Why is it harder to raise less money?

Question

I found a couple of deals, both are under $100k... so0 hard to find funding... lenders only lend over $100k.

After I make it to the top, I will target deals under $100k.

Abdurrashid Abdussalam · Answer

Thank you once again. I really appreciate you taking your time to break it down like that.

JD Martin · Answer

Well, let's assume just to make this comparison fast and easy that points are the only profit the lender makes for a second, that everything else is a cost of doing business and is a wash.

If the lender does 5 deals at $50k/deal, with one point per deal, they're going to make $2500. If that same lender does 1 deal at $250k, they're going to make $2500. Only they're going to do 5 times less work for that $2500. Is there more risk? Maybe. Or it might be less risk. Maybe the $50k deals are all in low value, high crime areas while the $250k deal is in an upper middle class neighborhood with stable values.

Abdurrashid Abdussalam · Answer

Okay. Thank you JD Martin. Maybe I thought of it from a different angle, but I understand now.

Previously, I used to think "some money is better than no money". I also thought the lender just lends money and sit back, and collect profit. But you are right. I still believe some deals are riskier than others,  and low risk/low amount should be fundable with ease.

JD Martin · Answer

Because there's the same amount of work and risk involved but less profit overall. Like anything, there's a sweet spot where profit is good and work/risk is acceptable.