Commercial Loans Blog

Commercial Loan Brokers: You Should Be Desperate To Buy Our Leads

Posted by George Blackburne on Mon, Mar 12, 2018

If you are not a commercial loan broker, you can ignore today's training article.  Simply enjoy the funny pics and think one more time about investing the bond portion of your diversified retirement portfolio into our first trust deeds yielding 7% to 12%.  With rates going up, your bond portfolio is probably getting killed.

 

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If you are a commercial loan broker, today's article shows you a new way to buy commercial leads from C-Loans, even if your credit score is less than 700 and/or your net worth is less than $700,000.  Here is a way for you to buy dirt-cheap commercial loan leads - even if we have turned you down in the past!

 

The Reward:

If you are a commercial loan broker, you should indeed be desperate to buy our commercial mortgage leads.  Why?  We just sent out a tombstone this week celebrating the 40th commercial loan closing for C-Loans by Glenn Gioseffi of Asset Backed Capital.  Forty commercial loan closings!  That's a ton of deals for the commercial loan business.

 

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Glenn's story shows you the path to great wealth.  Glenn started out as a lead buyer.  He bought our leads for the token fee of $1 to $9 up-front, plus 37.5 bps. to C-Loans upon closing one of our leads. 

After Glenn had closed five deals, he was added to C-Loans as a Proven Broker.  Remember the number five.  Five is the magic number.  If you buy our leads and close five deals, C-Loans will list your little commercial mortgage company on our Suggested Lender List, alongside some of the biggest banks in the country.

 

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But wait!  Its gets even better.  Because Glenn had already closed five loans for us, his lender score was augmented by 50 lifetime lender bonus points - 10 points for every closing.  In other words, as long as Glenn responded to every one of his leads and maintained a base lender score of 100%, he would enjoy a total lender score of 150%.  Such a score would often place him in one of the top six slots on our Suggested Lender List.  

From then on, Glenn received numerous custom-selected commercial loan leads in his email box every single day, and he didn't have to pay a dime for them up-front.  Of course, he still owed a software licensing fee of 37.5 bps. when he closed a deal.  

 

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Not being an idiot, Glenn dove in our leads with a passion and closed more deals.  Every time he closed an additional deal, he earned 10 more lifetime lender bonus points.  This moved him up the Suggested Lender List, so he saw even more leads.  And so on.  It was a true case of the rich getting richer.

But Glenn is a rare exception, right?  No.  Glenn merely joined this week the Over 40 Closings Club, along side Paul Elis and Jason Bengert.   Still leading the pack is Les Agisim, who last month founded the Over 50 Closings Club for C-Loans.  I'll bet Les has made over $500,000 in loan fees using our leads.  Over $1 million?  Could be.

 

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The Problem:

But there’s a problem.  We here at C-Loans will only allow mortgage brokers with a credit score of at least 700 and a net worth of over $700,000 to buy our leads.

Why are we such meanies?  We have been cheated sooooo often by starving mortgage brokers that we had to cut them off.  These guys don’t start out with the intention to cheat C-Loans.  You’ll recall that Lead Buyers owe us 37.5 bps. when they close one of our leads.  Sadly, when a starving mortgage broker closes a C-Loans deal, the temptation to put off paying us "until the next deal closes" is often irresistible.  And, of course, they never come back and pay us.  So we cut them off.  “No soup for you!”

 

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The Earth-Shattering Announcement:

Is your credit only so-so?  Is your net worth less than $700,000?  Both?  Have you applied to C-Loans to buy leads, only to be turned down?  There is, effective today, a new way to be granted the privilege of buying dirt-cheat commercial leads from C-Loans.com.

If you enter commercial loans that you find outside of the C-Loans System into C-Loans.com, and you close two loans with C-Loans lenders, we will let you start buying our dirt cheap ($1 to $9) commercial leads.  You now have a path to the Over 100 Closings Club.

 

 

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Example:

One of your favorite real estate agents sends you a commercial loan request.  You immediately enter the commercial loan into C-Loans.com.  You immediately earn a free commercial mortgage underwriting manual.

Huh?  Free what?  A free commercial mortgage underwriting manual?  You mean I am finally going to learn all of those mysterious underwriting ratios that commercial loan underwriters use, like the debt service coverage ratio, the operating expense ratio, management factors, reserves for replacement, loan constants, and cap rates?  For free - just for entering my first commercial loan into C-Loans?  Yup.

 

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Hey Brain Surgeons:

You have to actually enter a real-life commercial loan into C-Loans.com.  This does NOT mean that you went onto our home page, clicked on a gray button, and filled out a little lead form, in order to get some goodie, like a Free Commercial Loan Placement Kit.  No-no-no!

This means that you have to start with Step 1 of 6 and actually submit a real deal to six C-Loans lenders.  What we're trying to do here is to show you how the submission process works.  Once you have registered on C-Loans.com, and you have submitted your first deal, the next deal should only take you only four or five minutes to submit.

Watch, despite my admonitions, five or six brain surgeons will call or email my son, Tom, the General Manager off C-Loans, Inc., and say, "Where's my free $199 Commercial Mortgage Underwriting Manual?  I clicked on the button that said, Free List of 200 Commercial Lenders, and filled out the form."  Bona fide brain surgeons.  Ha-ha!

 

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Back to Our Example:

Bill Ambitious is a young residential mortgage broker.  He wants to move up the food chain to commercial real estate finance.  He lacks a four-year degree in finance or accounting, but he has completed a couple of years of junior college, his English skills are superb, he is quite presentable, if not handsome, and he is likable.

He accidentally came across the C-Loans.com web site and discovered that it is a veritable encyclopedia of commercial real estate finance.  Not only did he read every page on C-Loans, but he also went back and read every blog article ever written by Old Man Blackburne.  (If you go to my blog, in the right-hand column, you will see a list of months and years.)  He now had almost complete command of the ratios and the lingo of commercial real estate finance, but he just lacked leads.

He applied to buy commercial leads from C-Loans, but because he was rather new to the business, his credit score was only 670 (student loans), and his net worth was negligible, the big 'ole meanies at C-Loans turned him down to buy leads.  How maddening!  Where else could he find commercial loan leads for only $1 to $9 apiece.  Unfortunately the answer was nowhere.  Hmmm.

 

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Then Bill Ambitious read Big George's latest blog post, and he realized that there was finally a way for him to buy leads and work his way onto C-Loans.  If only he could close two deals on C-Loans.com and win the right to start buying dirt-cheap commercial leads!

Now Bill Ambitious was still doing a little marketing on his own.  He had the words, "Commercial Loans", prominently displayed on his business cards, his rate sheets, and his fliers.  He had also built himself a small mailing list of bankers located near his office who were making commercial loans.  He traded a list of ten of his bankers to George for George's famous, nine-hour video training course, "How To Broker Commercial Loans" ($549 retail).

 

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Every week Bill Ambitious printed up a cute, clean joke (he stole the jokes from George) on plain, 'ole copy machine paper.  He snail-mailed the joke to all 67 of his bankers, along with three of his business cards.  The technique worked well, and he was soon receiving four or five bank commercial turndowns every week.

But it was a lead from one of his realtors that provided his first opportunity to post a loan on C-Loans.com.  The loan was just a $100,000 loan request on a little house being used as a real estate office.  Now normally Bill Ambitious would not have bothered with a commercial loan this small; but he was electrified by the possibility of closing two loans for C-Loans.

 

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He entered the deal into C-Loans.com, using the six-step process, and within minutes he got an offer from a Wall Street nonprime lender listed on C-Loans.  The deal closed.  Hooray!  He promptly notified Tom Blackburne, the old man's son who runs C-Loans, so there would be a record of the closing.  "Hmmm," said Tom.  "This lender never paid us on this closing.  Here's $50, Bill, for keeping them honest."

Four months later, Bill Ambitious, closed his second loan for C-Loans - a $1.6 million multifamily loan that he closed with a hungry Agency lender found on C-Loans.  Eureka!  Within two days of notifying Tom Blackburne of his second closing, Bill Ambitious was finally granted access to the Lender Vault on C-Loans.com.

Like a starving man finally let loose on a cruise ship buffet (my seventh grade English teacher would have loved that metaphor), Bill Ambitious pounced on the leads.  Within seven more months, Bill had his five closings (commercial loans take some time to close).  Tom Blackburne was thrilled for him, and he had Ambitious Commercial Mortgage, LLC added as a Proven Broker to the list of lenders on C-Loans.com within an hour.  Bill received two commercial loan applications before he even went home that first night.

 

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Bloody Circus:

Now Les Agisim and Glenn Gioseffi are competitive men by nature.  Whenever a tombstone, announcing another closings for Ambitious Commercial Mortgage, appeared in their email box, they were happy for Bill.  At first.  But after Bill had closed 37 commercial loans for C-Loans in less than two years, they started to look back over their shoulders.  Like the chariot drivers of old, racing in the Circus in Rome, they urged their horses onward.  Who would be the first Proven Broker to found the Over 100 Closings Club?  Snap!  Crack!  Race on, my lovelies!

Did you know that a Circus was a chariot racing arena?  "Give them bread and circuses."  The classic Biblical movie, Ben Hur, was deadly accurate when it depicted bloody violence in these chariot races.  The teams were represented by colors - the Blues, the Greens, etc. - and bloody riots between the fans of the different colors were not uncommon.  In the famous Nika Riot, tens of thousands of people were killed!  The Crips and the Bloods have nothing on the ancient Romans.  "What has been will be again, what has been done will be done again; there is nothing new under the sun." -- Ecclesiastes 1:9.

 

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Bottom Line:

Great wealth potentially awaits you - if you can get approved to buy commercial loan leads from C-Loans.  Look for any excuse to enter a commercial loan request into C-Loans.com.  If you can close just two of them, the future is so bright that you gotta wear shades.

 

A Final Word on Proven Brokers:

In my training classes, I teach my students to never take their commercial loans to another broker.  Broker-broker deals almost never close.

I hereby make one exception to that general rule.  Your chances of closing a deal with one of our Proven Brokers are about ten times higher than with one of our garden-variety, sleepy, indifferent banks.

These Proven Brokers have a special relationship with a handful of hungry banks that allows them to get deals "on the bubble" approved.

 

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Whatever Happened To Our Friend, Bill Ambitious?

Old Les Agisim beat him to the finish line, but Bill Ambitious ended up making FAR more money.  You see, Bill Ambitious bought my four-hour course, How To Find Your Own Private Mortgage Investors.  In that course, Bill had noted that I taught him to collect the contact information of every wealthy borrower he met.  Bill did that religiously, whether or not the loan closed.  After four years, Bill sent an individually word-processed letter to each of the accredited investors that he had met as a borrower.

Dear Dr. Allen:

Back in May of 2019, we had the pleasure of working on a $2.3 million first mortgage for you on your shopping center in Columbus, Ohio.  Today I am writing to you about investing in our 10% first mortgage investments.

The response was overwhelming, and Bill now services $126 million in hard money loans for his 1,983 private investors.  His loan servicing income is currently $255,000 per month, whether he closes a new loan or not.  He is able to take his lovely bride of 16 years, along with their four beautiful children, on cruises and incredible vacations at least four times per year.

This is all because he closed two loans using C-Loans.com.  And folks, we have been in business since 1980.  My two sons, George IV (33) and Tom (32), will help Angela Vannucci - our heir apparent - to continue the legacy.

You really-really-REALLY want to be special friends with Blackburne & Sons / C-Loans, Inc.  Blackburne & Sons was one of the few lenders that was in the market, making new commercial loans, every day of the Great Recession.

 

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Commercial Loans and Franchise Financing

Posted by George Blackburne on Tue, Mar 6, 2018

Franchises.jpgOne expert recently described buying a franchise as getting a 30-yard head start in a 100-yard dash.

Investopedia defines a franchise as follows:  A franchise is a type of license that a party (franchisee) acquires to allow them to have access to a business's (the franchiser's) proprietary knowledge, processes, and trademarks in order to allow the party to sell a product or provide a service under the business's name.

 

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Few buyers of franchises are multi-millionaires.  They don't have hundreds of thousands of dollars to simply plop down in cash.  Therefore they need franchise financing to acquire the franchise.  Do you happen to need a franchise loan?  Are you a mortgage broker?  Does one of your clients need a loan to buy a franchise?

 

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There is a special Federal government program to help you purchase the franchise business of your deams.  Below are just a few of the many popular franchises that would qualify for this special Franchise Financing Program:

  • Firehouse Subs
  • Burgerim
  • Jimmy John's
  • Papa John's Pizza
  • Subways
  • Ace Hardware
  • Jiffy Lube
  • Minute Maid
  • The UPS Store
  • Sonic Drive-In Restaurants
  • Great Clips
  • Sport Clips
  • Servpro
  • Culver's
  • Supercuts
  • Anytime Fitness
  • Budget Blinds
  • Snap-On Tools
  • Valvoline Instant Oil Change
  • Smoothie King
  • and hundred and hundreds more

 

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These special Franchise Financing Program loans are insured by the Federal government, in a manner very similar to the Department of Agriculture's Business and Industry Loans.  These franchise loans are fully-amortized over 7 or 25 years, depending on whether or not there is real estate involved.

The interest rate on these Franchise Financing Program loans is VERY favorable, largely due to the fact that a large portion of the loan is guaranteed by the Federal government.  When you consider the fact that a franchisee buying his first business, and hence the loan is a start-up loan, the interest rate is amazing.

 

Franchise financing

 

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The thing about this Franchise Financing Program is that the lender making the loan - usually a bank - still has to retain the uninsured portion of the loan.  In other words, the bank has to keep a significant amount of skin in the game.  Approval is not automatically guaranteed.

But if one bank turns you down for a Franchise Financing Program loan, don't give up.  The next bank might very well approve your deal.  Some banks are all about the franchise.  They like certain franchises but not other ones.

 

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Some banks are all about the borrower's good credit, while other banks will accept credit scores in the low 600's.  Other banks focus on the collateral, while some non-bank lenders do not even require any collateral.  So don't take a single turn-down as proof that your Franchise Financing Program deal cannot be financed.

The borrower will always need at least 20% down to buy his first franchise.  That is chiseled in stone.  But some Franchise Financing Program lenders will let a franchisee open a second store with as little as 10% down.  Others will allow a franchisee to open its second store in less than twelve months!

 

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If you need a loan to buy a franchise, we encourage you to click on one of the red buttons scattered throughout this article.

 

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Commercial Loans and the Old Syndication Industry

Posted by George Blackburne on Fri, Mar 2, 2018

alligator-2.jpgThis article should be particularly interesting to accredited investors, commercial brokers (realtors), and commercial mortgage brokers because it describes a way for you to find the Holy Grail of real estate - equity money.

It is sometimes hard to fathom a world where such financial industry giants, as Lehman Brothers, Home Savings of America (once the largest S&L in the country), EF Hutton, Paine Webber, and Countrywide Financial, have now all either gone bankrupt or have been absorbed by a larger company into non-relevance.

 

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When I was new to the mortgage business, Home Savings was like the Roman Empire.  Their enormous branch offices - each an architectural landmark like the Parthenon - were everywhere.  They're gone now?

Billions were spent just marketing the names of these companies.  "When EF Hutton speaks, people listen."  Every day for for decades, and during every pro football game, you would hear their commercials.  Now the name, EF Hutton, is just a distant memory.

 

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There was another financial empire, a veritable colossus, that you may never have heard about - the syndication industry.  Was it a big industry?  Did they make a lot of money?  Think hundreds of billions of dollars worth of investments.  Think of an that was ten times larger than the entire hard money business.  Think big mansions, fast cars, and expensive parties.  Syndicators were at the top of the financial food chain.

But what is a syndicator?  A syndicator is a broker-dealer who puts together groups of wealthy private investors, known as accredited investors, to buy and hold commercial real estate.  But what is a broker-dealer?

 

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A broker-dealer (think: stock broker) is a person or firm in the business of buying and selling securities, operating as both a broker and a dealer, depending on the transaction. The term broker-dealer is used in U.S. securities regulation parlance to describe stock brokerages, because most of them act as both agents and principals (investing with their own dough).  A brokerage acts as a broker (or agent) when it executes orders on behalf of clients, whereas it acts as a dealer, or principal, when it trades for its own account.

Broker-dealers are heavily regulated by the NASD, the National Association of Securities Dealers.  Hence their downfall.  By the time the Syndication Crisis was over, on the order of 70% (90%?) of all broker-dealers were out of business (and some were facing jail time).

 

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It all started in the late 1970's, before the Reagan Administration.  Back in the day, the top tax rate was 90%!  But this tax rate was deceiving.  There were all sorts of tax shelters, where a taxpayer could lower his tax rate by investing his dough where the government wanted.  One of these tax shelters was multifamily and commercial construction.

Under the tax code prior to 1986, a doctor would invest several hundred thousand dollars into a limited partnership, put together by a syndicator, which would buy an apartment building using leverage; i.e., some bank would finance 70% of the purchase.

 

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This leveraged investment would intentionally produce a paper loss every year, largely due to depreciation.  The early limited partnerships were properly structured.  The early syndicators used just the right amount of equity (dough from the doctors).  While there was a paper loss, there was no actual out-of-pocket loss, called an alligator, for the investors.

A typical doctor would then take his $50,000 paper loss and use it to reduce his taxable income from $400,000 per year to just $350,000 per year.  Since the top tax rate was 90%, the doctor saved 90% of that $50,000 reduction in taxable income.  All was good in the world because the Federal government was trying to encourage the construction of new apartment buildings.

And the syndicators got rich, rich, rich.

 

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But like most manias, things got out of hand.  Eventually so many apartment buildings were constructed that they became over-built in some areas.  To make matter worse, syndicators began to structure deals with super-sized losses.  Syndicators would assemble syndicates with so little equity (doctor money) and with so much debt that the deals intentionally had a negative cash flow.  Yikes. 

These 1984 and 1985-era syndicates had large negative cash flows that had to be fed by assessing the doctors every month to feed the alligator.  When the general partner of a limited partnership - or modernly the Managing Member of a limited liability company - has to ask the investors for more cash, it is called a cash call.  Back in 1984 and 1985, the doctors didn't mind monthly cash calls because the negative cash flows produced super-sized tax shelter losses.  

"Would you like me to super-size your alligator?"  Ha-ha!

 

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When President Reagan was elected, he led a charge to change the U.S. tax code.  Tax shelter investments were no longer going to where they would produce the best benefit for the economy, but rather they were going into real estate deals where the real estate was hardly needed.

The Tax Reform Act of 1986 radically changed the commercial property market.  No longer could wealthy investors shelter their active income from employment with passive losses from real estate.  Suddenly one of the legs propping up commercial real estate values was kicked out from the under the industry.  "If I can't use the building as a tax shelter, then dump the dang thing!  I want out."

 

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Commercial real estate values then plunged by 45%.  Remember that number - 45%.  When commercial real estate crashes, it falls exactly 45% and not a penny more.  I have seen commercial real estate crash exactly 45% three times in my career - the S&L Crisis (includes this tax change), the Dot Com Crisis, and the Great Recession.  Remember this during the next crisis, when the Chicken Little's of this world are shouting that the sky is falling.  The time to buy is when blood is running in the streets, when commercial real estate has fallen 45%.

But the General Partner of the limited partnerships, the broker-dealer that syndicated the deal, couldn't sell the property.  After a 45% decline in commercial real estate values, the partnership owed far more on the property than it was worth.

 

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And thing got worse.  Under the old limited partnerships, the general partner was personally liable for the debt.  Holy crapola!  Guess who was the general partner?  The syndicator, the broker-dealer who assembled the syndicate.  

"But wait, weren't the doctors still liable for their cash calls?"  Maybe in theory, but in real life they all told the syndicators to go pound sand.  The banks foreclosed and obtained huge deficiency judgments against the general partners.  Facing countless collection actions from banks, the broker-dealers then filed for bankruptcy, one after the other.

 

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When Europeans landed in the New World, they brought the small box virus.  There were 25 million Native-Americans in North America.  About 21 million of them died of smallpox or other European diseases, for which they had no immunity.  Bankruptcies swept through the broker-deal industry in the late 1980's and early 1990's, just like a smallpox epidemic.  Virtually every small broker-dealer in the country was wiped out.

The syndication industry was suddenly gone - poof!  An industry involving hundreds of billions of dollars simply disappeared.  And it never came back.

Blackburne & Sons Realty Capital Corporation is returning to the syndication business. We have already closed a dozen small deals, and we made an offer on another Sacramento purchase this week.  Unfortunately we are focusing strictly on the Sacramento area right now, so we are not quite ready to ask for deals.

The deals we are doing are 100% all-cash deals.  Our deals are capital preservation deals, where there is zero debt.  The idea is to create a "partnership" (more precisely a new LLC) that can withstand just about any financial crisis.

Participation right now is being limited to our trust deed investors and those accredited investors who have signed up for our trust deed distribution list.  The best way to start seeing these deals - assuming you are an accredited investor - is to sign up for on trust deed distribution list.

 

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Topics: Syndication