Deal or financing first?

6 Replies

Hey guys!

I am in Charlotte, NC and I really want to get my first deal under my belt. Right now I am thinking a fix and flip is what I would like to pursue in order to build some capital. I have around 10k for a down payment and could access some cash from 401K loans for rehab costs. Assuming I would have to put down 20%, that would put me buying at a max of 50k. I was not in the military, so VA loans are out. I also own my own home, but don't really have enough equity in it yet to get a HELOC.

Should I now go talk to banks about a conventional loan for "livable" houses or a HML for "non-liveable" houses to get pre-qualified (from what I have been reading, banks will not lend on houses that are not in decent condition) or should I try to get a deal under contract and then seek financing?

Will the caveat of having to obtain financing exclude me from most wholesalers that are seeking cash buyers? 

Is most of my logic correct? Thanks for your help!

@Travis Bernard , you asked "Will the caveat of having to obtain financing exclude me from most wholesalers that are seeking cash buyers?"

Based on that question, the answer to your thread topic is obvious: Financing!

ie. Genuine pre-approval is like: being a "cash buyer". All the best...

Having to find financing will preclude you from a lot of deals out there. Most housing that cheap is going to need substantial work and is excluded from classic lending products. Your best bet might be to find someone to partner with until you build up enough cash portfolio to pay cash. Or save more money and try to finance something through typical means that can be mortgaged.

@Travis Bernard

You should always get pre-qualified prior to looking at housing. You need to know what amount you can get pre-qualified up to. 

My personal opinion is a buy and hold strategy as how are you going to pay for the rehab? You need to make sure you have enough for reserves as well as closing costs.