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Down payment and donative intent

National Mortgage Professional
Jun 26, 2006

Power marketing for commercial loansChip Cummings, CMCCommercial mortgage lenders It came in as a floor call, but since I was the only one in my office who pretended to know half of anything about commercial loans, I got the yell, "Chip, there's a guy on line four who's looking for money to buy a hotel and restaurant—you want it?" "Heck yeah!" was my quick, albeit naïve, response. That was more than 20 years ago, but I still remember it like it was yesterday. A young guy was looking for a $1.2 million loan to purchase a Howard Johnson 125-unit motel, complete with the ugly orange roof. Yes—boy, was I going to eat well the next month! Of course, that experience turned out to be a very long, expensive, tiring, exhaustive and disappointing educational lesson. It was one that my associates teased me about for months. But I learned some valuable things that year and actually did get to go back and finance that dump of a motel almost two years later. Nobody uses the phonebook The first lesson that I learned is that anyone looking for $1.2 million and has the credibility to get $1.2 million doesn't use the Yellow Pages to find it. Commercial loans do not come out of the blue, on a floor call, from a directory ad or a phone book. At least, the doable deals don't. To get good commercial loans, you have to go out and hunt them down. While the occasional referral from your residential customers will come in the door once in awhile, most of those clients don't realize that you do commercial loans, let alone know how to properly refer one to you. Such is the point of this article—how to do some power marketing in a highly competitive, cutthroat environment. Keep your day job Power marketing rule #1—You must realize that commercial loans are based off of relationships—strong ones that take a long time to develop. While the attraction of large loan amounts and big commission checks is strong, the reality is that you need to approach commercial lending as a long-term endeavor. With that said, let's look at some specific ways to efficiently market yourself in the commercial lending arena. Finding the loans Power marketing rule #2—Go where the loans are. My manager back then had a great saying: "If you want to catch fish, go where the fish are." If you want to find commercial loans, go where the owners are. This means not locating business owners, but rather building owners—there's a big difference. Many loan officers research and network with business owners. As a national trainer, I've had scores of students come back and say they've had limited success with chamber of commerce groups, networking, business letters, marketing flyers to various local business owners, etc. Well, that's because they're not fishing in the right pond. Most small-business owners don't own their own buildings. They rent. More than that, they have invested their hard-earned money and time into their businesses, not real estate, so they don't even own many multi-family properties. Commercial loans break down into several categories: multi-family, office, retail, industrial and special use. By far, the largest group of properties available for financing—and where you should probably start—is in the multi-family category. These properties are owned by various individuals, but the owners usually have a few things in common. Most are middle-aged or older, married, long-term employees or in management positions. They own from five to 20 units, most are local ownership and they are looking for a way to supplement their income, build some equity to sell for retirement and can be found in local rental property-owners associations or at the closest Home Depot on Saturday mornings. Yes, there are exceptions, but that sums up the target market for those properties. Larger multi-families are owned by limited liability companies or small corporations and managed by professional management companies. Finding the borrowers for these different types of properties requires completely different approaches. To get access to the local owners, I will go and speak at Rental Property Owners Association meetings or events and form affiliate relationships with suppliers such as plumbers, electricians, lawn and snow maintenance companies, etc. I will track down public records, do mailings and make phone calls to people who I already know own the properties. They are the best candidates for new properties and to refer similar-minded friends and associates. For the larger projects, I will develop relationships with property management firms and commercial real estate brokers. I network with certified public accountants, attorneys, investment firms and financial planners who have clients that own those larger properties. Work within the niches. For example, look for attorneys that handle foreclosures—don't spend time marketing or talking to divorce attorneys. Find a good broker One of the first things you will want to do is develop a strong friendship with a top-producing commercial real estate agent. These are the ones who are part of firms that you've probably never heard of and who wouldn't recognize a 1003 if they were sitting on one. All they do is live and breathe commercial real estate. Power marketing rule #3—Build a strong affiliate resource team. Commercial agents are an incredible resource for market information, leads and developing joint attack strategies. Find a good, reputable one and take him out to lunch. Interview him about what created his success. You are not looking for business from him; you are looking for someone to work with for your clients. You will be out on the frontlines with these borrowers, so put yourself in a position to recommend a quality broker or two. Their referrals will come later. Unlike the residential market, there are very few for-sale-by-owner transactions. An agent will almost always be involved and he will be able to provide financial and analytical data on the property, as well as provide a feel for the market itself. Build a strong relationship by developing and demonstrating your commitment to the partnership through your operational and marketing systems, creative financing options and solutions and having a no-nonsense realistic approach to transactions. Remember, there is very little emotion in a commercial transaction. It's all about the numbers. Start internally Power Marketing Rule #4—Start with your comfort zone. Examine your existing client base for anyone who currently owns investment property. Are they looking for more units or consolidating the ones they have? They probably don't even realize that you do commercial loans! Then, using your existing client base, look for managers or executives of mid-size to large firms. Ask them to refer you to the owner or decision-maker at the company to give you a foot in the door. Use that opportunity to learn more about what the company does, where it's headed and what types of financing will be required to get there. Company owners know and socialize with other company owners. Ask for more names. One referral can open some amazing doors when the right name is attached. Yes, it does take research. Yes, it does take networking (with the right target market) and yes, you will be pounding on a lot of closed doors. But frankly, that's the part that I love. For them, it comes down to trust. The players want to know, "Can I trust you to get it done? Can you get it done right? Can you do it in a timely manner?" Don't shy away. Most salespeople fall too easily to rejection or get sidetracked by running after the wrong target market. That's okay, it makes me look a lot more professional in the marketplace and I end up with a lot more deals than they do. Learn the rules of power marketing. They allowed a 19-year old kid to come back and finance a little 'ole Howard Johnson motel and pocket a commission check that was bigger than most of the other loan officers had ever seen. Funny—they aren't laughing, anymore. Chip Cummings, CMC is president of Northwind Financial Corporation, an international speaker, trainer and consultant to the mortgage industry and author of "Stop Selling and Start Listening!—Marketing Strategies That Create Top Producers." He can be reached at
Jun 26, 2006
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