Losing deals without proof of funds

[Corey Westermann]

Hi BPers,

I'm still relatively new and could use some advice regarding getting properties under contract. To this point I've purchased 3 rentals using conventional financing and large down payments. My goal is to continue to buy and hold SFRs in Portland, Oregon.

I'm currently looking to purchase my next property but my debt to income is out of whack and conventional loans are pretty much unavailable to me (even the portfolio lenders I've found).

The market here in the Portland metro is pretty crazy right now and I'm having trouble getting sellers to take my offers seriously without proof of funds. I'm consistently put in back-up position or ignored in favor of pre-qualified buyers. I have a large down payment ready and I'm confident that I could find hard or private money once I had the deal.

I guess my question is this - What strategies or methods should I learn about that will allow me to get properties under contract without being pre-qualified for a loan? Is it really my only option to have investors or hard money lined up prior to writing an offer? How do whole-salers do it - do they really have a POF letter that they include with their offers?

Thanks in advance for the help.

[Mike Nuss]

@Corey WestermannIt sounds that you're making offers on listed properties. That in and of itself is a problem. You're fighting an uphill stream there. Take a look at the buying pool....multiple investors with cash, 1031 buyers with cash, first time buyers with easy financing, migration buyers with cash. That is a very competitive battle so you have to separate yourself. I've sold 4 homes this year. Everyone has been a "pick and choose your offer" proposition. Think of it from a seller's perspective and then try to think how you can separate yourself from your competition? 

Offering more EM with some being non refundable is one way. Making a ridiculously high offer is another way. Getting hard $ pre approval is another. As a buy and hold investor paying a ridiculous high price and/or getting hard $ doesn't make a lot of sense. 

I think the easiest solution to this problem is stop making offers on listed homes. Start marketing directly to sellers and make offers in non competitive (or at least less) situations. 

Listed properties are brain damage. The last listed property I bought was January of 2012. The past 3 years of off market acquisition has been fun, rewarding and truly beneficial to all parties involved. The retail market has a completely different taste to it.

I was recently reminded how great we have it in off market scenarios when offering on a commercial property. We had to increase our offer by over $100,000, remove our financing contingency, make an all cash offer (changing our strategy to buy and refi rather than finance the purchase) and give the seller free rent back in order to separate ourselves from the competition. That simply makes life more difficult. Sometimes the property is worth it, but it better be worth it in order to go through all that brain damage. If we had found that seller prior to it being listed the environment would've been completely different. Less stress, less pressure and a much easier buying process. 

Direct marketing works, it's not for everyone, but it can be much more rewarding that dealing with realtors, over confident sellers and buyers paying too much $ for property.