Seek funding first? Or other way around?

Question

When seeking private loans to do a buy and hold using the BRRRR strategy, should you shop around for loans using a directory such as Private Money Goldmine, or get something under contract first, then seek funding?

Lori Greene · Answer

While it is easier to get the loan when you already have the property lined up, you have to start somewhere. So, get your funding lined up first. Then once you do a successful deal, you already have a relationship with the lender for the next one. Then, line up your next property for this lender.

Also, if you want the easiest funding, where YOU set all of the terms (including the interest), start lining up private investors. That's all we ever use anymore. It's easy. Everyone you talk to, everywhere you go, strike up a conversation about what they they do for a living, that opens the door to talk about what you do for a living.

Say, "If you know anyone who wants to invest in real estate but doesn't know how, or anyone who wants to make a 10% annual return on their money without having to do a thing, let me know. I'll hook them up. They put up the money, I do all the work, they get their return usually in less than 6 months."

You'll be surprised at how many people will say, "I'm interested." Especially business people and entrepreneurs because they understand the value of investing.

Good luck!

Jeff Goodale · Answer

Get funding setup first.  You will want to be upfront with the lender on what you are trying to accomplish.  You want a lender that is on the same page with you.  You don’t want to be surprised later that they won’t refi the type of property you bring to them.  You want to discuss minimums loan amounts as well.  Most will have a minimum amount.

You will also want to be sure everyone you talk to is not pulling your credit.  You don’t want a bunch of hits on your credit report.  Once you have a lender you are comfortable with they should also work to help you get your credit to be as favorable as possibly so you get best rate and that could take several weeks depending on your report.

Shawn Mcenteer · Answer

@Ted Meltzer also having a property selected makes lending process easier. I like to send property to lenders along with all my information to see where I stand.  That way lender will put in asking price, taxes, insurance and the property will act a bench mark.

Shawn Mcenteer · Answer

@Ted Meltzer how do you know what price to even look for. Imagine passing up on a property that meets your criteria because you think you can not afford it? Or imagine you get offer accepted to find out you will never qualify for loan. Most realtors should require proof of funds with all offers anyways but not all require it.

Jerel Ehlert · Answer

Start developing relationships with lenders, *and at the same time* look for deals.  Select 2 or 3 that you like who have different enough lending criteria to be significant.  Larger ones will have events or sponsor them, attend those.  This way, when you have a deal needing funding, you won't be a stranger.

Tom S. · Answer

@Ted Meltzer  Agree with above posts, call the lenders first and see their requirements in terms of credit, downpayment, and other required documentation, so you have it lined up and a pre-approval letter.

Shaun Smith · Answer

Definitely get a proof of funds letter first. You wouldn't want to miss out on a great property due to not having all your ducks in a row

Kelly DeWinter · Answer

Funding first with some sort of pre-qual letter.