REO deal flow with private money - questions

7 Replies

So I’m trying to do my first fix & flip deal with private money and I’m not clear on deal flow.  Hoping someone can take a few minutes to educate me.

So I found an REO that I'd like to make an offer on and have private money interested in investing. Just making an offer at this point, so no LLC for this property yet (they may not accept the offer), no note with investor or anything but bank requires proof of funds to even make an offer. Chicken and egg!

Do I make a blanket note agreement with investor (something along the lines of we’ll pay you X% IF an offer we make is accepted and then they can put a mortgage on the property once we close on it)? What if offer is not accepted? Pay them interest for the # of days their $ was in our account?  Return the funds without interest?

Or do you have to get their investment first, start paying interest on that money and then go shoppping for a property? This can’t be good; feels like buying under duress.

How are you guys handling this deal flow?

Line up GUARANTEED private money and have that lender provide POF. People get stuck all the time by "lenders" that back out at the last minute.

Originally posted by @John Thedford :

Line up GUARANTEED private money and have that lender provide POF. People get stuck all the time by "lenders" that back out at the last minute.

 These are private individuals that I know, not hard money.  How can I guarantee anything? Sign general funding documents?  Dumb it down for me please.

Originally posted by @Cathie Kovacs :
Originally posted by @John Thedford:

Line up GUARANTEED private money and have that lender provide POF. People get stuck all the time by "lenders" that back out at the last minute.

 These are private individuals that I know, not hard money.  How can I guarantee anything? Sign general funding documents?  Dumb it down for me please.

 If you are sure they will fund the deal then ask for proof of funds from them. Private lenders can be much less expensive than hard money lenders.

Originally posted by @John Thedford :
Originally posted by @Cathie Kovacs:
Originally posted by @John Thedford:

Line up GUARANTEED private money and have that lender provide POF. People get stuck all the time by "lenders" that back out at the last minute.

 These are private individuals that I know, not hard money.  How can I guarantee anything? Sign general funding documents?  Dumb it down for me please.

 If you are sure they will fund the deal then ask for proof of funds from them. Private lenders can be much less expensive than hard money lenders.

 If proof of funds are in their own names, then apparently they need to be on the offer paperwork too, no?

Have them provide a bank statement showing POF for your offers.

@Cathie Kovacs I've done something similar once. All I needed was a simple contract between the individual and myself, then we had to show their POF. It was that easy for me, not sure if it always is. We actually did not go through with the purchase, but everything was lined up and ready to go.

I would think they would be on the offer paperwork as holding a mortgage/note on the property.

they can't provide you with a letter stating that they are providing the funding for the transaction

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