First meeting with a lender

[Jason Krick]

Hey everyone,

I'm just starting out and getting my ducks in a row, so to speak, I hope to line up a RE agent, lender, and insurance broker to use primarily as my "team" that I go to. I have my first meeting with a lender on Wednesday. It is a portfolio lender that I was referred to by my RE agent. Initially, I thought I would just have an informal discussion about my plans to rehab distressed properties and either sell them, or rent them. At first, I would probably use HML for the acquisition, and then refi if it were to be a rental. After a general overview, I would ask if they were interested and had any products that would suit my needs.

The more I think about it, I'm wondering if I should submit a business plan that outlines the LLC, the members of the LLC, goals, strategies, etc. At the end I would attach a few spreadsheets of real properties with estimated rehab costs, holding costs, etc. That way he knows exactly how I will be doing my DD when analyzing a property. I would give it to him printed professionally in a binder.

Thoughts?  Am I overthinking it at this stage, as I was initially going to see if he'd at all be interested in this?

Thanks!

--Jason

[Nathan Emmert]

Even portfolio lenders are generally going to be looking to do recourse loans (against your personal credit, not an LLC). If you want to loan to an LLC, you'll be moving into non-recourse loans. Some lenders will do that in their commercial department... other lender cater specifically to LLC and IRA lending. Personal loans are in the 4.25 - 4.75% rate for 30 years conventional... if you go with a portfolio lender generally you won't get more than 15 years fixed... others will do 30 year amorts but have 5, 10, or 15 year balloons. The interest rates will vary anywhere from 4 up to 7%. Conventional you'll need to put 25% down... portfolio write their own rules so they can vary from 20 - 35% though the rare find will go even lower on the down payment. Commercial loans tend to be more variable, shorter durations and amortization, and higher interest rates.

Frankly, I'd skip all the relationship stuff... especially as you're just starting.  Chances are the banker knows more about the game then you do at this point if he's been doing investment loans a while.  You need to know what their lending criteria are... what down payments... can the seller carry a 2nd... do they do cash out refis?  What are the closing costs?  What are their terms, amortization, and balloons?  How much seasoning is required before a refinance?  Do they limit the number of loans?  What % of rent will they count towards income?  Do they require 2 years tax returns or will they take current year rents?

I've actually been working to locate portfolio lenders locally here in Michigan... apparently my email got so specific a few bankers thought I was a scammer and made me call them to prove I was actually a person :)