What Came First: The Property or the Lender?

Real estate investors and borrowers often face a fundamental question: should you find the property first, or secure the lender first? For straightforward deals—like single-family flips or rentals—the answer may not matter much. But when you’re dealing with mixed-use or rural commercial properties, the order can make or break the deal.

The Challenge of Hard-to-Fund Properties

Mixed-use and rural commercial properties often fall outside the standard “lend box” most lenders operate within.

• Mixed-use properties combine residential and commercial elements, which complicates underwriting.

• Rural commercial properties present valuation challenges due to limited comparable sales and higher perceived resale risk.

• When lenders do agree to fund these deals, they often offer lower loan-to-value (LTV) ratios, requiring borrowers to bring more cash to the table.

Even if the property looks like a strong investment, the financing hurdles can create a heavy upfront burden for the borrower.

The Property-First Approach

Finding the property first gives investors freedom to chase unique opportunities. This strategy can uncover undervalued or unusual deals with strong upside potential. However, the downside is clear: once the property is under contract, the borrower must scramble to find a lender willing to stretch outside their box. This “needle in the haystack” search is stressful, time-consuming, and often results in higher equity requirements or less favorable terms.

The Lender-First Approach

Starting with the lender’s criteria—their “lend box”—offers efficiency and predictability. Borrowers know upfront which property types, locations, and loan sizes are fundable. This approach reduces wasted time and increases the likelihood of smoother closings. The trade-off is that it limits creativity, since you’re shopping only within the boundaries set by the lender.

Finding the Middle Ground

The smartest borrowers blend both approaches:

• Know the box upfront. Ask lenders for their criteria before shopping for properties.

• Build a network. Include specialty lenders, credit unions, and private money lenders who are open to rural or mixed-use deals.

• Plan for lower leverage. Budget for higher down payments or explore creative structures like cross-collateralization.

• Prioritize transparency. Understanding the rules before you shop avoids wasted effort and dead-end negotiations.

  
  

Conclusion

So, what comes first—the property or the lender? For standard deals, either path works. But for hard-to-fund properties, lender-first is often the safer route. Borrowers who know their lender’s box before they shop save time, reduce stress, and increase their chances of closing successfully. Chasing the needle in the haystack lender after finding a tricky property may work occasionally, but it’s a gamble that can cost more than it pays.

5 Questions to Ask Your Lender Before Shopping for a Property

1. What property types do you fund?

   
   

   Clarify whether they finance single-family, multifamily, mixed-use, rural commercial, or specialty assets.

2. What are your geographic restrictions?

   
   

   Some lenders avoid rural markets or limit lending to certain states or metro areas.

3. What loan sizes and leverage do you allow?

   
   

   Ask about minimum and maximum loan amounts, and the maximum loan-to-value (LTV) or loan-to-cost (LTC) ratios.

4. What borrower requirements do you have?

   
   

   Understand expectations for credit score, liquidity, experience, or reserves before you commit to a property.

5. What exit strategies do you support?

   
   

   Confirm whether they’re comfortable with refinance, resale, or long-term rental income as your repayment plan.
   

Takeaway By asking these five questions upfront, borrowers avoid chasing deals that fall outside a lender’s “lend box.” This saves time, reduces stress, and ensures you’re shopping for properties with financing already in reach