When Kevin Green is contemplating the purchase of a multi-million-dollar apartment building, he wants a lender with expertise in the multi-family asset class, someone "who understands a buildings' bones."
Ideally, the lender should be "your financial team-mate, partner, advocate," says Green, president of Greenwin Inc., one of Canada's largest privately-owned residential property management firms.
While many buyers decide on the property they want to purchase and then enlist a mortgage broker to shop around at the banks for the best rates and terms, Green likes to involve his lender from the outset.
|“The lowest interest rate on its own is not the most important thing. The focus should be on the total cost of borrowing."|
"We want to acquire assets, so we hunt like a team, we do things as a team," he says. He switched from a bank to First National Financial LP shortly after a meeting in Starbucks with Robert Fleet, a financing specialist and Assistant Vice-President at First National, Canada's largest non-bank mortgage lender.
"It was a good move for Greenwin", says Green, whose style is to move and act quickly when purchasing a building. First National has a quick and reliable eye for evaluating the value and condition of the property being considered, Green says, and they provide sound strategic advice.
Whether the lender is a bank or a non-bank institution, deep knowledge of the complexity of the multi-family sector is essential, he adds.
Real estate veteran Maurice Kagan, who owns apartment buildings in Peterborough and Toronto, Ontario, says: "When you are borrowing, the most important thing is communication, and basically you have to believe that what they are telling you is true. But here's what can happen: You have sales guys who are trying to get your business telling you one thing, then they go to their credit committees and risk committees and come back with a totally different type of deal. It's very difficult dealing with a lender who doesn't know the business."
While Kagan is also a client of First National, he says there are other reputable lenders in the field too. The important thing is that borrowers make an informed choice.
First National's Robert Fleet and Peter Cook, Assistant Vice-President of commercial lending, advise in a paper they co-authored that borrowers should look at the reputation and experience of the manager handling their file as well as the reputation of the institution.
"You don't want to deal with an inexperienced person recently transferred from another department."
Kagan says it's "exceptionally important" that the lender knows the ins and outs of dealing with Canada Mortgage and Housing Corp., especially when the borrower wants to get the lowest interest rates possible. "The only way to get the lowest rate is to have CMHC insurance," he says.
Depending on the loan size, the borrower could potentially save tens of thousands of dollars in interest over the life of a CMHC mortgage, "but the lowest interest rate on its own is not the most important thing," Cook and Fleet. "The focus should be on the total cost of borrowing."
For instance, the cost of third-party reports, such as appraisals and environmental, engineering and structural studies may vary by thousands of dollars depending on the lender: "Borrowers should request that their lender provide them with three quotes from approved third-party firms and disclose processing and closing fees. The lender's legal fees should also be taken into consideration."
Greenwin's Kevin Green says it speeds up the process considerably when the lender provides the borrower with a detailed checklist of what is required to get the deal done.
A good lender will go on site to help a new borrower pull all the information together, Kagan adds. "There are a lot of details involved in these things, tax bills, hydro bills, they will come and look at your gas bills."
Cook and Fleet say every lender has a different approval process.
"The borrower should ask how long the process will take and how many credit reviews are required to approve their loan. They should also ask how quickly they can expect a letter of interest, a commitment letter and at what point they may lock in their rate in advance of funding. These are important questions to ask prior to selecting a lender."
For Green, the relationship with his lenders goes beyond transactions, valuations and discussions about roofs and boilers. His company is involved in providing social programs for families in some of Toronto's more impoverished neighbourhoods, he says.
"We want to make it safe. We want kids staying in school and getting jobs."
First National has provided financial and moral support for these endeavours. "When we launch a social program, First National will be there. If we open a centre, First National will be there." It means a lot, Green says.
This content was produced by The Globe and Mail's advertising department in consultation with First National Financial. The Globe's editorial department was not involved in its creation.