Communicates and is Easy to Work With
Communication is important in any industry, but it is critical in a time sensitive business with so many moving parts. Your lender should communicate on a regular basis in a way that fits your schedule and via a channel that works for you. Some prefer email, others a phone call – ultimately, the how is up to you, not your lender. They should also update you any time something changes with your loan and keep you informed on progress and potential issues.
Regular communication is a large part of being easy to work with. You should never feel like you’re bothering your lender with your questions or that calling them is interrupting their day. If you think of working with a lender as a relationship, there should be an ease involved and no doubt in your mind that they are in this just as much for your success as their own. Finally, you want a lender that is upfront about fees and loan structure. If your lender won’t tell you their fees up front, it’s time to find a new lender.
Offers a Deep Line of Products and Variety of Terms
So, you’ve opened a conversation with a lender that you think is a good fit because they offer the type of loan you need right now. Time to dig a little deeper. The loan you need today might not be the loan you need in the future.
You need to work with a lender that can help you build your business no matter what direction you decide to go. Today it might be fix and flip properties – but down the road you might decide to keep properties and rent them instead – does your lender do DSCR loans, too?
The other aspect of product to consider beyond loan type is loan size and term. You might be starting small but planning to grow to substantially larger loans. Can your lender grow with you? Term is important too because while short term might work for now, flexible terms will allow you to adjust if unexpected things happen with your business.
Lastly, while it might seem over simplified, be sure your lender is providing a loan that fits your needs and is not something they need to sell. A good lender makes the time to ask and answer a lot of questions to understand your business and explain their products and terms. So, while there might be a lot of discussion and explanation, there shouldn’t be any pressure to sign on to anything that is not a good fit for you.
Takes a Problem-Solving Approach
Your lender should bring solutions to the table that can help reduce your risk and your stress level. That mentality is built on several factors.
First, look for a lender with market and industry knowledge. Any lender should know what is going on with the economy, in real estate, and specifically in the market you are investing in. They should welcome questions and be willing to share what they know to provide the best solution for you.
On top of general market knowledge, it’s important that your lender has experience in real estate investment lending. It’s easy to be successful when an industry is up – but you want to work with a lender that has weathered down markets and kept lending.
Ask about their processing team and back office as well. A lender is only as good as the team behind them, and it does take a team to close in real estate. Great processors will often catch things before they become problems, and they can increase speed to close, something that can improve your ROI and your long-term success.
Do they have technology in place that is current and supports the lending process but is easy to use and can be adapted to move with the market? Online applications for example, indicate that the lender knows the importance of speed but a quick reply to an application submitted online indicates there are also people involved in the process to get things done, no matter what it takes.
Their Firm is Built on Flexibility
Any lender’s entire firm should understand that the real estate market changes constantly, so they are flexible and are able and willing to adapt to market conditions as well as knowledgeable enough to shift ahead of the market and help drive your business. Ask your lender, or other investors, how often your lender has changed their product mix in the last 5-10 years. Were they still lending during the downturn we recently experienced?
The bottom line is that finding the right lender is like finding the right property. Be prepared to review several that seem like the right fit, ask a lot of questions before jumping into anything, and find a lender that communicates, helps solve problems, has a product mix that serves your needs, and is savvy enough to move with the market.
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