Commercial Real Estate Deals And Finding Funding

  Finding financing for commercial real estate deals can be a laborious and time consuming, if not expensive experience. The traditional ways of using loan brokers can be frustrating and sometimes futile. By doing some research, I found a terrific resource for funding commercial real estate deals that cut out the middle-man thus saving me a lot of money and headaches.

I found out about finance companies when I was doing the Addison Business Center deal, a $48,000 floater that I eventually borrowed 100% on. I was dealing with the mortgage broker who had done some leasing for one - I'd even leased him some space in the center. So, of course, I called him up and gave him a shot at getting me a loan.

The first four places he tried were the same banks that I'd told him had already turned me down. I thought that was kind of strange, so when he reported back, I asked him about it and said, "I thought I told you not to bother with those banks." He said, "You're a well-known commodity, so I just thought I'd take another shot at them."

I continued, "Okay. Who else have you got?" He says, "Of course, I've got plenty of other sources - more finance companies, insurance companies, the works!"

Two or three weeks went by and he didn't bring me any quotes. When I called him on the telephone and asked how it was going, he responded, "It's kind of a slow market right now. I'm hoping to have something for you by the end of the month." "Well," I said, "The end of the month is too late. I have to get a quote pretty quick because I must have a commitment by the end of the October, if I am going to close in January, wouldn't you say?" Although he agreed with me, he still wanted me to give him until the end of the month, but I didn't-I fired him on the spot.

That morning I had been in the library, where I saw a ten- year-old book bigger than a video projector entitled, "Crittenden Real Estate Finance Directory." It was a reference book-you couldn't check it out, but I figured I needed my own copy of it. So, I called the company and got them to ship it to me for $300, which in 1987 was quite a lot of money.

When the book arrived and I started going through it, I was like a kid in a gigantic candy store. They had a page for every lender in the United States-the little banks and the big banks, the finance and insurance companies, all the pension funds-everybody.

So, I started through the book, looking for what their criteria was-in other words where would they lend, how much or how little would they lend, what kind of loan-to-value, and what kind of debt coverage ratios did they use. I started writing everyone who seemed to meet my criteria. A number of them responded by saying they would make 100% loans with the right setup. Five days later, I received a call from a guy at the Abacus, which tells you how far I got in the book.

A finance company in Chicago was owned by H. G. Heller, which is a huge finance company owned by the Fuji Bank and, at that time, was the biggest bank in the world. The guy at Abacus quoted me right over the phone. He says, "I'll follow this up with a fax and then I'll ship documents to you. If you fill them out and ship them back immediately, I can have a commitment for you within 10 days." I said, "Wow!" Now, if I'd been going through my mortgage broker, that would have cost me a point-and a point on $3,200,000 is $32,000.

Instead, I spent $300 on a book, wrote letters for four or five days, then talked on the telephone for 20 minutes, and got this great deal.

You can find other reference books like this, but I still think that the Crittenden Directory is the best. You can also find it online at crittendenonline.comhttps://www.penidaland.com/. They have all kinds of products and even carry newsletters from all sorts of lenders, including insurance companies.

They still have the original three major directories: the Crittenden Directory of U.S. Real Estate Financing, the Directory of U.S. Investors and Buyers, and the Directory of U.S. Retail Space Users. Each of these cost about a $1,000. The last one I bought was three years ago and it was on a CD-ROM, which is very cool, because you can quickly search it.

This directory lists all active lenders across the U.S. that make commercial loans. It includes contacts for construction loans, joint ventures, acquisition and development loans, and much more. They'll lock in the rates when they have a written commitment. Brokers are accepted, but not given preference. It gives you the contact information on everybody.

This is the killer. Until I met up with the Crittenden Directory, I thought that mortgage brokers had many better contacts than I could ever have! Not true any longer, that's for sure.

Locating potential commercial real estate deals can be the most important aspect of commercial real estate investing. In fact, without solid deals, you do not have any property in which to invest. It is really necessary to find the best deals you can so that your invested capital is maximized in its return.

When you locate only great deals, you can do fewer deals per year and make an exorbitant amount of money. Great deals are characterized by a return that equals three to four times the amount of your investment. However, if you find only average deals, the return per deal can be considerably less, causing you to either not make as much money, or do more deals per year. It takes the same amount of work and identical processes for each deal, so you might as well do less work and see a greater return.

You must use trusted and solid resources to locate your deals. Although there are many options to find properties, as they are available in every city and state, you must use resources with updated and accurate information. Below you will find the best resources to assist you in finding deals. You can use each resource to locate the properties that fit within your property investment criteria. Some resources may work better than others, depending on your area of specialization.

One of the best and most common places to find commercial property is through commercial brokers. This would make sense, as they are the ones who actually have the properties listed. You can go to them with a criteria sheet or specific information on the type of property you would like to purchase.

You can find brokers on a local or more widely spread basis, even going as far as calling brokers in other states. Most will be more than happy to call other brokers and find listings that best fit your criteria. They will bring you properties as they become available.

Another great advantage of a commercial broker is their ability to find pocket listings, or listings that are about to go on the market, but have not yet officially been listed. You can get a jump ahead of the competition and find excellent deals. Get in contact with a few brokers every day, and watch targeted properties roll in!

Another place to locate properties is on the internet. There are many sites that have hundreds of commercial properties for sale ranging from raw land to large retail and apartment complexes. These sites have information on both the property and the broker, so you can easily get in contact with the broker and learn more about the property. You can filter the information as you see fit, usually according to your specific criteria.

One of the best sites is Loopnet.com. This site houses hundreds of brokers all over the United States who post their many listings. You can filter through deals very quickly and reach a larger audience than you would in just your own community. Your ability to build contacts also increases with so many brokers and agents at your fingertips. I urge you to check out these commercial real estate sites and see what deals you can find.

Auction houses are great places to locate properties of all conditions and types. Many times you can get excellent deals on properties that you may otherwise have to spend a lot more for if they were listed with a broker. You can get on mailing and e-mail lists of different auction houses so they notify you of properties that will be going to auction. This allows you time to investigate the property as an investment, before the actual bidding day.

Auction houses also sometimes provide the option to purchase a property at a certain price before it goes to auction. You never know what opportunities will come along, so it is a good idea to stay in contact with several auction houses to be privy of the properties moving through their hands.

Although there are many ways to locate deals, these are among the best offered to the commercial real estate industry. The properties are abundant, and contacts can constantly be made, allowing for an ease of influx of other possible deals. A secret in this business is that the more contacts you have working for you, the more opportunities will be brought to your attention.

If you are working locally, and using only local resources such as newspapers, listings, and magazines, I urge you to use these other options. You can find local deals this way as well. It might even give you incentive to move out to your comfort zone and into areas where you will find even more opportunities.

Use these resources- commercial brokers, internet commercial real estate sites, and auction houses to find targeted, up to date, and numerous properties that could possibly bring your next big commercial deal!