Seller Financing: This is exactly what it sounds like.  The seller, instead of the bank provides the financing.  There are advantages to both the seller and buyer for this type of financing.  The seller gets consistent monthly payments and isn’t hit with a giant tax bill.  And you, the buyer, don’t need to go through the colonoscopy that banks like to call underwriting. You can also do a seller 2nd, where the seller holds a note for the down money of say 25%.  Then you get a loan for the remaining 75%.  Every month you would pay the bank or private lender for the 75% loan and you’d also cut a check for the monthly payment to the seller for their 25% loan. Private Lenders: You often hear this term and wonder where these unicorns are.  The funny thing is, they are not unicorns at all.  They are everywhere.  Friends, family, coworkers, accountants, lawyers, friends of friends, bank tellers, realtors, diners next to you in a restaurant…these are all people that have done private lending with me to grow my portfolio to 127 rentals.  You just need to start telling people about your real estate aspirations and start paying attention.  They’re everywhere. There are also financing options of: lease option, subject to, quit claim, sandwich lease options…the short answer?  Traditional banks are just one of MANY ways to finance your real estate dreams.

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Best time to buy real estate?
By Sal Lentini

There’s a saying, that comes from an old proverb about planting trees… “The best time to buy real estate was 20 years ago.  The 2nd best time is now”.  Everyone is always trying to time the real estate market.  They want to buy when the market is at the bottom.  Sounds good in theory but if you only bought when prices dropped you'd have a VERY hard time building a portfolio.  You wouldn't have purchased anything in the past 10 years.  And nothing in the 20 years prior to that. Every purchase I make is specific to the property I am buying.  It depends on the price, the terms, the upside, the taxes, knowledge of up and coming development nearby, rates, rents, how desirable of an area it is, how it fits into the rest of my portfolio, how much time it will consume etc.  And if you’re building a rental portfolio, just because real estate values go down doesn’t mean rents go down.  During the ’08 crisis, rents remained remarkably stable, even going up in some markets.  So make sure you buy using strong fundamentals.  If you’re buying solely with the intent of making money through appreciation…that’s not a good idea.  But if you’re buying because of the cashflow and the LONG TERM prospects then you’re on the right path. And what a lot of people tend to forget, the real estate market doesn’t need to collapse in order to correct itself.  It could just go flat for 10 years while the economy and inflation grows to catch up with it.  So if you wait for the next down turn you could be waiting a long, long time.  Just be smart with your investments on an individual basis and don’t worry about trying to time the market as a whole.

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Automate your real estate marketing
By Sal Lentini

Website chat: You can use services like Chatbot or ZenDesk to automatically answer questions on your site 24/7.  This provides instant customer satisfaction and increases your chances of customer acquisition. Email drips: Using ActiveCampaign or MailChimp you can set up emails to go out at regular intervals to your list.  Don’t rely on you finding time or remembering to draft an email to send out.  Set up all of your emails once and then put them on autopilot using autoresponders in your email marketing software. Social media marketing: One of the hardest parts about social media marketing is the consistency.  Making sure you deliver content regularly.  Instead of trying to remember and find the time every day or every other day.  Once a week you can generate a bunch of content, images, posts….and then use a service like Hubspot or Later to deliver them automatically on a schedule of your choosing. Virtual assistant: If you have a lot of small marketing tasks that you feel are sucking your time away from things that truly matter for your business then you should seriously consider hiring a VA.  You can find your candidates on UpWork.  I know, it’s hard to hand over control sometimes.  But, once you do, you’ll wonder why you didn't do it sooner!  

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Increase your multi family profits
By Sal Lentini

Vending store: Having vending machines at your property is common but what about taking it to the next level and installing a vending store?  Yes, you can place an entire vending store in your lobby or common area.  You can lease these stores that are about 10x12 feet and carry everything from food, beverages, cleaning supplies, medicines, etc.  Customers pay and a robotic arm picks up and delivers the item. Cell tower – rooftop leases: If you don’t get great cell service at your property that’s a good sign that there could be use for a cell tower or cell repeater in the area.  That’s where the top of your building comes in.  You could generate an extra $1000 a month.  That’s like getting an extra tenant that requires no work on your part. Pet fees: Pets are becoming more and more like family these days.  People pay extra to bring them on flights and more and more hotels are allowing pets.  The good news is, you can do the same and make extra money by doing it.  Allowing pets and charging a pet fee will make your units easier to rent.  And you can also tack on an extra cleaning fee when they leave.  Cleaning products to remove pet smells are getting better and better.  And in the not too distant future, if you don’t allow pets you will find your units harder to rent.  So you might as well entertain the idea now and make money while you’re at it. Beneficial insects: Have extra land?  You can rent an area of your property to produce local honey.  And depending on your local property tax exemptions you could potentially save thousands in taxes because raising bees counts as raising food animals.  You can create a work farm and sell the worms, the worm “tea” they produce and again, potentially qualify for tax exemptions.  Or how about raising praying mantis for $18 each?  Ladybugs, crickets…the possibilities are endless Storage: Do you have unused space in your building?  A basement?  Or an area of your land or parking lot you can build on?  Tenants always want more storage and are willing to pay for it.  And depending on the location of your building, you can charge nearby residents and businesses for your storage.  The best part about storage is, very low upkeep, consistent easy extra revenue and happier tenants.

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Finding deals
By Sal Lentini

There’s no magic bullet here.  You need to have multiple streams of leads.  Spread the word to everyone you know that you’re looking for deals.  Tell them what you’re looking for.  Here are some other deal finding methods: Wholesalers Call For Rent signs Direct mail Realtors Ads Auctions Networking Local real estate groups… You need to blast the word out to everyone.  You never know where your next lead is going to come from.  And leads tend to snowball.  When you buy a property, talk to neighbors and local businesses about your purchase.  Your marketing web keeps growing and along with it, leads.

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Growing your portfolio
By Sal Lentini

You’ve bought a rental or a handful of rentals but now you’re looking to take it to the next level.  How do you become an investor with hundreds of rental properties?  You need a plan.  If you continue operating the way you are now, your outcome will stay the same.  At your current pace, when will you end up owning 100+ rentals?  10 years?  20 years?  Never? I’m at 127 rentals and I’m planning on doubling that by the end of this year.  If you are serious about growing your rental portfolio (and if you’ve gotten this far into this post you probably are) then drop me a line.  I can coach you and help you learn from my mistakes and successes getting to this point.  Click on the “?” in the bottom right corner of each page of this site and we can set up a time to discuss.

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Quick Guide to Rehab Costs and Lifespan
By Sal Lentini

One of the aspects of real estate investing that seems scary is determining rehab costs on a fix & flip or repair & maintenance costs for a rental.  Good news is, it’s not as hard as you think. When you’re getting a short term hard money loan you need to estimate what your rehab costs will be so that you 1) get enough financing and 2) can determine if the deal will be profitable.  With a fix & flip it’s pretty straightforward.  Take your after repair value and subtract your rehab costs, closing costs and holding costs to determine your potential profit. When you’re getting a real estate investor loan for a rental, it’s slightly more complicated.  Since you’re not fully rehabbing a rental property when you buy it (because it’s not necessary) you’ll want to have a good handle on what your ongoing maintenance costs will be to know if you’ll cash flow on a monthly basis.  The way you do that is by estimating the current age of the big ticket items.  If you know the lifespan of these items (below) you’ll be able to determine how much you should set aside each month. For instance, say a roof costs $8,000 to replace in your area and lasts 20 years.  Say the current roof is about 8 years old.  You need to save $8,000 over the next 12 years so the cost of a new roof doesn’t come as a surprise.  12 years = 144 months.  $8,000 divided by 144 months = $55 per month.  Do that for each big ticket item.  Now these are just ballpark estimates.  You won’t get an exact age on the current life and just because something is supposed to last 20 years doesn’t mean it will.  It could last 15 or it could last 25.  Some estimates will be high and some low but you’re doing estimates on a bunch of big ticket items so they’ll average out. The other thing to note, the lender for your short term hard money loan will review your estimates and, if they’re any good, let you know if they’re low or high.  They want to protect their money and one way they do that is by making sure you are successful with your rehab. HVAC Cost of replacement: $3500 to $8500 Average life span: 12 to 15 years To prolong the lifespan of your HVAC unit the most important thing to do is regularly change the air filters.  You can do this yourself, have your tenant do it or set up a maintenance contract with an HVAC company.  Dirty air filters cause unnecessary strain on your HVAC system.  Once you near the end of the lifespan your HVAC unit becomes much less efficient, leading to higher electric bills, unhappy tenants and more expensive repairs when items like the compressor fail. Roof Cost of replacement: $5000 to $10,000 Average life span: 15 to 25 years Most shingles are warrantied 25 years.  Roofs last a long time.  You might have to replace a shingle here or there along the way but roof replacements are infrequent.  When you need to replace, shop around because the range in pricing is huge.  And again, if this is a flip, your fix and flip home lender will be looking at the age of the roof when deciding on your loan. Siding Cost of replacement: $2500 to $15000 Average life span: 20 to 50 years Lifespan of your siding is highly dependent on the material.  Brick will probably outlast your ownership.  Wood, concrete and vinyl siding will probably only need repairs here and there from storm damage, leaks or when replacing windows.  Keep on top of maintenance with power washing, either yourself or by hiring one of the many power washing companies out there. Garage door and opener Cost of replacement: Less than $500 Average life span: 12 to 18 years Your garage door will probably last through your ownership.  Openers have a shorter life but it’s still fairly long and they’re cheap to replace. Foundation Cost of replacement: $5000 to $10,000 and up Average life span: Life of home You probably won’t have to deal with foundation issues unless you buy a property with an existing one or you let problems fester (like leaks).  You should always get a home inspection and appraisal before purchasing a property.  The two of these will help point out defects in your future purchase. Windows Cost of replacement: $200 to $1000 per window Average life span: 20 years Windows are another item that will likely last through your ownership of the home unless there are issues with them upon purchase.  The most common problem is when they no longer shut properly or are improperly sealed around the edges.  This will lead to drafts and higher utility bills which means unhappy tenants or less cashflow. Deck Cost of replacement: $8000 to $20,000 Average life span: 10 to 30 years Wood decks should be sealed once per year, composite decks should be maintained by power washing.  If you do that, you’ll probably only have to replace a spindle or a board here and there. Appliances The range in price for these items are largely based on size and quality.  You can get away with cheaper appliances but you’ll have to replace and repair them more often.  Spending more doesn’t always mean better quality.  I’ve found there’s not much of a difference in quality once you’re in mid-range pricing.  Repairs may be more infrequent but more costly for higher end brands. Refrigerator Cost of replacement: $800 to $2000 Average life span: 12 to 15 years Washer & Dryer Cost of replacement: $500 to $800 (each) Average life span: 8 to 10 years Stove and microwave Cost of replacement: $200 to $2000 Average life span: 7 to 15 years Dishwasher Cost of replacement: $500 to $900 Average life span: 8 to 10 years So keep these numbers in mind when applying for investment property loans.  Whether it’s for a flip or a rental, knowing the current age, lifespan and cost of replacement for big ticket items will mean the difference between a mediocre career in real estate and hugely successful one.

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COVID-19's Impact on Real Estate Investor Loans - (Residential Hard Money Lenders)
By Sal Lentini

At the start of the pandemic Covid-19 hit the lending market like a sledge hammer.  Banks, hard money, private money, bridge loans, everything froze in an instant.  As the owner of an online lending platform I was in the middle of it all.  Investors that wanted to refinance their properties couldn’t and the brave ones that wanted to acquire were having a hard time finding lenders willing to fund their deals. There were some residential hard money lenders continuing to lend but with stricter terms.  LTVs dropped to 65 but guess what?  Any investors that took those hard money loans ended up making out really well.  The markets initially tightened but eventually loosened.  The tightening spooked the industry.  Builders stopped building, investors stopped buying and rehabbing, nobody was moving.  But for those brave investors that continued buying, we all know what happened next.  The housing market started booming.  People were fleeing cities, looking for a place in the suburbs with more space and a backyard.  People no longer had to commute to work, instead working from home doing Zoom calls.  Suddenly it didn’t matter where you lived.  Because of the lack of new homes and rehabbed homes, low interest rates, stimulus checks, prices skyrocketed.  Buyers were buying “as is - cash” on primary homes!  A house would list and they’d have 30 buyers show up with their contractors throwing ladders up on the roof.  It was insane. Needless to say, those investors that kept plugging along with residential hard money lenders for their flips made boatloads of money.  Rehabbers were making on one deal what they normally made on two or three!  I know some investors that plan on retiring a lot sooner because of how much they’ve made flipping properties since Covid-19 hit.  I even know some former W2 employees who lost their jobs and were able to get hard money loans on fix & flips because these types of lenders provide low doc loans.  They base the loan off the financials of the property (what it’ll be worth after being rehabbed) not the borrower’s income.  What would normally be an impossible loan with a traditional lender became possible.  The lender protects itself via interest rate, LTV and points.  But who cares if you make a huge profit!  I’ll gladly pay money if it means the difference of not making any money and making a ton of money. The greatest investor of all time, Warren Buffet, said “be fearful when others are greedy, and greedy when others are fearful.”  The real estate investors that invested when others were fearful came out on top.  It’s something to keep in mind.  Huge events that seem like they’re going to change things forever either don’t or they change in a way that no one predicts. I was living in NYC on 9/11 and thought Manhattan was done.  I thought everyone would move out.  Real estate would plummet.  I was sure of it.  Guess what?  It didn’t.  People are making the same predictions this time around.  Cities will become ghost towns.  Prices will fall off a cliff.  I don’t think so.  Drop some, yes.  Will they go back up?  Probably.  And the ones who’ll make out are the ones that continued investing using real estate investor loans to get them done.

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