5 Ways to Learn How to Do Commercial Mortgages

In my previous posts, you’ve probably seen my comment, ‘Now is the time to start thinking commercial’. Whether you’ve never done one or have only a working knowledge and you’re interested in taking the plunge, here are 5 ways to learn about and to start doing commercial mortgages.

While most of my discussion relates mainly to residential mortgage agents/brokers looking to expand their product offering these could apply to anyone looking to get into this side of the business.

Two things to consider when looking at each method;

1)     Time. Consider the time commitment involved and weigh the benefits versus the opportunity cost. Will the time ‘getting up to speed’ in commercial affect your residential business and clients negatively? Will you be missing potential residential opportunities while learning about commercial? Is it worth it?

2)     Volume is critical to learning. The key is to get exposure to as many commercial files as possible and to build up a ‘mental database’ of deals and get the experience that you can draw from to help you with the next opportunity. The more deals you can review whether or not you close them, the better. You get to see not only what CAN be done but also what CAN’T be done and why.

So here (IMO) are 5 ways to learn about and to start doing commercial mortgages. I’ve listed some Pros and Cons for each:

1. Do the deal yourself.

·        You can earn more per deal but you would give up on potential volume as you work thru each one learning as you go. While these deals do take more time, generally, speed and accuracy when necessary is important. Depending on your level of experience this way could be frustrating to not only you but the lenders and the client as well and could cost you deals.

·        The opportunity cost here could be very high as you won’t be as focused on your residential business.

·        Getting the volume you need to build that ‘database’ would be challenging this way.

2. Take courses to better educate yourself on how to do them.

·        While education and training are critical especially on an ongoing and continuous basis there's only so much you can learn from a book or a classroom.

·        Again, what is the cost in doing it this way and are you seeing the volume needed?

3. Work for a lender like a big bank or life co that does these all the time. Either in their commercial mortgage department or as a small business/commercial lender.

·        This may be radical but if you’re looking for a change, you will benefit from training and gain exposure to many different types of deals. This is my experience; I had been an independent broker for 1 year before I rejoined a major FI’s commercial mortgage division. I worked there 6 years before coming back to the broker side.

·        You tend to focus on the traditional asset classes (multifamily, light industrial, retail, mixed-use, office). Any of the deals that fall under the 'Other' of 'Everything Else' bucket you likely won’t be able to do since most Banks are traditional lenders and are very conservative.

·        The experience is invaluable since learning from a more conservative approach and forming your foundation this way and then relaxing your approach as a broker is easier than doing the opposite.

4. Work for an established commercial brokerage or firm that does these deals.

·           You would be surrounded with knowledgeable and experienced brokers which is invaluable. BUT, you have to find a firm that is willing to train and coach you along the way.

·          If you are 'green' there's still the learning curve so time will be a factor, but you will benefit from being in the right environment.

·        Depending on the firm you're with you may get to see a lot of different types of deals.

5. Partner up with an established commercial broker and develop a working relationship where you not only can gain knowledge and experience but you can earn money from day one. This is the best way IMO.

·        If you're an established residential agent/broker and want to expand your product offering by adding commercial deals partnering up with a commercial broker would yield the best return in the shortest amount of time.

·        Focus on Business Development activities and build/enhance your referral network. Learn what to look for and possibly develop a niche.

·        Gain knowledge as you go along and focus on building your capability. You can still focus on your res business, refer the commercial deal and share it with the commercial broker. As you close each deal, ask your new partner to walk you thru the file so you get an understanding of how it’s done.

·        The opportunity to see more deals this way is greater.

·        The only downside is you won't make the full commission on each deal. However, you will make it up in volume and making a portion of something is better than making 100% of nothing.

Hope this helps; if you have any questions or want to discuss a deal, please contact me.

Ermanno Tasciotti

Feb 2018