Advice on approaching a local bank as a new investor

5 Replies

Originally I was planning to buy deals all cash but I've decided based on my goals to leverage my capital.

I have been working on some financing options so when a deal presents itself I already have my ducks in a row.

As part of that due diligence I'm planning on approaching a few local banks and credit unions that I have history with.

I don't have a W2 job and haven't had any real income for the past couple of years. I was exiting from my last business.

I'm now focused on REI full-time moving forwards so there won't be another job or income stream outside of this.

I do have tax returns that show some income but it's very minimal and basically just what trickled in the past 2 years.

I have a good amount of liquidity in terms of cash, I have zero debt and I have a 750+ credit score.

Should I approach them with the intentions of trying to get regular conventional financing?

Should I tell them I'm an investor and discuss my strategy and the types of properties I want to buy with them?

Should I see about a line of credit instead and not even mention anything about real estate?

I figure I need to think this through in advance because if I go to them for conventional financing and get denied due to my lack of W2 and/or proof of income it would be pretty difficult to then say "hey what about a line of credit" since they already know what I'm looking to do at that point. So ultimately I guess my question is if I'm denied for one type of loan will that affect me from being able to try other financing avenues through that same bank or credit union?

Whatever you decide, approach the bank you least want to do business with first. Let them be your practice run before you approach the more desirable ones. That way if you screw up, no worries, just move on.
Originally posted by @Daniel Helland :
Whatever you decide, approach the bank you least want to do business with first. Let them be your practice run before you approach the more desirable ones. That way if you screw up, no worries, just move on.

The two that I have in mind are ones that I already have history with. One is a major chain and one is a local credit union.

Maybe I should find a third one and use them as the guinea pig. Just not sure what the best initial approach should be.

Don't go in and ask for a conventional loan. Without the W2 income, you wont get qualified. 

I would concentrate on the local community banks and credit unions that will do a portfolio or commercial loan. They will primarily be looking at the deal and want to see the DSCR debt coverage service ratio, at 1.2-1.4% or that the unit leases for 120% - 140% more then the PITI. they will only look at you & your income and credit score secondarily.

I would contact the ones you don't have a relationship with 1st, and do your test runs on them, then go to your established relationships. 

Originally posted by @Kevin R.:

Don't go in and ask for a conventional loan. Without the W2 income, you wont get qualified. 

I would concentrate on the local community banks and credit unions that will do a portfolio or commercial loan. They will primarily be looking at the deal and want to see the DSCR debt coverage service ratio, at 1.2-1.4% or that the unit leases for 120% - 140% more then the PITI. they will only look at you & your income and credit score secondarily.

I would contact the ones you don't have a relationship with 1st, and do your test runs on them, then go to your established relationships. 

Yeah I'm planning to take the commercial or portfolio approach as a backup plan if all else fails.

First I want to try and explore any personal options. I guess I'll shoot for a LOC and go from there.

Thanks Kevin and I agree about finding ones that I don't have a relationship first. I'll do that tomorrow.

The more I think about it the more I don't think a LOC will actually help me.

That would be more suitable if I just needed access to capital to use for down payments.

So I guess I'll see if I can qualify for any of their home loan programs first.

If not then I'll explore the commercial or portfolio route.

If that also fails then I'll resort back to lenders I've connected with here on BP.

I'd just prefer to work with a local bank or credit union I can build a long term relationship with if possible.

If anyone has any other suggestions on how I should approach them please let me know. Thanks!

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