Okay, let’s talk a little bit about financing your deals. If you expect to finance a business or real estate deals — are you sure you have everything planned out to do it correctly?  How do you figure out how much money you need?  How much money do you need to have available to do a “Free-In-Five” program?

Do you have a one year program where you have set your goals; because if you’re smart you’re saying, “By God I’m going to do 12 deals this year and I’m going to get it done.”  So the next step is how much money do I need to do those 12 deals?

So you want to look at the year, what your needs are going to be. Once you know what your needs are going to be for that one year then second, you need to have a line of credit or some kind of quick cash.  It can even be equity money.

We’ll get into that in another post. You can have equity money available.  But the number one rule that you don’t want to break is to find a great deal and then go looking for conventional financing. Those days are over and doesn’t look like they’re ever coming back for investors.

This is only for single-family residential – I’m not speaking of commercial. For single family residential, which is a volume type of business, you need to plan out how much capital you’re going to need to buy those houses over one year and get that capital procured. Because if not, you’re going to be spinning your wheels, losing deals, or always chasing capital for the deals that you’re finding.

So you need to get your capital in order first so that you can move on deals and execute your strategy. Anyone have any questions about that? If so, leave a comment below. Because I know a lot of times they’ll say get the deal and then go find the money, but the smarter way is to already have the money because the best deals are gone in a hurry.

The key to Financial Freedom is funding – pure and simple. The cold, hard fact is that your dream of building wealth and income through real estate will remain just that – a dream – unless you know how to fund it. Not only your deals, but your entire business. Inventory, marketing, education, capital expenses, outsourcing/salaries, reserves, taxes, insurance, etc. And the list goes on and on.

No matter what business you’re in, the basic formula for $ucce$$ is the same. Though our group focuses on real estate investing, there is an amazing array of small businesses among us, all benefiting greatly from the group, because the formula for $ucce$$ is the same. And adequate funding is a big part of that universal formula. Follow the formula, you $ucceed. Ignore the formula, and you fail. Period.

BTW, some of these businesses are related to real estate, some have no connection to real estate whatsoever. But without fail, the $ucce$$ of every single one of them hinges on the owner’s ability to create adequate funding to properly run and grow his business.

That is why this month’s Newbie Club is so critical. We are bringing in an expert to show you how to analyze and meet your total funding needs, no matter what your situation is today.

Did you hear that? No matter what your situation is today!

And we’re talking about all your funding needs, not just inventory (real estate). Where do you think McDonald’s would be today if they had raised only enough capital to buy inventory (beef, buns, drink syrup, etc.), but ignored all their other expenses? They would have never gotten off the ground! And maybe that’s why some of you have never gotten off the ground. Maybe, just maybe, you and I need to look at our business and its real funding needs in a completely different light.

This powerful Newbie Club meets Tuesday, March 10 at my Conference Center at 5855 Sovereign Drive, Houston, 77036. Meeting is from 7:00PM-9:00PM and is free. The “meeting after the meeting” at Denny’s is also free (except for your meal-which is 10% off), for those who want to join us for further networking

Our Special Guest is Cliff Pape of Home Buddies. Cliff is an economist, a credit and business consultant, an investor, and a small business owner himself. He has the insight, the experience and the ability to solve your funding problems. No matter where you are today.

My goal is not just to help you do your next deal. Dozens of mentors, teachers and gurus are available to do that. My goal for you is “Free in Five”. I want to help you create a realistic, customized business plan that will lead you to Financial Freedom within 5-7 years. Then make sure that you implement that plan. And then celebrate with you when your own personal “Freedom Day” arrives in the not too distant future.

Do you have a “Freedom Day” in mind? Do you know, clearly and in detail, how you’re going to get there? Have you honestly identified the obstacles in your life, and developed a plan to overcome them? And just so you know, every single one of those obstacles can be overcome. Freedom is for everybody, not just a select few.

If you don’t have clear answers to all of these questions, then Tuesday’s Newbie Club is an absolute must for you. Telecalls and webinars have replays, so don’t miss this Newbie Club because some guru wants to sell you a new “shiny rock”. I can’t think of any other meeting or activity that will fuel your $ucce$$ more than this month’s Newbie Club. We will be exposing the whys and the hows of fully funding, not just your deals, but your entire business. What could possibly be more important than that?

And no matter what your current situation. Did I mention that part?

Now, I didn’t say it would be easy, so come with an open mind and a personal commitment. Take lots of notes, ask lots of questions. Then take massive action. See below for a key to massive action.

First, I’ll see you at The Newbie Club Tuesday, March 10, from 7PM-9PM at 5855 Sovereign Dr., Houston, 77036. Then, I’ll see you at the top!

After all, 80% of $ucce$$ is showing up, and 100% of $ucce$$ starts with showing up.

To Our $ucce$$,

Gordon Appleby
Wealth Through Wisdom LLC

PS The difference between slow, painful boot-strapping and fast, smooth massive action is adequate funding. So, stop climbing and start leaping. Stop struggling and start growing. Come to The Newbie Club Tuesday, the 10th. You’ll be glad you did.

PPS Learn more about “Free in Five” and the new Wealth Club. Our goal is to not only help you get into real estate, but to help you get out of it. After your “Freedom Day”, you’ll be able to walk away, because you’re Financially Free. Or you can keep going, because you want to, not because you to.

What a liberating concept! Having an end in mind, right from the beginning. Sound good? You bet it does!

I’ll see you at The Newbie Club.

Gordon Appleby
Wealth Through Wisdom LLC

Many times people unknowingly make the mistake of borrowing against an entire revolving line of credit. Has anyone ever transferred a balance to a lower interest rate credit card? How about a home equity line of credit? When we borrow the entire limit against a new line of credit we lower our credit scores. If we borrow against multiple new lines of credit we can drop our scores more than a 100 points!

One of the biggest impacts on our scores is opening new accounts. The biggest negative affect we can have on our scores is opening multiple accounts with high debt ratios. You could have two accounts with high debt ratios, one of them could be a new account and the other could be an account that is ten years old. The newer account would drop your credit score more, simply because it is a “new” account with a high debt ratio.

One of the biggest problems is that we usually open a new revolving account only when we need it. For example: we go to purchase furniture and we want to finance the purchase. Typically the creditor will approve us for the full amount of the purchase. The problem is now we have just created a new account with a terrible debt ratio of 100%! Another common mistake is to find a low interest credit card and transfer all your balances to this credit card. Once again, creating the same problem; a new account with a high balance.

The solution to this problem is simple. We must plan ahead. We should always carry more credit than we will ever need. That way once we need to make one of those new purchases we will already have the credit available to purchase the item(s).

Another way to plan would be to use a second mortgage when purchasing a home instead of using a line of credit. Instead of using a credit line, we can use a second mortgage installment loan which has less impact on our scores.

Opening revolving lines of credit and borrowing the entire or most of the amount, is a common mistake done by consumers. The best thing to do if you are going to open a new revolving account is to have little or no balance until the account has matured for one year. If we have to borrow against a new account we must make sure the debt ratio stays below 50%.

Cliff Pape
Home Buddies

A very common quote on a credit report is “Too many recent inquiries in the last 12 months”. But as you look through your report you only see a few inquiries listed. So how and why in the world is your credit report telling you that you have too many inquiries, and how is this really affecting your credit score?

It means that for consumers who have a similar credit profile as yours, that there is a maximum number of inquiries that you can have and still get the maximum points for the factor that looks at the number of inquiries on your credit report. That number will vary according to the different credit profiles that people have. If you exceed that pre-determined maximum number of inquiries for your designated profile, then you receive less than the most points possible for this particular scoring factor, and the explanation will indicate that you have “too many” inquiries.

If you are searching for new credit, then FICO can see this as a greater credit risk. This is why your credit score will count the number of inquiries. Inquiries are requests that a lender makes for your credit report or score when you apply for credit. FICO scores consider inquiries very carefully because some inquiries are not related to credit risk.

Usually, one additional credit inquiry will take less than five points off of your credit score. Six inquiries or more on your credit report can be perceived as the fact that you are eight times more likely to declare bankruptcy than people with no inquiries on their report.

Your FICO score regarding inquiries takes into account the following:

FICO scores know that people shop around more these days for credit, so they do take that into consideration and will distinguish between a search for many new credit accounts and rate shopping for one new account. FICO scores usually will distinguish between a search for a single loan and a search that you do for many new credit lines, in part by the length of time over which inquiries occur. When you need an auto or home loan, you can avoid lowering your FICO score by doing your rate shopping within a short period of time, such as 14 days. But be careful, because some research shows that opening too many credit accounts in a short period of time can increase your risk of hurting your score- especially if you don’t already have some well established accounts that provide great length of history.

Your FICO score looks at how many new accounts you have by the type of account (for example, how many newly opened credit cards you have). It also may look at how many of your accounts are new accounts. And how long since you’ve even opened any new accounts.

Inquiries remain on your credit report for two years, although FICO scores only consider inquiries from the last 12 months. It wants to know how many very recent requests that you have made for credit. FICO scores have been carefully designed to count only those inquiries that truly impact credit risk.

Many kinds of inquires are ignored completely. Your FICO score does not count an inquiry when you order your credit report and score from a credit reporting agency. It also does not count inquiries that a lender has made for your credit report or score in order to make you a “pre-approved” credit offer, or to review your account with them, even though you may see these inquiries on your credit report. Inquiries that are marked as coming from employers are not counted against you either.

Good Luck.

Barbara Partaka
Home Buddies

The following is an example dispute letter for you to use when you have a collection account on your credit report, and you are willing and able to make payment on that account. You should always try to negotiate for “pay for delete” on these types of accounts that are showing on your credit report. This “pay for delete” needs to be done with the original creditor. You may negotiate a pay for delete with the collection company, but it’s best to get it accomplished with the original creditor if you can.

For example, if the collection account on your credit report is from the “VWX” company, you need to read who the original creditor was. Maybe it was originally a debt you owed with “Ma Bell”. You would then need to be negotiating with “Ma Bell” directly and not with “VWX”.

Your credit report will list the names and addresses of all the companies listed on your credit accounts.

Never just pay the collection account without getting an agreement in writing that they will remove all credit entries related to that collection account. If you just pay the collection account without this agreement, then the collection account can/will remain on your credit report. Always get the agreement in writing before you ever pay.

When you attempt this negotiation process on your collection account, you can always suggest/offer to pay a portion of the total amount owed. If the debt is still fairly new (within a few years) be prepared to offer about 60-70% of what is owed. If the debt is older, then offer 30-40% of what is owed. There is no magical number to offer to make them accept your agreement.

Please remember that each state has its own statute of limitations on someone being able to still try to collect on a debt. If your debt has surpassed your state’s SOL on debt collection, then there is a different dispute letter for that issue. In the state of Texas, the SOL on debt collection is 4 years.

Use the sample dispute letter below as a guide for your negotiation in a “pay for delete” on your collection account. Try not to make your letter look like a form letter. Handwriting your letter is acceptable as well. Just be straight to the point, and straight forward about the amount you are willing to pay on the collection account. Be specific in your letter if you need a payment plan to pay the amount you are offering.

Do not sign your letter and do not openly admit that the debt is yours.

Good Luck.
Barbara Partaka
Home Buddies

Pay for Delete Sample Letter

(Insert Date)

(Insert Collection Company name)
(Insert Collection Company address)

Re: Account Number: (Insert Account # here)
This letter is to inform you that:
In the spirit of compromise, I am willing to pay (***INSERT THE AMOUNT/PAYMENT PLAN YOU ARE WILLING TO MAKE***) to settle this account if, and only if, you agree to immediate deletion of this account from any and all credit reporting agencies, including, but not limited to, Equifax, Experian and TransUnion. The purpose of this settlement is merely to have this item removed from my credit files. It is not to be construed as an acknowledgment of liability for this debt in any form.
If you agree to the terms and accept this agreement, certified funds for the settlement amount (***INSERT THE AMOUNT/PAYMENT PLAN YOU ARE WILLING TO MAKE***) in exchange for full deletion of ALL references regarding this account from my credit files and full satisfaction of the debt. As certified funds will be used for payment, there shall be no waiting period regarding the deletion of this account from the credit reporting agencies.
Acceptance of this agreement constitutes a legally binding, contractual agreement to delete ALL information regarding this account from the credit reporting agencies WITHIN TEN CALENDAR (10) DAYS following receipt of payment as specified above and will not discuss the terms of this settlement with anyone, except as minimally necessary to comply with the terms and conditions of this agreement. If contacted by any third party, including credit-reporting agencies, you will not acknowledge that any settlement offer was made, accepted or executed and will, in fact, deny knowledge of any such account.
If you agree to the above terms, please prepare a letter on your company letterhead explicitly agreeing to the same terms as the above settlement offer and have it signed by an authorized representative of your company. It will be implied that this letter shall constitute a legally binding contract, enforceable under the laws of the State of Texas.
Your response must be postmarked no later than 15 days from your receipt of this settlement offer or this offer will be withdrawn and I will request full validation of this alleged debt, as provided for by the Fair Debt Collection Practices Act.
Please address all correspondence regarding this account to:

(TYPE IN YOUR NAME – DO NOT SIGN!!)
(TYPE IN THE ADDRESS OF WHERE YOU WANT THEM TO RESPOND TO)

(The Revolving Account)

Many times people pay off their credit cards and close the account because they do not use it. Although this move seems to make good sense many times it will lower your credit score. We must always maintain at least one open revolving line (i.e. credit card) to maintain and/or increase our credit score.

With the Classic credit scoring model you will have “lack of recent revolving account information” if you fail to have an open revolving trade line. If you have not had an open revolving line in the past six months this will greatly raise your credit risk which will lower your score. This is because when there is no open revolving in your credit file the score model has no way to evaluate your ability to manage this type of credit.

The key with revolving is that it shows the credit scoring system our ability to manage credit. There are several ways to obtain a revolving account home; equity loan, credit card, merchant or department store account and a personal line of credit. When we maintain balances on these types of accounts it can provide depth to our credit report and raise our score because we demonstrate that we have the ability to manage credit.

So to make sure that you are not risking your credit score you should have at least one open revolving account. In addition, you should periodically use this account and pay it off over time to show the credit scoring system that you understand how to manage credit. If you do only have one open revolving account you should make sure that the card reports to all three credit bureaus so that you are sure you are building all three credit scores with the account.

Cliff Pape
Home-Buddies

About 90% of the lenders all over the world use credit scores from one organization. That company is Fair Isaac Corporation or better known as FICO.

It’s a good idea for you to get your credit scores from the FICO website, because your FICO scores are the ones that most lenders will use to base their acceptance of your credit application. You need to get a true picture of what is going on with your credit scores and what is causing your credit score to be as it is.

Always be careful of the scam sites, anything with conflicting information, and the credit bureaus offering their own version of the credit score. There are many different credit scoring systems. There are numerous websites that offer your report, be sure that they also offer your true FICO scores for all three credit bureaus. At myFICO.com, you can purchase just one score or all three scores. This might end up being more than you want to pay, but it is the “truest” way of figuring out your true, accurate credit score.

The major bureaus also have their own version of credit scores. Let’s look at those now.

Experian and their affiliates (FreeCreditReport.com) may sometimes use a PLUS score or the FICO version 2 scoring system.

Equifax actually uses FICO scores most of the time or the BEACON. If you order a credit report through Equifax, like their 3-in-1 report, you’re less likely to notice large variations elsewhere because they use the FICO score.

TransUnion usually uses the FICO classic scoring system. There seem to be a few variations and some are closer to FICO scores than others.

AnnualCreditReport.com gives you a VantageScore which is different from the PLUS and the FICO score. The PLUS score is pretty similar to your FICO score. The VantageScore can be around 100 points off. The reason for this is because of the ranges and the formulas used to find your place in that range. VantageScores go from 501 to 990 where a FICO or PLUS score goes from 300 to 850.

And so there it is. Now you know some of the credit bureau secrets about your credit scores. You should always try to continue to keep yourself educated about your credit score and about the credit system.

Good luck.
Barbara Partaka
Home Buddies

Did you know that that about 80% of credit reports have some type of errors in them? Different types of errors can have a huge impact on lowering your score. Not to mention that those errors can be making you pay more for the loans you are getting.

Some of these errors are as serious as some accounts not even belonging to you, or even false delinquencies.

Here are some common errors on credit reports:

41% of credit reports have the wrong personal demographic information which includes it being outdated, or misspelled.

20% of credit reports ARE MISSING MAJOR MORTGAGE LOAN INFORMATION. Also other loan information that proves you are credit worthy.

26% of credit reports have accounts that are listed incorrectly as open or “closed by credit grantor.” If your credit report shows an account that says “closed by grantor” it looks like you are the one who did something wrong, so it can lower your score.

Wow, so what are you supposed to do now? Get a copy of your credit report! Start looking through it completely. Yes, this means look at the identifying information like your name, address, date of birth, social security number, etc.

Be sure that you look at each and every one of the accounts that are listed from beginning to end. Make sure that all the information is reported correctly for the account. Especially the credit limits, current balances, date it was opened, date of the last activity, etc.

Don’t forget to pay attention to the inquiries section and see which companies have been looking at your credit report. If there are companies that you don’t remember applying for credit with you will need to contact those companies as soon as possible to make sure you have not become a victim of identity theft.

After you have completely reviewed your credit report, if you have found any errors at all, you do have a few options on how to correct those errors. You can remove them yourself with dispute letters to the appropriate creditors or credit bureaus, or hire a company to guide you with this, or you may even hire an attorney.

Next week I’ll tell you the third credit secret of the credit bureaus.

Barbara Partaka
Home Buddies

Well as we all know by now the party is over. However, are all the economic indicators pointing to a horrific 2009 or is there a silver lining within the data? Will the housing and credit crunch continue to hammer the national economy? Most of all, how will the Houston economy fair in 2009?

Housing and Credit
Well the battle lines are now drawn in congress, and housing and credit should benefit in 2009. Congress has expressed an un-relentless resolve to combat home owners losing their homes. In addition, the fed has committed to using all means necessary to lower mortgage rates. So what does all this mean? More than likely we will see the bottoming out of the housing market toward the end of 2009. This means that stopping foreclosures and stimulating the buying with low mortgage rates will eventually draw down excess inventory within the housing market. This will begin to bring about price stability in many markets. With price stability, buyers will feel more confident in the market and will see an uptick in buying activity toward the end of 2009 or early 2010.

Silver Lining $850 Billion
For better or for worse, no matter what your opinion, $850 billion being pumped into our economy will definitely provide a much needed lift, its simple economics. Some people may want to argue about where the money should be spent, but that is a political matter and has no affect on the real economy. Once these funds hit our economy it will provide much needed jobs, tax breaks, etc.

For those of you who are worrying that the government is just printing money, I understand how you feel, but there is no need to worry. Typically what occurs is, during economic down turns the government runs a higher than normal deficit. Then once the economic prosperity returns the government will then pay down the deficit. A great example is by looking at taxes. In order to stimulate an economy in a downturn, the government will typically lower taxes and once economic prosperity returns, the government then raises taxes to pay down the deficit.

Houston Economy
Houston will finally experience a slow down in 2009. Many oil and gas projects have been shelved due to rapidly falling oil and gas prices. In addition, a key indicator for the oil and gas industry is rig counts and we are seeing a reduction in active rigs across Texas. The good news is that the medical center continues to expand and is doing well which should provide a cushion for the Houston economy in 2009. Overall housing sales in 2009 will be slightly positive or break even for the year. All the while, the rental markets will see a boost due to the credit crunch.

2009 will be a cautious year, but toward the end we should see the light at the end of the tunnel.

Cliff Pape

Home Buddies

Many people mistakenly allow themselves to fall into the trap of having a joint account. Usually this occurs because a couple believes that they can qualify more easily if they apply for a car, home etc. jointly, as opposed to applying separately. Although this may be the case, it is always better to first attempt to apply for a loan in one person’s name because jointly applying also doubles the liability to both of you.

Keep Accounts Separate

It is essential to keep accounts separate in order to protect your credit score. For example, if only you and not your significant other is on the car note and you miss a payment then only one of you will have your credit score affected. This ensures that if you fall on hard times that one of you will still have good credit to make necessary purchases.

When to have Joint Accounts

The only time you should both be on any type of liability is if one of you cannot qualify individually. For example, in buying a home, mortgage companies will require a sufficient amount of income to cover the future mortgage. Many times it will require the household income to cover the mortgage and in such a case they likely would require that both you and your significant other be on the loan.

So don’t fall into the trap of risking too much credit for any loan. Always apply first as an individual. If you cannot qualify, then and only then, should you bring in your significant other’s credit to secure the loan and vice versa.

Cliff Pape
Home Buddies