The new Dodd-Frank Regulations have driven a ton of former residential loan agents into the commercial loan business. I have never seen so many guys chasing commercial loan leads. In a market flooded with commercial loan agents, the wise commercial mortgage broker will adjust his marketing strategy. Commercial loan brokers need to market for commercial loans more directly, rather than just marketing to residential loan agents.
In the past, my own commercial hard money mortgage company, Blackburne & Sons, would advertise almost exclusively to mortgage brokers. Historically only about 10% of mortgage brokers worked commercial mortgage leads, and we could be sure of a good volume of commercial loan referrals by offering a 20% referral fee.
Nowadays, however, most mortgage brokers can't afford to just refer out their commercial loan leads. They need to work these commercial loan requests themselves. When they do work the leads themselves, they don't necessarily bring these commercial loans to us.
In response, Blackburne & Sons is starting to bypass commercial loan brokers in favor advertising to other sources of commercial loans, which is a more direct approach to the end-borrower.
Enough work. Time for a little fun:
As a general rule, you seldom want to advertise directly to commercial real estate investors for commercial loans. The reason why is because refinancing a commercial loan is very expensive. There is the $3,500 appraisal fee and then the $2,300 toxic report fee. Then the closing attorneys need to be paid their thousands. Since closing commercial loans is so expensive, most investors only refinance their commercial buildings when they are forced to. In contrast, I have refinanced my home four times in the past six years. In many cases, there was no cost to me.
The reason it makes little sense to market directly to commercial real estate investors is that the chances of your advertisement arriving at the exact time that an investor plans to refinance his commercial property is very, very low. Six times over the past 34 years I have sent out more than 10,000 direct mail pieces to commercial real estate investors. These costly snail mailings have never produced a closing.
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From a passenger ship, everyone can see a bearded man on a small island who is shouting and desperately waving his hands. "Who is it?" a passenger asks the captain. "I've no idea. Every year when we pass, he goes nuts.”
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So how does a commercial loan broker find commercial loans to place, especially when the market is flooded with competion? You will find commercial loan leads by soliciting referrals from workers who see commercial real estate transactions cross their desk on a weekly basis. Let me give you some examples:
- Commercial bankers (you solicit their turndowns)
- Commercial real estate brokers
- Property managers
- Other lenders, like credit unions or hard money lenders
- Residential mortgage brokers (on a name and number basis only)
- Residential real estate agents
- Real estate and bankruptcy attorneys
- CPA's and accountants
- Insurance agents and estate planners
- Investors who own 3+ commercial-investment properties
The first man said, "I make $10,000 a week," and continued to sit. The other man again looked all over the island and came back dejected. "We're going to die," he said. The first one again replied, "I make $10,000 per week." And he sat.
The other man took one more look all over, returned, and said, "There's no way we will ever get off this island. We're going to die." Once again the first man replied, "I make $10,000 per week, and I tithe. My pastor will find me."
Here's what you do: You develop a fun and interesting newsletter, something that your best friend would enjoy, and you send it out to your contacts by email on a regular basis. Here is one of my sample newsletters. Just make sure it is jam-packed with cute, clean jokes, funny pics, and cool videos.
You will need a nice template for your newsletter. Feel free to call the wonderful website designer that I use, John Merry, at 916-941-1180.
