Honestly, I'm sad to admit that it has taken me so long to get around to writing an article like this one. For many years, I've been teaching people how to do deals. In this process, I've also taught them how to establish relationships with team members, and I've seen some flourish and others fail before they even get started.
When you are getting started in the real estate investing business, talking with potential team members can be very intimidating. My advice has always been to keep trying until you get it. Remember the old adage “Practice makes perfect” and this is especially true in the art of conversation. In time, even the most skilled conversationalists will get better at the art of talking with team members. This is one area in which everyone has room for growth and which should be developed with ALL your team members!
For the purposes of this article, I am choosing to focus on your conversations with lenders simply because I have recently spoken with people who are facing particular challenges in this area. I have heard from far too many people who have damaged, or even destroyed, potential relationships with lenders, and as I begin to question and delve into what happened, I am astonished at some of the foolish things people say! They are failing at what should be an easy relationship to establish simply because they haven't practiced the art of conversation. Some don't say enough; others say too much. Some say all the wrong things and then wonder why no one wants to deal with them.
If you have bad credit and don't pay your bills, you must understand that you are at a disadvantage when it comes to dealing with lenders. In their eyes, you are not a prime candidate for a loan. Put yourself in the lender's position as you read the script below:
Hello Mr. Lender, I'm interested in becoming a high powered real estate investor in the area. I have yet to do a deal, and I'm looking to establish a relationship with a lender who is willing to come along side me. My credit is trashed. I was evicted from my last apartment, and my boss fired me last week for coming in late for the third time this week. But it's not my fault; it's my girlfriend's fault. If it weren't for her, I wouldn't have these problems. Do you think you can work with me?
A conversation like this is not going to work too well. Instead, you must realize that it's YOUR job to sit down and figure out what you can bring to the relationship with the lender. It's YOUR job to package yourself in the best light. Don't lie about your situation or try to hide the facts, but it is imperative that you tell banks why they SHOULD deal with you, not why they shouldn't.
Now maybe your situation isn't the issue. Many of you could easily get over that initial hurdle when dealing with a lender. However, maybe the bank's programs aren't exactly what you need, and you'd like them to do something different. I'd like to share a recent example of someone trying to do just that and get a bank to offer them 100 percent financing. But, before I go into the details, you must understand the way banks think:
- Banks want to lend money; it's how they make money.
- Banks like when someone puts money down; the loan is safer.
- Banks like things done a certain way and get uncomfortable with wild ideas.
If you have just entered a banker's office and tell him that you have an idea to get your buyers into homes with 100% financing and you want the bank to help you, you have just hit two of the three “sore spots” mentioned above. You may know EXACTLY what you want, but to dump it all on the table in one fell swoop will scare the lender away. Instead, you need to spoonfeed your ideas to the bank slowly and carefully. This usually happens only after you have developed a rapport with the lender. Then, once he knows you by your first name, you can then ask him if the two of you can meet to discuss an idea.
During your appointment, tell a story that leads up to your request. For instance, you may say “You know, I've been thinking about a way to help people buy homes with little to no money down, and I have a couple of ideas.” Then, before you share your ideas, ask “Has your bank participated in any creative financing to help get deals done?”
Then, let him talk. He may reveal all kinds of things that you can use as ammunition for your case, but it is VERY IMPORTANT that you listen to what he says. The bank may have already done some of the things that you want to propose or something very similar to it. If the lender has done something similar, you can say, “That intrigues me. It sounds similar to one of my ideas. Can you share a little more about how you pulled that off?”
The key is that you want THE BANKS to help you come up with a solution to your problem. You want them to be part of the solution. Although, you may already know the solution you are seeking, you want them to help you come up with that solution. You want to ask a lot of “What if?” questions, or “How would you do this?” type of questions.
I call this Exploratory Conversation. You need to have the conversation as if the two of you are exploring possible solutions. Don't be the arrogant person who already has the solution and tells the lender the way that things need to be. Your end result must be an idea in which the lender has input as you guide him toward the solution you are seeking.
I'm not suggesting that you manipulate people. What I am suggesting is actually very relational. We do it all the time with our spouses. There's a great line in the movie My Big Fat Greek Wedding in which the Greek wife acknowledges that the husband is the head of the family, but is quick to add that the woman is “the neck” that controls the head. She helped her husband come up with a solution he felt good about because she included him in the decision-making process.
So take your time, get to know your team members, and work out solutions together. Walking into a bank and asking “Do you lend 100% to investors?” will always get you a big fat “NO”. But that doesn't mean that lenders can't loan 100%. And remember: this principle also applies to title companies, double closes, and real estate agents willing to do low offers or work creatively with you.