This is Your Secret Weapon If You Want to Buy Rentals
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In this YouTube video, the speaker shares his experience of building a $40 million rental portfolio without using any of his own money, thanks to small local banks. He emphasizes the importance of using these banks and provides tips on how to find them and talk to them. Small local banks are not big box chains like Bank of America or Commerce Banks, but rather banks that are local to where you live and have three to ten branches. These banks offer long-term funding sources, such as mortgages for 25 to 30 years, which allow for smaller mortgage payments and positive cash flow. The speaker shares that he had 20 banks say no to him before finding the right ones and that one small local bank has written him $2.2 million worth of tax-free cashier's checks in the past 18 months.
The speaker explains why big box banks like Bank of America, Commerce Bank, and Wells Fargo are not ideal for real estate investing. These banks have a lot of customers who put their money in checking and savings accounts, and they make money on fees and lending that money out to other people. They do offer mortgages, but they sell them on the secondary market to institutions like Fannie Mae or Freddie Mac. In contrast, small local banks are ideal for real estate investing because they offer long-term funding sources, such as mortgages for 25 to 30 years, which allow for smaller mortgage payments and positive cash flow.
The speaker provides tips on how to approach small local banks to get them to listen to you. He suggests not acting like you know everything and not being too aggressive. Instead, he recommends being modest and honest about your experience level. He advises against using lingo that you don't understand and not lying about your financials. To find small local banks, he suggests asking other real estate investors, posting on local real estate investing Facebook groups, attending local meetups, and using the independent community bankers of America website.
The speaker advises being honest and real with small local banks to build trust with them. He suggests asking questions and admitting when you don't know the answer. To find the right bank, he recommends asking about cash-out refinances and the loan-to-value ratio. He pushes for getting as much equity or cash out of properties as possible and financing over a long period of time.
The speaker explains that small local banks usually offer adjustable rate mortgages that are usually three to five years long. The property is amortized over 20 to 25 years, and after five years, the interest rate will go up or down depending on what the market is doing. The speaker warns against getting adjustable rate mortgages for personal properties, but for rental properties, it can be in your favor to have them. The speaker emphasizes the importance of building relationships with small local banks and looking at them as partners.
The speaker shares how he was able to get tax-free money through cash-out refinancing with small local banks. He explains that he built a good relationship with one bank that has done $14 million worth of mortgages for him and his partner. They did a cash-out refinance on their entire rental portfolio over a four to five-year period. They were able to get great terms, including 30-year fixed mortgages for 10 years, which increased their cash flow. They were also able to pull out $880,000 of tax-free money. They did it again a year and a half later and pulled out $1.4 million, bringing their total to almost $2.3 million of tax-free money. The speaker emphasizes the importance of building relationships with small local banks and doing cash-out refinancing to create wealth.
In this YouTube video, the speaker shares his experience of building a $40 million rental portfolio