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Should I Choose a Bank or Choose a Banker?

People often ask for a recommendation which bank is best for real estate investors.

In my experience, banking activities are best managed through personal relationships with specific people in specific functions at specific branches of a bank with specific expertise and specific ability to deliver the required service.

For example, I work(ed) with local portfolio lenders for mortgage loans. Local portfolio lenders typically have just a few branches in our area and I developed relationships with the 1-2 loan officers who are connected directly to the decision maker for the loan. This is nearly impossible at a large regional or national bank since after the loan application you are often serviced by a call center and you rarely get to speak with the same individual twice AND even if you deal with one individual (this happened to me at with one large bank during a HARP refi a few years ago), that individual doesn't usually have direct access to the decision maker since that decision maker is part of a department that is a black hole hidden deep within the company.

In contrast, when I deal with someone like Mark J. at one of the local portfolio lenders in Cherry Hill, NJ, I know that I am dealing with a real person who I met in person many times who has direct access to the decision maker(s) at that bank for my loan. The ability to get direct service and reliable information is very high.

When I went to open accounts for a self-directed 401k and Roth 401k for which I am the trustee and administrator, I interviewed many branch managers at branches within a few mile radius of where I live. I wound up opening my 401k checking and money market accounts at a specific branch of a large bank tat services the entire east coast.

Was it because this bank is a great bank? Absolutely not! It is because the outstanding service of the branch manager, Michael S. is such that he championed the proper paperwork within the organization for this rare type of account. Since then, every time I walk into the bank and he is there, he comes over to shake my hand and ask if there is anything he can do for me and he MEANS it. I never hesitate to ask him to do things for my accounts.

I then opened the security deposit escrow accounts in that branch and they handle that well. I also handle international wire transfers there for my non-real estate business.

Do I have mortgage loans at this bank where Michael S. is the branch manager? No. I have them at three other banks (one local portfolio lender and two national banks). I inquired at Michael S.’ bank about mortgage loans for real estate investors and they did not meet my needs.

I had to open a "pay on death" account when my father was in hospice last year. I opened that at a certain branch of a national bank with a poor reputation because they had branches in both South Jersey and in the state in which my father lived AND there was one service person here in South Jersey that had experience with such accounts.

I had a HELOC on a rental property with another local portfolio lender for many years which I opened because the assistant branch manager in Audubon gave excellent service. When I later had to deal with other people at that bank, I eventually (after a few years) closed down that account.

The primary point I am trying to make here is that my main driving force for choosing a banker is the banker him/herself, not the bank. In my never humble opinion, while banks provide banking products, banks do not provide the actual service, bankers are the ones who provide the actual service. If so, then I want to deal with a banker who has the expertise, authority and desire to provide the specific banking service I need.

My secondary point is that different banks specialize in different types of banking.

For example, even though one of the national banks had promotions several years ago that offered construction loans for real estate investors, they were not set up for that. In contrast, construction loans are one of the sweet spots for Mark J.’s local portfolio lender bank. In fact, Mark J.’s bank prefers to lend to LLC's (the last time I spoke with them) whereas the national big bank made me jump through extra hoops to get a "regular" mortgage loan as a real estate investor through an LLC.

I would not go to a proctologist to service a snoring problem, even though both activities require expertise in plumbing related to the alimentary canal.

Similarly, I view banking, legal, accounting and other professional services as requiring specialized expertise by individual human beings who have that specialized expertise and capability to execute in that specific type of service.

I have one lawyer who I use exclusively for evictions and another lawyer I use for deed-related items. They both have expertise in real estate law, but one has MUCH more laser-focused experience in evictions and the other has laser-focused experience in deeds.

In addition, some lenders specialize in commercial loans to real estate investors with interest rates and points that are slightly above those for owner-occupant mortgage loans. Other lenders specialize in hard money loans to real estate investors at very high interest rates with high points.

The way to learn which lender is right for you is to interview several lenders and bankers and find the right match of loan characteristics, ability to deliver, willingness to deliver, integrity and interpersonal skills that meet your needs and instills confidence.

I do not deal with a legal firm with experience in patents, I deal with a specific attorney who has laser-focused experience with patents in the very narrow field in which I am applying for a patent.

I don't deal with an office that provides periodontal services. I deal with a specific periodontist who is laser-focused on dental implants and then I deal with a specific dentist who has expertise in installing specialized crowns for dental implants who also has a close working relationship, with the specific periodontist.

When I provide business coaching services or phase-transfer catalysis consulting services, I provide them to clients who need my specific types of laser-focused expertise in specific fields that I have actually and truly mastered. I turn down clients when I think someone else has better expertise or if someone asks for services that I have not mastered myself.

In summary, I do not deal with banks. I deal with bankers who can deliver the service I require.

When it comes to choosing a bank for a mortgage loan, interview mortgage lenders near where you live, or better yet, multiple local portfolio lenders in your area, until you find an individual banker who will earn your confidence in delivering the specific banking product you need.

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