Commercial Loans Blog

Commercial Loan Lesson:  Charm the Socks Off the Receptionist

Posted by George Blackburne on Tue, Jan 30, 2018

Receptionist-1.jpgWhether you're a borrower, commercial broker, or commercial loan broker, today's super quick lesson applies to you.

You're working with a commercial lender, who is considering your commercial loan application.  You have read my single most important blog article ever, which explains that commercial lenders make loans for their friends.  In other words, if the commercial lender likes you, he will ignore a lot of black hairs in your package.  Therefore you want to develop a friendly relationship with this commercial loan officer.


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Now think about it.  Would you want the receptionist telling your commercial loan officer, "Hey, Steve, that rude and pompous George Blackburne is only line three."  Or would you prefer her to say to Steve, "Hey, Steve, that little charmer, George Blackburne, is on line three.  Get him to tell you his little snail joke.  Ha-ha!"


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The moral of the story is pretty simple:  Charm the socks off the receptionist.

One of my mentors, the great Bill Oldenburg, taught me this lesson.  He would fuss all over the receptionist whenever he telephoned his lender, and when he would make a personal visit, he would bring her flowers.  He was a charmer, and to his credit, he sincerely meant it.  He considered these receptionists and assistants to be his friends.  Its no wonder that he syndicated some of the largest commercial construction loans of his age.


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The purple call-to-action button at the top of this page talks about my popular 9-hour commercial mortgage brokerage training course.  The course teaches a new broker everything from marketing for commercial loans, underwriting commercial loans, packaging the commercial loan, finding the right commercial lender, and lastly, fee collection.  We sell this course for $549.

But let's suppose you are a starving commercial mortgage broker.  You would love-love-love to own this course, but you don't have $549.  I will give you this 9-hour commercial mortgage brokerage training course course for free, if you will complile a list for me of ten bankers making commercial loans.  These are DVD's, so you will have to pay $30 or so for the shipping.

Please send your list to me by email.  Please insert in the subject line, "Trade for 10 Bankers."  Obviously I'll need your address and phone number.  Obviously this is George Blackburne III (the old man) at  Guys, I get 1,300 emails every single day, so it is very easy for me to miss your email.  Right after emailing me your list, please send a text to 574-360-2486, "George, I just sent you a list of 10 bankers." 


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I will please need the name of the loan officer, the bank, the address, the phone number, and his email address.  And guys, these commercial real estate loan officers must work at either a FDIC-insured bank or a NCUSIF-insured credit union.  I will not accept commercial real estate loan officers working for any other type of commercial lender.  I just want bankers.

You will probably have to call the ten closest banks to your office and ask for a commercial real estate loan officer.  Sometimes getting the banker's email address can be tricky.  They don't like giving it out.  I like to ask, "If I wanted to send you a package, to what email address would I send it?"


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You can also choose instead our 4-hour video training course, "How to Find Private Mortgage Investors."  I have been telling you guys for years, the money in the mortgage business is in loan servicing fees.  My company enjoys $87,000 per month in loan servicing fees, whether we close a new loan or not.  There has never been an easier time to start a hard money mortgage company.  If you send me 20 bankers, you can have both training programs.

We take these dozens and dozens of new bankers, and we add them to  Since the site is free and super-fast, you would be crazy not to search for commercial lenders using  


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Topics: Charm the receptionist

Low Cap Rates and Commercial Loans on Small Apartment Buildings

Posted by George Blackburne on Sat, Jan 27, 2018

Small Apartment Building.jpgWhen applying for a commercial loan to buy a small apartment building, you are likely to run into the following problem:  When the lender applies a 1.25 Debt Service Coverage Ratio to the Net Operating Income, the property will only qualify for a loan of 62% Loan-to-Value.  The commercial lender will then insist of a down payment of a whopping 38% of the purchase price!  Remember, purchase money second mortgages, behind bank or conduit first mortgages, are forbidden nowadays.

Who the fiddlesticks has 38% to put down????  What the hellions is going on?


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The problem when trying to finance small apartment buildings - I am talking about multifamily properties of 5 to 20 units - is that everyone wants to own them.  The Apartment Game has been played for generations in America.  You buy a four-plex, rent it out, and run it for five years.  In the meantime, the rents go up by 35%.  Then you sell it for a nice profit and use your profits, plus your original down payment, to buy a ten-unit property.  Five years later you sell that 10-unit building and use your big profit to buy a 20-unit project.  By the age of 55, you are ready to retire and live off your rents.  Your success is virtually guaranteed, as long as inflation continues.


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Because the Apartment Game is a virtually guaranteed path to a comfortable retirement, everyone wants to play.  If a small apartment building comes on the market, there is a feeding frenzy.  A 15-unit apartment building might have a NOI only $212,000, but the bidding is likely to go as follow:

"I'll pay $2,650,000 for that $212,000's worth of income."  This works out to an 8% cap rate.

"I'll pay $3,029,000 for that $212,000's worth of income."  This works out to a 7% cap rate.

"I'll pay $3,533,000 for that $212,000's worth of income."  This works out to a 6% cap rate.

When the bidding stops on this 15-unit apartment building, the price is likely to end at $4,348,000 - which equates to a cap rate of just 4.875%.  

Then, when the lender takes the $212,000 in NOI and divides it by the 1.25 Debt Service Coverage Ratio, he arrives at a loan amount of only $2,709,000 - assuming he used a 4.75%, 30 year constant.  Constant is just a fancy word for using a 4.75% interest rate on the new multifamily loan and a 30 year amortization.


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Quick Review and Summary:

An investor is buying a 15-unit apartment building that has a Net Operating Income of just $212,000 per year.  The bidding to buy the building is fierce.  Everybody and their brother is bidding to buy it.  The investor is forced to pay around $4,350,000 for the building.  The loan officer at the bank working to make the loan can only get the deal to pencil at $2,710,000 - using a 4.75% interest rate and a 30 year term.

The investor has some serious down payment money, but who on earth has 38% to put down?  Does this mean that small apartment buildings cannot get financed, even though small apartments are the most desirable type of income property in the whole world?  Please read this again.  The hottest type of real estate - the best and most secure collateral for any real estate loan - is small apartments.


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How Your Bank Loan Officer Must Handle This Situation:

First of all, the investor needs to choose a bank loan officer who is willing to go into Loan Committee and fight for the deal.  Then that loan officer must say:

"Boss, listen.  If we make a multifamily loan on a 100-unit apartment building, we could sit on that foreclosed collateral unsold for months, even though the loan had a 1.25 debt service coverage ratio originally. After all, there is not an unlimited demand for, and an unlimited number of buyers of, a 100-unit apartment building."

"In contrast, if we start to foreclose on a small apartment building (5-20 units), our REO department will have buyers lined up before the foreclosure sale even takes place.  You can verify this, Boss.  Just call the REO Department and ask them how many small apartment buildings we have unsold."


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"The truth is, Boss, is that small apartment buildings are the single most desirable class of real estate to own.  The prices get bid up so high (in other words, the buyers are willing to accept very low cap rates), that the numbers don't work for a traditional apartment loan."

"If we want the BEST collateral for our loans, we have to show some flexibility on the debt service coverage ratio on small apartment deals.  We have to be willing to accept a 1.0 debt service coverage ratio, as long as the buyer's global income (salary, interest income, other net rental income) will support a few vacancies."

What I have written above is the absolute truth, and the bank loan officer, in Loan Committee, has to keep pounding the drum.  "Do we want fantastic collateral for our loans in real life or just so-so collateral that looks good on paper."  If the loan officer sticks to his guns, Loan Committee will eventually agree.


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Here is one more arrow for the bank loan officer's quiver.  Any small apartment building that does pencil is almost assuredly in a slum.  For a small apartment deal to comfortably pencil for a 70% to 75% loan today, it must be selling at an 8% or higher cap rate.  In other words, in order to attract a buyer, the seller has to offer prospective purchasers a higher yield on the property.   The investor is thinking to himself, "The only way I am going to buy a property in this stinky area is if I am getting a huge return on my money."

So the last arrow in your loan officer's quiver is this:  "Boss, if a small apartment building loan ever pencils, I guarantee you that the area is so seedy that you wouldn't want your wife or mother walking around there at night.  The bank should want to make their apartment loans in good areas.  The reason why this deal doesn't pencil perfectly is because its in a good area."


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One final point:  Banks, agency lenders (Fannie Mae, Freddie Mac, etc.), and conduits will not allow the seller to carry back a second mortgage behind their new first mortgage loans.  Blackburne & Sons will allow second mortgages!


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Topics: small apartment loans

Commercial Loans Should Close Easily.  If Not, Move On to Another Lender.

Posted by George Blackburne on Mon, Jan 15, 2018

Asian banker.jpgCommercial loan brokers and borrowers often give up far too easily.  They get a commercial loan application in the door that they think is pretty good.  Then they take the deal to three or four commercial banks, who proceed to criticize the deal to death.  "I don't like the location."  "The borrower isn't strong enough."  "One of the leases expires in just 14 months."  "The borrower doesn't have enough liquidity."

Then the commercial loan broker loses confidence in the deal and quits.  He thinks to himself, "This must not be as good of a commercial loan as I thought it was.  I better go find a better one."  Arghhh!  There is probaly nothing really wrong with the deal.  Let me make something clear:



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Read my lips.  Every commercial loan ever closed had a few black hairs.  An intelligent eight-year-old girl (boys are still pretty 'tupid at that age) could pick out flaws in a commercial loan package.  Bankers often think they are a genius when they find a flaw in a commercial loan, and then they tell you to come back when you have a better deal.  Horse pucky!  When you weigh the pro's and the con's of the deal, your commercial loan should probably be made.

So what happened?  You took your deal to a bank or a particular bank loan officer who just didn't feel like lending today.  Because the banker wasn't in the mood, he picked on the first black hair that he could spot and then sent you packing with a pat on the head.  "There's a good little boy.  You come back later with a perfect commercial loan or the broomstick of the Wicked Witch of the West."  Hellooo? There is no such thing as a perfect commercial loan!


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Now we get to the point of today's training article:

Commercial loans should close EASILY.  If your banker is using weasel words, move on immediately to another bank!

When your banker uses weasel words like, "Well, I'm not sure," or "I'm worried about the loan-to-value ratio," he is just setting you up to turn you down tomorrow.  Commercial loan packages seldom get prettier overnight.  Banks seldom develop a voracious appetite for commercai loans overnight.  Therefore the instant your bank loan officer starts using weasel words, immediately submit your deal to three more lenders.  

Three is a magic number for me.  I try to make it a rule to always have my commercial loan submitted to at least three different lenders at the same time.  "Oh, my gosh, George, what if two lenders come back and issue me a term sheet at the same time?"  Oh my gosh, what if Michelle Williams and Mila Kunis both asked me out at the same time?  Ha-ha.  Ain't gonna happen in real life.  Always have at least three bankers looking at your deal at the same time.


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Now remember, the lesson for today is this:  Commercial loans should close easily.  Why?  How?  The answer is that you have to find the right lender for the right deal at the right time.  That's the key.  When you find the right lender at the right time for your deal, you will be amazed at how easily the deal will close.  There will be zero hard-selling on your part, and the "huge" black hairs will appear trivial to the banker.  So if your banker seems like he is fighting you - if it seems like the going is hard - you just haven't found the right lender for your deal.

This leads me to my next point:  Be prepared to take your commercial loan to at least twenty to thirty banks, or other commercial lenders, before closing it.  Using email and, this is super-easy these days.


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Of course, if you take it to a bank, and the banker is drooling all over it, then it sounds like you have found the right bank at the right time.  You certainly should never quit on a deal after presenting it to just ten or fifteen lenders.  Placing commercial loans is a numbers game.  The more commercial lenders to whom you present your deal, the more often you will "get lucky" and find the right bank at the right time.

"But George, where am I going to find all of these banks?"  Finding banks is easy-peasy:

  1. has 750 commercial lenders, and you can actually submit your deal using C-Loans.

  2. has another 3,500 commercial lenders.

  3. There are 6,799 commercial banks in America.

  4. There are 6,143 credit unions in America.

  5. Go to and enter the address of the subject property.  Then ask Google to plot the nearby banks.  Banks love to lend close to their office.


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One final point.  Let's suppose you have a commercial loan in Northeast Boston.  You approach the First National Bank of Northeast Boston, but the white, sixty-year-old, sleepy (lazy) commercial loan officer brushes you off.  Hmmm.  First National Bank should have been perfect for this deal.  The property was right in their sweet spot in terms of loan size and location.  Solution:  Wait 48 hours and then present it to a different loan officer at the same bank.  The new loan officer - Asian woman loan officers are often dynamos - might just love your deal.  I have successfully closed numerous commercial loans using this trick.  The new loan officer might be in the mood to close some deals.


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Topics: Commercial loans should close easily

Fix and Flip Loans and How To Find a House To Flip

Posted by George Blackburne on Tue, Jan 9, 2018


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On T.V. and at cocktail parties, you have probably heard all about people making big profits fixing and flipping houses.  The U.S. built only 1.2 million homes last year.  The U.S. must build 1.7 million new homes every year just to keep up with population growth.  How have we been filling that shortfall?  The answer is with fix and flips.   We are returning rundown homes to the housing stock.

When a fix and flipper renovates an older home, he is often providing a near-new home to some young couple, both of who are probably working.  They totally lack the time and experience to do the renovation themselves.  That fix and flipper is truly doing a good thing for that young couple.  The couple will enjoy a near-new home for 20% less than the cost of a new home.

Flipping homes is also great for the environment.  Think of all the trees that are spared because a new home is not constructed.  Lastly, think of the kids.  Older homes usually have much larger yards in which kids can romp and play, compared to new homes.

My point is that you should feel good about the work you are doing as a house flipper.


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But How Do You Find a Home to Flip?

Here are some practical tips:

Consider using a wholesaler on your first deal.

Wholesalers are in the business of finding rehab properties, putting them under contract, and then finding a buyer who will execute the house flip.  You take the place of the wholesaler in the contract, paying a fee to the wholesaler for being the middleman.  Make sure the wholesaler doesn’t add a profit margin to himself that is so large that he doesn’t leave any profit for you.   I recently did a Google search, “home wholesalers Indianapolis”, and I found dozens of listings.

Hire an agent who specializes in REO’s. 

REO stands for "Real Estate Owned" and refers to property that is held by a lender as the result of a defaulted loan.  Most of these homes will have gone through an extensive foreclosure, and perhaps an eviction process.  In addition, the prior occupants probably did very little to care and maintain the property during the pendency of the mortgage default, foreclosure and eviction.  As a result, many of these properties are priced lower than the surrounding homes due to their neglected conditions, making them ripe for a house flip.  Many lenders and loan servicers align themselves with a small group of realtors that specialize in selling these types of properties.  The key to finding them for your house flip is to work with a realtor who has the inside track on these real estate listings and new rehab homes on the market.  You can find them by doing specific internet searches for REO real estate agents and brokers within a specific geographic area.  For example, I just did a Google search of “REO specialists Indianapolis” and found lots of listings.

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Work with your favorite real estate agent using the MLS.

Have her set up email alerts for new listings based around key words, such as handyman’s special, fixer-upper, fix and flip opportunity, needs work, distress situation, divorce situation, neglected, needs repairs, foreclosure, REO, etc.

Attend foreclosure sales, estate sales, and auctions.

Real estate auctions, conducted at a public place, most often at the courthouse, are the best place to consistently source below-market real estate. The lenders are often times willing to take a discount from the amount owed.  This allows buyers to purchase a property at 60-80% of the market value. The investor can then quickly remodel (if needed) and resell the property for a profit. The downside is that oftentimes you need to pay all-cash for the purchase, and there is no title insurance or inspections on the properties.  Although there is some risk associated with this tip, with proper due diligence and patience you can do this profitably in any market in any area.  In addition, not every foreclosed home finds s a buyer at a foreclosure sale.  By attending foreclosure sales, you will be able to identify those lenders who are stuck with a foreclosed home that they do not want to own.


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Most hard money lenders just want to get rid of their foreclosures quickly.

They are not interested in becoming landlords or home renovators.  Their loans are often made at low loan-to-value ratios, so there is often sizeable equity in their foreclosures.  If you can find and contact these individuals or companies, you’ll likely get access to some great deals.  I just did a Google search of “hard money lenders Indianapolis” and found dozens of companies listed.


Build yourself a network of finders and contacts that - because of their jobs - run across distressed home opportunities.  The next several tips will explain exactly how to do this.


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Don’t be shy about offering to pay a finder’s fee for a home that you end up buying.

Folks, I am an attorney, and let me reassure you that finder’s fees are perfectly legal.  Advertise your finder’s fee offer boldly and with confidence.  “A finder is a person whose employment is limited solely to bringing the parties together so that they may negotiate their own contract.”

It is essential that your finder does not try to play real estate broker and negotiate terms.

If your finder negotiates any terms, it is illegal to pay him because he is not a licensed real estate broker.  Therefore limit your finder’s work to setting up an introduction.

How much should you pay?

I recommend a cool $1,000.   Capitalism works, folks.

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You need to institutionalize your marketing for homes to buy.

"Institutionalize?  That’s a big, boring, fluffy term.  I’m falling asleep here, George.”

By institutionalize, I mean that you need to develop a repeatable formula that works every time and which requires very little character on your part to implement.  For example, suppose I told you to get on the phone and call 15 people every day?  It’s a formula.  It would probably work; but who has the discipline to make 15 calls every day?  That requires an immense amount of character, so I don’t like it.   But how about this?  Could you develop a list of 70 to 1,000 particular people to whom you could forward a funny or interesting email once a week?  After the joke, you could have a signature block that reads, “I PAY $1,000 REFERRAL FEES FOR HOMES TO FLIP (in big, bold red print).  Please look for homes where someone has died, moved to a care home, or come back in foreclosure.”

 Choose your 70 to 1,000 finders by the nature of their work.

Certain people, because of the nature of their work, see good fix and flip candidates several times per year.   Here are the types of workers who see fix and flip opportunities on a regular basis - real estate agents who specialize in estates, antique dealers, estate sale professionals, clean-out guys, dumpster companies, divorce attorneys, and probate attorneys.


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Don’t forget business cards.

You should have two types.  One should read in big, bold type:  “I PAY $1,000 FINDER’S FEES FOR HOMES TO FLIP. “ The other might say, “I’LL BUY YOUR HOME QUICKLY.”

Develop an elevator pitch.

What on earth is an elevator pitch?  An elevator pitch is a short, succinct sales pitch - something that you can deliver in the time it takes an elevator to go up four floors.  Here’s a hypothetical:  “Hello, my name is George Blackburne, and I own Blackburne & Sons.  I am a residential developer, and I specialize in restoring and repurposing run down homes.  I pay a $1,000 finder’s fee to people who find me homes to buy and flip.  May I give you one of my business cards?”


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Put a magnetic sign on your car.

“$1,000 Finder’s Fee For Homes To Flip.  574-360-2486.”  You could find a great opportunity while your car is parked at the grocery store.

Get to know the mail carriers in the neighborhoods in which you want to buy.

Mail carriers know who is having financial difficulty, who is behind on their taxes, who is seriously ill, who is moving out, and more.  They know more than Google when it comes to the people on their routes, so get to know them.


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Finding homes to flip is a skill that you will refine and improve over time.  Have you developed a great marketing trick of your own?  Would you please share it with me?  Write to me at, and please write in the Subject line, “Great Fix and Flip Tip For Old George.”  I would really, really appreciate it!


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Topics: Finding houses to flip