If You Say It Do It

    I do very little soliciting for deals. Most of my partners are referred to me or we connect at REIA meetings. Many of these new connections are potential partners, especially those who are referred by current partners. Unfortunately, many of them take themselves out of consideration for silly reasons. They tell me they will do something, often something quite small, and then don’t do it.

    Here is a recent example: I received a referral from an investor I respect and have tried on a few occasions to do business with. He knew of a partner in his area who had a use for short term funding. Unfortunately, I don’t know the area. Most of my investing is within three counties. Expand that to 5 counties and it covers around 95% of my investments. This was a couple counties over. The good part is from what the referrer stated, the borrower was experienced, only needed approximately half of the value of his property, and only needed it for a short time. Even better, he didn’t actually need the funds. He simply wanted funds so he could get deeper into the rehab of another property which he already owned. Essentially a bridge loan for an active investor which might lead to more deals.

    The referrer, the guy I wanted to do business with didn’t want to give my contact info to his friend without my permission (this is one of the reasons I like this guy.) I told the referrer that I would be happy to look at his friend’s proposal. (I prefer that people contact me with their proposals--it is how I am used to gauging my first impressions. First impressions do matter. Make a bad one and you may not get a chance to make another one.) The proposal came later that day. It was a possibility. I responded with a few of my requirements and explained that since I did not know the area I would want at least a desktop appraisal. (I know an appraiser who will do these for ~$100. They are not full appraisals but I only needed to verify that the potential borrower was in the ballpark on the valuation. He was only asking for ~50% of the value.)

    It took 2 days for the potential borrower to respond. (I responded to his initial letter within a couple hours.) Not a great start. Further, in this contact he asked for 5% more than he did in his first proposal (this was an e-mail exchange—the first request was in the thread.) He addressed most of my concerns and said that he would send me photos (one of my requests). He also said that he would need 2 appraisals to sell this home (from FHA approved appraisers) so he would order one of them now and send me the results (that was the piece I needed).

    Nineteen days later he sent me before and after photos, told me this house was now listed on the MLS, and that he would still like the bridge loan. What did he forget? My biggest concern with this project is that I did not know the area well enough to value the property myself. The fact that he listed the property on the MLS for twice the amount he was looking for was an indication of value but he told me he was sending me an appraisal. I waited. Nothing. Six days later I asked him about the appraisal. The next day he notifies me that if I am still interested in doing this deal he will order the appraisal that day. I let him know that we weren’t communicating very well and not to bother with the appraisal at this point. I was out.

    I wanted to do this deal. Just the fact that I respected the referral source meant that it was fairly likely that I would have done the deal. However, the borrower told me he would do something and didn’t. If you can’t get that right before the deal is initiated I have no reason to expect my requests will be honored after I fund the deal? 

    If you say you are going to do something…do it.