Buying from a Wholesaler Without Cash

4 Replies

Hello BP wholesale experts!

I am pretty new to real estate investing and was wondering if wholesalers typically only sell to buyers who have cash or "fast" money like hard money? Can a buyer use traditional financing when doing a wholesale deal?

Thanks in advance!

- Shawn

Hi, Shawn - we've bought from a wholesaler using hard money, though not conventional. However, I don't see why you couldn't theoretically. I say theoretically simply because conventional lenders tend to be so risk-averse they may balk at acquiring a property that is under contract but not a direct sale. You might try through a local bank or credit union as opposed to a mortgage giant like Fanny/Freddie. I'd love to hear any lenders chime in on this. Good luck!

Whats going on Shawn,

The reason why it is uncommon for someone to purchase using a conventional loan is because 9x out of 10 the seller wants a faster than average closing date. Another reason is we are mostly dealing with properties that need a rehab and these banks are not the kind to fund deals with higher risk. 

Hi @Shawn S. You are going to want to use private money here. You could use traditional financing but you will very likely not be able to close fast enough. Also as started above these properties generally need repairs that banks do not like to lend on. A private money lender will look at the ARV of the property. They know why you are buying the deal at a discount. I recommend getting set up with a private money lender before you look at these deals. I know of a lender that can pre approve you for a private money loan. This will save 1 week on average on the loan origination process. A pre approval can make the difference between being able to close on a deal or watching it slip away.

Hope this helps,