how to vet out which lender to work with?

[Iman Yu]

From all the pod casts I've listened to, it's always recommended to work with the non main stream banks for your REI loans. I can understand and agree to the points they have made on that topic. However, I only had experience working with banks like Wells Fargo myself.

Now, I am in a position where I am trying to vet out which lender I should work with?

I have a few loan consultant/loan officers I am vetting out right now and I am not sure what I should expect? 

What kind of questions should I ask to vet them out? How are they different than a bank like Chase?

What's your personal take on working with a mortgage broker/smaller bank?

Thanks, 

Iman

[Charlie Fitzgerald]

Having been both a mortgage broker and a mortgage banker for the last 25 + years, I will tell you that the advantage used to be that brokers had access to more loan products and programs and the ability to shop your deal at multiple lenders and in the days of Alt-A and "creative financing" they were your go to source.  Of course there was a cost of doing business in this manner, as the broker had to get paid (either buy you or the lender or both - back in the post crash days.)

In the post Dodd-Frank increased regulatory environment of lending today, the advantages are not as great using a broker as they used to be.  The only real advantage is someone else doing the shopping for you.  Conventional programs and rates are nearly identical amongst the various main stream lenders.  Creative loan products are virtually non-existent in conventional lending today as well.

Setting all that aside, conventional financing for real estate investors is not as friendly today as it used to be. Especially when initially acquiring properties, and/or, seeking loans for rehab work.  The underwriting guidelines have all been tightened dramatically in the last 6-7 years, and make sense deals for well qualified real estate investors today, get turned down 60% of the time for reasons that were not even considered in the past.  Even when an investor is able to obtain conventional financing for acquisition/rehab, the turn times at most conventional lenders is 30-45 days or longer, and that is prior to another change coming in October of 2015 that will push that even farther.  So you sacrifice speed of capital for a little less interest rate, even when you are successful.  We all know that real estate investing is a speed game.  This is true both when getting into a property, when preparing a property to rent, and when preparing a property to sell.  Whoever has the money first gets the property first...and get's it ready to rent or sell first too, usually.

That's where Private Money Lenders can be a huge asset. I would rather have a phenomenal relationship with a credible and successful Private Money Lender, that is built on a win/win relationship and a deep understanding of how we are a benefit to each other, than rely on any big box bank (or any bank for that matter) for my capital needs. In my personal case, my borrowers and I communicate 7 days a week, any time of the day or night, when they need me. Try getting that type of access with most loan officers/mortgage brokers or at ANY bank. As a real estate investor, it's vitally important to have this ability. Most of you are looking for deals all the time, and some of you are looking only after 5PM and on the weekends because you have full time jobs to support your real estate investing for the time being. So is using a private money lender going to cost you any more in the long run? No. Because the incidental costs of acquiring capital from any source are going to be expensed into your transactions and paid by a tenant or buyer anyway, and with access to capital that I can get funded to you in 4-10 days or less, with virtually no headaches or personal qualifying restrictions (credit scores, DTI, number of properties already financed etc.) you can acquire many more properties per year. So, at the end of the day, your goal of being an investor of real estate to make money is enhanced, made easier and is more successful. I'm good with that! Are you?

Hope this helps.