Tony-land bank question - Posted by patsears

Posted by patsears on October 25, 2005 at 20:58:36:


Tony-land bank question - Posted by patsears

Posted by patsears on October 24, 2005 at 21:29:36:


I’ve got you’re book and read the land bank part, where you, instead of selling to pull your profit out, you hold onto the property for around a year, then refinance and pull your cash out that way to invest in more deals. My only question is, how many times, realistically, can you do this before the banks look at your credit report and say you’re over-extended? I would’nt think you could do it forever, even if all your properties were flush with equity and making a profit.

Am I wrong?


Re: Tony-land bank question - Posted by Tony Colella

Posted by Tony Colella on October 25, 2005 at 07:45:50:

Good question.

Banking is a game, in and of itself. I do not believe there is any certain number of deals per se that you can do with a bank before they cut you off but at some point each investor does seem to reach what we call the “glass ceiling” with an individual bank.

This is quite common and is by no means unique to land/home deals. I have found that commercial players as well as stick built investors have the same problem. Because land/home packages are less expensive then stick built properties, it takes longer to hit the glass ceiling.

The solution is to establish good lending relations with several banks. The higher the player is on the acquisition ladder, the more likely they are to face the glass ceiling in an individual bank. We then work with other banks until we feel resistance or strike their glass ceiling.

As best I can tell, banks reach a comfort level, even if you are doing great, cash flow is good and equity is good but they decide they want to share the ?risk? with other lenders just to be sure. When we go to other banks and do more deals we may well be able to come back to the original bank and begin again. I suppose it is a means for the investor to prove themselves to be professionals and not some fly by night investor. Time in the game translates to experience that the bank also wants to see but the only way to get that experience is to get into the game. That is why we find the land bank so successful. The 12 month seasoning is the beginning of the documentation of your experience.

In time, working with banks for small loans becomes more difficult than working with banks for larger loans. It?s almost as if you have to find a way to leap over the glass ceiling and stay above it for a bit before the bank looks up and asks for you business back.