Why Are The Banks Giving The Other Guy More Money???
Ok, I've been in the process of learning a few things here over the last 6 months. My business partner and I have made about 5 offers and now have a foreclosure ready to put back on the market and a rental property I will close on next month.
The problem is I live in a relatively small town (10,000) and there is one other guy who started doing the same thing we are trying to do. He has bought 6 houses in the last 6 months- the same ones we have put offers on. He always manages to get the information first and is just a little higher on his bids. He has also lost his job recently and is doing this as a business.
On my rental property I just purchased, the bank said I had to put down 25%- ouch! I couldn't come up with the cash, so used my home as collateral.
A couple days ago this man bought yet another house and he told me he was actually walking out of the banks with money in hand.... so, I called his bank to see what they could do for me. They told me that I had to have 30% down and they would only loan me 70% of the appraised value or the sale price whatever was lower. His last purchase was a bank property that he bought for $17,500- the mortgage they gave him was for $38,000! Just last month he bought a house for $21,500 (a dump we didn't think we could get appraised for $15,000) and the bank gave him a loan for $39,000. They will do additional monies for fixing the place up, but they will not release any of that until the work is done. How is he walking out with cash in hand?
WHAT AM I DOING WRONG??? HE doesn't even have a job and he's getting all these loans for 100%+++ financing. He has only owned his primary residence for 6 months or so and has already used that as collateral on a different large investement. Myself and my partner (both employed) on the other hand are contacting the same banks and have been told we need to come up with 25-30% down. I must be missing something- I need some serious advice.
Thanks for any help.
Ever heard of kickbacks?
Without taking any time to protect my vanity or pride, I will have to admit that I don't know anything about kickbacks! WHAT ARE THEY AND HOW DO I GET THEM????
I don't know if it matters, but I live in a very conservative state with conservative lending institutions.
It may not have anything to do with kickbacks. Which are ILLEGAL in all states. I can tell you that a persons portfolio is used when "walking into" banks like you said. Those type of banks lend on credit depth, credit history, and reserves. Long time reserves are actually better than cash reserves in a checking account.
Here is an example:
I never had personal credit until the year 2000, I was 35 years old. I owned my business since 1991. I had all of my mortgages, credit cards in my business name. When I applied for a Business Credit Card from MBNA for a sole proprietorship business in Nov 2003, I was turned down. My credit is high 700's, I have hundred's of thousands of liquid cash in checking account, many stocks, bonds, ect.
This was there reason "How can a grown woman of 35 never have any credit in her name." Well that lead to a shouting match, I hung up and didn't get the credit card.
So you should go over your portfolio and so should your partner.
Here is a list to start
1) credit report from all three bureaus
2) figure out what you average balance is on all monthly accounts
3) check out worth of all IRA's
4) check out stocks, bonds, mutual funds
5) check out your money markets
6) you get the picture
Now with all of this revised information find your strenghts and weaknesses in your portfolio and make the appropriate changes.
Utilize your strengths and downplay the weaknesses.
Lori
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If you really play your cards correctly, why don't you attempt to bird dog a property ot two to get to understand the competitions success. Maybe you will understand the hook being used with his lender.
Remember to use your head, and keep your feelings out of the future discussions.
Eric & Rosa
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It sounds to me that your competition may have a working line of credit as well as access to home acquisition and improvement loans.
With a home acquisition and improvement loan, the lender will finance up to 80% of the ARV of the property. Funds that are not actually used for the acquisition are held in escrow. As repairs are made, the bills are paid with a draw against the escrow. When the rehab is completed, any money left in the escrow is given to the borrower.
Perhaps you just need to apply for a different loan product than you are now.
Buy your properties 70% LTV and take out 80% loans and you will get money every time.
Try shopping elsewhere for your money as well. there are at least 5K lenders out there, most brokers use 5-6.
Good Luck!
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I am a mortgage lender and broker investor deals to over two hundred different banks. I will tell you that you can, with sufficient credit history, income, and reserves finance a non-owner occupied investment property to 95% of the LESSER of purchase price or appraised value. Your competition MUST be offering a secured position in some other asset in order to get greater than market value loans on his properties. One other posibility is that your competitor intends to accomplish MASSIVE upgrades to the property ( like making it into a 4-plex ) and the subsequent market value of the finished project will be 125% of the loan amount.
In some banks there are lenders who work with commercial loans and lenders who work with residential loans. Get hooked up with the commercial loan lender. They can offer more interesing deals than residential loan lenders.
Also, there are good and bad lenders. If you aren't getting what you need, LOOK ELSEWHERE (other banks, websites, mortgage brokers, etc.).
I don't blame you - I'd be mad too! But it seems like you aren't getting good advice when you go into the banks. Would you consider to be so bold as to ask this guy the NAME of the people he has been dealing with in the banks he uses? He'll probably tell you - if he doesn't realize how much you are all in competition.
Best of luck - hang in there!!
Thank you AmyClaire76 I was thinking that same thing while I was reading the replys. I would simply ask the bank lender that this guy goes to. I bet he will tell you because he sees future business in front of him. I w ould even ask the guy himself to see what he is doing, heck he might just tell you if you word yourself correctly.
Lori and Amy are right on.
Talk to the commercial side of the bank not the residential side.
Presentation counts for a lot. Go in talking like you just came from a late night infomercial and you will not get much. If you go in with a solid business plan and documentation sowing your worth and you could come out way with what you need.