How to bild relationships and get pre-qualified

Question

Hi everyone. Ben Barredo here from Knoxville, TN, a fired-up real estate newbie that is grinding and fighting to make things happen.

I have a question...well, a two part question.

I've listened to a lot of podcasts, read a lot of forums, and read books telling me to go out and meet bankers, loan officers, and make relationships. How the heck do I do that? Is it acceptable to just walk into a bank and take up a loan officer's time while not really offering to do anything that day? Will I be chased off or looked at like the 90% of "shiny-object" syndrome newbies that talk a lot but don't do anything? Should I wait until I close a few wholesale deals before I try to approach them?

The other part of the question is, how do I get pre-qualified with a letter from a lender so that I can make offers or bid on Auction.com for a 25k foreclosure or something? (has anyone ever used Auction.com? I found it today and there are a TON of cheap SFH on there in my area). Should I wait until I have 20% saved up?

Josh Braun · Answer

Regarding your first question - I've found it completely acceptable to meet new bankers and ask for pre-approval. The key here is to make sure you aren't wasting their time with a lot of questions.  Do your research before hand and present your situation fully informed prior to the conversation. Google "what bankers look for to pre-approve". Come prepared with a personal income statement, balance sheet and proof of income. Over prepare and be organized. And yes, if you are going to go the bank route, get preapproved before your have a deal lined up.  When you have your deal lined up, present it to the bank in a full business plan (property description, proforma, line item rehab budget, multiple exit strategies, etc).

Your second question - do your research before buying anything through auctions.  I always recommend folks to not waste their time there and go direct to seller. Much easier to find title issues before hand and less competition.

Regarding deals - you mentioned "as a newbie I don't always know if I'm looking at a deal".  If you don't know if it is a deal, you are going to have a hard time persuading an investor to know it is a deal.  If you find a true deal, investors will bite.  Make sure it is a deal though.  Present your deal with comps, rehab budget and multiple exit strategies for the investor.  There is no secret formula.  Here is how you do it and it takes work:

• Systematically analyze 100 properties in the zip code you are marketing (run .25mile, .5mile, same subdivision comps for similar houses; determine repairs needed, find out average days on market, determine your proforma, identify what purchase price you would have to get it at to make a profit using the 70% ARV formula, determine your profit after all costs incurred) 
• Determine 70% ARV purchase price, rehab budget, ARV, and at least 2 exit strategies for all 100 properties
• View the inside and prepare a detailed rehab budget for at least 10 of them
• Post your best 3 properties on BP and ask for folks to give you their feedback on how you analyzed

If you do EXACTLY what I mentioned above, I guarantee you will then know what a deal looks like and your confidence will increase.  I'll be candid with you though, most people don't want to do the above, because it takes work and they are looking for a secret formula.  If you want it bad enough, you will roll up your sleeves and do it though.  That approach worked for me and worked for others I gave the same advice. However, most folks don't take the advice because they want to watch TV on the weekends instead of working the extra side hustle.

Steven J. · Answer

Yes, shoot hoops with your dad before you go to the playground for stakes.

Banks most likely will blow you off as your suggest because they've likely seen plenty of folks come through promising to do this and that and never get anywhere.

As for bringing a deal keep in mind the cost of education. Although you may strike a deal on an awesome home and wholesale it to a pro AND get paid in the process its more likely that you can find a good lead, mention it to a investor and ask for help, and they close a deal and make a million bucks and you get a good education. Maybe you missed out on some money but you gained a lot of experience as well. Keep in mind, this is an exaggeration but its applicable. My first flip I was lucky to make money as well as learn.

My mantra is that losing no money and getting an education is still cheaper than college education (but I'm not dissing college).

Benjamin Barredo · Answer

@Steven J.

Ooh, that's embarrassing. I type really fast and get ahead of myself a lot. lol

I didn't mean that banks saw me as a shiny object but rather as a newbie with a "shiny object" syndrome running around thinking he's going to be the next Real Estate Billionaire and they blow me off.

I have just started going to meeting last month (I've been to three) and I'm making connections but so far I'm getting the same offer from investors. "Bring me a deal and I'll show you how to work it". Which is AWESOME, but first I have to find a deal and as a newbie I don't always know if I'm looking at a deal. And then, unless I get the deal under contract myself, they're still not interested in helping. But maybe that's because I haven't met the right person yet or they haven't seen me enough yet to know I'm serious. Idk.

Finally, did you mean to say to meet small size bankers "outside" my area? Is that just for practicing purposes? Like shooting hoops in the driveway with dad before going to the playground court for a pick-up game?

Thanks for your reply. I'll try to fix that spelling. I don't want to be viewed as "the illiterate guy" on BP. lol

Steven J. · Answer

@Benjamin Barredo first of all check your spelling on the word 'build.' But great questions. Its tough to know how to put the horse before the cart instead of the cart before the horse. I definitely suggest that you practice building relationships with banks outside of your area that you are likely not to work with. Make these visits to community banks and credit unions as big name brand banks won't likely give you the time of day.  It sounds like time is a concern of yours and of others which is good. You'll likely waste time of some loan officers in the beginning and that's why you start with outside banks. I'm doubtful many lenders will see you as a shiny object that is excited but rather an overly enthusiastic newbie who likely won't do anything.

As for building up some sway with closing some wholesale deals: Do it, if you can. It may be just as hard to build relationships with the right people but it could be done.

I wouldn't rely too heavily on auction.com. Its a commercial sight that many others can see as well so you're not getting the best of the best in most cases.

My recommendation to build relationships is to team up with another investor. Learn from them and what they are doing in your area and hopefully they bring you along to meetings, and introduce you to the right people.

Best of luck!

How to bild relationships and get pre-qualified

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