Keep Being Denied as Out of State Investor

[Erhan Sen]

Hi,

I am trying to find financing for multifamily properties I am interested. However, local banks, in the same state/city with properties, keep saying that they can't work with me because I am not local - out of state. Is this common? What's the reason? Any hints or recommendations?

Thx

[Doug Smith]

I was a banker for many years prior to this role. It is a sticking point for banks to work with real estate investors period. Compound that with not being local and they really don't like it. Banks are driven to do business "in their communities" by regulators. When you walk into a bank branch, somewhere near the door you'll see a required notice about their Community Reinvestment record. They don't like and are pushed by Federal and State Regulators not to do "transactional business"...meaning one-off loans with no active deposit relationship. They want to cater to operating businesses in the area. When I was a banker, they programmed me to look at real estate investors that weren't large home builders as bottom-feeding scumbags. Just look at me now...lol!. It's just a different business model and mindset. I've kept those relationships with my old banking buddies that are still in banking. We refer business back and forth. Lenders like us are set up for real estate investors and we get our capital from Wall Street, but we aren't set up for financing operating entities (doctors, lawyers, widget manufacturers, etc) and we refer those to them. It makes it a nice symbiotic relationship. Going to banks is likely the wrong place to go for what you seek. They really aren't set up for what you do. I hope that explanation helps.