Down Payment Downer

[Jesse Waters]

Been investing a while, but new to BP.

I am looking for another property, I don't have a preference if its single family or a quad.  Both fit into my strategy.  My current dilemma  is that every bank & lender that I have spoken with wants 30% down.  I understand their position on wanting to make sure that I have some skin in the game, but this has severely slowed down my rate of purchase.

With the exception of a few ups and downs and a little learning curve, everything that I have purchased so far is cash flowing well.  Just trying to figure a way around high down payments, or find lenders who are open to lower DP's, ie 10-20%.

Thanks,

Jesse

[Hattie Dizmond]

@Tyler Smiarowski has the right idea.  You're going to have to get away from the bigger institutions and the standard insured mortgages. 

Call every local lender in your market.  Focus on the smaller ones...small, local banks & credit unions.  Ask to speak to their Commercial Lending area.  You need to find one that does portfolio lending...not your portfolio...theirs!  You're looking for a lender that keeps the loans they make on their own portfolio & services them.  These guys have much different criteria for underwriting, because they are not looking to grade loans, then group them by grade & sell off portfolios of those loans to institutional investors. 

These small, portfolio lenders can take rental income into the equation, before it's been income for 2 years, etc.

That's what you need to find. Once you find 1, 2 or 3 that do that kind of lending, set up an appointment (or lunch) to talk to a commercial lender in person. Be prepared and professional, but not desperate. Take your own portfolio package with you...a personal financial statement, your business information (if you're doing business as an LLC or similar), references (including your atty), information on the properties you currently hold (including rental agreements, mortgages and current valuations). If you did rehabs on those properties, include before & after pictures. If you have a business plan, include that in your package...areas of focus, acquisition strategies, marketing strategies, exit strategies. If you've already got your next deal lined up, include the details on that property (including your entry/exit strategy) and details on the comps for the property.

Put all of it together in a professional, organized package that you can leave with the lender.  What you want to do is make him want your business, so that he is willing to get creative in how they can structure a loan to get your business.  You want him to want to take your package and put it in the underwriter's hands saying, "We really need to figure out how to do this deal."  This is you going in to interview the lender and see if this is who you want to partner up with to take your business to the next level.  This is not you begging for a loan.  

Don't lie and don't oversell your position, but remember, banks don't make money unless they lend money.  They need your business.