Let’s face it, if you are going to invest in OKC rental real estate, you almost can’t do without local banks for borrowing money to buy properties.

This article tells you what local bankers have to offer real estate investors.  At the end of the article, it gives you some tips about how to initially approach a local lender.

What is a Local Oklahoma City Lender?

A small local bank is a bank that does business in your local community and is not a national chain like JP Morgan Chase.  Their lifeblood is making good real estate loans, so they are looking to do business with real estate investors. Some examples of small local banks include, in no particular order, First Enterprise Bank, First United Bank, Prosperity Bank, Sooner State Bank, Frontier State Bank, Kirkpatrick Bank, Quail Creek Bank, etc.  That’s not an exhaustive list.  There are many others.  

What Types of Loans Are offered?

There are a wide variety of loan programs from one bank to the next.  You will always have to have skin in the game.  You can expect to put at least 20% of the purchase price as a down payment for these types of loans. If your property has some expensive renovation needs on top of the purchase, you will have a bunch of money tied up in the property.  That limits your ability to leverage your funds.  

However, you can refinance the property once the project is completed.  Most banks will require a seasoning time, for most is one year.  Alternatively, you could use a credit line to purchase the property and do the renovations.  Once the project is completed, you could refinance it.  In that case, one year of seasoning should not be required.

Most of these banks will amortize the loans on residential real estate between ten and fifteen years. It’s tough to get a $100K+ single-family home to cash flow with a 10-year amortization.  But there are several lenders that will do fifteen-year amortizations.  If you are looking for a 30-year loan, you’ll need to look into mortgage brokers or correspondent lenders.  

The commercial loans you will get from a small local bank are written for a 3- to 5-year time frame.  You will normally do renewal for the loan when the time frame is elapsing. I’ve never had a case in which a lender has not been willing to rewrite the loan.  I wouldn’t be concerned they will call the entire amount due.  But even if they did, it would just be a matter of shopping that loan to another bank.  

What do Small Local Banks look for in a borrower?

You must have good credit to borrow money from a bank to purchase investment properties. That means a credit score in the 720+ range.  

You will likely need to have some type of track record in real estate.  If you already have a few rental properties, that’s perfect.  I tried to start working with local banks right when I first started but was rebuffed.  I had to develop a track record of successfully owning and managing rentals before I began working with my first local banker. So, if you are just starting out, you may have to explore other financing avenues.  

Why would you want to borrow money from a small, local bank?

The biggest advantages of these loans are the very good interest rates (i.e., 5% to 6% during low-interest rates cycles), and low lending fees (i.e., normally less than 1 point, the cost of a title report, and an inexpensive appraisal).  It really is nice when your lender has control at the local level, instead of being subject to the whims of bureaucracy as when you are working with a larger national bank.   That makes approvals go faster.  It makes projects that have repair issues that would scare off a national lender much more doable.  

Another advantage is that local banks will have a limit on the number of properties they finance for you.  There is an upper limit when you are working with a mortgage broker or correspondent lender.  However, there is an upper total amount they will lend to one individual.  It’s a big number, and if you ever get there, don’t worry.  There are plenty of other banks who would love your business.  

What You’ll need to find a local OKC banker that you can possibly work with.

  1. Get your paperwork together.  Put a financial statement together.  There are many templates available.  Here is one template for a personal financial statement.  You’ll also need 2 years of tax returns.  And, there will be other items they will want, but this is a good start.  
  2. Get a referral from a current customer.  Get a current customer of the banker you want to work with to refer you to the lender.  This adds more credibility.  And, you will feel more confident that the lender you are contacting can really help you.  
  3. Have a deal in mind.  The banker will feel more confident that you aren’t just blowing smoke if you have a deal they can look at.  They are used to people contacting them who have a dream of becoming a real estate investor, but will probably never buy a rental property.  They don’t really want you to waster their time talking in hypotheticals.