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.

● ● ●

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.

● ● ●

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.

Every journey has a story. Imagine a new broker who is learning about SBA loans from his high-performing colleagues. The broker quickly realizes that the leaders in this space have carved out loan niches for themselves. Some specialize in specific industries while others focus on distinct loan purposes.

“A well-prepared borrower who has all documentation in order and a clear understanding of the steps involved can significantly streamline the process.”

Inspired by these observations, the broker decides to concentrate his efforts toward funding SBA loans in specific sectors such as hospitality and gas stations. He quickly sees the number of loans he’s completing skyrocket. The lesson is clear: Amid the variety of SBA loans, finding and mastering a niche can set a trajectory for success.

Over the years, the SBA has undergone significant transformations as the agency has adapted to the ever-changing needs of businesses and the broader economy. For brokers just learning about it, the government agency doesn’t offer direct loans. Instead, the SBA helps small businesses secure capital by guaranteeing repayment, sometimes for as much as 85% or 90% of the amount borrowed, from a bank or other lending institution.

Know the details

The SBA offers a variety of loan programs, each designed to support different business needs. The 7(a) loan program is the agency’s most common offering, with loans of up to $5 million for a range of business purposes, including working capital, expansion or equipment purchases.

The 504 loan program, available through a certified development company (CDC), is also popular, with financing tailored for major fixed-asset purchases such as real estate or large equipment. It offers long-term, fixed-rate financing of up to $5.5 million. At the other end of the spectrum, the SBA’s microloan program supports smaller businesses with loans of up to $50,000. These loans average $13,000 in size and are ideal for startups or other small companies in need of a modest capital boost.

The SBA has worked to streamline the lending process and shorten the wait times for borrowers. But myths abound. One such misconception is the time-intensive nature of an SBA loan. With the right partnerships, originating these loans can be as efficient as other traditional financing mechanisms.

“Brokers who are persistent, willing to delve deep, question the status quo and relentlessly pursue the best for their clients are the ones who truly stand out.”

The SBA process employs a tiered structure, with timelines that fluctuate based on the loan’s size, purpose and specific program being utilized. There are many nuances to the deal that can make the process speed up or slow down. For 7(a) loans, the time frame can vary significantly. Simple cases can require as little as 20 days, while complex transactions involving construction could extend beyond 90 days.

The 7(a) process encompasses three primary phases: packaging, underwriting and closing. Packaging speeds hinge on the borrower’s responsiveness and can take as little as 48 hours if documentation is promptly provided, although it usually lasts one to two weeks. Underwriting is contingent upon the deal’s complexity and takes one to two weeks on average. The closing phase can take approximately three to six weeks, although it’s not uncommon for this period to be extended due to additional third-party reports that are necessary for more intricate deals.

Throughout these stages, the borrower and broker must gather comprehensive financial data, not only for the business in question but also for any personal guarantors or associated businesses in which the borrower has a majority ownership stake. This thorough vetting process ensures a robust and transparent financial overview, which is critical for successful loan approval.

Dual-track process

The SBA 504 loan program is a dual-track process that demands synchronized efforts between a conventional lender and a certified development company (CDC). The CDC serves as the local delivery partner for the SBA loan.

As the borrower navigates through the application, the bank initiates its underwriting procedures in tandem with the CDC, which is responsible for securing SBA approval for their subordinate lien position or second trust deed. This coordination is crucial since the 504 loan is designed for the acquisition or refinancing of real estate or other significant fixed assets, thereby necessitating a layered approach to due diligence.

During this time, critical assessments such as property appraisals and environmental reports are conducted to ensure compliance with federal guidelines and to evaluate any potential risks. In addition, the process includes securing proper title documentation and insurance coverage. These steps are integral to safeguarding the interests of all parties involved in the transaction.

Typically, the entire 504 lending process from application to disbursement spans a period of 60 to 90 days. But it’s essential for mortgage brokers to communicate to clients that this timeline can be affected by the complexity of the deal and the promptness of submitting the required documentation. As such, a well-prepared borrower who has all documentation in order and a clear understanding of the steps involved can significantly streamline the process.

Watch for challenges

SBA loans are not without their challenges. For brokers wanting to originate them, it’s imperative that they go beyond a surface-level understanding and truly immerse themselves in the intricate processes that define this space. They must be responsive, organized and tenacious.

Clients are often navigating unfamiliar terrain when seeking SBA loans. Their anxieties, questions and concerns are valid. Brokers need to be responsive to their needs and ensure open channels of timely communication. In moments of uncertainty, a prompt reply or a reassuring update can make a world of difference.

The SBA loan process can be likened to piecing together a jigsaw puzzle. Each piece, whether it’s a financial document, a business plan or a property appraisal, holds significance. Brokers need to take a methodical and organized approach to ensure that no detail is overlooked. It’s all about maintaining thorough documentation, streamlined workflows and structured client interactions.

Central to a broker’s success is a systematic approach to loan origination. It starts with an in-depth understanding of the borrower’s needs. This foundation then paves the way for collecting the relevant documents and ensuring they align with the loan program’s prerequisites. But it doesn’t stop there. It’s also important to provide a thorough cash-flow analysis to evaluate the financial health of the business and discern its viability.

The SBA loan process can be complex, and brokers will find that tenacity comes in handy. Regulations evolve, client needs vary and economic climates shift. It’s a domain that demands a broker to be both knowledgeable and resilient. Brokers who are persistent, willing to delve deep, question the status quo and relentlessly pursue the best for their clients are the ones who truly stand out.

Lasting partnerships

As commercial mortgage brokers become successful, it’s easy to become focused on the allure of rate shopping. The prospects of landing the most competitive rates and the highest referral fees are enticing for any firm.

Possibly more important for long-term success, however, is relationship building. By forging lasting partnerships with lenders, brokers will find that such connections are the true cornerstones of success.

The SBA loan journey is often filled with intricate processes, meticulous documentation and constant communication. In such a scenario, the quality of the relationship with the bank can significantly influence the overall experience for both the broker and the borrower. It’s about finding lenders that offer not only competitive rates but also a collaborative spirit, a willingness to guide and a commitment to transparency.

Brokers should seek out banks that resonate with their working styles, values and goals. This alignment is about more than just transactional interactions. It’s about shared vision and mutual respect. This can lead to a smoother and quicker process. By nurturing this relationship through regular check-ins and ensuring open channels of communication, the resulting ties may lead to faster response times as well as exclusive access to special offerings.

These relationships also create a ripple effect that enhances the experience for a client, expedites their loan process, and often leads to better terms and conditions. Having a solid relationship with a bank can boost a client’s confidence in the broker’s abilities.

● ● ●

In the realm of SBA lending, it’s easy to get lost in the numbers and the allure of quick wins. But it’s relationships that make the real difference. These deep-rooted connections with banks aren’t just about smooth transactions; they are the backbone of your success. Every broker can crunch numbers, but the real leaders in this space dive headfirst into the world of relationship building.

This isn’t just about sealing a deal. It’s about forging partnerships that last. To those standing at the edge of the water, don’t just dip your toes in. Dive deep, embrace the challenges and remember that with genuine relationships and a clear focus, successful SBA lending is not merely achievable but also inevitable. ●

The post Navigating the SBA Loan Landscape appeared first on Scotsman Guide.

First American Financial Corp. reported that U.S. home prices peaked for a seventh straight month in October 2023. Annualized price growth at that time increased to 7% after bottoming out in the first half of the year. Meanwhile, Attom reported that nearly half of residential properties with mortgages in third-quarter 2023 were considered “equity rich,” meaning the amount of debt secured by these homes didn’t exceed 50% of their estimated market values.

At a time when home purchase business remains tepid, originators who once overlooked home equity lending products might want to reconsider them. Many lenders have already jumped on the bandwagon: According to data from the Mortgage Bankers Association (MBA), home equity loan and home equity line of credit (HELOC) originations jumped by 50% from 2020 to 2022.

“We see a lot of potential in this space, especially if there are more outlets in the secondary market.”

Marina Walsh, vice president of industry analysis, Mortgage Bankers Association

Across the 20 companies that participated in the MBA’s study, the average origination volume of these loans grew by nearly $1.2 billion during the two-year period. At the end of 2022, homeowners had roughly $31 trillion in total equity, triple the levels seen in the years immediately following the Great Recession.

“We see a lot of potential in this space, especially if there are more outlets in the secondary market,” says Marina Walsh, the MBA’s vice president of industry analysis. Walsh notes that banks are concerned about any loans they’ll hold on their books — particularly after the recent failures of a few institutions — but she also says that alternative lenders are emerging in the home equity channel.

These lenders tend to be fintechs that offer speed and convenience for online applicants, making their home equity loans more competitive against personal loans and credit cards. But they’re also excelling at strong underwriting standards and borrower analytics, Walsh says.

“Unsecured lending is just an easier process for borrowers,” she says. “Some borrowers are still remembering the overleveraging from the Great Recession. A lot of education is needed to show that (an equity-based loan) makes financial sense.”

There are several reasons why these products haven’t been more popular in previous market cycles, says Anthony Stratis, senior director of lending partnerships at Figure, a nonbank HELOC lender. These include a lack of compensation for the mortgage company and originator, few options for selling the loans on the secondary market and long funding times (MBA data pegged the average closing period for a HELOC in 2022 at 41 days).

Yet another potential hurdle, Walsh notes, is the personnel tasked with managing these types of financing requests. Consumer lending divisions, rather than mortgage divisions, were responsible for the bulk of home equity loan and HELOC originations among the lenders surveyed by the MBA.

“I hear more about trying to consolidate consumer products, technology-wise, into one loan origination system, so you have more of the prominent lenders providing a home equity loan add-on,” Walsh says.

Stratis believes that the overarching movement in consumer financial services toward online speed and convenience presents an opportunity to educate both consumers and originators. The modern home equity lending process is increasingly likely to resemble that of a personal loan.

“The credit unions and banks, I think they’re very good at being able to offer these products,” Stratis says. “But the process by which they do it is traditional in the sense that you’ve got manual underwrites that take place and a lot of paperwork going back and forth. … I think that’s a big barrier to a typical consumer, and not one that they necessarily want to go through for a $40,000 or $50,000 loan.” ●

The post Conditions are ripe for a surge in home equity lending appeared first on Scotsman Guide.

“Before sprinting off to initiate a 1031 exchange, the property owner should be wary not to overstep the boundaries, however broad they may be.”

The tax exchange is a complex strategy that must be understood completely before attempting and requires the help of a qualified professional. It has the potential of deferring both capital gains and any gains received from the sale of depreciated capital property that must be reported as income. Commercial mortgage brokers should be familiar with the 1031 exchange and how it works so they can better advise clients on whether they should use it to defer real estate taxes.

Deferred taxes

The 1031 exchange allows a property owner to “swap” one asset for another that is considered “like-kind.” Since the money never graces the investor’s pocket, any capital gains tax is suspended until the gains are eventually cashed in.

This scenario can be used repeatedly, with the seller rolling over the gain from one investment property to another. Even if there is a profit on each swap, the taxes are deferred until the buyer sells for cash at some point in the future.

This is a simplified explanation, and there are many nuances to the IRS regulation that must be understood, but it illustrates the basic function. By postponing tax payments, investors can trade with the full value of their properties — as long as they keep in mind that the IRS will eventually be owed the deferred gains.

As every investor knows, money now is always better, because a dollar in hand is a dollar that can be invested to grow wealth. Tax dollars will forever be tax dollars, but if they can be put to work for the investor before they go to Uncle Sam, so much the better.

Crucial details

A common question involves which types of property qualify as like-kind in a 1031 exchange. The term is ill-defined, but it essentially describes a tax-deferred transaction that allows for the disposal of one asset and the acquisition of another similar asset. Fortunately for the investor, the definition is quite open-ended. For something to be like-kind in real estate, it only needs to be some form of real estate, although primary residences do not qualify.

Before sprinting off to initiate a 1031 exchange, the property owner should be wary not to overstep the boundaries, however broad they may be. While most real estate is like-kind to most other real estate, it is like-kind only to real estate. For instance, the program doesn’t cover securities (such as stocks, bonds or notes), other evidence of indebtedness or interests in a partnership.

The 1031 exchange program has many rules that must be closely followed. For instance, in most cases, the process is classified as a delayed exchange in which one party will sell a property and then store the proceeds with a qualified intermediary, who is an independent and neutral party with no ties to any of the other parties involved. The intermediary holds the relevant money in an account that the seller cannot access.

Within 45 days of the sale of the first property, the former owner must designate the replacement property to the intermediary. The seller must then close on the replacement property within 180 days of disposing of the first property. Money left over from the transaction is taxed as partial sales proceeds. To offset the potential tax bill, the property buyer needs to demonstrate debt equal to or greater than what was paid off upon sale of the relinquished property.

Dubious connections

Due to the potential for tax avoidance, there are extensive guidelines in the tax code that require an expert’s guidance concerning “related parties” who enter an exchange. This term has a wide definition, ranging from family members to partnerships, corporations, trusts and entities in which more than 50% of the stock or capital interest is directly or indirectly owned by the taxpayer.

It is possible for related parties to use a 1031 exchange, but there are strict rules governing the procedure and it’s usually not advisable. Generally, buying property from a related party and selling it to an unrelated party is not allowed.

For related parties to qualify, they need to follow three conditions: They must hold the properties for a minimum of two years following the exchange; transaction details such as the sales price and rental income must be at prevailing market rates; and the taxpayer must be able to prove that the transaction did not result in tax avoidance through an income tax basis swap. There are other exceptions, but any property owner looking to avoid the prohibitions should seek professional help to make sure their financial plan is legal.

● ● ●

For those in the business of real estate investments, 1031 exchanges can be a vital tool to defer capital gains and taxes, freeing up money for current ventures. It’s crucial for mortgage brokers to recommend that clients find qualified advisers and thoroughly understand the process to avoid running afoul of the IRS. Doing so can mean the difference between financial growth and legal trouble. When it comes to the IRS, due diligence is always a must. ●

The post Understanding the 1031 Exchange appeared first on Scotsman Guide.

“Aggregate costs serve as the structural foundation upon which a project is built, but they also serve as a financial foundation for how budgets are built.”

Having a firm grasp on the aggregate costs and their influence on construction financing will give commercial mortgage brokers a realistic idea of how much money borrowers will need to complete their projects. When embarking on a project, it’s essential to consider all the expenses that fall under the umbrella of aggregate costs. These include direct and indirect construction costs.

Thorough understanding

Direct construction costs encompass the expenses directly associated with the physical construction of real estate assets. These include materials, labor, equipment and any other resources required to bring the project to life. It is vital to carefully analyze these costs to ensure accurate budgeting and avoid any financial surprises that may arise during the construction process.

It is equally important, however, to consider the indirect costs that are often overlooked but can significantly impact the project’s budget. Pre-construction planning, project permits, legal fees, insurance and licenses are necessary for compliance and approval from local authorities.

Each of these components plays a pivotal role in the successful completion of the project and the overall financial health of the stakeholders involved. These costs can vary depending on the project’s location, size and complexity. It is crucial for mortgage brokers to make sure that the necessary funds are allocated for permits, to avoid delays and legal complications that may arise if proper documentation is not in place.

Construction projects often involve complex legal contracts, negotiations and documentation. Hiring legal counsel to navigate these intricacies is essential to protect the interests of all parties involved. These fees can also vary depending on the scope of the project.

Insurance is yet another vital component of aggregate costs in construction financing. Ground-up development projects are inherently risky, with various potential hazards and unforeseen circumstances that may arise. Adequate insurance coverage is necessary to protect against these risks and provide financial security in case of accidents, property damage or other unforeseen events.

Look closely

By considering these expenditures, commercial mortgage borrowers and their broker partners can form a comprehensive budget that reflects the true scope of the project. This ensures that the project’s financing needs align with the actual costs involved, reducing the risk of budget shortfalls and financial strain throughout the construction process.

Lenders also play a crucial role in construction financing by analyzing aggregate costs. Lenders carefully evaluate the financial feasibility of a construction project before approving financing. By understanding the complete financial picture, lenders can assess the level of risk associated with the real estate project and determine the appropriate loan size.

Aggregate costs serve as the structural foundation upon which a project is built, but they also serve as a financial foundation for how budgets are built. By meticulously calculating all the expenses, brokers and borrowers can have a realistic understanding of what it will take to bring the owner’s vision to life. Skimping on this crucial phase can potentially lead to financial trouble down the road.

For instance, the cost of materials can vary significantly depending on the type and quality required for the project. Can this project use recycled materials? How far is the nearest quarry or gravel yard? How soon can the materials be delivered? These are all questions that must be considered.

Project owners must research suppliers, compare prices and factor in potential price fluctuations to accurately estimate these components. Similarly, labor costs need to be carefully assessed by considering factors such as wages, overtime and any specialized skills required for the project.

Lender scrutiny

Lenders will also closely scrutinize these costs to ensure that the loan amount aligns with the project’s financial requirements. If the aggregate costs exceed the loan amount, project owners may have to secure additional funding or reconsider certain aspects of the project to maintain financial viability.

Brokers and borrowers need to present a comprehensive and well-researched budget to lenders when seeking financing. This includes providing detailed breakdowns of the aggregate costs, along with supporting documentation and estimates from reputable sources. Lenders need to have confidence in the accuracy and feasibility of the budget before approving a loan.

Moreover, they must consider the potential impact of inflation and market fluctuations on aggregate costs. These factors can significantly affect the overall budget and loan size. Therefore, it’s essential to regularly review and update the budget throughout the project’s life cycle to account for any changes in costs.

There are also risks associated with underestimating aggregate costs. If the project experiences unexpected expenses or cost overruns, it could lead to financial strain and potential delays. Therefore, it is advisable to include contingency funds within the budget to mitigate any unforeseen circumstances that may arise.

Lender considerations

As mortgage brokers work with clients to evaluate potential loan options for their construction projects, it is paramount to consider how aggregate expenses impact the financing landscape. Different lenders have varying criteria for evaluating loan requests and consider a range of factors such as creditworthiness, project feasibility and, most importantly, aggregate costs.

Project owners must thoroughly understand how lenders assess aggregate expenses to present a well-informed loan proposal. This understanding allows project owners to demonstrate their ability to manage financial risk effectively and increases their chances of obtaining financing. By aligning the loan scope with the aggregate expenses, borrowers can show lenders that they have a comprehensive understanding of the project’s financial requirements.

One key aspect that lenders consider when evaluating aggregate expenses is the breakdown of costs. Lenders want to see a detailed breakdown of each expense category, including an itemized list of materials, labor rates and other associated costs. This level of detail allows lenders to assess the accuracy and feasibility of the estimated expenses.

They will also examine the project’s timeline and schedule when evaluating aggregate expenses. Construction projects often have specific timelines and deadlines, and lenders want to ensure that the loan amount is sufficient to cover the expenses within the given time frame. Lenders may also evaluate the project owner’s track record and experience in managing construction projects. Lenders want to see evidence of the developer’s ability to effectively manage costs so that projects are delivered on time and on budget.

Understanding how lenders assess aggregate expenses can be crucial for project owners seeking construction financing. By offering a comprehensive and compelling loan proposal that covers all the bases, mortgage brokers and borrowers increase their chances of obtaining financing and securing the necessary resources for successful completion.

● ● ●

Aggregate costs play a primary role in calculating commercial real estate project budgets and determining loan sizes in construction financing. By bolstering their knowledge and awareness of these financial dynamics, mortgage brokers and project owners can navigate the intricacies of construction financing with confidence, allowing them to make informed decisions, increase their chances of financing approval and realize successful construction projects. ●

The post The Project Must Pencil Out appeared first on Scotsman Guide.

The Federal Reserve has continued with its mandate to curb inflation by raising benchmark interest rates. While data reflects that this policy has certainly contributed to the general downtrend in inflation throughout the year, the impact on commercial real estate has been dramatic and not so positive.

“It is difficult to be optimistic about the remainder of 2023 or the early days of 2024.”

This year will prove to be one of the more challenging in recent memory for commercial mortgage originators. At this point, the outlook for 2024 does not appear markedly different as the sector manages the higher interest rate environment, which will potentially result in a rash of loan defaults and modifications.

Myriad troubles

In the residential real estate sector, limited housing supply has contributed to elevated prices despite a higher interest rate environment. Conversely, the commercial property sector this year saw asset values and loan origination activity plummet across all segments. Office and retail have suffered the most as lenders pull back from these areas.

Coupled with a higher interest rate environment, the market dealt with a short-lived banking crisis that ended before it even started. Sure, some banks dissolved due to a series of problems, including mismanagement and a flight of deposits. But there were others, including the nation’s largest banks, that weathered the storm and became even stronger.

The calendar years of 2021 and 2022 were generally ones of prosperity in both the commercial and residential sectors, fueled by low rates and insatiable demand. But as Warren Buffett was famously quoted as saying, “You don’t find out who’s been swimming naked until the tide goes out.” Many banks did not sufficiently hedge their Treasury portfolios, leaving them exposed to higher Treasury rates.

A number of vertically integrated real estate companies also found themselves holding high-rate bridge or construction debt, and they had no true exit strategy as a result of higher rates hampering their debt-service-coverage ratios. Couple that with higher property taxes and exponential increases in property insurance, and you have a perfect storm for which there is no port.

Many lenders, originators, developers and operators have entered the market over the past decade. A portion of these newcomers thrived due to timing rather than knowledge or skill. But times have changed and many areas of the commercial real estate business have dried up. As an old saying goes, “When fish are swimming into the net, you are not truly a fisherman. It is when they don’t that you learn whether you are.” Many of these novices have found this year that they are not truly fishermen. Deals have not only been harder to come by but harder to qualify and close.

Dark outlook

It is difficult to be optimistic about the remainder of 2023 or the early days of 2024. The Federal Open Market Committee (FOMC) has stated that it will keep interest rates higher for longer to curb inflation. While the FOMC may not raise rates further, borrowing costs are likely to remain elevated for some time. This climate will restrict lending volumes for commercial real estate as deals will continue to be debt-service constrained, limiting proceeds.

There are also growing concerns about inflation in wages and services, which may push any rate-cut projections further into the future. Another major fear is that a wave of new multifamily properties set to be delivered will drag down rents and curb construction in this sector. In addition, increased costs for energy, labor and materials could add to the woes of multifamily operators as they move forward.

Nearly $700 billion in short-term, low-rate loans on multifamily housing are expected to mature in the next two years, and many of these will have problems being refinanced. The near future also will bring defaults for office properties in many major markets. But as more companies require workers to come back to their cubicles, there is hope that the office sector will make a comeback.

Another area that reaped a post-pandemic boost in demand was the industrial sector, although signs of softness have started to emerge. And hospitality, a sector that sees lender interest vary, is on the tail end of an upturn since the lifting of pandemic-era restrictions. Recently, the appetite for hotel lending has begun to wane.

Glimmers of hope

One area of commercial real estate that may show continued strength is owner-occupied loans. Lenders are aggressively pursuing such deals, as well as the potential depository relationships afforded by these business clients.

Lenders also prefer using the U.S. Small Business Administration (SBA) platform to facilitate these owner-occupied deals, offsetting risk and exposure. Additionally, the secondary market for SBA 7(a) loans remain robust and represents a far more profitable transaction to lenders — with a fraction of the risk.

Although it seems unlikely that lending volumes will increase soon, there are reasons for optimism due to the fact that virtually every deal financed during this period of higher interest rates presents a refinance opportunity down the road. This is because any deals closed today are, in essence, bridge loans of sorts as borrowers wait for rates to fall.

As a rule of thumb, it is best to limit prepayment penalties on any newly financed transactions. Mortgage brokers should also avoid any defeasance, rate-swap or yield-maintenance transactions so that when rates do come down a bit, borrowers have no restrictions that prohibit them from refinancing and taking advantage of better terms.

● ● ●

As any loan originator will tell you, 2023 has been a difficult year. And unfortunately, 2024 doesn’t look to be much better. The key to surviving this period will be persistence and a focus on the segments of the market where financing remains readily available, such as multifamily housing and SBA loans for owner-occupied deals.

Using these tools should help you set the table for what will likely prove to be a more opportunistic time once the Federal Reserve has reversed course on its cycle of rate hikes. This will be a testament to Darwinism: Only the strong will survive, and those without the fortitude, experience and ability to excel in a down cycle may find themselves in another field. ●

The post A Continuing Rough Ride appeared first on Scotsman Guide.

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.

● ● ●

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.

A top supporter of this form of retail is Gary D. Rappaport, whose company, Rappaport, has been developing and operating shopping centers for nearly 40 years. Rappaport and his team have invested more than $1 billion in retail properties throughout the District of Columbia, Maryland and Virginia. He is also the author of “Investing in Retail Properties: A Guide to Structuring Partnerships for Sharing Capital Appreciation and Cash Flow,” with the third edition published by Forbes Books last month.

“Retail real estate, I believe, is the most complicated sector of commercial real estate.”

Rappaport spoke with Scotsman Guide earlier this year about the unique strength of the neighborhood shopping center. He also offered advice to investors who are interested in the sector.

What are some of the main trends you see in the shopping center sector?

Grocery-anchored shopping centers continue to be the most stable property subsector in retail, as well as one of the strongest property types in all of commercial real estate. Whereas most retail categories have a few creditworthy tenants, the grocery category — more specifically in the Washington, D.C., market where most of our operations are located — has multiple creditworthy tenants all seeking to expand. There have been very few neighborhood and large community, open-air shopping centers built during the past 10 years. Because of this, occupancy and demand for space have remained relatively high.

What are the key factors investors interested in this sector should keep in mind?

Location is very important, but so is the creditworthiness of tenants and the length of their leases. The type of financing we place on these acquisitions is also key. For example, fixed or floating loans and the length of time, which we use to obtain the projected returns versus the evaluated risk. The grocery-anchored product tends to have a significant, reliable cash-flow growth potential that investors can have confidence in. The yield of this type of real estate can start at a much higher point relative to office, industrial or multifamily.

Why has this type of real estate been so successful?

Shopping centers attract retailers that cater to consumer needs for essential products and services. I describe it as necessity retail that is mostly internet-proof. You can buy groceries online and have them delivered, but most people want to see the food for themselves. The centers also tend to act as last-mile merchandise providers because they are closer to where consumers live than the regional malls. At the same time, the open-air centers are less costly to operate and so can offer lower total occupancy costs than enclosed malls. The centers are attracting anchors and specialty retailers such as Kohl’s, Lululemon, Athletica, Express, Apple and Foot Locker. These retailers have been pivoting away from malls for more than a decade.

What do you look for in a shopping center property?

There is virtually no new supply being built and while difficult to find, we are always looking for a shopping center where we can use our expertise to create value through re-leasing, remerchandising, renovation, and professional management and marketing. I believe there is nothing like local knowledge and relationships to give us an advantage over other buyers. We have a reputation as strong community members who add value to a shopping center and the whole close-by community.

What are some of the mistakes that investors need to avoid with these kinds of projects?

Retail real estate, I believe, is the most complicated sector of commercial real estate and the sector in which the expertise of the sponsor is most important. In retail, one needs to understand cross-shopping and tenant mix to maximize sales across the property. One needs to understand tenant leases with clauses, such as exclusive and broad leasing rights, co-tenancy requirements, no-build areas, percentage rents and other restrictions that could materially affect the long-term success of a retail property.

Some developers are quite successful buying a shopping center that needs a capital investment and expertise, as we would provide, and then when the property stabilizes, they sell. I do not sell. I believe owning real estate for the long term is the way to create material assets for one’s partners and one’s family. Investors wishing to place funds in a partnership — as opposed to purchasing shares in publicly traded REITs — should be aware that this is a long-term investment and they need to have a long-term horizon for their investment. They must be content with receiving fairly reliable, tax-advantaged annual distributions that equal about 8% of their initial investment. ●

The post Q&A: Gary D. Rappaport, Rappaport appeared first on Scotsman Guide.

“This accelerated process enables mortgage brokers to cater to clients with urgent financing needs, ensuring a competitive edge in the market.”

The changes, coupled with improved turn times for loan approvals and an attractive, long-term fixed interest rate, make the CDC/504 program a game changer for commercial mortgage brokers and borrowers. For those not familiar with the SBA system, the CDC/504 loan program provides long-term financing to small businesses for the purchase, improvement or refinance of land, buildings and equipment. These commercial mortgages are administered by certified development companies (CDCs), which are nonprofit entities that are endorsed and regulated by the SBA.

Streamlined process

Beginning in May 2023, the CDC/504 program introduced streamlined and simplified affiliate rules while improving the calculation of the program’s $5 million cap. Under these new rules, ownership-based affiliation takes precedence, allowing businesses greater flexibility in access to SBA financing. Previously, the affiliation determination was based on control and identity of interest, which was sometimes challenging to determine.

Identity of interest is when relatives outside of the immediate family unit can have their ownership of similar businesses considered as affiliates. The new guideline is based solely on ownership percentage and industry, making more businesses eligible for the program and excluding some entities that previously would have counted against an applicant’s $5 million income cap.

“Brokers can now assist business owners who were previously excluded from the CDC/504 program, helping them to secure the funding they need for growth and expansion.”

This change in the affiliate rules opens new avenues for mortgage brokers to provide financing solutions to a wider range of businesses. As trusted advisers, brokers can now assist business owners who were previously excluded from the CDC/504 program, helping them to secure the funding they need for growth and expansion. The streamlined affiliate rules not only simplify the loan process but also enhance the accessibility and inclusivity of the SBA program.

Expanded eligibility

Another significant change to the CDC/504 program is the removal of SBA review requirements for franchises and management agreements. Previously, obtaining agency approval for these arrangements added complexity and delays to the loan process. Franchises and businesses with management agreements often faced additional scrutiny, making it more challenging for them to secure SBA financing.

With the removal of the review requirements, mortgage brokers can now expedite the financing process for clients involved in franchises or management agreements. This change significantly reduces the time and administrative burden associated with the SBA review, allowing for quicker turnaround times and enhanced client satisfaction. CDCs, however, still need to collect franchise and management agreements to confirm they are in effect, since they can impact cash flow.

Mortgage brokers can leverage this change to their advantage by providing swift and efficient financing solutions to clients in the franchise industry or those with management agreements. By simplifying the loan process, brokers can help these clients to promptly seize opportunities, fueling business growth and success.

More leniency

More changes to the CDC/504 program were put in place in August 2023. They refer to the elimination of character clearances and added flexibility around personal liquidity.

• Character clearances. The SBA will run a background check to determine if a borrower is currently on probation, on parole, incarcerated or under indictment. Previously, past felony convictions required applicants to pass a fingerprint check and supply past court documents.

• Personal liquidity. In the past, the SBA sometimes declined projects when there was an abundance of personal liquidity. For example, if the total project cost was $1 million and the owner had $3 million in personal liquidity, the SBA might have declined the loan request with the reasoning that the borrower could obtain conventional financing. With the changes implemented in August, there will be more leniency in these situations, assuming the project meets another “no credit elsewhere” reason such as loan-to-value ratio, property type, new business, etc.

Speedy response

In an industry where time is of the essence, the CDC/504 program has made substantial strides in reducing turn times for loan approvals. Commercial mortgage brokers can now leverage the program’s efficiency, with most approvals being finalized within two to five business days, once the complete application is sent to the SBA.

This accelerated process enables mortgage brokers to cater to clients with urgent financing needs, ensuring a competitive edge in the market. With quicker loan approvals, brokers can facilitate timely transactions, seize time-sensitive opportunities and build stronger relationships with their clients. The improved turn times contribute to increased client satisfaction while positioning brokers as reliable and efficient partners in the financing process.

Additionally, the CDC/504 program offers the ALP Express loan, which provides an expedited loan process for smaller projects. Only select CDCs in good standing are designated to participate in the Accredited Lenders Program (ALP). The ALP Express program is designed for projects of up to $1.25 million, if arranged in the typical 50% first mortgage, 40% 504 loan and 10% borrower contribution structure.

With the ALP Express loan program, the SBA only reviews loan eligibility, leaving the analysis of creditworthiness to the CDC. This streamlined approach greatly speeds up the approval and closing process, allowing mortgage brokers to provide rapid financing solutions to their clients.

Despite the recent upward trend in interest rates, the CDC/504 program stands out by offering significantly lower rates than the prevailing market. This advantageous feature gives mortgage brokers a persuasive selling point. By securing a CDC/504 loan, borrowers can benefit from long-term stability and shield themselves from potential interest rate fluctuations. Mortgage brokers can capitalize on this distinct advantage by positioning the CDC/504 loan as a financially prudent choice, attracting borrowers who seek affordable and predictable financing solutions.

● ● ●

With the recent changes to the CDC/504 loan program, commercial mortgage brokers should take note of the enhanced features, improved turn times for loan approvals and highly competitive interest rates. The streamlined affiliate rules, the removal of SBA review requirements for franchises and management agreements, and faster loan approvals pave the way for brokers to expand their client base through swift, reliable financing solutions. By leveraging the CDC/504 program, mortgage brokers can strengthen their position in the market, enhance client satisfaction, and unlock new opportunities for growth and success. ●

The post Unleashing Opportunities appeared first on Scotsman Guide.