Wednesday, 28 September 2016

Waad Nadhir - How to Build Relationships with Financial Institutions

Waad Nadhir has been in the real estate business for more than twenty-five years.

Once you prepare and outline your pitch for the banks, print multiple copies of it. Visit several banks and personally deliver your proposal. Doing so will show the bankers that there is a real person behind the potential deal. It will also help your proposal not end up in “to be read at some point later” pile. Also, let every bank you visit know that you are talking to multiple financial institutions.

Getting commercial real estate financing is an economic activity. Just like with every other economic activity the laws of economy apply, including the law of supply and demand. If banks are doing well and are looking to make deals, you can be bolder during your negotiations. If funds are scarce, you may need to accept a higher interest rate on the mortgage. Whatever happens, keep your eyes on the prize and think long-term. What will matter in ten, twenty and thirty years is that you bought the property you wanted.

Once you make your first few deals, the banks will start getting really interested in your offers and properties. They will be very interested to see the changes on your statements of assets and liabilities. Bankers will suddenly start making small talk about how you find your properties, what is going on with your current properties and so on.

You have probably heard the saying that “if you owe a bank $1,000, you have a problem, if you owe a bank $10,000,000, that’s the bank’s problem.”
If a bank gives you a lot of money and you pay it back, the bank will want to give you more money. They will start inviting you to business lunches and events. They are much more interested in giving a significant sum of money to someone they think will pay it off than deal with a lot of strangers off the street borrowing small amounts.

At a certain point, the banks will start trying to impress you. If you are just getting started or have a few properties, you will probably have to get financing on each property individually.

However, as your portfolio grows in size, you may reach a point where it is beneficial to you to consolidate your properties into one portfolio and obtain an umbrella mortgage. Umbrella mortgages are usually much more flexible compared to single-property mortgages. They typically allow investors to buy and add or sell and remove properties from the mortgage without it being affected.

Another advantage of umbrella mortgages is lower application and transaction fees. Finally, when you build a relationship with a financial institution, they would often finance your new projects after doing just a bit of rudimentary checking. This can be helpful because it significantly decreases the time between application and approval and allows you to make quicker and better deals. The ability to make such deals is what gives real estate professionals such as Waad Nadhir an additional advantage in the marketplace.