Table of Contents - Commercial Financing 101 with Anton Mattli
Dave Debeau [00:00:00] Hey, are you short on cash or credit to do more real estate deals than sign up for my upcoming five day capital crunch challenge happening this May? Seventeen through twenty first and you can register for free at Capital Crunch Challenge Dotcom. You're going to come away with this with a full roadmap on exactly how to raise six figures or more in six weeks or less and explode your real estate portfolio even under today's challenging circumstances. All right. So each stage to be full of training and a full on training and there's going to be action assignments. There's going to be live Q and A. There's going to be handouts. I'm going to be recording it, keeping it up for the week. So if you can't make any of the classes live, you can always check back and check out the recording. So again, go to Capital Crunch, Challenge Dotcom, get your spot today. Let your other real estate enthusiast friends know about this and we'll see you on May the 17th. Take care. Hey, everyone, it's Dave Debeau here with another episode of the Property Profits Real Estate podcast and today, zooming in all the way from lovely Dallas, Texas. We've got a Texan at heart, but as soon as he opens his mouth, you're probably going to hear he's not from Texas originally. Mr. Anton Matley. Anton, how are you today?
Anton Mattli [00:01:31] Great, thanks. Thanks for having me on this.
Dave Debeau [00:01:34] My pleasure. Now, that's not a that's not a very heavy Texas Texas accent. I hear they're my friends. So where are you from originally?
Anton Mattli [00:01:42] Yes, definitely not. I'm originally from Switzerland, grew up in Switzerland, and then right after school went to work in banking and I worked in New York. So five years Tokyo for four years, Hong Kong for three years. And then I left banking directly and did my own thing for the last 15 years. And that's brought me to Texas roughly 15 years ago.
Dave Debeau [00:02:05] Very nice. So you guys were for a real treat here because we've got not only a Swiss banker that we're there, we're talking about, we're talking with, but he's also focused on real estate and he also really has it dialed in with commercial financing. So raising capital for apartment buildings, that sort of thing. So and I'm really looking forward to our conversation. And I guess the first big question that I'd like to ask you is, in your opinion, what's the biggest difference between commercial financing and normal residential financing? So because you've got a ton of experience with this, so what would you say are the biggest differences?
Anton Mattli [00:02:51] So I would say really the massively biggest difference is that for residential financing, unless you do a big portfolio like a black rock and all the others, your personal credit score and income is really the most important element to it. Obviously, the appraisal needs to come back, but your personal debt to income ratio is the driver. When it comes to commercial real estate, your personal income doesn't matter what madras's, properties, income stream. So we call it generally analy or net operating income. That essentially drives how much the property is valued at, as well as about the so-called debt service coverage will be. And that will determine the loan amount. And you still need to bring in experience. You may have to bring in financial strength and liquidity, but it's still the property that essentially determines the actual loan amount.
Anton Mattli [00:03:54] Yeah. All right. Very, very cool. So, Anton, I'm curious because this is a really interesting for me, because you're
Dave Debeau [00:04:01] you're a banking executive by profession. You had a very successful career in that field. So I admire the fact that you branched out and went off on your own. Why don't you kind of share how that came about? Where did you kind of have the aha moment that you left the golden handcuffs of that nice cushy banker job and struck out on your own? Why did you decide to do that?
Anton Mattli [00:04:31] Yes, I think I always had an entrepreneurial streak in me, so that kind of came kind of natural to me. But ultimately, I think it was just the corporate structure that that you are exposed to and that you have to adhere to in a massive company is just at some point all that entrepreneurial elements that you want to bring to the table even feel great ideas. You just cannot implement them because you have to. So many rules to follow and all the hierarchies that you have to follow. And I just prefer to have a smaller environment that you can build from. And even if you become larger, at least you have matured to decision levels to work with. And that is what I'm trying to do with our firm, where we essentially have very short decision making processes and that we can implement ideas very quickly from our marketing side, from my right side, as well as from our originators. And that's really what what I like. At the same time, I will always have liked commercial real estate from a personal investment perspective and financing perspective until it was kind of a natural progression.
Dave Debeau [00:05:52] So it must have been a major, I'm guessing must have been kind of a major shift for for you going from that, working in a big bank in that corporate environment to striking out on your own. What were the cause? And I'm. Guessing you're I'm imagining you are dealing with huge accounts, you know, people are very, very deep pockets, then you struck out on your own. What did those first few deals or first few years look like for you and your company? What did you start off with when you from the big corporate life to the self-employed life?
Anton Mattli [00:06:29] Yes. Yes. So I would say it was probably a little bit lucky that I was able to build up relationships over the years. And I have always fostered my relationships throughout my career. And with that, I would say lucky enough that I've had a number of relationships of with family offices and high net worth individuals, and I was able to do step in there also to advise them on their direct or alternative investments, whatever you want to call it. And I was able to bring in my expertize that I that I built on on the banking side. And so with that, it was probably a little bit easier. So it was not that I just had to to go and start from scratch with with relationship building, but I already had the trust with a number of clients and entities that that trusted my expertize. And that's really how I started out.
Anton Mattli [00:07:30] So I wonder if you could explain to me what is peak finance? What what are you guys what is what's your core business?
Anton Mattli [00:07:36] Yeah, we are a commercial real estate mortgage broker, so we help property owners or deal sponsors. What I want to call it with financing, with that piece for for their acquisition or for their refinancing. So for similar to residential real estate, a big chunk of the money comes from a lender. So whether it's 60 percent all the way to 80 percent, that is essentially other people's money that is supporting that deal. And because that lender has such a big stake in that deal, they want to be sure that the sponsor and the property and all that matters. Now, it's very hard for a buyer and a small deal sponsor to really know who the right lenders are for a particular project. Right. And that's where we initially help to identify the right lenders. So we essentially are matchmakers that we recommend to proper lenders. Then we go out and get quotes. But our real work really starts after someone applies for the loan. So unlike on the residential side, where you when you apply for the loan, as long as your credit score checks out and your DTI works out and then the appraisal comes in, you can close within a couple of weeks and everything is fine. On the commercial side, there are a hundred plus items that lenders will look at after you apply for that loan light. So there is no no guarantee that that loan actually comes back in for the loan amount that you originally applied for and the terms that you applied for from an interest perspective, interest only and so on. And our job really is is to hand hold that deal to make sure that you get to the closing table without any hiccup and without any, as we call it, retrade twice, twice. We call it retrade when you apply for, let's say, a five million dollar loan. And then the lender comes back at the last moment and says, now we only do four million tonight. So that is really our our job. And that's where we are at most of our value.
Anton Mattli [00:09:50] So I've got a question for you, because you've been doing this for a long time. Fifteen years, I believe you said you're on your own.
Dave Debeau [00:09:57] I would imagine that you've worked with a number of relatively new people in the space that are just kind of switching from single parent homes, getting into multifamily residential or whatever that they're doing. What are some of the biggest mistakes people make when they're trying to line up financing for their commercial deals?
Anton Mattli [00:10:20] I would say that they do not really understand how a lender underwrites a deal compared to how a sponsor or buy will potentially underwrite the deal. Right. So I hope that anyone who is venturing into commercial real estate gets some form of coaching. I do not say necessarily that someone needs to sign up for a coaching class, but at minimum have a mentor like that. Has it done before now? The problem is, if you do not have a mentor and he just joined, let's say you're coaching class, you may learn all the underwriting tools and all that. How how they coach you and teach you how to underwrite a deal and repair the proforma. The problem is very often that these coaches are not really teaching the. Difference between how you underwrite it as a buyer and how a lender underwrites a deal and very often they make assumptions when it comes to loans that are completely off the mark.
Anton Mattli [00:11:22] For example, what are what are the assumptions that you see all the time that drive you crazy?
Anton Mattli [00:11:26] Yes. So as an example, they own the right to their own proforma collections to say, well, I can raise rents by a hundred dollars per unit, so now my rent income increases. So with that, my analy increases. And as a result, my debt service coverage is one point five and I can easily get 80 percent leverage right to the lender, says we. It's nice and dandy that you want to raise your rents and we hope that you can do it. But we earned the right to the in-place rent collections.
Anton Mattli [00:12:00] So what I'm understanding is the real estate entrepreneur tends to be a little bit pie in the sky. Very, very forward thinking, looking at what the numbers could be kind of falls into place. And what you're what you're saying is the lender doesn't
Dave Debeau [00:12:17] give a crap about that.
Anton Mattli [00:12:20] What they're looking at is what the actual numbers are today.
Anton Mattli [00:12:23] That's correct. Yes. I mean, there are some exceptions like for bridge loans and all that, but forward for a typical cash flowing assets that the typical first buyer would acquire. That's exactly what it is like. The lender doesn't care about what you can project. An older aspect. There is also very often the look at the so-called T12, which is the profit and loss statements that is provided by the current owner and particularly for smaller properties. It's not unusual that expenses are not fully loaded flights. They they it appears that your expense ratio is only 30 percent.
Anton Mattli [00:13:02] Are you telling me that sometimes people think of these things over here so it hardly happens. So there. Yeah. So that's the other mistake that a lot of newbies make, is that they just take whatever expenses they are. And naturally, Elango, again, doesn't care. We adjust the expenses to how we believe if the lender had to take over that property, if the is the borrower forecloses,
Anton Mattli [00:13:36] at what expense structure, we would actually have to operate the property at once. And it's not even just the lender that decides that. It's really the lender appraiser that comes up with that expense proforma from a lender perspective. So it's not like that. The lender just can say, OK, I like you. I do a repair and maintenance at three hundred dollars per unit. As an example, if the appraisal comes back and says it needs to be six hundred, that's what it's going to be. Right.
Anton Mattli [00:14:06] So, yeah. So so what I'm hearing between the lines that are down is that
Dave Debeau [00:14:11] it's very, very cold, calculated fact based number crunching. Right. That's what it is. It's what's the reality. And quite often us as the real estate entrepreneurs, we're kind of a little too on the positive thinking side of things, not always looking at what the reality is. And that's where they that's where the conflict comes in, correct?
Anton Mattli [00:14:35] Yes, absolutely. Yes. Yeah.
Dave Debeau [00:14:38] So what are your what are your tips for people when they're getting into commercial type deals? You know, you already mentioned make sure you try to have a good mentor, somebody who's actually done done it before. But in addition to that, what can people do to actually really kind of prepare themselves better?
Anton Mattli [00:14:58] Yes. So I would say really talk to as many people that has done it as possible. If you can. I would recommend and if you're comfortable with it, partner up with someone who has already done it. I bet you syndicate your team. And if you do a joint venture or whatever, it might be, the value to partner up with someone who has already done it is so significant that I would recommend, even though obviously you do up maybe 50 percent of the cheap, or if it's a joint venture of 50 percent of the deal that you think is a blazing deal, you will be more than happy to partner up with someone who has already done it because that individual or these individuals will will help you to avoid very costly mistakes. It's the the cost of mistakes in that the commercial space are much higher than they are if you made such a flip on a residential side. So that's what I really would recommend.
Anton Mattli [00:16:05] Yeah, that's very, very wise advice, Anthony.
Dave Debeau [00:16:08] Time flies when we're having a good conversation, that means we get to
Anton Mattli [00:16:13] circle back and do this again sometime in the future. But in the meantime, if people want to find out more about you and your company and how you might be able to help them out, what should they do?
Anton Mattli [00:16:23] Yes. So the easiest really is just check out our website, its peak financing dot com. You also can find me on Facebook and on LinkedIn. I'm very active on both. So that's really the the easiest way.
Dave Debeau [00:16:38] Fantastic. Tom, thank you very much. Nice to meet you. And thanks for. Thank you for sharing some some good insights into getting commercial financing.
Anton Mattli [00:16:45] Yeah. Thanks for having me on this.
Dave Debeau [00:16:47] My pleasure. Take everybody on. We'll see you on the next episode. Bye bye. Well, hey there. Thanks for tuning into the Property Profits podcast. If you like this episode. That's great. Please go ahead and subscribe on iTunes. Give us a good review. That would be awesome. I appreciate that. And if you're looking to attract investors and raise capital for your deals, that may invite you to get a complimentary copy of my newest book right back there. There it is, the money partner formula. You get a PDF version, an investor attraction book, dot com again, investor attraction book, dot com ticker.