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Faxing is back, but be careful!: Changes to "junk fax" law restore your right to send legitimate faxes

National Mortgage Professional
Jan 23, 2006

Bringing commercial deals into focus Art Swiatkowskicommercial loans, useful tips, getting started When talking with residential brokers who are looking to put their toe into the pool of the commercial and income property world, I've found there's one thing they all seem to want more than a life preserver: They want ideas on how to source commercial deals. They want a foolproof, easy-to-execute plan that will bring hordes of commercial leads to their door. If you are a residential originator looking for marketing ideas to attract commercial business to your shop, there are two questions you need to answer before you can implement a successful marketing campaign. First ask yourself, "Where do I start my journey into commercial lending?" And second, "Why is this a good place to start?" These are critical questions for the originator with little or no experience in the world of commercial lending. The answer to these questions is a matter of focus. Where? Rather than trying to provide every available commercial product to all possible prospects, it is wiser for novices to narrow the scope of their marketing effort to a specific group or category. Trying to be all things to all people is an overwhelming task. Reducing your focus will help make the transition to commercial lending more manageable, and your success more achievable. One area of focus that makes sense for the novice is small-balance commercial deals, say under $1 million. The marketplace has more properties that will lend themselves to this range of financing and they tend to be less complicated transactions than larger deals. For the uninitiated, the lure of a big commission from a big commercial deal often ends in frustration and much wasted time and effort. To start, keep it simple by keeping it small. Further refining your focus, you can choose to work with prospects in a specific industry or entities that may have a need for a commercial real estate loan such as property investors, bar and restaurant owners, retail or manufacturing businesses, or medical and dental practices. If you have knowledge of a particular industry from your past business experiences, it can be a great aid in building rapport with these prospects. Still others may find that the best way to get started is to focus on a property type. With most commercial real estate loans, the property is the most important ingredient to the lenders. Therefore, by learning the ins and outs of a particular property type, you can become an expert in that category. You'll know exactly what a lender is looking for to get that specific kind of deal done. Your focus may be on multi-family buildings, mixed-use properties, office buildings, retail space, industrial/ warehouse properties, agricultural/ land, automotive or one of many special purpose properties such as churches, self-storage facilities, mobile home parks, golf courses or entertainment centers. Many brokers who are new to the commercial side of the business narrow their focus by working with a particular lender category. One choice would be to work with the traditional lenders such as the banks, thrifts and Small Business Administration sources. Be aware that for the most part, working with these lenders will require a strong ability to understand their qualifying and underwriting criteria, as well as their specific documentation requirements, unless you are working with them on a purely referral basis. Another option would be to work with an intermediate non-traditional lender (non-bank alternative). These lenders typically require less documentation and rely more heavily on the appraisal for their decision. Although both categories deal with good credit borrowers, the intermediate non-traditional lenders target borrowers who want the simplicity and ease of a process that requires little or no documentation from them or their business. Because of the greater risk associated with this type of loan, the loan-to-value (LTV) is usually lower and rates are a little higher. The third category is the private/hard-money lenders. Many of the applicants that can't meet the credit requirements or guidelines of the traditional or intermediate lenders will find this group to be their best option. The higher risk of this type of loan is mitigated by a very low LTV and usually very high rate and points. Explore each category. Interview lenders so that you have an understanding of which will be the best fit for your entry into the commercial/income property market. Eventually, you would be wise to build relationships with at least one lender in each category. Why? Once you've selected your niche, consider the next critical question: "Why is this the best place to start?" The answer should make good business sense. Your area of focus should give you the confidence you need to successfully begin marketing to commercial clients. An example of a good "why" would be your experience and/or contacts in a particular industry. This can be a great basis for your choice. If you have worked in the restaurant business, your knowledge and connections could be invaluable to success with that type property. Perhaps you are familiar with the operation of gas stations. Automotive properties could be a good starting point for you. Do you know people who own multi-family investment properties? They can be a reference source that could get you started in that area. Perhaps your "why" is that you are more comfortable working with one category of lender over another. Some lenders have simplified their processes in order to attract originators to enter the commercial arena. Maybe a lender has training and marketing support that would be instrumental in helping you reach your goals in the commercial marketplace. For many originators, it may be advantageous to refine the focus using multiple levels. For example, you could use a lender category and client type, or lender category and property type. This can help you focus on the commercial side of the business without losing your residential focus. The ability to expand your marketing efforts are always available to you as your knowledge and experience grow, so dont be afraid to narrow your focus in the early stages. Who knows where your exploration of the commercial lending arena will lead. I've seen some loan officers and brokers shift their entire business over to commercial deals. But remember, in the early stages, the key to effective marketing for commercial loans is focus! Art "Ski" Swiatkowski is business development manager for InterBay Funding LLC. He may be reached at (215) 283-4520 or e-mail [email protected]
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