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You don't have to be Warren Buffet or a Wharton MBA grad to become a commercial mortgage broker. Like all businesses this is a competitive field and you need to work hard and know your craft in order to succeed in your plans to become a commercial loan broker.
The main areas/skill sets you need to master are: 1. A strong lender network. 2. Some type of reliable deal flow i.e. marketing program. 3. You have to be an expert at prescreening deals.
Becoming a Commercial Loan BrokerHaving strong relationships with your lenders is key. Although this would seem like common sense, many people in the business do not practice this, to their detriment. You need quick, thorough decisions. Having your files on top of their pile is ideal. If the bank representative doesn’t respect you, they’ll think you will waste their time on deals that have a very low chance of closing.
Become Commercial Mortgage BrokerMarketing is fundamental. You need to compete on a lot of transactions in order to find fundable deals and ones in which you can have some control over. Obviously there are many marketing methods out there. The traditional method is developing relationships with the local developers, commercial real estate brokers, CPA’s, attorneys, bank representatives, etc. This is probably still the best way, though it does takes a lot of time and is one of the harder methods as you may work on a relationship for some time before the referral source even has a chance to “throw you a bone”. Newer methods include mailers, email campaigns, ads in newspapers, etc. Regardless of which route you go you need some type of program to keep that phone ringing.
Becoming a Commercial Mortgage BrokerThe amount of time and effort that goes into most deals is significant. Knowing how to examine and analyze a loan request is critical. You can easily waste hundreds of hours on loans that have no chance, that's 0% chance of closing. Probably 50% of the loans we screen are not fundable – period. The reason? It's normally some combination of loan to value being too high, credit scores too low and here’s the big one that all of us trip over, the borrower not being able to document enough income on their tax returns. Showing income for most entrepreneurs to the IRS is often like a spy revealing its secrets in an interrogation. And there is definitely an “art” side of reporting income from the CPA perspective. CPA’s have some freedom on how they report income and will often put together tax returns in completely different ways.
So, you need to be very good at reading the borrowers tax returns to figure out if you have a viable deal.
Many inexperienced brokers "walk" from fundable deals, simply because the net business profit is negative on the business tax returns. Many of these loans are doable but the broker just doesn’t know how to get “deep” into the tax returns and find the income that is there and is often being sheltered or having items reported twice that can be added back to increase the income that can be used for underwriting, to service the debt.
We offer a few training programs that may be of help in your plans to become a commercial mortgage broker. Check out our commercial mortgage broker store for details.
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