Here are some tips on how to succeed as a commercial loans broker:
Tip #1: Never waste one nanosecond on international loans. International loans never close. The problem is one of taxation. No country in the world wants a bunch of foreign banks to come into their country and take all of the good loans, thereby weakening their own banks. As a result, if a foreign bank makes a loan across international borders, the host country will tax their interest income at some ghastly rate - higher than 30%. As a result, if you need a loan in Mexico, and no local bank will do the deal, you need to use the Mexican subsidiary of some foreign bank; Deutsche Bank of Mexico or Citibank of Mexico. If the subsidiary bank is chartered in Mexico, the tax laws aren't quite as brutal. I still would never waste time working on international loans. You could work on international commercial loans for ten years, full-time, and never close a deal. Here are more details.
Worried that she might have been injured, I googled
this GIF. I am pleased to report that it was photoshopped. :-)
Still funny though.
Tip #2: Commercial banks, credit unions, and savings banks (former S&L's) make 75% of all commercial real estate loans these days. Start there.
Tip #3: Big banks make big commercial loans, and small banks make small ones. Therefore match the size of your deal to the size of the bank.
Tip #4: Stay local. Banks greatly prefer to make commercial loans close to one of their branches. The closer the bank, the more likely it is that Loan Committee will approve the deal.
Tip #5: It's easy to find commercial banks and credit unions in Maine, even if you are located New Mexico. Simply go to Google Maps and type in the address of your commercial property in Maine. Click the "Nearby button" and then type in "banks."
Tip #6: The smaller the commercial loans, the more likely the deal is to close. Small commercial loans close. Larger deals? Not so much. I would much rather have a pipeline of three small commercial loans than a pipeline of thirty commercial loans larger than $3 million. Small commercial loans close.
Tip #7: This is going to sound terribly self-serving, but Blackburne & Sons loves to close small commercial loans in remote areas. You will have much less competition working on these small or remote commercial properties, compared to competing against fifty other commercial loan brokers in your local big city.
Tip #8: When you market for commercial real estate loans, you will speak daily with four or five wealthy real estate investors every single day. Even if they never send you a package, be absolutely sure to keep their contact information and the following additional data: (1) month of year, e.g. June of 2021; (2) the loan amount; (3) type of loan (first mortgage, construction loan, etc.); (4) property type; (5) city where the property is located; and (6) state where the property is located.
Tip #9: Someday you will want to send out the following, individually word-processed letter: "Dear Dr. Su: You may recall that in June of 2021, ABC Commercial Mortgage Company had the pleasure of working on a $1,300,000 first mortgage on your medical office building in Kansas City, Missouri. I am writing to you today about earning 8% to 10% interest in first trust deeds."
Tip #10: Your ultimate goal in this business is to someday become "the lender" and be able to approve your own loans. The real money in commercial mortgage finance is also in servicing income. Commercial mortgage bankers service their own loans, and they are rich. Commercial mortgage brokers do not service their loans, so when the inevitable real estate depression hits, they are crushed. Servicing income continues, even during real estate depressions (45% declines).
You know that expression, "You're not the
boss of me?" Doesn't work on cats.
Tip #11: Don't get too excited about construction loans. They seldom ever close for commercial loans brokers because if the developer had enough skin in the game (equity in the deal), some local bank would have made the deal in a nanosecond. Banks love construction loans, so if no local bank will do the deal, there is a big problem.
Tip #12: Don't waste money advertising in newspapers, online magazines, or on Google Adwords. You will spend a fortune and never close a deal.
Tip #13: The best commercial leads come from referrals. Build yourself a newsletter list of commercial bankers, commercial brokers (commercial realtors), property managers, other commercial lenders, residential mortgage brokers (on a referral fee basis only), residential real estate brokers, attorneys (who know you), CPA's (who know you), and estate planners (insurance agents).