Page 168 -

Build Income and Wealth with Residential Proper ties

Fortunately, entrepreneurs can pursue many other avenues. Culti-
vate your imagination. Systematically collect, study, and analyze mar-
ket data. You will find that bargain-priced properties exist everywhere.

Nurture your ability to recognize those nuggets of gold—even though
they may be encrusted with mud.
• Strengthen your borrower profi le: As you learned in Chapter 13 , leverage
can boost the returns you can earn from your properties, but you must
persuade someone (a lender, the seller, your dad, etc.) to loan you the
money. How do you accomplish this goal? Strengthen your borrower
profile. Anyone who advances you cash will in some way question how

well you satisfy these six Cs of loan underwriting:

1. Credit: Do you pay your bills on time, every time? Are you up
to your eyeballs in debt or sitting comfortably debt free? What are
your credit scores? (Review them at www.myfi co.com and look for
ways to lift them.)
2. Cash invested: How much of your own cash are you putting into

the property? Are you seeking a loan-to-value ratio of 50 percent
or 110 percent? Most lenders want you to put your own “skin in
the game.”

3. Capacity: Will your monthly income easily cover all of your
monthly obligations and living expenses? Or are you stretched so
thin that an unexpected trip to the dentist will put you into the
red? ( Note: If you’re buying your first investment property, many

lenders will not count your anticipated rent collections toward
your qualifying income.)

4. Cash reserves: Do you save regularly? Have you accumulated a size-
able amount to keep you solvent during a period of job loss or
illness? Can you cover your monthly mortgage payments on the
new property even if it sits vacant for a month or two (which, with
good management, should never occur)?

5. Collateral: Will the property appraise for more than your purchase

price? What’s the expected future for the neighborhood and city
where it’s located? How sound is your business plan and entrepre-
neurial vision for the property?
6. Character: Does your reputation support or contradict your plans

and promises? In life’s ups and downs, can people rely on you to
honor your commitments, to do what you say you’re going to do?
Do people believe without doubt or reservation that they can (and
should) trust you?

145

8/23/07 3:21:47 PM
c14.indd 145
c14.indd 145 8/23/07 3:21:47 PM