In another piece, I busted up some of the most common myths about bankers. My hope was that once you realized that banks actually need to make loans to make money, that each bank is different, and that bankers are no better or smarter than you, that you’d feel more confident going into a bank and talking to a lender.
Confidence is a good first step, but it’s not enough – you need to back it up with knowledge and preparation. You can have all the confidence in the world, but if you stumble into a bank like Johnny Lunchbucket, you’re not going to get far. Like anything else, you need to do your homework, learn to talk the talk, and come prepared with a plan to demonstrate that you know what you’re talking about.
I hope I’ve convinced you that you’re just as good and just as smart as any banker. Now I’m going to teach you how to prove it.
Let me just add, working with lenders is one of the biggest stumbling blocks for investors. That’s why we’ve dedicated a good bit of the Russ Whitney Millionaire Mastery Training Program to working with bankers so you can get the funds you need – on your terms! I’ll show you how at our next training.
In the meantime, here’s some of my best advice to get you started …
Step #1: Identify the best banks to approach.
I told you each bank is different. That means that some are more likely to consider a real estate investment deal than others. Your job is to pick the best prospects in your area and learn all you can about them.
For most beginners, it’s best to start with small community banks. Don’t waste your time with the giant superregional banks – they have too many layers and local branches have almost no authority. You want banks that have just a couple of branches. You may not be aware of them right now, but with a little research you can find them – they exist in every part of the country.
Small community banks have less personnel to sift through, they’re very focused on the community and their loan officers in the branch actually have some authority. You’ll get better service and quicker decisions.
Step #2: Go right to the top.
Once you’ve identified the small community banks you want to target, call the main branch and ask to speak to the president of the bank or the head of commercial lending. (In some places, they may be one and the same.)
Sound scary? It’s not. Again it’s all about confidence. Prepare yourself ahead of time, write down a script for yourself if it makes you feel better. Say that you’re a serious real estate investor and you’re looking to establish a lending relationship. Ask if the bank is interested in this type of business, and if so what types of programs they offer. You’ll be able to tell from the telephone conversation if the bank is pro-real estate or not – and remember, not all of them are. Don’t take it personally. But if the banker seems receptive over the phone, ask for a face to face appointment.
Step #3: Be prepared.
Once you get an appointment, you’ll want to make sure you’ve done your homework before you go in, and that you bring along some well-prepared, professional-looking information to leave with the banker. This will make you more confident during the meeting, and it will go a long way toward convincing the banker that you mean business.
What kind of preparation should you? First, be ready to explain to the banker the type of education you’ve gotten in real estate investing. You don’t need to mention me by name, but you’ll want to emphasize the time and money you’ve invested in learning about how to do this the right way.
Also, you’ll want some kind of business plan or financial projections to demonstrate how your business makes, or will make, a profit. If you’ve got a potential deal on the table, great – lay it all out and show exactly how it would work. If you don’t have a deal right now, write up a plan for a hypothetical deal. If you’ve already got some properties, bring financial statements to show that you’ve already done this successfully and that you’re generating positive cash flow.
Just as banks want to diversify their lending mix, it’s a good for you to diversify the sources of your loans. Seller financing and broker deals are great options for investors. But it’s still a good idea to know how to cut a deal with a banker too. Once you get past the intimidation factor and establish a rapport, you’ll see that a banker can be a useful member of your power team, too.