Why Real Estate Investors Need to Develop a Relationship with their Bank

Posted on: September 15, 2009

Categories: Buy, Residential House

Author: buyfixandprofit

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Rehab loans through bank relationships Image by Buyfixandprofit.com

Rehab Financing Made Easy – Develop a Strong Relationship with your Local Community Bank

Find that investor friendly community bank located in the neighborhood where you will be buying and fixing foreclosures.  Be upfront, truthful, and communicate openly with your bank’s lending officer.  Develop a strong relationship based on open communication and most importantly consistent on time payments. Keep the lending officer abreast of your work so they get to know you and eventually the bank will treat you as a preferred customer.  They will be more willing to work with you in hard financial times or with special requests.  It makes smart financial sense for lending institutions to work with their borrowers during difficult financial times rather than enforce their strict guidelines with no flexibility.

3 Month Payment Deferral

Here are two examples of where working with a local community bank provided benefits that one could not find with a large lending institution.  During a severe rain storm, I had a property where the basement flooded with 28 inches of water due to the city sewer backing up.  The insurance company would not cover the repairs and the new tenant decided to leave without any notice when this happened.  I explained the situation to my bank and without even having to twist anyone’s arm they offered to defer three months of payments so I could find a new tenant and fix the basement without going into default.  Those three months were tacked on to the back of the loan but at least I had some room to breath while getting this property back of track.

Cash Out Exceptions

Another situation showing the benefits of developing a relationship with a local bank involved a fellow rehabber and real estate investor.  He needed additional funds to purchase another great deal on a REO property but he had used up all of his cash.  He went to his bank and asked them if they would consider cashing out some of the equity in one of his rental houses.  The bank informed him that given the hard financial times they have suspended their cash out program but will make an exception for him since he is such a good client and has never missed a payment.

Once you have accumulated enough cash to put down for a down payment, the local community bank where your target market is located will most likely provide you with the best and most flexible purchase and rehab lending options.  Remember; make sure the bank does not sell their investor loans as this will eliminate their flexibility in dealing with investors.  Open communication and on time payments will pave the way for establishing a strong relationship with the lender.

A strong relationship with the lender, will allow you to focus on developing your rental portfolio that will provide you with residual income for the rest of your life. Work to pay off your properties as fast as possible and avoid cashing out all your money unless it’s for more down payments. Go for it because no one will hand it to you!

 Why Real Estate Investors Need to Develop a Relationship with their Bank
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