<p> "I am stuck and can't get out!!" These are the words I heard from a veteran real estate investor when he made a mistake that altered his life. This mistake did not take him down, but it sure made him lose sleep and a lot of money. The mistake? Putting a rent to own buyer in a house with a hard money loan in place. This mistake turned into a real problem when he learned that he could not qualify for a refinance. </p><p> When you're in this business there is a certain order things should be done. This goes for all aspects of a real estate deal. I typically focus on the financing, but even the order in which you rehab your house will impact your bottom line. I am working with a home flipper now that was trying hard to get a draw on our loan. Our draw schedule is based on a percent of completion model, so as work is done they are further along and get closer to hitting the benchmark. Our client wanted a draw and was not able to get the rough plumbing done in the basement but he still framed and drywalled the bathroom. Now he will need to undo the drywall to finish up the plumbing and redo the wall. In his mind it made since, but you can probably see that going out of order will end up hurting him on this deal. </p><p> When an investor calls our office and asks us for a loan, the first thing we want to know is the strategy to pay us back. If they don't know what they are going to do with the house and don't have a clear exit strategy for our loan, we are not interested in the deal. If they say they want to refinance, then <a href="https://www.home247.co/%E0%B8%9A%E0%B9%89%E0%B8%B2%E0%B8%99%E0%B8%A1%E0%B8%B7%E0%B8%AD%E0%B8%AA%E0%B8%AD%E0%B8%87/" alt="บ้าน กรุงเทพ">บ้าน กรุงเทพ</a> we want to be sure they are qualified to do that. Had this client told us he wanted to sell the house on a rent to own, we would not have done the deal and he would not have lost his money. The second he put that tenant in the house, the house lost value. In general, an owner occupied buyer will pay more than an investor, and if there is a tenant in the property, you are limiting your buyers to investors. He would have been much better off dropping the price while it was vacant. </p><p> My recommendation is to always come up with your exit strategy first, and line up the financing plan to match the strategy. If you learn that your strategy is not going to work, then either change the strategy or do a different deal. If you line up the money before your strategy, you can find yourself in a difficult position like our experienced investor did. Finally, I want to point out that it is not a bad idea to have goals and a plan to get there. If your strategy includes flipping or renting real estate, understanding the timing of your deals is essential. From there you will want to line up your financing before you find the deal. For example, if you don't have enough money in the bank in reserves for a rental, maybe you want to flip a house or two first and then buy the rental. Knowing this helps target what deals and price ranges to look for, and helps you line up the money. Despite what the "experts" say, money does not just find you when you have a great deal. You really do need to have that part of your business lined up. I agree that a great deal can always be sold, but it cannot always be funded. For that reason, you won't get hurt by putting a great deal under contract, but unless you are willing to sell the deal to someone else, get your ducks lined up now. </p><p> The correct order again is; identify a strategy, line up the money, find the deal. </p>
