Real Estate Investing: Do You Understand This Important Niche?

One of the reasons I tend to be pretty loyal to my lenders is fear. There, I said it. The lenders I recommend I recommend because they won't embarrass me. (There could be a whole blog post there.) They've been through the trenches with me and they have taken the time to learn a few of the oddities of mortgage loans made to non-owner occupants.

Just recently I had a novice real estate investor come to me with his pre-qualification letter. And he seemed hurt when I asked him to give at least one of my guys a call. "Why? This guy seemed very competent."

I swear I wasn't trying to make a point. But I picked up the call to interview the mortgage guy who had written the letter. Before I go out and show 15 homes, sit down and write a contract (another 2 hours of my time), negotiate, inspect, re-negotiate and wait till 5 days before closing to find out there is a "hiccup" I want to know who I am getting in bed with.

My first question was innocuous enough. He told me he had done "several" real estate investor loans in the past. I asked him if in fact my buyer could get closing costs paid (he had told me he could get them paid up to 4%) and he said yes. I then asked him if he was aware that I had never heard of a non-owner occ loan that would allow any more than 2% contribution towards closing costs.

Silence.

Now, let me say right here that I am aware that there are thousand of loan options out there and I AM NOT familiar with all of them. But I've been down this road before.He let me know he would check on that.

I had also found out from my would be client that he had very recently come into some money. The very same money that he was going to use to purchase his first income property. So I asked what the seasoning requirements were for the loan vehicle he was using.

Silence.

I'm not getting warm fuzzy feelings right about now.

Listen, I fully understand that everybody is new at everything in the beginning. The point I am trying to illustrate here is that non-owner occupant loans are different. Not knowing those differences can kill a deal when it's too late for everybody to walk away happy.

The same is true, of course, of REALTORS. Call any REALTOR on the planet and ask him if he works with real estate investor clients and the answer will be "YESSSSSSSSSSS!!!!" Ask them to describe a cap rate, or a rent roll or what NOI is and you'll get a blank stare.

Non-owner occupant loans are great for several reasons;

• Can be repeat clients again, and again, and again
• They tend to refer to other investor friends
• Tend to be a bit more savvy
  

Think about really getting to know the in's and out's of what the real estate investor needs in a loan product. You will find it to be very rewarding.