10 Keys For Commercial Mortgage Brokering SuccessEd Craine
July 10, 2008 — 2,546 views
If I told you the secret to success in the commercial loan business was to kiss a frog would you do that? Keep this thought in mind for the next few minutes while you read this article. Over the past 25 years I've seen a lot of people come and go in the commercial loan business. Most didn't do very well. Some did okay. And a few have thrived and done extremely well. How did they do it? What separated them from the rest of the pack?
What I'm about to tell you is likely to shock you in its simplicity. Why do I say this? Because when I train people on this topic or talk to agents who want to know what advice I can give them, 9 out of 10 shrug off what I say. They give me polite, interested nods and make a few pleasant comments, but then within minutes their eyes glaze over. They're thinking about their shopping list, their next appointment, or a beach in Tahiti. They think there's more to it than this, that there's some kind of secret formula like kissing a frog that either I don't know, or I'm not telling them. Ultimately they think that qualified leads and closed transactions should rain down on them like manna from heaven.
I'm going to give you the top 10 tips that I have observed and used in my own career as well as some implementation ideas. Follow these tips with consistency and desire and you will succeed.
Tip 1. Educate Yourself
Commercial lending is a complex business. The tools are very different from residential lending and even commercial sales. If you don't educate yourself on the basics and nuances of the commercial real estate market and its players, you will most assuredly not do well in commercial lending. If that's okay with you, you can skip the rest of this article.
There are numerous ways to educate yourself. Here’s a short list. Read everything you can about commercial lending and real estate. The various Crittenden Reports are a great place to start. Attend commercial real estate and lending industry trade shows and conferences. Sign up for seminars given by commercial lenders. Take classes offered by NAMB (National Association of Mortgage Brokers), CCIM (Certified Commercial Investment Member), Lorman Seminars and private companies that specialize in this area.
Tip 2. Get Hands On Technical Experience
Are you still with me? Excellent. While you’re educating yourself, get as much hands on experience in evaluating deals and clients as you can. Shadow a successful broker or loan officer. Go on appointments with him or her. Pre-screen potential deals, observe client behavior, volunteer to help process loans, volunteer to assist an underwriter. Be willing to work hard for little or no money while you learn.
Are your eyes glazing over? Are you thinking “He wants me to work for nothing?!” Think about it this way, when a person wants to become a doctor, he or she goes through three years of medical school paying up to $50,000 a year and then they work as a resident for another three years while receiving substandard pay. All this to learn their profession.
Tip 3: Find a mentor
For many of the most successful people I've seen in the business, this is the key to their success. Finding a good mentor can be the fastest way to learn the business. Ideally, your mentor will be both a role model and an advisor. The easiest way to find a mentor is to work for a company that is active in commercial loan brokerage and has a reservoir of knowledge and experience. Alternatively, find a commercial lender willing to show you the ropes.
Tip 4: Find the right broker
It goes without saying that you want a broker experienced in commercial lending. But also think about other things like what's the company's philosophy. Their reputation? What training do they provide? Do they have the resources and time to help me? Will they support me in doing residential loans if I want to? Will they help me build my wealth as well as my business?
Tip 5: Build your network
There are three benefits to building a strong, diverse network. First, it can act as your sales force. There's no better source of business than a great referral from someone who knows you. Second, it will be a great source of your client support activities. Say your client needs a top-notch estate planning attorney, a 1031 exchange intermediary, or you name it. They'll value you as a great resource if you can help them. The third benefit is the support you derive for your own business. People who can help you with your own business needs like accounting, legal, printing and other needs that you will have throughout your career.
Here are some great ways to quickly build your database. Join real estate industry associations and trade groups, a local chamber of commerce, a service club like Rotary, and a business referral organization like BNI (Business Network International).
Tip 6: Choose a target market (or two or three)
You hear a lot about choosing a target market or niche in commercial lending or any other business. Most people talk about it like it's easy. I'm here to tell you it's not. For most salespeople and business owners I’ve trained, this is the hardest thing for them to do. The problems you'll have fall into three general categories. The first is that you can't figure out who or what you want to target. This is the equivalent of the “I don't know what I want to be when I grow up” problem. The second is that people are far too general in targeting. For example, they'll say “my target market is apartment owners”. My questions would be: In what geographic area? What size apartment property? What cost? What type of ownership? Refinance or purchase? Exchange oriented? Rehab oriented? Any target ethnic group? And on and on. Most people fear that specificity will lose them money. In fact, the opposite is more often true. The more you specialize, the more money you’ll make. The third category of problems is picking a target market that's too difficult to penetrate. They're either too hard to reach, or too costly to reach. An example of this would be if you're new in the business, have limited financial resources, and decide to target loans of $50M and up on regional shopping malls. Good luck, you'll starve before you close a loan!
Tip 7: Surround yourself with prospects
Now that you know your target market(s), it's time to get yourself in front of as many prospects as possible. There are a variety of ways to do this. Agents often think of the obvious like advertising, cold calling and direct mail. These are all useful but diffuse strategies. More efficient ways to meet prospects are joining associations or attending conferences that serve your target market. Depending on your target market, join a local Apartment Owners Association, BOMA (Building Owners and Managers Association) or CCIM (Certified Commercial Investment Member) chapter. Attend conferences like Crittenden or ICSC. Or you might consider giving or sponsoring seminars on topics of interest, like financing issues and 1031 exchanges.
Tip 8: Learn your prospects' burning needs
When you surround yourself with prospects, don't think first in terms of selling to them. Rather, spend your time finding their burning issues and needs. You might find that affordable insurance is an issue. Or maybe security is a problem. Perhaps it's ADA compliance. Or permitting issues. Whatever the issues are, you want to find the top 5 or 6 so you have not only a better idea of what your prospects need but also how you can help them. This is a most appreciated way to make yourself a value added and key service provider.
Tip 9: Build a critical vendor power team
After you discover your prospects' burning issues and needs (other than financing), build a team of critical vendors who are providing the products or services to fill these needs. The most successful loan agents will have 5-7 such professionals that they work with closely. They will work with these providers in collaborative ways to help meet clients' needs and to refer each other business. Let me give you an example of a team to illustrate this. Say your target market is apartment owners of 5-20 units in North San Diego County. Your team likely would have a property and casualty insurance agent, investment real estate broker, property manager, real estate attorney, estate planning attorney, and CPA all specializing in this specific market.
Tip 10: Serve your market
Your goal here is to provide benefits to your clients and prospects that go beyond financing. You want to give them information of value like rent surveys and sales comparable information. You also want to be able to refer them to other service providers who can help them with their burning issues. The more you serve your clients and prospects with timely, useful information and referrals, the more your reputation and your business will grow.
So there you have them. Ten things that will lead you to the kind of commercial lending success that others would die for. The only catch is that there is one secret formula that I haven’t mentioned: You! All of the successful commercial loan agents I know found a way to put these common ideas into practice. I have found that unusual success comes from the uncommon application of common ideas. Your success is in your hands. Will you find a way to hold onto it and shape it and mold it? Or will you let it slip away? I’m betting that if you want it, you will find your way.
Ed Craine is the CEO of award winning Smith Craine Finance, one of the oldest independent Mortgage Companies in San Francisco, California. A 25+ year veteran of the real estate financing industry, Ed has originated and negotiated loans in excess of $2 billion, to include both commercial and residential properties. He has simultaneously held such notable positions as Vice President of the California Association of Mortgage Brokers (CAMB), as well as serving as the Public Relations Committee Chairperson of the 5,000 member strong association during 2007, the year in which the mortgage industry received more media attention than in recent history. Ed currently also serves as 1st Regional Vice President of the Certified Commercial Investment Member Institute (CCIM). He will be inducted as Vice President of the Southwest Region of CCIM in September 2008.