A key initial task required to kick off your real estate investment journey is obtaining a proof of funds letter. Working with a trusted private money lender like Security Financial Services (SFS) is an ideal way to do so and indicates to future property sellers that you have reliable access to the funds needed to substantiate your bid. Because the majority of real estate investment transactions are relatively fast-paced and sellers prefer a streamlined process, it is essential to first acquire a proof of funds letter prior to submitting an offer on a property to gain a competitive advantage over other bids.
The experts at SFS have drawn from their years of industry experience to provide the following breakdown of what a proof of funds letter entails, how you as an investor can obtain one, and a gameplan for what to do once you have it secured.
Why is a Proof of Funds Letter Required?
There is a common misconception in the beginner investment community that they can place a bid on a property before linking up with a private money lender to assist them in developing a viable financing plan for the planned transaction. In today’s ultra-competitive market, this approach is less than ideal and will likely result in you losing out on promising investment opportunities. A proof of funds letter makes your bid appear more credible and stand out from the crowd if there are multiple competing offers. This document is essentially a form of leverage, if there are two competing bids for the same property, but only one party can offer official proof that they have the money to secure the deal already, then the seller is most likely to accept their offer. Having the ability to showcase that you are a viable investor with the requisite buying power to proceed to the closing phase of the transaction immediately places you in contention for locking in the best deals on the market.
Acquiring a Proof of Funds Letter
It is a relatively simple process to acquire a proof of funds letter. Private money lenders typically ask for certain background information and a minimal one-time fee. Lenders want to ensure that the capital they provide has a planned investment purpose that has the potential to produce solid returns. Commonly requested information includes the property address and the planned purchase price for the subject real estate asset. You can increase your odds of obtaining the proof of funds letter by including a well-planned exit strategy and comprehensive investment model.
Next Steps
Armed with your proof of funds letter, now you are prepared to bid on an investment property. Investors often search for short sales where multiple foreclosure properties are presented to potential buyers. Knowledgeable investors can purchase these distressed properties at below-market rates, which is ideal for fix-and-flip projects. After locking in the deal, it’s time to inform your lender and plan how and when the loan will be disbursed.
Get Started Today!
Now is the time to chase down your real estate investment goals. Founded in 1943, Security Financial Services has established itself as the premier real estate-focused private lender in Northern California and the Bay Area. We offer the most competitive pricing and terms for private money loans and our streamlined approach means that you will have the money you need in a fraction of the time it takes for conventional lenders. The commercial real estate industry requires innovative and flexible funding solutions—which is exactly what the team at Security Financial Services delivers. Contact us today to learn more about how we can help you!