How to start out with lenders?

Question

Hello, I am wondering if anyone has used BridgeWell Capitol and what your experience was with them, good or bad. I have done a flip and did very well and am trying to take this business on full time. I am looking to get some funding in place so that I can make offers on property. I have quite a few deals that I am interested in but it seems like I should have funding set up before I make an offer. I have read that you get the deal then approach a lender, but this is kind of a catch 22 it seems. How can you make an offer with no proof that you can fund it? I have also read on here that you can get POF letters but that they dont really mean anything, and it doesn't seem right to potentially make the seller wait however long it takes you to find funding (could be longer than what you initially tell them you can close by). That would seem to make you look bad, and really should. I have about $20-30k in assets to put into a deal and for repairs. Any advice would be greatly appreciated.

Jeff S. · Answer

There are really only two questions that have to be answered in this context, @Eric Renney.

1) What loan information must you provide the seller to get your offer accepted?

These are not conventional loans. There is absolutely no consensus and all deals are different.  Some agents will convince their seller that a POF is all they need to accept your offer.  Many banks will accept these as well. In all cases, the POF should include a bank statement or sufficient proof that there is enough money in an account somewhere to fund your deal. Similarly, a pre-qualification letter means that a lender says they will fund a deal that qualifies.

In neither case does this mean that a specific lender will fund a specific deal and it's naïve to think otherwise.  There is no Catch 22.  You really have to speak with the seller or their agent to ask what they want to see, and then give them what they want. Whether they are worth the paper they are printed on or not doesn't matter.  The goal is to get your offer accepted.

2) What does it take to get the lender to perform?

The name of the game in lending is to keep your money at work.  Many lenders, even large ones, will promise the world, and not be able to follow through when it's eventually time for you to close.  They don't care if they put your EM at risk.  It's a part of the business that absolutely sucks and gives the industry a bad name.  It's also the reason that POF's and pre-qual letters cannot be relied upon.  They are important only to get your offer accepted.

You should be looking for money as hard as you are looking for properties and keep a stable of lenders, large and small, in your back pocket. Meet as many lenders as you can and understand their criteria.  Don't assume that any lender will accept any type of deal and don't assume that since they gave you a POF that they will therefore perform for you. We get a measurable number of calls from borrowers whose lender flaked out a day or two before closing and the excuses are often lame.

We know lenders that won't fund a property if the garage isn't attached to the home.  Why? Who knows, but it's their money and their rules.  They could fund like lightening and have the greatest terms, so it's important you know what each lender wants.  In Florida, I imagine lenders could shy away from certain types of construction.  Everyone is different.

This can work in your interest if you target specific properties to specific lenders and write your offers accordingly.  Once you make the effort to know the players and gain a bit of experience with them, it will be easier for you know who can and will perform, on what, and when.

Never tie yourself to any one lender. I completely agree that the best relationships are local relationships.

Good luck, Eric.

Jon Holdman · Answer

A pre-approval letter means the lender has actually dug into your personal finances and has approved you for a loan, as long as the property qualifies.  You are approved.  A pre-qualification means the lender has taken a cursory look at your finances.  You are NOT approved for anything.  A pre qualification letter is not sufficient to submit with offers.

Forget about the companies you've mentioned.  Network with investors in the area where you want to buy and find a HML that's working in that area.  Most HMLs are small, local companies that only lend in specific areas.  Sorry, but if you're looking for specific names you'll need to post in the Marketplace.  You can check our hard money directory, too.

When you submit your offer you write it as financed and include the pre-approval letter from the lender.  Some sellers may want to see financial information from the lender, if they're a small company.  You really do want to get the lender lined up before you make offers.

Jon Holdman · Answer

Hi @Eric Renney and welcome to BiggerPockets.

You might want to post in the Ask About a Real Estate Company forum and use the name of the company in your subject line to find out about specific companies.

Hard money lenders are lenders and you should write your offer as "financed" not "cash".  So you will need a pre-approval letter from the lender, not a proof of funds.  You should put in a realistic date for financing and other contingencies.   If you can't close by the dates you put in the contract, the seller is entitled to cancel the contract and keep your EM.

Eric Renney · Answer

Thank you

Jeff S Na  for all the information. I have been learning how important getting multiple lenders lined up is for a successful real estate business. I have acquired two private lenders who are willing to take on one project each at a time for now. Hoping to continue to grow my lender base. I have contacted bridgewell capital and am using them to acquire 2 properties at this time. The rates seem better than most hard money lenders I've found so far and they have been easy to work with. I am hoping to close on these two properties within 2-3 weeks.

Eric Renney · Answer

"Update"

The two properties we were set up to close with Bridgewell Capital were probate homes. The seller had told us that they just needed the final probate paperwork from their attorney and could close in 30 days. We are still waiting. We have found that probates can be very lengthy deals but there is always progress being made.

We have since made great relationships with some private lenders who have offered to fund the 2 properties for about half the interest and no points. So obviously we took them up on their offer.

What I can say about Bridgewell Capital is that they were very professional and very quick about getting everything ready for close. There were no problems or crazy requests. I will defiantly use them in the future if I cannot get private money 1st.

I was happy with the service and professionalism. Unfortunately I cant say how smooth the close would be. Based on what we did with them I would imagine it being just as smooth and easy as the rest.

They make the process very easy and take care of about everything throughout.

When we use them again I will try and get on here to share my experience.

Has anyone else used them that can share their experiences?

Jeff Copeland · Answer

I second what @Jon Holdman said above, with one exception.

The Florida (FAR/BAR As-Is) contract does not have a financed or cash option, per se.

Rather, it ask whether you are asking for a financing contingency. Specifically, the "no financing contingency option" states:

"(a) Buyer will pay cash or may obtain a loan for the purchase of the Property. There is no financing contingency to Buyer’s obligation to close."

So basically, you are saying, I may pay cash, or I may finance my purchase - but if I fail to close (barring other contingencies, such as inspections), then I forfeit my earnest money.

Most sellers and listing agents are going to want proof of funds or a legitimate pre-approval letter to accompany such an offer.

Hope that helps.

Marcus J Richardson · Answer

Account Closed are those bank credit lines or credit card business credit lines?

Account Closed · Answer

They are or can be both you act as personal guarantor

Account Closed · Answer

hi Eric! I've been using lines of credit to finance deals. It's score based only with less red tape and restrictions than private and hard money.720 score or higher nets you up to 300k

How to start out with lenders?

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