These skills enable brokers to estimate and analyze financial performance, return on investment and property value while negotiating deals more effectively. Quick calculations of the net operating income, the capitalization rate or the debt-service-coverage ratio, for instance, will enable the mortgage broker to demonstrate a higher level of professionalism to a potential client.

“There are about 25 commonly used financial ratios. Several of these are regularly employed when analyzing the performance of a potential commercial real estate investment.”

While these skills may be rudimentary for veterans of commercial real estate finance, those who are new to the business — or even a residential mortgage originator who dabbles in commercial deals — will need to immerse themselves in the basics. A solid grasp of accounting is useful when participating in this field.

Investment analysis

At the heart of financial analysis is an understanding of the financial ratios that measure the relationship between two or more components in a company’s financial statements. These ratios provide a way to track a property’s performance compared to industry standards, identify potential problems and offer a basic report card on management.

There are about 25 commonly used financial ratios. Several of these are regularly employed when analyzing the performance of a potential commercial real estate investment. The following list of terms is not all-inclusive but offers some key areas that can greatly benefit commercial mortgage brokers in their day-to-day business endeavors.

The objectives of financial statements are to provide information about the fiscal performance and changes in the financial position of an organization. This information is crucial when making business and investment decisions.

Financial information is presented in a standardized manner through a set of accounting rules and standards for financial reporting known as Generally Accepted Accounting Principles (GAAP). Much of the information about a company will be found in three common financial statements: the balance sheet, income statement and statement of cash flow.

Balance-sheet basics

The balance sheet is one of the most essential tools in the analysis process. It provides a detailed report of a company’s assets, liabilities and shareholder equity at a specific time, such as the end of the year.

This statement, however, does not show the trends playing out over a longer period of time. Consequently, the balance sheet should be compared with previous periods. By using financial ratios to examine the balance-sheet information, additional insights can be uncovered about a property’s financial condition.

The balance sheet places assets on the left side of the equation, with liabilities and shareholder equity on the right. The resulting equation is assets = liabilities + equity. The accounting equation can be read as assets – liabilities = equity.

The balance sheet is divided into current assets (converted into cash in one year) and long-term assets (converted into cash beyond one year). The accounts are arranged according to their liquidity and the ease with which the assets can be converted into cash.

A liability is any debt a company is obligated to pay. This may include debts to lenders and suppliers, rent and salaries. Long-term liabilities include the total amount of any debt due beyond one year. This will include all debt that’s amortized over a multiyear period.

Current liabilities include the portion of debt due within the next 12 months. As an example, if a company has nine years left on a mortgage for its office building, one year of this obligation is classified as a current liability and the remaining eight years as a long-term liability.

Digging deeper

Other aspects of the balance sheet include equity, which is the net asset value for the shareholders of a business. Net assets are the total assets minus liabilities.

Don’t overlook the balance-sheet footnotes. These offer information on assets, debts, accounts, contingent liabilities and background details to explain the financial numbers.

“These skills enable brokers to estimate and analyze financial performance, return on investment and property value while negotiating deals more effectively.”

An income statement is another essential part of reporting a company’s financial performance. The income statement shows the total income generated, all related expenses, and the resulting profit or loss during a particular period (such as a month, quarter or year). This statement provides insightful knowledge of a firm’s operations and performance in relation to prior periods and industry peers.

Also crucial is the cash-flow statement, which is a report that reflects the amount of cash a company generates from its ongoing operations. It might be the most valuable of all statements since it tracks cash flow through the business in three key ways: operations, investments and financing.

Measuring profitability

A key financial metric used to measure the profitability of an investment property is net operating income (NOI). It represents the income generated by the property after the operating expenses are subtracted. To calculate NOI for commercial real estate, subtract the property’s operating expenses from its gross rental income.

Operating expenses include property taxes, insurance, maintenance, repairs, utilities and property management fees. NOI is used by lenders to determine the maximum loan amount they’ll approve based on the property’s income-generating capacity. (In equation form, NOI = gross rental income – operating expenses.)

The debt-service-coverage ratio (DSCR) measures the cash flow available to service the property’s debt. It is calculated by dividing NOI by the annual debt-service payments. A property with NOI of $750,000 per year and debt service of $600,000 per year has a ratio of 1.25 (DSCR = net operating income / total debt service).

A DSCR of 1.0 means the property generates enough income to cover its debt obligation. A ratio of 1.25 or higher is normally considered an adequate ratio for commercial real estate investments.

Measuring risk

A property’s net operating income is also used to determine the capitalization rate, or cap rate, which measures the anticipated return on a property’s investment income. It is calculated by dividing the property’s NOI by its market value.

Take, for example, an investor who wants to purchase a shopping center that generates $375,000 in net operating income and is valued at $7.5 million. The formula is cap rate = net operating income / property value, which in this example would equal 5%. This means that the property generates a 5% return on investment based on its income.

An investor can also calculate property value based on a desired rate of return. Using a 5% cap rate, the value of the same shopping center can be estimated as follows: value = NOI / cap rate. In this case, the value equates to $7.5 million.

The cap rate is useful for comparing the relative values of different commercial properties. A higher cap rate generally indicates a higher return on investment, but it’s also typically associated with higher risk.

Measuring returns

Two more key terms to remember are return on investment (ROI) and cash-on-cash (CoC) return. ROI is used to measure the profitability of an investment. It is determined by dividing the net income by the total amount invested. The higher the ROI, the better the deal for the owner.

Finally, to measure the cash income earned from invested capital, a broker can use the cash-on-cash return. CoC is calculated by dividing a property’s annual pretax cash flow by the total cash invested.

For instance, let’s say an apartment building costs $7 million with a $1 million downpayment. The building generates $150,000 in annual pretax revenue, so the CoC return is $150,000 divided by $1 million, which equals 15%.

The CoC return means that the cash income earned on the building is 15% per year. Once again, the higher the return, the better the investment.

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The various ratios discussed here are important tools for analyzing the financial performance of commercial real estate. Like all tools, however, there are limitations. They are often based on past performance, may lack comparable data and may not offer enough information to identify an emerging trend. They also don’t reveal all of the relevant information about a company’s past, present or future.

Successful commercial mortgage brokers will use these tools and more to analyze a client’s investment prospects. Brokers need to understand a property’s history and be able to speak the language of financial analysis in the business environment. In other words, to know your numbers is to know your business. ●

The post Know Your Numbers appeared first on Scotsman Guide.

As a mortgage broker engaged to procure financing, one must have the ability to determine market values, especially in a fast-changing environment. Borrowers and lenders alike rely on brokers to guide the conversation around property values, thus determining the ability to finance these assets.

While some lenders will require an appraisal, a broker’s opinion of value will hold more weight when working with a private money lender. There are two primary methods for valuing commercial real estate — the income approach and the sales approach — that brokers should thoroughly understand.

Income approach

The income approach dives deep into the financial health of a property. It is a fundamental method for appraising a variety of income-producing properties, from office buildings and warehouses to apartment communities and shopping centers.

This approach estimates value based on the current income or the future income to be generated by the property. The primary components of the income approach are the net operating income (NOI) and the capitalization rate.

“As a mortgage broker engaged to procure financing, one must have the ability to determine market values, especially in a fast-changing environment.”

NOI is calculated by subtracting all operating expenses (excluding mortgage payments) from the property’s gross income. Operating expenses include property management, maintenance, insurance, utilities and property taxes. While each asset has its own specific expense structure, it is common for expenses to range from 25% to 50% of the gross income.

Take, for example, an apartment building that collects $150,000 a year in gross rental income and has expenses of $50,000 (a 33% expense ratio). In this instance, the NOI totals $100,000.

The capitalization rate, meanwhile, represents the investor’s expected rate of return on a property and is one of the most widely used formulas to determine value. To calculate the cap rate, divide the NOI by the property’s current value. If the aforementioned apartment community with a yearly net income of $100,000 is valued at $2 million, the cap rate is 5%.

Conversely, an investor seeking to purchase a property can determine its value based on their desired rate of return. If an investor requires an annual return of 8% on the same apartment building, for example, they would divide the NOI of $100,000 by the cap rate of 8%. This would lower the estimated value of the property to $1,250,000.

Cap rate expectations

Although cap rates are subjective and are based on an investor’s required profit margin, there are generally accepted cap rates throughout the marketplace. Over the past few years, investors have typically used cap rates of 4% to 9% to determine values.

Typically, lower cap rates are used for higher-quality properties in primary markets that are considered safer and thus yield a lower return. Conversely, higher cap rates are used for lower-quality properties in secondary and tertiary markets where investors need a higher yield to compensate for the additional risk.

Since cap rates adjust based on location, demand and interest rates, it’s important to stay up to date on currently acceptable ratios. As a rule of thumb, cap rates are typically 1% to 2% higher than current interest rates, which saw historically fast upward movements from 2022 to 2023.

Be sure to reach out to local sales brokers to get a good sense of market cap rates. You should also take advantage of the research reports published by major real estate companies (including CBRE, JLL and Cushman & Wakefield) that offer a variety of market insights.

The income approach is particularly valuable for income-producing properties as it directly considers the property’s potential to generate revenue. But it’s essential to have accurate income and expense data when calculating the NOI and selecting an appropriate cap rate.

Sales approach

The sales approach (also known as the comparison approach or market approach) is another common method to determine the value of a commercial property. This approach relies on analysis of recent sales of similar properties in the same market to estimate the subject property’s value.

To begin, gather data on recently sold properties that are as similar as possible to the subject property in terms of size, location, age and use. These properties are referred to as “comps” or “comparables.” This information can be provided by real estate brokers, collected from public records, or downloaded from data aggregation services such as CoStar or Crexi.

Once this information is collected, the focus turns to the price per square foot (PSF). For example, if a similar property of 10,000 square feet recently sold for $1.5 million, the PSF is $150. Determine the PSF for each of the comparable properties and calculate an average. Once you have an average PSF, a value for the subject property can easily be determined.

While the sales approach is relatively simple and straightforward, there are a few items to consider to ensure that values are accurate. First, make sure the comparable properties are truly comparable. For example, one should not compare a property built in 2020 with one from the 1960s as the values will be drastically different.

You could have two identical buildings that are in different locations, which could equate to vastly different values. Always remember the old adage of “location, location, location,” as investors are willing to pay higher prices for real estate in better locations.

The sales approach is particularly useful when there is an active market with a sufficient number of comparable sales. Naturally, it may be less reliable for specialty properties, or ones that lack recent comparable sales data.

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Until the commercial real estate market stabilizes, it will continue to be difficult to obtain financing for transitional and cash-flowing properties. Mortgage brokers who master these valuation approaches will thrive by helping clients make informed decisions, maximize returns and secure favorable debt for their real estate portfolios. ●

The post Make the Math Work for You appeared first on Scotsman Guide.

The novice approached the two luminaries and asked, “If you could name one thing that is responsible for your success, what would it be?” He expected the billionaire businessmen to speak about the importance of hard work or maybe discuss secret metrics for success. The answer that each provided simultaneously surprised him. It was one word: focus.

“The preliminary discussion to have with a client — before considering any other contingencies — centers on whether a deal has legs.”

Buffett and Gates are legendary for their abilities to cut out all the noise and focus on top priorities. Each of them are incredibly protective of their time and are very selective about what they work on.

Steve Jobs, arguably one of the most successful business leaders of our time, had the same take-no-prisoners focus. When Jobs returned to Apple in 1997 as its CEO, he famously reviewed the scores of product initiatives being pursued at the time and eliminated almost all of them, distilling the company’s focus down to what would become four iconic products.

What does this have to do with commercial mortgage brokers? Everything. Brokers who want to get deals funded and maximize their incomes need to focus on the loan requests that have the highest chances of success. Of course, this is easier said than done.

Picking winners

The most successful mortgage brokers are protective of their time and only focus on viable loan requests. Part of this process is to learn how to spot the winners. Another aspect of the process is being comfortable with saying no. This may entail learning some new habits — or breaking old ones.

When brokers receive loan requests, they need to understand the good, the bad and the ugly of each potential deal. From there, they need to make calls on whether the loans are fundable.

Brokers could go through the files and look for liabilities — tax liens, ownership glitches, credit issues, etc. — and ponder whether these problems can be resolved. Then they could run the numbers to see if the files are workable. But there are other, more efficient ways to get the job done.

Right questions

The preliminary discussion to have with a client — before considering any other contingencies — centers on whether a deal has legs. There are some crucial questions you will need to ask.

Does the loan request fall within the chosen lender’s parameters?A broker needs to determine whether the loan request  is too high or too low for the lender in question. Work with the borrower to hammer out what’s needed in terms of the loan amount or terms. A lender won’t want to fund a deal if the borrower doesn’t have a plan. For example, borrowers who put “max LTV” in their loan requests probably don’t have explicit uses in mind for the additional leverage.

Will the project at hand service the debt at today’s interest rates? One of the first things a lender will do is a debt-service-coverage ratio (DSCR) calculation. Head off an instant rejection by beating them to the punch.

For example, with bridge loan rates hovering in the 11% to 12% range today, do a quick calculation to find out whether the borrower’s income will cover the debt. Brokers can simply take the requested loan amount and multiply it by the interest rate to get a picture of what the annual interest payments will be. Compare this figure against the borrower’s net operating income.

If the proposed loan won’t allow for a positive DSCR, formulate a strategy for the borrower that could make the request more appealing. For example, look at their profit-and-loss statements or tax returns to find items like depreciation or one-time expenses, which can be added back to the equation to enhance net operating income. An interest reserve, which is a capital account created by the lender to fund the loan’s interest payments for a period of time, is another option if the borrower has a solid story.

Right metrics

Brokers also must determine whether the property qualifies under the lender’s parameters. The disconnect between the borrower’s estimate of property value and the appraised value is one of the more common reasons for a deal to fail. Yet the lender’s quote for loan-to-value ratio, cash out and the total funding amount all hinge on this estimate being realistic.

Consider whether the metrics the borrower is using are reliable. For example, the purchase price of the subject property will control the valuation, regardless of whether the borrower thinks the property is worth more. When a borrower says a property is worth $3 million but the purchase price is $2 million, a lender is not going to approve $2.5 million for the purchase.

In addition to valuation, there are many factors related to the property that need to be fleshed out. The location is key for determining population and other demographics. Tertiary markets — some suburban and most rural areas — are difficult to qualify in today’s market and may result in a quick rejection.

Crime statistics can come into play. Take, for instance, a property that was in an area where a resident had a 1 in 13 chance of becoming the victim of a violent crime. The lender passed.

Asset class also can impact a lender’s interest. Office properties are difficult to fund now, so these deals will require extra effort to persuade a lender. Look at all fundamental performance metrics to determine whether the property is worth the time.

It’s always wise to check the borrower’s numbers. Find historical financial reports and see whether the property’s income has gone up or down over the past few years. Resolve the red flags that will inevitably come up during underwriting, so you don’t waste time on a deal that’s not viable.

Borrower qualifications

Does the borrower have the qualifications the lender is seeking? Different lenders have different expectations for their borrowers. For many, prior experience in the asset class is paramount. For others, it’s liquidity, and for others, it’s credit. A common example with a bridge loan is to require the borrower to have a net worth equal to or greater than the loan amount, with liquidity — cash in the bank — that’s at 10% of the loan amount.

The borrower’s character also comes into play for some lenders. A cursory search can uncover a criminal background or a history of litigation. It’s always better to discover these issues before the lender does, so you can let go of a deal with a fatal flaw.

When working with multifamily properties, take a moment to Google the property address to see what the ratings and reviews look like. This is a way to catch badly managed properties and uncover elevated crime statistics. If you find something negative, see if there’s a good explanation for it.

From there, dig in and see if other red flags come up. If the lender likes the borrower’s story, there’s a greater likelihood they may be willing to tackle some problems. But if the deal doesn’t have the fundamentals to begin with, there is virtually no chance of being funded. Why waste time resolving a situation that has no solution?

When you’re speaking with a borrower, learn to focus on what you need to know. This may require reading between the lines. For example, a borrower may offer up a recent appraisal of the property. From their perspective, this saves time and money while proving their valuation claims.

The lender will have a different perspective and several questions. Why do they have a recent appraisal? Was it performed for another lender? Did that lender turn down the deal? What has the borrower done to overcome an objection from another lender?

Letting go

Rejecting a deal is difficult because it’s counterintuitive to turn away business. But relying solely on volume is deceptive. It’s easy to get seduced into thinking that a risky deal is worth a phone call at the very least. One call won’t hurt, right?

Let’s say you have a little extra time. You make a quick phone call to a lender to float a so-so deal. Nothing ventured, nothing gained. One phone call leads to one rejection and zero income. The problem with this habit is that it’s not sustainable. A broker who makes 100 useless calls over the course of a year can wind up with a serious loss of income.

Your time would be better spent honing skills that will allow you to quickly identify the deals that will close. Brokers need to focus their time and resources on these types of deals. Let the others go before they steal your precious time.

It’s also a good idea to periodically evaluate how you get your leads. If brokers find they’re getting stuck with too many loan requests that are no good, they need to explore ways to improve their networking connections and put more time into marketing efforts.

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Commercial mortgage brokers don’t need to be successful billionaires to run their businesses like one. They can thwart the time thief. By focusing only on what’s important, they can improve deal flow, get clients over the finish line and revel in rising income.

At the same time, there are ancillary benefits for brokers who focus on the best deals. These include better business relationships, larger professional networks, and strong reputations with lenders for thoroughness and quality deals that are worth considering. ●

The post Escape the Time Thief appeared first on Scotsman Guide.

In Episode 017 of the Scotsman Guide Author Showcase, Carl White interviews Brian Vieaux of FinLocker about his article, “The Big Bad Wolf,” in the October 2023 issue of Scotsman Guide Residential Edition.

Brian Vieaux is president and chief operating officer of FinLocker. He is passionate about financial literacy and empowering lenders with digital financial tools to attract, engage and retain clients. His 28-year executive career in mortgage banking and extensive experience in building business channels have positioned him to help mortgage lenders execute an embedded finance strategy, transitioning from a transaction focus to one of continuous engagement.

The post Author Showcase: Brian Vieaux, FinLocker appeared first on Scotsman Guide.

If they aren’t addressed, these uncertainties can weigh heavily on the minds of borrowers and deflate their confidence in the lending process. In recognizing the transformative power of effective collaboration and communication, mortgage originators must prioritize both speed and quality in their interactions with borrowers.

“Each team member in the lending process should have a clear understanding of their role. This creates a sense of purpose, fosters accountability and builds trust.”

By breaking down silos and fostering teamwork, originators can navigate the challenges of today’s real estate market and set themselves apart from the competition. There’s power in collaboration — and there are tangible strategies that can propel you to claim that power with confidence.

Heart of success

Collaboration lies at the heart of success in the mortgage industry. By working together as a team, mortgage professionals can unlock a wealth of benefits and overcome the limitations of operating in silos. The power of collaboration stems from the collective knowledge, expertise and perspectives of individuals coming together to tackle challenges and achieve shared goals.

When originators work in isolation, it hinders progress and limits the potential for innovation and growth. They miss out on valuable insights and opportunities for synergy. Collaboration, on the other hand, fosters an environment where ideas can be shared, best practices can be exchanged and creative solutions can be developed.

“Cooperative community teams require regular strategy sessions to have open dialogue, exchange ideas and generate solutions.”

By embracing collaboration, mortgage professionals can enhance their ability to deliver exceptional client experiences. Collaborative teams have a broader understanding of the mortgage process and can provide comprehensive solutions tailored to the unique needs of their clients. This leads to improved client satisfaction, increased referrals, and long-term relationships built on trust and mutual success.

Collaboration in the mortgage industry is vital to overcoming the issue of declining home affordability and ensuing buyer uncertainty. Proactive and transparent communication between lenders, originators and other key stakeholders (such as homebuilders) can move borrowers away from fear and uncertainty and toward possibility and confident action. In short, concerns must be addressed head-on.

Clear and consistent

By establishing clear guidelines, defining roles and responsibilities, and creating optimal workflows, mortgage professionals can deliver a consistent experience for borrowers. Effective communication lies at the core of developing these protocols.

Clear expectations and channels for communication, such as regular meetings or dedicated platforms, allow information to flow seamlessly between all parties. This keeps everyone connected throughout the mortgage journey. Lenders must integrate into the entire process rather than becoming ancillary after the homebuyer has committed.

Each team member in the lending process should have a clear understanding of their role. This creates a sense of purpose, fosters accountability and builds trust. By working together in a coordinated manner, mortgage professionals can leverage their collective strengths and achieve common goals.

Creating a consistent and streamlined mortgage process is the ultimate objective of protocol development. By mapping out the steps involved, identifying potential bottlenecks and streamlining workflows, mortgage teams can be more efficient and make fewer errors. A consistent process ensures that borrowers receive a standardized and exceptional experience, regardless of the individuals involved.

Collaboration and input from all stakeholders are crucial in developing effective protocols. By engaging in open discussions, sharing best practices and leveraging the collective expertise of the team, mortgage professionals can establish protocols that are practical, flexible and aligned with industry best practices.

Power of community

One way to think holistically about collaboration is the concept of “community teams.” These are cross-functional groups consisting of mortgage professionals, real estate agents and other industry experts.

The purpose is to bring together individuals with diverse skills and perspectives to collectively tackle the challenges of the home purchase process. These teams facilitate effective communication, encourage knowledge sharing and foster a sense of camaraderie among all stakeholders.

Within community teams, mortgage originators have a unique opportunity to leverage the strengths of their peers. By collaborating closely with real estate agents, homebuilders and other parties, originators gain valuable insights into market trends, buyer preferences and challenges faced during the homebuying journey. These partnerships enable mortgage professionals to tailor their services, provide timely solutions and exceed client expectations.

Cooperative community teams require regular strategy sessions to have open dialogue, exchange ideas and generate solutions. Shared goals are developed in these sessions that promote a sense of collective responsibility and accountability while building relationships based on trust and mutual respect.

Mortgage originators can tap into a wealth of knowledge and resources with these community teams. It’s a nontraditional structure that should become the new standard of excellence in the mortgage industry by creating more personal and collective fulfillment.

Five practical steps

Enhanced teamwork among mortgage professionals is crucial for business success. By implementing practical steps to improve collaboration, they can foster a culture of teamwork and drive exceptional results. Here are five action items for achieving these goals.

Build open communication channels. Clear and open lines of communication solve the problems that break many teams. There’s no end to the networking tools that might work for your team, but technology evolves rapidly over time, so find what works without getting too attached. What matters most is to be prompt and consistent with team members and clients.

Align goals. This is vital to ensure that everyone is working toward a common objective. Clearly define team goals and objectives that align with the organization’s overall vision. Regularly communicate these goals to the team and emphasize the importance of collaboration in achieving them. This builds bonds that add greater purpose and unity for everyone involved.

Leverage shared knowledge. The purpose of collaboration is to expand access to information and ideas, which can snowball into an expansive vision beyond what any single person is capable of conceptualizing. Encourage the sharing of insights and best practices for the betterment of the group rather than glorifying gatekeeper behavior, which can isolate team members and derail everyone’s success.

Promote accountability. Create plans that communicate expectations and deadlines clearly and frequently. Accountability shouldn’t be viewed as micromanagement or limiting to someone’s sense of autonomy. Instead, view it as a system of support. Celebrate those who seek help since it’s a sign that people support each other and trust each other to perform well.

Cultivate cooperation. Encourage collaboration and cooperation by fostering a supportive and inclusive team environment. Recognize team achievements, encourage cross-functional collaboration and create time for team-building activities.

Avoid silo syndrome

The prevention of common and recurring mistakes can help to foster effective teamwork and communication. By recognizing the importance of open communication, breaking down departmental silos and leveraging technology, mortgage teams can navigate the challenges of today’s market and stand out from the competition.

In a complex and dynamic mortgage landscape, the industry demands seamless collaboration and effective communication among lending professionals, real estate agents other stakeholders. When it comes to the issue of affordability, lenders play a key role in reducing uncertainty. They have a unique opportunity to educate and engage homebuyers about the loan process, helping clients to feel informed and optimistic about navigating the journey.

By fostering a collaborative mindset and utilizing technology to bridge gaps and facilitate information sharing, mortgage professionals can break free from the silo syndrome. Embracing strong strategies will enhance efficiency, improve decisionmaking and ultimately create exceptional borrower experiences.

As mortgage originators begin to synchronize efforts with their teams, they position themselves to navigate market uncertainty with confidence. When they open themselves to these practical strategies, it won’t matter how much perceived certainty exists. The benefits of working together in a more integrated system cannot be underestimated. When you step away from an isolated mindset and lean into a truly community-oriented team, you can forge a path of success with untold rewards. ●

The post Make More Time for the Team appeared first on Scotsman Guide.

Direct-to-consumer penetration fueled by large tech investments and marketing budgets add to the concerns many in this industry have about real estate professional disintermediation. On top of this, large third-party origination shops that retain servicing continue to cause consternation among originators over who “owns the customer relationship.”

“You are competing to create and provide a compelling experience to your consumer and a combination of high tech and high touch will get you there.”

With all of this turmoil, how should mortgage professionals think about Big Tech? Is it an ally or a disruptor? Is it a way to eliminate the go-between in the mortgage process — in other words, a broker and Realtor annihilator?

It depends on how the mortgage professional views their role and builds on their strengths to create relationships. It also hinges on how they utilize their hyperlocal intelligence to create effective engagement and deliver long-lasting outcomes for homeowners and prospective buyers.

 Let’s look at how these large tech companies can add value to the mortgage business, where they will disrupt the business, and how the industry can adapt and thrive in this evolving environment. By understanding these trends, mortgage professionals can have the best chance to embrace technology without succumbing to its risks.

Consumer expectations

Let’s get one thing out of the way: Big Tech’s digitization of the end-user experience and data-driven business, in the aggregate, has been fantastic for consumers — and, therefore, for the mortgage industry. No business can operate today without matching the experiences offered by Amazon, Google, Uber and others, providing consumers with what they’ve come to expect: instant value, instant gratification, transactional certainty and more.

Innovations made in point-of-sale software, data validation services and e-closings/e-notes were all accelerated by the Big Tech effect. So, the mortgage industry owes these tech giants a great many thanks for pushing the business into the digital age. Several mortgage companies even use Amazon’s Alexa or other voice channels to serve borrowers.

Mortgage originators commonly use Facebook, X and Google to generate and manage leads, and to communicate with borrowers in frictionless channels across mobile, voice and desktop devices. Big Tech has also allowed the mortgage industry to move its business into a data-driven world to continuously refine business activity, from customizing lead generation to improving product selection and optimizing processes.

Most fintechs have their roots in Big Tech, gestated from Apple, Microsoft, Alphabet (Google), Meta (Facebook) and Amazon, as well as Intuit, eBay and PayPal. This is a good thing. Startups founded by industry outsiders provide a different perspective to solving a particular problem or offer efficiencies in ways that a mortgage company, which is focused on the entire spectrum of its business, is too close to see.

Big Tech has made invaluable contributions to the digitization of the mortgage industry. A good portion of mortgage lenders and servicers, as well as technology providers, use Big Tech as the core infrastructure provider through their cloud services.

Big Tech has developed new tools and services for image and document recognition that can significantly boost productivity for the mortgage business. This improves how tax transcripts, pay stubs, and other loan origination and servicing tasks can be digitized. This high- quality, verified data is essential to underwrite and close.

Enticing opportunity

By any measure, the U.S. housing market is massive. The total value of homes hit a record $47 trillion this past summer, more than doubling since the Great Recession. Homeowners collectively owe $12 trillion on their mortgages for an average debt of about $236,000. With numbers this large, Big Tech will definitely take notice.

With so much fragmentation and several other characteristics (value-chain optimization, innovation potential, etc.), there is undoubtedly an opportunity for any of the Big Tech players to take a direct role in the mortgage market. There are two main ways for this to happen.

The first is through partnerships with consumer financial services. Nearly all notable offerings — from Apple, Amazon, Facebook and others — have started through relationships with financial services institutions and related players. Initial offerings were in the payments space, then credit cards, and now checking and savings services are being introduced.

Given the fragmentation of the online mortgage and real estate brokerage markets, expect to see more partnerships similar to the one between Amazon and Realogy. While that deal was canceled during the COVID-19 pandemic, Big Tech will likely work with established real estate and mortgage companies as it expands into the space.

The second area where Big Tech will get more directly involved in real estate is by acting on the affordable housing crisis that’s impacting its workforce. Already, the likes of Google, Amazon, Facebook and others are contributing to affordable housing solutions in the communities where they operate. This will be a valuable learning opportunity for Big Tech, shaping how and when they tackle more direct roles across the entire residential mortgage market.

Continuing role

In general, mortgage originators and real estate agents should not be overly concerned that Big Tech will make them fully replaceable. That is not who you are competing with. You are competing to create and provide a compelling experience to your consumer, and a combination of high tech and high touch will get you there.

 If you do not add fintech solutions to your business, you will lose clients to similar-sized competitors down the street that have adopted these tools to attract leads, nurture their pipeline, provide a digital mortgage process and retain clients. Look to leverage technology as a partner to better serve your borrowers.

There are many opportunities where Big Tech can help you do your job. These include partnerships to offer quality digital and mobile experiences to your millennial and Generation Z clients; proptech providers that can help with virtual home tours; and document management fintechs that can make e-closings seamless.

The idea to eliminate jobs usually works well in the low-value steps of a business process. But in a human-centered and emotional investment- based business such as the mortgage industry, the value of a knowledgeable real estate agent or loan originator who is a trusted adviser cannot truly be replaced.

Many of the most successful people in the mortgage industry believe in the customer-for-life model and deploy the fintech with the right fit to manage their business. Big Tech can add to the mortgage process and be a complementary partner. But if mortgage originators remain transactional and do not generate enough value for their paying clients, much like any other industry, they will be impacted by tech through reduced margins and lost business.

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So, how does a mortgage professional get back to the basics of home lending, remain a key part of a community and forge relationships that are an essential ingredient for supporting the journey to homeownership? It’s done by using Big Tech for its strengths and fintech for its innovation, then complementing both with what the mortgage professional is good at — relationships. ●

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One way to do that is something called ICE, an acronym that stands for impact, certainty and ease ― a trio that will guide your future moves. When working in an industry that’s as competitive and dynamic as mortgage lending, every strategy should be guided by these three pillars: the expected impact, the degree of certainty that positive results will materialize, and the ease of implementation for you or somebody on your team.

“The smallest businesses — forced to do what it takes to survive and unburdened by the expectations of stakeholders or large investors — are being forced to get creative.”

Rank each strategy on a scale of 1 to 10 with the top number having the greatest impact, highest certainty or easiest path to implementation. Each strategy must rank 8 or higher on each of the ICE categories before it gets a green light to move forward.

Potential effect

First up, let’s discuss impact. This is the potential effect a given strategy will have on your ability to secure more loans.

For instance, if you are deciding whether to design a logo or change your company letterhead, are either one of these something that is likely to greatly impact the number of referred leads you’ll receive? Most likely, there will be little to no impact. If the expected impact of the strategy is less than 8, it’s time to move on and seek another avenue.

By comparison, calling on your past database will — with 100% certainty — help you close not just a few more loans but a lot more. So, implementing this strategy would score a solid 10 for having the greatest possible positive impact.

The key to quantifying impact is to understand your goals and the various routes to achieving them. Not every strategy will suit every team. Keep an eye on emerging trends, be flexible and don’t be afraid to embrace innovative thinking.

Proven record

The second component, certainty, is all about confidence. How confident are you that the predicted impact will indeed come to fruition?

Ensure that you’re using data-driven insights to increase your certainty. Back your strategies with extensive market research, past experiences and expert advice. Gauge the success rates of similar strategies adopted by others in the industry.

With marketing campaigns, for instance, mortgage originators who call real estate agents on a 12-week basis generally get great results. Check around with industry peers. If they’ve done it successfully, you’ll know that the certainty is almost assuredly a 10.

Conversely, if it’s a new idea that has yet to be reliably proven, avoid it, even if it sounds great. There are many proven methods with a high degree of certainty on which to focus.

Manageable task

The final ingredient in the recipe for success is ease. How easy is it for you or your team to execute the chosen strategy? The best strategies are often the simplest. Complicated plans can lead to confusion, mistakes and wasted money. Again, if your strategy doesn’t score at least 8 on the easiness scale, it’s time to rethink it.

Keep in mind that easy does not mean effortless. It simply implies that the strategy is manageable and within the capacity of yourself or your team. Consider the skills, resources and time required. If a strategy requires more advanced skills, invest in training. If it needs more resources than your staff can handle, consider hiring. Remember, if the solution seems too complex, it probably is. Your strategies should streamline your workflow, not hinder it.

“It makes a lot of sense, then, to forecast that the next wave of success stories in the mortgage industry will involve those who develop, improve or deploy innovative technologies and business models.”

Now you have your strategy. But remember, it’s not enough to merely consider these factors. They need to guide every decision you make. With every strategy that scores 8 or higher in each of the ICE categories, you’re ensuring a higher success rate, minimizing risks and fostering a culture of strategic thinking.

Accurate measurement

Say that you’re considering hosting a webinar to engage potential referral partners. The impact could be substantial as it has the potential to reach a wider audience than traditional face-to-face meetings (impact: 9). But your team hasn’t conducted a webinar before, making the outcome less predictable (certainty: 7). Moreover, preparing for a webinar requires significant time and technical expertise (ease: 6).

While the strategy has high impact, the lower levels of certainty and ease make it a less-than-ideal choice, according to this framework. Instead, you might want to consider starting with a local seminar or investing in webinar training for your team to raise the levels of certainty and ease. But if you’ve done Zoom webinars before, this same strategy could score 9 for both impact and certainty and 10 for ease. That’s a green light — go for it.

Don’t let initial setbacks deter you. The ICE framework is designed to minimize potential failures and enhance your overall productivity. By taking the time to accurately score your strategies, you’re not only refining your current plans but also honing your strategic skills for the future.

Furthermore, this isn’t a one-time solution. As the mortgage industry continues to evolve, so should your strategies. Regularly review your plans and rescore them. What may have been a high-impact, high-certainty and easy-to-do strategy six months ago might not hold the same value today. The market shifts, new technologies emerge and team capabilities change — and so should your strategies.

And crucially, make the scoring model a collective effort. Engage your team in the process. This will not only provide diverse insights, but it will encourage your colleagues to think strategically. Teams that understand the logic behind a strategy are more likely to execute it effectively.

Lastly, remember to celebrate the wins and learn from the losses. Not every strategy will result in a jackpot. Each one will certainly provide lessons to improve your scoring abilities, making you a more efficient strategist and a savvier loan officer.

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In an industry where standing out is crucial, this framework offers a clear pathway to strategic excellence. By focusing on the impact, certainty and ease of each strategy, you’re setting yourself up for success.

Remember, the essence of this framework isn’t merely about assessing strategies. It’s about building a culture of strategic thinking and making informed decisions that bring out the best in you and your team. So, keep ICE at the core of your operations and see the difference for yourself. ●

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But without accurate data and credible information to determine the catalysts of rising expenses and diminishing revenues, it can be increasingly difficult for a borrower to discover the value of a property. It is equally likely that the cause of decreasing cash flow is either internal or external — or a perfect storm of both.

Commercial mortgage originators can help borrowers find their way to better data analysis by introducing them to and helping them understand the value of commercial property performance benchmarks. In any trade, a gauge is vital to consistently produce the highest-quality observations and results. In the commercial real estate space, benchmarks are among the most useful tools to measure the performance of real assets.

Originators can work with their clients to pull data and interpret results. With the answers in hand, operators can develop an optimization strategy and all parties can confidently move forward with financing efforts.

Benchmarking properties

Real estate benchmarks consist of external property data associated with various measurements, including market rents, occupancy rates, operating expenses and net operating income. This data is collected from management teams for assets across a range of sizes, features, locations and classes.

The data is then organized and analyzed to identify trends and typical benchmark ranges. Owners can compare the benchmarks against their internal property data, with the results helping them to identify areas of operational improvements or strategic changes to maximize market trends. The subsequent decisionmaking tree will differ depending on the answers and the principals’ objectives.

Benchmarks, however, are beneficial for more than asset optimization. They are indispensable in assessing the value of a single property or portfolio in the acquisition, refinance or disposition processes. They can also help to narrow the bid-ask spread and identify value-add opportunities. During times when valuations are in flux, benchmarks can help borrowers get a better idea of a property’s true value.

Property performance benchmarks have been around for years, but the size and quality of these datasets have grown substantially due to recent technological innovations. Organizations such as the Institute of Real Estate Management, the National Apartment Association, and the Building Owners and Managers Association, regularly collect and report data tied to commercial real estate, including multifamily, office, industrial and other types of assets.

Collection and analysis

Benchmarks do not offer much utility unless operators possess quantitative data to understand the performance of any properties to be acquired and can then compare this information to marketwide data points. Gathering this external data, however, can take significant time and labor. It requires coordination between management teams, especially when the owners are benchmarking a portfolio of assets.

Once the information is assembled, it can be analyzed to prepare the necessary data points for comparison. For assets or portfolios on a midsize or large scale, this analytical work requires specialized expertise. Therefore, whether hiring internally or contracting with third parties, the retention of data analysts (or data scientists for more complex portfolios) is a prudent move to draw the needed points and conclusions from the raw datasets.

This is an area where innovation can create greater efficiency, clarity and results. Industry-specific data and asset management platforms connect all systems or silos where data is housed. They automatically aggregate, organize and analyze the data, then report the key performance indicators (KPIs) and insights. While it’s not a substitute for seasoned analysts and decisionmakers, technology can significantly streamline the benchmarking and optimization process.

Competitive sets

With internal data for their own properties in hand, the next step for operators is to identify the groups of external assets for comparison, aka “competitive sets.” Comparing owned asset data to that of a properly assembled competitive set allows a borrower to objectively view the value of their properties and how they’re performing relative to the rest of the market.

For instance, if internal revenues are down year over year but are on par with the rest of the market, this provides a clue that the property is being well run and any change in value may be tied to external factors. Conversely, when these metrics fall short of market averages, it can signify that attention is needed internally.

Determining which properties comprise the competitive set is an important component of the benchmarking process. While the perceived sets are typically those with similar superficial characteristics (i.e., asset type, location or size), the actual set may include properties with similar operational parameters that can be statistically identified. Mortgage originators should seek out team members or advisors with experience in collecting and analyzing benchmark data and grouping it for effective comparisons.

Once the competitive set is defined and the data is prepared, the owner or asset manager can then determine how the property compares with similar assets from a revenue or expense standpoint. If the property is in the top quartile across the board, it is doing pretty well. But if it is in the bottom quartile, it is clear that work needs to be done.

Key indicators

Owners and operators should concentrate their attention and efforts in areas where they can influence results. Some data points or KPIs to look at on the income side include net effective rents, gross rents, rent adjustments, and losses or gains to lease rates. In regard to outflows, it pays to compare management costs along with the expenses of leasing, utilities, insurance, taxes and maintenance.

Revenue as a percentage of operations is a crucial measurement and a high-level point of comparison. It is valuable to know by what percentage revenues exceed or fall short of expenses. Expense ratios are another critical group of metrics to evaluate in the controllable expense line.

Another important benchmark is to look at the level of cumulative or specific expenses that are being consumed as a percentage of the gross operating income. The analysis will let a borrower know whether the property is being managed efficiently, and if the geographic market is favorable in terms of typical operating costs that are influenced by location-specific variables such as taxes, materials and labor.

In addition to providing the basis for assessing the performance of a particular asset, market lease rates and occupancy metrics help owners understand the strength of the subject market and other geographic areas. The data points uncover how much upward potential there may be for rent increases, and they are instrumental in the due-diligence process for acquisitions.

Strategy and decisionmaking

Commercial mortgage originators need to keep in mind that the purpose of this entire process is strategic planning and decisionmaking. Whether for optimization, acquisition, disposition, refinance or other initiatives, benchmarking equips the broker and borrower with knowledge of where an asset or portfolio stands in respect to the broader market.

For each of these objectives, a strategy powered by technological innovation and management is best served by the insights gained through benchmarking. Knowing the KPIs through internal benchmarking and comparing them to the market as a whole creates a starting point for finding both problems and solutions. But from there, a framework is required to efficiently plan optimization efforts and align team members across an organization with a clear vision and unified approach.

An ideal framework for using this new information is objectives and key results (OKRs). These are tools used by companies to set goals and create the steps to reach them. OKRs encompass key performance indicators, which can be used to measure the results of how the company did in achieving its set goals. This process is complex, but there are many resources available to plan and implement an OKR-driven strategy.

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The U.S. economy is testing the resolve of all stakeholders in the commercial real estate industry, with property owners and potential buyers positioning themselves to take advantage of this time of fluctuating values. Benchmarks are both a ruler and a compass that equip commercial mortgage originators and their clients with tools to navigate murky market conditions. They’ll be more likely to gain a true sense of direction in their pursuit of stability and growth, despite the upswells in mortgage rates and expenses. ●

The post All About the Benchmarks appeared first on Scotsman Guide.

It’s highly recommended to dedicate these 14 minutes a day to reading. Knowledge is transformative, and reading is one of the easiest and best ways to begin improvement in your life and business. It’s remarkable how such a seemingly small commitment can lead to significant growth over time.

“Through reading, we can learn from the triumphs and failures of others, gaining insights that can propel us further on our own journeys.”

Whether it’s a captivating novel, a thought-provoking nonfiction book or even an informative article, reading can take you on a journey of discovery, opening your mind to new ideas, perspectives and possibilities. For commercial mortgage professionals, books can both broaden and deepen your understanding of real estate investment strategies, as well as loan variables and guidelines. Combined with the ongoing learning you do already — by reading industry news and taking professional development courses — the right books can help you predict industry trends, improve service and strengthen your knowledge.

Book benefits

When thinking about the vast array of books that exist, it’s awe inspiring to realize that almost any topic you can imagine has likely been explored and written about. These literary treasures enable readers to tap into the wisdom and experience of others, providing invaluable inspiration, guidance and life lessons.

One benefit of reading is that it doesn’t have to break the bank. You can access many of these resources for free; your local library likely has dozens of books on commercial real estate available in physical, e-book and audiobook formats. Librarians can also assist you with research if you want to dig deeper into a specific topic. If you find a book you’d like to keep, head to the bookstore and purchase it for your personal library.

Through reading, we can learn from the triumphs and failures of others, gaining insights that can propel us further on our own journeys. Instead of reinventing the wheel, we can stand on the shoulders of those who have come before us, absorbing their knowledge and applying it to our own lives. Essentially, you’re starting at a higher level of learning and accelerating the progress toward your goals.

Remember, alongside book reading, it’s crucial to stay up to date on industry news, regulations and trends. It’s helpful to regularly follow reputable financial publications, stay engaged with industry websites, and participate in seminars, classes and conferences. Pair these resources with a commitment to learning via reading and you can provide exceptional service, anticipate market shifts and elevate your expertise as a mortgage professional.

The impact of reading goes beyond professional growth: It benefits our communication skills, empathy and overall well-being. By engaging with different writing styles and diverse perspectives, vocabulary expands, critical thinking skills sharpen and the ability to connect with others deepens.

Reading also promotes relaxation and stress reduction. Especially when reading for fun, it can be a form of escapism, allowing you to immerse yourself in captivating stories and explore new realms. Moreover, reading before bed can improve sleep quality.

Spare moments

If you ever find yourself thinking that you don’t have enough time to read for just 14 minutes a day, consider the wonders of audiobooks. With their growing popularity, building an audiobook library can enable you to immerse yourself in captivating stories during your commute, during household chores or any time you have a free moment.

Speaking of commutes, that journey (whether it’s 15 minutes, 30 minutes or more) presents a valuable opportunity to absorb knowledge through audiobooks. Even brief daily sessions add up to a wealth of information over time, allowing you to explore a vast range of subjects and acquire new skills.

The brain is like a computer that functions based on what we program into it. By consciously choosing to fill our minds with positive, enriching content, we pave the way for personal growth and become more well-rounded individuals. Learning is a continuous process and every bit of knowledge gained adds to your overall understanding. So, embrace your commute as an opportunity to engage in self-improvement and expand your horizons through the power of audiobooks.

As author and motivational speaker Zig Ziglar said, “Your input affects your outlook, your outlook affects your output and your output affects your destiny.” Embrace this quote in your growth journey and understand how the books you read can get you to where you want to be.

Reading list

As a mortgage professional, it’s crucial to understand the importance of continuous learning and being informed about this ever-evolving industry. If you’re looking for books to enhance your knowledge and professional growth, here are some recommendations:

• “The Mortgage Encyclopedia: The Authoritative Guide to Mortgage Programs, Practices, Prices, and Pitfalls,” by Jack Guttentag. This comprehensive guide is a go-to resource for expanding your understanding of mortgage programs, regulations and industry terminology. It’s an invaluable companion for navigating the complexities of the field.

• “Commercial Mortgages 101: Everything You Need to Know to Create a Winning Loan Request Package,” by Michael Reinhard. This book offers a comprehensive overview to understanding the intricacies of commercial mortgages. It covers topics such as loan request preparation, underwriting, risk assessment and the overall process of securing a commercial real estate loan.

• “The Handbook of Commercial Real Estate Investing: State of the Art Standards for Investment Transactions, Asset Management, and Financial Reporting,” by John McMahan. While not exclusively focused on lending, this handbook provides a wealth of insights into commercial real estate investments, including financing strategies and the financial aspects of the industry at large. It’s a valuable resource for gaining a holistic understanding of the commercial real estate landscape.

• “Mastering the Art of Commercial Real Estate Investing: How to Successfully Build Wealth and Grow Passive Income from Your Rental Properties,” by Doug Marshall. This book explores various aspects of commercial real estate investing, including financing options and strategies. It offers practical advice for navigating the financing side of commercial properties, making it useful for those interested in mortgage lending.

• “The Real Estate Game: The Intelligent Guide to Decision-Making and Investment,” by William J. Poorvu. Not solely focused on mortgages, this book offers a broader perspective on real estate. Understanding the broader landscape and investment strategies can allow you to offer more holistic advice to clients.

There are many other books that are well worth the read. You can find further recommendations online, at the library, and in the collections of your industry peers and mentors.

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Embrace the power of reading and let it transport you to uncharted territories within yourself, your business and the vast realms of literature. Enjoy it, and remember, it only takes 1% of your day. ●

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The truth is that to be the best in your field, the competition is not your colleagues or other companies. You are your own competition. If originators focus on bettering themselves rather than comparing themselves to others, they will already be far ahead of others in their field of expertise.

“If commercial mortgage brokers strive to become 1% better each day for an entire year, the cumulative effect of their daily improvements can be remarkable.”

By viewing themselves as their own competition, mortgage originators embrace a mindset of continuous growth and development. They recognize that their progress is not measured by how they stack up against others but by how much they now compare to their past selves.

A process known as the “1% better strategy” is a simple yet effective way for anyone to build knowledge and abilities. All the program entails is for participants to spend 14 minutes per day — about 1% of each 24-hour period — focusing on improving their skills and know-how. If participants can commit to staying with the process, they will see results.

Daily process

Each day, people can implement this strategy to make incremental progress and become a little better than they were the day before. Ultimately, adopting the belief that “you are your own competition” allows them to focus on their own progress, development and happiness. It frees them from the constraints of comparison, and it empowers them to create a fulfilling and meaningful life based on their own unique aspirations and values.

By spending just 14 minutes per day to improve themselves, those who implement the 1% better strategy can experience numerous benefits. The following list of benefits are just some of the advantages that people who use the program experience.

One of the main benefits is continuous growth. Consistently investing time to improve yourself, even in small increments, can lead to significant long-term growth. By aiming to be 1% better each day, participants accumulate progress over time and develop a habit of continuous improvement.

The process works well with incremental achievements. Focusing on small, achievable goals helps participants build momentum and maintain motivation. The 1% improvement approach allows you to set realistic targets and experience a sense of accomplishment as you reach them.

It also helps in skill development. Devoting regular time to enhance your skills or learn something new can have a profound impact on one’s personal and professional life. Whether it’s learning a new language, developing a talent or acquiring new knowledge, 14 minutes a day adds up to considerable progress over weeks, months and years.

Personal improvement

As those working the program witness progress, they will experience many pleasant surprises. This may include the growth of their self-confidence and self-belief. Knowing that they are consistently working on self-improvement can positively impact their mindset and overall sense of well-being.

Spending time each day to learn and grow expands one’s knowledge and broadens perspectives. It allows you to stay curious, adapt to new challenges and be open to fresh ideas. Taking deliberate steps to better oneself can lead to a greater sense of personal fulfillment and satisfaction. This self-improvement journey, no matter how small, can bring a sense of purpose and meaning to one’s life.

The program can lead to long-term successes. Continuous self-improvement, even in small increments, can have a compounding effect over time. The accumulation of marginal gains can lead to significant advancements in various areas of your life, including career, relationships, health and personal development.

By dedicating a specific amount of time each day to self-improvement, people often become more focused and efficient in utilizing their time, making a positive impact on their overall performance. This increased productivity can spill over into other aspects of their life and make them happier people.

Impact over time

The 1% better approach is not just about the time you spend actively improving yourself but also about the mindset it cultivates. If commercial mortgage brokers strive to become 1% better each day for an entire year, the cumulative effect of their daily improvements can be remarkable.

By consistently becoming 1% better each day, they would reach a theoretical growth level many times greater than where they began. This represents substantial improvement over the course of a year.

It’s important to note that this process doesn’t assume a linear progression of improvement. There will be many potential fluctuations and plateaus. The process by which humans learn and develop skills can be complex and not always easily understood. Nonetheless, this process demonstrates the significant impact that small daily improvements can have when compounded over time.

Getting started

It may seem as if 14 minutes is being described as a “magic” amount of time. That is because 14 minutes represents about 1% of your day. And utilizing just 1% of your day for these self-improvement tasks can lead to a major increase in your abilities in only one year. One way to get started is to use this time in the morning to plan your day. This can be an effective time management strategy that offers several benefits.

First, it helps lead to an efficient use of time. Dedicating a period of time to plan the day allows people to make the most of their time. It’s a relatively short period that provides enough space to outline a person’s priorities and tasks without being overly time-consuming. By investing this small amount of time upfront, anyone can increase their productivity throughout the day.

Second, planning the day helps bring clarity to one’s goals and priorities. By spending a few minutes to reflect on what needs to be accomplished, you can identify the most important tasks, then allocate time and resources accordingly. This clarity enables people to focus on what truly matters, minimizing distractions and increasing their efficiency.

Third, planning allows for prioritization of tasks based on importance and urgency. By allocating time to critical activities, people can ensure that they address the most significant responsibilities first. This approach helps prevent procrastination and ensures that essential tasks are not overlooked.

Planning the day in advance can reduce stress levels. By having a clear road map and knowing what to expect, one is less likely to feel overwhelmed or caught off guard by unexpected events. The act of planning in and of itself can provide a sense of control and calmness, allowing one to approach the day with a more composed mindset.

Effective management

Allocating specific time slots for tasks during a planning session helps to manage time effectively. By estimating how much time each activity requires, people can distribute their available time more efficiently and avoid overcommitting themselves. This approach fosters a sense of discipline and helps participants stay on track throughout the day.

While planning the day, one can anticipate potential challenges or conflicts that may arise. This foresight enables more adaptable and proactive strategies for handling unforeseen circumstances. If unexpected tasks or disruptions occur, having a plan in place allows for adjustments to schedules and the ability to make informed decisions more easily.

A study by the University of California at Irvine found that it takes more than 23 minutes to return to an original task after being disturbed or interrupted. Having a plan gets you back on track in a lot less time.

Spending these 14 minutes to plan your day also ensures that your daily actions align with your larger goals and objectives. It helps you stay focused on the bigger picture and ensures that your daily activities contribute to your long-term aspirations. This alignment enhances your sense of purpose and keeps you motivated.

Remember, the specific time duration for planning can vary based on individual preferences and needs. The key is to find a dedicated period that works for you. It should allow you to efficiently organize your tasks, prioritize effectively, and start each day with clarity and intention.

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There is an old saying that “the best time to plant a tree was 20 years ago and the second-best time to plant a tree is today.” There is no time like the present for commercial mortgage professionals to start reaching toward their life and career goals by committing to a 1% improvement in whatever area they choose. Beginning today will start them on the road to winning the competition to be their best selves. ●

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