Archive for the 'XBanker' Category
6 Steps To Properly Position Your Real Estate or Mortgage Business For Financing
April 30th, 2008 Categories: Real estate economics, XBanker, business financing
Below is the final post in a three part series by Ryan Page who maintains the not so ironic nom de plume of The XBanker. Ryan and the crew over at XBanker, which also include renowned personal credit guru Gerri Detweiler and incorporation specialist Garret Sutton, focus on small business advice and financing strategies.
Bookmark this site in your RSS reader as it’s chock full of great business advice that any real estate or mortgage professional should consider. Just because you’re a good agent doesn’t mean you’re a good business person, in todays volatile market of attrition every advantage needs to be explored. What’s most refreshing is that the content is not your typical regurgitated vanilla flavor, it’s spicy real world advice given by people who are active in the trenches.
Enough with the intro, the floor is now Ryans…
This is the final post in a three post series on financing your real estate or mortgage business. Before I dive into the meat of this post, I’d like to briefly recap what I’ve discussed thus far.
In my first post, I discussed how important it is to form an S-corporation or LLC. I recommended S-Corporations for most circumstances, with LLCs being a preferred entity for working with partners. In my second post, I demonstrated how forming a corporation or LLC can limit your tax liability. In my last post, I turned my focus to accessing capital for your business.
The objective is to create separation between yourself and your business - for asset protection and to preserve your personal credit. Properly obtaining business credit and bank financing can help you access thousands of dollars for your business, without impacting your personal credit scores or ratios.
As the final post in this series, I want to share six concrete next steps for getting your business in position for financing.
- Choose the right name. Believe it or not, what you name your business and how you define your business activities can have a huge impact on your ability to obtain financing. So whatever you do, please don’t: use the words “mortgage,” “real estate” or “investments” in your business name. All three of these words are akin to saying “bomb” on an airplane. I recommend setting up a management or marketing company.
- Set-up your business entity - now. The age of your business will either open or close doors for financing. The best time to incorporate was yesterday. Some of the most attractive lending products will require you to be in business for 2 or more years. If you’ve been operating as a contractor or sole proprietor you can sometimes sidestep this, but age is always an advantage.
- Legitimize yourself. It’s important that your business look legit. That means you should have a website and email address at that domain; and that your kids don’t answer your business phone. Look and act professional/corporate and you’ll have a lot better chance of obtaining financing.
- Get a couple business credit cards. If your personal credit is decent you should be able to easily secure a couple credit cards, even as a start-up. Your limits may start out small, but they can routinely be increased and most importantly - the balances won’t mess up your revolving debt ratios on your personal credit.
- Unsecured lines of credit. This is the holy grail of small business financing - cash that can be readily accessed! You’ll need stellar credit, good ratios and typically 2 years in business. Most banks offer these products, but you’ll rarely get all that you want from one line. I recommend establishing lines with multiple banks. You’ll be able to increase each line and you’ll have access to enough capital to make all your dreams come true (well, at least your business ones!).
- Build business or trade credit. Trade credit is the financing that business extend to other businesses. Like building your personal credit, you’ll need to proactively build your business credit by obtaining, using and paying off lines that will report to the business credit bureaus. If you properly do this, you’ll find that you can access thousands of dollars of credit, without the dreaded personal guarantee, with just about every business or supplier in the country. I’ve had a number of clients build their business credit so they could lease their business vehicle on the corporation without showing up on their personal credit. Others have leveraged credit accounts with the likes of Home Depot to finance the supplies needed to flip properties. There are endless possibilities - it just takes preparation and strategy to make it happen.
I hope this series has been useful. My partners and I will continually dive into these topics on our blog come pay us a visit sometime.
Thanks Ryan, you’re welcome back anytime…
Also See:
How Real Estate Professionals Should Properly Finance Their Business
How To Use The Proper Corporation To Minimize Your Tax Liability As a Real Estate Professional
How To Maximize Your Income and Minimize Your Liability as a Real Estate Professional
Sphere: Related Content
Lack of ‘Make Sense’ Business Models In Real Estate and Mortgage Still a Cause for Concern
February 15th, 2008 Categories: Mortgage News, Real Estate News, Real Estate Technology, XBanker, alternative real estate commission models
When the real estate and mortgage industries realize their traditional business models are now broken, the world will be a better place for all.
Words of advice: Pay more attention to the Loss side of a P&L and the right side of the balance sheet. Too much attention toward generating more revenue and not enough consideration to stopping the internal bleeding is the core of the overall problem…akin to emptying the water from a boat with a hole in the bottom using a (small) bucket.
This problem’s solution is routed in the fact that most professionals within these communities are not astute at running a business. A testament to this statement lies in that many RE and MoPro’s operate as ’sole proprietors’ (or submit as W-2 employee’s) when they should choose a corporate structure more in tune to maximizing income via benefits afforded other corporate structures. Just because one can sell doesn’t mean one can run a business.
The 6% real estate commission model is a horrid example of sound business practice. Economists routinely wonder aloud how this model has stood the test of time (answer: The omnipotent NAR ether/kool-aid). The commission ’split’ model commonly found in the mortgage broker industry (coupled with serious lack of disclosure issues), is far less discussed in open forums, yet just as fundamentally challenged.
It’s evidently apparent what happens in the down part of what are cyclical marketplaces…a mass exodus from the small business world, and thats not good.
I’d like to explore alternative business models that could work for both real estate and mortgage professionals by laying out some succinct recommendations and strategies for 2008, going forward…
I’ll be recruiting some seasoned experience from the world of business to opine via future posts regarding this topic. One of them is an XBanker 
