Commercial Loan Success with Brian DAmico and Dan Crowley

Brian DAmico: Welcome, welcome, welcome to another edition of our show, Easy Money New England where we like to say, “There’s no such thing as easy money.” Today on our show is a returned guest, Dan Crowley. Dan Crowley did our actual first podcast, it was on international podcast day, and it was very educating on the areas of commercial real estate. But we had to get Dan back on the show because in that timeframe, and Dan, he’s basically been a commercial loan advisor probably since … He grew up wanting to become one when he was probably age eight. And most people want to be a professional athlete or a garbage man at age eight. He wanted to be a commercial banker.

Dan Crowley: Yeah, they wouldn’t have me as a garbage man.

Brian DAmico: Since that time he’s been really formulating this plan of coming out with the software system that basically today is the official watch. It’s called Commercial Loan Success, and it’s a very interesting of how people can really give back the power to the people to find out is this deal bankable when it comes to commercial property. So without further ado, Dan, welcome to our show.

Dan Crowley: Brian, thrilled to be here. You’ve been a great supporter of the idea of Commercial Loan Success becoming available, and I would say to a certain degree you’ve been torturing me when’s it coming, when’s it coming. It’s great to be here. When you think about the fact that we worked together for the years that we have, and that I had been blessed to play the role in some of your family’s property activity, working with your dad and your brother and of course with you, a lot of the things that took place in those tremendous relationships were the inspiration for what we’ve now put out into the marketplace, so that everybody can get really a great level of control and some terrific levels of protection in their thought process. [crosstalk 00:02:54]

Brian DAmico: So if we had a title for today’s show, what would you call it?

Dan Crowley: I would say, it would really be The Genius of Adopting the Commercial Loan Officer Mindset. Because if you really think about the ideas of the different ways that you can finance a property, the way you look at a property, how you value a property, it’s very different when it’s a one-through-four family, and then when it becomes everything beyond that. Everything beyond that is a storefront with two apartments above or that fifth unit and beyond.

Brian DAmico: My title would be a little bit more simple. It’d be like, Commercial Loans, We Make It Easy. Sounds [crosstalk 00:03:32]-

Dan Crowley: You could look at it that way.

Brian DAmico: [crosstalk 00:03:33]

Jonathan: Or it could be easy money-

Brian DAmico: Easy money.

Jonathan: … with commercial loans.

Brian DAmico: Right, we make it easy. Easy money with commercial loans.

Dan Crowley: It could. There he is, [inaudible 00:03:40].

Brian DAmico: All right. Let’s talk about … is this considered software, hardware, what exactly … is it a software system?

Dan Crowley: It’s a software system tied to an educational platform that empowers folks depending upon what I call their angle of attack with regards to commercial finance, which could be for real estate, it could be for business property, it could be for investment property, it could be purely for business. But what’s getting a lot of action in right now is the fact that we’ve released the entire suite of income property analytics for both refinances and for purchases.

Brian DAmico: So, say, I know a lot of commercial buyers out there. If you’re driving around, this is definitely right up our alley, anyone who’s a subscriber to this show. That sounds … Say, this building for instance, where it’s Studio 21 Podcast Café, New Hampshire, say, I was driving by this house, I saw that it was for sale. I have my phone on me. I say, this is great. Let’s see if this deal is … see if I can get this financed. How would I go about that?

Dan Crowley: First thing you would do is find out whether or not it was a business property and you were going to acquire it for the purposes of running it as a rental, or if you were interested in acquiring the property along with the business itself. Let’s take income property.

Brian DAmico: Okay. So let’s say it’s a 12 unit property which clearly makes it commercial. So again, one to four units is residential, five units and up is commercial, also if it’s mixed-use, depending on the percentage of commercial property, it will be considered as commercial property. So with that being said, so say, it’s a 12-unit building. And I said, “I really want to buy this. It’s definitely not residential. What is the bank going to look at to see if this is going to qualify, and can I do it myself?

Dan Crowley: Two different things you’re going to want to get right off the bat. Number one is become familiar with the income characteristics of the property. Those income characteristics are going to be coming from two different distinct directions. Number one, the actual rent collections to do with the apartments themselves.

Brian DAmico: So that’s a rent roll, right?

Dan Crowley: That is your rent roll.

Brian DAmico: If I’m a person that’s on MLS or something like that, or what’s the other one called?

Dan Crowley: Oh, there’s so many of them now. Realtor.com.

Brian DAmico: LoopNet.

Dan Crowley: LoopNet is one.

Brian DAmico: Right. So if I have access to LoopNet, or I have access to MLS PIN, and I have that rent roll, can I use those numbers … I mean, the realtors put in that number, right, so it should be accurate.

Dan Crowley: You would like it to be accurate.

Brian DAmico: You would think it’s accurate. So if I put in that rent roll based on what they put into the system, I can use that as the rent roll.

Dan Crowley: That’s a start. The other part is asking the good question, the smart question. Does the property deliver any ancillary income? Any additional income sources. It could be laundry, off street parking, self-storage, could be garage space. Those are not always income drivers that are organically generated. Sometimes you’ll find someone who owns a property who does offer self-storage or garage space, doesn’t always rent it to just the tenants. They may make it available to the market at large. But those are incomes sources that you want to consider and you want to be able to verify as being accurate and being current.

The other than you wanted to determine about the rent roll, this is really important, a lot of more seasoned landlords, they just like the warm and fuzzy feeling of the fact that they’re fully tenanted. What they will do maintain that level of stability, especially as they paid the mortgage down that they may have had when they bought the property, is they may actually have their rents lagging behind what the market might support at a higher level. And consequently, it’s important to make the distinction between the current collection level versus what the projected collection level would be because from a buying decision standpoint, you want to make sure that you’re only paying for value that’s being delivered to you in the course of the transaction, not what’s left on the table for you to collect later on because you’re the one who’s going to have to take the risk in order to fulfill that higher rent level. So current collections both to do with the actual act of rents, how strong that rental stream is, and then ancillary income added on top of it are the things you want to look at from the income side.

Brian DAmico: Okay. So you have the rent roll, and the ancillary will give you all the income derived from that property. Then you have to look at expenses, right?

Dan Crowley: Absolutely.

Brian DAmico: You’re going to be typing it into your system now. You’re going to be typing in the rent roll, you’re going to be typing in the expenses. Let’s talk about expenses, and how do if the expenses are accurate?

Dan Crowley: Well, here’s one of the things that comes into play when you begin to adopt the commercial lender mindset, which is, when you think like a commercial lender, one of our mantras which we really do follow and we recommend to people all the time, is that if it’s a good deal for the bank, the chances are it’s a terrific deal for you. If it’s not a good deal for the bank, then take a step back, watch out, ask questions, find out why. Part of the data collection process that you’ll want to be collecting is going to be the Schedule E or the equivalent, which is where the tax reporting takes place with regards to last year’s historic report of operations for the government.

Brian DAmico: How likely is it to get that Schedule E? For people who don’t know, I mean, Schedule E is the schedule on the tax return that the seller is actually putting in the tax return on what the true expenses are. How likely is it that you’ll be able to get that Schedule E from the seller?

Dan Crowley: There will be pushback in some cases. In other cases, you’ll have sellers and seasoned representatives of the sellers who understand that it’s going to come up somewhere in the loan approval process unless it’s a cash transaction. They’re going to have to deliver accurate numbers. So because it’s a regulatory checklist item from bank standpoint, the bank is going to insist that either a certified version they can verify of that information is going to be provided or the schedule or equivalent because it’s a Schedule E and it’s being reported on your personal return. There are other equivalents of a Schedule E depending upon whether it’s held in a realtor trust or if it’s held in an LLC, but there’ll be some unique document that is reported to the government which captures the income claimed on that rent roll for that previous year as well as the expenses that are attached to it.

It’s important to get that information in the sub-schedules because there’s some dynamic value that is sometimes buried in that Schedule E that, depending upon whether you’re a buyer, can be discovered and, depending upon whether you’re a seller, you need to properly frame, so that you don’t cheat yourself out of market value. So putting this into the software, to put it very bluntly, someone can sit down, subscribe to the system, take what is a verified rent roll and a Schedule E and in 10 minutes know precisely where they stand in the eyes of regulated commercial lending.

Brian DAmico: That’s actually … it’s pretty amazing because, I mean, a lot of times you go to the bank and you really don’t know until two weeks or a week before closing if it’s actually going to go through, especially in commercial. In the residential world, we have these automated engines, and we do just that. We type in the numbers. We review pay stubs. We review W2s, tax returns, and we’ll know if it works based on putting it in an engine. But this is really revolutionary for the commercial world. What I really like about this, it’s not just … The piece that I think it’s great is you get a green light or a red light, basically, it’s bankable or not. You just don’t go that far. What is the next step to actually find a bank that wants to do this deal?

Dan Crowley: What’s terrific about the software is that when you receive what we call a GO-meter validation, that the particular transaction is financeable, whether it’s a purchase structure or if it’s a refinance structure, once you have that green condition present itself, or something that we consider to be within that reasonable buffer zone to a green condition, it’s going to open up what we call CLS Lender Central which essentially unlocks-

Brian DAmico: CLS, which stands for Commercial Loan Success Lender Central?

Dan Crowley: Lender Central unlocks access to and identifies the banks that are within whatever proximity you determine to that particular asset or to yourself who would most likely be interested in doing that type of loan that is equipped and is in the market to actually finance the kind of asset that you’re dealing with, whether it be a business, income property, corporate property or a piece of corporate finance.

Brian DAmico: Now, the banks that are in proximity, do you go over state lines? If say, for example, it’s a very large deal and maybe the small community banks can’t handle a very large deal based on all the requirements today and all that kind of stuff. Does it also go out of state if you press the button and say, “Shop the world,” or …

Dan Crowley: It will give you the ability to broaden your circumference in your search area. Now, one of the things that we talk about in commercial lending is that deals that travel very far from home in order to get done, sometimes what we call … they have a little hair on them. They’re not very strong deals. Well, we’ve already determined that your particular transaction is already a green light condition. It’s already been underwritten to regulatory correct underwriting guidelines that are typically used at the commercial bank level, the regulated bank level. It deserves to be there. You deserve to have that conversation with a credible commercial lender.

Brian DAmico: Let me make sure I understand it. I put it in the rent roll, all the ancillary income, I put in the expenses, things like real estate taxes, insurance, maintenance, if there’s a property manager, what other things could be expenses? Snow removal.

Dan Crowley: Here’s what you look at. Occasionally what will happen is that a property owner, let’s take a simple situation. There are different types of expenses. Some are long-term, some are short-term, some are the types of things that happen every day that will recur every year. Others are what we call generational expenses. A new roof. Porches on the back of a building. An entire new mechanical and heating AC system. Whatever it might be.

Brian DAmico: Really a one-time expense.

Dan Crowley: Generational expenses. But what a lot of folks will do is that they will expense them during a given tax year. Now, if you take those numbers and add them to the current income stream, it’s going to crush your numbers. It’s not going to bring you a fair determination.

Brian DAmico: Right. So would you have to take the depreciation over years?

Dan Crowley: No. What you would actually do is the program is built to compensate for those what I call generational-

Brian DAmico: One-time. Yeah, I call it one-time.

Dan Crowley: Yeah, one-time expenses. You put on a new roof, commercial underwriting allows you to recast those numbers and capture that expense in a different way so that you don’t hurt your current cash flow by impacting the numbers improperly. Consequently determining value becomes more relevant based on those numbers. See, what people need to realize is this. Properly underwritten numbers tied to the loan-to-value calculation, which is the percentage of that total transaction that a bank is allowed to lend, has a relationship with value.

Brian DAmico: So for example, if it’s a $500,000 piece of property, you’re going to put $100,000 down, that’s 20%.

Dan Crowley: 20% down.

Brian DAmico: Right. So it’d be an 80% loan to value.

Dan Crowley: Correct. Right.

Brian DAmico: So if I have the rent roll and I have all the income coming in derived from that property and I have all the expenses, it could be from a Schedule E or based off the MLS numbers of what the true costs are, I put it into your system. I get a red light, green light type of scenario?

Dan Crowley: You do. You get a GO-meter condition which is very, very detailed so that you actually know point by point not only how close you are to a workable deal, but if you’re just missing … It’s literally going to describe for you how much you’re missing in terms of … based on the amount of income additionally needed to meet the green light condition based how much expense you need to take off.

Brian DAmico: So say, for example, the expenses are too high, or the income is not enough. Maybe the realtor may have mis-priced, I mean, maybe it’s really not worth what that market is calling for. I mean, does that happen?

Dan Crowley: This is the sanity check part of the program, in that sellers will very often grab a value that they just think that they deserve, but it’s not really built on anything. It’s just because they’ve owned the property for a very long time. Let’s face it, the conditions under which they bought it, they may have owned it for 20, 25 years, may no longer be relevant. What commercial lending does is gives you a very finite path to determining the relationship between loan support and what is essentially a defensible price for that property in the marketplace. And if you find that the price that is defensible is very far away from the price that you’d like, chances are you may be one of those landlords who has run with low rents, and you may need to re-season those rents at a higher level in order to have a defensible sale price. You may need to economize the property from an operation standpoint in order to create more NOI that can service more debt which will relate to more value.

Brian DAmico: I think it’s a point for our listeners to understand that, Dan, you’re not just a commercial loan broker, but you’re actually an underwriter as well, right? So I mean, you know what goes into the underwriting of the file?

Dan Crowley: Oh, yeah.

Brian DAmico: Your history is you underwrite for large loans. So when you present a package to the bank of what’s bankable, or through one of the agencies, that’s already underwritten, and you built a system to basically replace you, basically artificial intelligence robot, you built yourself … [inaudible 00:17:19] a little robot.

Dan Crowley: Would be good. Walking across the table.

Brian DAmico: A loan robot. [inaudible 00:17:24] robot. Really, you took everything in your mind on how you underwrite a file and you built it to the system. So now when people can … Really, a DIY type of system because I remember if I saw a building that I liked, I would send it to you and I’d say, “Dan, what do you think about this?” That building … You have to … Tremendous amount of questions.

Dan Crowley: Well, I would beat you up.

Brian DAmico: Yeah, you would, yeah.

Dan Crowley: I mean, you could say it.

Brian DAmico: Yeah, you’d beat me up. When I would send it back to you and you would say, “Hey, I’m going to call you in a little bit,” called me, and then you’d say, “This building is not worth it. These are the reasons why. Get the Schedule E so you can really understand.” And really, this is what the system is going to do for you without having to locate you.

Dan Crowley: The idea is right now, in America, we are on the back end of what was a tumultuous period of time with regards to the mortgage meltdown and the economic meltdown. What happened with home ownership is quite famous and it’s been cited in movies and chapter and verse, what a lot of folks don’t realize is to what degree there was a big difference between regulated sane commercial lending at the bank level versus other loan products that were made available that were a lot more porous in their underwriting decisions and which really only teased people into the temporary ownership of income property only to have it taken away from them a few years later.

The reason that we built this is so that anybody can sit down and develop a core competency that’s based on proven prudent facts of how to approach an ownership condition, either in a refinance or in a purchase scenario, that will not only stand the test of time but will become a core competency that they can use to make good investment decisions for themselves, and that it also becomes something they can pass onto their kids and their kids’ kids. The idea that you can course correct just a couple of percent doesn’t look like a lot at the beginning, but if you can actually learn this and protect yourself going forward, where you end up if you stay on the course you are which is, “Well geez, if they said it was okay to borrow, I guess it’s a good deal,” versus knowing in your heart that you’ve applied a set of rules that will protect you, where that person ends up who just goes with the flow versus where you end up over time becomes vastly different destinations. You arrive at a much better place as time goes on.

Brian DAmico: Right. Because that person might put an offering, take the property’s word they think that it’s going to get the deal, and what people don’t realize is commercial property is really based … the underwriting is based on that property, right?

Dan Crowley: Only on the property.

Brian DAmico: So your system, you’re not going to pull a credit report on this person.

Dan Crowley: Nope.

Brian DAmico: You’re not going to say, “Hey, your credit score was 600. We need a 740.” Credit doesn’t play into …

Dan Crowley: It comes in later on. Let’s put it this way, great credit cannot cure a bad property.

Brian DAmico: Correct. Got you.

Dan Crowley: All right? Whereas in other types of lending maybe great credit scores can weigh in. Now, you can cross-collateralize different assets, you can create blanket financings, but in the final analysis, that group of assets would still need to meet the same-

Brian DAmico: Cash flow.

Dan Crowley: .. the same set of standards.

Brian DAmico: So it’s called debt service ratio?

Dan Crowley: Debt service coverage ratio.

Brian DAmico: DSCR, debt service coverage ratio.

Dan Crowley: It would just go from being a single asset analysis to global, meaning, we were going to do a blanket financing and we were going to blend assets we were buying with assets we already owned. As a group, they would need to meet that same criteria.

Brian DAmico: So now, if I’m a borrower or I’m a buyer, and I want to … You’re going to have some kind of interest rate to figure out what that number is going to become. How would I figure out what I think the market is for an interest rate or something like that?

Dan Crowley: It couldn’t be easier, and it really just depends on at what level that you’re lending at or borrowing at depending upon your approach. You would, for example, here in New England, this is Easy Money New England.

Brian DAmico: Easy Money New England.

Dan Crowley: Well, the Easy Money New England index would be if you’re borrowing from a regional bank, go to the Federal Home Loan Bank Board Boston page, look at what it called the classic advances, look at the regular rate, and ideally the way most banks price an initial underwriting on a loan would be to look at the five-year classic advance rate.

Brian DAmico: Five years, yeah.

Dan Crowley: And then, depending upon what they have as perceived risk levels, you’re looking at a margin over that rate of anywhere from 2% to 2.5% and 3%.

Brian DAmico: So between 2% and 3%. All right, so between 2% and 3% percent, and that rate would be what you can kind of plug in a system.

Dan Crowley: The median rate right now, today I looked at the rate this morning, would be a 5.59 on a five-year loan on a 25-year amortization because the index is at a 3.09, so you’d add 2.5% to that, and that’s where your rate would be today. The amortizations will vary depending upon asset class. It could be a 20-year amortization …

Brian DAmico: Depending on the bank too, right?

Dan Crowley: Different banks may have different structures. You may find that some banks will look at a certain asset class and only do a 20-year amortization. Some will do 25 or 30. As you know, if we’re dealing in the hot world-

Brian DAmico: Yeah, I remember working with you before in the past, I mean, I know these banks that go to a 30-year amortization on commercial. I know some that go to 30-year interest only. I mean, some of the things that are out there you wouldn’t realize in the commercial world.

Dan Crowley: That’s correct.

Brian DAmico: Also SBA world, right? So SBA world, you could actually put 10% down if you’re going to house a business inside of the property, which, that is not common knowledge.

Dan Crowley: A lot of folks … SBA is probably the greatest resource for the business person especially when they want to buy a property. If you were the person wanting to buy, the environment we’re in today, this is a single business. It’s got a lot of assets here.

Brian DAmico: Right. Let’s say this place was vacant, and Dave Garofalo, the owner of Studio 21 Podcast Café, if he was to come in and say, “I want to put my cigar place in here, I’m going to put my Studio 21 Café,” he would then punch this in the system and say, I’m going to actually move in there. He could put 10% down, and as long as … What would they use? Because if it was vacant, how do you figure out …

Dan Crowley: Well, let’s assume that Dave already was in the cigar business.

Brian DAmico: Yes.

Dan Crowley: Okay. And he found this location. All right, well then, he’s an established business. If he’s in business at least two years and he’s not in what’s called a special purpose category, which the cigar business is not, there are some businesses that are, but he would actually be able to finance up to 90% of the purchase of this property. 50% of it will be done by a bank based on what the terms are that they would like to make available, and the remaining 40% would be on a fixed-rate 20-year debenture that is fixed for the entire 20 years.

Brian DAmico: Debenture, what is debenture?

Dan Crowley: A debenture bond is a bond that is sold based on the mortgage that is created, and an individual investor would buy that bond, or a group of investors depending on the size. Sometimes there could be multiple investors involved because debenture bonds could be anything as tiny as just a few thousand dollars up to the SBA limit which is 40% or five million dollars, depending upon how large it is. So it’s a terrific way to lock in a large percentage of your loan.

Brian DAmico: Could you also do SBA loans through your system?

Dan Crowley: Oh god, yeah. We built a template which is preemptive in the way that it gathers information that goes through and not only quantifies and qualifies all of the what-ifs that are built into an SBA 504 financing but even goes as far as to qualify whether or not you’d qualify for what are called the additional green funds that are available through 504 if you were going to turn the building into being a LEED certified building, which is very efficient from an environmental and energy standpoint.

Brian DAmico: So if I was a bank, I’d want to be your right-hand man because obviously these banks want to lend money and they want to lend it on the commercial side of things. How do they get on your platform? Or are all banks in the platform … How do they get involved? I mean, are all banks automatically in the platform?

Dan Crowley: Right now we have made the entire banking community identifiable through the system. What we are now building and making available to the individual banks is the added ability with connectivity through the system to be able to electronically submit the documentation and the underwriting that we’ve created as an active accept or pass condition between the bank and the borrower.

Brian DAmico: So Fannie Mae or Freddie Mac has their own automated engines for residential loans. You’re basically creating that but for the commercial resource.

Dan Crowley: We are.

Brian DAmico: Wow. This is very interesting. If you’re a bank, I mean, I would think if they’re on the platform, they want to find loans just as much as anybody else.

Dan Crowley: They want good clients.

Brian DAmico: They want good clients, right? So this is a way for them to do that. If I’m a consumer now and I press the button, I got a green deal, it says GO, right? I want to press that button and see the area banks that would be … How do I shop that? I want to find the best terms or the best rate? Or how would I know which banks to go to?

Dan Crowley: Well, at this particular point you’re going to start off with proximity, all right? Number two, proximity is broken down into two categories. There’s geographic proximity, and then there’s a proximity of maybe somebody at that particular bank. The idea is are you looking for a new relationship, or are you looking to be able to communicate with your existing banker with a great deal of professionalism, respect and just be able to be more effective with them? It really is … Think about it in these terms. When you travel internationally one of the greatest things you can do is learn the language of where you’re going to travel and put a smile on the face of someone in a restaurant when you order in French. All right? Well, bankers, I have to tell you, commercial lenders are the most over regulated, overworked group of people out there. I mean, they really do go through a heck of a lot in order to deliver the level of service. I love these people. I mean, they really do a phenomenal job.

Brian DAmico: Well, you wanted to be one since age nine.

Dan Crowley: I came out of the womb wanting to be a commercial loan officer

Brian DAmico: Exactly.

Dan Crowley: I thought I was going to be a hockey player, I ended up not. But the fact that you can walk into your existing or prospective banker and be able to converse with them in their language, present information to them that is completely familiar to their thought process and then be able to proceed respectfully, all the while knowing before you walk in the door, and they know when you come through the door, either it’s that electronic, that virtual door, or that physical door at the front of that bank, that you are on board with them. They’re on board with you. Remember you talked about the anxiety factor, waiting a couple weeks for approval.

Brian DAmico: It’s very … The anxiety is real.

Dan Crowley: You know what? You don’t have the anxiety, and they don’t have the trepidation. They already know [crosstalk 00:28:18]

Brian DAmico: Especially when they have the commitment date. There’s always a possibility, you lose your deposit if the bank isn’t working quick enough. So if you give them all the information upfront, it’s going to streamline that process. So say, for example, I get that green deal. I get the GO. I look at the proximity of what banks around. Oh my god, this bank, they’re around me. I know the banker of that. I’m going to go see him. Can I print out my green type of system?

Dan Crowley: Your one sheet, we what we’ve produced, it’s an industry standard, it is exciting because the everything that’s gone into the underwriting is aggregated on the CLS one sheet. The one-sheet shows it all. And just staring right at you in the middle of that one-sheet is the debt service coverage ratio which is the primary measurement of success in this process. All your supporting data is there as well, but that GO-meter validation with the debt service coverage ratio showing a glaring green condition, it screams at them more than anything else on the sheet.

What’s even more exciting is that, especially when I was doing this just from the consultancy standpoint, because I’ve used my various versions of the one sheet for years, but even more so now that we’ve got the program and we’ve gone through all of our major testing and utilization over the last couple of years because it’s taken two and a half years to get to this point. The banks that were actually part of our beta … And we did it with real live deals. Clients who really needed money. Situations that really needed a lending component. To walk into those banks after I had already submitted all of the data electronically, there was nothing more exciting for me than walking in and seeing our one sheet with our loan package pinned to the back of the bulletin board right behind the lender, and then having he or she tells me the story of not only how impressed they were with it, but how many people around the commercial loan department of the bank came in said, “What the heck is that?” Grabbing it, looking at it, thumbing through all the pages. And just saying, “Holy cow,” because they hadn’t seen it before. It’s new.

Brian DAmico: I mean, it’s fascinating. One of the things that I like to add is in the residential world, we would say garbage in, garbage out. So you got to make sure what you put into the system is accurate, right?

Dan Crowley: Beware of round numbers.

Brian DAmico: Right. Beware. If it says, expenses, three grand a month for taxes.

Dan Crowley: Beware of round numbers.

Brian DAmico: [crosstalk 00:30:42]

Dan Crowley: Get a schedule. Your accuracy is everything. I mean, if you’re a buyer-

Brian DAmico: So if you don’t get the real numbers through the underwriting process at the bank, that’s their job. You’re going to give him the one sheet, but they’re going to make sure that those numbers are accurate. So whatever you give them, as long as they’re accurate, you know that deal’s going through.

Dan Crowley: You may as well input the right information the first time.

Brian DAmico: Exactly. And that’s what kind of what we see in the residential world is if you have the right numbers, you already know ahead of time.

Dan Crowley: Absolutely.

Brian DAmico: Those engines are already built, but it sounds like the Commercial Loan Success, I mean, this is built for all commercial deals.

Dan Crowley: This is everything.

Brian DAmico: Which is very interesting because, I mean, I know the banks … I mean, let’s face it, banks, the resources of a … I mean, there’s not a lot of community banks anymore. I know that when I go into a bank I would much rather a community bank versus a conglomerate because you don’t have that one-on-one type of relationship. They don’t look at you globally like, say, a Bank of America. They don’t know that you’re a big client there, or if you are a big client, or if you’re a small client, doesn’t matter, but they don’t look at you as a whole. They just kind of look at you as that transaction. As a community bank, it’s more of a relationship there. How does that work? Because community banks are getting really pinched.

Dan Crowley: Community banks, they represent some of the finest people out there in banking, especially in the commercial lending group. We speak in a lot of community bank association functions. We’ve gotten to know a lot of these people. They live where you live. They go to church where you go to church. They shop where you shop. Consequently, the way that they treat you … If they don’t treat you well, it’s going to come back to bite them. But their predisposition is they really are parts of the community. Not that the people who work for larger banks, super regionals and nationals, aren’t part of the community. They are. They all work very, very hard. I don’t think that you would want to ever be disrespectful to someone based on the size of the institution.

But at the community bank level, they tend to sponsor things, they’ll do the bake sale, they’ll do the Little League uniforms, and frankly, they want to do the best for their communities. They really do want to play a key role in there. Love community bankers. We’ve communicated with a ton of them as we’ve fine-tuned what we’ve done. We wanted to make sure that we weren’t missing anything in terms of the kind of information that they’d like to receive and the way that they’d like to receive it. So creating that portal has been critical.

Brian DAmico: So really, community banks versus big banks, it really, it all comes down to the people you working with. It doesn’t matter if so-and-so works for this mortgage company or works for this bank. You’re working with people. It’s the people that make up the-

Dan Crowley: They all want to do a good job. They all want to help you.

Brian DAmico: But some of these banks they have different guidelines or they have different structures, right? So one bank might do a 30-year amortization, where another one goes, “I would never do that. I just do a five-year amortization.”

Dan Crowley: Here’s what happens inside of banking. You’ll have asset classes, apartments, mixed-use, straight commercial buildings, and depending upon the composition of their particular lending area, what we call their lending footprint, is they will occasionally have a certain bucket fill up, meaning that they’ve done too many loans of a certain type, maybe apartment properties. Just came across this with one of my favorite lenders who’s an old friend. His bank is actually based in the city where we wanted to help one of the largest realtors in that city, who’s one of my clients, be able to do a loan. It just so happened because they’re headquartered there and my client’s, all of his buildings, are at that location, they simply had filled up the multifamily bucket. They couldn’t lend there.

Fortunately, a Lender Central says, “Let’s talk to this bank,” and we click on another one, and we are able to talk to the lender at that particular bank, speak to a commercial loan department. The analysis is the same. We might fine-tune it just based on there being slight differences in how they price the loan or the amortization they use, but it’s completely flexible, it changes on the fly. We just reprint the one sheet with the new criteria and boom, we’re in the bank, we’re having a real conversation, and we’re either helping the client or the client is helping themselves play the role of financing broker for their own deal.

Brian DAmico: Okay. So we talked about if I’m a consumer and I’m walking, I’m going through the city and I see a property for sale and I kind of deal with myself. I would think this is very powerful for a commercial real estate broker as well. I mean, do commercial real estate brokers kind of use your system and say, “Hey, I’m going to base my price … I’m gonna send it to my seller and sit down with the seller. I’m going to, based on the debt service coverage ratio”?

Dan Crowley: Sure. And the loan-to-value.

Brian DAmico: And the loan-to-value. This is kind of what the property is worth. Now, if someone goes in and says, “Hey, you know what? Your market rents are a little low. I’m going to raise them,” or maybe you could make … maybe put that part into the deal, if maybe they’re below market rents, but other than that, is this a great tool for a commercial realtor to use?

Dan Crowley: I will have you understand it from this particular standpoint, and I’m going to bring it really close to home for you. Your brother who is C21 franchisee running one of the most prolific Century 21 operators in the Northeast played with the software for a while and said this is a game changer because what it is, it’s a massive empowerment tool for anybody who wants to go out and gather the listings.

Brian DAmico: So if I’m a residential real estate broker, this will help me sell commercial buildings as well. When someone says, “Hey, I got a commercial building,” and they usually refer to a commercial broker or something like that, are you saying that a residential real estate broker can really get good at commercial? Is it much easier now than before?

Dan Crowley: I’ve been mentoring residential real estate brokers for years, many of them in your system, many of them around the country on being able to add that additional core competency to their professional skill set. What this does, it turns it into basically an on a switch. You can literally turn on that side of your brain. Imagine you’ve been a residential realtor for years, and in the metaphor of a residential realtor, let’s use the Brooklyn Bridge, all right? And your one-through-four family business has been the side of the Brooklyn Bridge that lands in Manhattan, and you’ve got a toll booth on that end of the bridge for years, all right? And you’ve been collecting tolls every time somebody goes over that one-through-four family side of the bridge. Now you decide you want to do commercial. Commercial is represented by putting a toll booth on the Brooklyn side of the bridge and suddenly you’re catching the traffic in the other direction.

Brian DAmico: You’re missing all those commercial plates that are going by.

Dan Crowley: Not anymore.

Brian DAmico: You’re not missing them [crosstalk 00:37:23].

Dan Crowley: Not anymore. They go through your toll booth now. And you’ve got not only the tools to effectively analyze but we back it up with an educational system and mentoring which actually makes you a powerhouse. You go from not doing commercial at all to being a sales and listing dynamo in commercial if you follow the system.

Brian DAmico: So you talk about commercial and we talk about residential realtors, we talk about consumers, mortgage loan offices could also-

Dan Crowley: Absolutely.

Brian DAmico: They can kind of use this system is helping their clients find out if it’s going to be a green light or a red light.

Dan Crowley: Especially that’s a contingent transaction. What will happen in your world quite often is that you’ve got somebody who wants to buy a house? Their ability to buy that house may stem from the need to refinance a different type of asset, and it could be a multi-family property that’s beyond four-family category.

Brian DAmico: Right. Well, mixed-use is there, right.

Dan Crowley: Or somebody who’s in the residential mortgage business wants to add an extra level of service and put on that commercial hat and be able to help them fine-tune their ability to go out and refinance that property to get the down payment funds they need for the primary transaction-

Brian DAmico: Yeah, makes a lot of sense.

Dan Crowley: … what they’ve done is they’ve made themselves even more valuable to that buyer. Absolutely.

Brian DAmico: So we talked about a consumer, we talked about a realtor, we talked about a loan officer, and then the bank. I mean, is the bank actually using the system on the back end too? Because, I mean, if the system, which I’m sure it does, is telling you if it’s bankable or not I’m sure the bank’s using that system too.

Dan Crowley: Many banks have tested it. They were a major part of the beta when we rolled it out, and what’s happening now is we’re going through an institution and regional screening process where we’re going to actually start making the bank version of the analytics available and be identified in CLS Lender Central as being a CLS equipped bank in the system. So that if you’re a user of the software and you see any number of banks that are sitting out there in bank land, the iconography in the system is going to identify which banks are simply available to you and which banks are also using the same analytics that you’re using, which will build more of an instant rapport between the bank receiving the information and the user of the software. It’ll actually streamline the process. It’ll really create an intertwining and almost an immediate one-on-one rapport, instant trust between the two because they use the same analytics.

Jonathan: Does that make you more accurate as well, pulling from the bank side?

Dan Crowley: Oh, absolutely, Jonathan. Without a question.

Brian DAmico: We talked about all the different people this could impact, especially the buyer, even the seller to find out the price, but if I’m one of these people, how do I get more information? How do I sign up? How do I start using it?

Dan Crowley: Well, you can go to CommercialLoanSuccess.com

Brian DAmico: CommercialLoanSuccess.com.

Dan Crowley: Yep. There are great introductory videos. There’s a terrific video when you scroll down for each and every what I call demographic class of user we’ve provided introductory videos. You’ve got tremendous amounts before you even subscribe and become a member of the program, you’ve got lots of information and there are lots of Q&A, lots of examples. Then, of course, we’ve got the mentoring program. You can call our 24/7 support team. They’re there, they’re waiting to answer your questions even before you become a member. We’re on your broadcast today, but our tutorials are available online. Once you get into the system, the amount of education that we’re providing is growing on a daily basis for both property investors, as well as for business owners or prospective business owners, someone who wants to figure out if they’re on the right track and what they would need to do in order to be able to forward a business or even create one because there are resources for financing new businesses.

Brian DAmico: How much does it cost to kind of get on your platform because right now I’m saying to myself, “Wow, this is a great value.” I mean, to get this into the hands of people is a great value.

Dan Crowley: We have a call to action right now that is on the site, and what I will do is I’m going to frame it this way. For less than half the cost of America’s favorite donut, you can have access to this system.

Brian DAmico: Is that a Krispy Kreme donut?

Dan Crowley: Well, depends on what part of the country … Donuts are-

Jonathan: [inaudible 00:41:48], this is Johnathan. [inaudible 00:41:49]

Brian DAmico: Big fan of donuts.

Dan Crowley: He’s a big fan, got it.

Jonathan: I believe he would say that Kane’s Donut would be the-

Brian DAmico: Kane’s Donut, that’s like a six dollar donut.

Dan Crowley: Well, I’m going one of the most widely distributed donuts but let’s put it this way. It’s far less than a dollar a day.

Brian DAmico: That’s great. Hey, you’re going to have the power in your hand much quicker than someone who has to break down the numbers. You have to locate the banker to find out if it’s bankable, you got to to find the guy, and then you got to get them all the information so you can break it down and say, “Hey, this might work, this might not work.” You might be out a week, two weeks, you might be on vacation. You might not be quick enough to kind of get that offer in there because you kind of want to know if it works before you put an offer because it’s very difficult to kind of take that offer away once you give it. All right? So I mean, I think that by getting this information, say, look, I’m going to offer you this but this is the reason why. Here’s my one sheet. This is what the property truly cash flows. This is what the debt services … It’s not bankable otherwise. So either you take my offer, or we talk about maybe I can raise rents if I know if the market value is there, then the market rates. I mean, is that …

Dan Crowley: It creates and it leads both parties toward what’s eventually a balanced transaction. It creates a win-win scenario, all right? If people who are in the residential sales business have had experience with folks that are pricing commercial property, it could be all over the place. It’s very frustrating for a seller when a property sits on the market for a very, very long time, and it’s embarrassing for an agent or a real estate salesperson when they listed the property and they can’t really explain why it’s been on the market for a very long time. Well, in using these analytics to come to some very finite conclusions about what they can do to fine-tune and season the property operations to command a better price or closer to the price that they want, being able to create an action plan because you can analyze it, it really is very soothing and comforting to know that you don’t just have to sit there, saying, “Why is it on the market so long?” You can fix it. We can teach you.

Brian DAmico: This is good on any commercial profit. So if it’s public storage, if it’s a storage facility, if it’s a mobile home park, is if it’s a big commercial-

Dan Crowley: Now we’re talking my language.

Jonathan: Yeah, double-wide, Jonathan.

Brian DAmico: That’s right. Jonathan’s a minimalist, he wants the own just a double-wide, but maybe you want to own a whole mobile park.

Jonathan: I could have 30 double wides, maybe a couple of singles.

Dan Crowley: We can work with that, Jonathan.

Jonathan: All right, I’m in.

Brian DAmico: And then you can go to, like, Utah and every single one with different [inaudible 00:44:27].

Dan Crowley: That was it.

Brian DAmico: I love that, right. Now he’s thinking, yeah.

Dan Crowley: [inaudible 00:44:36]

Brian DAmico: But yeah, so mobile park, public storage, what are some of the other property types that this could be .. multi-unit, residential.

Dan Crowley: People need to know this. If it’s more than four units, other than raw land, it’s commercial.

Brian DAmico: But what happens a big box, and I will say it’s a Walgreens or something like that.

Dan Crowley: It’s a national credit tenant?

Brian DAmico: Yeah.

Dan Crowley: It’s financeable.

Brian DAmico: So you’re still getting [crosstalk 00:45:04]-

Dan Crowley: And not only that, it’s got a bond rating which means you’ve really stepped in a good one.

Brian DAmico: If you’ve got that true expense and true income coming in you can still have it in the system and see if it’s bankable?

Dan Crowley: Right. In five minutes.

Brian DAmico: Wow.

Dan Crowley: Five minutes to perfect clarity. Think about that. Five minutes and then for the next three weeks you’re not wringing your hands, wondering if it’s going to be approved. You know and everybody else knows that it works. It makes life easy. It’s relaxing.

Brian DAmico: Well, I’m signing up for that. I know it’s on the beta but I got to [inaudible 00:45:39] with some numbers.

Dan Crowley: Rodney’s back.

Brian DAmico: Rodney Dangerfield. Yeah. Easy Money New England would like to say there’s no such thing as easy money but we always try to bring it, try to make it easier. If anyone wants any information in the show, contact Dan Crowley or yeah email us at info at info@newfed.com, and we’ll get you to the right place.

Dan Crowley: And there’s going to be a NewFed coupon code.

Brian DAmico: NewFed coupon code. You already are first.

Dan Crowley: You want to go back, subscribe to the site.

Brian DAmico: Thank you.

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Hi folks, it’s Brian DAmico, owner of NewFed mortgage, and I’m really excited to introduce fast-track mortgage, our new online system that gets you approved in less than 15 minutes, whether it’s a refinance or a new purchase. Just go to NewFed.com any time, day or night and click on the fast-track mortgage button, fill out the form, and within 15 minutes we’ll approve your loan at the lowest rate possible. Don’t waste time dealing with big banks, we’re local and here to help you close on your loan fast. Just go to NewFed.com, 24/7, and get approved in less than 15 minutes. Fast-track from NewFed Mortgage, now that’s a new way to get the loan you need fast.

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Subject to credit approval. [inaudible 00:47:16]. NMLS#1881. [inaudible 00:47:18]

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Speaker 1: The views and opinions expressed by the host, guests or callers of this program do not necessarily reflect the opinions of the Studio 21 Podcast Café, the United Podcast Network, its partners or affiliates.