As an investor trying to build a significant portfolio of rental properties, it’s in your best interest to have a good relationship with small local banks within the areas you plan to invest. The local credit unions or savings and loan will provide several distinct advantages over larger commercial institutions (like Bank of America). When you’re in the in the market to purchase additional units or to refinance some of the units you own, these local banks will be your best resource for those funds. The following are 3 advantages of using your local lender for your financing needs.
- Quick Loan Decisions: Your local bank is often going to make decisions at a quicker pace than the larger commercial bank. Loan officers are often on the spot and decisions need to be checked by less people as it moves up the change of command. The banks appraisers are also typically local and will be able to put a value on the property mush sooner.
- Local Banks Know the Market: Being local means they institutions have an intimate knowledge of the local real estate market. They understand the trends in particular neighborhoods and can better evaluate particular loans that hit their desk. If you’re investing in a hot spot of the city and values are quickly trending upward, the local credit union is more likely to be aware of this trend and make the loan more comfortably.
- Adjustments to Lending Criteria: Here is where your relationship with the banks really comes into play. The typical commercial lender has a minimum credit score, maximum loan to value ratio and other guideline that they need you to fit… and if you don’t you don’t get the loan. Your local savings banks will also have guidelines for lending but will allow for some wiggle room based on the applicant’s history and reputation. If you’ve had a long standing account history with the bank and have done what you say in the past this will mean something here. For example, if you’re trying to purchase a new rental unit and don’t have the full 20% down payment (commonly required for investment purchase), you’re more than likely able to negotiate this requirement than you are with a large commercial bank. If you can show that you have a long standing history of re-payment and have completed several other projects, your savings bank will usually bend for you.