Make an offer before finding a hard money or PM lender?

Question

I’ve found a few properties that might be good deals if the list price can be negotiated down a little (~10%). I’d like to put an offer in but will need to find a hard money or private money lender because all of my money is tied up in two other properties. My question is, do you submit offers on potential deals and make them contingent on financing and then go find the money after the offer is accepted...hoping you can do that quickly enough? Or do you find a lender first, explain what you’re trying to do, and then start submitting offers?  I don’t want to waste a hard money lenders time, but if an offer isn’t accepted it might take awhile to find another property where you can get an accepted offer. Thoughts? Thanks!

Tom Parris · Answer

The homes were not in Richardson, one in Paris TX and the other one in Kentucky.

I bought them with cash and financed them both, to owner occupants, for $2,000 down and financed the rest.  The cash flow is great, but I am looking for a lending source---private or a financial institution---to buy many more like these---they need to be in small cities though.

Property management is not a problem, since they own the house and will fix it up themselves.  If they default, I just sell it again!

Andrew Postell · Answer

@Trevor Smith I would ALWAYS suggest getting prequalified first.  What if your loan has higher costs than you were thinking?  If you know that going into the deal, you will know to offer a little less on the home.  If you offer, then have unforseen costs....that's how a good deal becomes a not so good deal.  You may not have ANY higher costs....but you just don't know yet.  Just get prequalified so the unknown becomes known.

Tom Parris · Answer

I have heard the "Find a good deal and the money will follow...." but I am making offers on very low priced homes and if you to close on the deal, you don't have much time to find some lender.

I have found two houses, one for $5,600 and another for $6,400.   I owner financed both of them for $29,000, with $2,000 down payments.    I used my own money for these because, with these deep discounts, the seller wants to close quickly.

Can anyone suggest how to find someone to be ready to finance similar properties?   So far, my "private lending" friends have not shown an interest, so any suggestions will be welcome.    Thanks!

Brian Corbett · Answer

The old saying goes...”find the deal, and you can find the money.”  While I have found this to be true in several cases, I would suggest making some hard money contacts while still looking for properties.  FInd out there lending terms, property terms, etc. that way you will know if the property fits the financing terms of your hard money lender.  They are often more seasoned than new investors and it should be noted that if they won’t lend on it then it might not be the best “deal.”

Tahra Wright · Answer

@Trevor Smith I was always taught to get the deal and if it’s good you’ll find the $.  Most of the hml’s are qualifying the deal, not just qualifying you as a borrower.  They can close in less than 2 weeks but without seeing the deal terms even if you are a stellar borrower they can’t fund guarantee they’ll lend.  In my area a few will pre-qualify you first so that when you have a deal they can just review it and decide to move forward or not really fast.  If I were you I’d talk to some lenders to understand their process and how fast they can close.

Pat G. · Answer

@Trevor Smith Are these properties residential or commercial in nature? If they are residential you will have less time from offer acceptance to close usually that in a commercial purchase. If it is residential when you submit your PA Purchase Agreement you could put in a financing clause, again it is not going to let that be 60-90 days?? I would do both, look for money/partners/investors and put in the offer. If they are truly "Deals" finding the money won't be an issue.

Anderson S. · Answer

So this was posted a while ago, I'd love to know what Trevor ended up doing.

Stacy Patel · Answer

Hi Trevor,

It's usually best to line up your financing first, especially with hard money or private money lenders. Having a pre-approval or at least an established relationship with a lender shows sellers that you're serious and can close quickly, which can make your offer more attractive. Additionally, it can help you avoid the risk of having an offer accepted but not being able to secure financing in time. However, if you find a particularly good deal, you could submit an offer with a financing contingency while simultaneously reaching out to lenders to speed up the process.

Ahmad Taha · Answer

I'm in the same boat Trevor, new to using HML, I've already determined terms but have not submitted paperwork to HML about a specific deal, wondering if should wait until offer is accepted

Tahra Wright · Answer

@Jay Hinrichs for sure. If I’m selling a property to a retail buyer then of course I have the same requirements, even down to who the lender is. But I don’t think that’s the type of transaction that Trevor was talking about!

Make an offer before finding a hard money or PM lender?

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