What are your MOST CREATIVE WAYS of getting BANK FINANCING?

[Shiloh Lundahl]

As many of us have come to find out in real estate investing, our ability to grow a real estate portfolio is highly dependent upon our ability to leverage our money. Or, in other words, use others people’s money to make our money go further. We can either do this through private money loans or institutional loans through banks and such. 

Because of the financial meltdown that came about largely due to bad lending practices, banks have more strict lending guidelines which is both good and bad.  It’s good in that now people have to prove that they have an ability to repay a loan they get. This helps the market not become as overinflated because there are fewer people who can qualify for a loan and thus there is less competition and lower prices. It can be bad because bankers look less at the individual borrower and their individual circumstances and they look more at the results of the algorithms that the computer gives them that decide whether or not to lend to someone. Whereas this may help lessen discrimination because it makes lending more objective rather than subjective, it also makes it difficult for investors to get the best types of loans over time because the algorithms are not created in favor of investors.

So how does an investor grow a portfolio if the algorithms are created against them? Simple, figure out the algorithms, and give the machine what it wants. 

This post and this question is for anyone who has had to get creative with getting financing for properties. What secrets or less common practices have you used in order to get loans for your properties? 

* One important thing I want to add here is that I don’t encourage mortgage fraud or lying on mortgage applications. So please don’t post anything that is illegal or that would get someone thrown in jail. Just post things that you have found that get around the the barriers of bank lending.

[Shiloh Lundahl]

@Derek Dombeck and @Yonah Weiss Here are a couple of new ones I just learned about:

If you have a spouse and you want the mortgage to be in your spouse’s name only (by the way, this helps keep your personal debt to income ratio down which helps get loans) and if you own a business, then employ your spouse in that business for a few months, pay them a really high salary with w2s and then have them qualify for the loan in their name with their w2 income.

Another one is, you can take one of your reserve accounts that you keep at the bank and you can create a trust account and fund it with your reserve account if the bank makes you have a large reserve account as part of the covenants for giving you a loan. Then you can have that trust payout a certain amount every month that can then be looked at as income to help qualify for a loan.