In order to invest in commercial real estate, you need to have a basic understanding of commercial loans. Do you want to know more but don't know where to start? Join us for this week's episode! Will Oldham, show host Jonathan Twombly's own commercial mortgage banker, explains commercial loans. He breaks down the process of obtaining a commercial loan, different types of commercial loans, how he advocates for his borrowers and more! He provides a wealth of knowledge on commercial lending that you simply won't want to miss.

Steps to obtaining a commercial loan

In order to secure a commercial loan, the borrower must first know his goals - is this a long-term deal, or a short-term flip? What is the most important - dollars or a lower interest rate? Once the borrower knows his goals, the loan officer begin to collect initial due diligence information. This includes things such as property information, history on the borrower, and net worth.

Once this is compiled, loan officer create a debt financing package to send to lenders. In Will's case, he tries to be creative, presenting his clients' stories, advocating for them to the lender. His job is to know what each lender is looking for and present them a deal that will be tailored for them. He explains why his borrower is a good fit for their loan.

How a first time buyer can increase his chances of obtaining a commercial loan

Commercial mortgage bankers increase new or early buyers' chances of obtaining a loan by knowing what each lender is looking for and advocating for borrowers. In addition to this, Will says that being transparent and upfront is vital. Deals need to be accurately presented to lenders and numbers correctly represented.

One hurdle less experienced borrowers face is not having enough net worth or liquidity. Lenders want to see borrowers with the financial ability to stick it out with a property, even if it is going through a hard time. Having partners or investors sign with you is a good way of increasing the chances of obtaining a loan.

The different types of commercial loans available, and when to use them

There are four types of commercial loans: agency loans, life insurance company loans, bridge deals, and CMBS loans. Agency loans are traditionally longer term holds - 10-year fixed rate loans. These are mostly used for multifamily properties, and they are long-term and higher leverage. Loans through life insurance companies are typically lower leverage deals and are more conservative in their underwriting. They max out at around 65-70% loan to value, but their interest rates cannot be beaten. Bridge deals are tailored to shorter-term flips and are very aggressive. They allow you to borrow up to 80-90% of the cost on a two or three-year deal. Last are CMBS loans, which are higher leverage and longer terms. They are typically used for other property types than multifamily.

Listen to this episode to hear more details about the different types of loans to discover which is best for your next deal.

Where is the market going, and what does this mean for you

There is a rising interest rate environment in today's market. Will explains that the US 10 Year Treasury Note is the basis for rates, and it is currently the highest he has seen in his career (though he says historically, it is still low). He is still seeing plenty of deals with interest rates in the 4-5%, and he does not see huge changes within the next few months.

Will says that he is currently pitching to borrowers looking at long-term investments to do a long-term fixed rate deal. This allows for a steady rate throughout a borrower's term in a market that has no downward pressure.

In This Episode Will Oldham says...

• [3:56] The process to getting to a commercial loan
• [7:41] Tailoring the presentation and package to what a specific lender is looking for
• [10:40] Metrics commercial lenders must follow
• [17:14] How to increase a first time or early buyers chances of finding a commercial loan
• [20:42] Why net worth is important
• [24:35] Different types of loans available
• [28:16] Benefits of using each type of loan and when to use them
• [36:58] How to exit loans and different types of prepayment penalties explained
• [42:27] Explanation of what Will sees in today's market

Resources Mentioned In The Episode

• [email protected] - Learn to be an asset manager and Investor
• Bellwether Enterprise(sponsor) - contact Will Oldham will(at)bwecap.com

Connect with Will Oldham

• will(at)bwecap.com

Connect With Jonathan and Real Estate Launchpad

• To invest with me go to www.TwoBridgesMgmt.com/investors
• To learn from me go to www.MultifamilyLaunchpad.com
• Join my free Facebook community

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