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by: Stephen Cook
Having a good hard money lender will help you to become more
profitable. You will be able to take advantage of deals when
they come available. You will be able to act quickly if need
be. You will be able to obtain a prequalification letter from
your lender to give yourself more credibility when making
offers, and finally, you will be able to act as the bank by
connecting your wholesale buyers with your lenders so they
can borrow money to buy properties from you.
Pre-Qualification Letters
If you are pursuing a lot of properties listed with real
estate agents you will need a prequalification letter to submit
along with your offers on many distressed properties, particularly
those that are owned by institutions. You can obtain a prequalification
letter from a hard money lender for this purpose, and in fact,
your offers will carry more weight when submitted with a prequalification
letter from a lender that is active in your area whom most
real estate agents--particularly the ones that specialize
in foreclosures--will recognize.
Hard Money Lenders and Your Buyers - A Match Made in
Heaven
It is extremely helpful to have a stable of hard money lenders
to call upon to finance the purchase and rehab of properties
that you may want to buy. However, even if you never buy a
property for yourself, the second and most important reason
to develop contacts with as many hard money lenders as possible
is that hard money lenders will be your best and most reliable
resource in making sure that your deals are consummated when
you sell homes to other investors. You want to become the
bank.
Many prospective buyers for your wholesale properties are
not all cash buyers, whether they claim to be or not. In reality,
most cannot simply write a check from their bank account,
but rather must borrow their money from other sources. Depending
on their source of funds, this may or may not be OK. If an
investor doesn’t have a legitimate source of funds, then it
is your job to screen them a little further to determine if
they qualify for you to take them to one of your hard money
lenders. Many are capable of making mortgage payments and
completing a rehab and would love to buy your properties if
they could come up with the cash. In this case, it is your
job to take control of the deal and lead them to the money.
Become the bank as well as the provider of the property. But
be careful. Maintain control of the transaction and use some
discretion in deciding whom you take to your lenders. You
don’t want to burn bridges with your lenders by bringing them
deadbeat buyers who default regularly. Your buyer's credit
report should show an intent to repay all of their debts on
time, and they should have some source of regular income which
gives them the ability to make mortgage payments to your lender.
Ultimately, you want to be able to take anyone who wants
to buy a home from you (assuming they meet your minimum criteria)
to one of your lenders. I have developed a regular following
of investors who buy from me because not only do I find the
properties but I also line up the financing, and you can too.
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