Why Go Local for Hard Money Loans?

Why should a real estate investor shop local for their hard money loan? Is there any advantage in partnering with a lender in your area?

What if the national lender is offering rates and terms that seem too good to be true? If a lender offers terms that seem too good to be true, they probably are. It’s unfortunately still common to lure potential customers in with rates they won’t qualify for only to offer terms they could get anywhere else.

But what about big lenders whose rates and terms seem reasonable and don’t change? Is there any advantage to going with a local lender over them? To answer this question, I talked to several people around the Rain City Capital office.

"A local lender is a resource for more than just funding." -Fred Rea

Fred Rea is the founder of Rain City Capital, which he built from the ground up in 2009. Since then, Rain City has become one of the top lenders in Washington state, funding over $750 million in 4,000 loan transactions. When asked about going local for funding, Fred quickly listed his top reasons:

• "Valuations by local lenders are typically done internally so you aren’t held to the will of some knucklehead BPO agent inspecting the property on behalf of a national company.
• A local lender is a resource for more than just funding. Networking is huge in this business. You can build a much stronger relationship with a local person who will drive by your property, buy you lunch, and help you plan a strategy. We can also recommend trustworthy contractors, title agents, and realtors for you to work with. After all, we’re in a partnership with you.
• The internal valuation and other benefits mentioned above result in excellent customer service that’s fast and convenient, but not heavy on process."

"When a local lender knows the market better than a national lender, it’s like an insurance policy." -Ian Morell

Ian Morell is the CEO of Caliber Real Estate, one of the leading real estate investment brokerages in the Northwest. He was also just named one of the Puget Sound Business Journal’s 2018 40 under 40.

Ian agreed with Fred, adding, "To us, the borrower is more than just a name on a piece of paper and that difference is crucial. We know their story. A local loan officer will fight for a borrower. They’re in their corner, on their team. When you look them in the eye and shake their hand, there’s a trust there that helps get a deal done. People ask for certain things. A nonlocal lender isn’t flexible and will give you a hard no. When you have a relationship with a local lender, that no becomes a maybe."

He also added another benefit to the relationship. "When a local lender knows the market better than a national lender, it’s like an insurance policy. We can protect you from making a bad decision. A local lender is putting up a lot of money so we’ll look that much harder. We’ve actually saved people from making some bad purchases in the past. Not because we want to say no, but because we want to build a long-term partnership with our investors."

"We’re able to help you with your comps and ARVS because we live there, same as you." -Lesa Say

Lesa Say is Rain City's most seasoned Sales Executive. She has worked in Washington real estate since 2005 and knows markets from Tacoma to Kennewick. The average real estate agent closes 3-4 deals a year, but during her time, Lesa sold an average of 25 properties per year, all without a team.

When she sat down to talk about the advantages of going local for a real estate loan, she said, "The main benefit of going local is we know the area. We’re able to help you with your comps and ARVS because we live there, same as you. When you pick up the phone and talk about a neighborhood, whether it’s Beacon Hill or Lake City, we already know the area you’re talking about. We also know how the current market is doing, not just what the national trend is.

"When people use a national lender, the funding often falls apart upon inspection. Traditionally, when a national lender goes out and appraises, they do a mile radius search for comps. When a local lender goes out to do an appraisal, they know the nuance of a neighborhood and often can produce a more accurate appraisal to help make sure you get your money’s worth."

"This relationship, if cultivated, can get you all kinds of goodies..." -Alex Brosy

Alex Brosy is another Sales Executive at Rain City. He previously worked for a traditional lender and knows the business well. When asked about the advantage of local funding, he said, "Coming from someone that used to originate loans at a national lender, I can easily say the main reason to use local money is because you have an actual, meaningful relationship with your lender. This relationship, if cultivated, can get you all kinds of goodies, like quicker closes, flexibility, or looking past things in a borrower history that would kill your deal with a national lender."

Whether it's a better relationship, second set of eyes, more accurate comps, or greater flexibility, there are many reasons to go local for funding on your next real estate purchase.