By Julie Broad
After fifteen years of investing in rental properties – many of those years we purchased as many as ten houses – I’ve always wondered why more mortgage brokers weren’t focused on helping real estate investors.
Investors can be more difficult to work with because fewer lenders will finance investment properties
and there can be a lot more paperwork involved, but it’s also rare for an investor to find a great broker to work with.
It took us years to find a great mortgage broker. When we did find a great guy we followed him around from company to company as he changed jobs because he understood our business, stayed current with the lender programs that would help us qualify for financing, and was always willing to work until he exhausted all possibilities. He also did his best to streamline the process for us to reduce the hours we spent trying to get a deal done.
We never once asked him to buy down a rate.
We never shopped our financing around anywhere else unless it looked like he wasn’t going to be able to finance our deal. And, we always referred lots of other real estate investors to him because he knew the programs that worked for investors.
Numbers are important to a real estate investor, but many investors will pay private lenders as much as 7-10 per cent to finance their deals, so they aren’t as worried about saving half a point on a deal as they are about whether they can get financing at all. The mortgage money also doesn’t come out of an investor’s pocket directly so they are less sensitive than a home owner that sees every penny as their own. For an investor, the tenant is paying the mortgage, so as long as the property will cash flow and the terms of the mortgage work for their investment strategy, the interest rate will be less of a concern.
The lending landscape is a challenging place for investors. If you take the time to find programs that will work, stay up to date on them and do a little networking you could find yourself with a very loyal and active base of clients who will never ask for a rate buy down.
Admittedly, my husband and I are not average investors and have built a much larger portfolio than most investors, but many active real estate investors will still do at least one deal a year. As the market value increases real estate investors actively seek to leverage their equity to purchase more properties so refinancing is common. Plus, real estate investors will also usually be homeowners who will need financing on their own homes.
In a five year period, a decent real estate investor will probably come to you with a minimum of five deals plus they will certainly be referring other investors your way. How many deals will you do through a normal home owner in a five year period?
So what do you need to do to sell yourself and connect with the real estate investor market?