Find the Property Deal First & Then Find the Money or Vice Versa?
Everyone has opinions and all depends on the individual real estate investors.
I have been to many real estate meetups and hear property investors say, “Find the deal, and then you can find the money.”
I would disagree with this approach. You are not the only one looking for good deals. Once you have a good property deal you need to lock it up & make sure you have all the funds. All the funds, mean refurb money, and even back up money in case for any crazy reason you can not get end bank financing at the end. Too many think it is guaranteed that a bank will lend you at “favorable” terms when you need to renew. Do you remember the appetite in 2009 from banks? How would you get out of your deal????
Lets face it…I have been investing in real estate for decades and Property Deals can move extremely fast!
Especially good deals from motivated sellers.
If you don’t have the money and financing in place first (before you find the deal), you can jeopardize losing the deal. Take into consideration no matter how much money you have, you will never have enough with real estate investing. Sam Zell a billionaire made this statement….and if it was true for him…it will be true for me and you.
You need to establish your money partners, ie banks, bridging companies, private money lenders, or even borrowing against your home ( not suggested)
Most banks are prepared to lend a 70 to 75% LTV (loan to value). I personally want much less. I have gone through 3 crashes and property investors who took out those loans were wiped out. I owned a bridging company and even 65% LTV loans went south. I spoke to a mortgage broker yesterday to see about 50% LTV loans ( yes I am paranoid). There are many reasons to borrow…however for me, it all depends on the maximum duration I can borrow. The longer the better. A long term loan can become an asset in the low interest rate world we are currently involved with..This can change as it has throughout history.
Consider private money for property acquisition and renovation stages and then refinanced the property with a bank (once tenants are in the units). That way we can capitalize on the value we added to the property through the rehabilitation. Either way, you need to know where the money is FIRST. Private money is friends and family. Many times this is the cheapest way to move forward.
What myself and my JV partners do is we are constantly sourcing for “Great” deals and parallel having discussions with all types of investors who want to get better returns than in the bank….We are in discussions with a Hedge fund to funds us as well as always willing to meet. Be available…be present…
Yesterday at the suggestion of a solicitor whom I had a meeting, he suggested meeting with a bridging company. I expressed to the bridging company I was not looking for a loan, rather I told expressed to them when I had my bridging company in the US, I would JV with investors and actually made more money than simply lending. I received equity and debt. We discussed two current potential deals we made offers on that are rather lucrative. Will be interesting to see how this comes to fruition as lending as a Bridger has gotten very competitive and real estate investors are looking for higher LTVs ( more risk for the bridging company) and lower interest rates.
In summation, we are not just looking for the Great deal…we are looking to build our liquidity and willing to share it with the right investors ( with experience & knowledge)…
I would strongly suggest the same to all. Any questions please feel free.
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