Real estate investing costs money—there’s no way around it. Whether you are dipping your toes into the industry with your first investment or are a long-term investor, you need access to capital. Working with a lender is a necessary and important part of your journey as a real estate investor.
But here’s the thing: not all lenders—or loans—are created equal. Unlike a car loan, for example, which varies little, real estate loans differ significantly. It’s important to work with the right lender for your needs and not discouraged if you get a “no” the first time. Tenacity in finding the right lender for you will set you up for success!
When considering loans, most people think of big banks. But credit unions offer some major benefits to real estate investors. To tell us all about it, we spoke with Mark Ritter on episode 41 of The Executive REI Show. He told us what credit unions all are about and why they might be for you.
From Banking to Community Lending
Mark started his career in the traditional banking world. The uncertainty and changes after 9-11 totally shifted the banking world, and he saw a chance to switch to something different. Credit unions were just emerging as a force in the financial world, so he made the switch.
His first introduction to credit unions was through his father who used to say, “your credit union is there for you.” After looking into it further, Mark loved the concept of community lending and cooperative financial services. Credit unions are loved and respected by their community members and there is a different philosophy to the big-bank mentality.
What Credit Unions Do
Credit unions are cooperative financial institutions, which means they work together to best serve their members. They collaborate with clients who need loans for everything from small to very large. Here are a few examples of what credit unions might be involved in:
- First-time real estate investors looking for loans in the hundreds of thousands range.
- Long-term investors who want to scale up and invest millions.
- Small business owners who need financing.
- The everyday person needing a mortgage, car loan, or something else.
And while many of these are the same as what a bank does, the philosophy is different. As a not-for-profit financial cooperative, the goal is to do what is best for the members. It’s focused on what the client needs, not what the bank needs.
Credit Unions vs. Banks
There are many similarities between credit unions and the banks. At the end of the day, there are the same legal requirements and regulations—the stack of paper to sign is the same.
But there are two main differences. Credit unions can offer:
- Access to decision-makers. Instead of just sending off an application into the void of a big bank, you have access to decision-makers and can have a conversation about your situation and goals. It’s relationship-based decision-making, instead of leaving it up to pre-determined algorithms.
- Flexible terms. Credit unions can be more flexible on terms because they loan from their own money. Unlike banks that borrow capital, which causes rigid terms and conditions, they loan from their own reserves. This means that they can be more flexible with the terms and conditions of a loan.
These two benefits can make a massive difference, especially for new or beginner real estate investors. You can have a more personal relationship with your lender, have a conversation, and ensure the deal you sign works for you.
Know Your Lender
The power of credit unions is that you can really get to know your lender. They are set up to be relational and focused on benefiting each member.
And whether you choose a credit union or bank, you need to get to know your lender. Mark suggests you look at it like going to a restaurant—there are some that are high-end, some fast food, and everything in between. You need to know these three factors before getting into a deal:
- What your needs
- What the lender is offering.
- The culture and intention of the lender.
And remember that lenders want to get their money back. So, choosing the right lender and loan will set both of you up for success—you meet you real estate investing goals, and they are paid back.
When looking for a real estate loan, remember that all lenders are not created equal. Credit unions are a great option to consider, especially when you are looking for something that is flexible and is relationship-based.
If you want to connect further with Mark and learn more about credit union lending, visit his website at www.markritter.com. And, if you want to hear from more experts like Mark, visit us at www.executivereishow.com to catch episodes of the podcast and access resources.