JULY 2019
THE OFFICIAL MAGAZINE OF GERACI
INDUSTRY SPOTLIGHT:
Allen Shayanfekr Sharestates
MONEY360 CREATING CREDIBILITY IN
PRIVATE CAPITAL
INSIDE: WEBINARS
AFAS PRIVATE LENDING STORAGE, BABY! www.originate.report 1
2 Originate Report | July 2019
CONTENTS JULY 2019
FEATURES 16 Storage, Baby!
Recession Proof, or is it?
By Dan Kryzanowski, Rocket Dollar
6
18 Seven Ways Webinars Will Grow Your Business Ramona D’Cruz, Geraci LLP
21 AFAS Are Here to Stay Ian Group, ProDeal360
28 Don’t Just Survive: Thrive in the Ever-Changing
Environment of Private Money Lending
By Bill Fairman, Carolina Hard Money
13
32 Private Lending as a Retirement Hedge
Clay Malcolm, New Direction Trust Company
34 Tips for When Your Borrower Files Bankruptcy
Alexa P. Stephenson, Esq.
WHO TO KNOW 6
16
Profile
Money360: Creating Credibility in Private Capital Charles Peckman, Originate Report
13 Industry Spotlight
Allen Shayanfekr, Sharestates
IN EVERY ISSUE
18
10 Industry Job Watch 24 Cities to Watch
Atlanta, Georgia
Originate Report Staff
36 Upcoming Events 38 Lender Directory
28 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
4 Originate Report | July 2019
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
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 Max Berger • Edward Brown Jonathan Bursey • Charles Peckman Ruby Keys • Romney Navarro
FOUNDING UNDERWRITERS
MARK HANF President, Pacific Private Money
ORIGINATE WEBSITE www.originate.report GERACI LAW FIRM www.geracilawfirm.com MEDIA WEBSITE www.geracimediagroup.com
Welcome to our July Edition of Originate Report! “To improve is to change; to be perfect is to change often.” -Winston Churchill Change is an inevitable factor of life, and a necessity for personal and professional growth. To mark the 2nd full year of Originate Report Magazine’s publication, we have embraced this idea wholeheartedly. You may have noticed some aesthetic differences already, but we are making more systemic changes as well, in terms of both content and distribution- read on to find out more! In this edition you will hear firsthand from one of the major players in our industry, Gary Bechtel with Money360. You will also be introduced to Allen Shayanfekr with Sharestates. Don’t forget to check out this month’s guest articles, either- we have a few new contributors with content that you won’t want to miss.
To Growth and Change,
Max
Max Berger Originate Report Editorial Director
CONFERENCE WEBSITE www.geracicon.com www.originate.report 5
PROFILE
A regular fixture at Geraci conferences. Money360 knows networking with other powerhouses is key in this industry.
MONEY360 CREATING CREDIBILITY IN PRIVATE CAPITAL
“I
By Charles Peckman, Originate Report
borrowers and intermediaries during its admittedly short existence. In the chaotic aftermath of the 2008 financial crisis, Bechtel said a
shifting
marketplace
–
along
love doing deals. Like a lot
Bechtel says his 30+ year career has
with advancements in technology
of people in this business,
given him the opportunity to apply
– contributed to a myriad of new
I’m a deal junkie.”
the knowledge he has garnered
business
throughout his storied tenure in the
Gentry’s vision for Money360.
With management and production positions
lending market, servicing countless
at
Extensia
opportunities,
including
mortgage lending space.
Financial,
“In 2014, the distressed debt business
Grubb & Ellis Company, Meridian
Founded in 2014 by current CEO Evan
had tapered off, so Evan saw an
Capital, Johnson Capital, FINOVA
Gentry, Money360 is a vertically
opportunity
Realty Capital, Pacific Southwest
integrated integrated, nationwide
lending space to bring to bear
Realty Services, The Alison Company
direct lender that makes small to
some of the things he had learned
and Hometown Commercial Capital,
mid-balance commercial real estate
at
Gary Bechtel’s resume practically
loans of $3 million to $25 million.
ventures,” Bechtel said. “Initially, he
speaks for itself. But in his current
Located in idyllic Ladera Ranch,
raised capital from high net worth,
role as the President of Money360,
Money360 has proven itself as a
accredited investors and placed that
a California-based mortgage lender,
mainstay in California’s immense
in bridge loans, and that’s really how
6 Originate Report | July 2019
his
in
previous
the
commercial
entrepreneurial
the business got started.”
in 2015, and we now stand at 37 employees. In 2015, we closed the
With the formation of the company’s
year at approximately $50 million
first debt fund in 2015, Bechtel
of total volume since inception, we
said he was brought on soon after.
are now at roughly $1.4 billion since
Throughout his career, he added, he
inception – this substantial growth
has run and/or expanded commercial
has happened over a relatively short
real estate businesses as either an
period of time.”
intermediary originating loans or running origination platforms or as
Despite the company’s growth during
overseeing lending platforms – and
this time, Bechtel said the early days
as the business grew, Money360
of Money360 were not without their
needed
ups and downs.
an
experienced
subject
matter expert in the field. “Building something from the ground “I was brought on with that interest
up is incredibly difficult, mainly
in mind,” he said. “We began ramping
because you just don’t have any
up the business in 2015 and really
brand recognition,” he said. “I think
in earnest in 2016, when we began
that’s where the hiring of highly-
hiring more origination personnel to
experienced people comes into play.
generate deal flow and back-office
When we didn’t have that brand
personnel to process the loans. From
awareness, the people we brought on
there, we have grown substantially;
gave us credibility. For the first year
I think I was employee number six
of our existence, we were relying on
the reputation and credibility of the people we hired. As time went on and we were closing loans regularly, the Company’s reputation as a reliable capital provider was established” Outside ideals
of and
shifting the
marketplace
aftermath
of
a
financial crisis, Bechtel said the success of Money360 thus far can be traced back to one simple factor. “I think our success is attributable to the team we’ve brought on – one of the things we’ve done since creating the platform is hiring incredibly seasoned, talented people within their specific role in the firm,” he said. “Typically, our people have around in
their
25
years
specific
of role.
experience Whether
that means you’re an originator, underwriter, processor, closer, or senior management, everyone has decades of experience and billions of dollars in the commercial real estate finance sector, and I think that’s played well with the intermarries and investors we work with.” Money360: Continues on pg. 8
www.originate.report 7
MOney360: Continued from pg. 7
It is important to keep in mind, Bechtel added, that experience is meaningless without a proven track record and bar-none attention to an ever-expanding list of clients. “Credibility
in
this
business
is
everything,” he said. “If you hire highly talented, highly experienced people who are tenured and have been through the cycles and can draw upon those experiences of structuring
and
re-structuring
loans, again, I think that’s what has
difficult to pinpoint a singular reason
deploy money in the space, those
for this increase, he added there are
players won’t be in the business a
a number of factors that have led
year or two from now. But companies
to the piqued interest of lending
like Money360 will be here because
professionals. These elements, he
this is our area of expertise and sole
said, include the skyrocketing of the
focus: we’re building a platform for
CLO (collateralized loan obligation)
the long-run.”
market
and
investors
becoming
frustrated with a lack of opportunity
As more lenders enter the bridge
to deploy the capital they have raised.
lending
space,
Bechtel
said
Money360 has thought long and “A lot of these players have come in
hard about how best to differentiate
knowing that they can make loans
itself from the competition; although
on their lines or balance sheets, and
this differentiation can seem quite
ultimately go to the CLO market
difficult at times, he said it is a
for liquidity and leverage – I think
“welcome challenge.”
separated us from many lenders that
you’ve seen a lot of people who were
are both in the market or have tried
in some other aspect of the lending
“It doesn’t always come down to
to enter the bridge lending space.”
business, be it CMBS, Mezzanine
price,” he said. “Some of these new
or Equity, and I think for all of the
entrants I mentioned try to compete
Bechtel said that in the past few years
reasons I’ve outlined before, some
on price and they try and compete,
the bridge lending space has seen
see the potential that the bridge space
possibly, with higher leverage, so
increased interest – and competition
provides,” Bechtel said. “My view
the market has become frothy to
– from startups and established
is that when the business changes,
a
lenders alike. Although he said it is
slows down, or they are not able to
having been through these cycles,
8 Originate Report | July 2019
certain
degree.
Unfortunately,
this is something reminiscent of
as hard as it is to
what we saw in 2007 in the CMBS
believe, we’re fine
[commercial
with that. We take a
mortgage-backed
security] world.”
long-term approach to
this
business,
That world, he said, has some
and we want to be
attributes of today’s bridge lending
able to honor our
space.
commitment
to
our
in
borrowers
“The business was crowded, there
the future funding
was a lot of money, and there was
obligations we may
some very aggressive underwriting
have and protect our
and
business,
investors as much
recognizing they could securitize
as we can from any
that product and really have ‘no skin
kind of impairment
in the game,’” he said. “Although that
of the loan.”
pricing
to
win
has changed since there is a minimum risk retention required of an issuer,
Aside from the sheer
but my concern – and we’ve already
pricing
begun to see this with some of the
Bechtel
new entrants into the space – is that
that
Money360’s
they are becoming very aggressive
clients
have
on pricing and structure to try and
to expect a level of
win business and that is fine today,
professionalism from his team, and
but potentially that could bite them
can sleep soundly knowing that his
and their investors in the future.”
team will follow through on their
component, also
said come
honestly, we wouldn’t have been able to fund as much as we have in such a short period of time if we weren’t reliable and credible . Aside from
commitments. Bechtel said he is
focusing solely on pricing, it’s our
Although Bechtel said it can be easy
proud when prospective and current
ability to structure the loan as close
to get caught up in what competitors
clients refer to Money360 as a
as we can to the borrower’s ask and
are doing, he added it is crucial to
“responsible, reputable” source of
mitigate risk as much as possible,
remain steadfast in the principles
bridge lending.
but also provide the confidence that
and
practices
his
company
we’ll be there for them in the future.”
has
established. “What sets us apart, I believe, is what lies between the ears,” Bechtel said. “We’ve been through the cycles – and given our team’s decades of experience – we’ve seen
“Building something from the ground up is incredibly difficult, mainly because you just don’t have any brand recognition,”
what can happen when you stretch
Another component of the company Bechtel said sets them apart is Money360 proprietary technology platform, 360Live and specifically My360,
an
interactive
client
portal designed to create a better transparency of the commercial real
and aggressively underwrite these
estate process. Anyone associated
transactions, so we ‘stick to our
“We’ve established a proven track
with a loan in closing has access
knitting.’ If we lose a transaction to
record with an experienced group of
to
someone who is going to come in
people that have proved themselves
and aggressively lend or over-lend,
over and over again,” he said. “Quite
this
portal,
enhancing
the
Money360: Continues on pg. 10
www.originate.report 9
or
Money360: Continued from pg. 9
traditionally painful process of email and drobox. Up until this point, Bechtel said it has been common practice for the loan process to take place “behind the firewall,” which can not only hinder the borrower/lender relationship but also the origination and processing process as a whole. My360 allows borrowers to track the status of their loan in real time, while also securely uploading
documents
and
other
the
intermediary
community.
we can do in the confines of our own
Bechtel said it is important to hear
lending platform. Taking Money360
the questions and concerns of the
from a smaller enterprise to what
investor
it is today has been very satisfying,
while
refraining
from
“bashing” newcomers to the space.
and that’s partially because we all believe in what we are doing here.”
“I will never, nor will anyone in our company, speak badly about one of
The relationships between all parties
our competitors as I don’t want to be
involved – intermediaries, borrower,
talked badly about either,” he said.
investors and employees – Bechtel
“But we will emphasize to them that
said the validation and recognition
pricing and leverage isn’t everything
of the success that comes with that
– viability, reliability and staying
is rewarding. But despite this vocal
power are key to a long relationship.”
support, he said there is “always work to be done.”
important pieces of information to
To Bechtel, that relationship extends
via computer or mobile devices.
not only between a borrower and
“We
lender, but between an employee and
Money360, and that is something
their company.
that I took on when I was first hired
As part of Money360’s branding and educational efforts, Bechtel said
have
very
large
goals
at
in 2015 – I think we’ve done a very
he has been fortunate to travel and
“Jumping into a new transaction to
good job of setting ourselves apart in
speak on bridge lending and hear
try and win it for the firm may seem
a very crowded space, and we plan
about some of the short-comings
impossible at times, but it’s incredibly
on doing so as we continue building
of potential competitors – when
rewarding – we have to realize our
this platform for the future.”
sitting down with potential clients
strengths and weaknesses, and what
CONTACT: For more information on Money360, email Gary at garybechtel@money360.com
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.
Money360, Inc., Ladera Ranch, CA Commercial Real Estate Loan Underwriter must be able to evaluate loan opportunities, including, the real estate collateral securing the proposed loan, the surrounding market and demographic area and the adequacy of the loan structure of the transaction and/or relationship. Primary duties include the underwriting of commercial real estate and bridge loans, reviewing loan documents, spreading financial statements, evaluating borrow/ guarantor financial support and management, and developing rationale for pricing decisions. The role will be responsible for all aspects of a proposed loan from the time the borrower executes the term sheet through closing. Interested parties should contact Paul Cleary. CONTACT: paulcleary@money360.com | www.money360.com
10 Originate Report | July 2019
PRESS RELEASE
GERACI MEDIA ORIGINATE REPORT MAGAZINE CELEBRATES 2-YEAR ANNIVERSARY IRVINE, Calif., July 09, 2019- Two years ago, Geraci released the inaugural edition of its industry magazine, Originate Report, targeted primarily at mortgage loan originators. This month, Originate Report commemorates its 24th edition, and thereby its 2-year anniversary. To mark the occasion, the magazine has been upgraded with a new look and fresh content. With brand-new content writers, new featured columns, and an expanded array of relevant topics for lenders, the Geraci Media team is working hard to keep readers as engaged as ever. The team wishes to express gratitude to their readers and advertisers for making Originate Report a huge success. The magazine has also transitioned from print to digital as its primary medium, creating opportunities for more interactive content and broadening its audience. It will remain easily accessible to its original readership of loan originators, lenders, investors, and other professionals in the non-conventional lending industry, and physical copies of the magazine will still be found at all Geraci events. Commenting on his experience as a contributor to the magazine, Romney Navarro from the executive team at Streamline Funding stated, “Oftentimes in our relatively niche business of non-conventional lending, you find it difficult to get your message out to the right audience. This is especially frustrating when your specific message can help somebody grow their business responsibly. I was thrilled to provide content to the magazine; first, because the people at Geraci are the authorities in spotting talent in our space and I felt honored to share my story with them. Secondly, because unlike others who have tried in the past, they have created a respected and well-circulated platform to share that story.� Originate Report magazine is distributed to thousands of loan originators, lenders, investors, and other professionals in the non-conventional lending industry. It has become an essential resource for its audience, providing valuable and timely content each month to help readers stay up-to-date on current industry trends and grow their businesses. Originate Report also provides a platform for professionals in the lending space to promote their services through both advertisements and the lender directory. Please visit https://originate.report/ to gain access to all previous editions of Originate Report. If you are interested in contributing content or advertising, please contact m.berger@geracillp.com to receive updated media and editorial kits.
Max Berger | 949.379.2600 | m.berger@geracillp.com www.originate.report 11
SPOTLIGHT SPOTLIGHT
INDUSTRY SPOTLIGHT Allen Shayanfekr
Co-Founder and Principal, Sharestates
12 Originate Report | July 2019
A
llen Shayanfekr is the
and compliance was pivotal for
for
CEO
launching Sharestates as a pioneer
while
and
Co-founder He is
in the real estate crowdfunding
an entrepreneur with cross-
industry. Under his leadership, the
functional expertise in real estate,
company reached profitability in
law, technology, and f inance.
merely 13 months. Allen now leads
Allen’s Juris Doctorate (JD) with a
platform innovation for Sharestates,
background in securities, regulation,
optimizing
of
Sharestates.
the
user
borrowers also
and
investors
spearheading
the
development of new loan products and capital markets relationships. To date, Sharestates has loaned nearly $2 Billion to real estate developers
and
returned
nearly
$750 Million in investor principal.
experience Q: How have you seen Sharestates grow and expand in the last few years? Since inception, the company has originated over $1.8 billion in real estate loans; because of that massive growth, the staff has gone from a team of 4 people to over 100. In just 4 years we have become one of the largest private lenders in the country. Q: What has been one of your biggest successes and one of your biggest failures in your career? Our biggest success has been our massive growth in private lending coupled by stable, reliable returns for our investors. I attribute that to our incredible team who have worked tirelessly to bring the vision we had for Sharestates to life. I view failure as part of the path to success. In other words, I don’t believe we have ever failed, rather we have learned
and
persevered.
Failure
always presents an opportunity to improve. Q: What does your typical day look like and how do you make it productive? Family and work are the most important aspects of my life, so I make time for each every day. I have Allen Shayanfekr, Sharestates
Allen Shayanfekr: Continues on pg. 14
www.originate.report 13
Allen Shayanfekr: Continued from pg. 13
found that the secrets to productivity are time management and effective delegation. After five years of building Sharestates, I cannot still be involved in every area as I once was, so I have placed leaders across our team to take on day to day operations while I carry out the strategic vision of the company. Q: How has your company vision
we first started would have saved me
Q: What is a recent trend in
from a significant amount of stress.
the private lending industry that
Q: What is something that most people don’t know about your company? Most people don’t know that we started a 506C called Share4Kids,
have always been a focus for our
and also the growing potential for
company. It felt natural to officially
mergers. As the industry has grown
create Share4Kids in support of the
and platforms have really developed
was our shift from both equity and debt products to focusing solely
“Our biggest success has
on debt. When we first started
been our massive growth in
Sharestates, we wanted to offer
private lending coupled by
both options but quickly realized
stable, reliable returns for our
that our core business, and what we
investors. I attribute that to
were really passionate about, was
our incredible team who have
funding deals. So we shifted our
worked tirelessly to bring the
focus and grew our client base with
vision we had for Sharestates
short term fix and flip bridge loans.
to life. ”
phase of their project to the next, including 30-year rental loans. Q: What advice would you give your younger self? I would tell my younger self that it will all be worth it. There were so many times throughout this process that we didn’t know how, or even if, things were going to work out. We have made countless sacrifices to ensure that this dream became a reality. To have that assurance when
14 Originate Report | July 2019
pan out. I think one of the most platforms that are still left standing
participate in each year.
programs to carry them from one
and private lending industries would
back and community development
I think the biggest change in vision
entire investment process by creating
see how the real estate crowdfunding
exciting trends now is to see the
many charity events we host and
our borrowers throughout their
We have been waiting since 2012 to
benefiting children in need. Giving
evolved from Day 1 to Today?
We have since been able to support
excites you?
their core competencies, we are seeing even more opportunities now for platforms to work together. I’m really excited to see what the next few years hold for private lending. Q:
What
is
one
book
that
you’d recommend other industry professionals should read, and why? The Ultimate Sales Machine, written
Q: What does success look like for
by Chet Holmes. We have provided
you?
the majority of our staff with a copy
I think the concept and the look of
of this book. The key takeaway from
success have changed significantly
the book is efficiency, and in a fast-
for me over the years. Of course,
growing company, we are always
beating our targets and constantly looking for ways to create a better product for our users is always going to be a part of feeling successful. But more than that, I think being proud
looking for ways to streamline our business. Q: What is your favorite quote?
of the man I am for my family and
“My favorite things in life don’t cost
my loved ones has become a much
any money. It’s really clear that the
bigger aspect of my definition of
most precious resource we all have
success.
is time.” – Steve Jobs
CONTACT: (212) 201-0750 | hello@sharestates.com | sharestates.com
Family Entrepreneurship “The buck stops here”
Real Estate Finance Corporation is a family owned and operated business based in Scottsdale, AZ. The saying “The buck stops here”, could not be embodied more than by this boutique firm. “It’s our name on the line, our reputation - not just as a business but as a family” said Alesondra Mora, Operations manager, niece to CEO/President Adam Child. There is a personal stake in each deal and interaction. We are here to build a legacy. Let us help build y o u r s . Contact our team today to discuss your potential investment opportunities.
14362 N. Frank Lloyd Wright Blvd., Ste. 1000, Scottsdale, AZ 85260 NMLS 1433420 | Phone (480) 477-7730 | refcorpaz.com | investorservices@refcropaz.com www.originate.report 15
FEATURE
Storage, Baby! RECESSION PROOF, OR IS IT? n Utopia, Texas, there is an
completely troll the aforementioned
opportunity for you to instantly
claims. The truth, of course, lies
receive
somewhere in the middle. Let’s hear
double-digit
returns
storage service with pick up and delivery, shares that “2017 and 2018 were record construction years for self-storage, but occupancy rates are still holding strong at 90%”
By Dan Kryzanowski, Rocket Dollar
I
of Callbox Storage, a full-service
That said, Bainter notes, “I would not say the market is recession proof, but I would say it is recession resilient.
from the experts.
Any time there is a recession it puts
political and economic conditions.
Is Storage Recession Proof?
people are willing to spend on things
Added bonus, you will also become an
For the past two years, every major
expert on this sector in less than 12
conference highlights “get prepared,
months. Finally, there is an endless
market is oversupplied…” and all
supply of commercial and consumer
we’ve seen is growth! claims Scott
need for storage as families living
customers, and for some reason,
Worden of CallPotential. Worden,
situations may change.”
nobody else is interested in Utopia.
an expert in technology and astute
on a property in a recession-proof market that is truly uncorrelated with
pressure on the amount of money and this would include storage. However, the other side of the coin is that a recession can create some
alternative investor, doubles down
Scott
As you digest this mythical town
with a resounding “Yes, (storage is
Storage and a longtime real estate
(though Texas does have a Paris, Gun
recession proof) over time, especially
veteran relatively new to the storage
Barrel City, and Loco), many folks
when you look at the prices sold.”
space, shares that “self-storage has
either wholeheartedly evangelize or
Kyle Bainter, Co-Founder and CEO
the lowest foreclosure rate across
16 Originate Report | July 2019
Mednick,
CEO
at
Square
industry’s
recession
resilience
sharing that “when people lose their jobs they want their stuff, when things pick up they still use it (storage).” Knobler cautions though that specific 3-5 miles pockets are not resistant to becoming oversupplied. Finally, Adam Kensky, Co-Founder and Owner of Triad Investments, like Mednick a newcomer to storage, notes that even during a recession, you can operate storage at a lower occupancy (i.e. higher vacancy) and run a good business, with breakeven a lot lower than other asset classes, such as multi-family. Kensky
also
recognizes
that
Millennials are “career renters” living other real estate classes, such as
Mooney also stays proactive on
apartments.”
national economic swings, as he suggested
less
aggressive
rate
Mednick also abides by the industry’s
increases for existing customers
longtime rule of thumb that a three
back
mile radius is “really your market”
thereafter
and that people will only drive 19
banking
minutes to their storage facility.
with some stores hit harder than
in
2008. hit
Charlotte hard
industry
was
when
took
refers
a to
the hit, more
in smaller spaces and candidates to be longtime storage renters.
Should I Do Storage? Once again, this is a very personal decision. Mednick made the move, though after three decades on the commercial and residential side. Kensky maintains his fix-and-flip
others.
Alvino
Recession resistant in a 3-5
recent
examples,
mile radius Jim Mooney, Vice
with a strong digital presence can
Tune in next month, for the final
President of Operations at Freedom
withstand a local downturn.
article of this series, as we get our
when
stores
business, now entertaining groundup development along with storage.
hands dirty with the experts on
Storage Management, and Christina Alvino, Founder & CEO of FineView
Dave Knobler, Director of the National
marketing, operations, and buy vs.
Marketing, focus on the 3-5 mile
Self Storage Group at Marcus &
build dilemma.
radius with deep insights across hundreds
of
properties
Millichap,
sums
up
the
storage
across
the country. Mooney and Alvino, consistently recognized among the industry’s top operator and marketer, stress that storage is a market driven business - recession resistant - based
ABOUT THE AUTHOR: Dan serves as EVP at Rocket Dollar and Capital Partner for Pinnacle Storage Properties. Dan has gone loco in Paris, finding his utopia inside a climate controlled 10*10 storage unit on those hot sunny days in Austin, TX. Visit with Dan at Captivate in Las Vegas. CONTACT: dan@rocketdollar.com
on local factors. www.originate.report 17
FEATURE
Seven Ways Webinars Will Grow Your Business
W
ebinars have grown in
Just how beneficial can a webinar
popularity
recent
be to your business? Here are 7
years and have become
reasons why webinars are a fantastic
an important marketing tool. These
their computer screens. People from all over the world can attend, providing your brand or product with the potential to see
By Ramona D’Cruz, Geraci LLP
in
engage with a larger group over
marketing strategy.
live web-based seminars can connect
huge results. This global reach creates networking opportunities for
building
relationships
and
partnerships.
you with leads from all over the
1. Global Reach:
2. Be Considered an Industry Leader:
world. They encourage interaction
Webinars are a cost-effective way to
Your audience has invested time
by allowing the audience to ask
extend your reach globally. Rather
in
questions or provide feedback in
than pay for flights and hotels to
the
real-time.
meet with individual leads, you can
share. They’re expecting valuable
18 Originate Report | July 2019
registering
and
information
listening
you
plan
to to
takeaways from the webinar, even
webinars. After hosting a webinar
is essential to show both new and
something they can put into place at
you’ll have metrics to measure how
established leads how your product
their own company. This positions
well it performed. These metrics
or service can improve or enhance
you and your brand as an industry
include the number of attendees,
their workplace.
leader, or expert.
number of those registered, and total
3. Audience Engagement: Webinars can give your audience the chance to ask questions and provide feedback. This is valuable
views. The webinar can and should
7. Expedite the Sales Process:
be recorded for you, the audience,
Depending on the prospect, the sales
and affiliates to share with others,
process can be slow. Businesses
growing the results even more.
want to convert a lead into a customer quickly. Webinars can play
because you can address concerns, reservations,
or
any
lingering
questions they may have about your training or product in real-time. You can customize your presentation to your audience based on their questions and feedback to keep them engaged. Ask them to take an
a significant role in expediting the
“Webinars are a cost-effective
sales process.
way to extend your reach globally. Rather than pay for
While it’s certainly important to
flights and hotels to meet
provide
with individual leads, you can
useful
information
and
tips to your audience, it’s equally
engage with a larger group
important to share how your brand or
over their computer screens.”
business can help them achieve this. How can your product be a solution
action, such as completing a task
6. Build Trust & Generate to their problems? Your webinar should show the audience the value increase audience participation and New Leads: or answering a question. This will interest.
Each time a person completes your
of your brand. Garnering interest in
webinar’s registration form they
the product and its potential impact
potential partnership. Webinars adds
There are numerous benefits to
4. Invite Guest Speakers to should be considered a new potential is the first step in completing a sale. Increase Engagement: lead, whether it be for a sale or a Include guest speakers, such as
industry leaders or affiliates, to speak during your webinar. These individuals should be familiar with your industry and value of your product. They will be able to educate the audience on the benefits or impact, validating information you have or will be sharing. By inviting a guest speaker, you can also increase the webinar’s attendance by including your guest’s audience and following. This can grow the number of leads you may gain substantially.
5. Results: Results can be seen quickly from
a personal interaction that videos
hosting a webinar. Though this article
and commercials don’t. Webinars put
only touches on a handful of them,
a face and name with your product
it should be clear that webinars are
making you approachable, human,
an effective tool for engagement and
and someone they can trust.
growth. As you take these benefits into account, you should begin to
Educating them on how your product
think how you can use a webinar
can benefit their company is the first
for lead generation and to increase
step in opening the door to future
traffic, which will yield great results
discussions
for your business.
and
partnerships.
It
ABOUT THE AUTHOR: Ramona D’cruz is the Media Assistant at Geraci Media. She recently joined the company and helps her team with various aspects of the Media firm by creating social media posts for the different social platforms, registering attendees for any one of our five conferences we hold each year, and whatever else she is able to do! Ramona graduated from CSULB with a degree in Sociology and decided to pursue higher education by enrolling in a MBA program, with a concentration in Marketing. CONTACT: r.dcruz@geracillp.com
www.originate.report 19
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It’s time to take your business to the next level. JOIN AAPL TODAY!
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20 Originate Report | July 2019
FEATURE
AFAS ARE HERE TO STAY By Ian J. Group, Esq., ProDeal360
W
hen you underwrite a
a partner at Geraci who manages
headwind in the works: technology.
loan,
the Real Estate Finance Group, says
In 2018, an Originate article by
down
that his firm relies heavily on AFAs:
Robert Greenberg titled “The Future
to risk. It is no surprise then that
“Parties to a transaction are looking
of Lending is Through Automation
lenders are becoming wiser to a
for certainty in timing and transaction
and
growing trend in the industry used
costs. When a fee is agreed upon at the
mortgage lenders have seen annual
to thwart the risk of unpredictable
outset of the transaction, both sides
growth rates at 30%, with the ability
closing
can have peace of mind about the
to process applications 20% faster
arrangements (“AFAs”).
value of the services being delivered.”
than traditional counterparts.
An alternative fee arrangement is
As a lender looking to take advantage
As lenders use workflow automation,
a departure from the traditional
of AFAs, the data shows that you need
transaction management platforms
billable hour structure by which
to be proactive. Of the law firms that
clients are able to close with more
offer alternative fee arrangements,
predictable
the
always
costs:
calculation
boils
alternative
fee
controlled
fees.
the Altman Weil report said that
non-billable
hour
72% of those firms were doing so in
are
reaction to client requests. Contrast
removing the risk of any unforeseen
this with the fact that only 28% of
costs at closing, ensuring greater
those law firms were responsible
predictability for their borrowers
for initiating such arrangements.
and their bottom line.
A recent Bloomberg survey also
By fee
and
requesting
arrangements,
lenders
supports this assertion: only 22% If you haven’t considered AFAs for
of respondents from national law
your business, now is the time to get
firms (i.e. firms with revenue under
on the bandwagon. Legal consulting
$10 million) said their firms have
firm Altman Weil reported back in a
adopted alternative billing models.
2016 study that 88% of law firms are
Approximately 50% of firms with
“initiating conversations with clients
revenue in excess of $1 billion have
about pricing and budgets.” Ninety-
adopted these structures.
seven percent of those firms maintain alternative fee arrangements with
While client demand is driving this
their clients. Nema Daghbandan,
trend, there is another oncoming
AI”
reported
that
online
and machine learning to close and underwrite
their
deals,
lawyers
are not yet responding to the tools making things faster. Per a 2019 Bloomberg
Analysis
titled
“Law
Firms Respond to Demand for Alt. Fee Models,” Legal Analyst Meg McEvoy reports that only 25% of law firms had implemented any changes to their billing model as their use of legal technology increased. This won’t always be the case, however. As clients and firms both make use of newer technology (all of those tools are available for lawyers as well!), firms can continue to bill at their rates and still maintain higher levels of profitability . . . they just need AFAs. AFAS: Continues on pg. 22
www.originate.report 21
AFAS: Continued from pg. 21
So what are the most popular AFAs that you can discuss with your counsel today? Here are four general types: 1. Fixed Fee A fixed fee is an all-in price for a specific matter. This arrangement is ideal for high volume lenders. This type of AFA works best within a longterm relationship between firm and client where the firm is familiar with the client’s business and workflow. 2. Periodic Flat Fees Building on the flat fee model above, clients and firms can also structure a predetermined flat fee billing over a period of time, such as a month or year. Periodic flat fees might also incorporate volume discounts based on the amount of work anticipated during a specific time period. 3. Fixed Fees with Collar This arrangement is based on hourly rate billing but contains a range above and below a budgeted amount called a collar. If the legal fees are below the collar, the client pays the difference; if the fees are above the
market already offering AFAs, your
not only streamline your business but
service providers have, at the very
also require your service providers
least, started to consider these
adapt to your workflow.
billing models, and so should you. The above examples do not represent
This shift is inevitable because cost
the entire world of AFAs. In fact,
control comes down to an improved
firms have entire departments built
user experience. Just as borrowers
to structure AFAs. And remember:
are gravitating to platforms with
the current data shows AFAs are
quicker
overwhelmingly client-driven. While
closings, lenders are looking for the
your firm may have thought about
same thing. Whether it’s through
AFAs, it is in your interest to do your
AFAs or adopting technology, we are
research and figure out what you
in the midst of a significant change
want.
in the way in which we all control
approvals
and
faster
risk. Now that you’re wiser to these So how do you get in on the AFA
trends, how will you leverage the
action? For your existing service
data?
providers: ask. If you are looking for new lawyers, make AFAs part of
Sources:
your search’s success criteria. Firms
· 2016 Law Firms in Transition, An
today know AFAs are necessary to be
Altman Weil Flash Survey (http://
competitive. “As a law firm, [Geraci]
www.altmanweil.com//dir_docs/
often times earns less using an AFA
resource/95e9df8e-9551-49da-9e25-
than [they] would have using a
2cd868319447_document.pdf)
traditional hourly billing model as the transaction is more complex than
· Meg McEvoy, Law Firms Respond to
originally anticipated or understood,
Demand for Alt. Fee Models (https://
but [Geraci] believes that AFAs are
news.bloomberglaw.com/bloomberg-
here to stay and are generally a great
law-analysis/analysis-law-firms-
way to practice,” says Daghbandan.
respond-to - demand-for-al t-feemodels), June 17, 2019
For the lenders out there that are unable to convince their counsel to
· Robert Greenberg, The Future of
provide an AFA, take action by using
Lending is Through Automation and
between a client and recently-hired
cost-cutting
AI,
counsel.
those platforms and tools that focus
report/future-lending-automation-
specifically on scalability. This will
ai/) August 14, 2018
collar, the client gets a discount. You might see this type of arrangement
technology.
Leverage
Originate
(https://originate.
4. Broken deal discounts Not all deals close so having an arrangement
with
your
lawyers
regarding broken deal fees will give you greater predictability. With a growing percentage of the
22 Originate Report | July 2019
ABOUT THE AUTHOR: Ian Group is the Head of Customer Success at ProDeal, a high-growth technology company focused on securing and automating transactions. Prior to joining ProDeal Ian was an associate in the global real estate group at Hunton & Williams LLP where he represented developers and institutional lenders in large commercial real estate transactions. CONTACT: ian@prodeal360.com
PRESS RELEASE
RCN Capital Announces CEO Transition Plan COMPANY COMMENCES BOARD OF DIRECTORS SEARCH PROCESS
SOUTH WINDSOR, Conn. (June 24, 2019) – RCN Capital, a leading nationwide direct private lender, announced today that Don Vaccaro will be stepping down as Chief Executive Officer. Mr. Vaccaro will be leaving his current role effective June 30, 2019. Jeffrey Tesch, RCN Capital’s current Managing Director, will be stepping in as Vaccaro’s successor. Mr. Tesch, who has been with RCN Capital since its founding in 2010, led efforts to develop the company into a national brand within the private lending industry with a focus on superior customer service and transparent loan products for a diverse customer base. “It is truly a privilege to have been named the Chief Executive Officer of RCN Capital. I want to thank all of my employees that have contributed to the company’s success and have made RCN what it is today,” said Jeffrey Tesch. “I look forward to continuing to lead the company’s growth efforts through our partnerships and strategic relationships. Under my leadership, RCN Capital will continue to take great pride in setting the highest ethical standards in the private lending industry and moving our space forward as a whole.” The company has begun the process of assembling a Board of Directors with extensive experience in real estate finance. The Board will provide additional oversight to assist with RCN Capital’s continuing growth initiatives. Since its inception in 2010, RCN Capital has underwritten more than 4,600 loans and overseen more than $1 billion in originations throughout the United States. In 2018, RCN Capital reported record growth by originating 1,077 loans for a total of $262M. RCN Capital is a national, direct, private lender. Established in 2010, we provide short-term and long-term commercial loans ranging from $50k to $2.5M+ for the purchase of non-owner occupied residential and commercial properties, financing of renovation projects and bridge funding. We lend to experienced real estate professionals, investors and contractors throughout the country. We value referrals; brokers are protected. For more information on our company or our loan programs, visit our website at www.RCNCapital.com.
Erice LaCentra | 860.432.4782 | elacentra@rcncapital.com www.originate.report 23
CITIES TO WATCH
CITIES TO WATCH:
ATLANTA, GEORGIA
By Originate Report Staff
F
ounded in 1837, at the end
US
its
temperature of 52.5F. The City
of the Western & Atlantic
spectacular botanical gardens. In
gets quite a bit of rain over an
railroad line, the City was
2010, Atlanta was the 20th most
average of 117 days with rainfall,
originally named “Terminus,” with
visited City and is home to multi-
and average annual precipitation
the name later changed to Atlanta.
national
of
Atlanta
is
now
considered
the
capitol of the Southeast and is a growing metropolis nestled in the foothills
of
the
Appalachian
Mountains chain with the lush
cities,
showcased
corporations
by
CNN
and
47.12
inches.
Spring
is
an
Coca-Cola. The City’s population of
especially stunning time of year,
5.5 million continues to grow, along
when beautiful blooms populate the
with its economy, and the City is
greenbelts and Atlanta’s outdoor
quickly becoming a global economic
festival season kicks off.
powerhouse. In terms of weather, Atlanta is
Must-see locations
located in the middle of the state
With such a rich and inviting history,
and has a generally warm and
you could spend weeks exploring
humid climate. The annual average
Atlanta’s many historic landmarks,
temperature for the City is 61.4F,
but it is easier to catch most of them
cities in America and has some of
with an average high temperature
with Georgia’s Historical Markers
the most extensive greenery among
of
tour. Metro Atlanta has 650 historical
Chattahoochee National Forest to the north and historic Savannah to the Southeast. The City of Atlanta is considered one of the prettiest
24 Originate Report | July 2019
70.3F
and
an
average
low
Atlanta, GA
• Median home price: $218,000 • Home price change: 8.2%
Economy:
• Major industries: Financial Services, Technology, Telecommunications, and a burgeoning movie production industry
• Homeownership: 41.28% • Median rent price: $1,850 (for a two bedroom apartment)
• Minimum wage: Georgia’s minimum wage is $5.15/hour, but typically the federal minimum wage of $7.25/hour
Job Market:
applies
• Unemployment: 4.1%
• Cost of living: Atlanta is #11 on
• Job growth: 2.3%
Forbes List of Best Places for Business
• Loan originator average salary:
and Careers. Cost of living is stable at
$75,469 (6% below the national
only 2% above the national average.
average) • Job growth: 1.6 percent
Housing:
• Loan originator average salary:
• Median household income: $63,986
$68,353/yr (according to Glassdoor)
markers alone. Also, be sure to check
Nightlife
bars, and live-music venues popping
out the Atlanta Botanical Garden
Although Atlanta places prohibitions
up each month. If you want to
on restaurants serving alcohol from
celebrate
Saturday at midnight until after
and midtown nightspots are plenty
church on Sunday at 12:30 pm,
and provide ample entertainment
nightlife still plays an integral role
options
on Piedmont Avenue, or spend the day brushing up on history at the Atlanta Cyclorama and Civil War Museum. Other popular must-see attractions
include
the
Georgia
Aquarium, the Fox Theater, the Fernbank Science Center, and of course, the Georgia State Capitol. Another must-see is the old city streets
in
Underground
Atlanta.
While it has begun redevelopment,
after
for
dark,
all
age
downtown
groups.
in Atlanta’s downtown shopping and dining complex. There is a little bit for everyone in Atlanta’s nightlife scene. Whether you want to relax with friends at a quiet cocktail bar, catch some sports at a neighborhood pub, or dance away the night at a contemporary nightclub, you can find
many shops and restaurants line the
it all in Atlanta. The nightlife in the
historic underground street scene
city is an ever-changing environment,
in a unique shopping experience.
with
new
coffeehouses,
sports
Dining Eating well in Atlanta is easy to accomplish with more than 12,000 restaurants
in
alone.
city’s
The
transportation
metro
Atlanta
ease-of-access
system
and
its
proximity to local fresh produce help make dining out on fresh and Cities to Watch: Continues on pg. 26
www.originate.report 25
Atlanta, you may want to check out
America as a county. While Atlanta is
home-grown favorites at American
a modern city with all the attractions
The city center is home to a diverse
Roadhouse or visit the Blue Ribbon
and events of a major metropolis,
group of ethnic dining options, with
Grill for Southern favorites such as
prices to fit any budget. Downtown
hand-cut steaks and fresh fish. More
Atlanta offers luxury dining at Joel’s
casual dining spots include Max
in Buckhead, or if you are looking
Lager’s, where you can get a wood-
kids include sports arcades, water
fired pizza while sampling some of
parks, museums, wildlife shelters,
their many ales and lagers made on
art functions, and other events that
Cities to Watch: Continued from pg. 25
affordable fare a foodie’s delight.
for a more casual meal, check out the acclaimed onion rings at North Avenue Varsity Drive-In. Whether you’re in the mood for a romantic dining experience by candlelight or finger-licking barbecue and beers, there is something for everyone in Atlanta. There is an excellent selection
of
dining
options
in
the premises. For healthier eaters, check out the Flying Biscuit Café, where you can feast on fist-sized biscuits, turkey and veggie burgers, and fresh-made organic pancakes.
Atlantans are most proud of their history and love to show off their historical landmarks to millions of visitors each year. Attractions for
help young people learn, plan, and explore. Atlanta offers day trips and weekend getaways to small-town festivals, the northern mountains, or its sunny, east coast beaches. Depending on the season, you can also pick up an Atlanta Braves MLB
Attractions
game, watch the Atlanta Falcons play
Southern states like Georgia have a
ball, or if you’re a racing fan, catch
many more delightful eateries just
rich history and played an integral
NASCAR laps just west of the city in
outside the metro area. If you’re in
role in the growth and development of
Talladega.
downtown Atlanta, but there are also
26 Originate Report | July 2019
www.originate.report 27
FEATURE
Don’t Just Survive:
THRIVE IN THE EVER-CHANGING ENVIRONMENT OF PRIVATE MONEY LENDING By Bill Fairman, Carolina Hard Money
R
ate compression, peaking
could probably agree that I’ve seen
fewer deals. Hey West Coasters,
home
my share of market cycles.
believe it or not, there are states
prices,
and
oversupply in the luxury
markets! Oh my!
with great Real Estate deals other The key is to understand that there
than just California and Arizona. The
are always cycles in every market,
price of admission is much lower,
If you’re a small-to-midsize private
some are longer than others and
and this also helps you to diversify
lender, these are just a few of the
every geographic market is a bit
your portfolio outside of just one
scary realities that you will have to
different, but nevertheless, markets
geographic area. Just sayin’.
face as we move forward in these
are always changing. With so much
next few years.
change, it’s hard to get bored.
Wall Street Funds like this space as well, and their cost of capital is
The question you should be asking
Rate Compression
yourself is: How can we take these
If you’re a private lender on the west
However, there are benefits for the
obstacles
into
coast, you’ve been dealing with rate
smaller players.
opportunities so we can thrive in
compression for a while. Why? I’m
this market cycle, not just survive it?
glad you asked.
and
turn
them
much lower than the smaller funds.
Not only have they added legitimacy to the hard money lending space, but
With 30 years of experience in the
For one, there is a lot of competition.
now some Wall Street Funds only buy
mortgage
Too many private lenders chasing
closed loans and have no interest in
banking
industry,
you
28 Originate Report | July 2019
originating loans… So now they need
to give your better borrowers an
after a serious fix & flip professional
you for deal flow.
even lower rate without hurting your
when most are bankable (or can raise
margins.
their own capital)’, consider this:
rate differential. This gives you the
Peaking Home Prices
While they are bankable, speed is
ability to offer lower rates and still
The good news is that higher home
still king in this business. In most
keep your higher yields.
prices in most areas is due to supply
cases, the professional started their
and demand issues, not speculation.
career with hard or private money,
Many will allow you to arbitrage the
For example, if you make a $100,000
and they understand the benefits. If
loan with 2 points and 10% interest
The bad news is that typical fix & flip
things begin to turn south for one of
only for 12 months, you would make
lenders do not have enough workable
their assets, do you think the banks
$12,000 over 12 months, a 12%
deals. A couple of considerations
will “work it out” with them? Of
return.
could be fix to rent deals, and calling
course not.
on the serious fix & flip professionals. Assuming that same $100,000 loan
Smart investors always have their
sold to a secondary market partner
The fix to rent loans are typically
private/hard money lender at the
at 8%, and you keep the 2 points
smaller amounts and shorter term,
top of their contact list and you can
PLUS the 2% difference in interest
but they are a good option to keep
bet who they will be calling first
each month, theoretically, taking
deal flow moving. You never know,
when a deal presents itself. They’re
the freed up capital and making one
you might even find a secondary
calling the lender that’s easy to
new $100,000 loan each of the next
market partner that will buy, or table
work with and uses common sense
eleven months, you could then make
fund a longer term rental loan which
in underwriting a deal - but that
$37,000 on the original funds.
helps add more revenue.
lender also needs to be somewhat competitive in their pricing.
At a 37% return, you can now afford
If you’re wondering ‘why would I go When that investor gives you a call for a great lending opportunity, you can be competitive in your pricing because now you know how to use your secondary partners more effectively. Besides, you’re not trying to get all of their business, just a small piece. Another added benefit to working with the professional fix & flipper: Efficiency in your own business. The professional isn’t likely to waste your time pitching deals that won’t work. They’ve been there, done that enough to know when a deal will be worth the due diligence. The professionals also use the right Private Money Lending: Continues on pg. 30
www.originate.report 29
Private Money Lending: Continued from pg. 29
marketing tools which make it more likely they will find the good off market deals with plenty of margin, unlike
the
“I-saw-it-on-HGTV”ers
and part-time flippers.
to make five $100,000 loans rather
legal & accounting council, learn
than one $500,000 loan… Even if
about software solutions that can
we do make our money based on the loaned amount, not the amount of loans. Worst case is you have to take one
help make you more efficient, and learn more about the many other facets of being a business owner in the private lending space.
back and rent it out for close to what
Flattening of Luxury Markets your expected return was going to Most importantly, you will meet and Here are some recent statistics from Attom Data Solutions for the third quarter of 2018 regarding US Vacancy Rates: Gary, Indiana topped the list with a staggering 19.42% - the local economy was hit hard in 2008 and
be, right? Try to get the same result for a million dollar home that you had to take back and now can’t sell. Probably not going to happen.
connect with like-minded people. Like-minded people that share best business practices, help you better understand the temperature of the
So how can you predict the exact
market in different geographic areas,
moment the market cycle changes so
and a lot of times can become long-
has not yet fully recovered.
you can pivot your business model
The big surprise for me was Hilton
and thrive in this new cycle? I hope
Head Island, South Carolina coming
you have a magic crystal ball.
in second at 16.90% - a large
term friends. My business partner and I are
percentage of homes on HHI are
The short answer is, you can’t.
involved
second/vacation
as
Well, not by yourself anyway. It
Mastermind Communities as well.
we all know, a leading indicator of
takes a team, a network of people
consumer confidence is a drop in the
that are looking at all of the leading
They are our best insurance policy;
purchase of luxury items, such as
indicators.
homes
and,
secondary homes. There are a few networking events There is also an oversupply of class
that are specific to the private lending
A, mixed-use residential condos &
space, however my two favorites
townhomes in larger metropolitan
are GeraciCon Events and American
areas. Most single family residential
Association of Private Lenders. Both
construction is in the more expensive
Geraci and AAPL have very well run
price range as there are very low margins in the affordable housing space. Even in my backyard, Charlotte, North Carolina, it’s taking much longer to sell the homes that are considered to be luxury than last year at this time. Let’s face it. It’s much easier to make one large loan instead of a few smaller loans, but it’s also much safer
30 Originate Report | July 2019
non-profit events throughout the year. These events are where you will
in
several
Real
Estate
they provide us with early insight into upcoming market changes so we can begin to pivot our business to thrive in the next cycle. Don’t be afraid of ever-changing market cycles. Embrace and thrive. Once the cycle is complete, you’ll already be positioned to thrive on the other side.
meet secondary market partners, ABOUT THE AUTHOR: Bill began his career in the mortgage banking industry in 1989 as a residential mortgage loan officer with The Money Centre, a Charlotte NC based mortgage brokerage. After eleven years with The Money Centre, Bill went on to become Regional Sales Manager for several other wholesale mortgage companies, the last a Wholesale Commercial Mortgage Lender.Bill was one of the few that successfully made the transition from residential to commercial lending and was assigned the duty of hosting the company’s half-day seminars teaching residential mortgage professionals how to underwrite commercial loans. CONTACT: bill@carolinahardmoney.com
You’re going places. Don’t stop until that place is the top. If you’re a loan originator looking to build your business and gain insight from the nation’s top mortgage brokers, bankers, lenders, and lawyers, Originate Report is for you. Distributed to 35,000 professionals in the private lending industry every month, this is where you come to see and be seen. To discuss submitting original articles, or for general Originate Report questions, email us at submissions@originate.report.
behind you all the way. find us online at www.originate.report www.originate.report 31
FEATURE
Private Lending as a Retirement Hedge
avenue may be easier to engage than you think. A self-directed IRA (which can be a Traditional IRA, Roth IRA, or another such retirement
By Clay Malcolm, New Direction Trust Company
T
plan) can originate private loans in a similar manner as an individual.
he last year-plus has been a
continued to pressure Wall Street.
turbulent ride for the stock
401(k)s, pension plans, and any
market.
touching
other retirement accounts situated
all-time highs in early-2018, the
in publicly traded equities have
major stock market indexes sunk
been along for the ride and can bring
into a lengthy correction before
understandable unease to investors
rebounding to highs in October. The
as
dip that followed and persisted into
Retirement
December was even more dramatic
to be a long game, but uncertain
as the indexes flirted with bear
times such as those of 2018-2019
market territory, generally regarded
can
at a 20% drop from a recent high and
anyone looking to retire in the near
an ugly threat to the decade-long
term. At a minimum, stock market
bull run stock investors had enjoyed
corrections can produce headaches
There
since 2008. Stocks pushed toward
and lead one to consider alternative
differences
highs for a third time in early-2019,
investment avenues.
loans with personal money and
but again bounced downward as
Fortunately, those avenues readily
with
economic
exist. As a private lender, one such
are certainly worth considering
and
After
geopolitical
risks
32 Originate Report | July 2019
account
be
values investing
especially
fluctuate. is
meant
damaging
to
You, as the account holder, have the flexibility to qualify potential borrowers and make final decisions on loan durations and interest rates. You can even secure an IRAowned loan with collateral if you so choose. Once you’ve settled on a loan agreement, your IRA custodian would issue the funds from your IRA’s cash position and you would begin collecting payments on behalf of your IRA. are
some
important
between
originating
retirement
money,
which
before initiating a private lending strategy with a self-directed IRA.
Tax-Advantaged Income When
you
generate
income
by
lending your non-retirement money, you may be subject to annual income taxes. Just as stock investors can avoid capital gains taxes (assuming the market cooperates by providing gains instead of losses) by investing with their retirement plans, loan income earned by your self-directed IRA is tax-deferred or tax-free. The IRS does not penalize the holder or diminish the tax benefits of the account simply because it holds alternative assets. Some IRAs allow you to deduct contributions from your income while enjoying tax-deferred growth, while other accounts offer tax-free distributions for qualified account holders. In either case, the tax advantages inherent to your particular account will not be affected by your chosen asset class.
Prohibited Transactions Prohibited
transactions
most
commonly occur through intentional or
unintentional
“self-dealing”
practices in which the account holder derives a direct benefit from his or her IRA investment. Lineal family members such as the account holder’s spouse, parents, or children are equally disqualified from conducting business with the IRA. Friends, business partners, or
non-lineal
family
members
like siblings or cousins are nondisqualified in this regard and may participate in an IRA investment at the discretion of the account holder.
Keep the Money Separate
Whether stocks are 20% up or 20%
Account holders are allowed to
down, it seems there will always
collect payments on behalf of their
be a demand among individuals
IRAs as long as they forward those
and small businesses for capital
payments to their IRA custodians.
via loans. The whims of the stock
The investor must always ensure
ticker—which lie well out of the
that earnings attributable to the
individual
IRA investment do not end up in his
can expose one’s retirement in
or her pocket. In other words, the
undesirable ways. By incorporating
IRA is the “lender” and therefore
a private lending strategy into your
receives the principal and interest
retirement portfolio, you can utilize
payments; to retain such payments
an approach that you know and
on a personal basis would constitute
trust, maintain a measure of control
a
be
over that approach, and hedge your
considered a distribution, and
retirement against stock market
could result in IRS penalties.
volatility.
prohibited
transaction,
investor’s
control—
ABOUT THE AUTHOR: Clay Malcolm is Chief Business Development Officer at New Direction Trust Company, a custodian of self-directed investment accounts that hold alternative investments. Mr. Malcolm provides preliminary and continuing education to anyone interested in promissory notes, real estate financing, and other loan structures as assets in IRAs, 401(k)s, and other such tax-advantaged or taxable investment plans. CONTACT: cmalcolm@ndtco.com
www.originate.report 33
FEATURE
Tips for When Your Borrower
Files Bankruptcy By Alexa P. Stephenson, Esq.
Y
ou’re a lender or secured creditor.
Your
individual, or third party.
the necessary recording information
borrower
filed bankruptcy. There’s
of the loan documents so they have all
What court the case was filed in
to present to the court.
now a stay in place prohibiting you
Different deadlines and rules apply,
from taking any action to enforce
depending on the specific district
3. Other loan documents
your lien against the property. What
court the bankruptcy case is filed in.
Other loan documents from loan origination
do you do now?
are
useful
for
your
Contact bankruptcy counsel, like
What chapter bankruptcy was filed
attorney in determining the full
Geraci Law Firm, to figure out
A debtor can file a Chapter 7, 11, 12,
extent of the borrower’s default on
the best options moving forward.
or 13 bankruptcy petition. There are
the loan. For example, debtors often
However, as we all know, attorneys
different rules and strategies for
claim a property is their primary
are expensive. Is there a way to get
each.
residence when they actually signed a Notice of Non-Owner Occupancy
the benefit of an attorney while keeping your attorney’s fees and
Case number
during origination.
costs as low as possible? Yes!
Your attorney will need to look up
certificate
Here’s the information your attorney
what documents were filed in the
declaration of non-owner-occupancy,
will need up front to give you the
case, as well as the deadlines that
and
best strategy moving forward, while
the court has already set.
executed during loan origination will
other
of
Providing a
business related
purpose, documents
help your attorney prove the debtor
also keeping your attorney’s fees down. If you give this information
Whether the debtor has an attorney
has a history of lying and breaching
and documentation to your attorney
If
the provisions of the note and deed
at the outset, you’re one step closer
themselves, there is a good chance
to getting paid in full.
the bankruptcy case will be dismissed
1. Notice of Bankruptcy Case Filing
the
debtor
is
representing
of trust.
early on for failure to file documents
4. Foreclosure documents
required by the court.
Copies of the Notice of Default, Notice of Trustee’s Sale, and Trustee’s
This is the document that most debtors will send to a loan servicer
2. Security instruments
Deed Upon Sale are necessary so
or foreclosure trustee immediately
The security instruments, including
your attorney can determine what
upon filing bankruptcy. The Notice
the promissory note, deed of trust,
stage of the foreclosure process you
of Bankruptcy Case Filing includes
assignments, and modifications, are
reached before your borrower filed
a lot of relevant information your
vital to establish a lender’s interest
bankruptcy.
attorney will need, including:
in the property. Judges often require
of these documents are best so the
Who filed the bankruptcy
the security instruments to be filed
court can take notice of the recording
Sometimes your borrower is not
with the motion for relief from stay
information in the motion for relief
the person who files bankruptcy;
and proof of claim. Be sure to send
from stay and any other documents
sometimes
your attorney the recorded versions
filed with the court.
it’s
an
affiliated
34 Originate Report | July 2019
The recorded copies
5. Accounting
8. Appraisal
Your prior communications with the
The court and bankruptcy trustee
One of the most common reasons
borrower also give your attorney
will need to know the amount
lenders receive relief from stay is
a sense of the lender/borrower
of your claim as of the day the
that the property has little to no equity cushion. While some judges
relationship,
bankruptcy case was filed. Providing your attorney with a recent payoff
allow
demand
will
(BPOs) to determine equity, the vast
allow your attorney to file out the
majority require a full appraisal and
necessary documentation with the
may even require the appraiser to
court, including a proof of claim and
testify in court about their valuation.
and
accounting
motion for relief from stay. It also provides the court with a detailed history of the borrower’s default on
Broker’s
Price
Opinions
9. List of borrower’s known assets Sometimes borrowers, intentionally
the
extent
of
the
default, and whether the borrower will be taking further litigious action to halt the foreclosure sale. Takeaway How you, your lender, your loan servicer, trustee
and
your
organize
the
foreclosure loan
file
for quick dissemination to your bankruptcy attorney can reduce your
the loan.
or otherwise, exclude assets from
6. Proof of Insurance
lying about what assets are part of
thousands, of dollars. In addition to
the bankruptcy estate is considered
having the documents above ready
fraud and is punishable by fine or
to go the minute the borrower files
even jail, it is important for your
bankruptcy, having the documents
attorney to know whether the debtor
organized and presented in the
has committed this fraud. If so, your
correct format plays an equally
attorney can inform the U.S. Trustee
big part in keeping attorney’s fees
their bankruptcy schedules. Since
A lender can be entitled to relief from stay if the debtor has failed to provide proof of insurance in violation of the note and deed of trust.
Knowing
whether your borrower has kept the property insurance current and having proof of same will let your attorney know whether relief from stay on this basis is an option. Your attorney can also bring up the lack of insurance with the bankruptcy trustee at the meeting of creditors at the beginning of the case. 7.
Preliminary Title Report, or preliminary
title
report,
get the U.S. Trustee to take further punitive action against the debtor. 10.
Communications with the
borrower It is important for your attorney to know the background between you
Trustee’s Sale Guarantee (TSG) A
of the missing assets and potentially
or
Trustee’s Sale Guarantee, will help your attorney determine how many liens are on the property so he or she can get a sense of whether the property has a significant equity cushion. If the property is overencumbered, you may be entitled to relief from stay to foreclose. These documents also will help your attorney determine the lienholders entitled to notice if and when a motion for relief from stay is filed.
and the borrower. If your borrower made promises about repayment or threatened to transfer the property
attorney’s fees by hundreds, if not
down. For example, having these documents ready to go in one legible .pdf file per document saves at least an hour of time of attorney review and permits the attorney to, at a glance, determine the best strategy. If you are a lender, loan servicer, or secured creditor and your borrower filed
bankruptcy,
questions
about
or the
you
have
bankruptcy
filing
process, contact the Geraci Law Firm
bankruptcy, your attorney could use
today. We are happy to give you a
this information to potentially get
free initial consultation on your
you relief from stay to foreclose.
bankruptcy matter.
to
someone
else
before
ABOUT THE AUTHOR: Alexa Stephenson is an Associate Attorney in the litigation department of the Geraci Law firm. Ms. Stephenson graduated cum laude from Chapman University School of Law in 2016. At Chapman, Ms. Stephenson was the Senior Symposium Editor for the Chapman Law Review, President of the Chapman Women Lawyers Association, and received five CALI awards for the highest class grade. Ms. Stephenson’s experience includes Chapter 7 and Chapter 11 bankruptcy proceedings and California motion drafting and procedure. CONTACT: a.stephenson@geracillp.com
www.originate.report 35
UPCOMING EVENTS 2019 EVENTS CALENDAR
AUGUST 21-23, 2019 | COSMOPOLITAN HOTEL, LAS VEGAS Where deals and capital meet! Join us for our flagship show of the year in Las Vegas! Captivate will turn its attention to the real need in the non-conventional lending industry: capital. Our Captivate Conference will connect lenders and investors and show you the tools you need to grow your business. With two and a half days of networking, Captivate will connect top sponsors directly with high net worth individuals who are looking to make their next business deal. All attendees will have access to network with one another through an app prior to the event. Join us in Las Vegas for good times, great memories, and valuable connections!
Showcase Your Upcoming Event Here Alicia Carter at a.carter@geracillp.com for more information. 36 Originate ReportContact | July 2019
You have knowledge. You have ideas.
Let us showcase your voice.
Currently we’re looking for articles showcasing: Business Development • Fintech/Newest Loan Programs • Automation in Today’s Evolving Society • Upcoming Trends & Changes • Marketing & Outreach Essential Tools & Technologies • New Legal Issues and Regulations. Another idea? We’d love to hear that, too.
Write for us. Email submissions@Originate.Report for more information.
www.originate.report 37
Lockett-N-Homes www.lockettnhomes.com Info@lockettnhomes.com
Direct Lender
Pacific Private Money www.pacificprivatemoney.com loans@pacificprivatemoney.com (415) 883-2150
Direct Lender
*All 50 States
5M
AL, AK, AR, CA, CO, CT, DE, FL, GA, HI, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MO, MS, MT, NE, NH, NJ. NM, NC, OK, PA, RI, SC, TN, TX, VA, WA, WV, WI, WY
50M
AK, AR, AZ, CA, CO, CT, DE, FL, GA, IL, IN, AI, KS, KY, LA, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, OH, OK, OR, PA, RI, SC, TN, TX, UT, VT, VA, WA, WV, WI, WY
5M
50K 100K 150K
55/33
Direct Lender
75/30
JCAP Private Lending www.jcap.net info@jcap.net (949) 236-6600
10M
Direct Lender
100K Helvetica Group www.helveticagroup.com loans@helveticagroup.com (310) 575-3301
*AZ, CA, NV
LET LENDERS KNOW YOU FOUND THEM IN 38 Originate Report | July 2019
*CA
REV. 06.25.19 2019
Direct Lender
* = STATES LENDING IN
Fidelity Mortgage Lenders, Inc. www.fidelityca.com psteigleder@fidelityca.com Peter Steigleder (818) 422-8879
75/2
50K
LENDER
90/30
H O M E
TYPES OF PROPERTIES
70/30
L O A N
15M
2019
TYPES OF LOANS
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
LENDER DIRECTORY
TYPES OF PROPERTIES
Direct Lender
Zinc Financial Inc. www.zincdinancial.com office@zinc.net Tom Valentino
Direct Lender
SFR
CA, CO, HI, TX, WA
90/2
10M 50M 2M
100K 50K
65-5*/70/5*
Sunset Equity Funding www.sunsetequityfinding.com lending@sunsetequitygroup.com (833) 786-7381 Los Angeles, CA 90010
*CA
75/5
Direct Lender
*65% For commercial and mixed-use and 70% for multi-family and residential investment. 5 years (custom terms are available)
NATIONWIDE EXCEPT ALASKA, SOUTH DAKOTA, NORTH DAKOTA
90/2
Sandstone Capital, Inc. www.sandstonecapital.net josiah.p@sandstonecaptial.net Josiah Puder (310) 909-8555 Ext. 1040
10M
Direct Lender
200K Redwood Mortgage Corp. www.redwoodmortgage.com RMC@redwoodmartgage.com (800) 659-6593 San Mateo, CA 94402
AL, AK, AR, CA, CO, CT, DE, FL, GA, HI, IL, IN, AI, KS, KY, LA, ME, MD, MA, MI, MS, MO, MT, NE, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, TN, TX, VT, VA, WA, WV, WI, WY
REV. 06.25.19 2019
Direct Lender
* = STATES LENDING IN
Patch of Land www.patchofland.com originations@patchofland.com (888) 250-2216 Sherman Oaks, CA 91403
50K
85/2
3M
50K
LENDER
TYPES OF LOANS
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 or at i Ac on qu s/ i Tru No sitio 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 m nk o e de t Se c o Lo a n l e d / nd s Re Jo M no int or va tg V te d a e Fo ge nt 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 l es to m e / /S TE Co o RM Re mm yn tiv ag t ai e (YR er l( cia ogu S) Sh En es l/ o te r Lo t ai ps/ t) Ga St nm rip sS en Ma Le t at i o t lls isu ns ) re Ho (G sp olf it a Mi lity Cou xe rs e (H d R e - u s e o te s / M ls) sid ar Pr ina I Ra entia oper ndu ) nc st r tie l I he nv s ial sa Se es tm lfnd s en Fa R e to ra tP ge rms st a ro pe u ra rti Of nt fic es s e
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ORIGINATE REPORT! www.originate.report 39
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90 Discovery Irvine, CA 92618 | Phone: 949.379.2600 | Fax: 949.379.2610 www.geracillp.com | www.geracicon.com | www.geracimediagroup.com 40 Originate Report | July 2019
*All 50 States