Success in the commercial mortgage brokerage business does not usually happen overnight. It could be seven to eight months before you finally start to hit your stride. Here’s why:
- Commercial banks are the lenders closing most of the new commercial real estate loans today, and the average bank takes four months to close a commercial loan. Yeah, yeah … the bank loan officer will tell you that the process only takes about 60 days … but he’s flat-out lying to you. A narrative income-property appraisal alone takes about 60 days, and most commercial lenders don’t even order the appraisal until 30 to 45 days into the process.
- Traditional advertising – like direct mail, magazine advertising, radio advertising, and TV advertising – simply does not work in the commercial mortgage business. You are therefore going to have to build yourself a network of 1,000+ referral sources. These referral sources won’t start producing a lot of leads for you for at least six weeks, assuming you hit them with a newsletter every ten days for six weeks. You’ll surely build a relationship with these contacts, but these relationships take a little time.
- Therefore, even if you hit the ground running, it’s likely to take at least six weeks plus another four months before the first of your commercial loans start to close.
The wise newbie will therefore keep his day job as he starts to build his mailing list and email list of referral sources. If you are teaching school or driving a cab, keep at it until your pipeline finally starts to deliver. If you are currently working as a residential mortgage broker, keep at it! With interest rates so low, this is a good time to be refinancing homes.
Since it takes so long to close your very first commercial loan, why should you even bother to learn commercial real estate finance? There is a superb reason, and I want you to read this answer at least three times:
Wealthy investors own the big commercial buildings you see around town, and there is no better way to meet those wealthy investors than to be a commercial mortgage broker.
Please re-read the above paragraph two more times and permanently engrain this concept into your head.
Once you have met and worked hard for a wealthy investor – you don’t even have to close a loan for him – you can make all kinds of money from this relationship.
You can sell this wealthy investor rental homes or commercial REO’s (properties foreclosed upon by a bank). You can manage a few properties for him. You can convince him to buy hard money mortgages from you. You can convince him to invest in a private money mortgage fund that you run. You can syndicate your wealthy investors to buy huge commercial properties. You can even partner with these wealthy investors if they have a great idea of their own.
So why do you want to become a commercial mortgage broker? Answer: Because there is no easier way to meet wealthy investors than to become a commercial mortgage broker.