Chicken or the Egg...and other Newbie questions

Hi all,
I hope I haven’t missed the answers to my questions below while reading y’alls posts but if I have, please bear with me…have read a lot of posts before joining here!!
I may have perhaps read one too many REI (rehab type) books, as I’m evidently confused about whether to line up the money or find a potential deal, first. I can see the advantages of each approach and have read good arguments in favor of each. So, it’s a “Chicken or the Egg” question - what say the seasoned hands here?
A further question re: sources of cash: loan broker v. HML. I am much more fee-sensitive than rate-sensitive which argues against HML’s but I like their apparent ability to close a deal fast, unlike most more traditional lenders. Given my planned short-term strategy of rehabbing v. buy-hold, I’m more concerned with establishing a good long-term relationship with a lender so that I can (hopefully) have simultaneous deals working and turning. The question is whether it’s preferable for a newbie to approach a loan broker or an HML…or does it really matter at first? (My relevant vital stats as a future borrower are 1) FICO in 790’s and 2) Cash in banks north of $175K, 3) Don’t mind leverage, 4) Plan to be doing rehab full-time, 5) Am a “recovering” commercial banker. :wink:
Thanks in advance for y’alls opinions and please excuse what may be naive questions!!


In my experience the best deals are the ones that require speed.
Finding deals IS this business. The best ones are properties that no one knows are even for sale. The last thing you want is a homeowner who is willing to let something go for 60% of what it is worth TALKING to anyone. Get them signed and let them know you are ready to go financially. There is no better way to prove that to someone than a letter from your bank or attorney stating the funds are immediately available for a quick closing.

I like to bombard these people with my ability to get them their money as fast as THEY want it. I’ll have them call my lawyer, I even go as far as giving them his name and telling them to look it up in the phone book. This way they know who they’re talking to. Same with my banker, let them look it up. This stuff sounds crazy but when you explain to these people that if I just gave you the number you could be talking to my brother. I always emphasize the pitfalls and show them how I am going out of my way to prove myself to them. This is VERY reassuring to a seller and gives you added leverage as the things you have told them are shown to be true.

As someone who is new to this field be very careful at this time. Don’t get me wrong. A great deal is a great deal, but the market is without doubt moving down and in my opinion could fall another 25% before it levels off. Just keep that in mind. Your properties should be home runs in this type of market. Pay no more than 60% to 70% ARV.

Good Luck!