Originate Report - December 2019 / January 2020 by Originate Report

DEC. 2019 / JAN. 2020

THE OFFICIAL MAGAZINE OF GERACI

WISDOM FROM THE CEO:

Jerry Delgado

Applied Business Software

Bobby Montagne

WALNUT STREET FINANCE

INSIDE: CULTURE CORNER

Armanino LLP

DEBT YIELD RATIO

Tips For Hard Money Lenders Capital for Cannabis Businesses WHEN TO USE A PRESS RELEASE www.originate.report 1

2 Originate Report | Dec. 2019 / Jan. 2020

CONTENTS DEC. 2019 / JAN. 2020

Features 18 What Is The Debt Yield Ratio That Banks Are

Now Using?

Edward Brown, Pacific Private Money

20 Culture Corner: Armanino LLP

Originate Report Staff

24 Charity Spotlight: Families First: Solving Orange

County’s “Hidden” Homelessness Crisis

Originate Report Staff

26 Lenders Beginning to Open Up Capital for

Cannabis Businesses

Dennis R. Baranowski, Esq., Geraci LLP

34 When To Use A Press Release (And When Not To)

Ramona D’Cruz, Geraci Media

Who To Know 6

Bobby Montagne - Walnut Street Finance

Originate Report Staff

14 Wisdom From The Ceo

Jerry Delgado, Applied Business Software, Inc.

In Every Issue

11 Industry Job Watch 28 Cities To Watch:

Orlando, Florida

Originate Report Staff

40 Lender Directory

34 www.originate.report 3

Revenue diversification

Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial

TODAY’S MARKET OPPORTUNITY: •

•

100 billion dollar non owner-occupied investment space SFR ’s 1-4 Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial Diversify product offering and add new revenue opportunities you may be missing out on Legally compensate your most prized relationships (Realtors) for referrals

WHAT TO LOOK FOR IN A BROKER + CAPITAL PARTNER RELATIONSHIP: • • •

Concierge across product offering with underwriting, training, service and support Dedicated call center for loan origination support and fund control Marketing materials provided including product tear sheets, pitch decks and web banners

In today’s market, refinancings have limited availability and there’s not much new housing inventory to lend against. For mortgage Brokers, this means the obvious; there are a lack of transactions in the market to profit from. For shops that are only doing refinance or traditional mortgages, opportunities only come around every 5-7 years. You’ve got to have a big client base to have volume. With financial products across SFR ’s 1-4 Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial, the sales cycle is faster, there is significantly higher recurring business, and a few lenders have teams dedicated to helping you succeed.

BROKERS, PARTNER TODAY

Think of it as a new product offering which results in the diversification of your potential revenue. All of this is well within reach, and much easier than you may think. The NON-O/O investment space is a 100 billion dollar industry that has come full circle since the last market downturn. Over the last decade private lending has been growing, and the comeback of property investors is at an all-time high. Here’s what it takes to do these types of loans and a good private lender will handle these things for your Brokerage… • • • • • • •

Review and process loan applications Document collection Facilitate Appraisal Coordinate Title & Escrow Complete underwriting Facilitate Funding Pay you

Traditional Realtors and Mortgage Brokers have the misconception they need an NMLS license to be a lender in this product space. The main point in dealing with a private lender is while they primarily fund SFR’s, these loans are governed under commercial guidelines. Thus we are not governed under RESPA, TRID or TIlLA. These loans are funded only into business entities allowing 7-10 business day closings and can pay anyone under a Brokerage license a referral fee or commission on the HUD at closing. There are two avenues a Brokerage launching this type of product to Real Estate professionals can expect to see. You can be a Correspondent Partner (the lender would fund in your name)

http://triumph.capital/brokers

4 Originate Report | Dec. 2019 / Jan. 2020

or an Origination Partner (the client would see the lender’s name on the HUD). Most deals are funded under a single set of product guidelines allowing training, underwriting and servicing to be easily understood. CORRESPONDENT PARTNER (CP): You look and feel like the lender, a complete white-label product. ORIGINATION PARTNER (OP): Traditional Broker + lender relationship, lender shows on HUD. A full concierge service for Broker partners handling everything from A-Z is an entirely new model for private lending and Mortgage Brokers / Real Estate professionals. Working with a direct lender enables Mortgage Brokers to keep the lion’s share of the profit and have the potential to earn from the yield spread as well, all while monetizing on much more frequent lending transactions, instead of the normal 5-7 year customer lifecycle. There many private lenders chasing this strategy and it’s safe to be wary of who to work with. While choosing a partner, look for someone who understands the business and has a strong reputation for closing transactions. You’ll also need support with marketing materials. Having the right documents and product tear sheets (one-pagers) for conversations, trade shows, etc. is helpful in positioning the opportunity with your existing book of referral business from Realtors.

For more information call

877-450-9741

ROB JENNINGS robert@triumph.capital

GEORGE O. FLINT goflint@triumph.capital

CEO Geraci LLP ANTHONY GERACI Anthony@Originate.Report

Letter

from the

Editor

Vice President Geraci Media RUBY KEYS Ruby@Originate.Report Editorial Director MAX BERGER Max@Originate.Report Art Director LYNDA HIGHT L.Hight@Geracillp.com CONTRIBUTORS Jerry Delgado • Dean Quiambao Ramona D’cruz • Edward Brown Elizabeth Morales • Charles Peckman James Bowie • Dennis R. Baranowski, Esq. FOUNDING UNDERWRITERS

MARK HANF President, Pacific Private Money ORIGINATE WEBSITE www.originate.report GERACI LAW FIRM www.geracilawfirm.com MEDIA WEBSITE www.geracimediagroup.com CONFERENCE WEBSITE www.geracicon.com

“For last year’s words belong to last year’s language – And next year’s words await another voice.” -T.S. Eliot

Welcome to the January Edition of Originate Report, and welcome to 2020! You may have noticed quite a lot of people posting thoughtful decade retrospectives all over social media this month; perhaps you’ve even written one yourself. We’re all feeling inclined to reflect on our life developments over the past 10 years, amazed at the way things have changed and how much we’ve accomplished. We’re also looking to the decade ahead with a renewed sense of hope and purpose. Here’s to learning from our successes and failures and striding confidently into the Roaring Twenties – wiser and stronger than ever. This month you will learn all about Walnut Street Finance, and the storied career of its founder and CEO Bobby Montagne. You will also get an inside look at Armanino LLP, and see how their employees-first culture has led them to great success. Lastly, don’t miss the debut of our brand-new column, “Wisdom from the CEO,” where Jerry Delgado from Applied Business Software has some advice to share from a lifetime of successful entrepreneurship. To your continued success in the decades to come,

Max

Max Berger Originate Report Editorial Director www.originate.report 5

PROFILE

Left to Right: Bobby Montagne, Founder and CEO; Michele Hsu, VP of Marketing; Katia Potapov, VP of Operations; Byron Clarke, VP of Finance

BOBBY MONTAGNE WALNUT STREET FINANCE

borrowers to achieve success with every project. This Virginia-based company has a unique advantageâ&#x20AC;&#x201D;for 20 years it was a builder, not a funder. Bobby admits he is more comfortable in blue jeans and boots because he was the one on job sites overseeing residential and commercial property

By Originate Report Staff

private lending firm that mentors its

development. Walnut Street Finance

f you ever attend networking

understand property development

events in the private money

the way he doesâ&#x20AC;&#x201D;he literally lives

lending space, then you may

and breathes real estate. Bobby

have met Bobby Montagne, founder

has a storied career that originated

and CEO of Walnut Street Finance

with a real estate investment trust

boots, they approach each loan as a

(WSF)

player

company and is now in its prime with

partnership. They not only want their

in the industry. Very few lenders

Walnut Street Finance, a hard money

borrowers to prosper, they have a

and

prominent

6 Originate Report | Dec. 2019 / Jan. 2020

has a ground-up understanding of construction,

land,

entitlement,

processing,

architecture,

and

building. Having dirtied their own

was then a new software program called Lotus 123 (it was the late ‘80s

“Company culture is more important to

and computers were just getting introduced in the workforce). I was

me than company profits. I spend a lot of

there for four years.

time thinking about how we can nurture the staff and continue our boutique

OR: So, then how did you get into the hard money space?

enterprise feel even as we get bigger. ”

BM: For the first 10 years of my career, I worked for other real estate related companies, soaking up as much knowledge as I could. In the late ‘90s, I decided to branch off, and started Walnut Street building single family detached houses and townhouses, as well as commercial projects, in and around Washington, DC. This is where our firm developed its

appreciation

for

our

future

borrowers. We did everything from acquiring and zoning to materials sourcing and construction. During this big growth period of a little under 10 years, we went from $1 commitment to their fund investors

estate development was occurring

as well. Walnut Street Finance is

very rapidly. Farms were being

built on knowledge and a deep focus

plowed under, roads widened, and

housing developments going up all

projects to employees. This trifecta

over the place. I would ride my dirt

is the key to their success.

bike on construction sites, and was

quality—from

investments

just always around them. This initial Montagne sat down with Originate

exposure may have inspired my draw

Report to discuss what it took to get

to real estate development.

while managing a volatile market

After college, my job choices were

and a healthy work-life balance.

in a suit or construction boots. I chose the latter, with the first one

Originate Report (OR): Let’s start

on a real estate development site

at the beginning—how did you get

called Ashburn Village. The plan

into real estate?

was to build 5,000 houses over 10 years. They hired me as the finance

Bobby Montagne (BM): I grew up

proforma guy, where I digitized

in northern Virginia, where real

the

finances

using

million in revenue. And then we noticed a change in the market, when sales began to slow. Around 2008, we unloaded the last of our real estate, turned it into cash, and started looking for opportunities to buy. The first projects

Walnut Street where it is today, all

firm’s

million in revenue to around $250

what

were

100-year-old

row

houses in Washington, DC, which we wanted to fix and flip. And it worked! This went on for about four years, and eventually we had excess capital. Our skills were now honed across almost all aspects of real estate, and since we had the money to do it, we could grant loans to our Bobby Montagne: Continues on pg. 8

www.originate.report 7

Bobby Montagne: Continued from pg. 7

former competition. The first eight loans were made on a yellow pad and a good closing lawyer. OR: As an entrepreneur, what was it like getting a company off the ground and what challenges did you face in the process? BM: I’ve learned that you go through very clear stages when building a company. The first stage is about juggling revenue generation with finding

the

right

markets

and

sourcing quality projects that will be viable. Eight out of ten young businesses fail at this point. So, if you make it through, by definition you’re already in the top 20%. Bobby Montagne, Founder and CEO

The next stage is a big focus on the sell. At Walnut Street, this happened a little over two years ago when our operation was not big or complex, so we were very hands-on with every aspect of the business. We truly benefitted from being really close to our clients. We were learning the business together, essentially. Their success was our success. No matter if they were first-time flippers or experienced renovators, we knew that by helping them with every aspect of their projects, they’d be able to make a better sale. That means they could become repeat clients. Win-win for us, them, and our investors, in the long-run. And what a boon this was for us all—WSF

has a bigger team, all of whom are

for processing loans and returns for

super dedicated but much more

our investors. We take underwriting

specialized. Every team member

really seriously at WSF to be sure

cannot wear multiple hats all of the

that we are not taking unnecessary

time, otherwise quality will falter.

risks. I think you might see that the

We are making adjustments and

recurring theme here is quality. We

putting processes and systems into

care about our team, our borrowers

place so we can better serve clients

and our investors and that can only

and fund investors. We have slowed

be supported with quality service

our origination growth rate a bit and,

and quality projects. So, what lies

when optimally positioned, will scale

ahead for us? Smart growth in more

even larger. The next three years are

tertiary markets where we can

going to be an exciting time for WSF.

deliver top-tier service for great projects that will guarantee ROI.

OR: What lies ahead for Walnut Street Finance?

OR: Tell us a little more about the people who make up Walnut Street

BM: As we’ve grown, we’ve definitely

Finance?

grew 250% during this stage.

put together departments that are solid—marketing is getting the word

BM: WSF has a really stellar staff.

The third stage is where things

out in more of our target markets,

Our first hire with the transition

sales is generating some quality

from construction to finance was

loans, and finance and accounting

Katia Potapov, VP of Operations. I’d

have developed excellent systems

have to say that we have built this

become a little more complicated. This is where we are now. WSF

8 Originate Report | Dec. 2019 / Jan. 2020

Left to Right: Michele Hsu, VP of Marketing; Bobby Montagne, Founder and CEO; Katia Potapov, VP of Operations

company together. As the firmâ&#x20AC;&#x2122;s

underwriting.

are

Main and Main can be safe, but not

right hand, she covers customer loan

essential to helping clients stay on

always lucrative. By focusing much of

onboarding and customer success

track and delivering for our fund

our business on these other markets,

and

investors.

WSF has been able to grow quite

instrumental

raising

His

efforts

rapidly. I think as more money enters

private capital. Since she has been here through all of our stages, she

Our most recent addition is Michele

this space, underwriting discipline,

can seamlessly move across all

Hsu, VP of Marketing. She came to us

credit discipline, and books and

departments, which keeps us on

with a tremendous amount of talent

records

track and pointed on the road to

and skill in traditional and digital

being even better.

marketing, plus she is very talented in building a business, which means

Byron Clark, VP of Finance, has been

she can weigh in knowledgeably on

with us for a year and a half. He sits on

company development and hiring

the loan review committee, helping

decisions.

will

increase

and improve, which is good for the industry. Additionally, the fractured nature of these markets will begin to dissipate which is a good sign of a maturing space. For us, this means we can deliver more quality projects for clients and investors.

us allocate capital and approve deals. He does an outstanding job of

OR: What trends in the private

producing company financials and

lending

being sure that our records are ship-

are going to play a role in the

shape, which is imperative as we

development of your company?

grow.

BM: The most prominent trend in the

industry

discipline

you

think

private loan industry right now is the Tony Zezzo, VP of Credit, manages

size of and appetite for secondary

our active portfolio and overseeing

and tertiary markets. Investing in

OR: On a more personal level, what are some of the most rewarding aspects of your position as CEO? BM: Watching younger people grow and take accountability for their Bobby Montagne: Continues on pg. 10

www.originate.report 9

Bobby Montagne: Continued from pg. 9

work, and really own it. I’d say that I see this with my employees and many of our clients. It doesn’t happen to everybody, but when it does and they take off with an empowered stride, it’s very rewarding. Additionally, it’s been incredible to be involved in developing a multi-decade company that is determined to be lasting. I take great pride in what our team has done together in what is actually a very short time. OR: How does your approach to customer service differ from others in this industry? BM: We know our customer because we are our customer. WSF never forgets where we came from. We like to think of ourselves as mentors rather than just lenders. Personally, Bobby Montagne, Founder and CEO

I know what it’s like to put your last $10,000 down as a deposit on a property, praying your lender

MB: How would you describe the

come to work every day because we

comes through for you. I’ve been

company culture of Walnut Street?

are excited to see how we can help

in our borrowers’ shoes, as have

BM:

many of our staff. And our company

each other be great.

important to me than company

roots help us teach our clients on

profits. I spend a lot of time thinking

how to accomplish a great flip—how

about how we can nurture the staff

to shop around for the best deals

and continue our boutique enterprise

on everything from materials to

feel even as we get bigger. We vet

contractors, how to manage time

our employees carefully to be sure

properly on a project to maximize

they’re on point and committed to

profits, and so much more. The

their own success. Just like with

difference is we really care. I’ve said

our clients, if employees grow and

it before and I’ll say it again—our

thrive then the business grows and

clients are our partners. We want

thrives. If they’re happy, everyone is

the best for them and will help them

happy. We focus on empowerment,

achieve their goals and dreams. Real

accountability, and fun. That doesn’t

love being with them. My family is

estate is a very personal business,

mean

ping-pong

very important to me, which means

and we’ve built WSF on being

tables; it means at our core we enjoy

I make time for them. I was the dad

personal.

and respect one another. We want to

at all the games, coaching the games.

Company

10 Originate Report | Dec. 2019 / Jan. 2020

beer

culture

taps

and

OR: Being an entrepreneur can eat up a lot of time. Do you make time for yourself? BM:

Absolutely.

I’ve

been

the

principal in my own company for over 20 years, so I’ve had to manage a diligent schedule to ensure my own happiness. I have a wonderful wife and great kids, so of course I

If that meant leaving in the middle

more smoothly and we are all happy.

years have not been on the same trajectory. Sure the market has

of the day for my kids and coming back on the weekend to finish a deal,

OR: To wrap it up, let’s take a look

increased, but not at the same pace.

I made it happen.

at something that is on everyone’s

WSF is preparing for whatever the

mind when it comes to real estate— Sports also keep me even-keeled and

the inevitable economic downturn.

it’s another thing I share with my

What is WSF doing to prepare?

family. I love to play golf and tennis,

market may bring by doing good business already. Our dedication to disciplined service demands that we underwrite respectful of our investors’ interest. Our focus on a

and recently picked up a game called

BM: What goes up, must come down,

pickleball. It’s like ping-pong, but

as they say. No one knows when

you’re standing on the table. In fact,

the economic downturn is going to

my daughter Annie and I actually

happen—not the chairman of the

competed in a mixed doubles club

Federal Reserve nor the smartest

championship, and we killed it.

economics professor at Stanford.

I also encourage everyone at WSF

What we do know is that we just had

to create a good work-life balance

a good run for a long time. Before

can help them always turn a profit.

for

the Great Recession, the real estate

So, as long as we keep our eye on our

understanding of one another. Like I

market was running off the charts,

humble roots and the success of our

said, if they’re happy, business runs

fueled by easy money. The last ten

partners, we’ll be just fine.

themselves.

try

solid portfolio in healthy markets ensures that we can protect our clients’ real estate investments. And the care we take with our clients, teaching them how to take on projects, properly manage time, and flip using smart resource allocation,

CONTACT: https://www.walnutstreetfinance.com/

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www.originate.report 11

PRESS RELEASE

GERACI MEDIA ANNOUNCES 4TH ANNUAL

INN VATE 2 0 2 0

C O N F E R E N C E

Newport Beach, CA., October 2, 2019 – Geraci Media is launching their 4th annual Innovate conference, a two day event that will provide attendees with the latest trends and insights in the non-conventional or private lending space. At Innovate 2020, which takes place this February 20-21 at the Balboa Bay Resort in Newport Beach, CA, expect to receive first-hand knowledge from industry executives and professionals on how to stay ahead of the curve in the new year. The event will focus on education, the changes happening in the lending space, the new trends in business, and more. The two day event will begin on the 20th with a welcome reception, and continue the next day with a variety of educational panels, a hosted breakfast and lunch, and an espresso bar. Innovate will also facilitate face to face networking through a smart phone app, a speed networking activity, and various networking breaks as well; all of which will assist in fostering new connections and business partners for all attendees. Sang Yoon from Pacific Equity and Loan spoke highly of a Geraci conference he recently attended. “A huge thanks to the Geraci team for putting together an excellent conference. This conference was the most productive one we have been to. We were able to connect with exactly the people we needed to meet in a very efficient manner.” Geraci’s goal for the conference is to help you feel comfortable while networking with the private lending industry’s best and brightest, and attending top-tier panels and discussions. If you have any questions or would like to attend or sponsor, please reach out to us – we look forward to hearing from you. Super Early Bird tickets are now on sale, so visit https:// geracicon.com/conference/innovate-2020/ to learn more. Register before Dec. 14th to ensure that you receive the best savings. See you there! 90 Discovery, Irvine, CA 92618 Alicia Carter, Event Manager | 949.379.2600 | a.carter@geracillp.com 12 Originate Report | Dec. 2019 / Jan. 2020

M A K E WAV E S AT

FEBRUARY 20-21, 2020 NEWPORT BEACH, CA Interested in attending or sponsoring? Contact Alicia Carter at A.Carter@GeraciLLP.com Balboa Bay Resort 1221 West Coast Hwy, Newport Beach, CA 92663 949.379.2600 | www.geracicon.com www.originate.report 13

WISDOM FROM THE CEO

Jerry Delgado Applied Business Software, Inc.

14 Originate Report | Dec. 2019 / Jan. 2020

Yes, focus on developing a great product, but take version 1.0 to market ASAP. Then listen to your customers’ feedback and follow up

with

endless

incremental

enhancements. How did you go about building a customer base for your early ventures? My co-founder and I placed a small ad in a local newspaper showcasing our products. This ad generated a few leads which we followed. We then traveled to each customer site and demonstrated our products. We

sold

them

all.

After

that

we did a lot of cold-calling and attended industry trade shows and conferences. This was 40 years ago

Jerry Delgado, Applied Business Software, Inc. ooking back to when you

What has been your favorite

started your first business

aspect of being an entrepreneur?

– how did you know when

I love the challenge of staying at

you had the right idea?

the forefront of an ever-changing

and I’m not sure if this approach would work today. What habits and/or mindsets have helped you succeed as a business owner?

I don’t think I ever felt like I

industry.

(all

Positive attitude, self-motivation

had the “right idea”. Mostly, I

entrepreneurs are innovators) I

and vision. There are so many

listened to my clients, and in turn

enjoy the process of bringing new

challenges facing an entrepreneur

they provided the “right ideas”.

ideas to life. Also, the boss has no

that having a positive attitude is

Customer feedback is probably the

dress code.

a crucial ingredient for success.

most important ingredient when trying

develop

successful

product. Moreover, I think that in the technology business there are no lasting “right ideas”. The right idea of today may not necessarily work tomorrow. It is also important to grasp a good understanding of where the industry is heading in both the near term and the distant

What

advice

innovator

would

you

offer

someone who is starting their first business? Starting your first business can be overwhelming. There are so many

daunting

issues

face:

Self-motivation is also key to running a successful company. Finally, the ability to stay focused on the “big picture” – Is the company headed in the right direction? Where do we need to be tomorrow, in 5 years?

product development, marketing, intellectual property and obviously financing just to mention a few. As a software developer I think

future, and this will provide you

one advice I can provide is: Do not

with a path to your next “right idea”.

take too long to launch a product.

Jerry Delgado CEO & Co-Founder Applied Business Software, Inc. jerrydelgado@absnetwork.com

www.originate.report 15

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16 Originate Report | Dec. 2019 / Jan. 2020

PRESS RELEASE

ABS appoints Carlos Nodarse Chief Executive Officer and names Jerry Delgado Executive Chairman, Effective January 1, 2020 LONG BEACH, Calif., December 20, 2019 - Applied Business Software (“ABS”) today announced that Carlos Nodarse has been appointed Chief Executive Officer. Jerry Delgado, currently Chief Executive Officer, has been appointed Executive Chairman. These changes are effective January 1, 2020. Carlos is currently Chief Operating Officer of ABS, and as a member of the senior management team for over 30 years, has played an integral role in the company’s business and growth strategy. “Carlos is a proven leader with hard-core software development skills, product vision and the ability to bring people together. There is no better person to lead ABS into the next chapter of product innovation and growth,” said Jerry Delgado, ABS’ co-founder and current CEO. “It is an honor to succeed Jerry, who has had an extraordinary tenure with ABS,” Carlos said. “I am proud and delighted to serve as ABS’ next CEO. The opportunities ahead for ABS are vast and varied, but to seize them we must have clear focus, and continue to bring innovative products to our customers.” ABS also announced that Jerry Delgado, ABS’ co-founder and current CEO, will assume a new role as Executive Chairman, and will devote his time to supporting Nodarse in his new role, and helping with product design and direction. About Applied Business Software Applied Business Software is a market leader and global provider of software systems and solutions to the lending industry. ABS offers a complete suite of software products designed from the ground up to specifically address the needs of those who originate and service loans. All our products are consistently rated superior in design, system interface, expandability, and ease of use. ABS is based in Long Beach, California. For additional information about ABS’s products and services, visit www.themortgageoffice.com or call (800) 833-3343. Elizabeth Morales, Director of Business Development www.themortgageoffice.com | (800) 833-3343 | elizabeth@absnetwork.com www.originate.report 17

FEATURE

WHAT IS THE DEBT YIELD RATIO THAT BANKS ARE NOW USING? By Edward Brown, Pacific Private Money

or many years, banks have

bank would also look at the Loan

amortization periods] as well as

used

Debt

Service

to Value [LTV] in conjunction with

requesting a lower interest rate.

Ratio

[DSCR]

the DSCR. Presuming the value

The combination of increasing the

as a way to access risk regarding

of the apartment building was

amortization period and lowered

the viability of a borrower to

$1,000,000, a 65% LTV loan would

interest rates allowed borrowers

make mortgage payments after

be acceptable to most banks.

subtracting

expenses

In previous years, a lot of banks

initially requested in order to meet

from income. The larger the ratio,

were willing to allow a DSCR as

the more stringent 1.35 DSCR.

the more comfortable the bank

low as 1.00, meaning that the

The

felt making a loan. For example,

NOI exactly covered the banks’

let’s presume that a borrower

the

Coverage

normal

borrower

the

they

with

the

above

negotiations

[from

the

bank’s

monthly payment; however, after

perspective]

was considering applying for a

The

2008,

was still at the same LTV, and,

$650,000

over

banks pulled back substantially

in fact, one could argue that the

20 years at 4% with a bank. The

in their lending practices and

bank was not compensated for

monthly payment would be about

raised the DSCR to 1.15, then 1.25,

the benefit bestowed upon the

$3,939 per month. If the apartment

and then many settled on 1.35.

borrower [lowering the rate and/

building grossed $8,000 and the

This severely constrained many

or stretching out the amortization

normal

$3,000

borrowers’ ability to finance their

period]. Just because the borrower

per month, the Net Operating

real estate projects. They either

met the new DSCR requirement did

Income [NOI] would be $5,000 per

had to come up with more cash, or

not put the bank in a safer position.

month. The DSCR would be 1.27

they had to negotiate for a longer

In addition, the problem with the

[$5,000/$3,939]. Of course, the

term [25 or possibly 30 year

DSCR is that it only addressed the

loan

amortized

expenses

were

Great

18 Originate Report | Dec. 2019 / Jan. 2020

Recession

problem

amount

that

the

bank

allow banks to access risk/reward

course, if interest rates rise, the

from an additional perspective.

bank would have liked to had a

This DYR effectively shows the

larger DYR, but it is similar to an

bank what rate of return [ROR] it

investor being happy with a bond

would earn if it had to foreclose. In our example above, the annual NOI for the apartment building was $60,000. Since the loan request was $650,000, the DYR was a healthy 9.23%. Although no bank wants to foreclose [as they have minimum

reserve

requirements

that affect their lending ability when loans go into default], the bank still has to face the fact that

does not address the LTV risk for the bank or give the bank a ROR should the bank be faced with foreclosing on the property. Prior to 2008, banks were willing to lend at a high LTV. Historically,

By requesting a high DYR, the bank will automatically limit its LTV. As banks get skittish, they will raise their DYR. One large bank has already increased its DYR to 11%. Other factors that may lower the bank’s DYR could be the location of the real estate. Desirable and stable areas may command a lower

to go down the foreclosure path.

DYR. Of course, these same areas

When CAP rates are in the 4-6%

also command lower CAP rates as

range, a DYR above 8% gives the

well.

bank some leeway should it need

Just as rates may vary when

to sell the property at less than fair

considering higher vs. lower LTVs,

entire loan with no loss. You can the monthly mortgage payment. It

interest rates rise were to 12%.

there are times when it will need

market value [FMV] and recoup its ability of the borrower to make

that is locked in at 10%, even if

see that, although most real estate investors focus on CAP rates, the DYR zeroes in on what ROR the bank will earn upon foreclosure. The DYR also ignores the interest rate the bank charges as well as the amortization of the loan. The DYR is vital in today’s low

60-65% was the norm; however,

interest

with competition came increased

interest

LTVs.

the

rate

environment.

rates quoted by banks may vary based on higher vs. lower DYR. This makes sense when considering that banks price their products based on risk. From a borrower’s perspective, negotiations will now have to be looked at from not only the CAP rate and the DSCR rate, but the DYR as well. Borrowers who have

over

the ability to put down a larger

values

down payment should take into

appeared to assist the bank with

substantially increased. Lenders

account all three ratios, as a little

risk due to the relatively low

do not want to get caught up in

extra down payment may go a long

[historical] mortgage payments.

situations where the FMV plummets

way in receiving attractive terms

However, when prices dramatically

due to increased interest rates [all

from the bank.

decreased,

were

other factors staying

faced with borrowers who were

the same]. Thus, the

upside down on their loans. The

DYR focuses in on the

banks needed to figure a new way

ROR the lender would

to assess risk for future loans.

receive if it were to

Along comes a relatively new ratio

receive the property

– the Debt Yield Ratio [DYR] to

upon foreclosure. Of

Lower

many

interest

lenders

rates

dropped 10

years,

ABOUT THE AUTHOR: Edward Brown is in the Investor Relations department at Pacific Private Money in Novato, Calif. CONTACT: edward@pacificprivatemoney.com

www.originate.report 19

CULTURE CORNER

Volunteer Vacation where dozens of employees went to Thailand to do work at an elephant sanctuary and teach English to children.

Everyone Wants a Recipe for Success Armanino LLP Cooked Up a Great One By Originate Report Staff

hat makes a company

of 19 years within the accounting

When there’s no explicit purpose,

successful?

It’s

not

and consulting industry to create

there’s

question

personalized data‐driven insights

inevitably spells trouble when

to answer. The right formula

for his clients, enabling them to

it comes to corporate culture.

depends

gain an invaluable edge over the

Armanino

competition.

have that problem. It exists to

easy

greatly

organization’s market, location

create

and clientele. But when it comes

direction—and

LLP

clearly

unparalleled

that

doesn’t

innovation

to the financial services industry,

Here, Dean gives a rare insight

and entrepreneurial advancement

look no further than Armanino

into

from

LLP for a stellar example of a

that make Armanino LLP both a

concept applies equally to its

winning corporate culture.

refreshingly vibrant place to work

employees, clients and surrounding

and a truly valuable resource

communities. Sure, that sets the

for its clients—a winning combo

bar quite high, but Armanino LLP

indeed.

wants to push the status quo. The

Dean

Quiambao,

Armanino

LLP’s CPA Partner, AKA “Chief

the

foundational

values

the

inside

out—that

goal is to always be a step ahead

Relationship Builder,” knows a thing or two about what it takes to

A Clearly Defined Purpose

of the competition, setting the

succeed. Dean uses his experience

Every company needs a “why.”

standard for what clients should

20 Originate Report | Dec. 2019 / Jan. 2020

expect

from

their

business

solutions provider. Put the Firm First—Always Armanino LLP operates on the principle that doing what’s best for the firm instead of what’s best for personal gain produces results. That applies from the ground

up—whether

specific

person,

department. means

that’s

partner,

Sometimes

turning

down

a or

that clients

whose values don’t align with the firms. But this transparency pays

sustainable

dividends

in the long run. At the end of the

day,

and

prioritizing

dedication

honesty collective

“Thank You Wall” which is called Clip-A-Compliment.

responsibility is what truly forms an entity’s reputation. Empower Employees Success comes from within. At Armanino,

there’s

assurance

routinely

its

all

powerful circulated

employees

that

they have the creative freedom to

formulate

novel

solutions,

voice their opinions and spark productive That

conversations.

internal

openness

and

subsequent dialogue translates into value for the firm’s clients. Innovation

doesn’t

happen

seclusion—it takes collaboration and interconnectivity to push the Armanino coordinates with other local companies in the area to host a kickball tournament.

“The thing I enjoy most about working at Armanino is the people. It’s rare to get along so well with your coworkers and these people have become family that I look forward to work and grow with.” – Rachelle Shamieh, Audit Culture Corner: Continues on pg. 22

www.originate.report 21

Triple Shots: where employees are featured on Armaninoâ&#x20AC;&#x2122;s Instagram page with something that they enjoy.

22 Originate Report | Dec. 2019 / Jan. 2020

“What I enjoy the most about working here at Armanino is the opportunity to be put in leadership positions no matter your title.” – Kiyoshi William Smith, Tax

boundaries in a technologically

even if they haven’t had the

That’s why the firm created its

advanced sector that’s constantly

opportunity to meet face‐to‐ face.

own charitable foundation that

changing

With 16 offices across the country

has

and over 1500 employees, it can

nonprofit

be challenging tomake sure the

make a positive impact in the

Innovative Connectivity

firm effectively includes every

surrounding areas. The Armanino

When it comes to connecting

individual. That’s why Armanino

Foundation

employees

fostering

came up with their innovative

many opportunities to give back,

connections, Armanino isn’t afraid

staff advisory board, where staff

both through volunteer outings,

to mix old school methods with

per region and per department

cutting edge technology to create

are nominated and elected to

and “Dollars for Doers” programs

a truly unique, and effective,

represent the staff, and they

and through giving initiatives.

work environment whose results

report directly to the C‐suite

Recently,

speak for themselves. The firm

members,

the

installed

walls,

with that elected staff advisory

the foundation gave away five

where employees can write thank

board to ensure that the staff are

$10,000

you notes at each office to build

heard on key issues. It’s a novel

within its four areas of focus;

solution to a real world problem,

Health & Social Services, Animal

use

something the firm takes pride

Welfare, Education and the Arts.

technology to incorporate their

in counting among their many

Armanino’s

substantial number of remote

qualities.

charitable endeavor is The Great Give, where gets everyone involved in putting the community first, from the partners to the

and

posing

new

challenges.

and

“Thank

You”

team‐centered

Additionally,

atmosphere.

Armanino

who

work

directly

employees. Using virtual “Shout Outs,” alike and

employees can

and

communicate

openly—all

real

clients

Give Back

freely

Armanino

understands

the

time.

concept that a company can’t

These messages are integrated

say they’ll be a great community

into each employee’s record, that

asset and not visibly contribute

way everybody knows everybody

that

community’s

needs.

partnered

its

with

numerous

organizations

gives

employees

“Volunteer

firm’s

Vacations”

celebration

50th

grants

anniversary, to

charities

longest

standing

staff, by shutting down for an entire day every year where every single employee signs up for a nonprofit and gives back in a meaningful way.

“I love the flexibility we have at Armanino. This helps with juggling life events! I also love how dedicated we are to high standards for our clients. We are not just “OK”, we are awesome!” – Maryellen Wright, Consulting www.originate.report 23

GENEROSITY REPORT

Families First: Solving Orange County’s “Hidden” Homelessness Crisis

“W

By Originate Report Staff

life

e make a living

In fact, over 28,000 school-aged

as a result of a housing crisis and

by what we get,

children are currently homeless or

ensure that the children’s welfare

but we make a

facing housing insecurity issues.

is adequately provided for.

by what we give.”

That’s

―Winston Churchill

where

Families

Forward

comes in.

One of Family First’s main efforts is their housing program, which

Homelessness isn’t typically the

Families

been

seeks to place homeless children

first term one would associate with

tirelessly pursuing its overarching

and families into stable housing.

the largely wealthy Orange County

mission of ending homelessness

Families

First

community, but it is a genuine

for Orange County-area families

families

and concerning issue affecting the

since 1984, when it started with

solutions for sustainable housing

area. Even more concerning is the

five

and

fact that one of the most rapidly

subsequently expanded to assist

tailored plan to return all families

growing sectors of the homeless

hundreds of families to attain

demographic is working families

economic independence and build

offering

with children that find it almost

stable homes for their children.

and offering them the resources

Forward

rented

has

apartments

and

impossible to make ends meet.

establish a

assists create an

self-sufficient these

homeless attainable

individually status.

families

support

to provide for a brighter future,

The elevated costs of basic living,

The organization actively operates

Families Forward looks to build a

rental prices, transportation and

several initiatives aimed to alleviate

more resilient community for the

childcare, combined with the gaping

Orange

homelessness

entire Orange County population.

shortage of affordable housing,

epidemic. Their overall goal is

A key component for success is

means a large number of families

to help alleviate the fear and

the

are at risk of living on the streets.

helplessness that can take place

to work with other like-minded

24 Originate Report | Dec. 2019 / Jan. 2020

County’s

organization’s

commitment

entities such as Orange County

provides career advice to housing

for time but still interested in

United Way, the Commission to End

clients, helping them with job

Homelessness and the Children and

searches,

contributing, Families Forward also

Families Commission.

and enhancing income potential.

interview

preparation

The tenant education workshop Families Firstâ&#x20AC;&#x2122;s outreach efforts

is another valuable resource that

also

pantry,

assist

income

more about affordable housing, the

individuals,

rental application process, renterâ&#x20AC;&#x2122;s

includes

which

food

available

qualifying

single

participants

learning

welcomes donations. As a nonprofit agency, Families forward relies on the continued financial support of the surrounding Orange County community to assist the homeless population. All donations remain in the local community to help local

couples, and families living in

responsibilities,

South Orange County and provides

the end of leases, tips to ensure

approximately 6,000 individuals

security deposit refunds and more.

being directly used to support

nonperishable items such as canned

The important services offered by

Interested

goods, rice and pasta. The pantry is

Families

Forward

happen

their donations online or choose

accessible up to 12 times annually

without

help

public.

for each qualifying individual, who

The

must wait at least 30 days between

community volunteers to expand

each food visit.

their impact and help vulnerable

expectations

with food assistance in the form of canâ&#x20AC;&#x2122;t

from

organization

the

depends

families. In 2018, there were more The

organization

community services

operates

than 2,00 volunteers who put in

career

over 21,000 hours of service. The

education

organization welcomes interested

counseling,

and

workshops. program

also

tenant The

counseling

personalized

and

individuals, groups,

families, faith

student

organizations,

families, with 90% of donations ongoing programs and services.

donate

donors

can

appreciated

submit assets,

redirect their Required Minimum Distribution (RMD) or apply for employee matching gifts. Through

the

Adopt-a-Family

program at Families Forward, the Geraci team came together to gift 16 kids with every item on their wish lists (and more) for the holiday

short-term, aiming to help with

businesses and others to assist.

individual,

and

Interested parties should complete

season. Each of the 5 families

group counseling needs. Similarly,

an online Volunteer Interest Form

will also receive a certificate for a

the

to learn more. For those pressed

festive meal. Happy holidays!

career

marital,

family

coaching

initiative

www.originate.report 25

FEATURE

Lenders Beginning to Open Up Capital for Cannabis Businesses By Dennis R. Baranowski, Esq., Geraci LLP

s the billion-dollar cannabis

Since marijuana is still considered

However, some lenders are now

market continues to grow

a Schedule 1 narcotic at the federal

seeking out real estate buyers who

and evolve, the real estate

level, banks have been slow to move

intend to lease to the cannabis

sector built around the industry is

forward until they see changes

expected to grow by tens of billions

industry because lenders receive a

in the current regulatory issues

more.

premium when closing on cannabis

surrounding

properties.

legalized

cannabis

businesses.

which, in all likelihood, will go national within a few years, banks have

still

been

cautious

about

Likewise,

rates

are

generally 25 to 100 basis points

Even as investors scramble to get in on the ground floor of an industry

Interest

private

lenders

have

limited their exposure by loaning on

higher on cannabis-related loans to offset the added risk of lending in the space.

properties that may be removed from the industry, such as landlords who

Although there is good money to be

do not own a cannabis business but

made by lenders by working in the

intend to lease space to companies

cannabis marketplace, lenders must

manufacturing or selling marijuana

still be wary of the ramifications of

products. Much of this consternation

changing state and federal laws that

way through Congress, it is only

stems from the federal laws that

shape the industry. If local or state

a matter of time before cannabis

prohibit

banks

laws suddenly change, it could result

goes mainstream, and banks are

from conducting business in the

in dispensary closures and cause

beginning to line up.

cannabis space.

tenants to break leases.

lending to cannabis businesses. With 30 states legalizing marijuana usage in some form or another and cannabis banking bills making their

26 Originate Report | Dec. 2019 / Jan. 2020

federally-insured

be ready to participate. Even if adultuse marijuana financial transactions are legal in California, they may not be permitted in financial hubs such as New York or Chicago, where some of these firms are headquartered. If a reclassification of marijuana from a Schedule 1 substance to that similar to alcohol or cigarettes occurs, the financial doors swing open. Until that time arrives, banks are

coming

with

innovative

financial solutions to provide needed capital to cannabis businesses. As the cannabis industry evolves, financial institutions will follow. The financial sector’s interest is continuing to grow in the burgeoning cannabis

market.

Financial

institutions will adapt more and more to cater to the cannabis industry. Right now, it appears banks and

the cannabis industry from federal

lenders are taking the cautious

prosecution. It now moves on to the

approach, even underwriting the

Senate, where industry experts hope

properties as if a non-cannabis

they can get it passed before the

tenant were occupying the property.

holiday break begins.

But as the industry continues to grow nationally, the buying of cannabis

Although the SAFE act offers some

properties is a booming business.

protections for the cannabis industry,

Local

banks

Based on the current trends, it is no longer a matter of “if” cannabis businesses across the U.S. will be able to obtain all of the capital and financial services that they need to be successful long-term, but “when” will it eventually happen.

With

the assistance of an experienced

marijuana-related

attorney, loans to cannabis related

getting on board as local laws go into

businesses still face challenges from

businesses can be structured to

effect, and municipalities familiarize

credit card companies and third-

minimize the exposure to the lender.

themselves with how to manage a

party service providers who may not

communities

are

slowly

burgeoning retail adult-use market. Proposed legislation making its way through

Washington

looks

likely to favor lenders than hurt them. The House has already passed the Secure and Fair Enforcement Banking Act, or SAFE, which protects lenders and landlords who work in

and

ABOUT THE AUTHOR: Dennis Baranowski has extensive experience in helping banks, credit unions, mortgage funds, private lenders, brokers, developers, and loan servicers navigate through complex transactions, including negotiation of terms, transaction review, and drafting of documents. Mr. Baranowski reviews, negotiates and drafts custom loan documents, construction loan agreements, loan workout agreements, leases, loan purchase and sale agreements, subordination agreements, intercreditor agreements, hypothecations, loan servicing agreements, investor agreements. He has authored articles on loan purchase and sale agreements, investment in private loans, and loss mitigation after default. CONTACT: d.baranowski@geracillp.com

www.originate.report 27

CITIES TO WATCH

CITIES TO WATCH:

ORLANDO, FLORIDA By Charles Peckman, Originate Report

hen thinking about a

is nicknamed ‘The City Beautiful’

a city holds in the mighty shadow

potential

vacation

for its tropical weather – can

of Mickey Mouse, Orlando is a

spot – whether it be

be described as a city of two

storied city with a multitude of

an escape from the Midwest’s

amusement parks. Since the first

sights and bites for all.

devastating winters or dealing

day they opened, the Walt Disney

with a house full of antsy children

World Resort and Universal Studios

Must-see Locations

during the summer – Orlando,

have served as a refuge for travelers

What does a wax figure of the

Florida is the destination of choice

young and old (in the hundreds of

world’s tallest man, a section of

for millions of families every year.

millions.) Although it can often be

the Berlin Wall, and a collection of

In simple terms, Orlando – which

easy to overlook the other attributes

shrunken heads have in common?

28 Originate Report | Dec. 2019 / Jan. 2020

ORLANDO, FL Economy: • Major industries: Technology, aerospace, and aviation • Minimum wage: $8.46/hour • Cost of living: 4 percent higher than the national average

(one-year increase) • Homeownership: 33.4 percent • Median rent price: $1,442 per month (for a one-bedroom apartment)

Job Market: • Forbes List: #23 • Unemployment: 2.8 percent • Job growth: 11 percent (three-year

Housing:

increase, the third-highest in the

• Median household income: $41,901

country)

• Median home price: $245,600

• Loan originator average salary:

• Home price change: 4.8 percent

$76,198 (per ZipRecruiter

These items (and more) can be

renowned Kennedy Space Center

eating

found at Ripley’s Believe it or

is the physical embodiment of the

ice cream while staring inside a

Not,

U.S.’ fight (and triumph) for space-

massive booster engine.

oddities in its 10,000-square-foot

located dominance. Although the

“Odditorium.”

day

Apollo missions may seem like

until midnight, the multi-faceted

they happened many moons ago

museum is the perfect place to

(pun intended) the larger-than-

get lost for an afternoon (or two.)

life remnants of those missions are

Far-removed from shrunken heads

still on display for all to see. There

and other oddities, the world-

is something truly magical about

which

houses Open

troves every

freeze-dried

“astronaut”

Nightlife It may be counterintuitive to think that you would need a winter coat while visiting Orlando, as its warm climate is what draws so many to Cities to Watch: Continues on pg. 28

www.originate.report 29

Cities to Watch: Continued from pg. 27

visit – but at ICEBAR Orlando, which is a nightclub and iglooesque bar, a warm coat may be just the thing you need. Nicknamed the “coolest spot in Orlando” (pun

Dining

Attractions

The bright red neon sign of Kres

If you’re looking to rub shoulders

Chophouse beckons hungry patrons

with the likes of Superman and

with

its

perfectly-marbled

cuts

and extensive whiskey selection. Perfect for a date night or post-

former U.S. Presidents, look no further than Madame Tussauds Orlando.

This

well-known

wax

museum is perfect for a selfie

intended), patrons have the option

meeting de-brief, this Chophouse

of braving the cold while sipping a

is well-known for its attention

selection of scrumptious cocktails.

to detail and cozy atmosphere.

If live music is more up your

If you’re looking for a little Latin

Far-removed from life on land,

alley, Independent Bar features a

flair in your dinner, however, look

but still perfect for a photo-op

multi-level live music and dancing

no further than Café Tu Tu Tango,

(just don’t use flash!) is the Sea

experience – in addition to, of

which offers live entertainment and

Life Orlando Aquarium, which

course, an array of ever-changing

a mouthwatering selection of tapas.

drinks. The “club” scene is not for

This spot is also conducive for large

everyone,

sometimes

groups, as its menu options are

after a long day the perfect post-

perfect for sharing. The colorful

work antidote is a cigar, glass of

décor and lively atmosphere of

opportunity to spend an afternoon

whiskey, and a double dose of jazz

the Black Rooster Taqueria are

with these marvelous creatures in

– Tanqueray’s offers all of this,

also perfect for anyone with a

with some of the smoothest acts in

hankering for Mexican food – a

jazz gracing its stage every week.

broad selection of tacos, bowls, and

Unfortunately, dark sunglasses and

ceviches will certainly leave you

fedoras are sold separately.

asking for more.

however;

that will make all of your friends jealous, in addition to being a perfect afternoon for all ages.

is home to a litany of sea-faring creatures. If you have never seen sharks and stingrays up-close and personal, it is truly a fascinating sight. At Sea Life, visitors have the

a 360-degree tunnel (in addition to, of course, thousands of other species.) In short, there is plenty to do in Orlando if theme parks – and their usual brand of chaos – are not your cup of tea.

INDUSTRY JOB WATCH

LOOK WH

O ’S

HIRING!

Looking to fill a posit Originate ion? Adve Report’s rtise it Industry of thousa Jobs to g here in nds of qu et it in fro alified ca nt ndidates Contact . us at (94 9) 629-3 961.

30 Originate Report | Dec. 2019 / Jan. 2020

Commercial Mortgage Credit Analyst – Newport Beach, CA Wilshire Finance Partners is a growing balance sheet lender and manager of several real estate debt funds. Our internal funding platform provides debt financing and equity capital secured by apartments/multifamily and commercial real estate throughout the United States. We seek a motivated and detail oriented individual with 3 or more years of experience as a Commercial Mortgage Credit Analyst or Commercial Mortgage Junior Underwriter to join our Newport Beach team. The Commercial Mortgage Credit Analyst will work closely with the underwriting and origination team and is responsible for processing, analyzing and facilitating loan requests secured by apartments/multifamily and commercial real estate. The Credit Analyst will obtain and review reports, documents and information; assist with processing and underwriting; assist loan closings; drive the management of post-funding loan covenants, draw requests and disbursements; assist with loan portfolio management; and assist with regulatory reporting. For more information about the opportunity, please visit the Careers page at www.WilshireFP.com

www.originate.report 31

FEATURE

Single-Family vs. Multi-Unit Properties – Tips For Hard Money Lenders James Bowie, Alta Capital Group

lthough

quite

trite,

the

single-family or multi-family units.

– after all, multiple units housed in

adage that “old habits die

With that said, however, there are

one location means that tenants are

hard” can also be true when

positives – and drawbacks – to each

all in the same place, which differs

property type.

from the often scattered layout of

faced with the types of properties that investors focus on – whether a

single-family tenants. Landlords can

real estate professional’s efforts lie

Multi-family

many

likewise leverage greater negotiating

primarily in the single-family home

pros, one of the most obvious

power with service providers and

space or multi-family world may

being

other

be a matter of preference, but it is

of scale is important to keep in

multiple units are at the same place

unwise to disregard “the other side

mind when crunching the numbers

(think bundled deals for high-speed

of the spectrum.”

and performing the due-diligence

internet, lawn maintenance, etc.)

their

units scale;

have the

economy

property

managers

when

required to acquire multiple units, Even the most experienced real

each of which generates its own

Multi-family dwellings also have a

estate professionals may get stuck

cash flow. Similarly, any repair costs

greater potential for appreciation.

in the mindset that one type of

that come up can be spread out,

Regardless of any upgrades or updates

property is “their thing,” but this

leveraging the costs against a larger

that have been made to the property,

thought pattern can cause investors

asset base. Although the total cost of

single-family homes have values that

to miss out on opportunities that

repairing a multi-family building’s

are usually tied to its surrounding

can add additional revenue streams,

roof, for example, may be greater,

property. Multi-family units, on the

diversify their portfolio, and improve

the cost is spread out amongst its

other hand, can incorporate value-

returns/reduce

various units (as opposed to one unit

add components that increase the

for a single-family home.)

value of not only the property, but

risk.

Long

story

short: there is nothing in the lengthy (yet unwritten) rules of being a real

can increase the rent as well (some

estate professional that precludes

The economy of scale also works in

amenities are particularly attractive

him or her from investing in either

an investor’s favor in another way

to younger buyers, including health

32 Originate Report | Dec. 2019 / Jan. 2020

that due to the sheer size of these

Multi-family dwellings are typically

properties, their down payments

valued

are much more substantial than

streams, but single-family units are

a conventional single-family unit.

more determined by their location

Sometimes, these down payments can amount to 25 percent of the property value, and some property managers require more cash “up front” if a prospective landlord doesn’t

plan

living

on-site.

Although this may be the case, it is sometimes easier to secure financing for these properties because lenders usually attach more weight to a property’s cash flow (as opposed to solely looking at a borrower’s credit

their

rental

income

and the local market’s supply and demand. A single-family home in a desirable, up-and-coming area, for example, may appreciate quicker compared to a multi-family unit in a similar area. One of the biggest drawbacks of these properties, however, is investors are limited to a single revenue stream. Payments are made by the sole

history, which is often the case for

tenant of the property, as opposed

single-family units.)

to multiple renters in a multi-family dwelling situation. Although this in

Single-family and wellness, on-site daycare, and exercise equipment.) Where the economy of scale and value-add highlight

components

positively

multi-family

dwellings,

there are some warnings associated with

financing

Tenant

these

turnover,

properties.

for

example,

is one of the biggest hassles of operating

multi-unit

dwellings.

Even if a property is well-managed and

immaculately

maintained,

tenants will still leave for a variety of reasons, which can hurt cash flow and leave empty spaces in a building – empty spaces that will need to be filled.

Although

tenant

turnover

can result in some headaches, it is certainly wise to account for this in budgeting, and put tenant screening into place before keys are handed over. It is also important to keep in mind

units,

although

and of itself is not necessarily an

smaller in physical size, still have

issue, scale-related concerns can

the potential to produce sizable

come into question if an investor

returns and have many positives

relies on a handful of single-family

associated with them. The initial investment in a single-family unit, for example, is often smaller and likewise, renovation budgets are often smaller as well. Whereas multifamily dwellings can require down payments as much as 25 percent, a standard single-family home can be purchased with a 10-15 percent down payment. Because these upfront cash requirements are smaller,

units for income. Regardless of an investor’s proclivity for

single-family

multi-unit

dwellings, it is always wise to at least learn about other ways to increase revenue streams or expand a real estate portfolio. There may be positives and drawbacks to both property types, but approaching

it may be easier for new investors to

a potential investment with an

gain the financing required for these

enthusiast – yet cautious – eye is the

projects.

best game plan.

About the Author: As President of Alta Capital Group, James oversees operations and business development for the company. Anticipating an emerging opportunity in distressed real estate investment, James founded Alta in 2009 to capitalize on the shifting market conditions. Prior to founding Alta, James spent seven years as a commercial real estate broker with Lee & Associates, The Staubach Company and Grubb & Ellis. Throughout his time in commercial brokerage, he specialized in the acquisition, disposition and leasing of investment property. Contact: james@altacg.com

www.originate.report 33

FEATURE

WHEN TO USE A PRESS RELEASE (and when not to) By Ramona D’Cruz, Geraci Media

eporters’

inboxes

are

targeted and cost effective. By

know when press releases benefit

flooded with press releases.

coupling press releases with these

their strategy, and when they

As the market has become

new tactics, marketers can breathe

don’t. The following points will

new life into this old standby.

help you determine when a press

more saturated with low-quality releases, the high-quality news

release is the best course of action.

has gotten lost in the crowd. While

When a marketer creates a public

press releases are still a viable

relations strategy, the first order

The Benefits of Press Releases:

marketing tactic, they have taken

of business is often to publish

Other publications will pick it up

a backseat to some other digital

press releases. However, the game

The purpose of a press release is

tactics that are more measurable,

is changing, and marketers should

to get as many eyeballs on your

34 Originate Report | Dec. 2019 / Jan. 2020

“One of the biggest benefits of public relations is the link building that comes with media coverage.”

news as possible. Many companies

garnered by press releases is a huge

humpday slump.

achieve this by posting a press

win for SEO managers everywhere.

release to the wire, where it

Link building

As a bonus, coverage often also

will be sent out to thousands

One of the biggest benefits of

comes with inbound links back to

of publications, and ultimately

public relations is the link building

your website. All of this means you

posted elsewhere online.

that comes with media coverage.

can’t depend on your release to do

Even though the press release But how do you get attention this

itself doesn’t help with search

way? You can start by releasing

engine optimization (SEO), the

quality

example,

resulting editorial coverage does.

releases with data get picked up

Be sure your release includes key

more. But you also need to time

words that you want to rank for,

it right. Press releases are more

so that when journalists see your

likely to be viewed by both the

release, they will use those words

media and consumers over the

as well.

content.

For

end of the week. For more views,

There

avoid

between SEO and PR. The press

during

that

communicate your story to the rest of the world, but you can use took slike keywords and helpful links to your advantage. They’re an important resource for journalists A press release is an opportunity to

weekend and at the beginning and distributing

all the work. It is simply a way to

tremendous

synergy

deliver all of the information you Press Release: Continues on pg. 32

www.originate.report 35

attention

press

not rely on press releases to prove

releases alone are not an effective

that public relations efforts are

consumer communication strategy.

necessary. Press can be measured

Many consumers don’t know what

in some ways, like how many news

press releases are, and they prefer

outlets post your release or referral

to get their information in a way

traffic from the release, but it’s

makes it easier for journalists to

that is easy to understand and feels

hard to track how many customers

quickly find accurate information

natural, like news articles. When

or prospects are generated as the

about your company.

thousands of stories are posted

result of a press release.

Press Release: Continued from pg. 31

want journalists to know in one package. Even external documents like earnings presentations and research documents, can be made available in a press release. This

journalists,

every hour, readers want to be An alternative to sending a release

able to understand them quickly.

on the wire is to send your release directly to a journalist over email.

Press releases are expensive Posting just one press release

What this means for marketers

over the news wire can cost over

is that in addition to posting

a thousand dollars. Often, they are

releases, you should make sure

not picked up by journalists and are

the content is somewhere else in

just reposted on other websites.

a better format, like a blog post,

Wire press release distributions

so that your audience can access

have become outdated as public

it. Rather than promoting your

relations efforts rely increasingly

release through social channels

on building relationships with the

improve your SEO

and marketing emails, you can

media rather than sending out

As stated above, press releases only

promote your blog post to achieve

hundreds of emails to journalists

help your SEO if there is additional

the same goals.

you don’t know.

your release distribution. Popular

The effectiveness of press release

Instead of spending money posting

belief is that press releases help

is difficult to measure

releases

your SEO, but a recent article by a

Marketers measure success through

time building connections with

Google expert says otherwise.

data.

other

journalists, learning what stories

marketing strategy components,

they’re looking for and what topics

press

extremely

they write about. Building these

difficult to measure, making it

relationships with the media will

hard to prove their success. Do

continue to pay off.

This makes writing about your company easy for journalists and establishes a strong relationship that will help guarantee future coverage. The Drawbacks of Press Releases: A release on its own will not

content published as a result of

This is because press releases are only syndicated for a certain amount of time before they are taken down. Even if they are packed with keywords and your company’s name, their temporary status

does

not

lead

any

progress in SEO rankings. Your PR strategy shouldn’t depend entirely on releases for SEO success. Press

releases

don’t

reach

consumers Although

they

might

get

the

However, releases

unlike are

the

wire,

spend

ABOUT THE AUTHOR: Ramona D’cruz is the Media Assistant at Geraci Media. She joined the company in 2018, and in that time she has become an indispensable member of the Media team through her passion, creativity, and attention to detail. She serves as the project manager for many of Geraci Media’s clients, plays an active role in conference planning and execution, and goes above and beyond to support her team members and help the organization achieve its goals. Ramona graduated from CSULB with a degree in Sociology and decided to pursue higher education by enrolling in an MBA program, with a concentration in Marketing. Working at Geraci and being a part of such a tight-knit team of individuals is exactly the environment in which Ramona thrives and she looks forward to her continued professional growth alongside Geraci. CONTACT: r.dcruz@geracillp.com

36 Originate Report | Dec. 2019 / Jan. 2020

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UPCOMING EVENTS 2020 EVENTS CALENDAR

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FEBRUARY 20-21, 2020 | BALBOA BAY RESORT, NEWPORT BEACH, CA Innovate 2020 will provide you with the latest trends and insights in the non-conventional/private lending space. At Innovate, you will receive firsthand knowledge from industry executives and professionals about how to stay ahead of the curve in the new year. This event will focus on education, industry changes, new lending trends, and more. Innovate will also facilitate face-to-face networking through our smartphone app, speed networking activity, and various networking breaks, all of which will assist in fostering new connections and business partners for all attendees.

Showcase Your Upcoming Event Here Contact Alicia Carter at a.carter@geracillp.com for more information. 38 Originate Report | Dec. 2019 / Jan. 2020

THE IMPORTANCE OF

results. This global reach creates networking opportunities for building relationships and partnerships. Your audi ence has invested time in registering and listening to the information you plan to share. They’re expecting valuable takeaways from the webinar, even some thing they can put into place at their own company. This positions you and your brand as an industry lead er, or expert. Webinars can give your audience the chance to ask questions and provide feedback. This how well it performed. These metrics include the is valuable because you can address concerns, reser number of attendees, number of those registered, vations, or any lingering questions they may have and total views. The webinar can and should be recorded about your training or product in real-time. You can Webinars have grown in popularity in recent years for you, the audience, and affiliates to share with customize your presentation to your audience based on and have become an important marketing tool. others, growing the results even more. Each time a their questions and feedback to keep them engaged. These live web-based seminars can connect you with person completes your webinar’s registration form Ask them to take an action, such as completing a task leads from all over the world. They encourage interacti they should be considered a new potential lead, or answering a question. This will increase audience by allowing the audience to ask questions orJust how whether it be for a sale or a potential partnership. participation and interest. Include guest speakers, beneficial can a webinar be to your business? Here Webinars adds a personal interaction that videos and such as industry leaders or affiliates, to speak during are 7 reasons why webinars are a fantastic marketing commercials don’t. Webinars put a face and name your webinar. These individuals should be familiar strategy. Webinars are a cost-effective way to extend with your product making you approachable, human, with your industry and value of your product. They your reach globally. Rather than pay for flights and and someone they can trust. Educating them on how will be able to educate the audience on the benefits hotels to meet with individual leads, you can engage your product can benefit their company is the first or impact, validating information you have or will with a larger group over their computer screens. step in opening the door to future discussions and be sharing. By inviting a guest speaker, you can also People from all over the world can attend, providing partnerships. It is essential to show both new and increase the webinar’s attendance by including your your brand or product with the potential to see huge established leads how your product or service can guest’s audience and following. This can grow the results. This global reach creates networking opporimprove or enhance their workplace. Depending on number of leads you may gain substantially. Results tunities for building relationships and partnerships. the prospect, the sales process can be slow. Businesscan be seen quickly from webinars. After hosting a our audience has invested time in registering and lises want to convert a lead into a cusWhile it’s cerwebinar you’ll have metrics to measure how well it tening to the information you plan to share. They’re tainly important to provide useful information and performed. These metrics include the number of at expecting valuable takeaways from the webinar, tips to your audience, it’s equally important to share tendees, number of those registered, and total views. even something they can put into place at their own how your brand or business can help them achieve The webinar can and should be recorded for you, the company. This positions you and your brand as an this. How can your product be a solution to their audience, and affiliates to share with others, grow industry leader, or expert. problems? Your webinar should show the audience ing the results even more. Each time a person com the value of your brand. Garnering interest in the pletes your webinar’s registration form they should Webinars can give your audience the chance to ask product and its potential impact is the first step in be considered a new potential lead, whether it be for questions and provide feedback. This is valuable becompleting a sale. a sale or a potential partnership. Webinars adds a cause you can address concerns, reservations, or any personal interaction that videos and commercials lingering questions they may have about your trainThere are numerous benefits to hosting a webinar. don’t. Webinars put a face and name with your prod ing or product in real-time. Though this article only touches on a handful of uct making you approachable, human, and someone them, it should be clear that webinars are an effecthey can trust. Educating them on how your product You can customize your presentation to your auditive tool for engagement and growth. As you take can benefit their company is the first step in opening ence based on their questions and feedback to keep these benefits into account, you should begin to the door to future discussions and partnerships. It them engaged. Ask them to take an action, such as think how you can use a webinar for lead generation is essential to show both new and established leads completing a task or answering a question. This will and to increase traffic, which will yield great results how your product or service can improve or enhance increase audience participation and interest. for your business. Webinars have grown in populartheir workplace.Depending on the prospect, the ity in recent years and have become an important sales formation and tips to your audience, it’s equalInclude guest speakers, such as industry leaders or marketing tool. These live web-based seminars can ly important to share how your brand or business affiliates, to speak during your webinar. These inconnect you with leads from all over the world. They can help them achieve this. How can your product be dividuals should be familiar with your industry and encourage interaction by allowing the audience to a solution to their problems? Your webinar should value of your product. They will be able to educate ask questions or provide feedback in real-time. show the audience the value of your brand. Garnerthe audience on the benefits or impact, validating inJust how beneficial can a webinar be to your busiing interest in the product and its potential impact is formation you have or will be sharing. ness? Here are 7 reasons why webinars are a fantasthe first step in completing a sale.There are numertic marketing strategy. ous benefits to hosting a webinar. Though this article By inviting a guest speaker, you can also increase the only touches on a handful of them, •it Upcoming should be clear Business Development • Fintech/Newest Loan Programs • Automation in Today’s Evolving Society webinar’s attendance by including your guest’s auWebinars are a cost-effective way to extend your that webinars are an effective tool for engagement dience and & following. This can grow the number of reach globally. Rather than pay for ights and hotels Trends Changes • Marketing & Outreach • Essential Tools & flTechnologies •and New Legal Issues and Regulations growth. As you take these benefi ts into account, leads you may gain substantially. to meet with individual leads, you can engage with a you should begin to think how you can use a webilarger group over their computer screens. nar for lead generation and to increase traffic, which 5. Results: will yield great results for your business. WebiResults can be seen quickly from webinars. After People from all over the world can attend, providnars have grown in popularity in recent years and hosting a webinar you’ll have metrics to measure ing your brand or product with the potential to see huge have become an important marketing tool. These

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Redwood Mortgage Corp. www.redwoodmortgage.com RMC@redwoodmartgage.com (800) 659-6593 San Mateo, CA 94402

Direct Lender

Zinc Financial Inc. www.zincdinancial.com office@zinc.net Tom Valentino

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LET LENDERS KNOW YOU FOUND THEM IN ORIGINATE REPORT! 40 Originate Report | Dec. 2019 / Jan. 2020

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MI NI MU M LO MA AN XIM $ UM Co LO mm AN er $ Co ns cial um Br e r idg Co e rp o A c rat i o qu ns i /T No sitio ru s ns te s a n ts/ L Pu eg dD rc h a ev e l o l Ent Re ased itie pm ha s en b ts Bla / Re mo nk S e e t Lo d e l e co d/ nd ans Re Jo no int Mor va tg V te d a en Fo ge t re i g n u re s s Ot h e N at i r on als MA XL OA NCh TO ur -VA ch LU es La E( /T nd % em (B )/M Au ar p AX les to m e / /S TE Co o RM Re mm yn t ag t a i i ve (YR e og l( rc i S) S En ue al/ s te r h o p L s o t ai / t ) Ga S nm tri sS en pM all Le t at i o t isu s) ns re Ho (G sp olf i Co Mi t alit ur y( xe se d H R e - u s e o te s / M ls) sid ar Pr ina In e o n p Ra d ) n c t i a l I e r t i e u st r he nv s ial sa Se es tm lfnd s en Fa R e to ra tP ge rms st a ro pe rti O f u ra n fic es t s e

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