Tenant Requirements with Banks

6 Replies

This is a pretty random question.. but I am curious of the legality of it. There is an 8-unit complex near me that is completely vacant and in terrible shape. So getting bank financing would be fairly difficult. I had an idea to require any tenants who wanted to live in the property to make the bank I use for financing their primary bank. Can I actually use that as a requirement? Basically the thought is, by bringing more money into the bank with new clients, they may be willing to finance the building + construction. Thoughts? Thank y’all!

Cody Bell - Montgomery, AL

@Cody Bell

You need to get a bridge loan on the property. This is sort of like a hard money loan when you fix and flip a single family house.

While you're on the bridge loan, you fix up the property nicely and start filling it with renters. Then you refinance it with permanent financing after you have a fist full of 1 year leases. If you did everything right, you might even be able to pull more money out of it than you put into it. If you don't think that would be the case, you should re-evaluate the deal to make sure it's worth all the risk and headache.

@Cody Bell

Hey Cody,

I really like the idea of appealing to the bank by sending them 8 new customers... I believe me as a licensed real estate agent that is classified as “steering,” requiring a consumer to use a particular vendor. BUT I would guess if you don’t have a license there’s no one who’s regulating how you screen your tenants and you have free reign. Similar to how you could pay a referral fee to anyone in the world and I can only pay a licensed individual.

Now that I think about it, though, you are regulated by the AL fair housing laws as a landlord - I’d check that to make sure who a tenant banks with doesn’t somehow relate to a protected class.

Suggesting someone open an account at a bank for facilitating rent payments is one thing, trying to require them to use a bank as their primary bank is another. I don't think it's a valid idea as you need to get the loan before you get the tenants.

If this property is something you can make work, find some private money (friends, family, etc) to help it happen.

Why is it empty?

It's great to think outside of the box!  But, even if you could somehow guarantee you'd be bringing 8 new checking accounts to the bank from future tenants, I don't think a bank would slant their normal underwriting requirements for it.