Are banking relationships important? or does it mean you are over leveraged

[Dan Williams]

Hello All,

Background 

- I own 13 SFH all with conventional mortgages.

- Currently, our LTV across all properties is 40%.

   - No experience with portfolio loans or commercial lending, educational awareness from Podcasts and Books only.

Description

In many podcasts I've heard establishing a relationship with a Bank or Lender is critical when scaling.  I do not understand why having one with a Bank or Lender is important.  To me, Lending is a business transaction and if you have the capital, business processes, and accounting to show a Lender you are worthy of obtaining a loan isn't that what matters?  It just seems like any Lender would be willing to finance a deal if the deal is good and you have adequate capital.  One of the big reasons I can see a relationship with a Lender being more critical is if you are leveraged to the hilt and it's risky to lend you money.  While being leveraged to the max may speed up growth; it seems like poor business practice.

My question is:

. - Does my Lending relationship mostly matter if my LTV is risky?

- Wouldn't most Lenders want your business if you have a higher LTV like 40-45% and adequate reserve capital? Thus less importance on Lending relationships?

Thanks in advance,

Dan

[Robin Simon]

Quote from @Dan Williams:

Hello All,

Background 

- I own 13 SFH all with conventional mortgages.

- Currently, our LTV across all properties is 40%.

   - No experience with portfolio loans or commercial lending, educational awareness from Podcasts and Books only.

Description

In many podcasts I've heard establishing a relationship with a Bank or Lender is critical when scaling.  I do not understand why having one with a Bank or Lender is important.  To me, Lending is a business transaction and if you have the capital, business processes, and accounting to show a Lender you are worthy of obtaining a loan isn't that what matters?  It just seems like any Lender would be willing to finance a deal if the deal is good and you have adequate capital.  One of the big reasons I can see a relationship with a Lender being more critical is if you are leveraged to the hilt and it's risky to lend you money.  While being leveraged to the max may speed up growth; it seems like poor business practice.

My question is:

. - Does my Lending relationship mostly matter if my LTV is risky?

- Wouldn't most Lenders want your business if you have a higher LTV like 40-45% and adequate reserve capital? Thus less importance on Lending relationships?

Thanks in advance,

Dan

 The importance is going to kick up and be much more meaningful once you graduate from conventional mortgages.  I think your perspective makes sense since you have stuck to conventional mortgages, which are a true commodity (everyone follows literally the exact same standards) so there really isn't differentiation among lenders and pricing/terms will be essentially the same.  Once you move towards non-QM, private or commercial lenders, there is much more flexibility and differentiation, so that changes the game a lot and you can get different terms and rates absolutely based on relationships