Mortgages & Creative Financing

4 Ways to Find Banks That Will Fund Your Next Investment

Expertise: Mortgages & Creative Financing, Business Management, Landlording & Rental Properties, Commercial Real Estate, Real Estate Deal Analysis & Advice, Real Estate Investing Basics, Personal Development
168 Articles Written

A common question I see on the forums is, How do I find a bank to lend to me? The answer should actually sound fairly familiar: You’ve got to pound the pavement. Here’s how!

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What Type of Bank Should You Look For

The first thing to figure out is what type of loan or institution to pursue. One of the best ways to get started in buy-and-hold real estate is with an FHA loan or 203K loan. With these loans, you can get up to 96.5 percent of the property financed at a very good interest rate. The only problem is that these loans are only available to owner occupants. Luckily, you can buy anything up to a fourplex with it. So why not buy a fourplex, live in one unit, and rent the other units out?

You're also eligible for up to 10 Fannie Mae–backed loans. These loans have to be in your name and not that of an entity such as an LLC. However, they are easier to get than a standard bank loan if you have decent credit and income. Any mortgage broker worth their salt should be able to help you get one of these.

After that, the best place to look is community banks. Large national banks are usually very conservative when it comes to smaller investors. They predominantly want to lend to large companies or homeowners. On the other hand, there are also some national lenders that focus on single-family investors — such as Lima One Capital and CoreFirst. These are worth looking into. They will generally have 30-year amortizations, but also more fees and a higher rate of interest than local banks. I would generally avoid hard-money lenders, as they are simply too expensive for holds. Even for flips, their fees and interest rates will eat up a lot of your profit.

Therefore, in my opinion, community banks are your best bet. It’s easier to build a relationship with these banks. And because the loans you will be taking out from them are portfolio loans (they keep them in house and don’t sell them on the secondary market), you will usually be granted a bit more leeway than you’d get from the one-size-fits-all national banks.

But where do you find these banks? Well, I’m glad you asked.

Related: 7 Questions Real Estate Investors Should Ask When Selecting a Lender

1. Ask for Referrals

If a bank has lent to another real estate investor who is doing what you are doing, then why wouldn’t it lend to you? At the very least, your odds are better. So the very first place to start, when looking for a bank, is to ask around. Start by asking any real estate investors that you know. Then, go to your local Real Estate Investor’s Association (REIA) meeting. Rub shoulders with other investors, and ask them who they are getting loans from. I’ve never met a single investor who was shy to answer this question. And there’s no reason to limit this question just to real estate investors. Be open about what you do. Always be asking for referrals, even if it’s unlikely that the person you’re asking will have some. I’ve been pleasantly surprised before.

Or why not ask in the BiggerPockets forums? I’ve answered this question multiple times for people who are looking for Kansas City banks. If anything, this helps secure my relationships: These banks recognize that I’m driving business. So why wouldn’t successful investors tell you which banks are lending?

2. Target Your Networking

While investors are great for bank leads, another place to look is by networking where bankers network. For example, I found one of our lenders at a CCIM conference, which is for people in commercial real estate — many of whom are bankers. Other places you could consider are the chamber of commerce, property management associations, and any sort of banker networking event you can find. Some banks sponsor events themselves, so these would be worth checking out too. Keep your eyes open and always be networking!

3. Don’t Be Afraid to Call Around

Another thing you can do is good ole-fashioned cold calling. When I first got to Kansas City, I got a list of 30-or-so local banks and, I just went down the list one by one. I called every single bank and asked to speak to a lender. Then I just told them what I was looking for:

“We buy single family houses and small multifamily properties throughout the metro area. We then fix them up and rent them out and are looking for a bank that’s willing to refinance those at 75 percent of their appraised value. Is this something you would be interested in?”

This was back during the recession, so most just said no. But a few said yes. I would then set up a lunch and try to build some rapport while making sure we were on the same page. Then I would submit our documents and see what happened. Most of the time, it didn’t work. But we got a few lenders this way. And that was back when nobody was lending. It’s much easier today.

Related: I Used Portfolio Lending to Transform My Business. Here’s How You Can, Too.

4. Target Your Calls

The most creative way I’ve found to find banks is to actually search for which banks ones lending to people like you. The process goes like this:

  1. Login to ListSource, DataQuick, or any other data lists site.
  2. Search for properties with the following criteria:
    1. In the area you are looking in
    2. Owned by a non-owner occupant
    3. With a loan taken out in the past year (or purchased in the past year)
    4. In the price range you are looking to buy in
  3. Write down each bank which has made a loan to such individuals or companies, and give them a call.

What’s great about this method is it drastically narrows your search in comparison to simply cold calling. Each bank on this list has made it abundantly clear that they are willing to lend to investors who buy in the area you’re buying in, at the price you’re looking to buy. So why wouldn’t they lend to you? I have found three different banks with this method and highly recommend it.

Conclusion

The most important thing is to get out there and start actively looking. Don’t get caught in the woe-is-me procrastination trap. There are plenty of banks out there willing to lend to investors, you just have to find them. After that, of course, you have to convince them to lend to you. But that’s the topic of another post; namely this one. Good luck!

Have you had luck using local community banks?

Share your experiences in the comments below!

Andrew Syrios has been investing in real estate for over a decade and is a partner with Stewardship Investments, LLC along with his brother Phillip and father Bill. Stewardship Investments focuses on the BRRRR strategy—buying, rehabbing and renting out houses and apartments throughout the Kansas City area. Today, they have over 300 properties and just under 500 units. Stewardship Properties on the whole has just under 1,000 units in six states. Andrew received a Bachelor's degree in Business Administration from the University of Oregon with honors and his Masters in Entrepreneurial Real Estate from the University of Missouri in Kansas City. He has also obtained his CCIM designation (Certified Commercial Investment Member). Andrew has been a writer for BiggerPockets on real estate and business management since 2015. He has also contributed to Think Realty Magazine, REI Club, Elite Daily, Thought Catalog, The Data Driven Investor and Alley Watch.

    John Murphy Rental Property Investor from Warsaw, IN
    Replied about 1 year ago
    Great tips thanks, Andrew! I especially like #3 as that is exactly what I did in my market in Northern Indiana. I cold called a dozen local banks and found one I could negotiate good terms with. They are happy to continue lending as I build my portfolio as well. They can approve loan’s up to a cumulative $500k in-house which is a big benefit as there is less red tape to get to closing.
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied about 1 year ago
    That’s great to hear John. It’s definitely true, sometimes the simplest tactic is the best.
    Scott A Smith from Jeffersontown, Kentucky
    Replied about 1 year ago
    What about credit unions? Generally rates are going to be better at CU’s than community banks, though they might be more conservative in how much they’re willing to lend you.
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied about 1 year ago
    Credit unions are also a good option. When calling around for banks I would definitely also call credit unions as well.
    Joel Ubiera Rental Property Investor from Buford, GA
    Replied about 1 year ago
    I appreciate you writing this article. I actually posted a question asking for recommendations of small banks that would fund my deals. I posted it maybe a couple of days before you published this article. Thanks again!
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied about 1 year ago
    Right here on BP is a good place to ask for sure. I’ve given a lot of people referrals for KC banks here in the forums.
    Kenneth Chen from Jersey City, NJ
    Replied about 1 year ago
    My favorite part of this post is this brief, friendly, to the point, professional sounding ‘elevator pitch’ ~ ““We buy single family houses and small multifamily properties throughout the metro area. We then fix them up and rent them out and are looking for a bank that’s willing to refinance those at 75 percent of their appraised value. Is this something you would be interested in?” And I had never thought about inviting my local banker, who has been very gracious, and personable, out to lunch. That seems super smart. Thank You Andrew. Much appreciated.
    Willie Morales Investor from New York City, New York
    Replied about 1 year ago
    Hi Andrew Good article, I was wondering if there are community banks that would lend on properties for $50, 000 and under? I hear that most large banks don’t, And we should look for smaller banks. Is that true? Thank you.
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied 2 months ago
    Sorry for the very late answer, but the best way is probably to bundle a couple together and get a loan on 3 or 4 at a time. That being said, this would be easier to do with a bank that you already had a relationship with than opening with this.
    Adrian Fajardo Rental Property Investor from Fairbanks, AK
    Replied 2 months ago
    Excellent article! I’m actually on the search for a lender right now. I’m going to refer to this article from time to time. Thank you for the knowledge Andrew! If it’s ok with you, I read on your profile that you often execute the BRRRR strategy, would it be OK if I ask some questions about it? Any help would be much appreciated.