Today I would like to teach you a method of establishing banking relationships. Now before I begin, I need you to understand the importance of these relationships, and how local relationships are far superior to long distance relationships. Look, for any business to work and to be a substantial, growing business, you need to have solid, trusted relationships to complete various tasks for you.
Why? Because after you complete the most important part of the real estate investing process (finding property below market value), the next step is financing that deal. If you cannot get the financing, the deal crashes and you lose your time, and potentially any earnest/option money invested in the project.
So let’s look at some of the key points in establishing a solid banking relationship:
1. Keep to Local Bank Relationships
This is the most important point I can make. If you want to have a close relationship with someone, they need to be within driving distance. I mean close enough to have a lunch appointment with them. It may seem obvious, but someone outside of your region or state may not know all the ins and outs of your location, let alone trust and like you enough to finance any difficult deals.
You see, if you build a real estate investing business, you are going to run into times where your deals require creative financing, and you will have to have someone that knows and trusts you, before they will be willing to do a creative financing deal with you.
2. Make Contact with a Decision Maker at Your Local Bank Branch Office
Now that you understand the importance of staying local, you will need to “interview” a few of your local banks, to pick out the one that will be best for you. But here is the difference between what everyone else will tell you and what I will tell you – don’t shop for banks based on offers, shop for banks based on people. You see, offers will come and go, and banks will compete. But what you really need, is to find a Vice President or other high ranking local branch office representative to take care of you.
The best way to do this is to walk in to the bank, and ask if you can speak with the branch office manager, or other highest ranking employee there. Sit down with them for a few minutes, explain to them what you are trying to accomplish in your business, and how they have a wonderful opportunity to become your first source for loan shopping. If you have previous projects, tell them a little bit about them, how you financed them, and maybe some issues or problems you overcame while working the project.
3. Foster the Relationship
After you have done your “interviews”, make your selection. Through your conversations, you should know which bank is going to be the easiest to work with, which is the most important thing. Rates, terms and conditions, etc. can all be negotiated, but dealing with someone who is rigid and difficult is not what you want to do.
Once you have your selection, build the relationship by offering to take them to lunch or dinner. Ask them what they look for in a client, and maybe share some resources like contacts you have in other industries that would be beneficial to your bank contact. Anything you can do to increase your value in their eyes will help (just don’t bribe them or do anything illegal). Before you know it, you’ll have a great relationship and your bank rep will leap to help you finance deals!