Should I look for a loan local to the deal or local to me?

7 Replies

So, I'm in the process of moving forward with my real estate investment adventure - looking for my first deal. This requires funding, of course. So my question is this: Do I look for funding that is local to my current location or local to where my deal is/will be? 

More insight: I'm looking into investing out of town - yes, I know this isn't the ideal course of action, but I would like to some day in the (nearish) future move in the general direction of this place. With the future in mind, I've considered looking where "local" would be in a few years.

Any advice is much appreciated!

@Lisa Sanders - I don't think it really matters.  It might make more sense to find one where you are planning on moving to, but really just find one you work well with it and run with it.  

@Lisa Sanders the answer to your question is pretty dependent on your scenario and the property type.  What I mean is that if the property and you can qualify for a "conventional" loan (a loan governed by Fannie Mae and Freddie Mac) then a bank close to you would be good to use. If you need a "portfolio" loan (a loan that is governed by the bank itself) then it is better to go with a bank closer to the property itself.  And just in case, a conventional loan will carry better terms.  So if you can receive a conventional loan, then go for that option first.

@Andrew Postell Thanks for the reply! I'm looking at houses that will require rehabbing, so the typical conventional loan probably isn't going to work.

Would you suggest local-to-the-deal hardmoney lenders, if it came to that?

Local to the real estate. 

@Lisa Sanders conventional loans do have a renovation loan.  Not every bank lends that type of a loan though...then again, not every bank is good for investors either.  Having a good lender (or 3) is a critically important step to being an investor.  Hard Money is good if you need to close quickly.  The conventional rehab loan is good if you have 30-45 days to close.  On average, the hard money lenders that are located close to the property will offer better terms.

@Lisa Sanders Where are you looking to invest buying a property that needs rehab as your first deal then managing the rehab from long distance is going to present some problems. Not saying that you could not get it done but it comes with risks.

If you're looking at hard money lenders, there's a third option:  use a nationwide lender.  National HMLs have pretty competitive rates compared to most local ones.

The best advantage of a local HML might be their ability to close faster since they know the market better and might not have to do as much research, and might not require a BPO/appraisal (i.e. they know how to do comps in-house).

Nothing will beat conventional / bank terms, but nothing is as hard to get as those either.  Especially for out-of-state investors without experience.

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