Entering into the world of commercial real estate can be a confusing endeavor and it can become frustrating when it is unclear with whom you are actually negotiating. Understanding the commercial mortgage providers, and the power that they have, is key to being able know the right steps to take.

There are so many options when it comes to pursuing a commercial mortgage that it is often frustrating and discouraging. You might not even know where to start. Before you do jump in with both feet, it is important to know who the various players are in the lending industry.

More so than in the private sector, the government usually has a significant role in commercial lending and real estate. Often the government is a key component in properties that are multifamily buildings, like apartment buildings. In these cases, the government plays the part of an active lender. There are also various agencies that work on behalf of the government, like Fannie Mae and Freddie Mac.

In addition to the government, the role of traditional lenders is also strong in the commercial mortgage industry. Banks have many commercial offerings that can help serve the needs of many borrowers. In this way, banks operate much like they do when dealing with residential mortgages, as direct lenders.

A unique facet of obtaining a mortgage for your business is dealing with conduit lenders. This specific type of lending tactic involves a conduit lender granting a mortgage and maintaining it for a short period of time before selling to off to a security backed agency. These conduits usually do this as a short-term investment. This is known as “securitization.” One of the appealing aspect of lending in this way is that these mortgages are often structured in a way that prevents prepayment (the details of this would depend on the specific loans). From an investment point of view, this creates a great deal of stability, as an investor knows that payments and interest rates are locked in, regardless of the fluctuations of the market. This specific aspect of commercial mortgages has also been hit the hardest by the economic struggles over the past 15 years. When the subprime mortgage crisis hit, issuing mortgages in this way slowed to a crawl, however, in recent years there has once again been an increase in these types of loans.

There are also various agencies that do not lend money directly but serve borrowers by seeking out sources of funding for them. These are convenient ways of optimizing your time and effort, as you can often find multiple offerings in one convenient location. These agencies just gather information for you and point you in the right direction, however. They do not apply for you.

How will I know which commercial mortgage lender is right for me?

There is no simple way to figure this out. You need to do your homework, figure out what each lender offers and decide what offerings fit your specific business and personal needs. It will require some research and a lot of diligence, but when there are hundreds of thousands of dollars at stake, that seems like a small price to pay.

Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:     (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.