Commercial Real Estate looks different these days. The industry has fluctuated significantly since the CRE market began to reopen toward the end of the COVID pandemic. Inflation is at its highest level since the early 1980s. In response, the Fed has raised interest rates and will continue with more hikes, making many CRE deals harder to close. But CRE investors aren’t running for the hills. Instead, buyers see a future for properties and are ready to invest.
Current economic ups and downs aren’t being felt equally across all types of Commercial Real Estate. Industrial and multifamily CRE are thriving and are expected to do well as we move toward the fourth quarter. Retail and hospitality CRE are slowly rebounding now that travel has opened up. Rent is up across all sectors, making investment properties more lucrative. The office space sector is the area where investors are most worried. However, even office properties can be had for a great deal with the right help.
Navigating the CRE space these days is much harder to do alone. That’s why engaging a loan broker is more important now than ever. Loan brokers help you close your most important and challenging acquisitions. They work to unearth the best deals and make sure you’re positioned to cash in on them. Brokers help CRE investors make money and, in most cases, earn their commissions from the lenders, not from you. So you can get expert advice without paying expert prices.
So, how can a CRE loan broker help you find the best investments in a challenging economy? Read on to find six solid reasons to find a loan broker who will help with your next buy.
Brokers Work with Multiple Lenders
If you want to work your deal with multiple lenders, a broker is the way to go. Brokers know which lenders are ready to move on to the next deal and which deals those lenders are looking for. This helps to match your deal with the best offers. Instead of shopping your deal to lender after lender, attract lenders to you and eliminate the runaround.
Your broker will help you build an application package that’s enticing to lenders. Then, you can present that package to the lenders that fit your needs. The alternative is filling out the application again and again based on slightly different questions for each new lender you come across. Some of those lenders might not be ready to commit or have specific requirements and preferences they don’t list on the website. That means wasted time and energy on your part, and possibly credit inquiries that damage your ability to get the right loan.
Brokers Identify Opportunities
When you’re looking to invest in CRE, the first thing that comes to mind is probably a corporate bank loan. But that’s not always the best choice. Big banks have tightened their lending requirements in response to increased interest rates. That means getting a big bank loan is more competitive than it has been in the past. Your local credit union or a private lender could be where the best deals are instead.
The federal government is busy making adjustments to more than just its benchmark interest rates. Federal agencies like the Small Business Administration are implementing economic incentive programs to keep small businesses afloat. A broker will have all the latest information on SBA and USDA programs that can save you capital on your CRE investments. Instead of guessing, work with a professional. Brokers do the work to identify opportunities that suit your business.
Brokers Demonstrate Pathways to Growth
Your CRE investment isn’t just a one-time purchase. Whether your intent with CRE is for long-term profit or short-term flipping, your broker will demonstrate short and long-term pathways to growth that you can cash in on. If you’re torn between two promising offers, a broker can show you which will pay off better down the road and what deals to strike on before they go away.
Should you hold off on CRE until your business is better positioned? Are there simple changes you can make now to make your offer more attractive in the future? How can investments now be leveraged for growth? When you get the help of a qualified broker, the answers to these questions should become clear. Talk about your goals now and where you see your business five, ten, or twenty-five years from now.
Brokers Access Off-Market Deals
Owners with properties to sell don’t always put them on the market. There are a few reasons they don’t. One is to save capital on listing agent fees. Going directly through a CRE broker eliminates real estate agent costs. The owner can also save time weeding out unqualified offers by going through a broker instead of advertising the property. Posting a “vacancy” sign outside of an office building can give current tenants the impression the building is losing business. Keeping the property off-market may help retain existing renters.
You won’t find off-market deals through LoopNet, PropertyShark, or other CRE listing sites. So, it’s hard to research off-market deals on your own. Presenting your deal through a broker gives you a competitive edge because brokers will only present qualified buyers. Less work for sellers means lower costs for you. Access budget-friendly properties you can only get through your CRE broker.
Brokers Have Local Knowledge
Great real estate isn’t always close at hand. Sometimes the best deals are outside of your local area. Markets aren’t the same everywhere, even under the same federal pressures. That’s another important reason to get a broker that operates in the city or town where you want to invest. Brokers know a whole range of factors it would take weeks or months to understand remotely.
As an example, the geology of a region has a bigger impact on CRE than most investors imagine. Property that seems like a stellar bargain might be priced to sell because it’s located in a flood plain. Perhaps it lacks foot traffic because of high winds or heat pockets in the area. Microclimate has a significant role to play in whether or not people want to live or work there.
Upcoming development plans, regional transportation access, and pending city legislation all affect how much your CRE will be worth. Nobody is in a better position to understand these circumstances than a broker who has lived and worked in the region for years. But these aspects aren’t just important when you’re hunting properties across state lines. Unless you’re in the business of keeping your finger on the pulse of CRE in your city, the local knowledge of a broker is priceless in your hometown as well.
Brokers Identify Risks and Opportunities
You probably already know a lender won’t approve an incomplete application. But you might not be aware that they don’t have to ask you to fill in the missing documentation and try again. Your CRE loan application can be denied outright if you lack all of the proper pieces. Working with a broker is another layer of review between your business and the lender.
There are certainly other obstacles to getting CRE funding beyond whether or not you have your application ducks in a row. Your business or personal credit score could be what’s holding you back. With the help of a broker, you can identify any trouble spots on your credit report. A broker can also tell you which of those trouble areas to target first to bring your score up fast. Should you free up the balance on that commercial credit card first or refinance for a lower mortgage rate? One will do more for your credit than the other.
Deciding to rewire the electrical system in your building without the help of an electrician is a bad idea (unless you’re an electrician). Fixing a cracked foundation without a contractor isn’t a good plan either. If you wouldn’t make these changes without the help of a professional, why invest capital in CRE without a knowledgeable broker?
Before you enter today’s competitive CRE market, have a conversation with someone from our team. We can help you craft an acquisition plan that’s right for your business so you can thrive in a challenging economy.
Recent Comments