Commercial Loans Blog

Track Commercial Loan Rates Instantly and At Every Moment

Posted by George Blackburne on Wed, Dec 17, 2014

PuzzledCommercial mortgage rates change daily, and there is no universal source - like Fannie Mae or Freddie Mac - where you can go to see exactly what commercial loan rates that banks are charging today.  If you are a commercial mortgage broker and you get a lead call, what interest rate are you supposed to quote?  If you're a commercial broker (commercial realtor) and your client asks you what commercial mortgage rate he is likely to pay if he buys this commercial-investment property, what do you tell him?  Today we solve your problem.

First of all, it is important to understand the reason why commercial mortgage rates are always going to be higher than the prime residential mortgage rate; i.e., the best rate on a 30-year first mortgage that a strong, perfect credit borrower can get to buy a house.

The reason why commercial loan rates are always going to be higher than the prime residential mortgage rate is because commercial loans are illiquid assets.  There is no organized secondary market for bank commercial loans.

Now if a bank were to make a standard 30-year first mortgage on a house, and then suddenly there was a run on the bank, the bank could almost instantly sell off its standard residential loans to Fannie Mae or Freddie Mac.  Such residential loans are therefore liquid assets.  Demand for liquid assets is almost always much higher than for illiquid assets.  The higher the demand for a loan, the lower the interest rate is driven by competition.  Therefore interest rate on commercial loans is almost always going to be a little higher than the prime residential mortgage rate.

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"Today is the busiest package transporting day of the entire holiday season.  UPS today will handle 585 million packages. They don't deliver them, they just handle them.  By the way, if you don't mail your package today, it will not be destroyed by Christmas." -- Dave Letterman

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But how much higher are commercial loan rates than the prime residential mortgage rate?  Historically the spread between comemrcial loan rates and residential loan rates stays pretty consisently between 50 to 125 basis points (0.50% to 1.25%).  Remember, a basis point is just 1/100th of a percent.

In other words, let's say the prime residential mortgage rate today is 4.125%.  If so, the vast majority of banks will be quoting between 4.625% and 5.375% for a commercial loan.

The typical commercial loan deal will be a 25-year amortized loan, with a due date of either 5 years or 10 years.  If the commercial property is older than 35-years-old, the bank is likely to insist on amortizing the loan over just 20 years, rather than 25 years.  After all, the commercial property, by that point, is getting a little long in the tooth.  If the bank agrees to a 10 year term, the bank will usually insist on readjusting the interest rate - with no floor or ceiling - once at the end of 5 years, according to changes in 5-year Treasury securities.

WTF

So when will the interest rate on your commercial loan be just 50 basis points over the prime residential mortgage rate, rather than 125 basis points?  Well, first of all, how desirable is your commercial property?  If its a six-unit apartment building in San Francisco within walking distance of Chinatown (many Chinese investors don't drive, so they want to be within walking distance of their friends), you have a Scarlet-Johansson-quality of commercial property.  You're likely to get the lower rate.

Scarlett

Here's another time you're likely to get the lower rate.  Let's suppose your borrower owns a successful company that keeps large deposits at his bank.   If you could convince the borrower to move his company accounts to a new bank, located conveniently nearby, I guarantee that he'll get the lower rate, as the new bank rolls out the red carpet.

Here's your final Rat Goodie* of the day - a wonderful, wonderful video.  A German grocery store did the equivalent of a flash mob using its cash registers (huh?) for its Christmas customers.  I absolutely guarantee this will bring a warm smile to your face.  :-)  

* Remember, all your marketing pieces need fun stuff - what I call Rat Goodies - to encourage your friends to open and read your sales pitches.

By the way, that Rat Goody lesson is just part of almost 40 such lessons in my Commercial Mortgage Marketing training program.  It's well worth the lousy $199 cost.

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Got an "A" quality commercial loan that is way too clean for my stinky 'ole private money commercial mortgage company?  New banks are joining C-Loans daily.

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Do you want Blackburne & Sons to issue a backup loan approval letter on that deal you currently have working with the bank?  There is no charge whatsoever for Blackburne & Sons to issue a back-up commitment on a commercial loan.  We're happy to do it because we know that 40% of the time a commercial bank can be counted on to turn down a perfectly good commercial loan at the very last moment.  Do you need a commercial lender that actually wants to make a commercial loan?

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I respectfully submit that the following is the best business offer you will receive this decade.

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Topics: Pricing of Commercial Loans

Why You Can't Trust Banks To Approve Commercial Loans

Posted by George Blackburne on Mon, Dec 8, 2014

commercial loansI almost ripped the head off of one of my commercial loan officers this week.  I had sent him a superb commercial loan lead, and he replied, "Oh, I didn't really work that lead because the borrower was looking for bank-type rates."  I was so flipping mad, I probably looked like Godzilla after a missile strike.

"You cannot trust a bank to approve any commercial real estate loan," I told him.  "A bank can turn down a commercial loan for a million reasons."

The loan could be too large, too small, or located too far away from the bank.  The commercial building could be made out of brick, and the bank has just had a structural problem on a totally different brick building.  Now the bank is against lending on any brick building.  The property could be a gorgeous, new, state of-the-art self storage project, only to have the bank turn the deal down because it had just lost money on a 50-year-old, functionally obsolete, self-storage project.

The bank could be suffering liquidity issues.  It simply doesn't have a lot of lendable cash sitting around right now.  The bank could also be fully-invested, with a loan-to-deposit ratio far in excess of a prudent 80% to 90%.  (Remember this important ratio and the target of 80% to 90%.)

The bank could be over-concentrated in office building loans or shopping center loans.  The bank could be too heavily invested in commercial loans altogether.  The bank could easily be having regulatory problems, with regulators suspiciously sniffing every single new loan - especially commercial loans.  The truth is - and remember that 'ole George you taught you this:

God has never stopped inventing new and unique ways to kill commercial loans.

Therefore, if you are a borrower, you should never trust a bank to approve a commercial loan.  I am not saying that you should never apply to a bank for a commercial loan.  After all, commercial banks offer the lowest rates on small (less than $5 million) commercial loans.  I am just saying that you must never rely on any bank to approve a commercial loan, especially if obtaining this commercial loan is important.

Now let's suppose that you don't really need the money immediately.  Maybe you were playing with the idea of buying an investment property, but it wouldn't be the end of the world if the deal fell through.  Well, in that case, no problemo.  Go ahead and apply to bank.  It's ironic, but the bank will probably approve your loan.  After all, banks are famous for being willing to lend you money when you don't really need it.


commercial financing


But Heaven forbid you should have a chance to buy the land located right next to your existing manufacturing plant - a special piece of land more valuable to you than almost any other land on earth.  Watch out!  The bank is going to leave you standing at the alter looking stupid.   It's going to turn down your commercial loan for the most stupid of reasons.  "I'm sorry, Mr. Jones, but the land was located on the left side of the street."  WTFudge?  Left side?  What if I approached it from the other direction???

Okay, what if you may personally need a commercial mortgage loan some day?  What should you do?  You just need to recognize the reality that there is a 40% chance that the bank will turn down your commercial loan at the very last minute.  Just acknowledge that possibilty and have a back-up plan.   You need a back-up lender.

My own private money commercial loan company, Blackburne & Sons (since 1980), is happy to serve as your back-up lender.  We get a ton of great loans this way because banks can be counted on to turn down  good commercial borrowers at least 40% of the time.

Guess how much we charge to issue a loan approval letter for you?  Nothin' honey.  Not a red cent.  And you can take our loan approval letter in to your own bank and say, "Look what these sharks are trying to charge me!  You can beat this, right?"  Banks love to undercut us.  The very fact that a competing lender has already approved your loan makes your bank much more likely to approve your loan.  After all, someone else is already willing to bet on you.

So, to you borrowers, I say, "Let us be your back-up lender.  We'll issue a loan approval letter for you at no charge, and we'll be there for you if the bank let's you down."  The same wisdom goes out to you commercial brokers (commercial realtors).  You need to back up your banks because they can be very flakey.

Apply For a Commercial Loan to Blackburne & Sons

But what if you are a commercial mortgage broker or a loan officer for Blackburne & Sons?  My lesson to you today is to never give up on any commercial loan lead just because the borrower has applied to a bank.  Always remember that bankers are flakes.  At least 40% of the time the bank is going to leave that unfortunate commercial mortgage borrower high and dry at the last moment.  Therefore, stick close to that commercial borrower and issue him a back-up loan approval letter right away.  Special note to commercial loan brokers:  Remember, you can get a back-up loan approval letter from Blackburne & Sons for free.

If you have been receiving my blog articles for awhile, you already know that I will give you an incredible directory of 2,000+ commercial real estate lenders for free, just for contents of a single banker's business card.  Does this offer seem too good to be true?  There is a method to our madness.  We use this info to send funny newsletters to these bankers, in hopes they'll send their turndowns to C-Loans.com.  I wasn't kidding when I said that God has never stopped inventing new and unique ways for bankers to turn down good commercial loans.  We want those turndowns!  :-)

Free Directory of 750+  Commercial Real Estate Lenders

To me it was always so obvious, but not everyone has caught on yet.  The real money in commercial mortgage banking is not in paltry loan origination fees.  No-no-no!  The real money is in loan servicing fees.  Once you start servicing your first loan, your life will never be the same.

The easiest way to start servicing loans is to become a hard money lender.  For most states, no license is required to originate and service commercial real estate loans.  My beautiful bride and I serviced our first 50 loans by hand using payment books.  It was pretty easy.  By the time you are servicing 25 loans, you'll be making more than enough dough to afford the wonderful loan servicing software sold by my old and dear friends at The Mortgage Office.

Become a Hard Money Lender

If you combine my basic nine-hour course on How to Broker Commercial Loans with my course on How To Find Your Own Private Mortgage Investors, you can get both courses for just $849.  Helluva deal.

Commercial mortgage training

One of our lead buyers closed a $6 million loan for C-Loans last week.

Please Click Here ToBuy Commercial Lead  


Topics: commercial financing

Content For Your Commercial Loan or Realty Newsletters

Posted by George Blackburne on Mon, Dec 1, 2014

Email_newsletter_copyToday's marketing lessons will also be helpful for commercial brokers (commercial real estate salesmen), not just for commercial loan brokers.  I built a $50 million commercial loan company using these simple marketing lessons.  They should work for you as well.

In my prior commercial loan blog articles, I stressed that list advertising - snail mail, fax, and email - is the most effective form of marketing for real estate sales and commercial loan brokerage.  One reason is because  you can crank out a commercial loan newsletter today, rather than waiting for weeks until the next magazine is published.

Your newsletters do NOT have to be fancy.  For 15 years I personally marketed by snail mail using a plain, legal-sized sheet of copy machine paper.  I didn't bother with a logo or with typesetting.  I just typed my company name, address, and phone number at the top.

So why would my commercial loan clients even bother to read such an obviously unprofessional newsletter?  Because it was unprofessional!  Huh?  What???

Have you ever gotten a "professional newsletter" from a CPA?  Have you ever read anything so boring?  Boooooring!  Nobody reads professional newsletters.  Do you know what real people do read?  They read jokes and funny pics sent to them by their buddies.  My first piece of advice, therefore, is to stop trying to be professional.  Instead, be fun.

What_the_Heck

Now every commercial loan newsletter (or realty investment newsletter) needs these four ingredients:

  1. Lots of funny jokes.
  2. A training lesson about commercial loans (or commercial-investment real estate).
  3. Some brief words from our sponsor; i.e., you pitching your services.
  4. One or more funny pictures or cool videos.

I call my jokes, funny pics, cool videos, and training lessons Rat Goodies.  In fact, I invented my own theory of marketing that I call the Rat Goody Theory of Marketing.  It basically says that if I have to bug my buddies and clients with a sales pitch, then I at least owe them some Crackerjack Treats for opening up the box.

"Gee, George, that all sounds great and everything, but where do I get fresh material for my newsletter every ten days?  Your own newsletters contain six to eight jokes, two to three funny pictures, and at least one cool video.  That doesn't even include the training lesson.  Where do you find all of this stuff?"

Here is where you find the Rat Goodies and the content for your own newsletters:

  1. You can easily find over 400 cute, clean jokes here.  Feel free to plagerize my materials.
  2. Pinterest has a wonderful collection of funny pictures.
  3. As for interesting videos, your buddies will send you some.  Just be on the lookout.
  4. As for training lessons in your field (commercial loan brokerage, commercial real estate brokerage, etc.), we all learn things every week.  Just be sure to make a note of anything new you learn - like this brand new commercial loan underwriting ratio, the Debt Yield Ratio - and share it with your buddies and clients.

Diarrhea

Here is one final thing that I do that has served me very well in marketing over the years.  Any time I meet a high-net-worth investor, be it from a commercial loan lead call, at a conference, or on the golf course, I am religious about adding this investor to my mailing lists.  This may surprise you but I found the wealthy investors that I needed to fund $50 million in hard money commercial loans when they first called my office in search of a commercial loan.  In other words, I turned commercial loan borrowers into commercial loan investors.  Huh.  Go figure.

My thanks go out to Dan Morris of Summit Finance, one of our lead buyers, for closing a $6 million commercial loan for C-Loans on Friday!  If he closes just four more deals, he gets listed permanently on C-Loans as a Proven Broker.  From then on, he no longer has to buy leads.  He will be set for life.

Please Click Here ToBuy Commercial Lead

Hey, did you enjoy listening to my audio and Powerpoint training lesson on the Rat Goody Theory of Marketing.  To move between PowerPoint pages, be sure to hit the Play button.  This lesson is just one of about 35 lessons in my wildly popular training course, How To Market For Commercial Loans.

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Ninety percent of bankers are downright slothful when it comes to working commercial loans.  Ten percent of them, however, are real go-getters.  That's the thing that C-Loans.com does best - it indentifies those bankers and those Proven Brokers who are ravenous to close commercial loans.  Don't poo-poo using our Proven Brokers because they close a hugely disproportionate share of the commercial loans closed on C-Loans.  Proven Brokers close commercial loans because they have personal relationships with their lenders.  True story:  I had a buddy 30 years ago who made a fortune one year because he brought two hookers and some cocaine to his lender's office, whenever he brought him a new commercial loan package.  (My buddy eventually ended up on Skid Row in San Francisco, a washed out drug addict.)

Submit Your Loan to 750 CommercialLender

The real money in commercial real estate finance is in loan servicing fees.  I charge our investors almost 2% per year for servicing their commercial loans.   On a modest-sized deal of $1 million, that's $20,000 per year, just for collecting 12 payments and sending them on to our investors.

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Topics: Marketing