Ready to invest in real estate, but don’t have the capital?
Acquiring capital is an oft-looked part of building your real estate portfolio. But don’t fret … where there’s a will, there’s a way. Over and over, we see creative solutions for investors’ need for capital.
The latest expert guest on our latest show offers new capital ideas WE hadn’t even heard of yet.
We always like sharing interesting new ideas, especially those that give real estate investors a competitive advantage. So listen in, and hear how Joe Nielsen at Clear Capital Group, Inc., can help you turn your real estate investments into a REAL business.
In our latest show you will hear from:
- Your master debt collector, Robert Helms
- His number-crunching co-captain, Russell Gray
- Real estate investor, advocate for small business owners, and founder of Clear Capital Group, Joe Nielsen
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The need for alternative capital solutions
Joe Nielsen, a long-time listener of our show (thanks, Joe!), was growing his own real estate portfolio and needed capital.
After spending many weeks … which turned to months … filling out endless applications and providing volumes of documentation only to be declined and forced to start over again, Joe kept thinking, “There must be a better way.”
In fact, if you’re looking for capital from banks and credit unions, stats are stacked against you. Less than 10% of businesses that seek funding actually get it.
So Joe created a new capital solution. He founded Clear Capital Group, Inc., a specialty commercial finance firm, to help the 90% who are rejected by banks.
Debt: A critical tool for real estate investors
Before we dig into details on how Joe at Clear Capital Group can help you, let’s talk about why debt is a GOOD thing in real estate.
Some people are raised to be debt-adverse, in every situation. Let’s back up and think about this though. There are two kinds of debt, and they are majorly different. Our quick definitions:
- Bad debt –High-interest rate credit purchases on consumer goods that offer little to no return in value. You PAY to have this kind of debt, sometimes twice as much as the item’s original cost.
- Good debt –Provides you a long-term return through an investment. This kind of debt PAYS YOU to own it.
See the difference?
In real estate, debt is a critical tool. In fact, the GOAL is to accumulate debt. Our friend and mega-bestselling author, Robert Kiyosaki, says the right debt is a very good thing because of leverage and tax benefits.
We use debt prudently when it’s available. (Remember, debt not always an option! Sometimes we go through whole economic cycles when it can’t be accessed.)
Managing your portfolio of debt
So with that primer, a lot of people don’t pay enough attention to managing their debt. They focus more on the monthly grind of covering utilities, property management, and maintenance.
Banks know this, so traditional lenders often require you have “debt-coverage ratio,” meaning you have enough cash flow coming in, they feel confident you won’t default.
When you get a loan on property, be prudent about it. Do your homework. Make sure you understand your credit, cash, and income sources.
Now you’re dealing with the financing needs of business. Growing your business means investing in more properties, so you save up a down payment and do it again.
Once you have several loans under your belt, it gets harder to get more. That’s where Joe and Clear Capital Group can help.
Seeing capital options more clearly
Clear Capital Group helps real estate investors across the United States get access to capital.
For example, if an investor has 10 properties and wants to invest in another one, the bank will likely tell them, “Sorry, you’re maxed-out on debt.”
Clear Capital Group can take those properties off of an investor’s private portfolio, so their debt-to-income ratio is viewed more favorably.
“You can have as many transactions as you want with healthy debt,” says Joe.
Another option is “wrapping them up” and getting a blanket loan. “This makes it more flexible and clears up the mess of being ‘Fannie and Freddied out’ that happens to a lot of investors,” Joe says.
Underwriting with Clear Capital Group is similar to a multi-family apartment building, and they do have some restrictions. For example, your properties need to be similar product types in near proximity to each other.
They will view your portfolio as a solid mass, and hope to see at least an 80% occupancy rate. Their fees and terms are for a 20-30 year amortization, and although their rates are higher than bank financing, they are fixed for 7-10 years.
“We can turn you into a legitimate business that we can lend to,” Joe says. “For example, this capital could help you with fixing and flipping so you can pay contractors and cover cost of materials.”
The biggest mistake investors make
Joe says it’s a mistake to find a property before you’ve found your financing.
“I educate my clients to prepare for financing first, THEN find the property that fits your strategy,” Joe says. “Seek out a lender and understand your financial profile,” advises Joe. “You want to identify the options available to you.”
This reminds us of our secret to finding a great deal: your Personal Investing Philosophy.
We also say there’s a “Personal Funding Philosophy” – meaning you need to determine the amount of risk you’re willing to take.
At Clear Capital Group, they help you in three ways in their complimentary initial consultation:
- Identify the options available to you.
- Determine a strategy.
- Help you achieve it by connecting you to the right lender.
We’re personally very excited about the tools available, some of which we didn’t know about. You can learn more in Joe’s report, “Tools for Funding Your Real Estate Investing Business,” which you can get by emailing [email protected].
Remember, a consumer thinks about saving, where an investor thinks about profit.
When you’ve got access to capital, you differentiate yourself. You’re not competing with every mom and pop investor out there.
Give yourself a competitive edge in the marketplace with Joe’s report, and ‘til next week … go make some equity happen!
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