When Casey moved to Texas, he had dreams of making a name for himself in the real estate industry. He quickly realized it was not as easy as the shows on Bravo make it look. Hard money lenders in Texas are not the only ones that are on the chopping block when it comes to loaning money.
If you have been following Level 4 Funding for a while, you probably have read a few times that it is fairly easy to borrow a hard money loan. This is true, for the most part, when you are looking for a potential lender you are free to pick and choose who you want to borrow from. If a certain lender is offering an interest rate that is out of your range, then find another. If the lender you are talking to is not willing to lend you the money are seeking, you do not have to work with them.
For some borrowers, like Casey, the lender may turn you away if they feel the property is not going to return their money. There are usually certain standards that hard money lenders in Texas look for when they are considering lending someone money for a property.
Someone that is playing to win
The real estate business can be extremely unforgiving if you are not prepared and careful when you are looking at properties. Many lenders will not lend to you if you are not risking anything for the investment. Most lenders expect you to pay a large enough down payment on what you plan to purchase.
This is a sign of good faith that you are willing to stick your neck out for the property so you can recoup your money. In Casey’s situation, he was not willing to put a large enough amount that would suffice the risk that the lender was taking. He could have gotten another person to invest with him, but this was his first property. The down payment was the least of his problems.
When in doubt know, your way out
Most people that get into the business try to look for homes that will have a higher resale value during closing. When experienced investors are looking for a property they can flip for a profit, they make sure they have a plan to pay back the loan if all else fails. Hard money lenders in Texas look for borrowers that have an exit strategy if the property fails to make a positive return.
Casey did not think of this when he was planning on purchasing the derelict duplex in a fairly rough neighborhood. Since many people were moving out and Casey did not have enough money to buy the rest of the city block, it was unlikely the building would have a positive return.
Setting yourself up for success counts in real estate
Planning accordingly with allow you to seek out any lender you choose. For Casey being new to Texas and not knowing how things worked he ultimately failed. Take a page from Casey’s book and remember this: do not be like Casey. Take the extra hour to look up potential investors, and forget about being frugal when it comes to a down payment.