Chicken or the Egg, Financing or the Deal?

Question

New investor here. I want to find a fixer upper and finance it via private lending. I will then fix it up and refinance through a Credit Union.

Quick question, do I find and set up financing first, or search for a great deal first? I know that you usually have to act fast on a good deal, but I also dont want to leave a lender hanging until I find said deal.

Tarik Turner · Answer

Lenders do not mind issuing a POF or reviewing an applicant as long as there is future business to be done.

Always have your loan product in place prior to searching for the deals so you know what you can get approved for and how much cash you may need to come out of pocket with.

Shaun Weekes · Answer

Get approved so that you know what you qualify for.  This is key because if you get a loan with a private money lender that doesn't mean you'll be able to refinance out of it.  So, getting pre-approved from the bank or broker or credit union is crucial to cash flowing and telling you that your max loan amount is 200K for example.

I hope this helps and have a great day.

Tarik Turner · Answer

I would say other than obvious rates and loan expenses you want someone who has a great response time, hassle free and lender with a simple (and most importantly) quick process - Time is always a major factor in RE investment loans

Nathan Braithwaite · Answer

@Tarik Turner

Thanks for the response. My follow up question is how do I select  good lender? Is one just like another? Other than the interest rate percentage, what else should I look for? For one thing, I don't want to get scammed, and I also do want the process to be to arduous and complicated. I guess I should just start asking around and making phone calls to see who I mesh well with.

Nathan Braithwaite · Answer

@Shaun Weekes. That makes sense to ensure that I am prequalified with both private money and the bank prior to finding my deal. I'll also definitely not to drag my feet about looking/finding once I do have funding. Thanks.

Barry Ruby · Answer

Hi Nathan,

If you are working in an area where there is lot of activity and competition, you do need to be able to "act fast". Having the debt and equity capital in hand or at least lined up will allow you to make an offer you can perform on. It will/should also inform and shape the offer you will make on the property and to more accurately assess the financial performance of the transaction you are structuring.

Introducing yourself to lenders and letting them know that you exist and qualifying them to understand their focus in making loans, their underwriting practices and the terms and conditions they would offer you if and when you found a deal that matched the lender's criteria makes a lot of sense. Prequalifying a lender should and then presenting your investment to them should not leave them hanging.

Chicken or the Egg, Financing or the Deal?

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