Getting funding is not always easy when flipping homes or buying rental properties. There are many things real estate investors can do to increase their chances of being funded. This post is by Matt Rodak, CEO of Fund That Flip, an online lender that provides fast, convenient and affordable capital to experienced real estate developers. By leveraging technology, Fund That Flip gains operational efficiency and passes these savings to you. Fund That Flip can approve investors in less than 24 hours in many cases. Matt knows what investors should focus on when trying to obtain funding because he approves funding for investors. One of the best parts of my job is the opportunity to look at 100’s of deals each month. I love deals. That said, we see a lot of deals that we just can’t do anything with. I wish we could fund every deal or at least more deals. In this article, I’ll go over what we look for and what you can do to improve your chances of getting the funding you need.
The more experience you have the better chance you have of getting funding
Most lenders, including us, prefer to partner with experienced developers. This is the most important and for someone just getting started a frustrating qualifier. How do you get experience if everyone wants you to have experience before they’re willing to fund you? We get it, it’s hard to fund your first deal.
Lenders see so many applications they’re trying to quickly separate those with the highest likelihood of success. For those of you that have experience, be prepared to give us a snapshot of your past deals so we can get comfortable with your abilities quickly, which allows us to be more responsive to your current needs.
Pro Tip: Keep some basic records on your past deals and put together a simple packet in PowerPoint or Word that shows the quality of your work and the value you’ve created. Email [email protected] and we’ll send you a great template you can use.
If you don’t have experience flipping, forming a partnership with an experienced flipper or a private lender may help you get your foot in the door.
Be prepared when applying for real estate funding!
There are tons of moving parts in a real estate transaction. Being professional and organized is paramount to getting a deal to the closing table. Just like you, lenders don’t like investing time energy and effort into a deal that never materializes.
We’re making an evaluation on your ability to close the deal based on how organized you are and how you present information. By giving us access to simple information such as a purchase contract, statement of work and comps used to generate ARV, you’re signaling to us that we have a higher likelihood of actually closing the deal. We’re going to make you our priority versus someone who can’t provide this information.
Pro Tip: Before approaching a lender, put together some of the basics and organize it into an email template that you can easily send out.
Lenders will want to know that you understand the market and the basics needed to flip. If you don’t know what the ARV is or how to find accurate comparable sold properties it will be very tough to ever get financing.
You have to know the expenses and profit potential when looking for financing
We all have our own underwriting models and for the most part, they all look at 3 important factors.
- How much are you buying the property for and how does that compare to its as-is value? Are you buying at a discount and what data can you provide to support that value?
- How much are you putting into the property and what are you doing to add value? Matching your scope of work to what the market demands is important and the more detail you provide in the scope of work the better.
- How much do you expect to sell the property for and what data do you have that supports that value? A CMA, BPO or a list of comps is very helpful at informing the lender on why your deal is a good one.
Remember, lenders don’t know the market or this specific deal as well as you do. Part of your job is to educate us on why you think the deal will make money. Data to support your story is always helpful and will help us move quicker on a funding decision.
Pro Tip: Organize all of your numbers in an easy to read spreadsheet. Use a tool like houseflippingspreadsheet.com and we’ll really be impressed!
What you must always remember is that we want to fund your deals! That’s why we’re in business. To do so we need to know that you’re a competent operator and the deal makes sense. By having experience, being organized and knowing your numbers you’ll easily put yourself at the top of our list.