At this point you are asking yourself WHY? The answer is simple, you need to know how to property package and sell your deal to a lender.
The following items are what I consider the main part of a deal. Before contacting a lender you should make an e-file consisting of these items (make sure the info you are sending is not dated)
- The executed purchase contract – signed by both parties of course
- Rehab budget (if the property is a rehab) – what are you planning on doing to the property and how much will it cost
- Comps – have you run comps? Within a ¼ mile of the property, 3-6 month sales, and the same sq ft, number of br and bath? Don’t take your realtors word for the resale value, have sold (not active) sold comps to support your end value.
- Most recent 60 days bank statements – can you show that you have money to put into the deal (whatever the lender requirement) plus reserves to show that you can make monthly payments on a loan?
- Property spreadsheet (if this is a rehab) – have you broken down the total cost of what you expect this property to cost from the purchase to the rehab, appraisal, title, realtor fees, holding costs, seller concession on the exit?
- Credit report – just about every hard money lender looks at your credit these days. Do you know your report? Is there anything on there you need to address to the lender and be proactive? It is better for you to be upfront and not have the lender ask you about your issues.
- Tax returns – yes the dreaded return. I know that not every lender requires these, but at this point I’m sure you are asking why do I need to show them? This is simple, if you didn’t file, there could be a lien out there with your name on it. The LAST thing a lender wants is an IRS tax lien being attached to the property.
- Color copy of your driver’s license – people its 2015, you don’t need a color scanner. Take a picture with your phone and email it! Why do we need your license? This proves you are who you say you are.
- Exit Strategy letter – have you written down what your plan is to pay this loan back? I know the quick fix and flip is attractive, but what happens if you can’t sell? How do you plan on paying the lender back?
Your loan request should be short and concise. Lenders see up to a few hundred deals a week. They want to know the meat of your deal off the bat.
Purchase price, rehab budget, ARV, how much cash you can bring to the deal, your experience, your credit score and your exit strategy.
What most lenders don’t want to know in the first few minutes – the sq foot, number of br or bath, your plans to make the house pretty (design ideas), about the neighborhood, and any other items that don’t tell the check writer if he needs to continue the conversation with you.
Your deal is made or lost in the first 2 minutes. Make sure your presentation is clear and concise in order to get that Hard Money Loan for your deal.