What questions would you ask?

Question

Hello everyone,

Long time lurker, first-time poster!  I have recently taken the plunge and left my full-time job to join my wife as a real estate agent.  We are in the Portland Metro area of Oregon.  I may be jumping the gun a bit, but one of the things I want to get out and do right away is meet some people at various lending institutions.  One of the things I keep hearing on the BP podcasts is that it can be difficult to find lenders for investments or finding ones that are willing to do the refinance portion of a BRRRR (was that enough Rs?).  I thought I would try to find, interview, and build relationships with people that would be friendly to the BRRRR strategy.  My question is: What would you ask them?  I plan on combing back through the podcasts for info too, but I would like to get your input.

Thank you,

Destin Brown

Julee Felsman · Answer

Hi @Destin Brown!

Congrats on taking the plunge! :)

This is going to be a little meta, as I'm a lender answering a question about questions to ask lenders... but here goes...

I don't know that I can give you script, but I'd suggest you focus your conversations with lenders on trying to figure out how well they know their guidelines.

Loan officers are often hired and trained to be salespeople. There's nothing wrong with being a good salesperson (so long as you are looking out for your clients' best interests), but you want to be working with a loan officer who's at least a "guideline geek" if not a "guideline guru".

The BRRRR strategy is centered on leverage. You want to use other people's money as efficiently and cost-effectively as possible to grow your wealth. Your loan officer (or your clients' loan officers) hold the key to accessing that money. You want a loan officer who knows all the nooks and crannies of the rules you'll need to navigate together to borrow as much as is possible (or appropriate) at the lowest cost.

Offering scenarios (your own, clients, situations you imagine encountering) would be a good way to get a feel for how well a loan officer knows their stuff.

And because BRRRR investing (and house-hacking) is a long-term game, you want a lender who can be a strategic partner to help you and/or your clients formulate and execute on what might be a years' long plan. Maybe ask if they've helped investor clients work their way from an initial purchase (owner-occupied or otherwise) to a larger portfolio.

I also think it's useful for a lender to have house-hacked, to have some rentals of their own or to have at least a little bit of experience working with investor clients. So just asking about their own experience would give you some insight.

This last component is not, I should add, critical (I didn't even own my own home when I started as a loan officer and some of my first clients were investors). But having some experience does have a lot of potential to bring some value. I often find myself taking off my lender "hat" to talk about tax stuff, or LLCs and risk management, or any number of other tangentially related topics that can circle back to lending and impact how we structure a loan.

Like I said, not a list of questions, but hopefully that'll give you some ideas as to what to listen for when you talk to lenders. Good luck!!

Suzanne Player · Answer

If you have the parameters of your next purchase (price range, type of property, geographical area you want to look in), or an idea of what you are looking for, ask for a prequalification.

From your question I can't tell if you are looking to buy your first residential place to live in (& maybe house hack, fix up, rent, flip, etc) or if you are looking to buy the 1st investment property, or where you are in terms of experience in real estate investing.

You can pull together your bank statements (including your 401k or IRA even if you are not using them in the transaction), pay stubs, tax returns, W-2's, & order your own credit report & call a lender & ask them about what amount of loan on what price property you might qualify for.  Even if you are not quite ready, it will tell you how far off you are.

Again, I can't tell much about your background so perhaps this is too basic for where you are.  What state are you in?  (I can't tell from your profile page.)   If you are a 1st time homebuyer, there are sometimes state government programs that are very helpful.  If you're a veteran, a VA loan might be for you.

AJ Shepard · Answer

@Destin Brown

We’ve never had problems with performing refinances, generally the issue is that there is not enough cash flow to support the deal because prices in the NW are higher than other parts of the country.

Mike Maier with fairway has done over 10 loans for us and just signed on a 4 plex with them last week.

Congrats on making your way into real estate, you’ll enjoy it!

What questions would you ask?

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