I just read a post here from a gentleman asking for a lender who would either lend on the down payment of a house, or lend on the entire purchase of the house.
The responses were mainly that there are no hard money lenders that will lend more than 90% of the purchase price.
While everyone responding is technically right about hard and private lenders generally not lending more than 90% of the purchase price, that is not the whole story.
I get the money to purchase properties all the time for both purchase, rehab, and everything in the middle.
And before you say, “that is all private money that you have existing relationships with.”
I have also received full purchase and rehab from hard money as well. (Not every lender will do it but there are those that will)
The bottom line is the secret to getting funded lies in answering the 2 questions EVERY LENDER asks, or for that matter every person looking to invest, from Bank of America, to the guy at 3 am considering on whether or not to buy a shamwow.
There are 2 questions every one of them will ask and if you answer them TO THEIR satisfaction, you will ALWAYS get funded.
On the other hand, if you didn’t get funded, check the questions, this is where you blew it.
And the questions are:
1) what’s my security?
2) What’s my return?
Now I know that for many, this will be a let down as the questions seem to be too simplistic. But hear me out.
When the private lender asks you about your “deal history,” or if you are putting “any skin into the deal,” or when Bank of America has you fill out their 10-03, checks your credit, bank statements and tax returns, they are asking the same question. What’s my security? How am I not going to lose my money?
Again, if you answer that question TO THEIR SATISFACTION, the next question will be relatively simple. You will simply have to either pay their standard rate of return or negotiate a rate that will work for both.
Now here is where it gets to the meat.
If I were to ask most of the seasoned investors who responded to the gentleman about his loan, if they were presenting a deal to “Mr Private Lender,” and he asked them point blank, “what’s my security?”
Undoubtedly, the vast majority would say, “the property along with a first mortgage at a very low Loan To Value.”
While this is a valid answer, this is where most people blow it or at the least fall into the answer unknowingly, which still make this process hit or miss.
The property and the mortgage are the collateral. The security is YOU.
Let’s look at BOA again. The personally look at your credit, you bank statements, your tax returns, etc… The property, they outsource. They are less concerned with the property except as collateral and just want to verify that it’s suitable. The main criteria and the one they personally vet, is you.
Think about this, if they like you, trust you, and believe in you, (in that order which I will explain in a sec) then most if not all the work is done. Now all you have to do is present them with a property suitable and keep your word.
On the other hand, if they don’t like, trust or believe in you, you could provide them the best deal in the world, at 10 cents on the dollar or better and they won’t do the deal with you.
If it is first contact, first they have to like you in order to even give you the time enough to consider to trust you. Once you get to the trust stage, they will consider lending their money, still concerned if they will actually get it back.
By the way, something to think about. The first 30 days after a loan is the most stressful time for a bank. They don’t know if they will get even their first payment, however once 6 to 12 payments have been made, they assume that continuing to pay will be most likely. This is why refi’s are so much easier to do than purchases.
(Side note: a way to fast track your stage from trust and belief would be to close the deal and either the day of or day after the closing, make your first payment. This proactiveness will automatically build up confidence in you.)
Think about this, If the real Warren buffet were to post here an investment opportunity to invest personally with him, I couldn’t imagine a single person here not ponying up to get in line to let go of their money.
On the other hand, the gentleman who posted, put no context into his request and the vast majority of the responses coming from the lender’s standpoint, gave him the standard to sage advice that this wasn’t really a possibility.
Only one person even made a request for more information and only then as part of his response did we even find out that the gentleman has closed deals and had the 20% to put down should it be required. But no one would have known this if it hadn’t accidentally come out.
Would this info at the beginning made a difference? Most likely.
Hopefully this will help some of you get more deals funded by remembering not just to sell the property, but to sell yourselves.
Hope this helps.
