Greetings from a jam-packed airplane headed North. I am on my way to go Walleye fishing in South Dakota. I am not an avid fisherman by any means and I have no idea how to fish for Walleye….but off I go to make new friends and to reconnect with another.

Anyways….

As some of you know, I have been working on refinancing my shopping center for almost a year now….and guess what? We closed!!! As my attorney, Jay, said…”…what an ordeal.” An ugly ordeal it was….thankfully with a happy ending due to the work of my mortgage broker(s).

I have three strong (at least I think) relationships in the commercial mortgage business. Not only are they my friends but they are amazing at what they do. I consider them the best in the industry.

1. Brandon Haddon @ Omni Credit in Denver, CO
2. Scott Nelson and Karla Lyngvar @ Lyngvar Financial in Sacramento, CA
3. Terry Painter @ The Business Loan Store in Milford, OR

I now use all three in every deal I do. “How so?” you ask….well….let me explain.

The subject is an eighty-three thousand square ft, class C, retail shopping center located in West, TX. Solid cash flow, solid tenants, great history, great city, etc…. but there were a few issues:

1. Environmental Reports were not conclusive
2. Lease terms for credit tenants were up for renewal in the next few years
3. Loan needed to be defeased
4. A weak economy and tight credit (and getting tighter)
5. and on and on….

I started with Brandon Haddon at Omni Credit first. Brandon had pulled off a miracle the year before by refinancing my mobile home park which I acquired via a lease option. Many mortgage lenders, including Terry from The Business Loan Store said I could not do the deal without me having to put 20% down….and I could not pull cash out. Brandon was able to do the deal for me. Not only was it a no money down deal…I was also able to pull cash out… a no money down commercial real estate!

Now….the shopping center was a difficult deal for several reasons but the first hurdle was the environmental report. Many moons ago…there was a gas station on the premise. The gas station and the underground gas tanks are long gone. BUT…the tanks at one time leaked. Now, to understand the problem fully, the property where the gas station once stood was not part of the shopping center and not part of the loan…but because it was an adjacent property, the lenders had concern. This issue caused my first mortgage broker (Brandon) to fall off. I felt that Phase One environmental report would suffice and that a Phase Two was not needed…and I stuck to my guns. But the lender Brandon was working with (Union Bank of California…which screwed me once before via another mortgage broker) felt that a Phase Two was needed….even though, at one time, they were fine with the Phase One report (go figure).

Next…I decided to “two fist it” and go to both Scott/Karla @ Lyngvar Financial and Terry Painter @ Business Loan Store. Karla and Scott felt that I would need to do a Phase Two. Terry on the other hand thought I had a good chance of avoiding the Phase Two. So I went with Terry.

Now, I have dealt with Karla and Scott on a personal level….and they came through on a big way later in the process.

So…Terry and his right hand, Sarah, went to work. There were so many issues (the list above) but Terry was able to get me a lender commitment on the property. This was a huge accomplishment because Terry was able to bypass the need for a Phase Two as well as manage the lender regarding the changes in the economy and the impact on the rates. Not to mention dealing with the defeasance.

Now, when I got the commitment, I sent it to Scott at Lyngvar financial to see what he thought. Scott said “Rob, I would love to do this deal for you but I cannot beat this commitment. You are getting the best terms in the market. I cannot even come close.” Wow….at that very moment, I knew that I was going to add Scott to my commercial mortgage team. Integrity in the mortgage business is hard to find…..as if you don’t already know that.

I needed Brandon, Terry, and Scott to get this refinance done. Even though only one mortgage broker was able to close the deal, they all played a huge role.

“Okay Rob…so what?”

Well….having different mortgage lenders in your corner is crucial. Mortgage brokers have relationships with different lenders. Just because one lender cannot do a deal does not mean that all lenders cannot do the deal. Even when it comes to environmental issues, terms, market conditions, etc., different lenders handle issues differently.

Also, having mortgage brokers that you trust will go a long way in avoiding losing money and time. Have a resource you can trust to confirm if you have a good loan commitment or not is a HUGE plus.

I have been burned by several brokers in the past that I have contacted through forums or newsletters (I have never had a good experience). I have always lost money and or time dealing with people that I do not have a relationship with. But I have had great success from those recommended to me. I met Terry at a commercial real estate seminar that we both spoke at. I met Brandon through a friend of mine that highly recommended him. I met Karla through a friend while I was in Sacramento. I highly recommend all three of them.

I am very thankful for Brandon, Karla, and Terry for helping me get through this “ordeal.”

Until next time……rob

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Tags: commercial loan, commercial mortgage, Commercial Real Estate, lending, Mortgages

Financing the purchase of an apartment building can seem like an overwhelming task for the first time investor. Generally, I have seen that both novice and even experienced commercial real estate investors underestimate the amount of work and due diligence that is required on their behalf to get the job done right. Usually it is not just lack of experience but also a lack of education that causes the most difficulties. The first time apartment building investor should dedicate a good deal of time to finding a competent commercial mortgage broker who specializes in apartment buildings or other cash flow commercial real estate properties.

One of the most common errors that I see the novice investor make is to work with a broker who has little experience with commercial mortgages.
For example, I have seen many new investors decide to use the services of a mortgage broker who only has experience in residential mortgages. The new investor may feel comfortable with this residential mortgage broker because he or she has helped secure financing for the purchase of their primary residence or vacation home. Sometimes it is because the mortgage broker is the friend of the family or even a friend who has a mortgage brokerage license and maybe does four or five deals a year. This is someone who I would refer to as a “weekend mortgage broker”. The residential property investment boom of the past few years created quite a few of these enthusiasts. Unfortunately, by the time the new commercial real estate investor realizes that his “friend” is not going to be able to get the loan closed it is usually too late. This can be a costly mistake in the commercial real estate arena where the investor has to come out of pocket for considerable fees such as appraisal, environmental and upfront application fees.

Without the specific knowledge of the commercial loan application, submission and underwriting process there is a very good chance that a commercial loan proposal will be outright rejected by the lender or even worse, get buried under a bank officer’s stack of loans that will never even be considered because the loan package wasn’t prepared correctly. The specialized knowledge and experience of the commercial loan application, submission and underwriting guidelines is the major attribute that you need to look for in a good commercial mortgage broker.

The beginning commercial property investor should also look for a commercial loan broker that has the time to actually help him analyze the deal that he or she is submitting to determine if it is in fact a good investment.
Many first time investors get caught up in the excitement and hype of potential profits and become blinded to the risks and shortfalls of a property. In other words, they invest based on an emotional decision without performing all of the necessary due diligence. One encouraging fact is that banks and commercial lenders will not lend on a property that doesn’t make good sense financially. It is rare to find a commercial lender who will lend an amount that equals more than 80% of the property value. It is also uncommon to find a lender will lend on an apartment building with a debt service coverage ratio less than 1.20.

However, these generalized numbers mean little when it actually comes down to analyzing a property and finally submitting a loan package. Your commercial mortgage lender should have an intimate knowledge of the underwriting policies of each particular bank to determine where the loan scenario will fit best and stand the best chance of getting funded on time. For example, some banks will consider income generated from the rental of storage units and the income from laundry machines when computing gross income and some banks will not. A little detail like this can have a big impact on your debt service coverage ratio and the overall success of the loan proposal.

Tags: apartment building mortgage, apartment loan, commercial loan broker, commercial mortgage