When making the decision to secure real estate financing, choosing the right lender to finance your loan might be a more important decision than you thought. A lender’s reputation can help the status of your offer because it has the power to solidify the seriousness and trustworthiness of your financial obligation within the contract. Commercial and Multifamily loans take a business loan approach, so credit score may not necessarily be a big deal when it comes to lenders, as they don’t base it off the individual, they base it on a “business.” Your credit score can actually determine which route is best for you. Regardless, understanding what options you have and working with a great financial team, is the wisest route we’ve found thus far!
When it comes to commercial and multifamily financing, there are bankers, brokers, bulge brackets, middle-market banks, and boutique options. How are you supposed to understand which is right for your financial needs? We want to help break these options and terms down so you can move through this process easier.
There are two types of mortgage lenders, direct lenders, and mortgage brokers. Direct lenders are banks, mortgage companies, or financial institutions that originate processes, and fund the loans themselves. One example of a direct lender is Chase Bank. Mortgage brokers match you with the best mortgage lender and loan for your needs. Brokers work as a single point person to help you compare loan options. For example, you could save time with a bank if your needs are simple, but banks don’t have to disclose their earnings on your loan, leaving you possibly paying more than you should if you aren’t aware of the current market pricing.
There are also three types of banks you should be familiar with if you are looking to invest in real estate. Depending on the type of real estate investment you may be seeking, choosing between a bulge bracket bank, a middle-market bank, and a boutique could make a difference in the outcome of your home financing experience.
“Bulge Bracket” is a slang term used to categorically describe the largest banking institutions in the world. According to Wikipedia, “Bulge bracket firms are usually primary dealers in US treasury securities. Bulge bracket banks are also global in the sense that they have a strong presence in all four of the world’s major regions: the Americas, Europe, the Middle East and Africa (EMEA), and Asia-Pacific (APAC).”
“Middle-Market” banks work with companies that have market capitalizations of about $50 to around $500 million and up. Middle-market banks are usually more specialized than bulge brackets, but less specialized than boutiques.
“Boutique” banks vary the most from one another, and specialize in particular areas of investment banking, aiming to give a more personalized service to clientele. Some boutique banks are strictly local, while others are similar in size to bulge bracket banks in that they span all across the United States, sometimes even internationally!
Commercial or multifamily loans can be intimidating or feel stressful and time-consuming if you are working with someone who lacks experience, expertise, or industry relationships. Bulge Brackets and Middle-Market Banks can sometimes lack the personal hands-on, local touch a boutique bank can have. Boutique financiers tend to specialize in services for a specific industry, benefitting clients looking for direct contact, focus, and quality. Larger banks tend to focus on the amount of the transaction, and they also lean on the conservative side when choosing who to finance.
Depending on who you work with, the right financial team should leverage their established industry relationships and expertise while also giving you a personalized approach to your transaction. It’s important to work with a financial team that has a local reputation within the market you are looking to invest in. When it comes time to put in your offer, knowing the lending is reputable goes much further than many initially think. Not only can that serve you, but your team should also be able to professionally present your contract, negotiate your needs, and close with as little stress as possible.
Pacific Shore Capital has a combined three decades of experience in commercial and multifamily financing. We know our way around financing and enjoy advocating for our client’s best interests. When you work with Pacific Shore Capital, you know you’ll be getting the best possible financing solution and the best possible service in the industry!
If you’re interested in learning more about real estate financing, or our team, tune into ‘Get in the Cashflow Game’ with K&K, Krystle Moore, and her husband, Kenny Simpson. Together they discuss all things multifamily real estate. Each weekly episode features real estate gurus, marketing geniuses, and experts in mindset and personal development. Whether you’re just getting started with your first real estate deal or you’ve been doing it for years, ‘Get in the Cashflow Game’ with K&K combines personal development with current trends and expert guidance, giving you actionable advice that saves you time, money, and frustration as you work to grow your investment portfolio, gain financial freedom, and create generational wealth.