Should I use a mortgage broker?

Question

Hello I am a newbie to real estate investing. I am looking to purchase multi unit properties, 5+. I am looking at my potential first property, a 6 unit, right now. I realtor sent me the lead and wants to wait to show me the property until I have financing established. He referred me to his commercial broker. Is this typical? Should I go through a mortgage broker?

My thoughts are that I should speak with a few banks in the area to find to see what lending options they have available first. Any advice is welcome.

Steve Vaughan · Answer

With plain vanilla resi mortgages either you use a broker or not doesn't really matter.

With commercial 5+ loans I've always had the best experience using a community bank local to the property.

Sam Fickel · Answer

5+ units is not a residential loan, it's commercial. It's highly unlikely that a broker does commercial stuff, but I guess there's a chance. The first thing you tell them after your name should be the fact that you're interested in a 5 unit and if they can help you. That way nobody's wasting any time.

Brokers are pretty great because, yes they are middle men, but they broker to wholesaler lenders, not retail lenders. You don't have access to wholesale lenders, so you end up winning with the competitive rate. I started my career working for a broker but they didn't provide the training, marketing, and other services that I needed to develop my business so I'm happy with where I'm at...But went back to the broker for my refinance because their rate is better than my employee discount lol.

Don't be scared of brokers, but you'll definitely need a commercial loan.

Ty Mellinger · Answer

Thanks for your quick response!

Joe Splitrock · Answer

I would do both. A broker has access to multiple lending sources. A banker may also have similar access, or may mainly offer loans from that bank. Talk to multiple people and compare. Let them know you are shopping around and encourage them to put forward their best offer. Competition always helps get you the best price.