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Question

I would like to ask about funding a deal and the order in which it's been said you should approach it.

This is what I heard from one source: FIND, FUND, FIX, EXIT. Seems to me if you go find the property first, that's no different from saying "Let's jump out of this perfectly good airplane without a parachute. We can find one on the way down." If you don't know without a doubt you have someone willing to work with you to fund at least a portion of your deal, aren't you setting yourself up to lose the deal? Why scramble around after you've gotten a house under contract, trying to finance the purchase and rehab? Why wouldn't it be better to find a private money investor first?

Bryan O. · Answer

Hi @Jody Sims. You can't fund until you have a deal, but once you have a deal it's too late to find funds...

What you do is line up the funding: get a private investor or bank that agrees to a flavor of deal. i.e. If I came to you with a 3/2 for $80, ARV of $130k, $20k rehab, and I plan to do it XYZ in this timeline, would you fund that deal? Yes? Okay! I'll go find one!

Jeff B. · Answer

For B&H, the Find - Fund is correct.  Until I know what I'm after, I can't make the loan application.  Of course, my credit and funds must be all in order, but then B&H is very uncomplicated.

Financing was never a problem compared to locating a property WORTH keeping which would cash flow.  My search radius expanded some 120 miles before I found one.

Jody Sims · Answer

You think like I do. I would like to establish a relationship with an investor who will at least entertain a deal before I go out and get a seller on contract. I don't like leaving anyone hanging, neither of us knowing for sure whether I can do what I said I would.

I'm not going to get into a deal that doesn't have a GOOD chance of delivering the profit I seek. I know much of the profit is going to depend on 1.) buying price, 2.) getting ALL the work done at or under budget and on time or before (whether foreseen or unforeseen), 3.) holding costs (homeowners insurance, interest on loans, property taxes) and 4.) selling it for the ARV I estimated, or as close as possible. Practically all I've learned has come from BP, though some is just plain common sense, which, yeah, I know isn't as common as we'd like it to be.

But... in spite of knowing all this, getting an investor to believe I know all this and can follow through... that's the trick.

*Goes back to reading "Ultimate Beginner's Guide" *