Access to Capital

I recently got this email from someone on ActiveRain and with his permission, I am responding publicly because I think all Investing Realtors should know how to get access to capital.

Larry's Message:

Hi Deven,

I have been doing what you are teaching for 37 years. You are very fortunate to have learned it so young. The one nut I could never crack was access to capital. Our banks are very conservative and their control is mind numbing. Canadians are fiercely loyal to their bank. Our banks own most of the brokerage houses. (How's that for a conflict of interest) When a loans officer is dealing with a customer it comes right up on the computer screen has this customer been cross sold. We have 5 big banks who control most of the lending and investments. Now they have all moved into the insurance business. I tell people in Canada we have the illusion of democracy. We can do any thing we want as long as we do as we are told. Many people do not know that our government quietly slipped BILLIONS to our banks before the proverbial shit hit the fan . In closing private investors willing to finance real estate deals in Canada are few and far between. Those that do have the capital are usually street smart business people who can do it for themselves. That's enough of my rant . All the best for 2012 and good luck in your business endeavors.

Best Regards

Larry

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My Response:

Hi Larry,

I am glad that you've been an Investing Realtor for 37 years, I am sure there is a thing or two you can teach me. Access to capital is something that has held many people back from becoming a great investor. In the US, it isn't quite as controlled by the banks as it seems like it is in Canada, but nonetheless dealing with banks is a pain. Instead I have chosen to avoid them entirely. I have not gotten a loan from a bank since 2007.

For the last several years I have done all of my deals with private capital. You mentioned that private investors willing to finance real estate deals in Canada are few and far between. Although I can't prove it because I am not a resident there, I would bet a substantial sum that their are plenty of people who are willing to invest in Canada. Finding an investor who is willing to pay cash for a property may be challenge at first, but there are certainly people who are purchasing properties for investment purposes.

Furthermore, their must be people who own property in Canada free and clear (no mortgage), these property owners are prime candidates for Seller Financing. By offering them a payment plan they can receive 2-3 times their purchase price over time (show them a truth in lending statement) or another comparison is showing them what banks are willing to pay them in interest and contrast that with what you are willing to pay on their payment plan for selling the property.

One other thing that I do is assume other people's mortgages, I am not sure if it would be any different in Canada or not, but I use a deed called an all-inclusive trust deed to wrap their existing mortgage and give them a second mortgage position.

Most often you will still need to come up with a down payment. Just like how you have found frustration in dealing with the banks, their is a market of people who feel the same way. With your knowledge and experience you can show them how to avoid the banks. Ask for a piece of the deal for setting it up, your contribution is finding, managing, and obtaining financing on the deal, their contribution is the down payment.

Then Split the profits with them based on what you and the investor thinks is fair.

I know some of the concepts I just explained may be hard to grasp at first, so I created a 30 minute free training video. I also have an excellent online training program with a $1 trial so you can make sure my techniques are working for you before you pay for the training.