Commercial Loans and Fun Blog

Carol Conman was a beauty.  When she would sashay into a room, in her tight skirt and her push-up bra, every man in the room would ache with desire.  Carol was also a crook.  Now she didn't rob and steal.  She was a white-collar criminal, and sadly state authorities rarely have the resources or the will to pursue white collar criminals.  (The gorgeous model in this picture is not Carol, but you guys get the picture.)

Here is how her confidence game would go down:  She would buy a home for all cash.  Then, using fake ID and a dummy financial statement, she would apply to two different private money lenders for a refinance.

Now both mortgage companies would pull a preliminary title report (known East of the Mississippi as a title commitment), and these title reports correctly showed that the property was free and clear of any mortgages and judgment liens.  Thrilled to provide financing to such a hot woman with enough money to buy real estate with all cash, both mortgage companies gladly approves her refinance.

Funny note:  I started out after college working for a personal finance company called Dial Finance. My manager once sent me into the field to collect an ill-conceived personal loan from this beautiful bombshell.  This babe had come into my boss' office, batted her beautiful eyes, and he had melted. Such bad loans were called leg loans, and they were always complete write-off's.  Looking back, I think this honey was offering me "kisses" that night at her home to go away and stop my collection actions, but I had my girlfriend at the time in my car outside.  Probably - no, absolutely certainly - it was best that I had to play dumb to the offer.  And yeah, my boss had to reimburse Dial Finance for this leg loan.

Anyway, back to Carol Conman...

Using charm and by batting her fake eyelashes, Carol convinces both mortgage companies to schedule their sign-off on the same day.  This is the key step!  In the morning, she signs off with Patsy Capital.  In the afternoon, she signs off with Droolingboy Mortgage.  She paid $200,000 for the house.  Two different mortgage companies just gave her a $150,000 loan.  Carol Conman then walks away with her $300,000, moves to a different state, and disappears.  Patsy Capital and Droolingboy Mortgage are left to fight it out.

Okay, so what happens?  Even though Carol signed off with Patsy Capital first, let's suppose the title company runner met his girlfriend for lunch on his way to the County Recorder's office.  By the time the runner was done cuddling with his girlfriend, it was 4:00 p.m.  In the meantime, Droolingboy Mortgage had blotted up its drool (boys are sooo stupid) and recorded its mortgage at 3:17 pm.  So who has priority?

The answer depends on the state. Different states have different priority rules.  There are three kinds of jurisdictions: 

1. Race Statutes
2. Notice Statutes
3. Race/Notice Statutes

Under a race statute, whoever records first wins. Thus, if Oscar purports to sell a piece of land to Al for $100,000, and the next day purports to sell exactly the same piece of land to Bob for another $100,000, then whichever of the two buyers is the first to reach the recording office and have the sale recorded will be deemed the owner of the property. Thus, if Bob is the first to record the conveyance, he will be the owner - even if he knew about the prior conveyance to Al. Race statutes are extremely rare because it is generally viewed as unfair to protect a party who had actual notice of a prior conveyance. Currently, Delaware, North Carolina, and Louisiana are the only jurisdictions where a race statute is in effect.

Under a notice statute, a subsequent purchaser for value wins if, at the time of conveyance, that subsequent purchaser had no actual or constructive notice of the prior conveyance. In short, a subsequent bona fide purchaser wins. Thus, if Oscar purports to sell a piece of land to Al for $100,000, and the next day purports to sell exactly the same piece of land to Bob for another $100,000, then Bob will own the land so long as he was not aware of the prior sale to Al. However, note that if Al records his interest before Bob's purchase, this recordation will be deemed to give Bob constructive notice. If Bob purchases the land without notice, and Al then records his prior purchase before Bob records his own purchase, then Bob will still prevail in ownership of the land.

Under a race/notice statute, a subsequent purchaser for value wins if (1) at the time of conveyance, that subsequent purchaser had no actual or constructive notice of the prior conveyance, and (2) the subsequent purchaser records before the prior purchaser. In short, a subsequent purchaser in good faith wins only if he records before the prior purchaser does. In this type of system, if Oscar purports to sell a piece of land to Al for $100,000, and the next day purports to sell exactly the same piece of land to Bob for another $100,000, then Bob will own the land only if he was not aware of the prior sale to Al, and if Bob actually records his interest before Al does.

Okay, so who has priority, Patsy Capital or Droolingboy Mortgage?  Well, both mortgage companies are bona fide purchasers for value.  In other words, neither company was in on the con, neither was aware of the other, and they both gave cold, hard cash for their mortgages.

Okay, who recorded their mortgage first?  Well, even though Carol Conman signed off with Patsy Capital first, it was actually Droolingboy Mortgage who won the race to the courthouse.  Droolingboy Mortgage has the first mortgage.

"But George, wait a moment.  What if Patsy Capital labeled their mortgage, "First Mortgage?"  It doesn't matter, even if Droolingboy Mortgage labeled their mortgage, "Seventh Mortgage."  If Droolingboy Mortgage beat Patsy Capital to the County Recorder's Office, then Droolingboy Mortgage wins.

"Yeah, George, I'm sure what you have just told me is right; but all Patsy Capital has to do is to submit its claim to the title insurance company."

Title insurance companies do not issue casualty insurance policies (policies that pay upon the happening of the car crash or the tree falling on the house).  Instead, title insurance companies issue indemnity policies.  Such policies only pay when an opposing party wipes out the policyholder's position, which could be a dozen years later, as long as Carol Conman is making her monthly payments.  (Carol just met and married Sammy Software, a wealthy dot-com owner.  Neither Sammy nor Carol want Carol to go to prison.)  In the meantime, the title insurance company could go bankrupt.  Yikes!

I have been in real estate finance for more than 40 years now.  I have never known a title company to pay without being sued by the claimant first.

Do you have a commercial real estate or mortgage website?  If so, you would be nuts not to add a link to C-Loans.com.  As long as you point your "Commercial Loans" or "Finance This Property" link to our home page (C-Loans.com), our computer program grabs your URL and prints it at the bottom of our loan application.  When the deal closes, we pay you a referral fee of 12.5 basis points (one-third of 25 basis points on loan larger than $5 million) when the deal closes.  We once paid Alan Dunn of Spydercube.com a referral fee of $21,250.  Can you imagine getting that call, "Hey, Alan, I have some good news for you..."

Did you learn something today?  Get two to three free training lessons in commercial real estate finance every week by subscribing to our blog.  Guys, here is what is happening.  I have two wonderful sons, and my heart is failing.  I am rushing to teach my two sons everything I have learned in my 36 years in commercial real estate finance before I stroke out (the traditional way for Blackburne's to croak).  By subscribing to my blog, you get to watch for free this training that I am rushing to teach my boys.

Do you have a friend or co-worker who would benefit from free training in commercial real estate finance?

Are you a commercial real estate salesman?  Why on earth are you not brokering commercial loans on the side?  As I have often told my sons, "There is no easier way to meet high-net-worth real estate investors than to be a commercial mortgage broker."  Bam!  You were nodding off, and the teacher just SMACKED his desk with his yardstick!  The sound was so loud that Shakespeare just sat up in his grave.  "This is going to be on the test!  There is no easier way to meet high-net-worth real estate investors than to be a commercial mortgage broker."

This is how I built Blackburne & Sons, my $50 million hard money commercial mortgage company.  I started out as a desk-and-phone commercial mortgage broker, but I was motivated.  I knew that I wanted to become a hard money lender.

Every time I talked to a high-net-worth commercial mortgage borrower, I saved my notes of the conversation.  "My goodness, George, you're quoting 2 points!  My own bank will give me the same loan at 1 point."  But three years later, that very same borrower got a word-processed letter from me, "Dear Dr. Smith, back in June of of 1982 I had the pleasure of working on a $450,000 refinance of your 16-unit apartment building in San Jose.  Today I want to talk with you about 10% first mortgage investments."  I raised 100% of my first hundred trust deed investments from former borrowers.  Former borrowers?  Hey, an investor is an investor!

Now I service a $50 million portfolio of hard money loans at an average loan servicing fee of 2% per year.  Do the math.

There is no easier way to meet high-net-worth real estate investors than to be a commercial mortgage broker."

You don't have to be a commercial loan broker to benefit from today's lesson.  You could be a commercial broker (commercial real estate salesman) or even a property owner looking for tenants.  This is the marketing program that I would adopt if a giant earthquake wiped out my entire business, and I was starting over from scratch, as poor as a churchmouse.

1. We are going to use newsletters because (a) newsletters put your name and contact information right into the "hands" of the recipient; and (b) if you send out a newsletter every 10 to 21 days, and you never miss a newsletter, by the sixth to eighth newsletter, your recipients will have bonded with you - especially if you share a little bit of your life each time.  I call this tendency to bond with a pen pal, "The Newsletter Effect."  Those of you who have received newsletters from Blackburne & Sons, my hard money commercial mortgage company, may remember the section in each newsletter called, "On a Personal Note ..."
   
   
2. We are actually going to use a snail mail campaign, rather than email, for this poor man's marketing program.  Why?  I want you to enclose two business cards in each envelope.  "But George, snail mail costs soooo much more than email!"  True, but we are only going to send out a small handful of letters.  This is not mass mailing.  This is very targeted marketing.
   
   
3. What do you send them?  Answer:  Something fun or fascinating, along with a brief pitch for your services. For example, if you are a landlord trying to find a tenant, your pitch might just say something as simple as, "Please don't forget that our popular strip center at the corner of Main and 4th Street has a 1,600 sf retail space available for lease for only $30 per square foot."  Keep it short and sweet.  Training note:  The rent for commercial or industrial space is traditionally expressed by professionals as so many dollars per square foot per year.
   
   
4. By something fun I usually mean a joke or two, a funny cartoon, a fascinating story, or a juicy bit of gossip.  An example of juicy gossip might be something like, "Donald Trump appears to be flip-flopping on a number of issues since he became the presumptive nominee.  The move may be a conscious part of a brilliant political manuever that was once used in ancient Rome 123 years BCE.  Here is how the technique might work.  Mr. Trump now says that he would have to consider raising the minimum wage.  Such an increase is hardly a pro-business, conservative position.  Nevertheless, if Hillary Clinton proposes a $15 minimum wage, the suggested move for Mr. Trump would be to propose a $16 per hour minimum wage.  If Hillary proposes two months paid maternity leave, Mr. Trump would propose two-and-a-half months of paid maternity leave.  In other words, Donald Trump would pivot even further to the left than Hillary Clinton, thereby stealing her thunder and her votes.  True story:  For centuries the Roman Senate stacked the deck in favor of the rich and powerful, making it virtually impossible for the plebes to improve their lot financially.  Most of the farmland was held by a small handful of super-rich patricians, and it was farmed by slaves.  Family farmers could not compete.  Then a reformer named Gaius Gracchus was up for re-election to the position Tribune of the Plebes, and he was promising agrarian reform (limiting the number of acres that one man could own).  The Senate therefore nominated their own candidate for Tribune of the Plebes, and the Senate's paid candidate promised even more than than Gracchus!  Gracchus was defeated, and he was soon murdered (beaten to death with legs torn off a wooden table) by a crowd hired by the Senate, just like his older reformer brother had been murdered by the Senate ten years earlier.  Of course, once the Senate's candidate was elected Tribune, he immediately recanted on all of his promises; but the point is that Donald Trump's recent policy reversals sound oddly familiar to students of history."  See, you don't have to use jokes or funny pictures.  Juicy gossip can be fun too.  (Guys, let's not trade angry emails about politics, okay?  Just because I recognize this diabolical but effective political technique does not necessarily mean that I approve or that I am a Trump supporter.) 
   
   
5. So what should your newsletter look like?  Keep it simple!  Take a piece of copy machine paper and type your company name, address, phone number, and your cell phone number across the top.  Then, in large bold print, type:  Today's Joke.  The insert a joke or a cool story, a story that you might tell one of your buddies in a bar over a beer.  I want you to use improper English - that means contractions, sentences that end in prepositions, and sentences that start with "And" or "But".  Do not be professional.  Be fun!  Be sure to include at least two of your business cards in every newsletter.
   
   
6. Okay, to whom should you send these newsletters?  Your snail mail list must be tiny.  To start, you might only have 50 to 70 names on your snail mail list.  If you are a commercial mortgage broker, most of these 60 contacts should be bank loan officers.  After all, the first place a potential commercial mortgage borrower calls is his banker.  If you are a leasing broker or a property owner, your list should primarily contain the owners of nearby companies who have nibbled on your space and local leasing brokers who are active in your area.  Ideally you have met each one of these contacts!  Snail mail is much too expensive to cold call new contacts.
   
   
7. Now let's talk frequency.  The Newsletter Effect does not start to produce until the sixth to eighth mailing.  Please read that sentence again.  Sorry.  I wish I had a miracle wand that I could wave for you, but there is none.  Mass mailings, newspaper ads, and magazine ads do not work at all.  Google ads, while effective, are pretty expensive (several dollars per click).  But after the 6th to 8th mailing, a newsletter campaign works as effectively as turning on a faucet.  Therefore we want to get the first eight newsletters out of the way as soon as possible.  I recommend mailing every ten days for the first eight times.  After that you can dial back to your Jenny Craig maintence program of once every 21 days.  Now you can see why we have to keep your snail mail list very small; otherwise a poor church mouse could not afford to send out his eighth newsletter.  Even though you may only be mailing to 60 guys, you will still have to send out six to eight newsletters to each one before you start to get a return.  Verbal proof story:  At Blackburne &  Sons I required each of my loan officers to build an email list of commercial brokers (commercial realtors).  My loan officers grumbled bitterly at first.  "This isn't working."  Then the seventh or eighth newsletter hit, a wonderful flow of deals started to come in, and my loan officers stopped grumbling.
   
   
8. Where do you get fun material for your newsletter?  Go onto Google and type in, "Jokes."  You will see a dozen free joke newsletters to which you can subscribe.  Or you can just go onto C-Loans.com and find my past newsletters.  Feel free to steal them.  You'll find over 600 cute, clean jokes from which to choose.  Also be on the lookout for interesting stories.  The most successful newsletter that I ever wrote was 20 years ago, and it was entitled, "Ebola is Going To Kill Us All!"  It was based on the wonderful book, The Hot Zone.
   
   
9. Now let's talk about great additions to your mailing list.  Let's suppose you're a leasing agent, and you meet the owner of a local tool and die company who mentioned that he may want to someday expand into a larger space.  Make sure that you save an extra supply (30 to 40 copies) of every newsletter that you send out.  Now print out ten envelopes to this new contact.  Stuff each one with an old newsletter and two business cards.  Now, using a pencil, write in the upper-right-hand corner a date, ten days apart.  For example, today is May 10th.  The first newsletter would go out today, and then another on May 20th, May 30th, June 10th, June 20th, etc.  Keep these  pre-addressed, pre-stuffed, and pre-sealed envelopes in an old envelope box in chronological order.  Then when you come in the office in the morning, you pull today's envelopes and place a stamp over the small date written in the upper-right-hand corner.
   
   
10. Folks, I have been in marketing for almost 40 years.  It is much better to have a tiny list of hot prospects (50 to 70) and to hit them with a newsletter every ten to twenty-one days than it is to send bulk mail to a list of 10,000 strangers.  I have wasted $4,000 doing mass mailings at least a dozen times during my career, and I never closed a single deal from such a mailing.  "You peed away $4,000 a dozen times?  Geez, George, are you mentally challenged?  When are you finally going to learn?"  Like my beautiful but long-suffering wife often tells our daughter, "Boys are stupid."  Ha-ha!  :-)

Do you have a commercial loan that any bank would love?  Get them to compete using C-Loans.com.

Do you need a commercial loan with no prepayment penalty? Is your client's commercial property partially vacant? Do all of your commercial leases run out in the next 18 months? Do you need a lender who will allow a negative cash flow? Do you need a lender who will also look at the borrower's global income - income from salaries, other investments, etc.? Do you need a lender who will allow the seller to carry back a second mortgage? Does your client have a balloon payment coming due on his commercial property? Has your bank offered him a discounted pay-off? Does your borrower have less-than-stellar credit? Is your client's company losing money? Is your borrower a foreign national? Do you need a non-recourse loan?

Be sure to save the business card of any banker you meet who makes commercial real estate loans.  We'll trade you a list of 2,000 commercial real estate lenders for that one banker.  We solict these guys to refer their commercial mortgage turndowns to C-Loans.com.

Have you registered on C-Loans.com ?  This just means filling in your name and contact information into Step One of Six.  We want you pre-registered so that if you get a a hot commercial real estate loan that you can quickly enter it into C-Loans.com.  In return, we'll give you a free Commercial Mortgage Underwriting Manual, a course that we sell on C-Loans for $199.

Are you a commercial real estate broker?  Why aren't you brokering commercial mortgage loans on the side?  I have often told my sons, "There is no easier way to meet high-net-worth investors than to be a commercial mortgage broker."

Did you learn a few things today?  If so, subscribe to this blog and receive two training articles in commercial real estate finance every week for free.  We also try to have a little fun with it too.

Got a friend or co-worker who might benefit from learning commercial real estate finance?

The Church Lady on Saturday Night Live described the general election.  "It's a choice between a godless liberal democrat and Hillary Clinton."

Is one of Trump's political advisors a student of history?  I wonder... And Gaius Gracchus, didn't you learn from what happened to your older brother?  Geesch.  Maybe my wife is right.  "Boys are stupid."  :-)

Blackburne & Sons recently increased its loan-to-value ratios across the board.  Because we are in a recovery, Blackburne & Sons will now regularly make private money (hard money) commercial loans up to 70% LTV.  If the deal is a purchase money loan; i.e., the borrower is buying the property, and the buyer is putting 25% down in cash, we will even consider 75% LTV!

One of my loan officers complained, "But it seems like all of my loans are restaurants, and (because the failure rate of restaurants is enormous) we cut our loan-to-value ratios back to 60% to 65%.  I'll never get a restaurant loan approved at 70% loan-to-value."

That got me to thinking.  Hmmm, would I ever approve a 70% LTV loan on a restaurant?.  The answer is, "Yes, if the restaurant was not really a restaurant."  Huh?  In prime downtown locations, many row commercial buildings are leased out and improved as restaurants; but in reality that are just big empty boxes.

A row commercial building is just a general purpose commercial building where there is a zero lot line on both sides with the neighboring commercial buildings.  There is no side yard.  The buildings are squished together against each other, just like a townhouse is squished against the homes on either side of it.

So back to our restaurant.  If I was being asked to finance a row commercial building that was just currently leased to a restaurant, I would expect my loan officer to argue in Loan Committee, "Hey, this isn't really a restaurant building.  It's a garden variety row commercial building.  It's just a box.  Prior to the restaurant, it was leased out as an office supply store and then later as a dress store."

And now - finally - we get to the point of today's lesson.  Let's suppose the restaurant is called, The Sicilian Noodle.  Now remember, every commercial loan must have a name.  It might be Pine Haven Apartments, Tire City Building, or Charlotte Strip Center; but every commercial loan must have a name.  The reason why is because a great many commercial properties are owned by two or more couples or by an LLC.  You can't call the deal the Smith loan because the Jones and the Carpenters might also be on title.

Now back to my row commercial building.  Should my loan officer label this deal as, "Sicilian Noodle Restaurant Building"?  No-no-no!!!  My loan officer wants to make clear to Loan Committee that this is not a restaurant building but rather just an empty box.  He should call the deal, "Main Street Row Commercial Building."  Give your commercial loan a good name!

Let's look at a different scenario.  Suppose that Rosewood Boulevard is a long commercial strip that runs west to east through the entire city.  By the way, a commercial strip is a busy commercial thoroughfare whose sides are lined with businesses.  It is not a gentlemen's club.

Now the eastern stretch of Rosewood Boulevard runs through a middle-class, bustling neighborhood called the Triangle District.  Unfortunately the western stretch of Rosewood Boulevard runs through the Porkloin District, and the Porkloin District houses the lowest-income section of town.  Many commercial buildings are boarded up, and most of the commercial buildings in the area are protected by bars on the windows and they are covered in gang grafitti.  Drug sales are one of the single largest sources of income for the residents.  Gun battles are waged nightly, and the Nightly News often starts out their broadcasts with, "Another seven people were gunned down on Rosewood Boulevard last night in the infamous Porkloin District."

Okay, now a test of your understanding.  Are you going to name your next commercial loan, "Rosewood Boulevard Liquor Store?"  If you answered, "No," then you understood today's training lesson.  Does "Triangle District Strip Commercial Building" sound more appealing to a Loan Committee?  I think so.

Earlier in today's article I mentioned private money loans from Blackburne & Sons.  When does it make sense to use Blackburne & Sons as your commercial lender?

Do you need a commercial loan with no prepayment penalty?  Is your client's commercial property partially vacant? Do all of your commercial leases run out in the next 18 months?  Do you need a lender who will allow a negative cash flow?  Do you need a lender who will look at the borrower's global income - income from salaries, other investments, etc.?  Do you need a lender who will allow the seller to carry back a second mortgage? Does your client have a balloon payment coming due on his commercial property? Has your bank offered him a discounted pay-off? Does your borrower have less-than-stellar credit? Is your client's company losing money? Is your borrower a foreign national? Do you need a non-recourse loan?

These are all good reasons to apply to Blackburne & Sons.

"George, my commercial loan is a slam-dunk.  I just need a great rate.  I'm competing on the deal." In that case, you should submit your deal using C-Loans.com.  Our hungry life companies, conduits, and commercial banks will eat that A-quality deal right up.  You should also use C-Loans.com if the loan is larger than $3 million (too large for Blackburne & Sons) or if it is a construction loan, regardless of the credit.  The banks will quickly scarf up that construction loan, and our 150 hard money lenders will dine on that large hard money deal.

Many high-school-educated commercial mortgage brokers make more money than many college- educated professionals because they have the natural ability to sell, great English skills, and some great training in commercial real estate finance.  Our 9-hour commercial mortgage brokerage video training course - now coupled at no additional charge with our 6-hour audio training course in Intermediate Commercial Finance - is a cheap way ($549) to change your life.

Don't forget to snag the business card of any banker you meet who makes commercial real estate loans.  We'll trade you the contents of that one business card for a free directory of 2,000 commercial real estate lenders.  We solicit these guys to refer us their commercial mortgage turndowns.

Many mortgage brokers find C-Loans.com while browsing at night.  We want these guys pre-registered so that when they run across their next commercial loan, they can immediately enter it into C-Loans.  Registering is just a fancy way of filling out your name and contact information.  If you register on C-Loans.com, I'll send you a free Commercial Mortgage Underwriting Manual that I sell separately on C-Loans.com for $199.

Got a friend or co-worker who would benefit from my free training in commercial real estate finance?

Want to receive free, regular training in commercial real estate finance?

This week C-Loans, Inc. paid a referral fee of $1,131.25 to a lady who had merely mentioned C-Loans.com in one of her blog posts.  This lady had wisely made the mention of C-Loans.com be an active hyperlink, so we were able to trace this closing back to her blog article.

Our programmers have added automatic software to C-Loans.com whereby we automatically capture the URL of the web site from which the visitor jumped.  That URL is printed at the bottom of the C-Loans loan application.  When the deal closes, we go back to see who owns that website and send them money.

While this week's referral fee of $1,131 is a nice gift from out of the blue, we once paid a referral fee of $21,250 (!!) to a lucky guy named Alan Dunn of Spydercube.com.  Can you imagine being Alan and getting a wonderful phone call like this, "Hey, Alan, we need a W-9 from you.  We have a check here for $21,250 for you."  Alan's deal was on a $17 million closing.

All you have to do start earning huge referral fees from C-Loans is to create a hyperlink on your real estate or mortgage web site that says, "Commercial Real Estate Loans", "Commercial Financing",  "Apply For a Commercial Loan", or "Finance This Property."  Then point this link to C-Loans.com.  Your link needs to point to our home page and not any other page because only our home page is programmed to capture the referring URL.

Beware of the Link Police (see the two photos above).  If you put more than one link to C-Loans.com on your web site, the Link Police are likely to break down your door in the middle of the night and haul you away to Guantanamo Bay, where you will never be seen by your family again.  Not!  There is no such thing as the Link Police!  I'm just being a smarty-pants here to make an important point.  You can absolutely put a link to C-Loans.com on every one of your website pages.  The more links you add to your website, the better your chances of getting a wonderful phone call.

Now if it was me, I would put a "Commercial Loans" link at the top of each page, a "Commercial Financing" link in the middle of each page, and an "Apply for a Commercial Loan" link at the bottom of each of my web pages.  When you or your internet guru creates a new page of content, you guys don't start from scratch each time.  Instead you copy an existing page, maybe even from a master, and then you make your changes.  Be sure that your master page contains these links so that every time you create a new web page in the future, links to C-Loans.com will be automatically added.

Now let me speak to you commercial real estate brokers (commercial realtors).  On your company website are your active listings.  I strongly urge you to create a "Finance This Property" link at the bottom of each commercial property listing.  Give yourself a chance to make some serious dough from out of the blue.

How can you be sure that we won't cheat you?  In reality, you don't; however, Alan Dunn (the lucky $21,250 recipient) would never have known that we closed that deal.  Nevertheless, we paid him immediately.  Remember guys, I own Blackburne & Sons, the hard money commercial lender.  As part of our duties, we service $50 million in hard money loans for 900 elderly investors.  At any given time, there is usually over $1 million in our trust accounts.  If I was going to break bad (pun intended), I'd loot our trust account long before I'd steal your $1,131 referral fee.  Please also remember that this is our 36th year in the commercial mortgage business.

Still suspicious?  For just $95 we will create a special partner link for you that will allow you to -

1. Embed a "Commercial Loans" hyperlink in your email newsletters and even in the signature block of your daily emails. Without this special link, we can only track referrals from websites, not email newsletters or even everyday emails. If you pay for one of these special partner links, be sure to insert it right into the signature block of your emails. Hey, you never know when one of your wealthy borrowers or real estate brokers might happen to need a commercial loan.
   
   
2. Receive a copy of every commercial loan application generated by your website or emails. This way, if you happen to see a commercial loan that you want to broker out yourself, you can jump on the lead and call the borrower.  You can also use these copies to audit us.

If it is worth $95 to you to get a copy of every lead generated by your website, please call Mick Carlson at 574-855-6292 or email him at mcarlson@blackburne.com.  In my opinion, this is NOT necessary, unless you publish an email newsletter and want to embed a hyperlink or two in your newsletters.

Now let's talk plagiarism.  The nice lady who wrote the blog article mentioned above, and who earned a nice referral fee, probably got a lot of her material from my blog and my website.  Good for her!  I'm happy to let anyone use my material (you don't want to copy my articles or web pages word-for-word because Google will punish you for duplicate content), as long as you include an active hyperlink back to C-Loans.com.

Are referral fees legal?  Absolutely, as long as you don't try to quote material terms.  I wrote an excellent whitepaper on the subject of referral fees for commercial loans.

Please continue to be on the look-out for bankers who make commercial real estate loans.  We'll trade you the contents of just one banker business card for a free directory of 2,000 commercial real estate lenders.  We solict these guys to refer their turndowns to C-Loans.com.

Have you registered on C-Loans.com?  Registration is merely the process of inputting your name and contact information (Step One of Six) into C-Loans.  Entering your contact information into one of the blue buttons on our site is NOT the registration process.  We realize that you are more likely to enter your next commercial loan into C-Loans.com if you have pre-registered, so we are offering a free $199 Commercial Mortgage Underwriting Manual to anyone who pre-registers.

Got an "A" quality commercial loan request sitting on your desk?

Need a nonprime or subprime commercial loan?

Ready to finally learn commercial real estate finance?  Commercial real estate brokers (commercial realtors) can add a whole new profit center to their brokerage businesses by learning how to broker commercial loans.

Bankers, get 200 free SBA loan leads.

Got an employee, co-worker, or a friend who could use this free training in commercial real estate finance?

My old friend, Leonard Rosen, is hosting another one of his enjoyable Pitbull Private Lending Conferences on June 2nd at the The M Resort in Las Vegas.  I have been to a number of these conferences, and I always get a lot out of them.

Leonard Rosen is an interesting guy.  In addition to helping mortgage brokers to become hard money lenders, Leonard is also a judo ground fighter.  He competes regularly, even though he is well over 50 years old.  His son is the apple of his eye, and the 13-year-old (?) boy is also a highly-ranked competitor in Brazilian Jiu-Jitsu.  Huh.  I think I just figured out why Leonard still rolls at age 53 (?).  If he doesn't stay ahead of his talented son... Ha-ha!

I have been telling you for years that the real money in the mortgage business is in loan servicing fees.  Mortgage company owners need that steady residual income to keep their doors open during the regular real estate crashes that seem to hit every 14 years or so.  There is no easier way to build a loan servicing portfolio than to become a private money lender.  

Blackburne & Sons, my hard money commercial mortgage company, services a $50 million portfolio at any average loan servicing fee of 2% annually.  That's $83,333 that I know I will have coming in the door every month, even if every one of my new commercial loan originations falls out.

At Leonard's Private Lending Conference, not only will you learn the fastest and cheapest way to become a hard money lender yourself, you will also make scores of great contacts.  Only the brightest and most ambitious mortgage brokers attend this conference.  Lenders troll the lobby looking to snare these new brokers to bring them deals.  Be sure to bring your latest packages.  A lot of deals get done with these hungry lenders at Pitbull Conferences.

Click here for more information.

C-Loans has just introduced a new program where we will give bankers, hungry to make more SBA loans, 200 free SBA commercial loan applications so that they can sample our deals.  I want to stress to bank loan officers that these leads are free.

Commercial real estate loan officers working for banks will able to search our Lender Vault for commercial loan applications - either SBA loans, conventional commercial mortgage loans, or a combination of the two - that are the pefect size for the bank.  They will be able to choose commercial loan applications that are located in the bank's preferred lending area, and they will be able to select deals secured by the right type of property.  For example, if the bank has had a bad experience with hotels, none of these 200 free SBA loan applications will be on hotels.

I'm sorry guys, but this offer is made only to FDIC-insured commercial banks and NCUSIF-insured credit unions.  If you actually have a desk at the bank and you go to work there every day, please click on the red button below:

"Gee, George, how can I get my hands on some of these SBA applications from C-Loans.com?"

Commercial mortgage companies and commercial mortgage brokers can still buy commercial loan applications from C-Loans.  Our commercial loan leads are really-really cheap up-front, typically just $1 to $9 apiece; however, if you do close the loan, you owe C-Loans a software licensing fee of 37.5 basis points (slightly more than one-third of a point).

If you do buy our leads, you will want to keep careful track of the fact that the leads came from C-Loans.  While its never fun to share your loan fee, once a mortgage broker has closed five loans for C-Loans, we will add you to C-Loans as a Proven Broker.  From then on leads will automatically arrive in your email box without the need to pay anything upfront.  If you cheat us by closing a loan without paying us (and you somehow don't get caught), you are really hurting yourself because you will never be able to earn your way onto C-Loans.com.

Earning a listing on C-Loans as a Proven Broker could easily prove to be the most significant event of your business life.  We have a number of commercial mortgage brokers who have now closed more than 40 loans for us each.  (After their first five closings, they were listed on C-Loans as Proven Brokers.)

Are these commercial loan applications any good?  C-Loans, Inc. has closed over 1,000 commercial loans totaling over $1 billion.  For more information about buying cheap commercial leads from C-Loans:

Please be on the look out for the business card of a banker who makes commercial real estate loans.  You can parlay the contents of that one business card for a free directory of 2,000 commercial real estate lenders.

The mean-and-potatoes of our $545 nine-hour training course in commercial mortgage brokerage is our Commercial Mortgage Underwriting Manual.  We'll give you a free copy of this manual, just for registering on C-Loans.  Registering is just a fancy name for filling out your name and contact information.

Now a depressing subject.  There is no such thing as an experienced commercial mortgage loan broker who has not been repeatedly shafted out of a commercial loan brokerage commission in excess of $15,000.  Personally I got so outraged that I went to law school, became an attorney, bu then never practcied, other than to collect my own companies' loan fees.  When you have had enough of this kind of financial abuse, order my fee agreement and fee collection course.  It shows you how a layman can collect $100,000 loan fees without hiring an attorney.  This training is the most important subject that I will ever teach you.

If you are not already a regular recipient of my training articles, sign up to receive free training in commercial real estate finance.

Got a buddy who works as a commercial mortgage broker?

Repricing is defined as an increase in the interest rate of a commercial real estate loan after a term sheet has been agreed upon and after the third party reports have been completed.  Conduits are the commercial lenders most likely to reprice a commercial loan.

Some commercial mortgage lenders insist on fixed rate loans.  Other commercial lenders greatly prefer adjustable rate mortgages, when they can convince a borrower to take one.

Why would a commercial lender ever want to make a fixed rate loan?  Some lenders - like life insurance companies and pension plans - need to know exactly what they will earn in interest income over the next ten years.  The reason why is because life companies and pensions trusts need to make sure that they will have the dough to pay their death claims or retirement benefits.  These big companies employ actuaries (maths geeks with sharp pencils), who can tell them pretty accurately how many people will die or retire in a given year.

Conduits are specialized commercial lenders (or special departments inside of money center banks, like JP Morgan Chase, the largest conduit originator) that originate large, plain-vanilla commercial real estate loans destined for securitization.  By plain vanilla,  I mean permanent loans on the four major food groups - multifamily, office, retail, and industrial.  You will recall that a permanent loan is just a first mortgage on a commercial property with a term of at least five years and with at least some amortization (usually over 25 years).

You will also recall that a term sheet in commercial mortgage finance is a written expression of interest in making a loan and a good faith estimate of the eventual terms.  Term sheets are also known as loan proposals, good faith letters, or conditional commitment letters.

Now term sheets are legally worthless.  They are NOT commitment letters.  They are NOT binding on the lender.  That being said, once a commercial lender has issued a term sheet at a particular interest rate, the lender is almost always loathe to change the interest rate, as long as the commercial mortgage borrower has fully-cooperated and not dragged his heels.  I think this level of honor among commercial real estate lenders is a credit to our industry.

Ocassionally even honest and well-intentioned commercial lenders have to reprice their commercial loans.  Conduit lenders make their dough when they sell their fixed-rate permanent loans to a securitization trust at a premium.  A premium is when an investor buys a fixed rate bond (or mortgage) for more than the face value.

Example:  Morgan Stanley Capital Markets originates a $20 million conduit loan on a lifestyle center in Pittsburg - surprisingly one of the most successful cities in America.  By the way, a lifestyle center is a new type of large shopping center where lazy Americans can drive right up to the door of the store they want to visit, rather than needing to hike 300 yards down the center of an enclosed mall.  Assuming this new conduit loan is properly priced, Morgan Stanley might be able to sell this $20 million new commercial loan to the securitization trust for $21 million.  That extra $1 million is the 5-point premium earned by Morgan Stanley for originating the loan. Be careful:  I have no idea of the size of the premiums that conduits typically earn on deals.  I am just trying to help you understand the concept of a premium.

Okay, we are finally getting to the point of today's training lesson.  You will recall that we said that repricing is defined as an increase in the interest rate of a commercial real estate loan after a term sheet has been agreed upon and after the third party reports have been completed.  We also said that conduits are the commercial lenders most likely to reprice a commercial loan.

Recently the CMBS industry (the conduit loan industry) has been in turmoil.  When China suddenly devalued the yuan by 5% about six months ago, the credit markets got spooked.  Stock and bond markets worldwide began to make wild swings.  Volatility became the new buzz word in the field of finance.

This put the conduit industry between a rock and a hard place.  Remember, conduit loans are fixed rate loans because that's what the CMBS bond buyers (life insurance companies and pension plans) want.  But what happens to a small conduit when it prices a new loan at 4.4%, a rate that would ordinarilly produce a 5-point premium, only to discover at the closing 90 days later that the the loan needs to be written at 4.90%?!  That 5-point anticipated premium disappears!  To make matters worse, the conduit might even have to discount the loan (sell it at a loss).  Yikes!

Well, do you remember when I said that that terms sheets are NOT binding on the lender?  You guessed it.  That 4.4% conduit loan is going to be repriced to 4.90%.

Right now there is a lot of repricing going on.  I should go into the business of selling Tums to conduit owners.  I would sell a lot of them right now.

Do you need a commercial loan right now?

Even if you don't have a pressing commercial loan need right this moment, you still should go onto C-Loans.com and register.  That's a fancy term for just filling in your name and address.  As soon as you do, I will send you a free $199 commercial mortgage underwriting manual.

Keep your eyes out for the business card or the contact information of a banker making commercial real estate loans.  We'll trade you the contents of that one business card for a free directory of 2,000 commercial real estate lenders.

Be sure to subscribe to this blog to get free training in commercial real estate finance.  These blog articles are written with great love and care because they are my legacy to my two wonderful sons.  Congestive heart failure almost got me twice this year, so I am scrambling to finish the training of George IV and Tom.  By subscribing you'll be getting the same training as my sons.

You can also forward this blog article to a friend.

Location is far-far more important to commercial real estate lenders than home loan lenders.  In home loan lending, a borrower merely has to meet the lender's minimum requirements.  Once the borrower satisfies a home loan lender's minimum requirements (loan-to-value ratio, debt ratio, downpayment size, credit score, etc.), the home loan lender approves the deal.  The borrower doesn't get a better interest rate because the property is located in Beverly Hills, as opposed to a dangerous area on the South side of Chicago - home of bad, bad Leroy Brown.

In contrast to minimum requirements, commercial real estate lenders are cherry-pickers.  They  take the most attractive deals available until they have satiated their hunger for commercial mortgage investments.  An example of a high school dance will help to make this concept easier to grasp.

Okay, its the high school dance, and its a mixer.  Everyone arrives without a date.  The girls flock to one side of the gym, and the boys flock to the other.  Rocky Hupson, the handsome quarterback and captain of the football team (playing the role of MetLife in our metaphor), walks over and asks the beautiful Head Cheerleader to dance.  The commercial mortgage rates offered by MetLife, the nation's largest life insurer, are the lowest in the country.  MetLife can pretty much have any commercial loan it wants.

Then Bradley Pitt, the fiercely handsome star running back (playing the role of Prudential Life Insurance Company in our example) asks the second prettiest girl to dance.  And so on through the rest of the 180 life insurance companies.

Life insurance companies always have the lowest interest rates on commercial loans, so they are at the top of the CREF food chain.  They cherrypick the safest deals until they have used up their yearly allocations for commercial mortgage investments.  And that's a lot of dough.  Even though there are only about 180 life companies, they fund the really large commercial loans - deals of $5 million to $500 million.  Altogether life companies fund about 23% of all commercial loans - by dollar volume.

While we're on the subject of yearly allocations, its possible to bring an absolutely perfect commercial loan to a life company late in the year, only to find out that the life company has already used up its yearly allocation of commercial mortgage investments.  Your loan will have to wait until January of the next year to fund!

Okay, now back to the school dance.  Then Matlock Damon, the star middle linebacker (representing JP Morgan's conduit lending division) looks over the lovely ladies.  All of the cheerleaders have already been selected, but there are some lovely, athletic ladies from the girls' track team, so Matlock selects one of them.  Then the remaining 37 players on defense (representing the 38 major conduits) whirl in and charm the lovely ladies.

And so on through (3) the commercial banks; (4) the credit unions; (5) the non-prime lenders; and finally (6) the private / hard money money lenders.  Commercial lending is a pecking order, where commercial lenders, when its their turn, choose the most attractive commercial loans still available, until their demand for commercial loans has been satisfied.

Now we can finally get to the point of today's training lesson:  As the most handome and dashing man at the high school dance, life companies will only make their huge commercial loans on commercial properties located in terrific locations.  These locations are what is known as primary locations.

A primary location, in terms of commercial real estate finance, is one of the most desireable locations in a gateway city in terms of traffic count, accessibility, safety, and affluence of the neighborhood.  In other words, a lot of Lexus'es, Mercedes, and BMW's need to be driving by.  You will rarely find a life company lending in a city of less than 500,000 residents.

A gateway city is defined as a large, generally safe, metropolitan area, featuring at least one major universities and a socially vibrant city center, that is a beehive for commerce, immigration, and job creation. The typical gateway city enjoys a pro football franchise and/or a pro basketball franchise and an MSA containing at least 1,000,000 residents.  

Conduits, on the other hand, will regularly make commercial loans on properties located in secondary locations.  A secondary location is defined as a middle-class, less-commercially-active area in a large city or an affluent, vibrant, and desireable area in a smaller city.  A secondary location is typically a nicer-than-average location, but it is just not an incredible location.  Is there a lot of brass and glass around?  If not, you're not in a primary location.

Example:  The most affluent and desireable location in Fargo, North Dakota - where all the physicians and attorneys congregate to do business - would be considered a secondary location.

"Gee, George, this is all very subjective."  Yup.  That being said, when you find yourself in a primary location in a major city, you'll definitely know it.  

“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description (of "hard-core pornography")… But I know it when I see it…” -- Supreme Court Justice Potter Stewart

Here's a good layman's test:  You'll know you are standing in a primary location when you suddenly feel very, very poor.  Ha-ha!

All other locations in commercial real estate finance are know as tertiary locations.

Keep looking for the business card of any banker making commercial real estate loans.  We'll trade you the contents of that one business card for a free directory of 2,000 commercial real estate lenders.

Do you need a commercial real estate loan right now?  Submit your four-minute mini-app to 750 hungry commercial real estate lenders and watch them compete to give you the best deal.  And C-Loans is free!

During the real estate crash of 2008, there were a ton of broken condo's in Florida.  Developers would start new residential condo projects in 2007, and by mid-2008, the residential real estate market had completely collapsed.  The developer would build a 100-unit condo project, but he would only sell 35 of them.  The rest of them, usually several years later, would eventually be rented out as apartments.  Voila!  You have a broken condo.

The construction lender, almost always a commercial bank, is usually is forced to foreclose and ends up owning the 65 unsold rental units.  Typically the foreclosing bank will offer the 65 rental units for sale as a bulk sale.  Why a bulk sale?  Why not sell off the condo's individually?  Wouldn't the bank recover a lot more by selling off the apartment units individually?  After all, individuals condo's fetch far more (1.4x) per square foot than apartments.

In a few more paragraphs, I'll explain why.  For now, however, suffice it to say that all 65 units will almost always be sold off in bulk.  Your commercial-investment property client wants to buy these 65 rental units because they are almost brand new, and they were built with far more amenities than most apartment buildings.  The object today is to finance this broken condo.

For the reasons I will outline further below, few banks will finance broken condo's.  There are around 5,400 commercial banks in the U.S., and probably fewer than a 300 of them will touch a broken condo.  But some banks will indeed finance broken condo's.

Most banks which will finance the purchase of a broken condo will only do so if the borrower is acquiring a majority of the condo units.  This is important to the bank because the bank needs to  control the homeowners' association (HOA); otherwise the HOA might pass a rule detrimental to the bank, such as no For Sale signs on the property.  If your buyer is acquiring less than half of the condo units, you'll need to apply to a private money lender, like Blackburne & Sons.  We here at Blackburne & Sons absolutely love-love-love to finance broken condo's.

The best way to get a commercial loan from a bank on a broken condo is by using C-Loans.com. When you enter your commercial loan into C-Loans, you should apply for a standard first mortgage on an apartment building (please remember that - as an apartment building).  In the Special Issues section, be sure to write that, "This is a broken condo project.  My client is buying ____ units out of a total of ____ units."

If you don't have any takers for your particular project, be sure to write to me personally.  In the Subject line, please type:  "Need Help With a Broken Condo."

Okay, now let's go back and see why so many commercial lenders are freaked out about making commercial loans on broken condo's.  When a foreclosing construction lender takes title to a large number of unsold condominium units, it typically acquires the Special Declarant Rights and thereby become a successor Declarant.  Huh?  What on earth is a Declarant?

The Declarant is the person or entity that creates the original governing documents for the association. The Declarant is generally the developer of the project and usually reserves certain rights and powers to himself related to the sale of units in the project, extra voting rights, etc.

Okay, I kind of understand... But what are these Declarant's Rights that the developer is so desperate to reserve?

The Declarant's Rights are found within an association’s declaration. Here are some typical rights reserved by the declarant:

1. Promotion: This allows the declarant to maintain model homes, a sales office within an existing building or unit, construct a temporary building for housing of a sales office and erect advertising or signage promoting the project and the sale of units;
   
   
2. Construction: This allows the declarant to make alterations, additions or improvements to the property that it deems necessary or advisable for the project. This often includes landscaping and the storage of construction equipment and materials upon the property, without the payment of any fee;
   
   
3. Easement and dedication: Easement rights allow the declarant to provide access to the property to any governmental authority, public or other utilities serving any lot or unit. Dedication rights allow the declarant to dedicate or transfer portions of an association’s common area to a county, municipality or other governmental authority that has jurisdiction over the property;
   
   
4. Architectural control: This allows the declarant to formulate and bind all of the owners to certain standards governing the appearance of units/homes and the community as a whole;
   
   
5. Amendment: In addition to possessing the authority to add property to the development, declarants typically have the unilateral ability to amend an association’s governing documents. In addition, any amendments the membership wishes to pass are also typically required to be approved by the declarant. If the declarant does not agree and its approval is needed, an amendment to the association’s governing documents will fail;
   
   
6. Assessment payment exemption: Most declarations include an assessment payment exemption for the declarant. Often the obligation to pay assessments for a particular unit or lot does not commence until the declarant sells to a third party;
   
   
7. Assignment: The right to assign allows the declarant to transfer to a third party all or some of the rights granted in the declaration.

Source: http://www.keaycostello.com/collections/declarants-rights/

Okay, George, I now pretty much understand what a Declarant is and why he wants to retain his Declarant's Rights.  But why does a commercial lender give a hoot?

Let's suppose your bank finances a condo development, and the bank is forced to foreclose on a project that is not complete.  The pool hasn't been dug, and the garages are not completed.  As a successor Declarant, the lender is usually subject to all liabilities and obligations imposed by law on the developer, including unpaid assessments for the foreclosed units.

As a successor Declarant and a dealer (you sell more than 4 units per year), the lender is responsible for delivering a public offering statement (POS) to purchasers and is liable for any "omission of material fact there from if the lender had actual knowledge of the misrepresentation or omission or, in the exercise of reasonable care, should have known of the misrepresentation or omission."  In addition, as a successor Declarant and Dealer, the lender will be liable for breach of the implied warranties of quality with regard to those units sold by the lender and the undivided interest in the common elements attributable to those units. These warranty claims typically involve defective building envelopes and can cost millions of dollars and take years to resolve.

 Yikes.  I'm just a banker, not a builder.  I don't want to warrant that anything is free of defect.

The lender can avoid substantially all of these liabilities obligations by recording an instrument declaring its intention to hold the Special Declarant Rights solely for transfer to another person as part of a bulk sale of the remaining units to that person.  This option does not allow the lender to recover the higher revenues that may be available by individually selling the units.

Now you know why the bank will insist on a bulk sale.

Attention Brokers:  It is our hope that you will avail yourselves of C-Loans.com again and again; but first I just need you to register on C-Loans.  This does NOT mean clicking on one of the blue buttons and getting a freebie.  This means completed Step One of Six on C-Loans.  Basically you're just filling in your name and contact information.  We want you in a sprint start, so that you can immediately start entering your commercial loan request when you come across a live deal.

Therefore we are going to bribe you.  We will give you a free copy of my famous Commercial Mortgage Underwriting Manual.  But please, be fair.  We're giving you a $199 freebie.  Use your real email address!  Recently a bunch of folks have been using email addresses other than their main email address.  Basically they are giving me an email address for Junk Email.  

C'mon, guys, you and I only make dough when we close loans together, and I need to remind you from time to time-to-time that:

1. Blackburne & Sons makes loans on broken condo's;
   
   
2. We finance nudie bars and strip centers with X-rated book stores;
   
   
3. We will sometimes make non-recourse loans; and
   
   
4. We will allow the seller to carry back a second mortgage behind us.
   
   
5. Etc.

So please be sure to use your real email address  I promise you'll find our joke-filled newsletters entertaining.

Okay, suppose you're a commercial broker (you list and sell commercial-investment properties).  An investor client calls you up and asks, "I like that strip center that you showed me yesterday, and I'm crunching some numbers.  What are commercial mortgage rates today?"

C-Loans, Inc. has just built a very helpful new website at CommercialMortgageRates.co.  (Please note that we chose not to pay the extra $20,000 for the dot-com extension.  The extension is dot-co.)  The entire site is devoted to commercial mortgage rates.

The page that you want is this one:  Table of Current Commercial Mortgage Rates.  I update these commercial loan rates on a regular basis, and right now we are in a period of faily stable interest rates.  These rates will always be - if not precisely spot on -  very close to the commercial loan rate that you or your client will pay.

You may find this suprising, but the commercial loan rates of most commercial banks are usually within 25 basis points of each other.   You will seldom find Bank A quoting 4.75% and Bank B quoting 6.0%.  A basis point is just a fancy way of saying 1/100th of one percent.  Therefore 25 basis points is 25/100th's of one percent - or one-quarter of a percent (1/4%).  

I recommend that you bookmark this particular table right now.

But you're not done.  This helpful table only shows you the current commercial loan rates in the market.  It doesn't tell you anything about the expected amortization of your new commercial loan, the term, or the prepayment penalty.  Here is what you should quote your client:

Multifamily Loans:

Fixed rate, thirty-years fully-amortized, rate readjusted to market every 5 years, and a prepayment penalty of 3-2-1.  In layman's language, 3-2-1 means 3% in year one, 2% in year two, and 1% in year three.  The loan is open in years four and five.  This prepayment penalty pattern repeats every five years.  Open is just a fancy way of saying no prepayment penalty.

Commercial Loans:

Fixed rate, twenty-five years amortized, due in ten years, rate readjusted to market at the beginning of year 6, and a prepayment penalty of 3-2-1.  In layman's language, 3-2-1 means 3% in year one, 2% in year two, and 1% in year three.  The loan is open in years four and five.  Open is just a fancy way of saying no prepayment penalty.  This prepayment penalty pattern repeats in year six.

Conclusion:

You no longer have to track hundreds of commercial lenders to find the best commercial loan rate for your client.  You've learned that most commercial real estate lenders have commercial loan rates that are within one-quarter of a percent of each other.  All you need to do is bookmark this Table of Current Commercial Mortgage Rates.

Do you need a commercial loan right now?

"I am shocked - shocked I tell you - to learn that there is gambling going on in this establishment."  - Louie the loveable French police captain in from the classic movie, Casablanca.  I am shocked -  shocked I tell you - to learn that ten commercial mortgage brokers got shafted today out of a commercial loan fee larger than $10,000."  Next to my Practice course, this is the course that you simply must take.  I got so sick of being screwed out of loan fees that I went to law school at age 35, with two kids in diapers, graduated with honors, passed the Bar on my first attempt, and then never practiced law.  I make more money in the mortgage business.