What you’ve got wrong about banks – and how to make them work for you
If you’ve been reading my stuff for awhile, you know that banks aren’t my first choice for financing investment properties. I’d much rather get seller financing, or if that isn’t an option, work with a mortgage broker. Both of these options offer a lot of advantages for investors.
But that doesn’t mean you should write banks off altogether. Remember, you always want to be open to new opportunities. Conversation never hurt anybody, and you just might learn something. And if you play your cards right, you may even get a new deal financed in the process – if you know where to go, who to talk to, and what to say.
I’ll even give you the words to say – the same words that have made me millions of dollars – at the Russ Whitney Millionaire Mastery Training Program.
If you’re like a lot of people, the very idea of walking into a bank and asking for a loan freaks you out. You’re scared, you’re intimidated, you’re thinking they’d laugh you right out of their office. The very thought of sitting in a banker’s office reminds you of being called to the principal when you were a kid.
Hey, you’re not alone. But I’m here to bust up all those myths about bankers.
Myth #1: Bankers love to say no.
When you think of a banker, you probably picture someone in a three-piece suit, sitting behind a big desk. Most people’s imaginary banker sits there all day, just waiting to say no to people asking to borrow money. People just like you.
But the reality is that bankers want to make loans. They need to make loans. It’s how they make money. Even in today’s economy, that’s still true. People sometimes think of banks almost like a government agency or a public utility. But remember, banks are for-profit businesses – and mortgages and commercial lending are big profit makers for them.
That also means that banks’ decisions are not personal. If it’s a no, it’s not a judgment on your personal worth or character. It’s just that your deal doesn’t mean their business strategy right now. And if it’s a yes, they’re not doing you a favor because they like you or because you’re a nice guy or gal. They’re doing it because they think they can make money. Period.
Myth #2: Bankers are smarter than you.
Ok, maybe they wear suits and have big desks and ritzy offices. So what? That doesn’t mean they’re smarter than you, or more successful than you. Maybe they have fancy degrees and VP titles after their names, but I’ll bet they’re not financially independent. They’re still working for someone else, right?
Sure, bankers probably know more about banking than you do. But even if you’re just starting out, I’ll bet you know more about real estate investing than they do. I’ve rarely found a banker that understood my business right away – I always have to educate them on what I do and how I do it. So remember, they may have things to teach you – but you have things to teach them, too.
Myth #3: All banks are the same.
Lots of people assume that if one bank says no, all banks will say no. But that’s simply not true. There’s no secret society where all the bankers get together and make the rules. All banks are different, just like anything else.
Different banks have different specialties, different strategies, different approaches to making money and setting themselves apart in the market. The bank on this side of the street may be very interested in real estate lending, while the one across the street may be interested only in car loans. Each bank can only lend so much, and each one has to decide how they are going to divide up their lending pie. One may decide to devote 30 percent of its lending to real estate, while another may set aside 70% of real estate. The board of directors, the president, the senior lending officer – all these people weigh in on this decision, and of course each group comes to a difference decision.
So just as with anything else, you have to be persistent. Sure, you may hear a lot of nos. But if you keep at it, eventually you’ll get a few yeses. That doesn’t mean the nos were a waste of time. If you’re paying attention, you’ll learn something from each no – something that will make the yes happen faster.
Hopefully now you’re feeling a little more confident about approaching a banker for financing. That’s the first step. The next is to arm yourself with the information you need to make it happen – how to pick the banks you want to approach, who to talk to there, and what to say. I’ll cover all that in another piece. In the meantime, keep reminding yourself that you can help bankers as much as they can help you.