Do you line up funding before or after finding a deal?

Question

Genuine question for active investors here

Do you prefer having financing options ready before submitting offers, or do you secure funding after you have a deal locked?

Pros and cons to both, curious how others approach it.

Jeff Roth · Answer

Hi Brandon!

Great question! You asked if you should have your financing lined up before or after finding a deal.

Most of the time lenders and private money investors invest in the deal or property not the concept of investing.

Sometimes you can have a partner, private investor, cash, or an investment fund ready to go and looking for deals. However, this usually comes after having a proven track record for you and your team.

That being said, great deals are hard to find but easier to raise money for because lenders and investors will see the opportunity and want to be a part of it.

Someone once said a lazy person uses their own money. I like that. If you train yourself to raise and use other people's money wisely, your returns can be infinite.

To Your Success!

Erik Estrada · Answer

Getting the deal under contract first helps you gain more leverage as a borrower to secure the best terms. If you actively shop deals and are not committed to building a lender-client relationship, having a deal under contract shows lenders you are serious. It also incentivizes lenders to provide lower fees if they know you are actively shopping it.

You can also do the alternative and build a lender-client relationship and get better terms with more volume and repeat business. This is critical to do early on, especially if you want to scale to multiple flips/rental purchases per year. Constantly shopping a deal will inevitably lead you to a bad apple and you will pay the price at closing....

Bo Smith · Answer

I always line up at least 2-3 funding sources first. Makes your offers way stronger when sellers know you can close fast. One tip that changed everything for me: get pre, approval letters that don't expire for 90 days, not the usual 30. Gives you more runway to hunt without scrambling for new letters. What's been your biggest challenge with the funding side?

Joe Villeneuve · Answer

Both. The mechanics are a little different whether you are dealing with traditional financing or private.

Either way you must first get approved for financing in general as far as you personally. You will find out what your limits are with the lender.

Then, after you get the deal, you get financing for that specific property.

Doug Smith · Answer

From a lender's perspective (who also happens to personally invest), it's great when I can gather several items from a borrower in planning for the offer. Normally, we'll get a personal financial statement, 2 months of bank statements to show liquidity, a "schedule of experience and real estate owned", entity docs, a driver's license, and discuss what their credit looks like. If we have this, we can prepare a "battle plan" for the offer to ensure that the deal flies through smoothly. Developing a strong relationship with an experienced, competent lender is key. You want to make sure that when you make an offer, it sticks. It also helps the seller know you're for real. Making an offer without doing work up front with your lender, in my opinion, puts you at a disadvantage unless you're paying cash. Hope that helps.

Do you line up funding before or after finding a deal?

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