Group Buys On Loans

[Y33]

What sort of negotiating power would a group of individual investors have if they all went to the same bank to negotiate new loans together?

For example if 20 investors all with a minimum 1million dollar debt offered to come across to one bank at the same time could they negotiate a better rate than what is normally offered?

If group buys can negotiate discounts then why not group investors?

Any MB interested in taking a stab at this?

 

[Jamie_D]

Hello Y33

You will definitely receive better rates based on volume.

I was able to do something similar 12 months ago on $5mill deal so I would expect one of the majors to accomodate your request.
CBA won the deal then however I don't know if they're as flexible now.

The rate will also depend on whether there is residential or commercial securities involved.

I'm ready to take a stab...

 

[Rolf Latham]

Hiya

The amount of work to generate the loan doesnt change to the lender..........

In the current climate of lots of cash to lend, with lots of choices, the extra
.1 % or .15 % youd generate wouldnt be worth the while, for the trade offs, because everything comes as a package .

Dont forget that such arbitrage will require the borrower to use a lender that may not be the most suitable for them, and that isnt worth ANY volume discount in most circusmtances.

We must remember, mortgages are not widgets

ta
rolf

 

[Bradsdad]

What sort of negotiating power would a group of individual investors have if they all went to the same bank to negotiate new loans together?

For example if 20 investors all with a minimum 1million dollar debt offered to come across to one bank at the same time could they negotiate a better rate than what is normally offered?

If group buys can negotiate discounts then why not group investors?

Any MB interested in taking a stab at this?

I would see the lender looking at each on a investor by investor scenario. The reason being is that to grant any further discounts would require them to place clauses in each pricing approval. e.g Investor 1 has a 0.90% discount approved subject to investor 2,3,4,etc having their loan approved & drawn. Investor 2 has 0.90% discount approved subject to investor 1,3,4,5,etc......

In saying this, there's no harm in asking.



Oh, and the attractant of 20 investors may be diminished if quite a few of them are already with such a lender who would look at this.


REgards
Steve

 

[Y33]

There will definitely be pros and cons of such a deal.

Rolf, Bradsdad,

Borrowers can decide as a group what they want before approaching any lenders so everyone gets what they want.

It may also be possible to go as a group but negotiate individual conditions so no need to be tied to each other.

The idea would be to say that we have 20 investors with individual loans each over a million dollars that are looking for the best rate and what ever else is beneficial and on offer. Not all loans would have to be identical.

The main idea is to think out of the square and explore options.

 

[Bradsdad]

I'm not saying the loans would be tied in together or that the facilities would be the same (although would all need to be resi or all commercial as they have different pricing depts and almost certainly all Full-Doc).

The issue is that each clients loans would be submitted individually. the lenders problem would be that I go to them with the names of 20 investors, their names and the loans splits. They now have the total lending volume concerned and base their discount accordingly.
Let's just say for example they give a 1% discount for all those concerned. I would receive 20 pricing approvals (1 for each client assuming none of the investors bank with this lender). I would then start submitting applications with the pricing approvals attatched. How will the lender know the following?....
1. That I actually submit all loans through them
2. Monitor that i do the above
3. Know that the applications for all 20 (they'd probably settle for 75% strike rate) would be approved.
4. Be guaranteed that once approved half don't proceed.

If the above could be overcome then come the issue of getting all 20 investors to be able to organise themselves so that the applications could be submitted within a short timeframe. I couldn't see a lender being willing to let the applications come in dribs and drabs over 6 months.

It's however an interesting thought and certainly gets the mind ticking. It would certainly be a challenge to work with but might just be doable.


Regards
Steve

 

[Y33]

Steve,

Good points raised and food for thought.

I'm probably focusing more on the pros than cons.

What lending manager wouldn't be happy to have 20 seasoned investors in real estate come knocking on the door so to speak.

Would be nice if all investors were after the same sort of deal to make it easier, for example, IO, fixed, 100% offset etc.

 

[Jamie_D]

The banks would jump at the opportunity.

It helps when MB like myself go direct as opposed to via an aggregator

We tend to have more scope, better communication as well as flexibility and to a degree more power to get the job done as we write huge volumes

I am sure the bank would approve the deal on certain conditions like providing the bigger discounts if all parties proceed etc etc

Obviously each loan application is treated as seperate and follow normal lending criteria

A big job.........Still worth a shot...

 

[Bradsdad]

Steve,

Good points raised and food for thought.

I'm probably focusing more on the pros than cons.

What lending manager wouldn't be happy to have 20 seasoned investors in real estate come knocking on the door so to speak.

Would be nice if all investors were after the same sort of deal to make it easier, for example, IO, fixed, 100% offset etc.

The Pro is surely rate driven from your initial thread. Should a lender agree to such an idea the benifit would be one of cost (interest savings)to the investor.

I don't mean to be sounding negative towards you idea at all but instead giving you possible obsticles that may rear their head. It is better to go into this well informed, that way you know when to jump (the obsticles) and hopefully cover off an any negativity the lender may have.

I'm a little fearful that any discounts over say 0.90% may be out of reach in todays climate but you never know until you ask.


In regards to the "same sort of investor", I would say that the only similarity required would be that the loan types were ALL residential or ALL Commercial. The actual loan structures shouldn't come into it.



Regards
Steve