Real Estate Investor · Los Angeles, CA · Member since 2013 · 50 posts · 12 votes
I'm looking to do my first BRRR deal in the Hampton Roads area (city of Hampton). I've been pre-qualified with a traditional lender and have been submitting offers through my agent but getting beat out by cash offers.
Will a POF from a HML help me compete with the cash offers?
@Marion Lee - Local agents would rather see your POF from a traditional lender than a HML. Agents are getting burned by HML deals not closing and unless they know the lender from past deals, most don't trust them to be reliable closings. Just yesterday we had a HML rant in one of the agent groups I'm in because some investors HML pulled out at the last minute. Probably because the investor never planned to close and only wanted to tie up the property to wholesale it. That practice is hurting the rest of us who can and do close on our contracts.
If you are planning to use traditional funds though, maybe you should look at properties that are already fixed up. You will pay a little more, but you won't have to do the rehab and you will have less competition from cash investors. Just a thought.
Unless you can remove the financing contingency from your offers, the cash offers will probably continue to beat you out. Unless you are willing to offer more than the cash offers then the seller might consider an offer with a financing contingency
@Marion Lee - Local agents would rather see your POF from a traditional lender than a HML. Agents are getting burned by HML deals not closing and unless they know the lender from past deals, most don't trust them to be reliable closings. Just yesterday we had a HML rant in one of the agent groups I'm in because some investors HML pulled out at the last minute. Probably because the investor never planned to close and only wanted to tie up the property to wholesale it. That practice is hurting the rest of us who can and do close on our contracts.
If you are planning to use traditional funds though, maybe you should look at properties that are already fixed up. You will pay a little more, but you won't have to do the rehab and you will have less competition from cash investors. Just a thought.
To elaborate further on Patti's last comment, you will most likely have to remove two Rs as paying the higher price will put you closer to market value and unable to refinance with any significant gain anytime soon. You would essentially just be hoping for a cookie cutter rental at that point.
It's not impossible to purchase a rehabbed home under market value, but you almost certainly won't be finding it on the MLS.
Basically, I would say to either be patient and keep trying or get something that'll cashflow and put BRRRR on hold until you can pull that sort of deal.
Depending on your timeframe, it may work better for you as already having an investment property looks good to most lenders.
Another option would be to network with some wholesalers, but you would likely run into similar cash issues.