Which comes first, the financing or the deal?

4 Replies

I have a logistical question, I cant wrap my head around how this all works.  

I keep hearing and reading, "If you find the deal, the money will come".  So how do you SECURE the deal, while looking for the money?  Do you just put in an offer contingent on financing?  Or does that only work when using mortgage financing?  In our current situation, we are looking at hard money or possibly a private investor.  When we have purchased personal residences in the past, we have always submitted a loan preapproval letter to our realtor and that was included with our offer.  But you can 't really get a preapproval for a hard money investing deal.  And I know that, in general, by the time I can find the money, the deal will be gone.  

Please help clear this up for me!

If you are planning on using hard money to be able to bid on bank owned and listed REO's then you need to secure a hard money lender first. Once you secure the lender then you need to know what your plan is to pay back the HML. Then and only then should you bid on property.

Good luck

@Tessa Rysztak Hey good question. The answer I think is "both" come first. Now I know that doesn't really seem like it helps right off the bat but you have to know what path you will take with investing or at least decide on where to start.

So if you are going the SFR route that will be somewhat different options than MFH.

For example, lets say you don't have the money personally to just go buy a property or the credit or the pre ap letter, well yeah the deals might go fast and require cash. Hard money might be a short term solution to entry or deal acquisition on SFR but you will have to refi right. However with MFH the pool of buyers is smaller so you might be able to lease option or use contract for deed to control the property for no money or a couple thousand down.

If you will be doing SFR and need cash to do deals in your market then you might need a partner or set things up with HML and know you can refi with conventional lender but need more time to let the process work at its normal pace after you start a relationship with the bank.

"the money will come" part kinda says, if you find a money maker and let people that have the money know about it then they will play ball with you.

Thanks for the quick replies :). 

I should have mentioned, I am looking at using Hard money for flips, not buy and hold.  So no need to worry about refi's, unless the process goes horribly wrong.

@Tessa Rysztak

Well in that case...... if you can find good enough deals and/or you live in or invest in a market that supports the sales prices you need to use the more expensive hard money and you use hard money because you don't have access to private money, then by all means - first make sure make sure make sure you have done your homework homework homework and go use the HML and buy sell buy sell buy sell until you have your own pile of $$$ to use at a much cheaper interest rate than HML's

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