Читать книгу Flipping Houses For Dummies - Ralph R. Roberts - Страница 74

Since the mortgage meltdown of 2008, banks have tightened their criteria for approving loans. However, they’re still eager to loan money. After all, that’s how they earn their money. You just need to be able to persuade the decision makers at the bank that you can make the loan payments and pay back the loan on time with interest. The key is to earn their confidence in you.

To gauge their confidence in approving a loan, lenders look at your five Cs: collateral, character, credit, confidence, and cash flow:

 Collateral is the property you intend to purchase. When you’re flipping houses and attempting to obtain loan approval before looking at houses, you’re not in a position to describe the collateral, but you can put together a plan that shows the price ranges of the houses you intend to purchase, appreciation percentages for the area, and how you plan to renovate and sell the properties for a profit.

 Character is the way you present yourself to the lender. You need to convince the lender that you have the knowledge and resources available to profit from your investments. A strong plan and presentation can convince the lender that you have the right stuff.

 Credit is your credit report, credit score, and credit worthiness (how much you can afford). A clean credit report shows that you pay your bills and aren’t over your head in debt. See “Checking and correcting your credit report,” later in this chapter.

 Confidence is how strongly you and the lender believe that you can deliver what you promise. Pitching a solid plan can build the lender’s confidence. How you portray your project either gives the lender confidence in your abilities or sends the lender running to the hills.

 Cash flow is your current monthly income minus your monthly expenses — the amount of money you have free each month to take on your project. Consistently having significantly more monthly income than monthly expenses shows lenders that you’re a competent money manager and can afford loan payments of a certain amount.

Before approaching a prospective lender, do your homework and draw up a business plan showing that you know what you’re doing. Here are a few ideas on how to proceed:

 Show the prospective lender a sample of a property that someone else recently flipped in the area — for example, a property that the person bought for $80,000 on August 8 and sold for $146,000 on November 16. Persuade the lender, through your knowledge and enthusiasm, that you can do the same.

 Present a property you would purchase now if you had the money and explain how you would fix it up and sell it.

 Tie up a property on paper (either through a purchase agreement or an option to buy) and present this property as an opportunity. It sounds risky, but it often works, and it forces you to find the money to close on the deal! (Your agent or attorney can help you with the necessary paperwork.)

If you’re not comfortable drawing up a plan yourself, ask your agent and attorney for help. They can assist you in creating a plan and point you in the direction of other lending institutions and private investors they know.

If at first you don’t succeed, try, try again. If a lender rejects your proposal or gives you the cold shoulder, figure out why, change your package or presentation, and give it another shot. When I first started, a lender rejected my loan request on the grounds that I didn’t have enough experience. I added my father, an experienced carpenter and builder, to my proposal and pitched it to the same lender, who eventually loaned me the money I needed. My perspective has always been that “no” means the person I’m dealing with doesn’t “know” enough information to say yes.