How do you get a commercial line of credit from a bank that isn’t backed by real estate? It’s all about relationships and it’s all about working with smaller banks.
If you have a good credit score, and you have some assets in that bank, you have a good savings account, go talk to one of the bankers and see if you can get a line of credit for $50,000 or $100,000 that you could potentially use towards a down payment on your next property.
Please always use a local lender when buying.
Because out of state lenders don’t understand the nuances of your local market. They can’t get over some of the hurdles that local lenders can just plow right through that you never even knew would come up, because they solved them already.
I heard of a lender requiring someone to have earthquake insurance. We live in Minnesota, we don’t have earthquakes. But this San Francisco lender insisted that there was a policy in place to protect themselves.
Don’t make the mistake of using an out of state lender, go for someone local who will make the process easy and get your loan closed.
How do you know if you’re dealing with a good or a bad lender in a real estate investing deal?
One of the things I always think about is this: is the person who is helping me originate the loan close to the loan committee?
The loan committee is the group of people that approves the final loan. They're the ones giving you the final thumbs up or the thumbs down.
If the person who is originating the loan is a part of the loan committee, that is incredible. Or if they have the loan committee on speed dial, that’s super important.
Because every deal, especially as you grow your portfolio, is going to be complex. And there’s going to be parts that can be like a gray area.
You want to make sure that you have someone who’s committed, who understands your vision and can advocate for you to the final decision maker at that lender.
Lastly, what kind of terms should you look for in an investment property mortgage? One of the things that’s most important to me is having a flexible mortgage.
This means that there’s no pre-payment penalties. So I can sell the property or I can refinance the property without getting hit by a steep pre-payment penalty.
Because I look at my investment properties as chess pieces. A lot of times, I’m refinancing or I’m selling to continue to double down and to buy more.