Securing lending options in today’s environment 

By Tom Berry, Investor Loan Source

Securing the debt financing to purchase investment real estate has been fairly easy over the last decade as we have been in a long period of plentiful capital and historically low interest rates. It seems you could find lenders in every direction, ready to lend on a good investment property but as recently as a year ago, we started to see a shift. Interest rates had been climbing for a year or so, and newer, inexperienced investors started defaulting. The credit markets and private capital providers alike started pumping the breaks. So how do we as RE Investors, secure the debt financing to invest in today’s environment?

First, you have to start with a “good deal”. You would be shocked at the number of times, potential borrowers fill out an application for a loan on a property that has no chance at profitability. If you are a newer investor, educate yourself on what makes a deal a “Good Deal”. Attend your local REIA meetups, shadow a successful investor, JV with someone more experienced, hire a coach to teach you. Don’t just grab a contract and assume it will be profitable for you. When you present a “bad deal” to a potential lender, you immediately lose credibility. Let’s face it. No one wants their money to be used on your practice.

Next, you need to have your ducks in a row. What I mean by that is, you need to have the project planned out and your personal and business finances in order. Look, I was broke when I started investing in real estate and had no money or credit so I’m not saying you can’t start with nothing, but I will tell you it’s the hardest way to go. The better your finances, the more likely you will succeed in your project which means the bigger pool of potential lenders you will have to pick from. Take some time to get your Personal Financial Statement in order and updated. Write a biography on yourself highlighting any successful RE deals you have done and any relevant business, construction, or management experience you have. Next, have your project planned out in detail. Acquire construction bids, write a detailed scope of work, and prepare an Executive Summary on your project.

While each of these steps may require a little time investment, none of them cost money. I can promise you, most borrowers don’t want to take these simple steps, which means, if you do, you will stand out from the crowd and as credit markets tighten and private lenders get nervous, you want to be the standout.

If you are working with Private Lenders, you can take it a step further and have  a detailed background check and credit check done on yourself and add that to your package. Nothing provides comfort to a private lender like transparency. There are many other things you can add to your lending package. I always added a list of the properties I had purchased recently and their prices, rehab budget vs actual costs, and current rental rate and value. Hopefully you can start to see the types of things you can add in a lending request that will set you apart and add value to your proposal. Remember, people won’t lend to you if they don’t FEEL LIKE THEY KNOW YOU, like you, and trust you. The only way for them to feel they know you is for you to share information with them about yourself. Not just your deal. Too many investors focus all their time talking about the property and not enough on themselves and what they bring to the deal. In the end, people lend on you! They justify that decision with the property!

In 2014, after purchasing over $18,000,000 of real estate with only $1,000 of my own money, I partnered with a good friend who was also my largest private lender, to start a different kind of Private Money Lending Company. Investor Loan Source www.ILS.cash. I wanted to be a conduit from the private capital world to the real estate investor world. Since that time, we have funded over 2,000 loans and have closed over $1.2B in loan volume across 26 states, while NEVER USING A BANK OR WALL STREET CREDIT LINE. As real estate investors, we still buy property focusing on large shopping centers now, but our largest company is our lending company which funds Fix and Flips, DSCR loans for rental properties, and commercial development and re-development projects. If you have a project, you are needing debt financing on, visit our website and fill out a short application so we can discuss it with you. We never charge any fees until you are approved for the loan, so you have nothing to lose. Let us raise the capital so you can focus on finding “Good Deals”.