Good Questions to Ask Community Bank RE: Loans 4, 5, 6 and Beyond..?

Question

I'm taking a page out of Arthur Garcia's book (awesome podcast Arthur - thank you!) and making the rounds of the community banks to find out more about overlays and underwriting rules for loan #4, 5, and beyond.

For my last few properties, I chased low interest rates and closing fees and basically worked with whoever would give me the best deal.  From everything I've read on BP, seems like once you get to 4 and then 5, there seems to be a much narrower pool of banks and the lending restrictions get tighter and tighter.

For our multi-property owning friends on BP, what are some questions I should ask in my meetings with loan officers in regards to obtaining financing after loan 4? As I've been finding, seems like some of the more important questions to ask are oftentimes the ones you didn't even know to ask!

For the record, I'm doing conventional investment property financing, 30 yr fixed. Thanks!

Sean Stewart · Answer

Wow, thats great to hear Tanya! I Look forward to learning from your experiences at the meetup

Lynn McGeein · Answer

Tanya, when calling the smaller banks, try and research online (usually easy as they all have individual websites these days) and find the loan officer with most experience there as if you call and talk to a newer guy, I've found they say they don't do 5-10 just because they don't actually know they can.   I believe Monarch Bank in Virginia (Fitzgerald Financial in Maryland where we researched) does 5-10 conventional with the 25% down, higher credit score and 6 months reserves for all properties.  We discussed it with them (Fitzgerald) when they actually got us our second FHA, which can be impossible if the loan officer doesn't know what he's doing.   I transferred our savings acct from NFCU last year, which only does 1-4, to Monarch to start building a relationship there as we hope to buy #7 soon.  BB&T is probably worth researching as well, as, strangely enough, when we tried to use them initially, it didn't work out (fees too high once and said they don't do it another time), but they've taken over 2 of our loans, 1 investment and 1 FHA, within months of closing on the properties.

Tanya S. · Answer

Sean - There are cash flowing properties in the DC metro area, though not always in the places you might expect. I do plan on attending the meetup in Columbia Heights and am happy to share my experiences.

interestingly enough, during my meeting today at the bank, the loan officer mentioned he has a client who is on his 26th loan with them for a rental property in the DC area! says the guy's wife keeps finding new ones that she likes so he can't say no. Wsh I had that problem!!!

Sean Stewart · Answer

Hey Tanya S. As a new investor from the D.C. area, that is interesting to hear. Are most of your rental properties in the D.C. area? Granted, I just started looking in the D.C. area but rental properties with any sort of decent cash flow seem difficult to find. Would love to chat about the area if you have a few minutes sometime. There is also a brand new meetup group formed by a bunch of BP'ers in the D.C. area if you are interested!

Russell Monson · Answer

I  recently closed on my 5th and 6th conventional deals (both duplexes).  You are right that it is very difficult to find someone to do it.  I found my lender by referral from other investors, and I have been very pleased with his performance on my loans.  However, I would be leery about calling a bunch of lenders and asking them if they do investment loans over 4 because most of them who think they do don't end up knowing their own guidelines because they don't do a lot of them.  This could easily kill a deal if you find out about some guideline your lender was unaware of late in the game.  Also, I pay a lot more in fees to do these loans than I did on my first four, there is a lot more work involved on these and a lot less competition, so it's not so easy to negotiate fees, etc.  Plus, I really want to keep my lender well compensated since he's actually getting them done quickly for me.

Tanya S. · Answer

Thanks Russell, will PM you.

Just met with my first local bank, which was recommended by another investor. They do portfolio loans, but starting from loan #5, not #11. And no conventional 30 yrs, just 5 yr ARM.

Had a great chat with the loan officer about trends he's seeing locally (40% of his customers are investors and they're increasing). For those in DC worried about the automatic cuts affecting the local market... he says he hasn't seen any fallout. business is brisk and even increasing from his standpoint.

Tanya S. · Answer

Thanks Jon. I was thinking it was going to be much more complicated than you describe, given all the new lending restrictions. I will shop around and report back to BP with my experiences. If others have anything further to add, please share!

Jon Holdman · Answer

If you want 30 year fixed, you're still looking at conventional loans.  So, the question is simple:  "do you do conventional loans for investment real estate once I have four mortgaged properties".  Most won't.  A few will.

At some point, you will hit 10 and that's the end of 30 year fixed.  Portfolio lenders will go beyond 10 mortgaged properties, but not with 30 year fixed loans.