Hey, welcome back to the series on partnering and real estate and how to do
it. And today's topic is really, "How many homes can you qualify for?" If you're
going to partner up and do real estate, your credit has limitations. So, the question
is, "How far will your credit actually go?"
So, the first thing that you need to understand is that my credit, your credit,
the President of the United States credit, all of our credit has a limit.
Which means banks are only comfortable lending so much to us. Now, I will tell
you that if you're getting into a partnership arrangement and you're the
funding partner, that means that you're bringing money or credit or both to the
table, you want to be aware of how far your credit can really go. In today's
financial climate and really what it's been for quite a long time, is that banks
are comfortable helping you lend on up to maybe 10 homes.
You'd have to probably use a variety of different banks. But ultimately, what ends
up happening is that when you buy an investment property, you can imagine that
that mortgage reflects on your credit. And what that does is that increases
your debt-to-income ratio. However, you can supply the bank with the rental
contract. And they'll take 75% of the income and count it against the debt.
So, if you have a solid cash flow on that property, it could bring it all the way
back down to zero. And in that bank side is they're basically saying, it's like, "We
see that you have a home but you're not financially negatively impacted." In fact,
often if you do it the right way you can be positively financially impacted and
actually qualify easier with every home you buy. But banks have a tolerance.
They've got rapid acquisition rules on how many homes will allow you to buy it
in a certain period of time. We'll have rules on whether you can buy one at a
time versus two or three at a time. And ultimately, when you get to ten, most
banks are going to say, "You're out of the game." That does not mean that you're out
of the game. What it does mean is that we need at some point in the journey to
bring on what I call a credit partner. Now, credit partner is the individual
that says, "I got great income, I got great credit.
I don't maybe have money to invest in real estate but if you'll give me a
small piece of the profits maybe 5 or 10 percent on the back, maybe is
something a little different to incentivize me, I'll actually carry the
liability of this." Well, in my specific case, my partner's normally get 5%
of profits and I'll pay them a couple thousand dollars on the front. So,
that means they get something upfront. And then when the home eventually comes
off their credit years later, they're also going to get a percentage of the
proceeds at the time of sale. So, I just want to share with you... If any of that
went over your head, what it basically means is, there's no limit to how much
real estate you can buy. Would I give up 5 or 10% of profits to be able
to continue buying as many homes as I want with the bank system? Absolutely. So,
I want you to be aware that that does exist. Now, let's jump into
pre-qualification. Whether you are bringing someone on to partner with or
if you're going to be my partner. As the funding partner one of the things that
we need to ascertain is where you at financially with your credit? That means
we're going to put together something we call a mega file. That means one of my
assistants is going to put you in touch with my banking team. And they're going to
request a stack of documents. And it might take you a couple hours to track
it all down. They're going to want recent mortgage statements or the last two
years of taxes. They're going to want recent pay stubs, they're going to pull your credit.
They're going to do all of these things. And what they're looking to do is not
qualify you for doing an investment property. Remember, we're trying to build
a huge portfolio right out of the gate. We can pretty much determine how many
homes you'll ever be able to purchase. And can you buy one at a time, two at a
time or three at a time. One of the things that can be challenging for some
people is to actually do the boring minutia.
I need my partners to do this. You've got to go dig in and gather up all your
personal finances. Don't be a worried about being judged. You need to be honest
and you want to supply everything. It is a third party lending team. There's
nothing they can do with that financial information by law. They can't sell it,
they can't share it, they can't do anything. In fact, their offices are under
lock and key. Because that information is not allowed to switch hands in any way
shape or form. Now, if you supply all of those documents... And I would encourage
you to do it as soon as possible like that's one of those things as a partner.
You can say, "Hey, I'm being a good partner. I'm jumping right on the bandwagon. I'm
going to supply all that." And we give it to the lending team. And what they're doing
is they're looking at all the different banks that we work with. Now, remember
this is a team that has done hundreds and hundreds and hundreds and millions
of dollars worth of lending? This is their specialty. They're not going to treat
this like a normal loan. This isn't your buddy or roommate or
family member that does loans. They're not allowed into the process here.
Because we're actually looking at a series of banks, a sequence of banks and
how to get your credit to go as far as possible. Now, after they've had your file
for a few days, they're going to get back in touch and essentially say, "Here's how
much you can buy. Here's one you can buy, here's how often you can buy, here's our
banks with rapid acquisition rules, here's the banks that don't care how
many you have. These are the banks that have slightly
lower rates versus higher rates." But they're all going to be within a similar
margin of each other. And the team that I've set up to do this, basically, they
charge very standard rates and they're going to do a lot of extra work and go
above and beyond to help build this portfolio. Now a lot of people I will
pause for a moment to say, "get rate conscious." I want you to understand I'm
extraordinarily rate conscious. But there's something more important than
being conscious about rate. And that's scoring the next deal. Imagine for a
moment going with the bank that maybe has a slightly higher interest rate.
Maybe a quarter percent higher. But they'll allow you to buy your next four
homes when the bank with the lower interest rate wouldn't. That means that
you actually can get in the game. And we're not ever going to have
conversations and mincing words over a half a percent or a quarter percent or
an eighth of a percent. Because I want the lowest rate possible because that
will give us the highest cash flow possible. But remember, if we're earning
20% ROI on a deal and the interest rates a quarter higher then
maybe this 20% ROI drops just to hair. You know what?
Whether it's 20% or 19 and a half or 20 and a half percent, guess what?
That's the big money that we're focused on. So, we are going to be rate conscious.
But it's more important to make sure we can buy all the real estate that we want.
Now, what if we find out that you actually can't qualify? You might have as
a partner money but you may not be able to have very usable credit? Some of you
might own a business and you might have a lot of right offs. And so, you might
make a fantastic income but thank goodness to our tax write-off system, it
might not look like you have much. So the eyes of the bank might say, "Well, they
can't really buy anything or they can't do very much." Don't worry. We're going to
bring in a credit partner from day one or day ten or day 1,000 because at some
point we know credit will run out and it's about being able to buy the next
deal. That's the most important part of building wealth. To get it compounding
and compounding and compounding. So in the first decade, a little can turn into
a lot. And the second decade a massive amount of money can turn into a legacy
that can keep feeding generations and doing tremendous good. Listen, if you're
looking at becoming my partner, thank you for watching this. If you're watching
this so that you can learn how to partner with other people, I hope that
this video gave you exactly what you needed. If you are going to partner with
me, just remember when the time comes to gather the financial documents for the
mega file, I want you to scramble to make it a top
priority because there is some setup time before we're actually able to go
out there and do real estate. And the pre-qual is one of those parts that will
keep us from actually getting under contract and getting action on our very
first deal. So, get it in place, get it put together. And remember, if you are
interested in partnering, you can talk to my team by clicking the link below.
Otherwise, we'll see you on the next video.
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