Hard money vs Private Lender

[Sarah Robinson]

I have a few questions. Please bear with me as this might not sound particularly sophisticated...

I want to make offers on houses! I have done a lot of research and analysis on *primarily* single-family homes with fix-and-flip potential. I am still in the process of saving some cash to put into the deal myself, but I would love some input on what "next steps" I should take. 

Do I approach a hard money lender before making an offer on a house? My understanding is that timing is key when it comes to making offers, but I can't really make an offer on a house without having funding already secured, or can I? I know this is a "chicken and the egg" kind of question. But seriously though, what do I do if I make an offer on a house, it is accepted, and then I can't find financing for the deal? Does the deal just fall through and I move on with my life to try and find something better? Can I walk away without tons of fees from something like that? So that is scenario 1... 

Scenario 2 is preferable to me in some ways. I would love to find a partner in my area that would be willing to have me do the footwork/they provide financing, and we split the deal profits 50/50. I know there are people who have the money but don't want to really put in the time and effort to go to the property regularly, oversee the work, etc. But of course, this does mean having to work with someone I barely know, in a more intimate way than a hard money lender would require. Is it wise to partner up with someone in this way, or will I need an attorney to do this safely? I am concerned about the implications of this... On the other hand, I would hope to find someone who was willing to do the financing for just the profits, instead of charging incredibly high interest rates like Hard Money would. Is that an unreasonable expectation? 

Pardon my barrage of questions, but if anyone is willing to tackle this, I would be extremely grateful. :) 

[Derek Dombeck]

@Sarah Robinson

You can likely find everything you need by joining a local Meetup or REIA. Start building your network and just be honest when you meet a seasoned investor. Let them know you have the time to work if they would mentor you and help with the needed funds.

As far as hard money goes, every lender has different criteria. When I lend, I will go up to 65% of the After Repair Value. This means, if my borrower can purchase and repair the property within that 65%, they don't have to use their own money.

When you are searching for private money, think retirement accounts. Many people you know have IRA's and 401k's that are under performing and would love to lend it out. The first step is to learn this process inside and out, so you can educate potential lenders about the steps.

Last but not least........ Don't wait to make offers! If you had millions of dollars to spend but you aren't making offers, your backers will grow tired of waiting quickly. If your deals are good, you will find the money.

Happy Investing

Derek Dombeck