Rookie Reply: What’s The Best Way to Find a Lender?

Ashley:
This is Real Estate Rookie, show number 62. My name is Ashley Kehr and I am here with Tony Robinson and we are back with another rookie reply. Today we have a Facebook question from Kaylee Driver. So Kaylee is asking, “When looking for a lender, specifically 203(k), what is the best, most effective way to find them? Do I need to find someone local?” I’ll jump right in there and I will just say right away, I’ve never done a 203(K) loan or have I ever tried to find one. What about you, Tony?

Tony:
No, I’ve done construction loans, but it wasn’t [inaudible 00:00:44] 203(K) loans. So I don’t have experience with that specifically either.

Ashley:
Yeah. But we can definitely answer the question just as a finding a lender and questions you can ask to specifically find the 203(K) lender or for whatever loan you’re looking for. So the first thing is I love local lenders. Like I do think that you have more options with them, but definitely reach out to as many banks as possible and just tell them what you’re trying to do. Don’t even ask for a specific loan that they have, reach out and see what they can offer you. So tell them your situation, like I’m looking to buy this property. I want to rehab this property, and then I want to refinance out of this property or whatever you plan to do for your real estate investing strategy. And then see what they can bring to the table for you and offer you.

Tony:
You literally took the words out of my mouth. I think sometimes we as investors kind of put ourselves in these boxes of, I need to do this specific type of loan, or I need to do this specific type of thing. And like my first two deals, they were both zero down, no money out of pocket. And it was only because the bank told me that that was something that they had. I think had I got in there and said, “Hey, I want an investment loan to do this rehab,” and they would have given me something else. But I told them what my goals were and they said, “Oh cool, we’ve got the zero down thing where if you can find the right property, then it works.” So I love that advice.
And you’ve talked to me about this as well, right? Ashley is that the local banks work really well for you both on the residential and the commercial side. And I know I’ve had a lot of success on the longterm investing side with local banks as well because they tend to have a little bit more flexibility and things like that. And I found my first bank through a referral where I’d had a family friend who went through that bank, they had a really good experience. I followed with him and that’s how I found my first one.

Ashley:
Yeah. So I would start with the local banks in your area, especially start with the banks that you’re already have a relationship with, even if it’s just a bank account or maybe your home mortgage is there. So start there at reaching out to those banks and then just Google other banks in the area. And then start from there, make phone calls, email the lenders. Emailing is so easy, you can literally copy and paste what you’re trying to do and then send it out to 10 different lenders in the area and see who responds quickly, see who has something to offer you. Maybe they’ll want to jump on a call with you, but that’s like a great starting point is just reaching out and saying what you want to do and seeing what they have to offer.
So let’s go through a couple of examples, Tony, of when we’ve found lenders and like different questions we’ve asked to get what we needed.

Tony:
Yeah, I think so what you said about just like Googling, I did that in Louisiana, which is one of my markets as well. And literally I just made a list of like, I just Googled bank, Shreveport, Louisiana, credit union, Shreveport, Louisiana, and you get a long list. I told them, “Hey, here’s what I’m trying to do. I’m trying to find properties that are distressed. I need to rehab them and then get some permanent financing in place.” And some said, “Yeah, we have this,” or some said, “No, we don’t do that.” Really just kind of walking them through.
I think some of the questions that I’d like to ask the most was, do you guys work with investors? Have you done these kinds of transactions in the past? Just to kind of get a sense of, I guess how well they know the world of real estate investing.

Ashley:
Yeah. I agree. When they reach out back to you and tell you something like, “Maybe it’s not a good fit for this property,” but that’s someone you can save for maybe another investment down the road too. So don’t single any of these loan officers out, save them, keep them in your network, keep reaching out to them, keep bringing them different deals that you want to finance too. That’s important. So I’m going to give you guys my greatest loan story ever, which was just by telling someone what I wanted to do. My partner and I wanted to purchase a property. We had put an offer on it and we didn’t have the money yet to pay for it.
So we had been using a private money lender at that point and we kind of tapped him out and we’re like, well, we’ll figure this out. We are already confident. So we were actually working on getting lines of credit on other properties we own. So we were at the bank just talking about doing that. And we mentioned to the loan officer this other deal that we had, and I happened to have my BiggerPockets calculator report on the deal. And was like, yeah, just like, we’re trying to figure out what we’re going to do. And the loan officer said, “Well, if you want, I’ll give you a loan.” And I’m like, “Yeah, well, we don’t want to put 20% down. We would like to buy with not our money.”
He’s like, “Here’s what I can do. I can give you a 90 day unsecured loan on the property. So no collateral at all. You two, just the personal guarantors on the loan. Well, first I’ll give you a check for the exact amount you need to close. And then once you close on the property, you’ll come and you’ll do a 20 year fixed rate mortgage on our residential side,” which was also awesome because we were an LLC. So it’s very hard to find a residential lender who will do a longterm fixed rate on an LLC loan. So we ended up doing that. Once we refinanced, we paid off that 90 day loan and we had the longterm fixed rate loan with the bank. And even to sweeten the deal of that story, so we bought it for 35,000 and we got our appraisal a week after closing. We just rented it out and we put a fridge in there and it appraised for 55,000.

Tony:
Wow.

Ashley:
So we were actually to, we refinanced out at like 42,000, so we put a little bit of cash back to our pockets too. But that was like my best thing, because we weren’t even going to ask him about what you could offer. We were just talking about it. And maybe on the refinance side, they would be interested in lending and he offered that to us. So there’s so much opportunity there as to what banks can do, especially small banks like this bank, I think has maybe five or six branches in total.

Tony:
Ashley, I’m exceptionally disappointed that we are now like four or five months into our partnership and this is the first time I’ve heard the story. That’s got to be one of the best financing stories that I’ve ever heard.

Ashley:
Yeah. It’s sort of my favorites.

Tony:
Just by happenstance, you casually mentioned it and it turns into this great opportunity for you. And you’ve mentioned this in the past too, right? Is that there’s no downside in asking the question, the worst that someone can say is now like, I think you always say like, when you’re talking with the seller, you always ask them, “Do you have any other properties?” Right? And same thing in the lending space. If you tell them what your goals are and you tell them what you’re looking for, either they’re going to say, “Yeah, we’ve got something to match that,” or they’re going to say, “No, we don’t,” then you go on to the next bank.
So man, what a great story. I love that. And the fact that they gave you a loan, a residential loan as an LLC, I’ve never heard of that before. So I’m learning a lot on this call today too.

Ashley:
And it was awesome to have that fixed story too for like such a long time, but it wasn’t very high rate. So like if we had gotten on the commercial side and only done a five-year fixed rate, we probably could have, at that time gotten like around a 5% interest rate, but we actually had to pay 7.35% interest for that residential fixed rate investment loan they called it.

Tony:
But it still cashflowed, right? The deal still made sense.

Ashley:
Oh yeah. We recently just refinanced out of that for a 10 year fixed rate on the commercial side at, I think like 3.3% maybe.

Tony:
That’s awesome. That’s awesome.

Ashley:
Yeah. It’s just there’s so many different options with lending-

Tony:
So many, right?

Ashley:
… and what different banks can offer. Yeah.

Tony:
And we didn’t talk about this much, right? But I think getting referrals from other investors is a great way to go, right? Like I’m sure if someone in your market came and said, “Hey, Ashley, here’s what I’m trying to do.” Now you’ve got an ace in your back pocket to say, “Hey, go talk to this person at this bank. Here’s what they did for me.” And maybe it’s not the same for everyone, right? Like maybe you’ve had a different relationship with that banking or with that lender, but at least go to other investors in your market, ask them what they’re doing and see if you can leverage those same relationships.

Ashley:
And I think it’s important too when you are doing this first loan with a new bank, you don’t show boat it or brag about it, but you tell them your story in that yeah, you want to keep doing this and you would love to keep lending with them. You’d love to keep this relationship. And when you do continue with the same bank, it’s so much easier than starting fresh. They’ll already have a ton of your information. One of the worst parts of lending for me is all of the information they want from you and having to gather all that together. So the bank, they on the commercial side, at least, every year you have to hand in your personal financial statement, they want a copy of your tax return, well, they already have all of that information. And then you’re ready to do your new loan. You just give them the information on the property and then you don’t even have to put it in for yourself.

Tony:
So I think to answer Kaylee’s question of whether or not she’s over-complicating it, I would say yes. Right? It’s very simple. It’s not a very complicated process to go out there and find a lender. I would challenge you Kaylee to, every day for the next five days, either pick up the phone or send an email out to like three or four lenders in your target market. And by the end of the week, you’re going to have so many options of loans to choose from your head’s going to be spinning. So it takes sometime to find the right lender, but it’s definitely doable.

Ashley:
Yeah. And they’re going to want your business. A loan officer makes money off of doing their job, like getting mortgages. So they’re going to want your business. So definitely don’t be afraid to reach out and talk to them, especially if you’re going to continue to be a real estate investor, they’re going to want to help you build your portfolio and be the ones financing and lending on them.
Well, thank you guys so much for listening today. If you have more questions about lending, how to find loan officers, definitely check out the BiggerPockets forums, ask people that are in your market and they can definitely give you recommendations right there on the forums or in the Facebook group at realestaterookie. Thank you guys for joining us. And we will have a new episode on Wednesday. I’m Ashley Kehr at Wealth From Rentals and he is Tony Robinson at Tony J. Robinson.