Finding financing for commercial real estate deals can be a laborious and time consuming, if not expensive experience. The traditional ways of using loan brokers can be frustrating and sometimes futile. By doing some research, I found a terrific resource for funding commercial real estate deals that cut out the middle-man thus saving me a lot of money and headaches.
I found out about finance companies when I was doing the Addison Business Center deal, a $48,000 floater that I eventually borrowed 100% on. I was dealing with the mortgage broker who had done some leasing for one - I'd even leased him some space in the center. So, of course, I called him up and gave him a shot at getting me a loan.
The first four places he tried were the same banks that I'd told him had already turned me down. I thought that was kind of strange, so when he reported back, I asked him about it and said, "I thought I told you not to bother with those banks." He said, "You're a well-known commodity, so I just thought I'd take another shot at them."
I continued, "Okay. Who else have you got?" He says, "Of course, I've got plenty of other sources - more finance companies, insurance companies, the works!"
Two or three weeks went by and he didn't bring me any quotes. When I called him on the telephone and asked how it was going, he responded, "It's kind of a slow market right now. I'm hoping to have something for you by the end of the month." "Well," I said, "The end of the month is too late. I have to get a quote pretty quick because I must have a commitment by the end of the October, if I am going to close in January, wouldn't you say?" Although he agreed with me, he still wanted me to give him until the end of the month, but I didn't-I fired him on the spot.
That morning I had been in the library, where I saw a ten- year-old book bigger than a video projector entitled, "Crittenden Real Estate Finance Directory." It was a reference book-you couldn't check it out, but I figured I needed my own copy of it.
When the book arrived and I started going through it, I was like a kid in a gigantic candy store. They had a page for every lender in the United States-the little banks and the big banks, the finance and insurance companies, all the pension funds-everybody.
So, I started through the book, looking for what their criteria was-in other words where would they lend, how much or how little would they lend, what kind of loan-to-value, and what kind of debt coverage ratios did they use. I started writing everyone who seemed to meet my criteria. A number of them responded by saying they would make 100% loans with the right setup. Five days later, I received a call from a guy at the Abacus, which tells you how far I got in the book.
A finance company in Chicago was owned by H. G. Heller, which is a huge finance company owned by the Fuji Bank and, at that time, was the biggest bank in the world. The guy at Abacus quoted me right over the phone. He says, "I'll follow this up with a fax and then I'll ship documents to you. If you fill them out and ship them back immediately, I can have a commitment for you within 10 days." I said, "Wow!" Now, if I'd been going through my mortgage broker, that would have cost me a point-and a point on $3,200,000 is $32,000.
Instead, I spent $300 on a book, wrote letters for four or five days, then talked on the telephone for 20 minutes, and got this great deal.
You can find other reference books like this, but I still think that the Crittenden Directory is the best. You can also find it online at crittendenonline.com. They have all kinds of products and even carry newsletters from all sorts of lenders, including insurance companies.
They still have the original three major directories: the Crittenden Directory of U.S. Real Estate Financing, the Directory of U.S. Investors and Buyers, and the Directory of U.S. Retail Space Users. Each of these cost about a $1,000. The last one I bought was three years ago and it was on a CD-ROM, which is very cool, because you can quickly search it.
This directory lists all active lenders across the U.S. that make commercial loans. It includes contacts for construction loans, joint ventures, acquisition and development loans, and much more. They'll lock in the rates when they have a written commitment. Brokers are accepted, but not given preference. It gives you the contact information on everybody.
This is the killer. Until I met up with the Crittenden Directory, I thought that mortgage brokers had many better contacts than I could ever have! Not true any longer, that's for sure.