Proof of funds for apartment purchases?

Question

Is it typical for the seller or his agent to require proof of funds just to look at the property. I have came across this several times recently. I'm looking at 12 to 40 unit properties. I will raise private capital for the purchase. I do have other properties but they are leveraged to some degree. Not a ton of useable equity there. Any advice is much appreciated.

Thanks

Jeff Greenberg · Answer

I tell my team that if the broker is asking for pof, they think that you are a newbie.  If you develop a relationship and know the lingo, you are less inclined to get the question.

Salvatore Lentini · Answer

@John Story Proof of funds is really just a way for brokers to weed out the tire kickers.  If you establish a relationship they are less likely to ask for it.  Also, it really just depends on the broker and how willing they are to sacrifice their time.  By not asking for POF they run the risk of spinning their wheels for nothing.  If they do ask they run the risk of eliminating the investors that don't have the money YET but will get it if the deal is good.

Anthony McEvoy · Answer

@John Story: I do not want to say it is typical but definitely not uncommon for what you are looking at.  For that price point, they know the buying audience is not that large.  Therefore, they don't want to be wasting time.  My uncle was in that situation and would just avoid them until he got his portfolio funding from a financial institution.

It does stink because it is a chicken and the egg theory... how do you get capital unless you bring a deal to the team?  At the same time, how do you know it is a deal unless you view it?

Do you have some sort of proof that you can fund an operation like this from your other deals?  Something that would parallel a pre-qualification letter from a mortgage lender?

Anthony McEvoy · Answer

@John Story: Also, I have shown I have money in one location (bank account) and decided to use money from a different source (sold stocks).  There is nothing wrong with that.  For instance, if you have the ability to leverage a property, then use it to show you have the funds.  If the deal comes to fruition and you decide to fund it with a different method (aka private funding), so be it.

John Story · Answer

Anthony McEvoy getting a statement of past performance on deals is definitely a possibility. I have good relationships with a couple local banks.  Thanks!

Sam Shueh · Answer

Sellers do not want to see the traffic scare off tenants.  We have homes here. The agent demand you show them your bank statement. Anyone can come up with a preapproval letter or one looks like a letter.

Proof of funds for apartment purchases?

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