How I became a real estate investor and a loan underwriter

 It was 2009, and for the past year my business partner and I had tried getting a solar business off the ground.  Eventually, we threw in the towel because of the lack of economics in the space.  We both had saved up over $100K in cash between both of us, because we were ready to inject capital into the solar business.  After we threw in the towel, I was driving around and found a triplex in a “transitional” area.  The key was, nobody was ever going to find this triplex if they weren’t looking for it. 

The triplex was empty, but we could easily get it rented for $550/unit.  Especially after fixing it up a little.  We bought the property from a wholesaler, who had subsequently bought the property out of probate court.

Here was the deal summary:

Purchase Price: $85,250

Estimated Renovations: $10,000

Estimated Total Monthly Rent: $1,650

 

Obviously, this property was going to be very profitable with a 17% cap-rate. 

From a lending side, we were going to put the 20% down, and were simply requesting a $68,200 loan.   We were going to fund the renovations with our cash.  Please note, we could have bought this property with cash.  My partner and I both had very well paying white collar jobs and no personal debt other than our personal mortgages.  Additionally, both our credit scores are high 700s.

This is where it gets interesting…

No bank wanted to finance this.  And when I say “no bank” I mean, I literally called 10 banks and my partner called 10 banks and we got turned down immediately. 

Why?

“We don’t finance investment properties anymore”

Remember, this was 2009.

It’s funny to me now, that banks will finance anything “multifamily”

Eventually we started asking for referrals and found a bank that specializes in real estate investment loans (my current employer). Once, they received all of the information and made the required presentations, the loan process was very simple. 

I plan on posting two follow-up posts to cover how exactly I got the loan, and how the property is performing now.