Little Bank, BIG WIN!!!

10 Replies

So, I have been trying to get lending sources lined up.  I had talked with some boutique lenders such as B2R, La Quinta etc, and only coming out with high rates & less than favorable terms.  Last week I got some paperwork in the mail from the bank that I keep my business checking account at.  Since I was going by the bank I decided to drop by the bank & face to face with the folks there.  

After I took care of the paperwork I asked to speak to their commercial lending rep.  

We went through the normal introductions.  When we got down to business,  I was floored by the terms that they are offering.

Under $500k 20 year am with 7 year balloon for 4.6%.  

The big kicker here is that they are only asking for 85% LTV, DCR of 1.25.

Most other banks/lenders I have talked to want something along the lines of 70-75% LTV. By cutting my down payment requirements in half from the 30% I had been paying to 15% it would seem that my buying power has just doubled.

Let everyone know if your deal actually works out.  I've had bank after bank present terms that they end up not being able to deliver for one reason or another.  If those terms are for real, please send the BP community the good news and the loan officer name, area and phone number!

@Darren Eady

I most certainly will pass it along. There are a few items that weren't previously discussed. First, they are lending to LLC, which I have held for 3 years and they wanted to see my experience & history as a land lord. The loan officer in this case is also a RE Investor as is his wife, so, I felt that passing his first line test spoke well for the potential of this deal.

It might be some time before I bring one into close with them, we are partnered up on a rehab and have our next 2 purchases lined up via seller finance.

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I live in greenwood and invest in Columbia.  I just today talked with Guide Mortgage in Columbia.  I have just started talking with them but it seems promising. With a good credit score will lend 85% Ltv on investment with less overlay than many banks per the broker stated over the phone.

My current financing is with palmetto citizens, Wells Fargo (loc & personal loan), and Sun Trust. I don't recommend Suntrust. Their under writing is overkill. It took me 60+ days to close with 770 credit score and 25% DTI ratio. I like palmetto citizens, but am growing out of their box. I have been surprised by what all Wells Fargo will do as a large bank.

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@Anna Buffkin

The bank is First Citizens. For this loan they are lending to LLC, commercial (5+ units). There seemed to be some flexibility in the deal. They told me that when I walked through the door 3 years ago they wouldn't lend to me, now (the same people across the desk from me) they will.

I also do business with Guild Mortgage.  I have 5 mortgages, so its hard for me to get residential mortgages (4 or less units) for less than 30% down.  It sets me back to put up down payments that high, however, it does help cash flow.  When you talk to Guild talk to Rick Starnes at their NE location.  He's a friend of mine & has a good understanding of the investor mindset, although, he is still limited by the rules of his bank/Fannie guidelines.

Its funny that you are in Greenwood investing in Columbia, I was thinking that Greenwood has potential, small town feel, big city aspirations, or perhaps that's the majority of the state???

Thanks.  I believe I called Guild's Lexington office, but have only inquired and may call the NE office.

my husband is from Columbia and I lived there for 8 years. 40% of columbians rent, and their are a lot of distressed properties and owners. I am small owning 3 properties: 2 SFH and 1 condo. After the experience with Suntrust about 2.5 years ago ( mentioned above) we figured 2 would be plenty, but I got the bug to start growing earlier this year and bought the condo with personal loan.

Greenwood property tax is high especially in the city limits compared to Columbia.  A 100k house in the city will have 3k taxes each year.  a friend in the area has been trying to rent a 3/2 in a good area, but the inventory here is really low.  It has made me reconsider greenwood.  I don't plan to be here forever though and don't want property in the middle of nowhere to have to potentially sell.

I've just had a very similar experience to @Jesse Waters , a small community bank, Reliance Bank in State College, PA didn't really want my business (not in a nasty way, just not asking for my business) until I had 3 years experience. Almost on the anniversary of my LLC's existence, the bank called me to ask if I would consider refinancing everything with them. They offered me 4.5% for 20 years in a 5-year ARM on ~$180k of debt.

Small community banks are the way to go IMO.

So, a follow up to all of this.  We will be closing on August 28th.  But the deal has changed somewhat from what was originally worked out between me and the bank.  To be upfront about it, the bank is in the middle of a merger with another bank and the guys at my branch weren't aware of all the new changes/limitations imposed under the merger until my package got sent up for approval.

So, we were originally going to re-fi 3 properties to leverage the equity to purchase 3 more. The first restriction placed on us was a max of 4 properties per relationship with that bank, even if we used different LLC's, it would still be counted as one relationship. After some back and forth we got the bank back to our original DP/equity amount, however, they wouldn't go over 15 years on the amortization schedule. I was comfortable with the cash flow at 20 years, but taking 5 years off the schedule really hammered our cash flow down. At 20 years we would have made (after all expenses & mortgage) $125/door, with the 15 year schedule it was closer to $45/door. I just didn't feel comfortable going that low.

So, on the fly I had to try and push the deal through with a different bank. That bank walked on us because one of our properties showed a loss on our tax return. In all fairness its a SFH that took a bad vacancy 2 years ago, and has had a Sec 8 tenant in place for the past 18 months, mix in some other reservations they had and that fell through. None of their other reservations were related to the financial performance of the property, but due to the fact that all the properties are quads on individual tax numbers even though they are all on the same block.

So...  Here I sit with 3 properties under contract, due-diligence time running out, inspections paid for & closing schedule rapidly approaching with no bank.

I really hate to say that, but I had to drop 10 & punt.  I pulled two of the contracts on due diligence, and in truth, both of those two properties needed a ton of work after closing.  I'll skip the details.  I also did what I really didn't want to do, I got another conventional mortgage for the 3rd 4-plex that I had under contract.  I called another banker that I had been developing a relationship with & secured a 30 year loan with 25% down @ 4.49%, not too bad considering how many mortgages I hold.

I wish this was the success story that I was hoping for, 12 more units with nothing down, but I am still moving in the right direction.  Shortly, I will have this property closed & I can begin the search again for a creative solution to my lending woes.

Best of luck to all.

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