What Does Your Client REALLY Need?

Posted by in Brian's Blog, Commercial Real Estate

It is not about what they want.  What they want may very well not be available today.  It is important when doing commercial loans to not only screen off the deals that won’t work, but make sure you are clear on the absolute must have of the client-not just his want or wish list.

The following question/answer was posted on the Commercial hotline and I think it illustrates the point.  Remember, 1 marginal issue can be overcome, 2 can not.  First the question….

Loan Type : First Mortgage
State : Michigan
Loan Amount : $1-2 Million
Property Type : Strip/Shopping Center
Other Property Type :
Purpose of Loan : Cash-out Refinance
LTV : 45
Credit Score : 805
Occupancy : Investor
Doc Type : Full
Comments : The Property cash flows @ $20,000 and the payment is only $4500. 100% occupied and borrower does have assets

Answer: How much cash are they wanting out and for what purpose? Generally speaking, cash out in Michigan is a no go ESPECIALLY on investor properties. Two marginal issues (cash-out and Michigan) is too much to overcome. If he wants more then $100-$200K in cash out, no one will do.

(I had to find out more information so my answer was a question) To this the broker responded, “If $200 is the max then $200 will do”.  Which brings us to this lesson:

“Here is the deal.  It is almost, I mean, almost impossible to get cash out on investor property in Michigan.  There needs to be a reason-fix up the property, etc.No way we convince lenders to just give him cash out because he needs/wants it.  It is two marginals-Michigan and Max Cash-out.  If he wants money out to renovate we may be able to find him a deal on one property, maybe two properties (w/two different lenders) but we just won’t see that many lenders willing to do cash out EVEN FOR IMPROVEMENTS.

This is a classic case of we need to find out more. How much money does he really need, what does he need it for?  Then, with that end in mind, we look at his total picture and see what we can do.  Don’t just focus on cash-out, maybe we do a securities loan, roll an IRA, and get small cash out on one or two properties.  We have over 100 lenders, maybe 2 will do small amount of cash out on investment properties in Michigan-that is what you are trying to push through.  Let’s figure out his REAL need, in light of the current marketplace, and go from there.”

You see, it is not about what the client wants, it is about what we can get approved.  Listen, owner occupied SBA stuff can be written in Michigan and Ohio all day long.  But you go investor and it is a whole different story.  I had a super strong deal in Ohio, purchase, 75% LTV, property debt covered at 2 times, borrower had $4 Million LIQUID in reserves-strongest deal I had seen.  Borrower has 31 other properties-but he was signing exclusive with me-why?  Every local bank and all the national players this guy knew did not want to do an investor loan in Ohio.  I tried a local branch of PNC bank even, who are in Ohio, and they did not want to do it.  I finally found a source and got the client a 5 year fixed at 5.57%.  The client now loves us.  But only one lender out of over 100 in my database was willing to do this ridiculously strong loan because it’s investor and Ohio.  The CLIENT is a legit player, he tried many lenders before coming to me.  If that deal would have been a cash-out deal, not even the lender that approved him would have done it.  Cash-out, investor, Michigan-not happening.  We will have to help that Michigan guy with creative other products like the Self-Directed IRA deal.

The great thing about this time is this-there are so few options for the borrower.  You have to say no to the deals that can ‘t  be done, get to the bottom of the true need on the deals that have some merit, and focus hard on the doable deals.  There are tons of mega strong borrowers, with ample reserves, liquidity, etc that are struggling to find financing.  You can write those guys up IF, and only IF, you don’t spend time on deals with no chance of funding. 


p.s.  The Commercial Hotline can be a great way to find a home for commercial loans.  In residential, you have FNMA, FHLMC, and FHA-that is about it except hard money.  In commercial you have tons of options.  But unless you spend a lot of time closing those loans, you won’t know what can and can’t be done.  Our Commercial Hotline program finder is awesome.  If you have a commercial deal that you are struggling to place, give the hotline a try.  Just click on the link below to check out the hotline, there is a ton of training, conference calls and much, much  more.  Everyone who signs up this month will get my 6 page in depth, “Ultimate Commercial Cheat Sheet” which tells you every type of program and what can and can’t be done.  Yours free with your hotline membership.  Click on the link below to check it out today!