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....
IT'S ALL ABOUT RELATIONSHIPS!!!
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.”