5 Keys to Getting Your First Loan as a Commercial Real Estate Investor

Securing finances for our first deal was a major hurdle. The housing collapse of 2008 was fresh. The stock market was fluctuating. Many banks around the world were very tightened. They were not lending money in the commercial real estate sector, but fortunately, they were lending to multifamily, which is our expertise.

In our minds, we were low-risk, and we had secured paying jobs. We were doing our real estate investing part-time. Our business plan was strong and we had good credit. However, the bankers did not see it the way we saw it.

The lenders always ask, “What kind of experience do you have? What properties do you own?” and other questions. Lenders always want to look into or are interested in your record of accomplishment. We were able to convince the bank that we were starting up but we had looked into these properties we had formulated a plan of attack. That was how we got our first deal.

When applying for your first loan, convince the lenders that you are passionate and well prepared to invest in real estate. Also, show them that their money is secure with you.

Here are four steps that I recommend you follow in order to get financing.

1. Build Relationships with Loan Brokers

I recommend that you build strong relationships with some loan brokers. They are the people who can open up your horizons – to help you find out what is out there, what kind of loans are available in the area where you are purchasing commercial property. 

2. Build Relationships with local Credit Unions

We started in the local community Credit Unions. We started seeing some officials there and we tried to show them our properties. These local Credit Unions are more inclined than big banks to give you a hearing. They are much more likely to listen and give you a loan.

3. Demonstrate You Have ‘Skin in the Game’

Be prepared to put your “skin in the game.” Lenders will want to know, “How much are you bringing into the deal?” Lenders are interested in how much you believe in your deal and are willing to invest some of your own money. 

Lenders will be more confident in you and your business plan if they see you are willing to take on some of the risk. Present your deal to them with specifics. 

4. Consider a Joint Venture Partner in the Deal who can Qualify for the Mortgage

You can bring a joint venture partner in the deal. Joint Venture partnerts typically receive cash flow and equity shares in the deal so that they can qualify to get that first loan with you. You need to seek a partner who may or may not have experience. However, he or she must have a good net worth and liquidity of cash.

Be confident! It is really needed to show your strengths in talking to mortgage brokers, bankers and others. Your presentation should be professional and thorough and learn what questions to ask.

Write down these answers so that you can be confident and clear. It will help you erase your own doubts about your inexperience. Look professional and follow up with lenders and mortgage brokers. Remember that the lenders consider everything before they lend to you. They are giving you so much money and you need to make sure this money is not wasted … that is their biggest worry.

5. Seller Financing

Another option for getting your first deal is seller financing. You should look at some commercial assets where the seller might be willing, even though they might not advertise. Ask the brokers and the sellers. This really helped us when nobody wanted to give us a loan. Lenders are looking for experience, so seller financing is a great way for you to get a first loan so you can start building a record of experience.

Be triumphant, even with just a few properties, because you are setting a trend. Strive to succeed in your first few deals and build a strong record of accomplishment. Your ability to borrow in the future will be based on how well you have succeeded in getting your first few properties under your belt.

Every lender is different, and every borrower faces different obstacles. Do not give up. Keep trying until you get the loan you need. Look into private money, which may be from family, friends and hard money lenders. There are pros and cons of all this.

Conquer your first deal! Start a good trend! And keep on going!