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Hard money/private lending before or after deal?
Working with a couple wholesalers, see deals I can jump on but they go fast. Wanting to get capital from private lendor/ hard money lendor but from what I understand I'd have to present a deal to them before getting capital lined up. Should I ask for a recent sale from wholesaler to use as an example to present to lendor? Just wondering how i can quickly get capital lined up from lendor and get a target property lined up all simultaneously so that I can close quickly? Any advice is appreciated.
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Originally posted by @Gabrielle Simmons:
Working with a couple wholesalers, see deals I can jump on but they go fast. Wanting to get capital from private lendor/ hard money lendor but from what I understand I'd have to present a deal to them before getting capital lined up. Should I ask for a recent sale from wholesaler to use as an example to present to lendor? Just wondering how i can quickly get capital lined up from lendor and get a target property lined up all simultaneously so that I can close quickly? Any advice is appreciated.
Hey Gabrielle
The lender can only move as fast as you give him the information he needs to make a decision. Once you get that to them, they can say "Looks good, go find a property". They are usually going to need the following information. :
- Application
- Credit
- Entity docs (Articles of Formation, SS4 letter from IRS, W9, Operating Agreement with Member List and if the LLC is old, a certificate of good standing from the Secretary of State's office)
- They lender will order an appraisal or BPO that you will pay for.
- Scope of work
- Purchase and Sale Agreement
- Hazard and Title company contact information
- Your ID's
- Sometimes 2 month's bank statements
It's incumbent on the borrower to do their due diligence to make sure the numbers are tight. A good rule of thumb would be to make sure your total loan to value based on the after repair value doesn't exceed 70%. That means you will have to buy the property right to be able to purchase it and then renovate it under those parameters. Sometimes lender's appraisals and BPO's for the final numbers come out much lower than anticipated. It happens, but make sure you have contingencies built into your purchase and sale contract. Be prepared to walk away.
Hope that helps
Stephanie