Remember to ask your lenders for help

I've been developing a working relationship with several Banks over my investing career and it’s important to develop multiple relationships.

When you owe a bank several million dollars they like to know you. I am lucky enough to like to play golf and I'm invited out several times a year by either the president of the bank or the vice president of commercial lending.

Now I very nicely remind them that in order to make this round of golf tax deductible we need to talk a little business; I chuckle smile and enjoy the golf.

I always managed to get a little conversation about loans my current ones and projects in the pipeline. Over this past summer as interest rates have declined ,I would make little comments about how I will need to start looking around at refinancing early because my +/-5%, 5/5 arms we're starting to look kind of pricey and with loans out there in the mid-3% range it would be worth my time and money to refinance.

Now I have already been talking with other lenders, you need to know what’s truly available in the market before you go and talk about anything.

So to my surprise while driving back from a property my bank rep the VP of commercial lending gave me a call and asked me how I would like to have all 7 of my loans reconfigured or adjusted to a lovely 3.99%, I asked him what's the catch?

He politely said “Paul run the numbers see what you think”.

So I did I went back and looked at the following items for each of 7 loans.

  • 5-year TCMR (the Fed number my loans are linked to.)
  • I looked at when our loans were to adjust.
  • I looked at what our current interest rates were.
  • how many monthly payments we have made
  • how many we still had to make before adjustment date
  • what our current payments are
  • what the estimated new payment was going to be
  • what will our savings be
  • I also looked at the new terms how were they going to adversely or positively affect us.

After reviewing all of these items I picked up my phone, called my VP at the bank and I said “let's do this”.

Here are the results for a $4,236 processing fee.

Payments go down by $606.04/mo. taking just a little under 7 months to repay the processing fee.

The gross savings on our renegotiated loans is $19,399.11 subtracting the processing fee of $4,236 that generates a net savings of $15,163.11.

When you look into buying a property you need to know why and how you're investing. Our strategy is buy and hold. It must generate cash flow from day one. I don't take any kind of wind fall profits into account or profit if we sell. We are hoping to build a business to pass down to our 4 children to generate long lasting income for many years to come.

Now with these unexpected savings of $606.04/mo. we now have the situation of what do with this money. Money setting idle is not our friend, it has to earn its keep. We could keep paying the same amount every month and accelerate the mortgages or we could apply it to our capital improvement budget and move a few repairs forward.

I would say well worth playing golf. Getting to know your lenders building relationships with people will help you build your business and do great things over time I wish you all God speed in your business and I look forward to talking with you.