Lending questions for a beginner

13 Replies

Good afternoon BP This is my first post and I’d like to start by saying how incredibly insightful this forum has been for me. There is so much information and so much collective experience here that I am confident that I’m in the right place. I am looking for advice regarding bank lending. I have read about all the lending options that are discussed here on the forum and my question is should I go to my bank or a bank branch near where I live to discuss lending options...I intend to invest out of state...or do I speak with a bank branch that is local to the investment? I am starting out completely new and might explore hard lending also but for now I am interested in finding out about getting pre approved. Is it better to go to a bank closer to where I live or is it better to use a bank from the town I’m investing in? I contacted a Wells Fargo that is near my house because there is a branch in the area I am looking to invest in.

Using a lender in the same general area as the property will usually work better for you.  They know and understand the market better.  Keep in mind, if you are looking to fix and flip, traditional lenders may not be your best bet.  In that case, a hard money lender or private lender will likely be able to provide more flexibility.

@Jeff Ledyard thanks for the advice. I’m keeping my options open right now as I am still learning. My intention coming in to REI was to buy multi and rent them out long term. Now that I have joined BP and have watched some webinars, I see that there are so many options available. Fix and flip is appealing and I have read that hard money is an attractive option when going that route. The more info the better. Thank you.
@Joe Tomko thanks for the advice. I flirted with the idea of investing in NJ but have totally decided against it...for now. I have heard from others about the laws here in NJ not being favorable towards landlords. I have been looking in PA because the areas I’m looking at are less than or about an hour away. Also, I have a friend who has done well a little farther north in Scranton.

In January, I sold my duplex in Allentown.  It is still a sellers market in the Lehigh Valley.  David Ribard is my realtor, he sold my property before it was even listed.  He works exclusively with investors.

@Joe Tomko thanks for the info. Allentown could be an area that I would focus on in the future. I haven’t spent much time analyzing that part of PA. Is the Allentown and Bethlehem area a smart place to look right now?

Hi @Christopher Bruno . I'm a Realtor in the Lehigh Valley and the landlord of a multi-family property in Allentown. In my general opinion, since each deal is different, Allentown and Bethlehem both have strong cap rates at more affordable prices than NJ (I grew up in north NJ and have lots of family still there). If you're looking to flip in those areas, investors will statistically be your likely buyer depending on neighborhood (e.g., Allentown is ~33% owner occupied overall). Demographic trends are favorable for long-term buy-and-hold, considering the Lehigh Valley is the fastest growing region of Pennsylvania and Allentown specifically is the fastest growing city in PA. 

Let me know if you'd like to hear more. 

@Christopher Bruno Welcome to the forum! Great place with lots of valuable insight.

Overall, I recommend you choose a lender that is local to your investment. Most of my clients are out of state and buy in the Lehigh Valley, and they have had good results using the local lenders here. As long as the lender is in-state, and / or does a good number of loan closings in the state, you should be fine. The only time I've had lender issues is with a California based loan company that didn't understand Pennsylvania real estate law. You will deal with your lender primarily by phone / email and send documents to them digitally, so their location doesn't matter all that much.

@JJ Chojnowski In talking to others, it seems the Lehigh Valley is still a sellers market. However, if you know where to look and how to evaluate a property, you could certainly find a good deal. The sellers are making money selling their appreciated properties, but they are selling simply because they're are buyers who think that it's worth buying. I believe those that say there is a housing bubble that will burst in the coming months. Do your homework on both the market and on each individual deal. I could be wrong, it's happened before (thankfully not often).

I think you defeat the purpose of banking local to where you're investing if you do so with a national lender like Wells Fargo. Find a local lender, but find a local community lender

@Joe Tomko I'm not sure I'd call it a bubble, but I do know of sellers doing exactly as you describe. I think your advice of "doing one's homework" applies to every deal you do. 

@Christopher Bruno I a certain area's investment desirability has to align with one's particular goals... Is your idea to buy-and-hold to generate cash flow for a specified term? Are you looking turnkey, a place you can add some value, or the shell of a building that needs to be redone and populated with tenants? Residential, strictly commercial, or mixed? Are you aiming at appreciation due to the "path of progress" (which some may label as speculation)? Just some questions that may help you refine what your investment interests might be.