Do I Need a Capital Advisor?
You do not need a capital advisor to find a loan for your commercial real estate property.
For almost all things in life, you don’t need someone doing it with you…
…but it helps.
- The commercial real estate market has changed dramatically due to Covid-19.
- You don’t need a capital advisor but it makes it easier to get the best loan terms.
- Test your capital advisor to make sure they can give you very specific reasons to demonstrate that they understand how commercial real estate finance has changed over the past 7 months.
When I play basketball, I play better when I have a teammate.
When I learn Spanish, I learn quicker when I have a teacher.
When I work out, I see faster changes when I have a trainer.
The Commercial Real Estate market is changing.
In a previous blog, I discussed how debt markets have adjusted to COVID. The top three things we are hearing are lower leverage, higher interest rate spreads, and lenders denying riskier projects.
On the equity side, I’m hearing that equity is actually plentiful but the challenge is finding deals that “pencil” (aka the underwriting for expected results produces return metrics that are acceptable to the equity investors in the deal).
The main problem: sellers of real estate are asking for prices too high for buyers to justify their purchase. The end result is equity capital waiting on the sidelines until prices come down (including distressed property opportunities).
The ENTIRE landscape is changing.
Save yourself the pain and frustration.
It’s hard to find the right financing these days. Real estate friends and clients are all telling me the same 2 things: 1) it’s tough finding deals AND 2) when they do, their old sources for debt capital are no longer there or they’re not competitive.
That pain isn’t going away.
Trust me, the right financing is out there, it’s just harder to find. Some lenders are actually getting more aggressive to win clients, but these shops are hard to find because they’re not your brand name Chase, Wells Fargo, or US Banks of the world. They’re sometimes small and obscure; but they are trustworthy, have been around for decades, and provide great leverage and rates.
If the right financing is at those bigger shops mentioned earlier, sometimes having the cell phone number of their head of lending can go a long way to getting your deal to the top of the stack. Those are the key relationships to develop.
Communication is key.
In this changing environment, communicating with lenders every single day will be the difference maker to getting your deal financed. Are they still lending or paused due to COVID? Are they the right person to talk to? Do they have clout? How have their lending parameters changed?
I’m sounding like a broken record but I can’t stress this enough. It’s not just the lender that makes the difference but WHO specifically you’re talking to at that shop that can change your entire experience.
With so much uncertainty these days, it is key to develop relationships with lenders that can deliver on what they promise. But just like dating, developing a strong relationship doesn’t happen overnight. If you’re looking for that teammate, that teacher, that coach, that counsel … find yourself a commercial real estate advisor that appreciates building human capital.
Whether we help you or you have someone else, here’s how to make sure your capital advisor worth your time:
In the words of John Maxwell “Teamwork Makes the Dreamwork.”
Best of luck out there my friends.
I’m happy to engage with you in the comments so that everyone can learn. If you prefer to share privately, feel free to email me at firstname.lastname@example.org.
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