Planning is not only critical to obtaining the best possible loan to fit your needs, it is essential to your overall financial well being. You should ask yourself why you want to make the acquisition, how you will use the commercial facility and how you will maintain the facility. Make sure that you prepare a budget for yourself which includes "reserves" for replacement when the roof needs to be replaced, air conditioning goes down or any number of other routine items break. I also recommend that you create what we call the PIP (Property Improvement Plan) defining and budgeting how you will continue to upgrade the property over the holding term to enjoy the maximum appreciation of your asset. And, of course, make sure you fully understand how you will pay the loan back. Make sure you have a contingency plan as well. An example of a contingency plan is where you have purchased vacant land, obtain the entitlements so that you can sell the approved project. This makes it a "spec" loan which is risky in a lender's eyes. However, if you have a backup plan which defines how you will develop the property yourself in absence of a bulk buyer you have a complete plan for a "self liquidating" investment. Your loan request will be much more solid!

As we format our agendas for 2008 one word of advice comes to mind: "know who you are doing business with, on any level". Remembering back 35 years ago when I was a commercial loan trainee I struggled with the question: "what's the most important component in making a loan?" I thought the answer was easy, "collateral"; my mentor said "no" and explained that, with the wrong people involved, any deal was risky. I would encourage you to make sure your Mortgage Company has a real office with real people who are willing to share their experience, references and track record with you. Another clue are the professional organizations to which that company or individuals belong. I have asked for lender references recently and gotten the answer "oh, we can't divulge our clients due to confidentiality" - big red flag! At any time asked, Mortgage Authority will provide clients' references, with their permission of course. When a transaction is closed and it is proven to be a win for everyone involved there are always people who will attest to the fact.

Charles Pope, Mortgage Authority