Banks...The smaller, the better

Banks...The smaller, the better

Thought I would cut/paste an entry from our journal in case it might help others.

We are so blessed to have excellent credit & a solid sound income base from my day job. I've lined up a great Mortgage Broker to work with on the Conforming side, but as everyone in REI knows, our deals don't always fit the "Big Bank" lending criteria. Quite frankly, with the volume of REO properties in our market, they frequently require cash outlay for rehab, etc...

To satisfy this need, I've taken to my small, local, community banks. I've met with two banks in town, one w/ only one branch & the other with only two branches. Here is what I've found, these banks really don't do what they would call "residential lending". However, they will lend within a "business relationship" for the purchase of residential investment property. Here is how I've approached them:

For example, today I met with the Asst. VP of Commercial Lending for a local Community Bank. In arranging the meeting over the phone, I explained upfront that I was a RE Investor, looking to finance SFR, primarily following a buy/hold strategy. He said that they have options for this type of investment approach so we setup the meeting.

When we met, the first thing I did, before asking any questions about the banks lending services, was to take the opportunity to explain my business strategy & explain my approach to identifying target properties. More importantly, I went through the process I use to "crunch the numbers" on each property to determine if it is a viable investment. After my dog and pony show, I expressed my desire to use my REI business to help members in the community to avoid distressed financing situations and help potential buyers overcome the financing hurdles (using Lease/Option strategies) so they can achieve their goal of home ownership.

What I found is that the banker was appreciative of my detailed explanation to our business model and he responded that, beyond being credit worthy, my overview of our business model gives him a great deal of insight into my character as a person which plays a big role in their lending decisions." He liked the approach I was taking to secure sound investment properties and he offered solutions that he could provide to allow us to finance, not only the purchase cost, but also the closing, rehab & improvement costs into the loan if the deal made sense!

Of course, my response to that was; WHAT, WAIT A MINUTE....YOU'RE TALKING ABOUT 100% FINANCING!!!! I DIDN'T THINK BANKS WERE DOING THAT ANYMORE. Well, they're not, but your small local banks typically don't lend against a portfolio being sold in the secondary market, so they can call their own shots. To top it off, they will close deals in the name of our LLC.

The moral of the story when approaching small community banks...
* Have a solid investment strategy that you can clearly articulate to the bank
* Be upfront with your strategy and open about what you need from them
* Stress your intent to benefit the community through your business and a desire to work with community partners like their bank.

I can't say that this will work for everyone, but I am fired up and can't wait to run my first loan through my local community banker. Not to mention, it's pretty cool to be able to walk into a bank, sit down in the bankers office and share the killer deals that you've secured. As they say....



Joshua 1: 8-9
"Study this Book of Instruction continually. Meditate on it day and night so you will be sure to obey everything written in it. Only then will you prosper and succeed in all you do. This is my command—be strong and courageous! Do not be afraid or discouraged. For the Lord your God is with you wherever you go.”


for sharing your story. How did you come up with your REI business plan? What language are they (Lenders) looking for in your REI business plan?


In the name of Allah, the Beneficent,
the Merciful.
22.He is Allah besides Whom there is no God: The Knower of the unseen and the seen; He is the Beneficent, the Merciful.
23. He is Allah besides Whom there is no God: the King, the Holy, the Author of Peace,the Granter of Security, Guardian over all, the Mighty, the Supreme, the Possessor of greatness. Glory be to Allah from that which they set up (with Him)!
24. He is Allah: the Creator, the Maker, the Fashioner: His are the most beautiful names. Whatever is in the heavens and the earth declares His glory: and He is the Mighty, the Wise.

Thanks for sharing your

Thanks for sharing your approach. I'm still chasing that 1st deal and am iffy on how to finance it so I appreciate the post

Business Plan

It's nothing real complicated. I've taken a lot of the strategies from Dean's book & applied them to our strategy. Finding killer deals, securing contracts on properties at 30-40% below FMV & cashflowing properties until the market returns & we decide to sell.

The key is in determining FMV on properties so that you & the bank know you are bringing good deals to the table. The TotalView tool that DG provided offers great info. I would also use other sources to be sure you have any regional/local factors considered in determining FMV. I've found the TotalView values to be a bit low in some of the areas I invest in Central Florida.

I also developed an XL Spreadsheet that I share with the loan officer. It lays out all aspects of each deal so that I know what my offer should be & what return I should get on 5 & 10 year intervals with cashflow calculations for buy/hold properties. I'm a bit obsessive when it come to the details, so it requires some admin time, but it keeps me from pursuing bad deals, so it's worth it.

Hope this helps!


Joshua 1: 8-9
"Study this Book of Instruction continually. Meditate on it day and night so you will be sure to obey everything written in it. Only then will you prosper and succeed in all you do. This is my command—be strong and courageous! Do not be afraid or discouraged. For the Lord your God is with you wherever you go.”

Small Banks and the Portfolio Lender---your best friend

Robbie and Vicki,

Thanks for sharing your interesting findings on independent community banks. I find that nothing generates more confusion than this topic, and I don't see a lot of posting at this site to help clarify, why small banks? If I may, I wanted to elaborate a little further on what you have begun here, because you have really stumbled onto something here that is very important to all investors, especially in our current lending climate.

As you have already alluded to, these lenders typically lend in the context of a business name. They will often bundle residential properties into one package and finance them as a commercial loan. These lenders will not sell off your loan into the secondary market, instead they keep the loan on their books and service the loan within their portfolio of loans---hence the name portfolio lender. Why is this so important to us real estate investors? It means one very important thing; they don't have to follow those ridiculous rules and guidelines imposed on us by Fannie & Freddie. You know, the 4 rule limit by Freddie, the 10 rule limit by Fannie, seasoned cash-out refi's, 6 months cash reserves, etc. My portfolio lender (I have two of these loans with them) tells me it's only going to get worse---yes, more rules are coming down the pike. And folks these rules not only shut us out, but stifles the economic recovery.

Time to get moving and build a good relationship with a couple of portfolio lenders like Robbie has. Most investors I know make the mistake of staying away from these guys because of their low credit score. Don't assume your credit score is too low to make this work, these are business loans and these guys create their own guidelines. However, since this is a business loan it is good to have a " credit profile " without this your chances to get a loan in your business' name are between slim and none---when you establish your LLC begin building credit immediately. Also, the other problem you will encounter is that your LTV will likely be significantly reduced by your lender. Here is a secret---BRING A GOOD DEAL TO THE TABLE to compensate for any shortcomings, and one with sufficient equity and cash-flow to pay down the debt. Business loans are about your ability to pay back and if there is enough equity in the property it will offset any risk associated with the borrower---it's all about the deal. And if you bring the right deal to the table these portfolio lenders will allow the following:

1. Blanket loans.
2. Immediate & unseasoned cash-out refinances.
3. An unlimited number of financed properties.
4. Loans in the name of your LLC---aka business loans.
5. investor loans.(stated loans, 100% financing, etc.)

As I have already stated these loans are typically done as commercial loans so get familiar with these terms: see,

1. NOI--Net Operating Income. Do not include your debt service (mortgage).
2. DCR or DSCR--Debt Coverage Ratio.


1. LOCATE THESE LENDERS--a lot of investors will tell you these lenders just don't exist. And most of the time it will come from the mouth of your broker. That's because portfolio lenders do not work with brokers, so don't start there. Brokers do not have access to the wholesale money market. I recommend these two sites:

First,, click on, the "find a community bank" button, and search your area by address and zip code. Second, my favorite,, you will find every CU in the country here by city and state--pay attention to the contact info at each location, this is an indicator who you will want to speak with. You will find that credit unions are more accomodating to investors, so I would begin my search there. You will have to become a member of the CU though, and that will require a small deposit to open your account---$25 bucks or so.

2. FIND THE VIP--identify the right person to speak with. Look for a staff directory. This will usually be the VP of banking, the bank manager, loan administrator, the commercial loan officer, or the chief lending officer--my favorite go to guy. Leave a message telling them you are a local real estate investor, and you would like to meet with them.

3. CONTACT THE VIP--this is your opportunity to see if they can work with you, so ask intelligent questions, and make sure they will work with investors. If so, make an appointment to sit down and discuss your business plan. If not, move on. Never ask to do an application over the phone, or apply on-line when you want to build a relationship. This should be done face-to-face.

4. PUT TOGETHER YOUR REI PORTFOLIO--make yourself credible to them. Remember bankers aren't impressed with your report card. They want to see how well you manage your money. So include the following:

* A copy of your business plan. Keep it simple. Include your mission statement and a realistic goal of how you plan to profit on each deal--remember, it's about your ability to pay not about your fico score. Explain how you arrive at the numbers, and explain your strategies you plan to employ. Explain your approach to due dilligence. Make sure you include an exit strategy. Mention you plan on using a management company, and explain the extent of their duties and fees. Don't forget to mention your inclusion of sec. 8 tenants---yeah sec. 8 can sometimes cut into your profit margin, however it is gauranteed income by the govt., that is deposited directly into your account, and your local community banker loves that. Just consider that, as your give back to the community moment. For good measure I throw in my buyers & sellers list. This not only shows them that you're taking the time to construct these list, but it also gives them a glimpse into the type of properties you are pursuing as well as companies and people you are doing business with--please deal with ethical people only. And finally, include an example of a deal you have already completed if you can--supplement this with diagrams, drawings and photographs.

* Your investment resume. Dedicate the first paragraph to your real estate objectives. What are your goals as an investor, and are your goals in line with your experience. Include your team members if any. Don't try to come off sounding too ambitious here---be realistic and confident.

* A personal financial statement. They want to see where the cash-flows. Include your fico score. Explain any credit mishaps.

* A statement of real estate owned. This is a detailed list and summary of all properties you are currently holding. I include before and after photographs, along with the property's financials including cash-flow, and profit statements---very important to these guys. I also will include any current appraisals I may have. You will also want to include a list of pending deals that are in your "active" file---these are potential deals you would want them to fund.

* An executive summary. This should explain the type of financing you are seeking.

5. CREATE A LIST OF QUESTIONS--You don't want to come off sounding like a novice--rehearse your questions before each interview until it becomes second nature. Know the lingo, LTV, fees, DOS, pre-pay penalties, etc. If you want to brush up on your terminology, or you simply don't know, go to, and they will get you up to speed. This is a comprehensive financial glossary---unfortunately it isn't free.

6. MEET THE VIP--Do this in person. Articulate your vision clearly and be concise. Have a laconic simplicity about your presentation, in other words, don't bore them to tears. The lender will be looking for what it is you are seeking. I have found that pictures and graphs help since they understand numbers and graphs, but lack visual acuity. Remember this is a symbiotic relationship, don't be nervous.

7. AWAIT THE OFFER--If you can't understand the offer get a team member to explain it. Make sure the offer is in writing.

As you can see you have a lot of work to do here, so create a system that will allow you to routinely update this file so it is always current and ready to go. I created mine on the computer using excel spread sheets that my wife designed. This makes it easy to update and download onto a disc for my banker's use. The more organized you show yourself to be, the more credible you will appear to them. And remember the more you make their job easy for them the better turn around time you'll have. I'm currently working on a marketable version of my real estate porfolio file which will allow any user to "plug and chug" in their personal info, financials, photos, etc. If it ever comes to fruition I will post it here for your comments.

Well, I hope this helps to continue the dialogue that Robbie started here regarding the importance of small community banks. The info I have added is my personal approach, and I know from experience it does work.

Robbie I agree with you on Total View and similar tools of its kind they are notoriously inaccurate. Matter of fact I just had an appraisal completed on a property I am purchasing in Indianapolis and it came in at $212K. Total view and other similar tools have its worth at $170K. That's roughly 20% off. These tools can be a good beginning point in your search. However, if you want to get an accurate as possible FMV you'll have to do it the old fashioned way--get your boots on the ground. All that other info, I get it from my realtor, comps, sale price, crime rate, etc. IT IS FREE!!! I just email her the address, and within 24hrs I have a complete, detailed print-out of all the most current info I need for that particular property in my hands with out barely lifting a finger. She also sends me automatic updates of any property at $25K or under in 4 different markets across the country. Yeah, the birdseye views are nice, but it tells me nothing I need to know to make an intelligent and informed decision---for my money, you can't beat a good realtor.

Best regards on all your real estate endeavors.




Small Bank


That is an excellent post about what community banks can do for investors, and very well written. Thanks for posting.


Thanks for the info

Very nice post that will truly help me out since I live in an area with several small banks sprinkled all over the region with just one or 2 offices. Will have to put this in the tool shed for now since my credit is weak atm but thanks for the great post.



As I stated in paragraph 3, don't assume your credit score is too low to make this work, these are business loans, and THESE GUYS CREATE THEIR OWN GUIDELINES. Bring them a deal they can't refuse! You'll be amazed how flexible they can be. By establishing a relationship with them now, you'll improve your credit much faster. You will pay a little higher rate, but that will decrease as you establish credibility with them. If you want to make it in this business you will need the help of a good banker. My lender is a team member.

Best regards,




Obsessive is OK

I have been wondering for a bit about exporting the data from these websites and placing it into an excel spreadsheet or maybe designing an access database that takes into account the Fair Market Value (FMV). I've been hearing about not going beyond a mile and a couple of years within manufacture of the home. I've also done some reading about specific categories related to adjustments regarding gross income so you come very close (hopefully) to a good profit and where to find these figures. A visit to your local Tax Assessors office is what I need to accomplish and I need to find out about trash services and take an average, it's the little things that make the difference? Anyhow I was very glad to read your posts and learn - Thank You.

Bill G.


Never Give Up, Never Surrender!


Thanks for the great information Robbie. WOW!! I am always amazed at all the wonderful people I find on this site. Everyone here is so quick to help. Be it good or bad the wealth of information is absolutely staggering and I will be a DGer for life. I am new to the family, but when I can help I will. WOW!!!


"Understand the Plan, Understand the Power, and Understand the Prize" (Pastor J. Grice)

“Formal education will make you a living; self-education will make you a fortune.” – Jim Rohn

Matthew 5:16

16 In the same way, let your light shine before others, that they may see your good deeds and glorify your Father in heaven.

Make it Happen!

You bet!

The more conversation the better. Southstars follow up reply gave me even more great info. That's what it's all about.



Joshua 1: 8-9
"Study this Book of Instruction continually. Meditate on it day and night so you will be sure to obey everything written in it. Only then will you prosper and succeed in all you do. This is my command—be strong and courageous! Do not be afraid or discouraged. For the Lord your God is with you wherever you go.”

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