In talking with a potential client yesterday I heard the comment “What comes first – the plan or the money?” The answer is – the plan. It always starts with a plan. Just because you have an asset that has a lot of equity in it does not always translate into a cheque being written by a bank or lender. In fact, most banks and lenders that do write cheques on the strength of available equity and no plan tend to charge accordingly with higher rates of interest and fees.Don’t want to put a plan together – no problem. Be prepared to pay more.
Understand the exit
A bank or lender who agrees to provide you with financing will want to know how they are getting their money back. Will the property generate rental income to pay off the debt over time? Will the project have enough sales to cover the debt within a reasonable window of time? What’s the plan for getting rental income or sales? If you are holding a property and waiting for a sale – what’s the plan to generate interest in the property? Will you adjust the price downward at specific dates if no interest is shown by potential purchasers? Defining the exit strategy makes finding the money that much easier.
Good deals can always find good money. What makes a good deal? A good plan.