2022 - I have a deal, will the money easily follow?

Question

On the BiggerPockets podcast, we're frequently told that if you find the deal, the money will easily follow. Are they saying this because it's a seller's market?

Next year when the housing market turns into a buyer's market, are they going to tell us that if you have the money, the deal will easily follow?

Or is this a rule of thumb that will always work out? (If you find the deal, the money will easily follow)

By "deal", I'm referring to a property that meets the 70% rule.

Account Closed · Answer

In your world, what is a "deal"?

That means a lot of different things to different people. Will the money follow? Not really. You have to either have an existing relationship with a lender of some sort or a "spectacular deal" (defined by whomever you want to borrow money from). We'll be moving from a hot market to a speculative market. It takes more work to find money in a speculative market.

Keep your eye on Evergrande in China. They are $300,000,000,000 ($300 Billion) in debt as one of China's real estate conglomerates. They are about to go bankrupt. It could cause markets around the world to shake. But, . . . . maybe not. When things are uncertain, money tightens up.

Jon Schwartz · Answer

The housing market is going to turn into a buyers' market next year???

Jon Kelly · Answer

@Mike Schorah The phrase, "if you find the deal, the money will easily follow" has nothing to do with buyer's vs seller's market.

It means when you find a great deal you will easily find the money for it. Either you will come up with the money or you can easily borrow from family/friends or other lenders because it's such a great deal.

It's easy to find money when you find a great deal with 16% COC, 12% IRR, $200+/mo in cash flow, etc.

It's tough to find money when you have a crappy deal with 4% COC, 2% IRR, $25/mo in cash flow...

Steve Vaughan · Answer

The 70% rule is an old one that says you want to buy at 70% of ARV, minus repairs.  Basically only buy for 70% of FMV.

Needless to say, 90% of people that swear by 70% have been sitting on the sidelines frustrated since about 2014. LOL

I'd say if you're networked and experienced, fair money can follow a deal.  But it's not easy.

If you're new and don't have a network of good folks around you, the money may follow, but it will come at an extremely high cost.

Here an average investor can find a mostly decent, specific HML at 8% and 2pts + oversight the whole way.  Could be a benefit if you're new and want the 'assistance'. This is probably a newbs best case scenario.

Later, private money can be used.  I usually pay 6%, no points, no oversight, for longer terms, but capped at about 60% LTV/LTC.

You as the operator/investor matter and will determine how easy, efficient and inexpensive the money is that follows.

John Flanagan · Answer

I agree with Account Closed. The concept of a deal is all relative... It also depends on where exactly you plan on finding the money.  Banks or hard money lenders don't care whether you got a "deal" or not, they only want to make sure they get paid back w/ interest.  If you're dealing with private investors all they care about at the end of the day is how it benefits them, regardless of whether it's a buyers or sellers market.  If you show value by making them money or highlighting the opportunity to make them money then usually the money will follow.

Jeff S. · Answer

Don’t subscribe to the myth that if you find a great deal, the money will somehow appear @Mike Schorah.  This is the stuff pedaled by gurus.  You should be looking for money as hard as you are looking for properties. The last thing you want is to be scrambling at the last minute to find money after having an offer accepted.  Plus, private lenders are as different as fingerprints.  A deal that works for one might not work for another.  If you meet many lenders and learn their lending criteria, you’ll be able to pick and choose the best match.  This is not hard to do.  Just stay off the web.

Craigslist, Facebook, LinkedIn, Connect Investors, and the like are crawling with scammers.  Note that the lender list on BP is not vetted.  The best and safest way to find lenders is at local real estate clubs, face-to-face.  If you can’t meet in person to develop a relationship, do it over the phone with a list of informed questions. Meetup is a good site to find local REI clubs.

Local lenders will understand your area, the prevailing lending rates, and potential obstacles you might face.  They will also be more inclined to provide an accommodation to someone they know when issues arise.  Rest assured; you will have issues.

@John Flanagan wrote:

“Banks or hard money lenders don't care whether you got a "deal" or not, they only want to make sure they get paid back w/ interest. If you're dealing with private investors all they care about at the end of the day is how it benefits them ...”

This is the basic definition of a predatory loan. Anyone willing to loan to you without evaluating your deal, perhaps approving you quickly, or uncaring about its profitability, is either a scammer or an idiot. Legitimate private lenders, be they professionals or your mom, will absolutely care if you have a deal and will make money. This is how you pay them back and also how you stay in business to borrow again. And no, they don’t want your property.

Eric Bilderback · Answer

@Mike Schorah

What is the 70% rule?

Finding a deal is great but I have found more deals then I have money.  Funny how when I have had money I can always find a deal.

I cringe a little when podcast people or folks like that say if you find a deal you will find the money.  I have found the opposite to be true.

Good luck man,

“When I was poor nobody bought me nothing.  Now that I am rich people give me free stuff all the time.”  -Charles Barkley

Alan Bostick · Answer

@Eric Bilderback

I agree with you. This is an age old law of the earth. Proverbs 18:16 “A mans gift makes room for him and brings him before great men”

Eric Goldman · Answer

having the contract in hand is a great way to find money. Personally, I like going into any deal with the money in hand already.

Sammy Brazell · Answer

I COMPELTELY agree with  @Mike Hern

2022 - I have a deal, will the money easily follow?

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