All Forum Posts by: Seth Williams

That does sound pretty crazy. I've seen banks pass up on some pretty sweet deals in my career. For example, one bank in my town refused to finance a golf course, even though they would've been at 20% LTV.

Why would they pass up a deal like this? Because LTV doesn't matter to them (or at least, it isn't the only factor they're looking at). They have to consider their borrower, the usability of their collateral, credit history, financial data from your industry, and on and on and on...

Banks aren't always good at analyzing things on a case-by-case basis. In your case, it's hard to know what they're getting stuck on (especially because they won't tell you).

Kind of reminds me of what Bob Hope once said,

"A bank is a place that will lend you money if you can prove that you don't need it."

Cool. I went to Calvin College (and I'm in the process of finishing up an MBA at Northwood University). GVSU is an awesome school too - I've taken a few Accounting & Finance classes there.

The nice thing with Michigan is, the properties are cheaper and the market is easier to get into without being made of money. It's been a rough market for the past few years - but over the past few months, things have really been picking up.

West Michigan is also a pretty well diversified economy, so even when the economy is down, it never gets THAT bad around here (it's a different world than Detroit, as you probably know).

Even though prices took a serious tumble since 2008, you can still make some great rent revenue - which is a great combination when you're looking for properties with killer cash flow.

Hmmm, I can see why you'd be frustrated. I'd be pretty upset about that too. I always appreciate people who are upfront with me and tell me WHY there's a problem (rather than keeping everything behind the curtain). That's more immature than anything.

It kind of sounds like an appraisal issue may have come up (in which case, I'm surprised they wouldn't just tell you that). I know a lot of the appraisers we've been dealing with have made some absolutely STUPID valuations on various properties - to the point that it derailed the entire deal. It's been a huge problem as of late. If this happened in your case, it might explain their sudden decline of the loan.

Unfortunately, the only way to get around a bad appraisal is to order a new one from someone else (and pay thousands with no guarantee of a better result).

Hey Nick Meister, I'm right in your neck of the woods. I've been investing in the Western/Northern areas of Michigan for several years now... you're in a good place - for sure.

Where are you going to college?

Hey John Mireles - as a commercial real estate banker, I have to agree with Joel Owens.

US Bank may just be trying to tell you that that they don't want to do the deal (it's a "read between the lines" thing). I know from experience that this is a tactic that MANY commercial loan officers use to turn down a prospect. Rather than just saying "No" (which is what they should do), they'll make the deal look so bad that you'd be crazy to do business with them (unless of course, you have no other choice).

I've heard mixed reviews about US Bank. They are a big outfit, and most huge banks want their borrowers to fit into a very conventional, small box. Many of the biggest banks operate this way, but just because they're giving you a hard time doesn't mean there aren't 10 other banks in your town that would be happy to give you much better terms and flexibility. Shop your deal around town. Make it your job tomorrow to call five other banks and present your opportunity to them - you may be pleasantly surprised.

Also, keep in mind - most commercial bankers are looking to finance businesses that will occupy the building that they are buying... or at least a large portion of it (because owner-occupied properties are a lower risk to them). When I look at prospects, I can't even consider rental income as part of their cash flow - because (contrary to how good of a landlord you may be), many investors aren't good landlords, and there is no guarantee that the rental income will always be there.

If rental income is going to be 100% of your source of repayment, then it doesn't surprise me that a big, inflexible bank would be difficult. If this is purely an investment property (and it sounds like it is), that could be part of the reason for the higher interest rate and level of resistance you're seeing.

Thanks Ned - that makes sense. That's how I handle most of my transactions as well (buying outright for VERY cheap, rather than assigning deals that are moderately priced). I've assigned a handful of contracts over the years, but I'm always looking for insights on how to make the process more seamless.

Thanks again for sharing.

Good info - thanks Ned Carey. Do you ever get 100% of your assignment fee prior to closing? How common (or uncommon) would you say this is in your experience (percentage-wise)?

Awesome - those are good ideas. Thanks Alliee and Dean!

Hey Ned Carey and Dean Letfus - suppose I had a deal under contract and I only had $10 of earnest money into the deal (or some other nominal amount). In a case like this - is there a standard percentage or flat fee that you would typically ask for as a deposit from your end-buyer?

For instance - $500 or 1% of the purchase price (whichever is higher)? How would you guys handle this?

I totally understand the seller not wanting to cough up the entire assignment fee until it closes, but at the same time, it'd be nice to get SOMETHING upfront.

How do you know when the offers you're sending out are low enough?

Here's one good indication...

This letter was in response to an offer I sent to a tax delinquent property owner (note: the name of my company is "Landmark Properties" - hence "Dear Landmark"). Notice how even though he laughs at my offer, he is still interested in doing business? ...interesting.

I keep a small collection of letters and voice mails like this in my office (one guy even tore up my contract and mailed it back to me). I've learned to laugh it off - it actually provides good entertainment value and keeps things interesting. Most importantly, it helps reassure me that my offers are low enough (for my business model, anyway).

The kicker is, I have a much larger collection of contracts from people who have accepted some ridiculously low-ball offers (usually around 10% - 20% of market value).

As laughable as my offers may be to some people (e.g. - this guy above) - some people take these low-ball offers very seriously. It's not uncommon for me to come across people who act like they've won the lottery after receiving my offer for a few thousand bucks.

Just because I wouldn't sell a property for next-to-nothing, doesn't mean the current owner wouldn't do it.

How do you get properties for this cheap?

You send ridiculous, laughable offers to everybody.

I've learned that you just can't make assumptions about who you're dealing with until you've put your cards on the table. You don't really know until you KNOW. Sometimes you'll get a response like this guy above, and sometimes you'll get a free and clear property for a CRAZY cheap price - so don't be afraid to make a low ball offer (and once you think it's low enough... lower if further). You CAN hit the jackpot and when you do, you'll be glad you didn't make assumptions!