All Forum Posts by: Gary Tsai

Recently, I've been searching for ways to fund a deal but I keep getting conflicting information about the purchase contract from various sources.

A little while back I posted a question here about the process of making an offer when private/hard money lenders are involved. My impression from the responses (which were great and very helpful, by the way) is that I should get pre-approved for a loan. Great.

The real estate agent that showed me the property that I want to purchase tells me that she needs earnest money and proof of funds letter from my lender before submitting the offer. Fair enough.

What threw me was when I spoke to one private lender, one of the first questions he asked me was, "Do you have a purchase contract in place?" I told him, "No, because my real estate agent wants a proof of funds letter." His response to that lands somewhere between annoyance and exasperation, but he basically told me to call him back when I get a purchase contract in place.

A conversation I had with the next private lender I contacted basically went the same way.

So, it looks to me like a case of chicken or the egg: My real estate agent won't put in the offer without a proof of funds letter, and the private lenders I've spoken to won't approve me and/or provide a proof of funds letter without a purchase contract.

What am I missing here? Am I getting the runaround?

Thanks Ali and Paul for the warm welcome, as well as the tips.

@Joe Fairless : Doing a search for bridge loans I found more hard money lenders with more favorable terms ... which is exactly what I needed. I appreciate the help!

Hi BP community!

My name is Gary and I'm from Pittsburgh, PA. I'm new to real estate investing but I have already started looking around. Hopefully, I will be closing on my first buy-and-hold rental property soon.

Enough about me, though. I actually found BP while doing research and I must say that I'm impressed by the support that BP members give towards one another. It's inspiring to me and I will work hard with the goal of being a valuable contributing member of this community.

I appreciate your input, Darrell.

All things considered, I believe the circumstances that I am working with presents bigger problems than the deal itself. I believe that the property is well-worth the investment even at a higher initial interest rate. I'm not exactly alone in this, either. I have capital investors and together we have enough capital to last 9 months to a year (depending on the terms of the deal) even without tenants/rent coming in. The issue is that my capital investors do not want to be included on any loan application and I do not have the income stream to qualify for conventional mortgages through banks by myself. Furthermore, not all of our starting capital is liquid. It'll take a long time to acquire it all and we don't have enough to put cash down on the property right now.

This is why I am looking for a private investor for a short term loan to act as a bridge. My broker contact tells me that I'll be able to refinance out of it within a month or two, but I went conservative and calculated 6 months anyways. Based on my calculations, I can break even with one unit (it's a duplex, after all) rented borrowing at high single-digit interest and break even with both units rented while borrowing at low-to-mid teens interest. If I can get high single-digit interest rate and rent out both units, I'd be profiting quite a bit from the deal on a monthly basis because both units are currently or soon-to-be occupied.

So overall, I believe it's a great opportunity. I just need to find the connection to get it going.

Thanks again for everyone's input. It's been very helpful and I really appreciate it.

Clarification: When I said I wasn't planning on rehabbing the property, I meant that I wasn't planning on rehabbing the property for sale.

Hi @Cuong_Le,

I considered the hard money option, but the deal doesn't seem to fit the hard money model.

The property that I am targeting isn't a foreclosure and I wasn't planning on rehabbing the property. It is priced lower than the comps sold within the last 3 months but not low enough to make it rehab-then-sell opportunity (my realtor friend and I estimate the list price to be about 10% below market value). I thought about playing the waiting game because the seller is motivated ... but given that all the comps were purchased within 2 months of being on the market, I don't expect the price to drop much lower.

Given that most hard money lenders will not fund past 65% of the ARV (at least those that I've seen in Pennsylvania), plus the fees, it looks to me that going with hard money would be an extreme stretch in order to get the deal done.

However, I could be completely wrong given that I am new. Feel free to correct me if that's the case.

On the other hand, I do have a separate question relating to what @Jon_Holdman said:

If private lenders are mostly just individuals like myself (albeit with a lot more cash on hand), how do pre-approvals work in that case?

Thanks gentlemen, I really appreciate your input into the matter!

Hi BP community,

I am new to real estate investing and I have a question that I haven't been able to find an answer to.

I am working out of Pittsburgh, PA and I found a property that I'd like to purchase, keep, and make money by renting it out. I can't qualify for financing through conventional means (ie. FHA or conventional mortgages), so I was looking to acquire the capital through private lenders.

My question is this: Do I make the offer first and secure the financing for it after the property's under contract, or do I secure the financing first and then make the offer?

Thanks in advance,

Gary