This week’s podcast episode is designed to help new real estate investors understand how to find money for their projects, and how to prepare to get your deals funded. If you’ve been trying to get your first project under your belt, or maybe even your 20th deal, this is the episode you’ve been waiting for.
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If you’re a newbie investor, you’re probably concerned about finding money to do deals. In fact it might be the most feared topic in all of real estate investing. Here are a few tools on how to get past that fear, get prepared, and a formula you can easily learn to see if you have a deal.
I’ve said this before – If the deal is strong, the money ALWAYS shows up!
How do you really know if it’s a Deal? Check out Zillow, RedFin, Trulia, RealQuest
Get verification – BPO/Appraisal
Get repair cost estimate: Roof, Flooring Paint (in/out) H-V-A-C, Kitchen, Baths
Here’s the formula:
‘ARV’ x 65%. Subtract repair costs. Then subtract a profit you want to make.
The example was: 100k x 65% = $65,000 – $15,000 – $5,000 = $45,000 is your highest offer.
Again, this is THE HIGHEST offer you can make. In a hot market, some people go to 70 or even 80%. I implore you to never, ever go higher than 75% – it becomes pure Speculation!!!
Are they selling below that? How much lower? It might be a deal if you can get it lower than your highest offer. – Still be cautious – not a deal just yet!
Now that you KNOW you have a deal, approach a lender: google your city/hard money broker or private lenders, search craigslist. You can even try moolahlist.com or scotsmanguide.com
You’re now armed with enough knowledge to sound competent.
- Lenders will bounce ideas off you
- Loan application
- Credit report
- How much money you’ll have (if any)
My suggestion is to get 2 deals done, then decide if real estate investing is or isn’t for you. I think it’s much easier to make that decision with $30,000 in your bank account! Right??
Summary: I want to emphasize that Money is available for projects = If the deal is strong enough, the money ALWAYS shows up!
Rehabber tip: Here are the docs lenders will usually want:
- Preliminary Title Report
- Loan Application otherwise known as the 1003
- Credit Report on all the signers
- Appraisal and/or the BPO (brokers…)
- Mortgage or Deed of Trust
- Promissory Note
- Various Disclosures from escrow – HOA, Indian Lease, Land Lease
- You might even need to provide a proof of your funds that you’re putting into the project
If you can begin to compile these docs prior to calling a lender, it’ll be easier and quicker for them to make a decision.
Let’s open it up to Listener Questions!!!
- This first question is posted on episode 2’s show notes page. Eddie says: “Keep them coming Roger. Great info. Can you talk about points and how they apply to lending?”
- This second question is a two-parter from Wendy at WendyReinhardtRealty.com: “Do you have money to loan on Florida properties for my clients who want to fix and flip and are restricted by conventional lenders? Do you have any clients who might want to invest in Florida real estate and use me as their Realtor?”
Now, I’ve got a couple of questions for you:
- Has your greatest fear with real estate investing ever been realized?
- Did you loose everything? Did you bounce back?
To answer these, please scroll down to leave a comment.
I’d also be honored and very grateful if you would rate my podcast on iTunes. Its a tremendous help in the visibility of this podcast. People who haven’t heard it can discover it. I’ll have a link in the show notes.
If you’d like to comment on this episode, please scroll down to the show notes for this episode – I would love to hear from you, please feel free to leave a comment, ask a question, or tell me your thoughts.
I’ll be back next week with another show, so thanks again for listening, and – Keep Moving Forward, my friends! 🙂