How Do You Fund Your Deals?
Posted on July 28, 2014 byJust met with a would-be real estate investor. For two years she’s been trying to get into the investing business. Problem is, she has yet to meet with a seller face-to-face.
When I asked why she hasn’t met with any sellers, she said: “What if the seller takes my offer? How am I gonna pay for the property? Banks sure aren’t lending to investors right now!”
Ironically, the fear of the seller saying, “YES!” is what keeps most would-be investors from ever making their first offer. But the astonishing thing is, if your deal is a good one, the money will ALWAYS find you!
We get loads of calls from investors who are looking for money to fund their deals. For example, yesterday an investor contacted me about a 2-bedroom, 2-bath condo he wanted to buy and flip. The condo’s ARV (after repaired value) is $65,000. It needs $15,000 in repairs. The seller agreed to a $48,000 sale price. But when all the expenses are factored in, there’s no way this investor will make a dime on this deal, and that’s why no one will fund this one.
Remember: Some of the best deals you do are the deals you don’t do!
Before she retired from banking, Tina Jennings was one of our institutional lenders. Boy, was she tough! You had to prove to her – beyond a shadow of a doubt – that you had a good deal in hand before she would make you a loan. We thought this was fantastic – especially for newer investors. Tina prevented lots of investors from getting into some seriously boneheaded, money-losing deals. We loved her for this! (NOTE: These days, Tina manages investors’ condos in Panama City Beach, Florida. She and her husband, Parnick, also invest in real estate.)
Now let’s look at what happens when an investor finds a solid, money-making deal.
A couple approached me about a month ago. They needed to borrow $350,000. Here’s the thing: A good number of private-money lenders – including Kim and me – would gladly loan the money on this deal without batting an eye!
Why? Here are the rough numbers: The property’s ARV is $550,000. It’s in a very desirable, high-end Atlanta neighborhood. The seller agreed to a $280,000 sale price. The property needs a $70,000 makeover. This means that there’s roughly $200,000 in raw equity in this deal!
Think about it: If the private-money lender makes this loan, he’s gonna get a solid return. If the deal goes belly up, because the property is the collateral for the loan, the lender will foreclose, then sell this house and make an incredible return!
Because this was such a slam-dunk deal, the couple had multiple private-money lenders show up on their doorstep offering to make the loan.
The person who is out there meeting with sellers and solving folks’ real estate problems is the Rainmaker. Nothing happens until the Rainmaker finds an opportunity and structures it into a win-win deal. Once the Rainmaker has this good deal in hand, everyone else will show up – lenders, contractors, realtors, etc.
Go out there and knock on sellers’ doors. Be the Rainmaker!
Bill & Kim Cook are a husband and wife real estate investing team. They live in Adairsville, Georgia and have been investing in real estate since 1995. They specialize in buying single-family homes, mobile homes and mobile home parks. They also run North Georgia REIA and teach folks how to successfully invest in real estate.
