Common investor mistakes: financing

A pre-approval is not the same thing as a funded deal. Investors get in trouble when they underwrite with one rate, forget lender fees, ignore reserve requirements, or assume a refinance will land exactly when the BRRRR spreadsheet says it will. Financing is an operating constraint, not just a cost of capital input.

Before you offer, confirm the loan product, down payment, closing costs, rehab funding source, reserve requirement, appraisal timing, seasoning rules, entity requirements, and what happens if rents or DSCR come in lower than expected.

Late surprises usually have early signals: the lender is vague about investor overlays, the loan estimate changes without explanation, the borrower needs to move cash between accounts, or the property condition does not fit the product. Those signals deserve immediate escalation because they can change the offer price, contingency strategy, or whether the deal should proceed at all.

Operational reality means running a downside version of the financing stack. If the rate is 75 basis points higher, the appraisal is 5 percent lower, or the lender asks for three extra months of reserves, the deal should still have a clear next move.

Keep a written financing checklist in the deal file. It should include lender contact, product, rate lock status, cash-to-close estimate, reserve requirement, appraisal date, insurance quote, title milestones, and fallback lender. Update it weekly until closing.

Do not let a spreadsheet hide liquidity risk. The right financing plan protects closing, carry, rehab, and stabilization. If one surprise can force a credit-card-funded rehab or a distressed refinance, the financing plan is too thin.