Pooling Private Money
by Alan Cowgill
When you pool money from private lenders, you’re putting funds together from two or more different private lenders.

You obviously need to look at doing something different where your state’s paperwork is concerned. This means you will need to file paperwork with your state and provide a disclosure document to your potential private lenders.

In Ohio, for example, we have what is known as 6(A)1 filing. This filing allow for pooling private lenders’ money in running your real-estate investment business.

This filing also allows advertising and unlimited private lenders.

Remember, securities laws and regulations vary from state to state and the Federal SEC has its own set of laws and regulations.

Pooling money occurs when you combine funds from two or more different private lenders.

You should use or form a new business entity. You should choose a corporation (which could be an S-corporation) or an LLC. Some states have different filings available depending upon whether you have a corporation or an LLC, and LLC’s are sometimes treated as partnerships. Most states won’t allow you to pool money when you’re operating as a sole proprietorship or DBA.

You cannot use your state’s exemption for real-estate transactions, similar to Ohio’s 3(H) exemption, when you pool lenders together. You can not use this particular exemption because there is no paperwork involved. In Ohio, you must “upgrade” to the 6(A)1 form, which allows pooling. All states have similar paperwork levels.

You should use one of your state’s filings that allow for pooling money. As an example, Ohio has a number of these filings available, such as a 6(A)1.

These filings require you to fill out paperwork, informing the state regulator about your business and what you’re doing. It usually requires you to disclose information to your potential private lenders, which is for your benefit as well as your private lenders’ benefit.

You’ll pay a fee to your state regulator when you file your paperwork.

One of the things I’ve taught my students and continue to stress is that you shouldn’t be pooling money from private lenders unless you make sure you’re in compliance.
In order to be in compliance with your home state’s securities laws, you’ll need to find the proper exemption, filing or registration option and comply with its requirements.

The following is some general information on staying in compliance with your state’s requirements.

When you use an exemption to bring in private lenders, you are making an offer and sale of a security. It’s important to understand that an offer to sell is usually treated the same as a sale when it comes to securities compliance.

Two key concepts to understand when you sell securities are that there are exempt securities and there are exempt transactions. Whether you’re selling stock, equities, borrowing money, or debt, these are treated as securities. An exempt security usually means a security issued by a governmental agency or authority.

An exempt transaction refers to the sale of a security not issued by a government agency that has been given an exemption under state law (or federal law) because of the nature of the security and how it’s sold.

Many of my students are basing their compliance on the exemptions in their states that are similar to the one in Ohio found under 3(H):

Ohio Revised Code, Chapter XVII, Title 1707.03(H) The sale of notes, bonds, or other evidences of indebtedness that are secured by a mortgage lien upon real estate, leasehold estate other than oil, gas, or mining leasehold, or tangible personal property, or which evidence of indebtedness is due under or based upon a conditional-sale contract, if all such notes, bonds, or other evidences of indebtedness are sold to a single purchaser at a single sale, is exempt.

Remember, these are still securities, and the sale of these securities can be exempt under securities laws in Ohio. Compliance with the offer and sale of these securities is still required.

Some states may offer you more than one choice, so you’ll want to evaluate those choices.

Alan Cowgill is the owner of Colby Properties, LLC. and President of Integrity Home Buyers, Inc. Alan is a full-time Real Estate Investor, investing in single family and small multi-family properties in Springfield, Ohio.

Since 1995, Alan has bought and sold over 200 investment properties. Alan uses Private Lenders, not banks; to fund his real estate purchases. By doing this, he has created his own private bank of $2,000,000 in funds. Alan looks for “Win – Win” situations, where the seller, the lender, and the eventual homeowner can all “Win”. He is not a Realtor, but a Private Investor.

Alan has served as an elected official to the Board of Directors for the Clark County Property Management Association. He is an author, consultant and national speaker. He has been asked to speak on the topics of “Investing for the Beginning Investor.” and “Finding Private Lenders.” His home study system, “Private Lending Made Easy”, shows new and seasoned real estate investors how to find private lenders for their own real estate business.

In addition, Alan:
• Holds a BS Degree in Business Management.
• Has over a quarter century experience in Business Management.
• Is a published author not only for Real Estate but also in American Industry.
• Featured in the Business Section of the Springfield News-Sun newspaper in May, 2001. Article on real estate investing in Springfield, Ohio.
• Adjunct Professor for 5 years at Clark State University.
• Acknowledged in the book “e-Mail Basics” ISBN #0-9676313-1-9.
• Speaking Engagements include: Yovel, England; Dallas, Texas; Fort Collins, Colorado; Atlanta, Ga.; Jacksonville, Florida; Cashiers, SC.; Las Vegas, Nevada and Springfield, Ohio.
• Business trainer and consultant.
• Member of the Springfield Chamber of Commerce and Better Business Bureau.
• Appeared on a twenty-eight minute real estate infomercial that is shown nationwide.

And best of all, Alan Cowgill is married and the father of three children.

Making money in hard times through syndicate deals

It’s a fairly well acknowledged fact that when the going is good just about anyone can make money. This is as true of real estate as any other market and when the going is good there everyone tends to think the same way: they think of the rewards more than the risks and want to get in there and make as much money as possible.

In a tough market however everyone wants to hedge their bets and spread the risk while limiting their exposure and it is here that syndicate deals are born. As a real estate expert active in real estate for a long time and with a reputation for delivering value and closing deals I get asked all the time to front different syndicates.

I am in the envied position of being able to pick and choose who I do business with and which deals I decide to take on which means that I am also in the position of picking those which give me the best return for my time and my expertise. But that has not always been the case and I had to work my way to this position through sheer hard work and application of what I call my ‘rules of picking a good syndicate deal’.

In brief, a syndicate deal is when you close real estate deals using other people’s money. This means you are acting as a front man using your skills and knowledge to work real estate investments while behind you there is a syndicate of people who have put in money to a varying degree and who will get a proportionate percentage of the profits. You will also benefit from the deal by taking an agreed slice of the profits as you will be instrumental in making the deal happen in the first place.

As you realise the moment a market gets tough real estate investors and those who want to invest in real estate without being real estate investors per se try to limit their exposure by spreading their money in as many deals as possible. This means they tend to go for syndicated deals which spread their money and increase their chances of making a profit while reducing the risk of losing everything in just one deal going bad.

From a real estate investor’s point of view a syndicated deal in tough times makes perfect sense as you tend to use zero of your money and simply invest your time, reputation and expertise. This means that you can continue to make money even when the real estate market is going through the doldrums which is what being a professional real estate investor is all about.

David Lindahl, also known as the “Apartment King” has been successfully investing in single-family homes and apartments for the last eight years. He is the author of four popular, money making home study courses “Apartment House Riches”, “How To Estimate And Renovate House For Huge Profits” “Managing For Maximum Profits” and “The Real Estate Investors Marketing Tool Kit”. He can be reached at TheCoachingClub.com.

How to make money in real estate using other people’s money

Smart real estate investors know that the best way to make money in the real estate investment market is to use other people’s money and trade their own expertise and negotiating skills for a slice of the profits.

As a real estate investor of many year’s experience and with a certain reputation for closing lucrative deals I am constantly being approached by groups of investors who want to break into the real estate market without risking huge chunks of their money and without having to go through the painful learning curve that’s often associated with investing in a market you know little about.

I am in the advantageous position of being able to wait until a good deal comes along and then choosing the group of investors I will work with. This, in essence, is what a syndicate real estate deal is. Rather than put up all the money, investors put in a percentage which will reflect their percentage of the profits, thus minimising their exposure in each single real estate deal.

The question is what do you do if you have not yet got a reputation but can still pull off a profitable real estate deal and do not want to risk your money? Well, this is where you need to be creative. The moment you have a deal you think you can close at a profit you need to move fast to get your syndicate together.

Potential real estate investors willing to put their money up can come from almost anywhere: friends, family, colleagues, people you work with, acquaintances, business angels and professional investors who earn their money by investing through syndicate deals. The list is almost endless and putting a syndicate together will depend on two things, first the kind of deal you think you can close, which will also determine the profit margin and the maximum number of people you will want to come in and second on how convincing you are in getting people to trust you with their money and give you a free hand so you can make it work for them.

If, right now, you are thinking that there is simply no way you can say anything to anyone to get them to trust you with a few hundred thousand dollars you can think again. Putting together a syndicate and fronting it is very much a case of cool judgement, steady nerves and the ability to negotiate carefully, pay attention to detail and find new ways to squeeze profit out of a real estate investment.

Good news travels fast and it usually takes no more than one successful deal to get you a reputation in which case you will find that then people trust you enough to want to come to you rather than you having to hunt for them and that is the hallmark of success.

David Lindahl, also known as the “Apartment King” has been successfully investing in single-family homes and apartments for the last eight years. He is the author of four popular, money making home study courses “Apartment House Riches”, “How To Estimate And Renovate House For Huge Profits” “Managing For Maximum Profits” and “The Real Estate Investors Marketing Tool Kit”. He can be reached at dave@real-estate-fortune.com and www.TheCoachingClub.com.

How to Be Creative With Financing

By Ken Rolf

If you are a seller, you need to widen your pool of buyers to people who do not qualify for traditional financing as well. Some options may be the following:

Seller Financing

If you have equity, you may want to offer seller financing. With seller financing, the seller is the bank.

Assumable Mortgage

Other alternatives are checking with your lender to see if the buyer can assume your mortgage. Although most loans are not assumable, today some lenders may offer that as an option to a seller who is about to fall behind in their mortgage payments or who is already in default. It may make more sense for the lender to allow a buyer to take over the loan than have to foreclosure on the property. Average foreclosure costs to a lender are approximately $50,000 per foreclosure.

Lease Options

Lease options are a way to sell your home in a difficult market for a higher price because the buyer enters into a contract to lease your home with an option to buy it at a specific price in the future. Lease options are a great way for buyers who do not have enough cash or who have bad credit to own a home. During the option period, they can work on cleaning up their credit and qualifying for traditional financing or saving more for their down payment. Generally, the buyer pays an upfront option fee to you. A portion or all of the lease payments can be used as credits to the buyer towards purchasing the property. If at the end of the term, the buyer chooses not to buy the property, you just keep the lease payments, and you can continue renting the home to them or look for another buyer or tenant and enter into a lease option with them.

Creative Financing Options for Investors/Buyers

Finding traditional financing for your deals is getting tougher because banks have tightened their lending guidelines. So here are a few options that are available for getting financing if you don’t have cash:

Private Investors or Hard Money Lenders

Private investors are individuals or companies that will loan you money on a short term basis quickly. They don’t have to follow any strict lending guidelines like traditional lending institutions must do. Most are interested in the equity of the property and how quickly you can pay them back. You will have to pay a higher interest rate and points upfront, but the advantage is you don’t have to fill out a lot of formal paperwork, go through credit checks and you get the money quickly so you don’t lose your opportunity to buy the investment property you have found.

Seller Financing

You may want to have the seller finance the transaction if they have equity.

Assume Seller’s Loan

Another option is to assume the seller’s loan if the lender will allow it. This way you can save on some of the costs associated with a traditional mortgage.

Wholesaling

Wholesaling real estate means putting a piece of property under contract and assigning it to another investors/buyer. You receive an assignment fee from your investor/buyer for finding the property and securing the contract. The advantage is you don’t have to close the deal yourself, and you make a quick assignment fee of approximately $5,000 so you can move on to the next project.

Being creative and thinking outside the box is what makes today’s investor successful. Once you do enough deals and accumulate some cash, financing won’t be an issue for you. But if you are just starting out or short on cash, you will need to secure financing ahead of time in order to do your deals and stay in business. Compiling a list of private lenders is a smart thing to do so you can contact them when you find a good deal and jump on it.

Today is the best time to buy real estate and take advantage of the buyer’s market. So having financing available is critical to your success. Just taking the time to plan ahead and get your financing ready will allow you to continue to grow your investment portfolio and give you the financial security and long term wealth you hope to achieve.

Putting together winning real estate deals without risking your own money

 The secret to making big money in real estate investment is syndication and I will explain why that is in a minute. First let’s focus on something important: every investment entails some risk and successful investors are great at minimising the risk not just for themselves but also for everyone else involved with them.

This means that as a real estate investor you must quick at putting together deals using syndicates. Essentially a syndicate is a group of investors representing an interest in breaking in the real estate investment market who put up a certain amount of cash and get fronted by a professional.

If you are clever about it and you have began to establish your credentials, build up a reputation and can talk the talk in a way that convinces people to trust you with their money you are then off to a flying start. It means that you will bring credentials, the ability to close profitable deals and expert negotiating skills to the table.

For the investors who form the syndicate the benefits are two fold. First they gain a foothold into the competitive real estate investment market without having to put up a whole lot of money to begin with and this means reduced exposure for them and fewer risks for their money. Second they gain someone who will do all the leg work and close the deals and work for their profit. All they have to do is sit back and enjoy it.

Provided you are diligent in your work, capable of paying attention to every detail and good at working under pressure and, hopefully, working at more than one deal at a time then your earning potential should only be limited by your ability to put deals together, the success you are having in attracting potential investors willing to trust you with their money and the state of the market which decides supply and demand.

In many of the workshops and courses which I run I am asked about how exactly do you go into getting yourself in that situation where essentially you get to pick and choose the deals you close and the people you work with? I always answer that making money out of real estate investment is not rocket science. It requires skills and techniques which almost anyone can learn and apply.

I learnt them the hard way and I teach them to those who want to follow my path to natural, financial independence. Creating syndicates and using other people’s money to invest in real estate without risking your own allows you to create win-win scenarios which benefit everyone and that is the best way to build a career, a reputation and a personal fortune.

David Lindahl, also known as the “Apartment King” has been successfully investing in single-family homes and apartments for the last eight years. He is the author of four popular, money making home study courses “Apartment House Riches”, “How To Estimate And Renovate House For Huge Profits” “Managing For Maximum Profits” and “The Real Estate Investors Marketing Tool Kit”. He can be reached at dave@real-estate-fortune.com and www.rementor.com.

Understanding Corporations, Limited Liability Companies (LLC’s) and Limited Partnerships
By: Darius M. Barazandeh, Attorney at Law / M.B.A.
The best way to understand a corporation, limited liability company (or even a limited partnership) is to realize that each creates a special legal relationship or privilege between the business owner(s) and the government. These areas of government include:
1. State Government (including state taxing authorities and the state court system)
2. The Federal Government (specifically the IRS and the Bankruptcy court system)
You may be saying, alright Darius, I still don’t understand what you mean by a relationship or privilege. The best way that I can put it is this:
A business entity is a legal relationship which allows for certain privileges. When teaching people about entities, I like refer to an often forgotten fact: In England during the colonial period the ability to create a corporation required an exclusive grant (i.e., permission) from the Crown (that’s right the King or the Queen!). Remember a business entity is a privilege!
HERE IS ANOTHER TIDBIT: Did you know that when the original 13 colonies were established, many were actually corporations or similar form. For example, the Maryland Company was used to settle and develop…you guessed it, the State of Maryland. Other examples include, the Virginia company, the Massachusetts company and others. Why would someone use an entity to explore and colonize the New World? The reason is that colonization and exploration were risky investments. Ships were lost at sea, diseases ended the lives of thousands, and a host of other risks were present with each expedition.
By setting up these expeditions as corporations investors could contribute money but were only be liable for the amount invested. In other words, these early arrangements promoted exploration, development, and commerce by limiting liability for investors. The same reasoning is true today. When liability is limited to what you contribute to a business, people are more likely to start businesses. THE REASON: Less risk if everything goes wrong BUT more to GAIN when things go RIGHT!
The point of these historical facts is to make it clear that the purpose of a business entity is to limit the liability of owners/investors to the amount contributed to the business. These facts should also make you realize that liability protection is a privilege.
Why Should you be concerned
about liability protection?
I am not here to scare you…but use common sense. Real estate businesses require you to deal with numerous parties, including: tenants, sellers, partners, investors, lenders, management companies, independent contracts, employees, and others. The more parties you deal with the more likely it is that something may not go as planned.
The first step is to learn how to run your business in fair and careful manner…so that you reduce the chances of getting sued. Always remember this: A business entity (LLC, corporation or limited partnership) is not an excuse to act in a careless or negligent manner. You need to be fair when dealing with all parties and you need to outline agreements with partners, vendors, contractors, etc. You need to respond to tenant’s complaints regarding rental property. In short you need to become a MASTER good business practices. I spend a considerable about of time in my courses covering a topic I call ‘Lawsuit Avoidance 101′. This means that we teach you good business practices to help you reduce the risk of getting sued. It’s simply so important!
Another issue to keep in mind is that since you will be dealing with tenants, sellers, partners, investors, lenders, management companies, independent contracts, employees, county agents, you may get into the position where you will need to assert your rights. In other words, you may need to take another person to court, because your rights have been violated, a contract has been broken, or money has not been paid to you. Many times when you assert your rights, you may then be sued by the party you are taking to court. I know this sounds harsh…but it happens! This is called a ‘cross claim’ and it means that the party who is being sued is now also suing. Usually this happens because the other party’s attorney believes that they have a claim and/or they will be in a better position using a cross claim. Basically this means that for you to assert your own rights, you may risk getting sued.
ALWAYS REMEMBER THIS: There are also steps you can take to allow more chances for a pre-lawsuit settlement. This makes the lawsuit truly a last resort. Ask this question: Do you have alternative dispute resolution clauses in your agreements? Obviously, if you can settle matters outside of court via an alternative dispute resolution method, then may be a big advantage and a savings of time and money. An alternative dispute resolution clause will require parties to work at settling a claim through mediation or another non-litigious (and less expensive) manner. Again, a lawsuit should be the absolute last resort. We cover all of these areas in more detail for investors because it something that most people and even some attorneys leave out!
There are also tax advantages and disadvantages to recognize when selecting an entity for your business. We will discuss these in later articles.
To learn more about which entity may be best for you and how to create, run, and maintain an ‘iron clad’ LLC or corporation, you don’t need a grant from the King or Queen…but you should see Mr. Barazandeh’s, Wealth Building LLC ^TM and Incorporate for Wealth^TM courses.
To learn more about business entities, tax choices and avoiding risk, please listen to our FREE AUDIO SEMINAR! (no downloads required!)

I want to wish you the best of luck in your endeavors and email me if you ever need help!
If you plan to invest in Texas please see: Texas Houses for Pennies ^TM
If you plan to invest in tax lien certificates states, please see: The Attorney’s Step-by-Step Guide to Investing in Tax Lien Certificates
______________________________________
Information contained within this article was not intended to be, nor should it be taken by the reader as legal, financial or tax advice. The above article was written for educational purposes only. If the services of a Texas attorney are desired please contact Mr. Barazandeh or seek the services of another attorney.

Raising Private Money and Syndicating DealsWhen the going is tough the tough get going goes the old phrase and this truly applies to the real estate game. It is easy to make money when real estate is booming but it is easier to make money still when things are tough, provided you know what to do in order to make that money.

The biggest opportunity under a so-called tough economy is for those of us who are looking forward in the acquisition of real properties and mortgage paper that are going quickly into default.

But what if you don’t have enough money to acquire those assets? Is it possible to get people who have the money to put that money up if you have the expertise to make it happen?

Several of my clients are now asking me to help them to “syndicate” real estate and the paper that supports it, because they know that now is the time to make money. Everybody makes money during good times – but the biggest money, as I mentioned above, is made during the tougher times and we are now in times which are considered to be tough by many respected financial analysts.

Syndication means that a group of investors put their money into a pool for the acquisition of assets that are bigger than they can purchase by themselves. The person who is in charge of the investment, the coordinator, is called the promoter or the syndicator. The syndicator is generally paid a fee for organizing these deals. The size of the fee depends upon the size of the deal but it is fair to say that no syndicator is going to go into a deal for peanuts.

So, the real question here is if you are going to get into a deal where you are the syndicator what are the most important elements to keep in mind? If I was going to be flippant here I’d say the size of the check you get when the deal is done and you are at the other side but I will be serious certainly these things are important but the most important thing is to ascertain first the process through which you will raise money (which requires having potential investors on tap) and secondly to structure the deal in such a way that everyone wins.

The surest way to get more deals is for each one to pay off as handsomely as possible. Bear this in mind as you structure each deal. Do the hard work necessary for the payday that’s coming and remember that the only reason investors are knocking on my door is because I have worked hard to develop a reputation of delivering high value to those who trust me with their money, and that is the best form of advertising I could have.

David Lindahl, also known as the “Apartment King” has been successfully investing in single-family homes and apartments for the last eight years. He is the author of four popular, money making home study courses “Apartment House Riches”, “How To Estimate And Renovate House For Huge Profits” “Managing For Maximum Profits” and “The Real Estate Investors Marketing Tool Kit”. He can be reached at dave@real-estate-fortune.com and www.rementor.com.

No Out-Of-Pocket Cash

The most successful real estate investors are the ones who have conquered the art of creative financing. They seldom if ever use their own out-of-pocket cash. One of the best methods of creative financing is finding private lenders (also referred to as “private money”).

This is funding that comes from a private source such as friends or family members. It could be a business acquaintance, or a professional such as your physician, accountant, attorney, or even your eye doctor.

If you are in a position where you have no capital and perhaps a less-than-stellar credit rating, it may be difficult for you to believe that people are out there ready to hand money over to you, but it’s true. They are out there and they would very much like to hear from you.

Private lenders are people who have money in low-return investments such as an IRA, Certificates of Deposit (CDs), or perhaps even low-yield mutual funds. If you come to such a person with a strong deal which could net them a higher percentage than they are now getting – and receive it quicker – most will say yes. And furthermore, they will say yes repeatedly. This means you can borrow 100% of your purchase price including the repair costs and closing costs. You need never use your own capital.

Create the Deal First

Those who are new to real estate investing think they need the money before negotiating a deal. However, the opposite will be true in this case. What better way to convince a private lender than to have a deal right in your hands.

The details your investor will need to know are such items as:

• Anticipated sale price
• Purchase price
• Repair costs
• Holding costs
• Selling costs
• Total loan
• Loan to value

• Profit potential

The more information you can present, the better the private lender can make an informed decision. Having the information in hand also means you can present it to more than one lender. In other words, you can “shop” your deal. If this is your first deal, it’s best to begin with lesser amounts. Once you earn the lender’s trust, then advance to the higher priced deals.

When you find a willing private lender, make sure that the money is readily available. There’s nothing worse than coming down to the closing day and find that he or she needs two or three more days to get the money in hand.

How Much To Pay?

The standard going rate for such funding is around 15% and some will charge points as well. (Be sure to avoid any type of pre-payment penalty.) Loan to value (LTV) will range between 65% and 75%.

Some of your loans will be for a very short time – a few days perhaps. Others may stretch into two or three years. It is usually the older lenders who are patient and would rather see their money multiplying over a longer period of time.

Finding Your Lenders

If you have difficulty finding an individual who fits these qualifications, try an ad in your local newspaper seeking private money. Detail how much is needed and the approximate return. You may be surprised at the responses you receive.

In addition to newspaper ads, ask real estate agents, title or escrow officers, and even other investors in your area. There are people with money “for hire” who would love to have a client like you who would repeatedly borrow funds. If their money is sitting idle, they are not happy!

After your reputation becomes more secure, you will have a number of private lenders who will work with you on most any deal. In fact, once you win their trust, they may not even need to see the details of the transaction. All they want to know is how much you need and for how long.

Once you begin to think creatively about financing your deals, you will have more leeway to make offers on bargain properties that would be impossible to transact with conventional lending sources. That’s pretty exciting.

Using a marketing system that allows her to find some of the very best ‘below market’ deals around the country, Iman Yusef-Yahya’s system has enabled her to assist other real estate investors looking for simple, high profitable deals. Get instant access to these profitable deals at http://www.ImanAndJoesWholesaleProperties.com