The rules of the game of real estate investing have changed somewhat in the past couple of years. (As if you haven’t noticed.)
Re-fi’s that used to be abundant and readily available are now as scarce as hen’s teeth. And hard money lenders – well, their numbers decrease with each passing day. The hard money lenders (HMLs) had no qualms about lending to wholesalers and rehabbers when the deals were abundant and the market was fast and highly active. They were confident that the deals would move quickly and rarely were they ever stuck with foreclosures. At one time the deal itself was the collateral; that is no longer the case.
Indeed HMLs did get saddled with properties going into foreclosure and many were of marginal value. Today, iffy deals are no longer going to fly. When the credit tightened up, HMLs had to find a new way to do business. And now the requirements are much more stringent.
Now the credit rating of an investor will be part of the criteria, something unheard of previously. Cash on hand, bank statements, pay stubs if the investor is employed, W-2s and tax returns if self employed are all going to come into play.
Since many of the ways that RE investors used to do business will not fly in today’s market, what’s the answer?
In spite of all the changes, there are still sellers who need to sell, and buyers who are ready and willing to make the purchase. In other words, there are still a lot of great deals out there, even if you don’t have the cash to finance them. Keep in mind there are still investors out there with a pocket full of cash ready to take a look at the deal you are presenting. Just make sure your deal is rock solid and that your reputation and your business ethics are as well.
You may need to turn to those whom you know and love who have a self-directed IRA, or a retirement account that they want and need to use in an investment-type transaction. Leave no stone unturned as you look around you for creative ways to create needed capital.
Will it require an additional measure of persistence and ingenuity? The answer is yes. But that’s why you will remain in the business while others have fallen by the wayside.