If you have ever thought about financing a commercial real estate property, the thought of using a commercial mortgage broker may have crossed your mind. A commercial mortgage broker is an intermediary between a financial institution that offers loans and commercial real estate owners, developers and investors who are seeking mortgage financing.
Some property owners have debated using a broker based on the belief that it is more expensive to engage the service of a broker than going directly to a lender. While in some cases this may prove to be true, this common belief is not an accurate assessment in all cases and we will list the various reasons to why that is.
The reality is that there are a number of ways in which you can save money by engaging a commercial mortgage broker to provide assistance with your real estate financing needs and objectives. If you take the time to determine the value of using a broker, you will surely see that it is money well spent.
Let’s take a look at some of these reasons first hand.
1. Better Access to Lenders
Locating a good lender to fund your commercial mortgage is not an easy task. Due to the wide range of property types, loan types and special circumstances associated with each transaction, a single lender relationship simply cannot offer a one-size-fits-all program for all scenarios. A good mortgage broker will have dozens of working relationships with active lenders who will accommodate your specific borrowing needs. You may waste a considerable amount of time simply trying to find a lender that offers the loan program or parameters you need. At the end of the day, real time feedback could save you thousands of dollars by leveraging your brokers experience and networking abilities.
Eligible Property Types
Many property types can qualify, some of which include: apartment buildings, shopping centers, office, hotel, industrial and self storage properties. Our loan experts can also finance warehouses, mobile home parks, student housing, marinas and parking garages.
2. Don’t Put All Your Eggs in One Basket
Creating a competitive environment for your commercial real estate financing needs is imperative. Working with a single relationship lender may be comforting, however, lending environments and banking regulations tend to change. Some lenders also impose single-borrower loan limits of specific amounts i.e. $30,000,000 and would not extend mortgage financing beyond that amount. Experienced brokers monitor these nuances and look to navigate around them to secure their clients lender relationships that can accommodate their financing objectives.
Brokers can often facilitate loan terms that are far more superior than what commercial real estate owners are able to obtain on their own. By leveraging a brokers experience and strong lender networking, you obtain bargaining power to get the best financing in return.
3. Lower Interest Rates
One of the most significant ways in saving money by using the services of a commercial mortgage broker rests in their ability to deliver lower interest rates, longer amortization periods and flexible underwriting of the loan. Active mortgage brokers are often times provided preferential interest-rate options based on the volume of business they bring to a lender. This rate savings is passed along to the borrower. Brokers also add value by obtaining interest-only loan options to borrowers looking to frees up cash-flow from their real estate investment. All in all, these savings could turn out to be significant over the term of a loan.
Note:
Most loans facilitated by Integra are non-recourse, with standard lender carve-outs. In addition, most of new tenant improvement and leasing commissions (TI/LC) are paid directly by the lender as “good news money” when new tenant leases are signed, preserving the owner/investors personal capital.
4. Non-Recourse Vs. Recourse
Commercial mortgage brokers often shine by delivering competitive non-recourse loan structures for multifamily, retail, office, hospitality and industrial property types. No borrower wants an unnecessary liability on their balance sheet, especially those that are in the business of ground-up development.
Brokers are able to facilitate competitive non-recourse acquisition financing and refinancing. Obtaining non-recourse construction financing is no easy task, however, a good broker can leverage their lending relationships to facilitate such a loan. Developers usually have to provide a completion guarantee. Whether a permanent loan, bridge loan or construction loan, it is common for all non-recourse loans to have standard “bad-boy” carve-out provisions, which now takes us to reason #5.
5. Loan Structuring
Commercial mortgage brokers understand the complication and intricacies of negotiating and drafting favorable loan documents. This is an area where brokers truly earn their commission. Each transaction can be unique in its own way and having an experienced mortgage broker to help navigate you through the drafting of the loan structure can be critical.
For example, whether the loan is procured through a life company, conduit or an agency lender, the proper structuring of Tenant Improvement, Leasing Commission (TI/LC) and Replacement Reserves is important. So too are reporting requirements that lenders generally require of the borrower which can be time consuming and costly. Brokers assist in finding and adding flexibility to make the lives of borrowers easier pre and post-closing. This is yet another way brokers add value to transactions when engaged. Commercial mortgage brokers work hard to provide a seamless closing process.
6. Certainty of Execution
If you had previously engaged a commercial mortgage broker to facilitate financing for your property, then you should already know that brokers normally get paid at the closing of the loan. If the loan is not closed and funded, the broker does not get paid. Having said that, mortgage brokers are incentivized to negotiate, structure and facilitate a successful closing. Networking in commercial real estate is important, and brokers frequently earn their keep.
Whether you are in a market for a commercial construction loan, permanent, mezzanine or bridge loan, a good broker will be able to provide guidance in selecting the best lending source. If timing is an issue, the broker will be able to leverage their long term relationships with a lender to garner an expedited processing of your request. A commercial mortgage broker is your advocate in navigating the commercial lending marketplace to deliver results and savings.
- Current Rent Roll
- Last 3-Years of P&L Statement
- Property Address
- Sponsor Information
- CapEx Schedule for Last 5 Years (if available)
- Current Rent Roll (with lease start/end dates and sq/ft for each tenant)
- Last 3-Years of P&L Statements
- Property Address
- Sponsor Information
- CapEx Schedule for Last 5 Years (if available)
- Tenant Sales (if required to report)
- Most Recent Trailing (12) Month Income and Expense Statement
- Prior (3) Years of Income and Expense Statements
- Most Recent STR Report
- Summary of Franchise Agreement
- Historical Occupancy Report
- Sponsor Resume