Which one comes first, the Chicken or the Egg? The Money or the Deal? Why Do Most Investors Fail To Buy A single Property? PART TWO

[Toyin Dawodu]

 Which one comes first, the chicken or the egg? The money or the deal?

I really want the veterans to weigh in on this topic because it will help the newbies a lot. I got a lot of direct response from newbies about lack of money.

As many have stated also on the post, money or finance is another reason keeping them from making their first deal.

My question to veterans, "did money really keep you from making that first deal?" If it did, how long did it keep you from that first deal?

Sometimes we have to crawl before we walk. For example, I remember when I bought my first house, I had to qualify for the house as owner occupant. It was a HUD property, but I also knew I was getting it way under market. My goal was to fix it up while I was living there until I sell it. But that never happened. Four hundred houses later, I have not had to qualify for another loan or go cap in hand begging any bank or lender for money to finance my deals, I make them chase me.

So how did I do it? How did I buy four hundred properties with very little or no money? Some of the veterans know the secret, so I am going to discuss how I did my first few deals here. Please give me your response if this resonates with you or if you have done this too.

When I began heavily buying properties, I had been toying with this idea of taking over loans subject to. This was a popular concept in the eighties, until it the lenders started the their "due on sale clause" noise.  But for those who know how, it’s still a good and easy way for a good deal maker to buy properties with little or no money.

So I bought my first take over deal and took title to the property. Two weeks later, I sold it with a wrap around and netted $5K, plus another $20k in the back end. Then I leveraged the $2k cash for down payment on the next deal, and on and on.

HARD MONEY TO THE RESCUE

When I first approached a hard money lender to finance my first real deal, he literally laughed me out of the door. I gave him the deal scenario and he told me he would only finance 70% of my purchase price. Then I asked him, “where do you expect me to find the rest of the money?’ His answer was, “you should have been buying the property for 70% of market value to begin with” Then I asked him “who will be stupid enough to sell their property at 70% of market value?"  His answer was. “Toyin, they are out there, you just have to find them” He was right. I found at least eight five of them that he financed to the tune of $8.5M. I did not put penny down on any of the deals. On some deals, he also financed the rehab and I ended up with money in my pocket at closing.

WHAT IS THE LESSON?

As a newbie, your focus should be on finding good deals. Once you find the deal, the money will show up or you will find a partner or a mentor to walk you through the process of getting it financed.

Another problem I see from the comments on my last post is that most newbies do not know a good deal even when they see one, so they spend their time chasing bad deals that no lender will finance unless you are putting 30% down and qualifying for a loan.  I’ll probably address this topic next.  What is a good deal and how to find them?

Hope everyone will jump in and tell us if money is really the problem or the right deal is the answer.