The Banking Decoder
(The 7 Step Process To Opening Up Your Funding Faucet for Purchasing Real Estate)
1- Block out 3 to 5 hours and look up 10 to 15 banks online in your area and call to speak to their residential/commercial loan department to let them know what you are looking to do. Time blocking is the best way to quickly work through who does what and who does not.
2- Turn off the e-mail and outside distractions to focus in on the bank interview process.
3- Build you bank cheat sheet. Take good notes so you can refer back to your master banking list later.
4- Understand that you're just collecting information so you KNOW YOUR BANKING MARKET. Some will, some might, some won't... so what! Knowing where you stand with your local market is VALUABLE information.
5- Don't stop when you find one that will (lend) because later on they may NOT! You can't have enough funds lined up as a good business owner.
6- Be prepared. Clearly define what you are looking to do when you talk to them. Bankers will lend more easily if they know you have a purpose and are organized.
7- Ask the right questions. Be ready to take notes w/ your questions on paper with space to put the answers and refer to later. And set an appointment!!!
Being Prepared:
A. People buy into what they can see. Come prepared on paper w/ typical deals that your are looking to do w/ sample numbers.
B. Have your taxes in order and asset statements.
C. Have your POWER TEAM on paper so they know you have the entire process covered when they lend to you and your business. (Title Co, Appraiser, Insurance Agent, Private/Hard Money, Inspector, Insured Contractor and so on...)
D. Show them prior deals if you have already done them.
E. Tell them about your active investor network that is ready to buy and sell. This could lead to them telling you they have some properties to unload. Hmmm... opportunity.
You can help them market online w/ your marketing engine.
F. Let them know you are also looking to grow your business with other partners. (This lets them know that you may have other banking customers to bring if needed.)
G. Put your "Buyers Web Site" link on your sample deal scenario to encourage them to check out your business. (Credibility Boost)
H. Have a mission statement on what your company is business for and where you plan to take your business in 2,3,5 years. (People can get on-board your business bandwagon easier if they can see the VISION.) Put your web site addresses at the bottom.
J. Have several copies of your "Prepared Package" in hand and ready to give to the lender so they can share w/ other decision makers at their bank. (You want everyone in the bank to have their eyes on your stuff... the more the better.)
Banker Interview Questions to ask:
A. Who is the best person to speak to about lending on investment real estate at you bank? Can you put me through to them and do they have an extension and do they have an e-mail address?
B. Ask the lender what is their typical amount they will lend up to on an investment property deal or project? (60%, 70%, 80%)
C. Is that amount of the purchase price or does that include purchase price and rehab costs?
D. Do you lend on the After Repair Appraised Value? If so, then ask what % of the ARV?
E. Do you require down payment if the deal is good enough to stand on its own from a ARV standpoint? If yes, then how much %?
F. What are your typical costs and terms? Upfront costs? Loan terms (20 yr, 30 yr, Fixed or not fixed rates)?
G. What is the typical funding turn time for deals w/ a complete loan/funding package in hand? (This shows you mean business. Bankers LOVE to hear that you are implying you will be ready, organized and not a waste of their time.)
H. Are their loan (amount) minimums I need to meet on my investment deals I deliver? (Again... you are implying your are ready to give them good researched real estate deals that "fit" what they are looking for.)
J. Do you have good business banking accounts for my business to start a deposit relationship as well? (They look good to their superiors when they bring in NEW depositors and this can go miles towards getting them to open their money faucet to your investment business!!!)
K. Who would be my point of contact to get you what you need to get my investment deals/projects approved? (Try to get name, number, extension and e-mail if possible.)
L. Is there a limit on the number of deals we can do with your bank or a lending limit that I need to be aware of, so I know what to bring you or not bring you? (Lets them know that you know that banks have these rules and you are an informed investor.)
K. Do you lend in personal names only or LLCs as well? I'm willing to sign personal guarantees if you lend in the LLC. Lets them know that you know they will want you to personally guarantee the loans. (Shows Knowledge and Professionalism over your competition.)
M. Do you have a preferred title/closing company that your office likes to use? (Shows, that if needed you are will to make the relationship user friendly.)
At this point... you want to find a spot in the conversation to transition into asking...
N. What would be good time to set an appointment and talk about setting up accounts with you and going over my investment package to make sure you have what you need from me to be ready to close on deals?
Get the appointment and land the relationship!!!
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Bonus Banking Tips: (Here are some other tips to help you land the lending relationships)
1- Ask other investors who they use and when you call in start by saying "I was talking to Joe Blow about banking and funding for my business and he told me to give you a call." The bank will already be way more inclined to listen to you since they will immediately put you in the other investor's category that they are already lending to. MONSTER TIP!
2- If the lender/banker says "No" to what you are looking for then don't shut the book on them. Just ask them what type of deals do you typically look for that are more in your lending sweet spot. I have a large network of investors that I work with.
3- If they want money from you on deals, (what lenders call "Skin in the game") then get creative and ask them if they can "Cross Collateralize" or place a lien on other property you own to help cover the down payment. Or ask them if you start a deposit relationship with them if they can place a hold on some CDs you start with them as some down payment or collateral.
4- In replacement of down payment the lender may sometimes take your pledge of assets (i.e. stocks, bonds, mutual funds and so on...) to get your deals to the closing table.
5- If you use some of these tips also ask if they can look to release the collateral or pledged asset after you prove on a few deals that you perform. Or ask if they can release the holds after you make on-time payments from 12 months or so.
Remember this should be a part of your "Real Estate Business Development" time. If you are not working on your business development, then ask yourself "Who is?" Be purposeful and systematic to your business and reap the business success benefits.
Above all else... he or she who comes prepared, asks the right questions and shows the bank that you want a "relationship" while being user friendly to deal with will win the "Funding Battle." Now block out time on your calendar and crack the code because after all, your business deserves it!!!
Jason Palliser
Co-Founder
REI BlackBook
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