Commercial Loans Blog

New Problems Making Commercial Loans on Cannabis Properties

Posted by George Blackburne on Fri, Oct 20, 2017

Pot.jpgMy hard money commercial mortgage company, Blackburne & Sons, was considering a nice hard money commercial loan on a cannabis growing facility in Washington State, where properly licensed facilities are now legally allow to grow it and sell pot for recreational use.

But a big problem has arisen.  Every title company in the state is now refusing to issue title insurance, for fear of running afoul of Federal law, which prohibits the sale and use of marijuana.  If we can't get title insurance, we can't make the loan.


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What makes me belly-laugh is that, while I doing research for this short article, I ran across a product now being sold on  It's a one-plant, discrete growing vessel for pot.  It's a mere $109, and its eligible for free, two-day shipping if you belong to Amazon Prime.  Ha-ha!  In defense of Amazon, one could grow parsley in your closet with this device.


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If any of you guys have a solution to my problem, please write to me at [email protected]


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Topics: Pot growers can't get title insurance

Commercial Loans and Fractional Ownership

Posted by George Blackburne on Mon, Oct 16, 2017

Ski chalet.jpgHave you ever gone snow skiing and rented for your family a gorgeous ski chalet near the slopes for a week?  What about the beach or the shore of some big, beautiful lake?  Did you ever rent a big, gorgeous home on the water for a week?

Often these ski chalets and waterfront homes are of fairly new construction, and they were built with five, six, and sometimes even seven bedrooms.  These giant homes are perfect for extended families, say, three brothers, their wives, and their children.  This is not just a happy coincidence.  These homes were built exactly for this use - to be rented out on a weekly basis to extended families.


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Sometimes these gorgeous vacation mansions are owned by a single, filthy-rich guy.  I don't even know the guy, but I hate him.  I'm so jealous.  Ha-ha!

Many times, however, these vacation mansions are owned by four to ten families in a concept known as fractional ownership.  Each family will own, say, a one-eighth of the mansion, giving them the right to six or seven weeks of the year in which to live in the property.


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In real life, the family owning one-eighth of the property will usually only stay in the property for one or two weeks per year.  The rest of the unused weeks owned by the eight families will all be rented out to vacationing families, typically a week at a time.

Essentially these vacation mansions will be run as hotel units - rented out and cleaned weekly by a management company originally selected by the developer-sponsor of the of the fractional vacation mansions.  The developer-sponsor will often develop a half-dozen to a dozen similar properties nearby, giving him enough fractional ownership units to sell to justify a decent-sized marketing budget, much like a large timeshare project.  In plain English, there may be ten of these beautiful vacation mansions right next to each other, all managed by the same management company.


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Now do you remember that filthy-rich guy that I hated?  He owned this entire vacation mansion by himself, so he would have no problem getting the property financed as a second home or as a rental home.  Remember, home loan rates are always much lower than commercial loan rates, so he wants this property characterized by his lender as a home, not as a commercial property.  He wants a garden-variety conventional home loan, NOT a commercial loan.


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But to those eight families who own their vacation mansion as fractional ownership units, financing may prove to be problematic.  First of all, each of them does not own the entire property by himself.  Unless all eight families miraculously agreed that they wanted to finance the property, they would never be able to get a conventional loan.  And who wants to guaranty a $1.8 million loan when he only owns 1/8th of the property???  The other owners could easily walk away in a financial pinch.

Secondly, the property is essentially a tiny hotel, with tenants coming and going every week.  Such a property would be viewed as a nightmare by most banks considering the property as a commercial loan.  Yikes!


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Is it therefore possible to even get a loan on a fractional ownership unit?  Blackburne & Sons, my own private money lending company, will make a 15-year fully-amortized commercial loan on fractional ownership interests.  Our loans have no prepayment penalty.  We have done several such loans, and they have performed well.


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Are you ready for a commercial loan right now?  You can't close your deal until you actually apply for it.


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I started out writing these commercial real estate finance training (CREF) articles to train my sons and my staff in the business.  Now over 5,200 commercial real estate professionals follow this blog.  And why not?  It's free training in commercial real estate finance, and I try to write two articles per week.


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Commercial Loans and How To Meet Bankers

Posted by George Blackburne on Thu, Oct 12, 2017

Banker-1.jpgBefore I get into how to meet bankers, let me first explain why you want to meet bankers.

The first thing that most borrowers do to get a commercial loan is to call the commercial real estate loan officer working at their own bank.  Underwriting a commercial real estate loan is fairly sophisticated, so the profile of a typical bank commercial loan officer is a sleepy, white male between 48 and 60-years-old.  Unfortunately this guy (or lady) is not usually on commission.  As a result, a great many of these mature, salaried, commercial loan officers really don't care if they make another commercial real estate loan or not.


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I think that its a mistake that banks don't give their commercial loan officers more of a financial incentive to close commercial loans. Just about every bank in America would benefit from a few more good, commercial real estate loans in its portfolio. After all, commercial real estate loans are among the most profitable loans that a bank can make. But I've said it before, "Banks are lousy capitalists."


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So why do you want to meet bankers? If you are commercial real estate investor, and you are thrifty by nature, you may not want to pay some commercial mortgage broker a one-point fee to find you a bank willing to make you a commercial loan. You will want your own Rolodex of six to ten bankers located close to your income property. Remember, you can't just rely on your own bank.

Bankers are notoriously moody and unpredictable when it comes to commercial real estate lending. One moment they love self storage loans, and the next moment, usually after a big loss, they wouldn't touch a self storage loan with a ten-foot pole. One moment the bank is as tight as a drum, and the next moment the bank will make a commercial loan on a so-so property to a recent bankrupt, all because the bank got a big commercial loan payoff, and they are flush with cash. As an income property investor, you need multiple (6-10) bankers to whom to offer your deal.


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If you are a commercial mortgage broker, you want bank turn-downs. Bankers get first crack at most commercial real estate loans, and they turn down the vast majority of their commercial loan applicants. Remember, the typical bank loan officer is not on commission, so he has little incentive to say yes. Bankers are therefore the absolute, very best source of referrals. If your mailing list (email or snail mail) does not consist of 60% bankers, you have some work to do.


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Now before I explain how to find bankers, let me give you a quick refresher on where to find bankers.  A bank is three-times more likely to approve a commercial loan if the property is located close to one of its branches.  This lesson alone is worth the price of today's admission.  A bank is three-time more likely to approve a commercial loan if the property is located close to one of its branches.

Therefore you want to meet all of the bankers located close to your commercial mortgage brokerage office or close to your income property.  Its easy to find nearby bankers.  Simply go to  In the upper-left-hand corner, you will type in the address of your office or your commercial property.  Lastly, click on the "Nearby" icon and then type, "banks."  Voila!  You have just identitified every bank located close to your office or the commercial property that you are trying to finance.  Good stuff, huh?


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Now, finally, we will explain how to find bankers.  Simply call up the nearby bank branch that you identified using Google.  Be sure to ask the receptionist for a loan officer who handles commercial real estate loans.  If you just ask for a commercial loan officer, you might get the wrong guy.  Normally there will be one commercial real estate loan officer, usually working out of a different branch, who handles all of the commercial real estate loan requests for five or six branches.

Once you reach the guy, make sure that the first words out of your mouth are the following, "Hi, Bob.  My name is John Smith, a commercial mortgage broker (or a commercial real estate investor).  Did I catch you at a good time?"  Those eight words are the keys to the kingdom.


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Unless you have a specific deal to present, you really only need to know a few things:

1.  Minumum loan?

2. Maximum loan?

3. Lending area?

4.  Do you make SBA loans or USDA loans?

Why don't you need to know any more?  Because banks all quote pretty much the same commercial loan.


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Perhaps the most important thing to retrieve from a new banker is his email address.  Bankers can sometimes be freaky-deaky about giving out their email address because they get a ton of unsolicited email.  The way I like to handle it - at the very end - is to ask, "If I have a commercial loan that I want to show to you, to what email address should I send it?"  That seems to work for me.  Asking the question at the end seems to imply that the entire seven-minute phone call will have been wasted if the banker doesn't give up his email address.

Did you learn something today?  This is how I teach.  I use a ton of humor, and I try to weave in lots of verbal proof stories - real life stories that prove a point.  I strongly encourage you to order this course about how to become a commercial mortgage broker.  Trever Cole Commercial - who just closed their 50th loan for C-Loans, Inc. this month - uses this video course to train all of their new commercial loan officers.


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Nobody ever listens to me, but the real money in commercial real estate finance is in loan servicing fees. My little eleven-person commercial hard money firm now brings in over $83,000 per month, whether we close any new loans that month or not. When Cisca and I were first married, we dreamt of the day when our loan servicing income would exceed $2,000 per month. Then our mortgage and utilities would always be paid. Today this number is $83,333 per month. The real money in commercial real estate finance is in loan servicing fees.


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Topics: How to meet bankers

Commercial Loans and Experience-Based Retail

Posted by George Blackburne on Tue, Oct 3, 2017

Apple Store.jpgWhen we physically shop these days, there are apparently two different ways to shop for physical goods that you can take home immediately, as opposed to waiting for Amazon Prime to deliver them.  The first way to physically shop is that you can go to some big box store, walk the acres of concrete flooring, and buy your stuff quite cheaply.  

But there is now an alternate way to shop, where perhaps you pay a little more, but the whole outing becomes an enjoyable and stimulating experience.  This is called experience-based retail.  I stole the following paragraph from an interesting article on the subject:


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"A customer’s shopping experience is affected by a myriad of factors, but we would place the greatest emphasis on a retailer’s ability to offer unique products and deliver a high level of customer service. Apple’s stylish devices are sold by knowledgeable staff able to help customers navigate sometimes complicated electronics, and their numbers ensure that service is rapid. Sales staff at lululemon athletica offer personalized and attentive service to consumers of the store’s versatile athletic apparel, while the friendly and eccentric staff of Trader Joe’s keep check-out lines flowing and add as much character to the aisles as the grocer’s self branded offerings. Upscale department stores like Nordstrom’s and Bloomingdales offer free personal shopping services to all consumers, and fellow mall tenant Lush, a seller of organically produced cosmetics, offers private events and makeup consultations."


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Millennials actually spend materially more money on "shopping experiences" than they do on plain 'ole shopping.  For Millennials, the experience-to-stuff ratio (yes, there actually is such a ratio!) is 1.14.  For Baby Boomers and Generation Y, that ratio is closer to just 1.0.

Experience-based retailers can be found in malls and lifestyle centers, and in terms of retail success, such retail centers are far more successful these days than retailers in strip centers or power centers.  Do you remember what a lifestyle center is?  Think of a lifestyle center as a mall for fat people who are too lazy to walk an enclosed mall.  Ha-ha!  You can drive right up to each store.  Most lifestyle centers also enjoy several popular restaurants that add importantly to the experience.


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I used the term "power center" above.  A power center is a huge shopping center consisting of six to twelve big box retail stores.  Examples of big box retailers include Abercrombie & Fitch, Barnes & Noble, Bed Bath & Beyond, Best Buy, Costco, Dicks Sporting Goods, Dollar Tree, GAP, Home Depot, JC Penney, Kohls, Lowes, Macys, Michaels, Nordstrom, Office Depot, Office Max, Old Navy, 
Rite Aid, Saks Fifth Avenue, Sears, Staples, Target, Trader Joes, Walgreens, and Wal-Mart.

Don't forget, however, that power centers are not doing nearly as well as the experience-based retailers found in malls and lifestyle centers.  As I was compiling the above list of big box retailers, I had to delete one-third of the names because the companies had already gone bankrupt.   


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Now if you own a shopping center, you definitely want more experience-based retailers in your center.  Experience-based retailers bring in far more money per square foot than normal retailers, so such stores can afford a higher rent.  In addition, they are less likely to go bankrupt, like so many of the big box retailers (think: Toys R Us.).  

"The attractiveness of malls and lifestyle centers is further compounded by their defensive positioning against e-commerce. The experienced based nature of the goods and services their tenants offer are extremely difficult to replicate online, and thus their competitive advantages over other brick-and-mortar retailers transfer to online retailers as well. Dining establishments lack online competition and live entertainment by its very nature cannot be replicated digitally, nor can the ability to meld shopping, dining, and entertainment into a series of cohesive and related experiences."


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Meet Again.jpg


Today we learned about experience-based retail, lifestyle centers, and power centers.  I write these training articles to train my sons and my staff in commercial real estate finance.  By subscribing to this blog, you can effectively audit these training classes for free.


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Topics: experience-based retail