Re: Do I Find Property First Then Financing - Posted by ray@lcorn
Posted by ray@lcorn on October 24, 2000 at 22:33:45:
There is an old saying along the lines of “nothing so concentrates the mind as impending doom.”
That’s what I used for motivation when I first started buying properties at auction. I would bid the property in, then max out the cash advance on my credit cards to cover the deposit, and scramble like he11 to find the money to close. I had some close calls in getting the deals funded… actually had to threaten to sue one seller after going past the closing date… but I always closed. The first time my wife (then my girlfriend) saw me go through this she thought I was nuts. Bad enough to do it once or twice, but I kept several deals floating almost all the time. Forget life in the fast lane… this was more like living in the oncoming lane! I did it that way because there wasn’t a banker anywhere that would give me a credit line or a pre-approved loan, but once I had a property bought cheap enough, I could get the funds. I hope you’re in better shape than I was back then.
The ideal scenario is when you can take the time to develop a relationship with a lender BEFORE you need the money. If you have a business plan, all your financial documentation in order, and the time to shop around, then you can most likely come up with a deal for financing before you go looking at properties.
However, with that approach you run a very real risk of “analysis paralysis.” That’s when the timing isn’t right, the paperwork isn’t completely complete, or the lender’s schedule, or your schedule, or the weather, or who knows what is just never quite right for you to actually get it done. That’s my old friend procrastination popping round for a visit… and he can be a bear to get rid of. That’s why I did those deals on the “excitement” plan… once I had money on the table that could be lost (and that’s what happens when you can’t close), it was amazing how fast I could pull together financial statements, a business plan and whatever else a lender wanted.
Take some time to put your plan into writing, write up a glowing background history as an introduction, and get out and talk to lenders, brokers, sellers, buyers… all of the people that make this business work. Chase some deals, run some ads, do some courthouse work. Once you get in the proximity of deals being made, you’ll learn fast enough what works and what doesn’t. And when you lose a deal that you just know could be a home run because you didn’t move fast enough, you’ll either hang it up or dig in and bear down for the next one. Bottom line, that’s the only way you’ll find out if you really like this business.
I’ve often heard Ed Garcia say there is no teacher like the street… you have to get out there where deals are being made to learn how to make them. Nobody ever gets it right the first time, so hurry up and get the first time over with!