Commercial Loans and Fun Blog

Facebook announced this week that it is using blockchain technology to develop a new form of crypto-currency, similar to Bitcoin.

By the way, did you know that Bitcoin is becoming an increasingly large contributor to global warming?  In order to mine for additional Bitcoins, dedicated computers have to solve these immense calculations. The calculations are so difficult that it takes whole refrigerated warehouses to hold the hundreds (thousands?) of computers working in parallel to solve the equations.  These computers are drawing an immense amount of power, which, especially in China, means coal-powered electric power plants are spewing tons and tons of unnecessary greenhouse gasses into the atmosphere.

 

 

 

 

The name of Facebook’s new crypto-currency is the Libra.  The name comes from ancient Rome, where a libra was a unit of weight used when minting coins.  Facebook intends to use the Libra so that its WhatsApp users can easily and inexpensively send money worldwide.

WhatsApp is software that is used to send text messages.  The cool thing about WhatsApp is that it works overseas, and there is no cost.  When my son, Tom, took his beautiful new bride to Peru on their honeymoon (they actually tried Guinea pig, a delicacy in Peru), we were able to stay in touch instantly by sending text messages using WhatsApp.

WhatsApp has over one and a half billion users, making it the world's most popular messaging application.  Facebook paid $19.3 billion for WhatsApp in 2014.  Mark Zuckerberg found the $19.3 billion between the cushions of his couch.  Haha!

 

 

 

 

Okay, so Facebook is using blockchain technology to create the Libra.  Blockchain, they say is the next big thing, and some say that it will someday be as important as the internet. Thousands of companies worldwide are developing new technology using it.

But what on earth is blockchain technology?  I had to read a half-dozen articles about blockchain technology, each claiming to be written in plain English, before I started to get a tiny handle on understanding it.  Here is what I have deciphered so far.

Blockchain technology helps to solve the problem of trust and hacking.  If two companies across the world want to do business, they often have to use a trusted intermediary – like the stakeholder in a bet.  They don’t dare use the internet to do their deal directly because of the fear of hacking.

 

 

 

 

Blockchain technology takes their secret documents and makes them up into a packet called a block, which is attached to the blockchain.  The blockchain must be enormous because the data is added end-to-end like a giant chain.  All of the blocks in the blockchain are spread out among tens of thousands of computers across the world.

Where the blockchain really adds value is that all of the other blocks in the blockchain are constantly checking each other to make sure that no data in any of the other blocks has been hacked and altered.  This is why your precious bitcoin registration data is secure from hacking.

 

 

 

 

 

Different Subject:

Do you know any high-net-worth investors who invest in first trust deeds?  If so, we will gladly you pay a $250 referral fee the first time that he invests with us, even if he only invests $5,000.  Simply use the Investor Input Form below.

 

 

 

 

Guys, please don't forget that if you convince a bank to join C-Loans that we will share 20% of our net software licensing fee on the first three closings.  Each referral fee could be thousands of dollars.

Just pitch your banker friend by phone and then send your contact information to Tom Blackburne, the General Manager of C-Loans, Inc.   Even if your banker does not join immediately, we will put him into our lead nurturing system, which will send him a reminder about the opportunity once a month.  If he ever signs up, he is your guy.  He remains your guy, even if he changes banks, until you have been paid on three closings.

Because we here at C-Loans.com will be responsible for closing the sale, there is a little bit of a race going on by brokers registering their bankers.  You can't just send in a list of names, however.  You need to pick up the phone first and explain how C-Loans works.  But once you have made your telephone pitch, be sure to rush his contact information to Tom Blackburne, so we can register him in our system as your guy.

 

 

 

 

 

 

 

What does commodity money have to do with commercial loans?  In fact, what on earth is commodity money?

Arguably, the opposite of commodity money is fiat money.  Fiat money is currency that is given its value by governmental decree or declaration.  Some king, dictator, or government suddenly declares that a new currency hereby constitutes money.

 

 

 

 

This fiat decree is usually accompanied by a declaration that all future taxes will have to be paid in this new currency.  From then on, in order to pay their taxes, the people will have to accumulate a whole bunch of this new fiat currency.  This gives the new currency value.  You can use it to pay your taxes.

Another way a government can give value to some new currency is to declare that its holders can use it to pay off their old debts.  If you look at a U.S. dollar bill today, you will see that it is no longer redeemable for gold or silver.  It does, however, contain the language, "Legal tender for all debts, public and private."

Now that we know what fiat money is, what is commodity money?  Commodity money is money that has intrinsic value in other uses.  For example, gold and silver coins have intrinsic value because they can be melted down and used to create jewelry to adorn pretty girls - hopefully making them happy enough to kiss us.  Sorry, ladies, but we men are pretty simple animals.  We don't have a whole lot of moving parts.  Haha!

 

 

 

 

But gold and silver coins are not the only types of money that have intrinsic value.  The shekel from the Bible used to represent a certain measure of barley.  Other commodity monies represented a certain measure of salt.

Quick review:

Okay, so fiat money is just paper money that could loses 100% of its value if the government disappears or simply prints too much of it.  In contrast, commodity money is made up of good stuff (gold, silver, barley, or salt) that you might want to own anyway.  It has intrinsic value.

The biggest example of a worthless fiat currency today is the Venezuelan bolivar.  The current exchange rate is 6 million bolivars to the U.S. dollar, and the inflation rate in Venezuela is expected to reach 1,000,000 percent this year.

 

 

 

 

In a series of dramatic reforms issued by President Nicolas Maduro, Venezuela has just devalued its bolivar by a whopping 95%.  In a bid to salvage the country's economy from complete collapse, the new currency, renamed the "sovereign bolivar", will also be re-denominated, which removes five zeros from its unit measurement.

The mere fact that a currency is a form of fiat money does not make it unsound.  The U.S. dollar and the Euro are examples of fiat currencies that work very well.  While the U.S. Treasury no longer prints Silver Certificates or even Greenbacks (paper money issued by the Union during the depths of the Civil War that were eventually redeemed for gold in 1879), the rest of the world gladly accepts dollars.

So what does commodity money have to do with commercial loans?  Well, the U.S. no longer issues commodity money.  If you take your dollars to the Federal Reserve, you can no longer redeem them for gold or silver.  This means that, in theory, the U.S. dollar could become as useless as the Venezuelan bolivar.

 

 

 

 

 

I am deeply troubled by calls from certain Democratic presidential candidates for socialism.  As one economic commentator said this week on CNBC, "There are only two ways to motivate people to work - financial incentives and the point of a gun."

Between Lenin, Stalin, Mao Zedong, Pol Pot, and pikers by Kim Jong Un, socialists have murdered on the order of 100 million people in the past 120 years.  Nevertheless, a great many young people today are turning their heads towards the sirens song of socialism.

"If a man is not a socialist by the time he is 20, he has no heart.  If he is not a conservative by the time he is 40, he has no brain." – Winston Churchill

I think the problem lies with our high school teachers and our university professors.  We don't allow illiterate fools to teach our young people.  They need a certain amount of education.

 

 

 

 

 

If Donald Trump died and appointed me king, I would require that no one should be allowed to teach our impressionable young people unless they have first taken extensive courses in economic history.  I propose no litmus tests for teachers.  They can be as liberal as they want to be; but they should not be allowed in front of our young, idealistic students until they have first taken certain economic history courses.

They need to study the financial successes of such brilliant economic leaders as  Nicholas Maduro in Venezuela and Robert Mugabe in Zimbabwe.  Nicholas Maduro's hyperinflation in Venezuela's has only reached 1,000,000 percent per year.

However, under Robert Mugage, Zimbabwe's peak month of inflation is estimated at 79.6 billion percent per month.  That works out to 89.7 sextillion percent per year in mid-November 2008.  Heck, in comparison, Maduro is just another piker.

 

 

 

 

Can you imagine trying to arrange commercial loans in Zimbabwe or Venezuela?  As commercial lenders and commercial loan brokers, we need a steady currency.

Guys, please don't forget to refer us potential trust deed investors.  The first time they invest with us, even if they only invest a pittance, we'll send you $250.  We just need his name and email address, and we'll do the rest.

We sell exclusively by email, so no one will call your investor friend and try to sell them an investment.  Our first trust deeds yield between 7% to 12%, and Blackburne & Sons has been in business since 1980.

 

 

 

 

One final thing.  Each of you commercial loan brokers knows three or four banks who make commercial loans.  If you convince a bank to join C-Loans.com as a lender, we'll pay you 20% of our net software licensing fee on the first three closings.  Each of these fees could be thousands of dollars.

You don't have to do much.  Just call your banker friend, tell him about C-Loans.com, and send him the link our page, Commercial Lending Preferences.  Afterwards, please send an email to Tom Blackburne at C-Loans and give him your lender's contact information.  

We'll do the rest.  We have a follow-up system that will reach out to to him once per month until he gets hungry enough fo commercial loans to join C-Loans.

 

 

 

 

 

 

Please-please stay with this article until you've read the Important Notice section below.

First, imagine getting the following call.  "Hey, Steve, do you remember when you convinced Manny Ramirez of Beantown Bank to join C-Loans.com as a lender?  Well, Manny just closed a $4.85 million commercial loan for us.  We have a referral fee check here for you for $3,637 - which is 20% of our net software licensing fee."

 

 

 

 

So that's the deal.  If you convince a direct commercial lender - a company servicing at least $20 million in commercial loans - to join C-Loans.com as a lender, we will pay you 20% of our net software licensing fee on the first three deals that he closes for us.

It should be a pretty easy sale.  C-Loans works.  C-Loans has closed more than 1,000 commercial real estate loans totaling more than $1 billion.  It costs the bank nothing to join C-Loans.com.  There is no monthly fee.  There is nothing to sign.

Several times per week your bank loan officer will receive carefully scrubbed commercial leads that are perfect for the bank - the right loan type, the right size, the right property type, and the right location.

 

 

 

 

All the bank has to do is to bump their normal loan fee by 37.5 bps.  Our fee is just 25 bps. on deals larger than $5 million (for banks, credit unions, conduits, and life company correspondents).  After the deal closes, we'll send the bank an invoice for our software licensing fee.  

Got a buddy who is a commercial real estate loan officer at a bank or credit union?  Simply have him complete this Commercial Lending Preferences form, and then promptly notify me that the bank came from you.

How much will you earn?  We're closing a $3.5 million loan with a bank this week.  If you had referred that bank, your referral fee would have been $2,625,  And you will earn a similar fee on the first three loans we close with that bank commercial loan officer!

 

 

 

 

 

I urge you to cut and paste this Commercial Lending Preferences form and forward it to your favorite bankers.  This could be serious money for you for just ten minutes worth of work. 

Important Notice:

After you have reached out to the bank and introduced the C-Loans concept, please be sure to send us your banker's contact information right away.  We will code this bank loan officer as yours, and then we will enter him into a lead nurturing campaign.  Thereafter he will get a solicitation once a month reminding him to join.  If he joins at any time, he is "your guy" until he closes three deals (assuming you were the first guy to refer him).

Housekeeping Matter:

"Your guy" is the commercial loan officer, not the bank.  It has to be your commercial loan officer who closes the commercial loan, not some other loan officer at, say, Bank of America.  The cool thing is that "your guy" remains "your guy", even if he leaves Beantown Bank and joins Big Apple Bank.  

 

 

 

 

 

We are looking for banks, credit unions, and life company correspondents.  We are not looking to add more commercial hard money shops to C-Loans because they compete against Blackburne & Sons, my own hard money shop.  By the way, please check out our new website.  Purdy.

Note:  We are happy to add hard money commercial loan companies to C-Loans if they regularly close commercial loans in excess of $1 million.  Blackburne & Sons tries to stay with deals of less than $1 million.  Why?  Large hard money loans default far too often. 

I urge you to cut and paste this Commercial Lending Preferences link and send it to each of your bank commercial loan officers before a competing broker beats you to it.

 

 

 

 

C-LOANS, INC.

 
Tom Blackburne

General Manager


4811 Chippendale Drive, Suite 101

Sacramento, CA 95841
574-210-6686  Best

916-338-3232  Office

tommy@blackburne.com

P.S.  We are back to selling $1 to $9 commercial leads again, after a one-year moratorium; and yesterday we lowered the minimum amount to open an account from $1,000 to just $500.

 

 

 

 

 

 

At the end of this training article, I will tell you where to find lenders making commercial loans on golf courses; but first we all need a reality check.

Golf courses across the nation are seriously overbuilt, and most of them are losing money.  About nineteen years ago, when Tiger Woods was at his zenith, golf soared in popularity.  Golf course developers went crazy building new courses.

 

 

 

 

But when his beautiful ex-wife knocked out most of his front tooth out with that hurled cell phone (after bashing in his car with a golf club), and after Tiger's play started to crumble, the popularity of golf started to wane.  It has never recovered.

Young people simply don't have the time to take up golf.  Eighteen holes take too long to play.  There are even some calls to reduce the number of holes from 18 to 12 in order to reduce the time it takes to play a round.

I was shocked today to learn that the number of regular golfers fell from 30 million to just 20.9 million between 2002 and 2016.

 

 

 

 

Holy moley.  Not surprisingly, revenue to the public and semi-private courses has plummeted proportionately.  Private courses are having tremendous problems retaining enough members to keep their courses open.  

A private, member-only golf course in my former home town of Plymouth, Indiana failed.  A dozen former members were able to buy the foreclosed golf course back from the bank for just $525,000.  The bank's first mortgage had been $1.7 million, and the cost to replace the course had to exceed $4 million.  Hundreds of acres and a gorgeous club house - all for just $525,000.  Amazing.  The bank certainly didn't want it.

As a result of the whopping 30% decline in play, golf courses are failing in droves across the country.  The industry has lost about 1,000 courses in the past seven years, and the pace of golf course failure is starting to increase as the owners finally run out of reserves and get tired of feeding the alligator.  An alligator is a negative cash flow on real estate.

 

 

 

 

Bottom line:  Golf courses everywhere are losing tons of money, and commercial lenders know it.  There is very little appetite to make commercial loans on golf courses today.

Nevertheless, if you simply must have a new commercial loan on a golf course, you might try an SBA lender.   Golf courses are eligible for SBA loans.

The problem, however, is that the SBA does not guarantee the entire balance on any SBA loan; so the bank making the new SBA loan will have a significant amount of its own dough at risk.  You are going to have a lot of trouble finding any banks or SBA lenders willing to make commercial loans on golf courses.

 

 

 

 

What about credit unions?  Credit unions are unusually flush with money, and they will make any commercial real estate loan these days that makes sense.  If your borrower is buying a struggling golf course at a huge discount - like the one in Plymouth (see above) - and your buyer is clean, strong, and experienced, you might have a chance.

On the other hand, if your golf course owner is bleeding cash like a stuck pig (like most golf course owners today), good luck.  A bailout loan is unlikely to happen.

What about a hard money lender?  Maybe.  But a hard money lender will only make a commercial loan of a golf course these days once.  After taking their inevitable huge loss, the hard money lender is unlikely to make the same mistake a second time.

 

 

 

 

 

That's the bad news.  The good news?   There are billions and billions of new hard money lenders, each (unknowingly) anxious to make a mistake by making a new commercial loan on a beautiful golf course.  You will find hundreds of credit unions and hard money lenders on C-Loans.com and CommercialMortgage.com.

So are all golf course owners doomed?  Maybe not.  As more golf courses close, play at the remaining golf courses increases.  My favorite golf club in Plymouth, Indiana has picked up a significant number of new members this year because three surrounding courses have failed.

It's a game of survival.  If a golf club can financially hold on, while all of the competing golf courses surrounding it close down, the club may be able to pick up enough golfers to finally make a profit.  Remember, even though the number of golfers nationwide has plummeted by a whopping 30%, there are still 20.9 million golfers in the U.S.  As the song by Wilson Phillips goes, they just have to "Hold On" for one more day.

 

 

 

 

 

This article will eventually lead you to the perfect place to find a commercial loan on a bed and breakfast inn; but first a reality check.

In terms of cash-on-cash return on your money, however, the single worst real estate investment on earth is the bed and breakfast inn ("B&B").  In addition to earning an almost zero percent return on your life savings, the buyer also gets to enjoy rising early every single day of the week to cook breakfast.  Is this a great country or what?

 

 

 

 

Don't get me wrong.  Bed and breakfast inns are usually gorgeous properties.  The big winner here is the previous seller (phew) and the guests, who get to enjoy a relaxing getaway with their favorite someone.  But the inn keeper?  He is totally and completely screwed.

What seems to the problem?  Bed and breakfast inns are so gorgeous that the buyers  fall in love with them... and then they grossly overpay for them.  In many cases, the buyers will put down a whopping $500,000 and take out a commercial loan of $800,000 or more.  Then the buyers try to service the debt on this massive commercial loan by renting out fewer than ten (just four?) guest rooms.  

These commercial loans simply don't pencil.  Sure, the B&B might generate enough dough to make the mortgage payments, but there is seldom any money left over on which the retired couple can live.  Therefore the buyers have to go deeper and deeper into credit card debt in order to survive.  Eventually they have to sell, and the Old Maid is passed on to the next sucker.  Phew.

 

 

 

 

You will recall that a cap rate is the return on your money if you bought an income property for all cash.  For example, suppose you buy a 36-unit apartment building.  You start with your Gross Scheduled Rents, and you lose some potential rent when you have some vacancies and credit losses (5%).  Then you have your operating expenses and some replacement reserves that you have to set aside for the roof and AC units.  

When you are all done, you are left with your net operating income ("NOI"), which is your dollar return on your investment.  (Important note:  Do NOT deduct the payments on your commercial loan when computing your NOI.)  Your cap rate is simply your NOI divided by what you paid for the building.*

You can buy decent apartment buildings for a 5% to 7% cap rate.  In other words, if you buy the apartment building for all cash, you will enjoy an income of around 6% on your money.  You can buy good office buildings and retail properties for 6% to 8% cap rates.  But bed and breakfast inns?  B&B's sell at 2% to 4% cap rates!

 

 

 

 

"But George, the owners also get to live in the beautiful property rent free."

True.  It's an appealing lifestyle, until the cost of the repairs and replacements eats up your cash reserves.  Now if you have a huge, outside retirement income on which you can survive, and you don't need the B&B's income to buy groceries, then the B&B lifestyle may be for you.  But as an investment to generate a cash-on-cash return on your retirement savings, bed and breakfast inns are stinkers.

What about making commercial loans on bed and breakfast inns?  From a lender's perspective, they are not the best kind of collateral.  (But they are not the worst.)  B&B's seldom generate enough dough to pay for professional management.  As a result, in the event of a foreclosure, the bank has to immediately close the inn.

 

 

 

 

A foreclosure destroys years and years worth of marketing effort.  "Oh, honey, let's sneak off and stay at that little B&B where (giggle) little Johnny was conceived.  Oh, no... it's closed down!"

Now let's talk about personal property.  If a buyer pays $1.5 million for a bed and breakfast inn, at least $300,000 of that price will be for the gorgeous, antique furnishings.  Guess what happens when a lender forecloses?  Poof.  They are all gone.  Empty building.

That being said, B&B's are not the absolute worst collateral for a commercial real estate loan because they are usually gorgeous and the setting is heavenly.  They are far-far better collateral than, say, an apartment building in the ghetto.

 

 

 

 

Okay, suppose you are looking for financing on a bed and breakfast inn.  Where should you go?  Banks don't like to finance B&B's because they are money-losers.  The borrowers almost never have large enough cash reserves to attract a bank.  

I don't think the SBA will finance bed and breakfast inns; but I could be wrong.  I just wrote to my SBA loan buddies and asked them, and I'll post the results here.  This just in:  Riley Risto, an SBA loan officer for Gulf Bank, just replied, "Yes, those are tougher deals to get done, but there’s no SBA restriction.  The zoning has to be correct."

If I needed and SBA loan, I think I would apply to a local credit union.  The key is the word, "local".  You can find scores of suitable credit unions for your B&B deal on CommercialMortgage.com.  

 

 

 

 

By the way, guys, when you use CommercialMortgage.com to place a commercial loan, be sure to scroll down past the Recommended Lenders section to the Hungry Lenders section, where you will find your thirty DIRECT LENDERS (banks and credit unions).  You may not be scrolling down far enough.

My own hard money shop, Blackburne & Sons will make small commercial loans on bed and breakfast inns.  Our biggest limitation is that our maximum loan size is $800,000 for such properties.

Be sure to check out our updated Blackburne and Sons web site.  Purdy.  :-)

 

 

 

 

* Multiplied by 100% to put the number into a percentage format.