8 Compelling Reasons to Work With a Local Lender

by | BiggerPockets.com

I have 11 rental properties, and I compete 10-15 fix and flips a year.

I finance almost everything through my local portfolio lender, and there is no way I could do as many deals as I do without my lender. When I bought my first investment property, I used a mortgage broker, and it was not a good situation. We had to extend closing weeks because it took them so long to review my documents, I had to send in every single detail about my finances, and it was not a fun process.

I understand why many investors only buy one property if they have to deal with big banks or mortgage brokers. When I found a local lender who would lend me money on my rental and flips, it was an amazing change. Everything became easier, and they used common sense to lend money to me!

Why is my local lender so awesome?

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 8 Reasons I Love My Local Lender

1. My lender will lend on more than four (and more than ten!) properties.

Most conventional lenders won’t loan to an investor with more than four loans. There are almost no big lenders that will loan on more than ten properties. My local lender will loan on as many properties as I can qualify for.

2. My local lender will lend on fix and flips.

I have a commitment with my lender that allows me to finance 75% of the purchase price on my flips. They charge 5.25 percent interest and one point on one year term loans.

I have not met a conventional bank that will do this, and hard money is much more expensive.

3. My lender does not require any repairs to be made.

Conventional lenders will want homes to be in livable condition — even for investors. I can buy a home that is almost falling down, and my lender doesn’t care; they don’t even need utilities to be on.

4. My lender does not require appraisals on loans under $100,000.

As I mentioned already, for houses that do need appraisals, they do not require any repairs or even the utilities to be on.

5. My lender is easy to work with.

When I bought my first rental, it was with a mortgage broker, and it took forever and was a huge pain. My local lender requires my tax returns and my accounts to be at their bank  — and that is about it.

6. My local lender allows cash out refinances.

Most conventional lenders will not allow a cash out refinance after you have four mortgages. My lender will allow a cash out refinance in most situations, including when I have more than ten mortgages.

7. My local lender can close fast.

I can close on my rental properties in less than 30 days and my flips in less than two weeks. If I have to pay cash for a flip right away, they can do a refinance in less than two weeks.

Due to that fast, closing times for my offers are much like closing on cash sales, with no appraisal and a two week close.

8. My local lender is more lenient on counting rental income.

Most big banks will want to see rental income on your taxes for one or even two years before they count that income. Then they will usually count 75% of the income towards qualifying for a new loan.

My lender in the past has only needed to see a lease to show income towards qualifying for a loan.


The downfall to a local lender is they do not offer 30 year fixed loans on my rental properties — but they do offer five and seven year ARMs with a 30 year amortization and no balloon payment. I don’t mind ARMs since I plan to pay my houses off quickly, and the ARM actually saves a lot of money over the first five or seven years.

My lender does not lend in all states, and local lenders all have different terms and policies. The reason a local lender can be so awesome is that they lend their own money in some cases. They do not sell their loans, and they do not have to go by Fannie Mae guidelines like the big lenders.

What do you think? Have you used local lenders before?

Leave me your thoughts in the comment section!

About Author

Mark Ferguson

Mark Ferguson is a has been a real estate investor and real estate agent/broker since 2002. He has flipped over 165 homes in that time, including more than 70 in the last three years. Mark owns more than 20 rental properties that include single family homes, as well as commercial properties, including a 68,000 square foot strip mall. Mark has sold more than 1,000 homes as a real estate agent and is the owner/managing broker of Blue Steel Real Estate in Greeley, Colorado. Mark started the InvestFourMore blog and website in 2013, which has hundreds of article on real estate. Mark is constantly sharing his insights, case studies, and interesting things that happen to real estate investors on both his blog and well-known sites like Forbes.


  1. Frankie Woods

    Mark, enjoyed the post. You gave very compelling evidence to go with a local lender. I must say I agree. I recently linked up with a local lender in St. Louis. However, they still only allow 10 properties to be on there books because they sell the notes… I will need to find another one meeting the criteria you outlined above soon! Happy investing!

  2. Larry Russell

    Nice post. I’m in the process of cultivating what I hope to be a similar relationship with my local lender. I’m scheduled to close on a rental property with the hopes of doing more business with similar terms. The next step is to see if my local lender with finance fix and flips.

  3. Ditto.

    All kinds of concessions available esp. when they get to know you and your style.
    If they see a history of wise financial savvy, they bend over backwards to get and keep your business.

    We are currently building a brand new office building with two apartments inside and I will essentially get 100% financing at super competitive rates with minimal loan costs.

  4. Well done Mark. Very useful information. I use a portfolio lender and they offer me the following;
    5,25% interest rate
    5 year balloon
    20 year amortization
    75% LTV
    I have to pay appraisal every single time that usually cost me $350 to $400.
    What do you think about my portfolio lender, Mark? Again great article.

  5. Great info. I agree, though finding the right local lender is not easy. It will take some serious research and effort for most. Other assets, personal commitment to repay the loans etc can complicate or ease the situation. You did not mention LLC’s at all, this can add complexities as well for lenders or drastically change the terms. To help prepare more novice investors. How long had you been doing this? This helps with the story to the lender. The flexibility is earned through a proven track record and perceived reduced risk.

  6. Sara Cunningham on

    Hi Mark,

    Great post. This is exactly how we operate. We have a local lender with no limit on the number of properties that they will allow us to hold. What I love the most is that they are open to creative ideas and because decisions are made by them locally they work with us to make things work. . They only offer 70%ARV and will only lend within a 50 mile radius but this is OK since al our properties so far fall into that criteria. Since we are long distance we know need to find a lender in MD that will work with us in a similar fashion.

  7. Great setup. It is important to have local relationships with insurance salesman/sales ladies, community banks, and local contractors. I love going to local ribbon cutting sermons, volunteer at local events, it provides connections to many local who’s who. When those folks see you consistently in the community and keeping your business open in numerous conversations and events(sponsors ing little league teams, local events) builds trust.

  8. Hey Mark,
    I completely agree. Small, local banks is where its at. I think most investors find that due to financial reasons…it’s not always a choice to work with small local banks. They need to start at the bottom and maybe use Private Money or HML’s…until they get some sizable cash going and bring their credit scores up….and then…the world of small banks seems to open up to them more easily.

    Tks for article,

  9. Matt Fish

    Hi Mark. Thanks so much for sharing. Could you provide some insight into how you cultivated this relationship with your local lender? Did you have an account with them for many years prior to discussing lending or did you discuss lending and then set up an account? Did they set the terms or was there some negotiation on your part? I would love to hear more about the initial conversation with the lender, the things you asked them and what they asked you. Thanks again!

    • I did not have an account with them. Another agent told me about them and the investor deals they do. I approached the bank and the first person I talked was not helpful. He basically said transfer your accounts here and we’ll talk. I talked to another person a few months later who was awesome and told me what they offered. I moved my accounts over and that was it.

      They do not negotiate. It is a take it or leave it deal that they offer everyone.

  10. Justin B.

    Your local lender is slightly nicer than mine. Ours is still really awesome to work with and we get everything you get except:
    — We do have to get an appraisal (unless we’re purchasing from the bank)
    — I only get 20-year amortization on my ARM’s, but I’m still happy with that.

    But yes, I agree with you wholeheartedly. Also, I have one more to add. I’m an actual person to them, not a 10-digit number on a piece of paper. I have the direct number to everyone involved in my approval process.

  11. Shaun Reilly

    Great points all around.
    Big banks had totally soured me on dealing with any institution at one point.
    Now I have seen you and some other people talk about the flexibility of the small banks and I have been looking into this for a while now.
    Currently working with a smallish credit union that is hopefully going to do a LOC on a free and clear rental I have. If it works out it will be similar to a lot of the other commenters with the 5.25%. Since it is a LOC it is one of those good for 10 and paid off in 20 types, though the rate can vary after I believe a 5 year lock.
    Being a LOC I also don’t pay if I don’t use it. So I can take it out for DPs on rehabs or to cover expenses if there is a cash flow burp.
    If I get this setup they can do similar LOCs on some places that have crappy mortgages on them (HATE 30yr fixed…) and again won’t “cash out” but I will have access to the extra equity as needed.
    They also do no seasoning cash out refi’s if I buy a total beater rental and fix it up using cash or private/HML.
    Can definitely be a game changer if things all come together like I’m hoping.

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