Loans, Credit, and Real Estate

Hi! My name is Cyndi. I have been in real estate for well over 20 years. When I started, real estate was not as regulated as it is now, and a handshake meant something. The real estate market has evolved over the years. Some changes for the better, and some changes are not as positive as lawmakers would have us to believe. Just to give you an example, when I started in real estate, we had 2 pages of sales agreements. Now, often we have over 22! Of course we need lead-based paint addendums, radon disclosures, mold disclosures, and numerous other information pages that are attached to the agreement to keep us all safe. Scary? not at all! Information frees you to make logical, wise decisions. Again, when I first was a licensed realtor, there were not the gamut of mortgage loans, consumer loans, and credit cards that there is today! Nowadays, people can get a loan for 100% of the appraised value of the house, have the seller pay their closing costs, and they will be in the house in 45 days with $500 or less out of pocket! I have helped numerous people achieve home-ownership in this fashion.

When I was growing up, my father was a well-respected bank president. I still hear many stories of how he had given people loans on a hand-shake. These loans were not based on credit reports, credit scores, and how many hoops the applicant can jump through. Today we are in the computer era. Everything that we do is linked to our social security number! It is so important to protect our social security number, that lawmakers have initiated privacy laws that protect us from identity theft.

Have you ever applied for a credit card, car loan, or mortgage, just to find out that you don't have the necessary credit score or credit according to the criteria of that specific lender? Doesn't it feel like you have just been rejected by another person that you have been diligently trying to build a relationship with? Worst of all, in most cases, there is a third party involved (ie: lender, bank, salesperson) who is depending on the (positive) answer from the originator of the loan to make a sale happen. (Imagine being turned down after a proposal of marriage with your (hopefully) future mother-in-law sitting somewhere in the same room!) How embarrassing! This is exactly how it feels to be rejected for credit! Financing is the key to many of the projects and goals that we are looking to achieve. Other People's Money or OPM for short, is the key to buying real estate investments.

Have you ever, or do you know of anyone who has stellar credit, and cannot get a loan because of low credit scores? That is the situation that we have faced in our real estate investing. We have never been late in any payment for any creditor for over 10 years. However, because of the fact that we had numerous loans outstanding, (and many of them maxed), we had to settle for a higher interest rate loan, shorter term, prepayment penalties, and additional expenses. Just because of our "low" credit score. In other words, we had to pay a high price to achieve our financial goals. Now, we are a little wiser, and a lot more knowledgable when we buy a house or investment. We have structured our financial life in such a fashion that we are using OPM to achieve our goals and ambitions. Anybody can do this. Below, is an itemized list of things that you will have to do to achieve your investing or real estate goals.

1. The very first thing on your list is to write down your goals. Many people do not have goals to be able to achieve! They go through life living from paycheck to paycheck waiting for that bonus, overtime pay, or tax refund to spend for extras and\or goodies. With a financial goal, you will have a reason to save, a thrill when you achieve your goal, and the desire to continue setting goals. And always if you are a couple, make those goals joint goals. Make perfectly certain that both of you agree on the goals and the time frame specified for achieving these goals. The other very important issue that you need to know is writing the goal(s) down. There is something very powerful about having these goals mutually agreed upon, written down, and posted in a place that you see it consistently.
2. Get your cashflow position in order. What that means, is get your monthly expenses in line with your monthly income. If you make $2500 per month and you are spending $2700 in expenses, it will not take long before you are head over heels in debt. You might have to make some hard decisions on decreasing monthly debt. This might include reducing the size of your housing payment, consumer loans (ie: car loans, personal loans) , or revolving debt (ie: credit cards, lines of credit).
3. Build "steps" to achieve your goals. A baby does not take steps the minute that it is born, and neither will any of us be able to achieve our goals without taking small steps one at a time. Examples of some steps might be: develop a monthly budget, develop a savings plan, pull your credit so that you know what is there. There are many reputable on-line links to be able to pull credit, and you will know what is on there to be able to take care of. Make an appointment with a bank or lending establishment so that you may develop a relationship with them. Believe it or not, bankers are people too! They want to see the people that they are dealing with. They also want to learn to know you. Make sure that you find a lending establishment with good mortgage, consumer, and revolving loans. Study their loan programs. If the lending has multiple programs that you could be looking for, then build a relationship with the loan officer. That does not mean going in every day, and hanging out in his/her office. Building a relationship means to make an appointment, get brochures of the banks programs, ask questions, and build a written plan to take into the lender to be able to see what you are planning.

The important part of achieving any goal is perseverence! If you feel that these goals are not attainable, too long of a time frame, or too difficult, you will not even start! Take baby steps. One small goal that you have achieved, is worth more for your self-image than trying too hard and pushing yourself beyond your ability. This not only is discouraging, but affects your health as well. I will give you an example of goal setting that happened to my family. A little over 3 years ago, we purchased a wonderful 200+ year old stone commercial property. It had over 20,000 sq. ft. with a house and a barn in a great area. It was a fire-damaged property, and needed gutted, and we rented lots and lots of dumpsters. Not even 6 months after we settled on this property, we put an agreement on a large fixer-upper house for our family to move into. We had been looking for over 6 years for a property like this, and we finally found it. It also needed a good bit of work, much of it being cosmetic, however, it all needed done before we could move into it. Now, we had 2 fixer-upper properties to fix up at the same time with only one crew. On this property was another house which also needed work, and it was to be rented out within a month of settlement. So, now we had 3 buildings that all need varying degrees of work to be done, and only a limited amount of manpower and funds. Add this to the old house that we moved out of, which needed updating to get it ready to sell! To say that we were over our heads at this point was not quite true to say, but with monthly payments on all properties, with only enough manpower to do one building at a time, would quickly deplete all of our funds. We will talk more in detail about this later, but the point is that now, we were working towards all of our goals too quickly, taking step after step immediately, and it put us in a very stressful, unhealthy position. My family started working around the clock, recruiting as many people as we could to help us fix up these houses as quickly as we could. As anyone knows, with 4 complete houses that needed beautified, limited manpower, peoples' schedules, and quickly diminishing funds, you just cannot complete that many within 2-3 months! Hindsight is always 20/20, but I wonder what we could have done differently. I do know though, that we were always exhausted, never on-schedule, constantly frustrated, and our health was failing as well due to stress, exhaustion, and unusual schedules.