The Investor Mindset

The marketing engine driving the exposure for the majority of real estate lenders has capitalized on the fact that the US Economy is based on consumption for the most part. As such the home buyer is considered a consumer of housing as a commodity. The real estate buying public is targeted as one who is spending their money in the form of down payment in addition to adding a debt obligation to themselves in the form of financing. Both things have a negative connotation to the consumer. With this targeted marketing there is a play toward the emotion of the consumer since most purchases are an emotional decision. Make that person imagine themselves in the perfect home with the perfect kitchen and the perfect view. Their lives at that time will be of course perfect.

With that state of emotion one might rapidly sign on the dotted line and nervously wait like a kid on Christmas Eve for the euphoric flood of happiness that is to come on closing day. Such anticipation of euphoria is tested when the demand for documentation comes from those at the Lenders Office who are now perceived as keeping the potentially happy home buyers from their well-deserved life of perfect habitation bliss. The thoughts of happiness can evolve immediately to a form of rage toward those who are impeding a dream from becoming reality.

Those who are adding so many steps in the form of verification to their perceived short trip to tranquility are marring the picture painted in the mind of the buyer. It was illustrated to be so simple and effortless. The buyer deserves this home, deserves to have their promised dream. There was no pacing, stress, scratching of the head, sleepless nights in the commercial.

As a stark contrast the real estate investor has a vastly different view once they have experienced the shift in mindset form consumer to business. Their new or expanding business is based on the ownership of cash flowing assets. No longer are they spending money for a commodity. No longer are they indenturing themselves to debt. The real estate investor is sharing risk in a business venture with a new partner. The Lender is no longer their foe in this, but a partner willing to accept the majority of the upfront risk on the building of the investors business. In a typical scenario where a business owner started said business with a partner sharing in the startup risk, he or she would have to pledge the commensurate percentage of ownership, revenue and voting rights to the partner based on the percentage of capital invested.

The common arrangement between two partners is each contributing 50% to the start up. With 50% contribution one can expect 50% of earnings, 50% voting rights, 50% ownership, and 50% of profit from sale. I have witnessed in many cases where one partner was very much disengaged in the day to day operations, however still maintained their percentage of ownership because of the up-front contribution and acceptance of the start-up risk. Business has been done this way for centuries.

In the world of the real estate investor, many invest approximately 20% of the capital to purchase the cash flowing asset and the partner (lender) pledges 80% of the capital. Rather than the Partner (lender) demanding 80% ownership, 80% of the profit and 80% of the voting rights, the lender only requires monthly payments based on a very small percentage of the 80% invested capital, and they sit silent.

In addition there are the very few Partners (lenders) who also have experts available to the investor with the technical knowledge like what is held within the confines of my office between my staff and I. Our collective decades of experience exceeding a century with thousands of investors can aid in making your business successful. That expertise is not only in getting the financing process complete in some of the most difficult circumstances, but also in offering suggestions based on how the most successful investors had built their businesses.

There are many in the lending world who can close a loan. There are many who do an exceptional job at that. There are however very few who understand how to use such skills to make the real estate investors plan even more successful. When looking into a partnership with a lender take special care to be sure they are interested in a partnership with you. You are no longer the general consumer. You should not be treated as such.

DISCLAIMER: No statement on this profile or contained in this article should be considered a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet LTV requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines, and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over life of loan. Reduction in payments may reflect longer loan term. Terms of the loan may be subject to payment of points and fees by the applicant. Equal Housing Lender. SecurityNational Mortgage Company Inc. NMLS# 3116. Any amounts, figures, payments or loan terms stated are based on continually changing markets, rates, loan programs and borrower specific qualifications, and subject to change without notice. See loan officers featured for a personal consultation and accurate pricing.

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