So the number one mistake I hear quite regularly when people are convinced they want to own commercial real estate for their business is they immediately rush out, well–frankly, they go online and start looking at space in their city in their square footage requirements, what have you, or they go running out and find a real estate broker to help them, and they go shopping. They immediately go shopping–they have no concept of what they can afford. Oftentimes, what they’re thinking in their heads is, “Hey, I pay $5,000 a month for my current rent. I can probably afford that or maybe a little bit more, or a pay $10,000. Say, that’s where I’m going to try and, you know, target this.” The problem is, a lot of times they waste their own time, they waste the broker’s time–they get so far as to work with a lender like myself, they will probably waste my time.
What I would suggest to people, if you’re ready–if you’ve established yourself in the marketplace for whatever product or service that you offer and now is the time to go out and buy commercial real estate–you want to get pre-approved first. You want to know what you can go shopping for, what you can afford before you go out there and do it. As I always say, you don’t want to go shop for a $3 million piece of property if you can only afford $300,000. So, what that means is, it’s very simple–I’ve got six basic documents that we like to collect from a business owner that probably covers about 85 percent of our quantitative underwriting, and it’s real simple. It’s actually symmetrical–it’s three years of business tax returns, three years of personal tax returns, it’s an interim business financial statement, profit and loss balance sheet, and it’s a personal financial statement. It’s a business debt schedule, which tells you about your long-term liabilities for your business and an authorization of released credit, so I can pull your FICO score as well as know what your personal obligations are and what your personal debts are. Once I have those six things, I can actually formulate and tell you what you are financeable up to so that you can go find the property that fits within your financing parameters. It’s really important to do this. I don’t see too many business owners do it. I’ve been telling this to commercial real estate brokers for years: Don’t waste your time showing somebody around the property, confusing activity with results. Make sure they’re pre-approved first. It’s really simple. We can do this in a day–that’s all it takes. You give me all this information and within the day, you know exactly what you can go shopping for. You’ll save a lot of time and heartache.