How Do I Find an Investor-Friendly Lender?

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Real estate investors know that having an investor-friendly lender makes all the difference. For those starting out in real estate investing, you may be surprised to hear that some lenders are better than others when working with investors.

Real estate financing plays a significant role in the success of a rental property. Loan terms like mortgage payments, interest rates, or even down payments for a property can make or break you financially. 

What does it mean to have an investor-friendly lender on your side, and where do you find one? 

What Is an Investor-Friendly Lender?

An investor-friendly lender is familiar with the real estate market and focuses on a property’s long-term potential rather than honing in on the current market value.

Certain lenders may focus on specific types of loans, some of which may not work for investors trying to obtain a mortgage. For instance, investors cannot rent a single-family home with an FHA loan or owner-occupied conventional loan unless they first live there for a year.

An investor-friendly lender will understand these rules and help guide you with the right financing to meet your investment goals. If you want to house hack, your lender will provide loan options and explain the pros and cons of each.

Other common investor-friendly loans

Conventional mortgages may be the most common type of loan for investors buying a rental property, but it’s not the only option when working with an investor-friendly lender.

Private money and hard money loans provide another source of capital outside of traditional loans. These types of loans can be an incredible tool for professional investors because they generally are not based on an individual’s income but rather on the property’s value or income. 

These types of loans usually have higher interest rates and require a larger down payment but can have many advantages like faster closings and loans based on a property’s value or income instead of the borrower’s W-2 income. Hard money and private money loans are especially popular with flippers and people who are adding value to properties because they can be used on properties in poor condition that do not qualify for traditional loans.  

Flippers and investors using the BRRRR method may use these loans because they expect to repay them within a few months, either through a property sale or refinance.

The Best Ways to Find an Investor-Friendly Lender

Finding an investor-friendly lender that works for you is essential. Your relationship with your lender is crucial for any potential properties you want to invest in. Here are some ways to find an investor-friendly lender.

Lender Finder

Technology is inevitable, and every day, more tools are being added to the real estate tech stack to help organize and simplify your next investment. Lender Finder from BiggerPockets allows you to enter details like the property’s location, possibly even an address if you have one, what you want to purchase the property for, and so much more.

Once you specify what you’re looking for, this resource does the hard work for you to find investor-friendly lenders who meet your criteria. You can compare lenders by investor ratings and reviews so you get the best financing and guidance that’s right for you. Using Lender Finder, it’s fast, free, and easy to connect with lenders that specialize in investing—it only takes about 2 minutes or less.

BiggerPockets forums

Posts from BiggerPockets members within the forums ask for advice on local lenders and even basics like what interest rate to look for, the best investment property loans to get, the minimum down payment terms, and more.

An experienced investor in your area can guide you in the right direction for a lender near you, as well as one that will best fit what you want to do. For example, do you have a rental property in mind? Get advice on which lenders to look for in your rental property’s location. Interested in commercial property? Find a commercial lender that best suits your needs.

Local networking

From your local real estate group to something on Meetup.com, it’s crucial to network locally with people in the real estate industry. Interested in learning more about rental property loans? Find a local investor who owns multiple rental properties and can tell you the ins and outs of financing and owning a rental property.

After being gung ho on networking this year, I can tell you that the real estate industry and the connections within the industry are intertwined. Real estate agents, for example, have many connections, from financing to insurance to property leads, so an agent tends to be an all-in-one connection.

I’ve also met mortgage brokers at local events who, despite being unable to finance your deal, can link you up with a lender who can. Maybe at a networking event, you meet other local investors who can refer you to a contractor they love to work with or even recommend a local investor-friendly lender that would love to finance your next potential deal.

Cold calling

Picking up the phone can create a more personable connection than sending a text or an email. It allows both parties to get to know each other in a way that no 25-text thread ever could.

So, where do you start, and who do you even cold call? If you’re not one to be out and about and picking up the phone feels more comfortable, call local real estate investors currently killing it in your area. An experienced real estate investor will quickly have a list of investor-friendly lenders you should or should not contact.

When cold calling, don’t be afraid to chat with multiple lenders or mortgage brokers because each one will have different terms. Be sure to ask a potential lender how many loans you can have at once, the loan minimum for a property, and what kind of loans they specialize in, be it rehab loans, portfolio loans, or something else. Remember, the type of property, whether residential or commercial real estate, plays a significant role in the kind of financing you get.

Social media

Social media is no longer just a place to post pictures of friends or family—it’s perfect for networking too, especially when looking for investor-friendly lenders. For example, an investor could easily request lender recommendations from local investors.

There are 4.8 billion social media users worldwide, representing 59.9% of the global population and 92.7% of all internet users. Imagine all the research opportunities there to find a lender that best works for you.

Google

Aside from research on a social platform or chatting with the local REI group, Google is officially its own beast. And as you know, it offers an exponential, sometimes overwhelming amount of information.

When looking for a lender, read any Google reviews associated with the lender’s business or name. Google reviews are a great way to gain insight into people’s thoughts without actually having a conversation.

If the lender has a website, you can search the different loan programs and the type of investment, like a rental property, on which the lender offers terms. Also, remember that the loan minimum depends on the property type.

Benefits of Working With an Investor-Friendly Lender

An investor-friendly lender has so much to offer to real estate investors. Let’s dive into the benefits of working with a lender who’s just as into real estate investing as you are.

Simplicity

Applying for a loan isn’t simple, but when looking for an investment property loan, it’s essential to consider the hoops you’ll have to jump through to get the loan in the first place. Many real estate deals are time-sensitive, so it’s essential to find a lender that doesn’t have a lengthy approval process.

An investor-friendly lender can flag any issues during the underwriting process and recommend several different loan options based on your needs. 

Speed

Time is of the essence for many real estate investors when buying property, especially if it’s an immediate cash flow property. An investor-friendly lender can make quick decisions on investment properties and provide the necessary funding within an acceptable time frame.

Convenience

Investor-friendly lenders seem to appreciate and acknowledge a real estate investor’s time by being overly accessible, whether handling documentation online so that their real estate investor client doesn’t have to make an extra trip or being readily available.

These lenders nurture a client relationship and are overtly optimistic about their client’s investing future. Plus, their loan programs offer a more customized approach to financing something like a flip or a rental property.

Ready to Connect With an Investor-Friendly Lender?

Whether investing in rental properties or commercial real estate, connecting with investor-friendly lenders makes all the difference when running a real estate business. Investment property loans, especially for a newbie investor, might be confusing. If the end goal is to invest in multiple properties within the next few years, it’s essential to create a dynamic professional relationship with a lender.

It’s essential to have a lender who offers the right loan programs, understands your needs, and works within them to give you the best possible outcome. Each lender will have something different to offer, so choose a lender whose financing works best for you.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.