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I think the best thing to do would be to go ahead and share with you how I got started, how I got into finding private money and how I went about it. What I plan on doing is showing you how to get all of the money that you need to buy, rehabilitate, and maintain single family houses, regardless of your credit or financial situation. Concerning my background, I started out in the corporate world. I was a manager in aerospace. I had been working with a company for 17 years, and I couldnt make ends meet. I was bored, and I knew that if things didnt change in my life, I was going to retire poor. I was living in a two bedroom apartment, and then I got lucky. When I got my federal tax refund back in February of 1995, I went out and bought lottery tickets. Thats not where I got lucky, because I lost. That evening, I was up at 2 oclock in the morning because I was unable to sleep. I was channel-surfing and hit one of those real estate infomercials. I had seen it a number of times before, but that night I took the time to watch it for a little while. They had a 30-day money-back guarantee, but I didnt have the money to buy the $159 course. I did have a credit card. So I picked up the telephone, and that phone call changed my life. I got the course. It had a lot to be desired, but it accomplished its mission and got me into real estate. The first year that I got that course, I bought two properties. The second year, I bought five. And the next year, I bought eighteen. Then I got myself into a pattern where I started buying one each month. Now you have to realize that, at that point in time, I was still working a full time job. Also, since February of 1995, I have not bought a lottery ticket Ive done over 100 deals since 1995, and I still do deals today. And without funding, it creates a big hole in my business. I quit my full-time job to become a full-time real estate investor in November of 2001. This is what happened to me. I had excellent credit, and I had been going through the bank to get loans. Thats how a lot of real estate investors start out. I knew all along that I should bring private money into my life. I had been to a lot of seminars and boot camps and heard about it, but I didnt really pursue it. My mother had gotten some money from the insurance company when my dad passed away, and she didnt know where to invest it. She started out with certificates of deposit. I would see my mom drive 45 minutes, one way, just to get an extra eighth of a point on a certificate of deposit. I knew from the seminars about private lending that I could help her out. So when I told her about it, she started to loan money to me. I paid her monthly payments at 15% interest on the money that she had loaned me. That was around 1997-1998. I had one gentleman call me. He loaned to me and still lends to me today. He started out with $5K and today is up to about $40K. But those were the only people that invested with me. I realized when I came out Copyright 2005-2010 Colby Properties All rights reserved

of my job in late November that I needed to really get on with finding private lenders. I decided to hold a luncheon. I did that in February and then held a second one in March. At the first luncheon, I had 18 people show up and 12 showed up for the second one. That money has now grown to over a million dollars. Its really made a tremendous change in my life. I saw my competition as people with certificates of deposit doing what my mom was doing. I structured my private lending program to compete with that market. And obviously I can do very well against certificates of deposit. Today they are around 1% or 2%, and Im paying 12% if the folks let the money accrue until the house sells. I pay 10% if they want payments like my mother does. Let me share with you a little bit about how I use the private lender money. I see it as four different ways. One is I buy junkers. I pay all cash for them and then I rehab them. My exit strategy is to do a rent-to-own on them. Ill put someone in the house, and Ill look for them to cash me out in a period of about four to six months. Something I have been doing recently, and something that you can do as well, is buy junkers and wholesale. Now Ive avoided wholesaling since 1995, but I did my first wholesale deal on Friday. The reason is I had so many houses coming through that it would be a good thing for the business to wholesale a few of them. Actually, today I signed two purchase and sale contracts to do two more. Ive got those in the pipeline, too. I know a lot of people do assignment of contracts for their wholesale deals and thats great. If I get close to the sale, I go ahead and pay cash for the house with the lenders money and then market the house and wholesale it. Thats what Ive been doing. The third way is called short sales. Ill give you an example. I was sitting at my desk about a year ago and the phone rang. The lady on the other end of the phone had a house that she had paid $65K for and never made the first payment. Seven months later, the bank was foreclosing. She had financed the house 100% for $65K. She called me up and said that if I could buy the house in five days, the bank would sell it to me for $25K. I bought that home, and made over $31K on that property. That was a great deal. So I do short sales. I do Subject To deals, where the house is deeded to you. Ill use small amounts of private lender money to rehab, or maybe carpet and paint, do a little bit of touch up, or make up back payments, or however you want to do a Subject To

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house. Im not taking money out of my own pocket to spruce the house up a little bit. Those are four ways that I use private money in my life, and its really worked out wonderful for me. Now one of the things that you folks on the phone might be interested in is that when I used to borrow money from a bank, I used to go to the bank and have to fill out stacks and stacks of paperwork, give them two years worth of tax returns and pay stubs, and all that kind of stuff. Then when I would buy a house, fix and sell a house and needed to buy the second house; I had to go jump through all of the same hoops and go beg for money and fill out all of that paperwork. I ran into a situation where the bank didnt want to lend money on a particular house. I like to buy houses that are ugly, and I had a house that had no furnace in it. It took us four and a half months to close on the house. I could have lost the deal. The seller could have gone away. It was just a frustrating experience. Now that I have private money, there are many times that Ill get an offer accepted on a Monday and on Friday I will own the house, all in the same week. You can visualize from the example that I just gave you where you go to the bank and you beg for money every time you want to buy a house. Its a totally different scenario with private lenders. With a private lender, youll buy a house, fix a house, and sell a house. Then they have been paid back their principle and interest. I pay simple interest. Immediately, they are looking at me to get that money out working again so that they can continue to make 12% interest. That happens to me over, and over, and over again. Once you find a private lender, there are a lot of houses that you can buy with that money. Once you buy, fix, and sell a house, youre ready to do it again. They want you to keep that money out there so that their money will grow. That was a surprise for me early on. They tend to test you out. They start you out with a small amount of money, like maybe $5K. Once you have proven yourself and they have more money freeing up, they will continue to lend money to you. Ive got one lady that started me out at $25K dollars, and today shes up to $250K. That happens to me in a number of situations. Also, you get a ripple effect. Its like throwing a pebble into a pond. Someone will start to lend money to you, and they will talk about it to their family and their friends. Ive got one private lender that began investing with me, and now its not only him, but his wife and his two sons as well. So thats really nice, they become your best sales force.

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Lets talk a little bit about how I find private lenders. Theres really a three-step program. Ill cover each one of these in detail. First Step - generate leads. Second Step - invite people to a luncheon. If they cant make the luncheon, I send them information about my program. Third Step - they either pass or play. This is a very low-key sales pitch. Its not a high pressure situation. There are folks that want to lend that are either in or out. And our job is to share with them what we do, how they are going to get paid back, and how their money is secure. Then they can make a decision on whether they want to lend to you or not. Now, lets break down each one of those three steps. Step number one is, I generate leads. You have two options, people you know and/or people you dont know. The easiest and my favorite is people you know. To generate leads here is to just create a script and talk to your family, friends and associates. Now, if you are in the NFL (no friends left) club, you will be seeking out strangers and you MUST file with your states securities office BEFORE you advertise. Also Id do this with and SEC attorney helping you. Let me share with you how to attract private lenders once you file with the SEC. I like to do that with newspaper ads and with postcards. With the newspaper ad, I run a 2 by 3 ad in the paper. Ill run this ad seven days prior to my luncheon. Ill run it every day. I know that some of you are going to laugh about this, but the first day that my ad comes out, I have it in the obituaries. I move it around in the paper, moving it to different sections. My thoughts are that some people might read every page in the paper, and theyre going to see it; but other people might not read every section. I want to make sure that I get full coverage on this. First day in the obituaries, and then on a Friday night Ill run it in the entertainment section, where movies and stuff like that are listed. On a Saturday, Ill run it on the sports page because people are checking scores out. So I just move it from section to section on those seven days. Let me read you the headline. The headline here is, Tired of Low C.D. Rates? Its a big, bold headline. Ill tell them the date and the location of the luncheon. Ill invite them to this free seminar. I happen to hold it at a country club because it is close to where I live. I give them the date, but what I dont do is give them the Copyright 2005-2010 Colby Properties All rights reserved

time. What that does is forces the folks to call up and ask for the time. That way, I can get a list of names of who is coming. I can also get a head count, because Ive got to order lunches for these folks. I want to see what the volume is so that Ill know how many lunches to order. The second thing is I send out this postcard. Ill read you a little bit about the postcard that I send out. Its like a little story. First off, the headline reads, Free Report! Amazing Alternative to Low Paying CDs and Risky Stock Market! Find Out What Your Banker and Broker Dont Want You To Know! And heres the little story it tells, Springfield, OH-She was simply stunned to hear what her banker had told her. Im really sorry, Elizabeth. I cant do any better than 2.4% on that C.D. If you want to tie it up for ten years, I can get you a little over 4%, but thats it. A lousy 4% on a CD, what was she going to do? Elizabeth felt betrayed. After all, shed been putting her savings into this bank for 17 years. And, now that Frank was no longer here, she had to take care of everything herself. It frightened her to have to deal with taxes and paying bills, and trying to figure out things like refinancing her house. All of that was tough enough. But then to watch her monthly income sink like a brick in water; it was the last straw. He didnt even care that they had been such loyal customers for all these years. Im going to stop there. This goes on. Eventually, she goes to one of my luncheons and finds out that she can make a lot more money than what she is making on CD s or with the stock market. As the headlines say, Free Report, I can also send her a report. I have two postcards that I use. That was one of them. I send it out on yellow postcard paper. The other postcard that I use emulates the ad that I have in the newspaper. I figure if somebody sees the ad in the newspaper and then they get the postcard that looks the same, getting hit a number of times with these, that it might trigger them to pick up the phone and give us a call. Typically, I will send out three postcards prior to my luncheon, and I send them a week apart. On that first postcard, where I told you the little story, I kind of envision that every time I drop that in the mailbox, I slow down the postal service here in town, because I can see all the post people reading the thing. You might wonder how I know who to mail these postcards to. Well, I rent a list from list brokers. You can find these list brokers in your telephone book. Theyre all over the nation. You call them up, and you can ask them for a list of names and addresses, get phone numbers, and email addresses if you want. My Copyright 2005-2010 Colby Properties All rights reserved

luncheon is something local, so Im looking for someone that is in my county. Ill call up and ask for a list of folks with certificates of deposit, and I get 1,074 names. Ill also include that I want names of people who buy things through the mail. I do that because theyre getting a postcard, and I want people that like to buy things through the mail, so thats why Im trying to market to those people. This is a very cheap list. Since the list is good for a year, Im thinking about ordering one with people who have money invested in IRAs. That is such a huge market out there. Those folks are really looking for a great place to build wealth. Theres a lot of money out there that is not making what we can afford to do here in this particular industry. With a list broker, I order a list of names, they email it to me, or I could even have them email it to my printing company. The printing company can make the postcards, print the labels, and mail it all out for me. Now, when I got started in all of this with those first two luncheons that turned up a million dollars, I had my son, Mark, do the stamping and the labeling. I had some free labor there. So, you run your ad in the paper, and you mail out your postcards. The next thing that is going to happen is your telephone is going to ring. I dont take the calls directly. I have the calls go to a 24/7 live answering service. You can take it to a voice mailbox, but I prefer someone live. I dont want folks to hang up. If you look at this, its a very simple system. What I do is put an ad in the paper, send out some postcards, and I have an answering service pick up the calls for me and take the names. And were ready to go have a luncheon. Lets move into step two now, which is actually having the luncheon. Some of you folks might want to write this down. There are four steps to a fund-raising luncheon, and Ill go through each one in detail. Step number one is to schedule the luncheon at a nice place. You want some place thats nice and quiet. I like to have it at the country club. I will have chairs, an overhead projector, and a screen at one end of the room. Then Ill have tables for a luncheon in an area in the back of the room. That way the tables can be set up while we are up in the front talking. I do the talk first. Once Im done talking, we go back and have lunch. The neat thing that I found in the very first luncheon was that there was some synergy in that. Ive got a room full of folks that dont know each other. Youll have a husband and his wife, or a man and his son, but the rest of the folks tend not to know each other. You put on this presentation, and when you are done with your presentation, everyone goes back to eat together. So the logical thing Copyright 2005-2010 Colby Properties All rights reserved

to talk about is what they have just seen. So it tends to continue, and they sell each other on what they have just seen. Number two is to send out the postcard and run the ad. And then the third thing is, I hold the luncheon and get the commitment on site. Its a very simple program, step-by-step. Lets talk about this commitment. There is a nanosecond between when youre done talking in the front of the room and the presentation is over, until you send them to the back of the room for the meal. What happened in the first luncheon is I didnt know what to do. I said, Well, if anyone is interested, just give me a call. It was really a very weak close. What theyre looking for is some direction. Youve just gone through this presentation, now what do they do next? Its not a high pressure situation. Its a very gentle situation. You just let them make up their mind. In the second luncheon, I created a little form that just asked for their name and had a few questions, such as, Are you interested in loaning money? It worked well. Theres a place on there that asks if they have IRA money, how much they want to lend. So youre getting commitment on site. They fill out the form and give it to you before they leave the room. Ill give you an example. I had those two lunches about a year and a half ago and I had so much money show up that I didnt have to have any more luncheons. I have hired a man in my office here in the last couple of months, because I want to take my business up another level. He wanted to start having some luncheons, so we started having some more. Weve had three luncheons within the last four weeks. Last night, I had only eight people show up. I had $50K on one of these forms, given to me immediately. The gentleman was ready to lend. More money shows up later, like in that first luncheon that I had a year and a half ago. A gentleman was there, he liked what he saw, and knew at some point that he was going to loan money. But he wasnt ready yet. For whatever reason, due to whatever was going on in his life, it just wasnt the right time. Two months ago, he called up and started investing. Once you get the information out, its like turning on a tap of money. Its just a money stream that will just continue to come in. I had a luncheon two weeks ago that had an attendance of 28 people. I havent gotten the numbers from that one tallied, but I know that the week before there were 18 people, and we had $100K on the spot. Although I havent added it all up, I would imagine that with those three luncheons, in a short period of time it will be well over a million dollars. Thats the way that it works.

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Why do I like the luncheons? Im looking to leverage my time. If you can imagine, Ive just listed off here over 50 people that Ive talked to. All of those talks were an hour a piece for three different talks. And, I got to talk to 50 people. If you had to do those one at a time, it would take you forever. I was a little bit shy about approaching people one-on-one. But to do it in a group works well for me. Its quick and its simple. My conversion rate, I think, is much better. The money will continue to show up. I know not everybody is a public speaker. But once you do the overhead, they tend to tell a story; and you just follow along with them. I got lucky in the first luncheon, because I created a check sheet. Actually, I was looking at the check sheet for the luncheon that we had yesterday, and it was all filled out. I brought this guy in a couple of months ago to help me buy houses, and he does the presentations now. I dont even have to do the presentations. Ive got somebody else doing them for me. He had the check sheet from last night all filled out, which was really nice. Its just a step-by-step check sheet to make sure that weve gotten everything covered. Such as, what we want to take to the luncheon, names of the folks that are coming, if the food is ordered, the overhead projector, and things like that. I was very lucky that I did that in the first luncheon, because now I dont have to recreate the wheel every time. Its very simple to put one of these things on. I should share with you a little bit about how you can feature the room, the setup, when you walk in the door. Ive got a sign-in table. Ive got my administrator, the lady that works in my office, sitting at the sign-in table. I also use a laptop computer with and overhead projector. Ive got a PowerPoint slide presentation of the houses. These are before and after pictures of the houses that Ive owned and fixed. This presentation loops. It will go on for about eight minutes. And it shows slides that last about six to ten seconds a piece and then it will go to the next slide. Ive also got stacks of money and some jokes, all of which focus on lending and real estate. It gives the people that are coming in something to look at. It also sets the stage and builds some credibility. Along with that, Ive got credibility kits that Ive created. When you go to many of the seminars and real estate boot camps, you dont get a certificate when you are done. I decided that, in order to build credibility, I should show a lot of the education that I have gotten. I created certificates myself and sent them to the folks that had those seminars. I provided a place on it for them to sign and then a return envelope. Ive got signed certificates in my credibility kit. I also put in testimonials. The pictures on the front cover are full-color before andafter shots of the houses. In addition, I include a 13-page document that I call my Report on Private Lending. It answers a lot of questions about private lending. Ive got that in my credibility kit, also. The room is now set up and staged. When Copyright 2005-2010 Colby Properties All rights reserved

Im ready to give the presentation, I just walk to the front of the room, click off on those slides, put up the presentation; and Ive got 37 slides that describe the program, as well as the company. Now, I know that a lot of folks may be afraid of public speaking. In fact, some people are more afraid of speaking than they are of dying. Obviously, the logical thing to do, if you dont want to get up in front of a handful of folks and talk for a half hour, is hire somebody to do it. My recommendation to anybody on the phone that doesnt want stand up and talk is to get a hold of the person that will be doing your closings. Who better to get up and talk in front of folks than the same person that closes your real estate deals? You can get your accountant to do it. In a luncheon that we had a couple of weeks ago, my accountant showed up. He was very excited about what he had seen that afternoon, and what I was talking to him about was having a luncheon just for the accountants in the area. They do the tax returns of a lot of folks, and a lot of folks are feeling a lot of pain from not getting high returns. So, maybe they can refer folks to us. Step three is where they pass or play. I have a little folder for each of them when they come into the room. At the end of the talk, before we go back and have the lunch, I ask them to pull out that. I say, Fill out the form, and Ill meet you in the back of the room for lunch. Its that simple and easy. There are people in the crowd that have IRA money. We can all use that. Today, I have one person who is transferring over $100K. I have another person transferring over $250K. I have another person moving over $15K. And, I have yet another person moving over $6K. Thats just this week! So, the IRA money is huge. With IRA money, were not allowed to lend to ourselves, our child, or our parent. But your brother or sister could loan it to you. There are other ways to obtain money from private lenders. I like the luncheon, but its not only way. I read that postcard to you a little while ago. I said that they could ask for a free report. What I came up with is something that I call an audio business card. Obviously, people are going to call in. I had one call-in two nights ago, a gentleman in a wheelchair who could not make the luncheon, but wanted more information. Ive got an audio CD that is approximately 22 minutes long that talks about private lending. Ive got a plastic shell, called a clamshell, which will hold that audio CD and my business card. It also has a pocket inside for me to put other information. One of the things that I put in there is a welcome letter from me that explains to them a little bit about private mortgage lending. The second thing that I put in there is Copyright 2005-2010 Colby Properties All rights reserved

the commitment form that I talked about earlierthe one that I hand out at the end of the luncheon. The third thing that I put in there is a newspaper article from an interview that was conducted with me about a year ago. I put that in there as well to build credibility. You could also put testimonials in there. The first time that I handed out this little professional looking box, with this audio CD in it, the first person came back and invested $27K with me. Its really a powerful tool. You may be getting the idea that Im going out and begging people for money. Actually, the opposite is true. Let me ask you this. Where else can someone get a high rate of return and all they have to do is write a check? There is little or no work, and they get a high rate of return. So, their job is to write a check, then sit back and wait for a bigger check. Let me say that again. Their job is to write a check, and then sit back and wait for a bigger check. There are some magic words that you can use. Its just a simple little paragraph that I will give to right now. It says, Do you have IRA, or investment capital, not currently earning a secured high rate of return? Thats a simple little phrase that will help you find private lenders. One of the things that I said that I would share with you is how I ended up here. After I had those two luncheons and had the million dollars show up, a national speaker wanted me to share what I was doing with 53 other folks in the room. So I showed up with my 37 slides that I show at my luncheon. He asked me to speak right before lunch. I went through my 37 slides, and something interesting happened. The two days before that, I had been eating lunch alone. That particular day, there was a whole pile of people that went to lunch with me. That was really nice, and they bought my lunch. After lunch, I was heading back to the meeting room, and I pulled into the parking lot. Some Guy was in the parking lot looking for me. He said, I want to buy your slides. And I said, Well, I didnt think that my slides were for sale. What will you give me for them? I didnt have a clue as to the value. And, he said, Ill write you a check, right now, for $200 for your slides. I took it and he got my slides. When I was walking off the parking lot to the front door, there was lady standing there, who was looking for me. She said, I want to buy your slides. And, I said, Some guy just paid me for my slides. And, she said, Thats great! Ill give you a check for your slides. So, when I walked into the room, before I got to my chair, a gentleman came up to me and said, I want to buy your slides. So I put a system together and explain this to other real estate investors. But, let me tell you how its changed my life. When I went out and started looking for private money, I desperately needed to bring money into my life, in order to continue the business. How things have changed is in the last eight weeks, Ive

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bought seventeen houses. They were all bought with cash, not with any of my own money. So, life is pretty good around here, right now! Question Now, once someone says yes, is there any paperwork that you need to fill out? What I mean to ask is, are there any legalities behind this? Alan Cowgill Now, when they commit that they have money to lend, I dont ask for any paperwork, at that time. I dont take any check, or anything, at that time. I dont want to touch the money. Because, you dont want the money heading off in the wrong place, and be responsible for that. I handle it like a bank does. What I do is let the person know that they will be hearing from me shortly, and that their money will be directed to my closing agent that is in Ohio, who happens to be an attorney. I work with the same attorney that deals with all my personal properties, and back when I was borrowing money from the bank. Thats the same attorney that I use for my closings. Hes does a lot of closings here in my community. So, what will happen is the private lender will send a certified check, good funds, to the closing agent. The closing agent will put the money in their escrow account. Then, they will set up a closing. The lender will get a mortgage on the property, based on which position that they are in. They will get a promissory note that is personally signed by me. They will also get hazard insurance, on which they are listed as the mortgagee. In addition, they will get lender title insurance. Okay? So, thats the way that it is structured. Then, at the closing table, the money is dispersed by the closing agent. If I have rehab money, then I get that money at that point in time. On the legal items: 1) You cant use the word guarantee with a lender 2) You must file (ask for permission) with the SEC if you want to advertise or pool the money 3) You can not pay commissions to someone for finding a private lender for you 4) You need to know the number of lenders and dollar threshold within your state. Question Now, since you set the terms of these loans, do you kind of fudge a little bit on the loan to value ratios? I know that most mortgage brokers, typically, will lend 65% to 70% loan to value. Do you keep it around that, too? Or, do you try to get more? Alan Cowgill No, I max it out at 70%, and stop. I keep that extra pad in there. And, if you think about it, I cap everything at 70% loan to value, and whats above that is my

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payday. Thats how I get paid, when the house sells. So, thats an additional protection for my lenders, because I stop at 70%. Question While you are in the process of courting your lenders, do you any of them ever ask you, Well, is my money secure? Alan Cowgill I address it right up front, at the luncheon. That is one of their concerns, and I make sure that I cover it. I explain to them that their money is secured in a number of different ways. One of those ways is that we do not handle that money. We go to a formal closing. The second way is that, at the closing, they get the documents. They are the same documents that the banks use for personal residents, to secure their loans. And then, the third area is what you just talked about, the loan to value. I said to them, in the luncheon, I know weve all seen those commercials on T.V. where theyre talking about loaning you 125% on your money. Thats not our business. Thats not what we do. You wouldnt want me to do that. Where were at is at the other end. We only leverage up to 70% loan to value. Now real estate can be risky and you must be honest with your lenders. So I create a disclosure statement and in that, I tell them that real estate is risky so there is full disclosure Question Does anybody ever ask you for life insurance based on the fact that youre signing on these notes? Alan Cowgill Ive never been asked for that. Question What if the investor needs to get their money out? For example, they have given you their last savings, and all of a sudden they need their money out of the deal. Is there anything that you can do about it? Alan Cowgill Thats a very good question. Ive had that happen to me twice. Ill explain both of them to you. One guy had loaned me $8K. Right after he did that, he got his tax bill for $3K. He needed $3K of the $8K back. I had his money for about a month. What I did was, within 24 hours, I handed him a check for his $3K. He still has the $5K loaned to me, now. The second one just happened to me. This is a rarity, it doesnt happen a lot. But, every now and then, it will happen. I had a lady that had loaned me money, and had a first mortgage on a house. I had a second Copyright 2005-2010 Colby Properties All rights reserved

mortgage behind her. This lady wanted to buy a new home for herself. So, she needed the $25K back for the down payment on her home. So here is what I did. You just bring in a new private lender, replacing one loan with another. The first lender, the one that needed her money back, is paid off. Then, you just bring in a new person, and you put a new loan on the property. So, then what I do is make two calls, one call to the private lender to ask them if they are ready to get their money out there working. If they say that they are, then I tell them that they need to send the check to my closing company. Then I call up the closing company and tell them what is going on. I let everyone take care of it from there. I dont worry about it. Question Now, I can see how you would be getting a lot of people wanting to give you money. What I would be concerned about is if you cant get their money working fast enough, and they say, Forget that guy. Im going to just buy another C.D. How do you keep them? Alan Cowgill Great question. I make sure that the money is moved quickly. The next thing is communication with folks. Making sure that they understand what is going on. The third thing, which is something that I cover at the luncheon, is lets say that you have a bank C.D. that is paying 3%, which I know is really high, right now. Im paying 12%. And, a bank will charge you a penalty of three months for an early withdrawal. Even if it was a six month penalty, if youve got $10K loaned out at 3% interest, and they hit you with a penalty, youve only lost $150. But, you take that money out and move it to me, and for the next twelve months, youre going to making over $1K. So, even if they go and park their money for awhile, its still a better deal, at this high rate of interest, to move it back over to me and keep it in play. Question What do you do if a lender wants the position of first mortgage, but they dont have a lot of money? Alan Cowgill I decided, before the first luncheon, that I would set a minimum. Anyone who would lend between below a certain amount would be in second position. Anyone above that amount would get a first position. I have never had anybody decline to lend because they are in a second position. I do get questions about that. I do get people that say, Hey, I want to get to this amount so that I can get a first mortgage. Well, the deal is they need to lend enough money to warrant that position.

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Question You say that property value is relative. What do you do if the property goes bad? For instance, you think that you could sell the property for $100K. So, you borrow $70K. And then, the property value goes down. The comps are only at $70K, now. Alan Cowgill You need to understand that the money that I am borrowing is not out there on that property for very long. If I buy a house today, it will take me about thirty days to rehab, and another thirty days to put somebody in there. Here is something that I do that has really changed the business. I do enough screening on the people that I put into the homes, so that I know that within the next year they will be able to buy the property. Theyve got the wherewithal. Maybe theyve got bruised credit. Maybe they need to save up some money to put down. But, theyre going to be able to do that within that period of time. I make sure that theyre credit is close enough so that theyll be able to get financed through a mortgage broker. After I rehab a house, and put somebody in it, I really like for my exit strategy to be rent to own. And, I like to get them cashed out within four to six months. For example, the people that Ive put into homes within the last couple of months will be able to use their tax refunds for this purpose. I know that, last year, I had a big spike of home sales in the February-March time frame, because, everyone was getting their tax returns back. So, if youre looking at property values sinking, I dont keep the houses long enough for that to happen. Question Suppose somebody who holds a first mortgage needs to back out of a deal, and wants their money back. So, you bring in a new lender. If the person holding the second mortgage does not subordinate to the new loan, would you pay them off? Alan Cowgill Yes. My people are going to cooperate. If I find out that somebody wants to go inspect my houses, or get too far into the business, theres just no reason for us to be involved with them. Question When you schedule your investor luncheons, do you ever have a problem with people not being available due to work, etc? What day of the week do you hold them? Do you do this on Saturday or Sunday, or just during regular weekdays? Alan Cowgill Thats a great question. When I got started with this lender luncheon, I thought I was going to do one a month for the rest of my life. I had no idea that it would be Copyright 2005-2010 Colby Properties All rights reserved

so easy, and that so much money would show up. So, I decided that I would rotate. One month I would have a luncheon, and then next month I would have a dinner. Well, I had two, and that was the end of it. Actually, the first two I had were luncheons, and then I was going to have a dinner. But, there wasnt any point in it. The one that I was at yesterday was a dinner. Weve had two luncheons and one dinner, in the last month. Just to capture that market of folks that couldnt make it to the luncheons. So, thats what we do. You also asked about the days of the week. I like to do them on Tuesdays or Thursdays. Ive done both, and they both work well. I havent tested out the rest of the week, or weekend. I thought I would stay away from Wednesdays because I know that doctors are off that day, and might me doing other things. I would focus on getting them into a dinner, anyhow. I did have a doctor show up last night. Doctors are a good market for us. They have a lot of discretionary income. Also, they are out playing golf with a lot of other folks. So, if theyve got a great investment, theyre going to tell them about it. I started out that way; it worked, so I just stayed with it. The three that weve had in the last month were all Tuesdays. Question If I find a private lender to fund just my rehab work, does he get listed on the insurance policy for the home, in protect his money, as well? Alan Cowgill Yes. Whether the person is in the first position or the second position, you want to make sure that they have a mortgage. You want to make sure that they have a promissory note, signed by you. I think thats only fair. And then, youll also include them on the insurance policy for the house. The person in the first position is listed as the mortgagee. The person in the second position is listed as additional insured. However many mortgages youve got, everybody needs to be protected. Question To do this, you need to be good at finding the properties and buying them right, correct? Thats the key to this whole thing, right? Alan Cowgill Right. Whether you have private lenders, or you go through a bank, if you want to make money, you had better find the right house. And, you make your money when you buy it. You get your money when you sell it, but you make your money when you buy it. Question When I look at the Sunday newspaper, I see at least ten or fifteen ads that say, I buy houses. Copyright 2005-2010 Colby Properties All rights reserved

How do we handle this? There are ten people saying that. And, I can drive around my place in Phoenix and see all these signs that say, I buy ugly houses. Ill take over payments. How do we handle this with so many flags all over?

Alan Cowgill Yes. I know that about your area. Im very familiar with that. In fact, Im going to be out there in a couple of weeks, to talk. There are a couple of things that I want to say about that. The first thing is we dont have to worry about our competition. The foundation to this business is to get a rock-solid education. I figured that out, early on. And, thats what I did. I went out and read that first course that I got, three times. I listened to the tapes over and over again. Then, I continued my education. And, I still go to boot camps. I was just at one this past week. So, you just want to continue your education, be the best you can be, and then you dont have to worry about your competition. The second thing is about those ten ads that you have in your paper, out there. I dont know why this is, but somebody might only be triggered by one of those ads. So, many times, real estate investors get so busy that they dont return a lot of those phone calls. To be honest with you, I used to be like that. Id have a call come in, and Id be so busy that I didnt have time to follow up. So, a lot of people will call on an ad and not get an answer, so theyll move on to the next ad. So, you want to be responsive, if youve got an ad out there. The third thing is that you dont have to market in the paper. You can market a lot of different ways. You can do target marketing with postcards, which is what I do, to find private lenders. You can get signs up. There are a lot of different ways to get the name out there. The key is to let people know that youre in business. You know, you ought to be handing out twenty business cards, every day. Question Im up here in Canada. I was wondering if there was going to be any difference in the way the system works. Alan Cowgill I just shipped three courses to Canada, within the last month. And, those arent the only ones I have up there. Ive got a course in Australia, and a number of courses in Canada. Im getting great feedback from the folks. I havent heard much about any alteration that you have to do to it.

If someone wanted to learn more about finding private lenders they can contact: Alan Cowgill Phone Toll Free (866) 831-3540Fax (937) 399-5694 www.PrivateLendingMadeEasy.com Copyright 2005-2010 Colby Properties All rights reserved