Kingdom Property Investments Journal

Let me get myself caught up...

Bought Dean's books back in April. Read both in 1 week & started planning, researching & trying to get our REI adventure started. After finding a solid RE Agent that has been nothing less than great to work with, we finally made our first offers on 3 properties on 6/23/09. Two have been rejected, one on a short sale is still hanging out there. We have since made offers on 4 other properties, 3 rejected, w/ 1 other short sale still in process.

Fast forward to today. After a day of travel w/ the day job, I attended a local REI Club meeting this evening, met a great group of local REI people and learned a lot about my local market that will help with our REI strategy. Tomorrow morning brings another day traveling in the day job, but my afternoon is chock full of REI. Meeting with the Loan Officer at a small local Community Bank to discuss financing options & then off w/ my agent to view 2 REO properties.

Even though we haven't closed a deal yet, our motivation & enthusiasm stays high. Vickie & I can't wait to do our "Celebration Dance" once our first offer is accepted (We chuckled when we heard Joe & Stacey say that....that will so be us!)

God Bless all the DG Family!

Robbie

After traveling most of the morning yesterday, I arranged to view five REO listings w/ my agent. By the time I arrived back in town around 2pm, my agent called after arranging the viewings and found that 4 of the five had multiple offers on them, at or above the bank's list price (bummer). Our market seems a bit strange since we have experienced this on many occassions in the past few weeks.

Anyhow, he was able to find two newer listing to look at, so we have three possibilities. The first two are promising & best of all, they don't have any offers (YET). The last one was scary (as were the neighbors). Only asking $39K, but I think I would have to actually pay someone to live on the street it is on. We're not desparate, so I chose to pass on that one.

Placed offers on the other two REOs:

3/2 Block-w/ 1628sf
FMV: 93K
Asking: $72K / Offered: $50K (needs $10-$12K in rehab)
Can rent for $800-$850/mo, cashflow $300 +/-

3/1 Block-840sf Bungalow w/ a killer yard
FMV: $72K
Asking: $59K / Offered: $35K (needs $12K-$15K in rehab)
Rent for $700-$750/mo, cashflow $400 +/-

Our current offer counts:

6 offers
2 rejections
2 pending response (short sales)
2 just submitted

Can't wait for the first positive response...just give us at least a counter already. We've passed the point of no return! We will own an investment property before the year is over.

We are so blessed to have excellent credit & a solid sound income base from my day job. I've lined up a great Mortgage Broker to work with on the Conforming side, but as everyone in REI knows, our deals don't always fit the "Big Bank" lending criteria. Quite frankly, with the volume of REO properties in our market, they frequently require cash outlay for rehab, etc...

To satisfy this need, I've taken to my small, local, community banks. I've met with two banks in town, one w/ only one branch & the other with only two branches. Here is what I've found, these banks really don't do what they would call "residential lending". However, they will lend within a "business relationship" for the purchase of residential investment property. Here is how I've approached them:

For example, today I met with the Asst. VP of Commercial Lending for a local Community Bank. In arranging the meeting over the phone, I explained upfront that I was a RE Investor, looking to finance SFR, primarily following a buy/hold strategy. He said that they have options for this type of investment approach so we setup the meeting.

When we met, the first thing I did, before asking any questions about the banks lending services, was to take the opportunity to explain my business strategy & explain my approach to identifying target properties. More importantly, I went through the process I use to "crunch the numbers" on each property to determine if it is a viable investment. After my dog and pony show, I expressed my desire to use my REI business to help members in the community to avoid distressed financing situations and help potential buyers overcome the financing hurdles (using Lease/Option strategies) so they can achieve their goal of home ownership.

What I found is that the banker was appreciative of my detailed explanation to our business model and he responded that, beyond being credit worthy, my overview of our business model gives him a great deal of insight into my character as a person which plays a big role in their lending decisions." He liked the approach I was taking to secure sound investment properties and he offered solutions that he could provide to allow us to finance, not only the purchase cost, but also the closing, rehab & improvement costs into the loan if the deal made sense!

Of course, my response to that was; WHAT, WAIT A MINUTE....YOU'RE TALKING ABOUT 100% FINANCING!!!! I DIDN'T THINK BANKS WERE DOING THAT ANYMORE. Well, they're not, but your small local banks typically don't lend against a portfolio being sold in the secondary market, so they can call their own shots.

The moral of the story when approaching small community banks...
* Have a solid investment strategy that you can clearly articulate to the bank
* Be upfront with your strategy and open about what you need from them
* Stress your intent to benefit the community through your business and a desire to work with community partners like their bank.

I can't say that this will work for everyone, but I am fired up and can't wait to run my first loan through my local community banker. Not to mention, it's pretty cool to be able to walk into a bank, sit down in the bankers office and share the killer deals that you've secured. As they say....

IT'S ALL ABOUT RELATIONSHIPS!!!

FINALLY!!!

After many unsuccessful verbal & written offers, we have some movement. We viewed two nice homes last Thu, 7/23. Planned to put offers on both, but only one offer made it in on Friday the 24th. On the other property, which was my preferred choice of the two, the bank is being a real stickler. They will not even accept an offer until we receive a prequal through them. We are very clean risk w/ 740+ credit, but they didn't like the fact that we did not disclose where our Down Pmt was coming from. I explained that we would not be using them for financing & the bank rep even told me that we would fly through underwriting simply based on our credit & my income from my day job....but she still required proof of funds for the down pmt. I jokingly asked if there would be issue if I took cash from my pillow case and deposited $20K into my bank account to show her. To this she responded that she would then need the funds to be seasoned & to know where the money came from?????

ALL THIS JUST TO SUBMIT AN OFFER ON A HOUSE THAT I COULD BY ON A CREDIT CARD!! Wow.

Oh, well. We decided to pass on that property (actually we'll let it sit for another two months while my funds "season" and then go back with a really low offer) and offer on the other..a nice 3/2 block home w/ 1268sf.

To my suprise, my agent called me on Monday to say that we had a Counter Offer & it's been a fever of activity sense then:

Friday / List Price, $72K - I offered $50K (FMV - $95K)
Monday / Bank Countered $68K - I countered $60K
Tuesday / Bank countered $63 - I accepted contingent on inspection

I know the house has some issues, with which I plan to go back to the bank to justify my last standing offer of $60K or I'll go $63K w/ seller paid CCs.

Can't wait to get through inspection next Monday to move forward and hopefully get the deal done.

Well,

Business at the day job is getting a lot of attention and has me swamped right now (can you say "Health Insurance"?) That's just fine, because it's not stopping us from forging ahead w/ the REI business. Today was a bit of a strange day for us...considering where we've been through the past 2 months since getting started.

Had an inspection on the property we settled an offer on last week. The inspection did not present any deal breakers, so we find ourselves actually in the position to REALLY BUY A HOUSE for the first time. Now if I could just get my loan officer at the bank to give me some time to meet with him to get our financing secured. No worries, we have another small community bank as a back up if needed.

Now I find my attention focusing on the rental "prep steps" to get the house ready for rental. We are supposed to close at the end of Aug, so we still have some time to get our ducks in a row. Nothing major, small bathroom gut-job, paint, minor drywall repair & a couple new windows and we're all set. Shooting for $5K in repair with a rent of $850/mo. Mortgage pmt of around $500/mo should cashflow between $300-$350 depending on if I can hold to the $850 rent.

Exciting times, but now the tough part begins...RESTRAINT! Vic & I committed to each other that we would limit ourselves to one property this year (yes, I know we're ultra conservative) so we can get our Landlord feet wet. We plan to continue growing our REI portfolio next year. What do they say about addictive traits. I know the first rent check that shows up in the mail is going to have me salivating at the MLS listings from my re agent.

Oh Well...we'll see where God leads us next.

Take Care & God Bless,

Robbie

Do you think I could get a loan from small community bank with a 550 credit score?

Bob

Hey Bob,

I know it sometimes comes down to the bottom line credit score, but don't let that hinder you from seeking out institutional financing solutions for your investment business. You really don't know what they can do for you until you ask...but you don't want to "ask" right up front. These banks need to get to know you & your business before they determine what they can do for you.

I'm working with two local banks & have found that they both have very different guidelines. I honestly don't know what their "low end" FICO requirements are, but I've found the factor that they weigh heavily on is the relationship they have with you & the character you present for yourself and your business. You really don't know what the bank is willing to do for you until you ask. I strongly recommend that you contact your smaller banks & get a meeting with the head loan officer or someone in charge of business lending. Don't go in with a list of questions about their lending requirements, or ask what they can do with a "550 Credit Score". You want to present a "business case" for them to do business with you. Treat it like a partnership and consider the bank a member of your team. I know it sounds "hoaky", but sitting down with our banker/loan officer, going over our business plan and long term investment objectives went a long way to forging, what I hope will be a long productive relationship with the bank.

Another step we took very seriously (after a successful meeting with the loan officer) was to establish banking accounts with the bank. We operate an LLC, so we setup business accounts (& actually put money in them) to show our seriousness about doing business with them.

These banks are much more traditional than your "Big Box Banks". Don't expect to stand in a "cattle stall" lane and wait on a teller to help you. As my wife said after visiting our community bank for the first time "Wow, I haven't gone into a bank and actually sat down with a banker in forever." It's actually pretty cool to have that type of relationship. After all, they are a key part of your investment business (unless you know someone with lots of cash!!)

A couple of personal pointers:

1. Set up the meeting to discuss your REI business and to learn more about their business banking/lending services. Call me a traditionalist, but dress nice for your initial meeting. Not necessarily suit & tie, but have some nice slacks, dress shoes & a collared shirt at the very least. Remember, "Character Counts!"
2. Have a brief overview (your 60 sec. pitch) ready to provide the loan officer. They need to know who you are, what your business about and why your are interested in working with their bank. This will help the banker generate some questions to spur discussion about your REI business.
3. Show a commitment to the bank. You're looking for a partner, so it's important to let them know that. Express your intent to establish business and/or personal banking relationships with the bank.
4. Now...get the bank some business. Refer others (especially other businesses) to your bank.

Hope this helps!

Best Regards,
Robbie

Thank you for all your assistance.

Bob Ross