Business Development & Sourcing Guide

Transcription

1 Business Development & Sourcing Guide Copyright 2002 LendingApps, Inc. 1

2 Table of Contents Overview...3 LEAD SOURCES...6 Commercial Property Owners...6 Commercial Real Estate Brokers...6 Financial Advisors...6 INTERACTING WITH SOURCES...7 Property Owners...7 Real Estate Brokers...7 Financial Advisors...7 THE MARKETING PROCESS...8 MONTHLY NEWSLETTERS...9 CREATIVE...10 Sample Letter: Property Owner...10 Sample Letter: Realtor...11 Sample Letter: Financial Advisor...12 Sample Advertisement...13 Sample Loan Package: Office...14 Copyright 2002 LendingApps, Inc. 2

3 Business Development & Sourcing Guide Overview Originating commercial mortgages requires knowledge: 1. knowledge of the borrower s wants, needs/requirements and desires regarding the transaction, and 2. knowledge of the commercial mortgage process, underwriting, risk analysis and creation of a proper loan package. While it is true a borrower can contact his local banker friend, with whom he plays golf on weekends, and obtain a commercial mortgage. What the borrower may not know is he may be able to obtain more attractive and more suitable financing (e.g., long term, fixed rate financing), at a more competitive rate by engaging the services of a mortgage broker. The key to originating commercial mortgage business is to understand the value you bring to the transaction. Whether you solicit the property owner directly, or through an intermediary such as a commercial realtor or a financial advisor, everyone will probably tell you the same thing: that he or she is looking for the lowest interest rate. There are several key elements to understand before you can determine if rate is the primary factor, they include but are not limited to: - Requested loan term (and amortization) - Fixed or variable rate (does the borrower have a desire to control PITI regularly without adjustment?) - Tolerance for prepayment penalty, lock-out or yield maintenance (e.g., how long will the borrower hold the property?) - Willingness to pay upfront fees and closing fees (e.g., underwriting, appraisal, engineering, environmental, etc.) - Recourse options (will the borrower realize a tax benefit from structuring a non-recourse transaction vs. full recourse? If the borrower requires nonrecourse financing, is this a likely conduit deal?) - Cross-default, cross-collateralization, ability to obtain release provisions (ability to obtain lease provisions. Does the borrower need the ability to obtain lease provisions?) After investigating, you may find the borrower would be best suited for a conduit-type transaction, as compared to a local bank transaction. The ability to advise the borrower, and offer several financing options, often creates significant value to the borrower. Another important contributor to adding value to a transaction is knowledge of the underwriting process and risk analysis. Often, the appearance the deal at the time of submission differs from the end result of the final term sheet. This is because cash flows vary for every commercial property, and unless the broker understands the issues and Copyright 2002 LendingApps, Inc. 3

4 demonstrates the underwriting risk in the loan package, the lender will have difficulty providing an "accurate" quote. Copyright 2002 LendingApps, Inc. 4

5 For example, for a lender to provide an accurate quote on a retail property, the lender will often reconstruct the operating statement in order to calculate PGI and subtract a vacancy reserve, normalize the income and expenses and then adjust the expenses using an expense growth rate, and then apply the property-specific underwriting parameters in order to calculate the stabilized NCF, direct capitalized value, LTV and DSCR. This is referred to as a first cut and should be completed by the broker prior to submitting a package to a lender. So the keys to originating commercial mortgages include understanding the borrower s deal points and analyzing the underwriting risk of the transaction (completing a first cut ) prior to submitting to lenders. This will enable you to have a mutual understanding of the issues, and an ability to communicate these issues to the lender and negotiate the best terms and rate on behalf of your client. The following are step-by-step guidelines for finding and marketing to the sources for commercial mortgage leads. At the end of this Guide, you will find sample marketing letters and marketing materials. Copyright 2002 LendingApps, Inc. 5

6 LEAD SOURCES Finding sources for leads can be a relatively simple, but time consuming task. While there are many online websites and list brokers offering information about commercial property owners, commercial real estate brokers and financial advisors, it is recommended you focus your efforts locally, giving you the ability to meet in person. Borrowers and lead sources often prefer to interact with other local professionals. Furthermore, finding the sources in your local area is relatively inexpensive search the yellow pages, business directories, or spend a day at the local County Assessor s Office examining property ownership records. Commercial Property Owners The benefit of marketing to property owners directly is that you are going straight to the decision maker. The best source for finding who owns what property in your county or state is the County Assessor s office. Here, you will find information on every property in the county, contact information, date of last sale, and sale price, among other things. This information may or may not be available for free, so it is recommended you call ahead to check, and bring some change, cash, check and a credit card just in case you need to pay for copies of the information. Commercial Real Estate Brokers The benefit of marketing to real estate brokers is that each broker may have four or five deals he is currently working on, and one creative mailer and follow-up phone call can result in a year s worth of business. The best source for finding commercial realtors in your area will be in your local yellow pages. Consider marketing to the individual realtor, or to the senior broker at that office. Consider sponsoring and speaking at a seminar for brokers advising them how to effectively gather information that will make for a smooth loan process. Financial Advisors Marketing to CPAs, financial planners, estate planners and local banks should probably be the last group that you focus on because finding commercial mortgage financing for their clients is a very small portion of their overall work. However, a trusted financial advisor is a far stronger link to the client than most intermediaries. Once you gain their trust, you will find the extra validation for the client tends to increase your chances of working on a real deal. Your local yellow pages will be the best source for leads. Copyright 2002 LendingApps, Inc. 6

7 INTERACTING WITH SOURCES Property Owners Many property owners have spent a great deal of time and money seeking attractive financing, and have often wasted money on fees based on inaccurate quotes from unqualified mortgage brokers. Keep in mind, virtually every property owner has an opinion of the value of their property holdings, whether based upon personal opinion or an appraisal. However, this predisposition can hurt their financing efforts and often misguides the mortgage broker into soliciting the wrong financing. An effective technique to market to property owners is to illustrate to them how their property is analyzed from a lender s perspective. Then, illustrate and describe how a comprehensive first cut underwriting that addresses the key deal points prior to soliciting lenders, puts you in a better position to accurately represent the borrower s financing requirements, and subsequently obtain the best and most accurate quote. Real Estate Brokers Most real estate brokers recognize they cannot complete a sale unless the prospective purchase can obtain market financing. You bring value to a real estate transaction in several ways. First, your first cut underwriting can validate a listing price, or further support the strength of a purchase offer. Just because a property is listed at $5MM, does not mean it is worth $5MM. An effective technique used in marketing to realtors is to illustrate, in underwriting terms, the financial issues with a property s cash flows, and how those issues will require certain underwriting parameters (e.g., vacancy reserves, TI/LCs, income trends, etc.). This can provide the realtor with additional insight on how to establish the right listing price, identify the right buyer, manage the financing expectations, and essentially, have a pre-packaged loan request ready for the buyer. It is recommended that you offer to do this type of pre-packaging for every new listing the realtor takes. Financial Advisors Most financial advisors have relationships with property owners. While financial advisors advise their client on financial matters, few are educated in the art and science of underwriting commercial mortgage loans. By providing commercial mortgage advice to these professionals, you can gain their referral business by educating them on how they may better advise their clients who own investment properties, or whose clients are the decision makers for their employer s commercial property. You will also find banks that do not offer commercial mortgage loans would rather provide a referral source than to simply turn away a current or prospective depositor. Copyright 2002 LendingApps, Inc. 7

8 An effective technique to market to financial advisors is to educate them about what affects the underwriting issues of their clients commercial properties, and how you are available to discuss any of his client s commercial property s prior to taking a referral. You will also find that if you educate financial advisors, they will provide the best prequalified leads because not only will they gather the correct information and do a preliminary cash flow analysis, they will also manage their client s expectations. THE MARKETING PROCESS Traditional techniques for marketing include active marketing, such as cold calling, and passive marketing, such as advertising. The most effective approach is active marketing that involves a combination of direct mail (cover letter and sample loan package) and follow up phone call. Whether the first call results in business or not, it is recommended that every new client is added to your monthly newsletter. Sample Letters: Property Owner Real Estate Broker Financial Advisor Sample Office Property Loan Package Sample Advertisement Sample Monthly Newsletter The follow up call to the mailer should be a reiteration of the opening paragraph of the appropriate sample letter. It is advised you complete the LendingApps training materials prior to making this phone call, as you may be required to discuss a deal - and the best way to discuss a deal is by asking the right questions BEFORE agreeing to work on a deal. Copyright 2002 LendingApps, Inc. 8

9 MONTHLY NEWSLETTERS It is highly recommended that you create a monthly newsletter and send it to your entire mailing list each month. Whether you choose or mail to send your monthly mailer is not important. is the least expensive form and easy for many prospects to file. For whichever one you choose, make sure it is sent every month, and is received by the prospect/client preferably on the first business day of each month. Furthermore, keep the newsletters meaningful. Quality rather than length is important. Mailing current interest rate information or local/national news items may or may not be of interest to every prospect, but mailing them information that helps them save/make money, will be of interest. Remember, if you follow the LendingApps approach, you probably obtained business because you educated your client. Continue with that approach in your newsletters. LendingApps has provided you with a significant amount of educational materials that you can paraphrase in your monthly newsletter and send to your clients. Take a look at one of the s you were sent from LendingApps Commercial Newsgroups, as an example. For the most effective mailer, keep it to one page and include your name as the title of the newsletter for name recognition, with your picture on the top. Fit your content below the title and picture, and conclude with your phone number and address at the bottom. If you have previously met with the client, including your picture will make your mailer much more memorable. But even if you did not meet with the prospect, including a picture will personalize the mailer, and will humanize your newsletter. Copyright 2002 LendingApps, Inc. 9

10 CREATIVE Sample Letter: Property Owner Link to Sample Letter: Property Owner January 1, 2004 Mr. James Bond Bond Properties 007 England St. Los Angeles, CA Dear James: If you have tried to get a loan for your commercial property in the past only to find that you wasted thousands of dollars in fees from inaccurate loan quotes, then you are not alone. Many mortgage brokers do not understand the elements of a comprehensive underwriting analysis. In order to provide an accurate loan quote, important it is to understand the key underwriting aspects. More importantly, I will have the opportunity to structure the loan so that it best suits your needs providing you with the most optimal loan structure. Enclosed is a sample underwriting analysis I perform for all of my commercial clients. Because of the professional analysis I do prior to talking to my lenders, I am able to negotiate the best deal on your behalf. I will call you next week to discuss how I might earn your business, or you can call me at the number below. I specialize in Office, 5+ unit Multifamily Apartments, Mobile Home Parks, Retail, Industrial, HealthCare, Self Storage, Hotel and Mixed Use properties. Kind Regards, Joe Broker (555) Copyright 2002 LendingApps, Inc. 10

11 Sample Letter: Realtor Link to Sample Letter: Realtor January 1, 2004 Mr. James Bond Bond Properties 007 England St. Los Angeles, CA Dear James: Mortgage financing is paramount to any successful real estate transaction. Often times, borrowers are unable to secure optimal mortgage financing, causing transactions to be delayed or even never reach the closing table. From a lender s perspective, understanding the financial risk in a transaction is as important as matching a buyer with a seller. A high percentage of commercial property purchasers rely on local commercial banks that may only provide shorter-term recourse loans. At ABC Mortgage, we provide our clients with honest answers and reliable and prompt service. Pre-arrange reliable financing quotes on your listings to validate asking prices. Reduce your buyers costs by arranging long-term low cost debt financing. Introduce refinance scenarios to property owners create capital for future property acquisitions. Enclosed is a sample underwriting analysis our company performs for our commercial real estate clients. We represent numerous commercial mortgage lenders throughout the country. Because we perform a comprehensive analysis prior to engaging lenders, we are able to negotiate the best deal on your client s behalf. We would like the opportunity to work with you. I will call you next week to discuss how I might earn your business, or you can call me at the number below. Our company specializes in Office, 5+ unit Multifamily Apartments, Mobile Home Parks, Retail, Industrial, HealthCare, Self Storage, Hotel and Mixed Use properties. Kind Regards, Joe Broker (555) Copyright 2002 LendingApps, Inc. 11

12 Sample Letter: Financial Advisor Sample Letter: Financial Advisor January 1, 2004 Mr. James Bond Bond Properties 007 England St. Los Angeles, CA Dear James: Advising your clients regarding their commercial real estate holdings can be a complicated task. Keeping up to date with underwriting parameters and market driven cap rates can be as time-consuming as staying abreast of the new tax law changes. Enclosed is a sample underwriting analysis I perform for all of my commercial clients. Because I complete a comprehensive analysis prior to talking to my lenders, I am able to negotiate the best deal on your client s behalf, and would like the opportunity to work with you. I will call you next week to discuss how I might earn your business, or you can call me at the number below. I specialize in Office, 5+ unit Multifamily Apartments, Mobile Home Parks, Retail, Industrial, HealthCare, Self Storage, Hotel and Mixed Use properties. Kind Regards, Joe Broker (555) Copyright 2002 LendingApps, Inc. 12

13 Sample Advertisement Link to Sample Advertisement $10,000 in fees for Appraisal, Environmental, Legal and Processing. So why didn t I get a loan on my Commercial Property? If you are like most commercial property owners, you may have worked with mortgage brokers in the past that promised you a great rate from a great lender. So you paid all the required fees just to find out that you could not get the rate that you were promised and your loan never closed. At ABC Mortgage, we are serious about structuring the best loan for our borrowers, and providing accurate loan quotes. If you need to arrange financing on your commercial real estate, call ABC Mortgage. We will provide you with a sample loan analysis that illustrates our professionalism and level of understanding of your commercial real estate holdings. (800) Specializing in Office, 5+ unit Multifamily Apartments, Industrial, Retail, Mobile Home Parks, Healthcare, Self-storage, Hotel and Mixed Use ABC Mortgage 1000 West Fifth St., Los Angeles, CA Copyright 2002 LendingApps, Inc. 13

14 Sample Loan Package: Office Link to Sample Loan Package Copyright 2002 LendingApps, Inc. 14