The Value Of A Commercial Mortgage Broker
Getting financing is a key part of buying an apartment building. It’s a big part of “where do I get the money”, which is probably preoccupying most of your thoughts going into a deal.
A lot of this can be solved with a good mortgage broker.
Your local bank may have a commercial mortgage loan officer and because of your familiarity with the bank and the staff there, you may be tempted to try and finance your transaction with them.
Tip: Resist the temptation. a) because they likely only have loan programs that apply to fully stabilized property, and b) because if you don’t qualify for the few programs they have they will say you can’t get financing for your deal.
Instead work with a commercial mortgage broker to finance your deal; ideally one with a “can do” attitude and creativity.
Commercial mortgage brokers have hundreds, often thousands of commercial mortgage programs to choose from, not just a few as with your local bank. Whatever the nature of the property you are buying, a commercial mortgage broker can find a loan that will fit both the property and you as the Buyer.
Obviously, they have a broad selection of loan products for already stabilized property. For property with deferred maintenance and high vacancy they can arrange a construction loan, where your interest payments are prepaid while you turn the property around and raise the NOI.
And then there are bridge loans, short term (1-3 years) loans that provide liquidity for the Buyer to acquire the property quickly, and then correct problems needed to stabilize the property. Bridge loans are perfect for situations where Sellers are struggling with management and have high vacancy and expense ratio. They are also perfect for situations of financial distress, like buying a property out of bankruptcy, and of course, buying REOs. A good commercial mortgage broker will have a variety of bridge loan programs to work with.
They will also have hard money programs available for situations where quick closing trumps everything else; like heirs wanting to liquidate a property to get to the cash.
Especially in today’s environment, where there is a lot of financial distress in multifamily, the mortgage brokers that will be most useful to you are very well equipped with bridge financing and hard money. Because of the creativity required to solve the problems of financial distress, they have a dealmaker’s mindset. This makes it easy for you to spot them … because they talk your language.
When on the the phone in search of a commercial mortgage broker, if you feel like you are talking to a loan salesman spouting off about underwriting and mortgage-speak, keep looking.
When you feel like you are talking to another apartment entrepreneur who wants to know about the deal, the seller motivation, what the value plays are, why the expenses are so high, what the exit strategy is going to be, what are the repairs are and what your turnaround plan is, you will have found a valuable new member of your team who knows “where to get the money” to fund your deals.