Crafting the ideal loan package and what it can do for a broker’s business
Metrics such as return on investment (ROI) percentage or debt service coverage ratio (DSCR) are two straightforward ways a broker can forecast whether a given property will perform for life of the loan. Investors on a fix and flip project should be looking for a return in mid-20s to low-30s range to feel confident enough to proceed. If a broker notices that a deal doesn’t start in that neighborhood, they should stay away and advise the client to do so as well. The same tactic can be applied to long-term rentals. A DSCR north of 1.0 is the only starting point a broker should consider. A positive cash flowing property puts the investor in the best position to succeed from day one.
While closing loans and earning business is important for brokers, so is associating themselves with successful, high-performing loans. If clients start to have underperforming loans more often than not, a broker’s client base can start to slip away due to a portfolio on the decline and the inability to create stability or longevity in the industry.
Broker business benefits
When these components come together to create the ideal file, the floodgates open for a broker. Positioning themselves as the perfect middle ground while always keeping the investor and lender in mind when working a deal is how brokers last.
The industry becomes much easier to navigate when a broker is doing so with a clear plan in place. Getting to the point in their career where crafting the ideal loan package is the only option seems like it would take too much time for a broker, but the benefits that come as a result of that initial leg work are worth it.
Repeat business due to efficient closings, referrals to other investor clients because of a repeatable process and clear expectations, and lender benefits and customer service due to a high loan closing rate are distinct advantages to achieving success in this industry and are all well within reach when a broker decides to take on this new way of doing business.
