Proof of funds question

[Jeffrey Grieshop]

this is a pretty basic question. I better know the basics before the specifics. I am hungry for a rental property. I am ready to look at many and submit offers as well. Before that though, I want the buyer to know that I have the funds to fulfill my end of the deal. I want to be a cash buyer, so how can I become that? I have liquid funds, not enough to cover the purchase of properties I have been looking at though. They would cover some of the down payments, I believe, but not the full purchasing price. I do have a SEP that is pretty healthy for someone 32 years old. But, I think my ticket to financing the rental properties I am pursuing lies in my home. I have it paid in full. I purchased it for an amount of that which is usually 2 to 4 times greater than the investment properties I usually look at. I could nail down my criteria but I am not worried about that just yet. I am familiar with a HELOC, not entirely, but somewhat. Anyway, when I make an offer or I go to a showing I want to know that I have the funds to buy it. I emphasize I want to know I have the funds, not think I have the funds to make the purchase. How do I go into showings being that guy? What steps do I take?

Furthermore, a bit of what inspired this was something Brandon Turner said in The Book on Rental Prop. Investing. He said "those guys in the bank you talk to and say "ya, we can get you that loan" are not really the ones approving the loan. It still has to go to underwriting." So, I simply do not want to be misled and then surprised when I can not get funding.  

Also, I did talk to one lender recently about a loan. He said I was preapproved but I never received anything in writing. There was nothing concrete to show a seller. So, I am a bit confused on how to attack the proof of funds concept. I am seeking some direction

[Stephanie P.]

Originally posted by @Jeffrey Grieshop:

this is a pretty basic question. I better know the basics before the specifics. I am hungry for a rental property. I am ready to look at many and submit offers as well. Before that though, I want the buyer to know that I have the funds to fulfill my end of the deal. I want to be a cash buyer, so how can I become that? I have liquid funds, not enough to cover the purchase of properties I have been looking at though. They would cover some of the down payments, I believe, but not the full purchasing price. I do have a SEP that is pretty healthy for someone 32 years old. But, I think my ticket to financing the rental properties I am pursuing lies in my home. I have it paid in full. I purchased it for an amount of that which is usually 2 to 4 times greater than the investment properties I usually look at. I could nail down my criteria but I am not worried about that just yet. I am familiar with a HELOC, not entirely, but somewhat. Anyway, when I make an offer or I go to a showing I want to know that I have the funds to buy it. I emphasize I want to know I have the funds, not think I have the funds to make the purchase. How do I go into showings being that guy? What steps do I take?

Furthermore, a bit of what inspired this was something Brandon Turner said in The Book on Rental Prop. Investing. He said "those guys in the bank you talk to and say "ya, we can get you that loan" are not really the ones approving the loan. It still has to go to underwriting." So, I simply do not want to be misled and then surprised when I can not get funding.  

Also, I did talk to one lender recently about a loan. He said I was preapproved but I never received anything in writing. There was nothing concrete to show a seller. So, I am a bit confused on how to attack the proof of funds concept. I am seeking some direction

 Reality is you're not a cash buyer unless you have the cash.

If the only place you can get cash is from a HELOC on your owner occupied residence and you're comfortable leveraging your home for an investment property, do it. Many people get their starts that way.

Another way would be leveraging your home and getting a hard money loan.

Get the HELOC and then get a hard money loan for the down payment and renovation costs until you're reimbursed by the HML. Once you're reimbursed, the project is sold and you replenish the HELOC. Rinse and repeat. Another way people leverage other people's money to take their margin.

You may also be able to get a loan against your SEP, but I think the HELOC is a better way to go. As @Fred Shatzoff said, make sure you've got a financing contingency in the contract if you don't have the cash.

Best of luck

Stephanie