Rental Property Investor · Metro Detroit, MI · Member since 2016 · 277 posts · 269 votes
This may seem like a stupid question, but I hear @Brandon Turner always talking about Finding a Deal and the money will come.
I find potential deals frequently. Problem is, good deals don't last long. By the time I find the deal and communicate with a potential investor, the deal is scooped up.
When they say, "Find a Deal" are they referring to get it under contract?
What if you get it under contract and cannot find a private money lender that's interested?
I'm at the point where I have a few people interested in Private Lending for me to scale, but not sure how to approach this moving forward.
Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
7y
I'm assuming you are referring to wholesaling or JV investor. You need to have a few investors lined up first. By that I mean you need to really know what they are looking for and what their ability is to react.
Once you find a deal, you need to make an offer subject to financing acceptable to you. That gives you a few days to shop it and a way out if you can't find anyone.
In addition to your preferred investors, you then want to advertise it, send it out to your local real estate group, call everyone you know, etc. Really grind it to try and move it.
Don't be worried about the seller knowing what you are doing. If they are truly motivated they won't mind having someone spending all the time and effort to help them sell. Be open and transparent.
Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes
7y
@Matthew John I think there are very few who actually know what a "deal" is and how to find it. It sounds like you can find them you just have to be quicker with your financing side of the transaction so you can get an offer in and get it under contract.
Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes
7y
@Matthew John having the financing in order up front will give you an advantage when submitting an offer. I feel it's unethical to get a property under contract when you do not have the resources to perform on the contract.
Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
7y
I'm assuming you are referring to wholesaling or JV investor. You need to have a few investors lined up first. By that I mean you need to really know what they are looking for and what their ability is to react.
Once you find a deal, you need to make an offer subject to financing acceptable to you. That gives you a few days to shop it and a way out if you can't find anyone.
In addition to your preferred investors, you then want to advertise it, send it out to your local real estate group, call everyone you know, etc. Really grind it to try and move it.
Don't be worried about the seller knowing what you are doing. If they are truly motivated they won't mind having someone spending all the time and effort to help them sell. Be open and transparent.
Real Estate Investor · Miami, FL · Member since 2015 · 38 posts · 13 votes
7y
@Matthew John
Yes get it under contract.
Once you have it under contract you can blast it to your buyers list. (WHICH YOU SHOULD CONSTANTLY AND ACTIVELY WORK ON GROWING).
Then get your buyer to send money to escrow.
Then apply for transactional funding.
Transactional funding is funding to make the deal happen for you. It is short term....5 minutes to 2 days. My transactional lender covers 100% of my purchase cost for the A-B closing....charges 1% fee and $50 wire fee. He only requires that my end buyer has sent the funds into escrow for the B-C closing to take place.
So...in the A-B...I "bought" the house (using someone else's money) for a few minutes, and then in the B-C, I sold it to my end buyer.
For cash buyers, you can research properties that have sold for cash in the last 6 months and send out letters saying something along the lines of I'm a wholesaler, I come across great deals, reach out to me if you're interested in receiving info. Reach out to investors on BiggerPockets, LinkedIn, even Facebook groups. Attend local meetups and REI's.
Hope this helps!!
Rental Property Investor · Metro Detroit, MI · Member since 2016 · 277 posts · 269 votes
7y
Thanks guys.
I am not looking to wholesale. I am looking to BRRRR rentals using other people's money. I already have purchased 3 units with conventional loans, but I have attracted some people who are curious about investing.
These people want me to show them examples before they'd consider giving me money. My problem is, by the time I show them it's usually too late because it'll get scooped up by someone else.
Maybe I should just submit offers first & see if they get accepted. Then go see the house and price repairs & run it by my list of interested investors.
Flipper/Rehabber · Greensboro, NC · Member since 2010 · 623 posts · 615 votes
7y
@Matthew John Yes, when you "find a deal" you have negotiated and have it under contract. That involves knowing the true after-repaired-value and rehab prices so you know what to offer.Then you must know how to negotiate and get a signed contract.
If you've done all of this correctly, you can take the deal to pretty much anyone with money and they will lend on it. If you have trouble getting funding, it's probably not a "deal". A "deal" has real value and investors would be interested in it.
If you have good credit, you can get pre-approved by hard money lenders so you never have to miss a deal because you don't have funds.
Rental Property Investor · Metro Detroit, MI · Member since 2016 · 277 posts · 269 votes
7y
@Karen Rittenhouse Do they primarily look for something that will refinance into a bank loan?
I find deals that might not necessarily fit the BRRRR, but could still produce good cash flow in good shape.
Here's one example - I bought a Duplex that didn't require any work. I bought it for around market value, but was able to force value that added to the rent. Market was renting it at $1370 for both units, I managed to raise rents to $1600 within 1 month.
This property didn't require rehab that would bring up the ARV and it doesn't make sense to refinance, but it's still a good deal because it cash flows.
I don't believe this situation would work well with hard money. They charge too high of interest rates & they're meant for short term investments or ones you can refinance & pull equity out.
Flipper/Rehabber · Greensboro, NC · Member since 2010 · 623 posts · 615 votes
7y
@Matthew John - lenders look at you first, your personal criteria, then at the property.
Most won't know what BRRRR is because that's a BiggerPockets term. But what your property is doesn't matter, in many instances.
You need to find out from local large banks, community banks, and credit unions what their terms and requirements are for what they lend on. Then you need to get pre-approved with hard money lenders who are always there for short term - purchase and rehab. And you need private money sources who will loan on the smaller deals, but they're also not good for long term lending because of the cost.
Rather than looking here, call around to find out who lends on what so you have your funding lined up before you need it.
Rental Property Investor · Metro Detroit, MI · Member since 2016 · 277 posts · 269 votes
7y
@Karen Rittenhouse My issue is I don't qualify through any traditional methods or this would be a lot easier. I'm broke on paper and I don't have normal W2 income. My only hope is finding a private lender and hard money would only work for value-add properties.
I have 2 deals under my belt that I funded myself and both were very successful. I suppose if I'm not looking to value add properties and since I'm considering forced value properties (raise rents), then I should be looking for a small money partner and not just a private lender.
Rental Property Investor · Metro Detroit, MI · Member since 2016 · 277 posts · 269 votes
7y
@Bob Floss II So what's your process when scoping out potential deals?
Before, I did showings at about 30 properties before finding anything that made sense. Would that be a waste of time? Should I just contact the seller with an offer on paper and if they accept, make it official then do a showing with my realtor and start the DD process?
This seems more efficient than going to see 30 different houses to find 1 deal.
Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes
7y
@Matthew John I’ll do some preliminary work before wasting a bunch of time looking at properties. Looking at pictures, I’ll guesstimate the rehab and back out from what I think the property will sell for based on comps. If the numbers look good I’ll set up a showing and view the condition and tighten up my rehab estimate. If the numbers look bad I’ll note what I would want to pay for it and set it to the side. Sometimes I’ll send the agent an email that the property is overpriced so they can send to their client.
I love looking at properties but viewing 30 is tough. I’d rather focus on the ones where there might be meat on the bone.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
Broke and no w2 income is not a good combination to a lender. From their prespectIve ; Why would anyone want to work on a deal with someone with little experience and lack of financial wherewithal ?
Why don’t you have income why are you broke
Rental Property Investor · Metro Detroit, MI · Member since 2016 · 277 posts · 269 votes
7y
@Dennis M. *Broke on paper is much different than being broke, Dennis.
I have multiple businesses and only pay myself the minimum each year to get by. No where in this thread did I mention I want to work with a traditional lender, I'm seeking private lenders. I have credit partners with good W2 & credit, just seeking more money partners.
The whole topic is asking what "finding a deal" consists of. I can find deals all day long, but unless it's under contract it doesn't mean anything. My cash partners want to be able to analyze the deal prior to making that decision to invest. My question was...should I just get these deals under contract with an offer & then approach investors?
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
Okay now I understand better . I would look at creative financing . Try to find a burned out landlord and see if they agree to sell on terms with a minimal down payment
"My question was...should I just get these deals under contract with an offer & then approach investors?"
Short answer, Yes. Long answer, a cash partner doesn't want to spend time reviewing a deal to find out you can't follow through. When I pitch a deal, I have it under contract. I know investors on here freak out about getting a deal and not finding an investor. At the end of the day, if you know what you are doing, get a good deal under contract, and know how to pitch it, you'll get someone to go in on the project with you.
Rental Property Investor · Metro Detroit, MI · Member since 2016 · 277 posts · 269 votes
7y
@Bob Floss II Thanks Bob. I haven't partnered with anyone on a deal yet or used OPM. I'm confident that I can execute, but convincing someone else to invest 100k or so into a deal for me is a bit nerve racking for them.
Once the deal is under contract, how do you approach your investors whom have expressed interest in working with you?
Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes
7y
@Matthew John It depends upon your relationship. Some I've known for years and can present them with the numbers and they will make a quick decision. With a newer investor, they'll want to review the purchase, the rehab plan, comps, your track history, etc.