Dont Let It Happen To You! Banker Reveals
I travel a lot. There have been times Ive been in a different state, a different city, every day.
And everywhere I go, I talk to people. Students, other investors, Realtors, brokers, attorneys, bankers. I love to hear what they have to say, to learn new things, to get new ideas that I can use in my own business and teach to my students. Its one of my favorite things about what I do.
And while I hear new things all the time, Im also amazed at how constant things are. Year after year in city after city, people have the same experiences. The same things work, and the same things dont work, no matter where you are on the map or what it says on the calendar.
I was struck by this the other day when I was talking to a banker friend of mine that I hadnt see in awhile. This guy knows his stuff hes been in commercial lending for almost 30 years, in banks both big and small. Hes worked through high and low interest rates, up and down economies, bear and bull markets.
Through it all, hes made loans. Thats his job. If he doesnt make loans, hes out of work. And he loves to give loans to real estate investors, because he knows that a good real estate deal is one of the safest investments going.
But heres the problem: in all his years of commercial lending, he has never had a real estate investor come into his office prepared to do business.
Thats right never.
And Im sure hes not alone. Real estate investors may say that banks dont want to lend to them. But they may not have considered that they could change that, simply by making it easier for the banker to say yes.
One of the first things that go wrong is that the investor doesnt take the time to develop a relationship before asking for a loan. We may live in a high-tech age, but the majority of deals are still based on the handshake test: whats your gut feeling about the other person? Do you like them? Do you trust them? This basic rapport (or lack thereof) can determine whether you even get the opportunity to present your facts and figures.
If you get that opportunity, you then need to tell a good story. Weve talked about the information you should provide to a lender when youre proposing a deal: financial statements, cash flow analysis, details on the deal in questions, tax returns, and a current copy of your credit report, for starters.
But when youre building a relationship, you also want to paint a picture for them of what you do. Keep a portfolio of before and after photos of your properties both those that youve flipped and those youve jazzed up and kept for cash flow. Invite them to tour of your properties or take them to look at a deal youre considering. Believe me, most of them would welcome the opportunity to get out of the office and you can take it as a chance to demonstrate your expertise and prove that you know what youre doing.
Remember, youre trying to build a relationship here and every good relationship has to be based on mutual trust and honesty. Play it straight dont try to hide things or make the lender dig for information. That will just make them suspicious. Lay your cards on the table but be prepared with solid information to explain and offer a solution to each problem.
Bankers are not going to come knocking on your door, offering you money. But if you do your homework, put time into preparation and take the time to listen and learn, youre likely to come away with a deal at some point. Remember, bankers want to make loans. Its up to you to make them want to make one to you. Russ Whitney
by: Russ Whitney
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