Hard Money Runaround?

Question

I decided to go to Barnes and Noble today to see what they had on specific niches of REI and found a book on REO's called "How to Buy Bank-Owned Properties for Pennies on the Dollar" by Jeff Adams. I sat at a table by the bookshelf for about 3 hours reading it and I have to say, it opened my eyes to REO's. My goal this weekend was to find a book do just that. Throughout the book I jotted down a few questions to ask you guys and gals when I got home. Here is one:

Jeff talked about acquiring your money before the deal which is of corse a must and one strategy he suggested for beginning investors was through hard money lending which seems appealing to me because I'm a young investor with no prior deals and from what he says they judge based off of the deal and not the investor mostly. He explained the process of how it works and the process of going about finding and securing a committed hard money lender. All that makes sense. The part I'm confused on is when he said that, over the course of pages, in order for the bank who owns the property to take you seriously they'll only talk to you about a deal if you provide proof of funds; but the only way the HML will approve you and provide proof of funds is if you bring them a deal. Well you can't properly analyze and pitch the deal without all the information which the bank won't give you because you haven't offered proof of funds.

Perhaps not all hard money lenders will turn you away if you don't have a deal on hand.

Perhaps not all REO agents will turn you away if you don't have proof of funds on hand.

Just looking for someone who's familiar with the process to clarify.

Thanks.

Omari Brown · Answer

@Vonetta Booker Ahh well best of luck to you!

Vonetta Booker · Answer

I'm using hard money for rehabs & flips.  I'm about to close on my first one (currently going through the inspection period), so I'm crossing my fingers--kinda nervous as hell, lol!

Omari Brown · Answer

@Vonetta Booker Thats cool how they've got it online like that. What kinds of deals are you using Hard Money for?

Vonetta Booker · Answer

@Omari Brown,  the way I work w/ my HML is that if I see a property I'm interested in, he has it set up on his site so that those who've already gone through the application/approval process w/ them (like myself) have password-protected access to a users' area where you can input the property address, purchase amount, etc.--and it generates/emails a POF letter to you almost instantly.  Pretty cool.  Before they had that set up, I would just send a quick email detailing my interest in making an offer, the offer price, ARV, estimated repairs, & general property details. Either way you should be able to do either of these w/ your HML, they send you back a POF letter which you can submit w/ the rest of your offer.

BTW, to "tag" someone you type the @ symbol & the beginning of the person's name; when it appears at the bottom of the reply window, just click on it and the tag will be inserted.

Hope all this helped, good luck! :-)

Omari Brown · Answer

What would you suggest as the best method that you use in todays times to finding REOs? Do you scout the bank websites and government assisted websites for deals? Do you network and work with REO agents that bring you deals?

Also, noob question, how do you tag someone haha?

Mike Alder · Answer

@Omari Brown

Sounds good!

Omari Brown · Answer

Thanks Mike, that definitely clears things up. I'm going back to Barnes and Noble to finish the book tomorrow so hopefully I'll be back tomorrow with more questions for you haha

Omari Brown · Answer

Thanks Najeriq, if I find myself down that path I imagine myself wholesaling those deals because I simply don't have the capital or knowhow to do a rehab and flip or hold and refinance. If I go into an REO deal planning a wholesale exit, is the process with the bank and overall structure of the deal much different?

Mike Alder · Answer

Hi Omari,

I deal with a lot of hard money and private lenders for my investments. If you have already met a hard money lender that will fund in your area of interest then show this lender any REO deal you are interested in purchasing and your exit strategy for the property. If the lender likes your plan they will most likely write you a proof of funds letter on the spot so you can put an offer in on the property. If you don't know any hard money lenders yet go to your local REIA meetings or search for them on bigger pockets. When you meet them tell them about yourself, where you want to invest, what priced properties you will be investing in and if they will fund your area of interest. Hope this helped. If you want to talk more on this feel free to contact me. Thanks

Mike