Help clients seize high-yield property deals by mastering key lending strategies and market trends
The following article was provided by RCN Capital.
In the ever-changing real estate market, experienced investors are always on the lookout for new opportunities. Even during the higher rate environment that’s been present since the middle of 2022; an investor’s mindset tends to look at how they can take advantage of recent trends and find the right deal to continue building their portfolio.
These past few years have been a prime example of this. With higher interest rates leading to potential primary homebuyers taking a step back, investors found opportunities in the market due to reduced competition, making it easier for them to secure properties.
Granted, it is important to stress that just because a property is on the market doesn’t mean it would be a great investment. As investors navigate the market seeking out their next investment opportunity, knowing they have real estate professionals in their corner who are looking out for their best interests and guiding them in the right direction is a crucial asset towards making sure a project is worth their time and money.
As brokers, being up to date with current market trends and identifying areas throughout the country where there is investment potential is a valuable service you can provide for your investor clients.
The value mortgage brokers provide
The real estate investment space can be complex at times, both for experienced investors as well as those entering the industry for the first time. Because of this, brokers can establish themselves as useful allies to real estate investors. Mortgage brokers are so much more than just the professional connection between the borrower and the lender.
They navigate potential issues, negotiate on the borrower’s behalf, and utilize their network to guide the borrower and ensure and seamless process through closing. Overall, mortgage brokers are there to simplify the intricate nature of real estate investment financing.
Two of the most common strategies for real estate investors are fix and flip and DSCR loans. Fix and flip projects are a highly lucrative strategy because they can offer substantial returns in a short time frame, allowing investors to work on multiple properties a year. Brokers should find this attractive from a business perspective, as working with fix and flip investors can lead to more repeat business opportunities.
DSCR loans are for investors seeking rent-ready properties that require little to no work at all, but cash flow well enough for the investor to make a monthly profit that becomes passive income over time. Brokers should invest time into becoming experts on these types of projects, so when these deals cross their desk, they are prepared to concisely answer any questions and be ready to offer solutions to the problems their clients are facing.
Problem solving and program understanding
Brokers work best with investors when they share the same business mindset, so it is imperative for brokers to communicate with transparency to their clients. Take the time to learn what their overall goals and objectives are on their investment journey. Whether it’s fix and flips or long-term rentals, any scenario can be susceptible to hiccups, so taking the time to understand exactly what lenders want in a deal can allow brokers to get ahead of any potential issues.
Knowing details like a lender’s experience requirements, minimum and maximum loan amounts, and minimum credit score right from the get-go can prevent unexpected issues from popping up in processing.
For example, if a borrower wanted to do a cash out refinance on one of their rental properties, the amount of leverage a lender can provide can depend on their credit score. And depending on the lender, the small difference between a 699 and a 700 credit score can have significant changes in pricing and loan amount. Taking the time to study the nuances of a lender’s loan programs can be the ultimate determinant in finding the right opportunity for investor clients.
A crucial but understated part of being a mortgage broker in the commercial space is knowing when a prospective deal isn’t going to work, and relaying that to their clients. A strong selling point brokers can present to their clients is that their success is your success. When advising investors on their prospective deals, brokers are committed to acting in their clients’ best interests.
Not every property is going to be a fit as an investment, and this sentiment comes into play a lot with fix and flips. Just because it is a broken-down house that needs some work doesn’t mean that the investor should go through with the deal, there are a lot of factors to consider.
Aspects such as whether the projected return on investment is going to be worth the time and effort and if the property is in a desirable location so it sells quickly upon completion are important to acknowledge. Situations like this are ideal scenarios where brokers can flex their expertise.
Relationships are key
Where brokers can really stand out for their clients, is by having great working relationships with different lenders that provide a myriad of investment lending options. When an investor approaches a broker with a potential deal, it can speak volumes regarding their preparation and professionalism to know which lenders specialize in that specific type of project.
Furthermore, brokers having established relationships with multiple lenders can save time and money by securing the best loan offer as quickly as possible for their clients. Investors should focus all their attention on their current projects, as well as seeking out other opportunities. A broker stepping in to manage communication with lenders, discussing rates, and organizing documents is a tremendous service that can speed up the loan process as well.
It is also worth stating that these lender relationships can often lead to more favorable pricing options for investor clients. Another perk is being afforded exclusive access to knowledge directly from industry professionals who track the market on a day-to-day basis. Especially with lenders who receive a majority of their business through brokers, they are going to make sure that those who are bringing them business are provided with as much data as possible to keep them ahead of the curve in the current market.
They can even provide their brokers with tools such as educational platforms to help brokers master their loan products, or even access to a loan calculator that matches that company’s guidelines and can provide quotes on prospective deals. Information and tools like these are valuable resources for a broker to solidify themselves as an industry expert for their clients and establish themselves as a trusted resource.
Leverage your expertise
Brokers that can consistently provide valuable information to investor clients can stand out and showcase how to be an asset to their everyday business. By advising on lucrative opportunities, leveraging their expertise, and collaborating with lenders, brokers can learn the ins and outs of popular investment strategies and set themselves and their clients up for long-term success.
