Originate Report- February 2018

FEBRUARY 2018

THE OFFICIAL MAGAZINE OF GERACI

Bob Eakin of

JCAP Private Lending

Old School & High-Touch

See page 6 and visit jcap.net for more information

Cities to Watch: Boston, Massachusetts

Inside February

5 WAYS

To Stay AHEAD BUY or SELL: Which Comes

FIRST? TAKING

Advantage of Roth IRAS? You Should Be! www.originate.report 1

2 Originate Report | February 2018

ANTHONY GERACI CEO/Editor

CONTRIBUTORS

Letter from the Editor

Max Berger • Edward Brown Aruna Hatti Clay Malcom • Alan Peterson

Thank you all for the numerous letters you have sent me in support of this magazine.

FOUNDING UNDERWRITERS

with you. From its inception, we wanted to add value to you every way we can, and

RUBY KEYS Marketing/Editorial Director

JOHN PELACHE Account Executive

ALICIA CARTER Marketing Coordinator

DAVID BASEN • MAX BERGER Marketing Assistants

PAM HUBER Art Director

Your thoughts and thanks keeps us going and lets us know we’re on the right track

we hope you’re getting a lot from the articles and from the advertisers you need to

know in the industry to get more deals funded, more business done. How else can we add value to you? Let me know.

MARK HANF President, Pacific Private Money

This edition showcases a dear personal friend of mine, Alan Peterson, and his story

on his path through entrepreneurship. Also, we spotlight two industry professionals this month: Michael Tedesco with Appraisal Nation, and Bob Eakin, whom we meet

up with again to discuss alternative non-bank lending.

DAVID OWEN CEO, A List Partners

ORIGINATE ONLINE

Know someone we should spotlight? Ideas

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contents FEBRUARY 2018

Features 6

JCAP Private Lending Old School & High-Touch

By Originate Report Staff

10 Winning as a California Mortgage Loan Officer in 2018

12

Five tips to remember to stay ahead.

By JCAP Private Lending Staff

12 Does it Make Sense to Buy a New House Before Selling the Old One?

By Edward Brown, Pacific Private Money

16 Mortgage Rates Rise Slightly in December, as Originations Drop

20

By Aruna Hatti, Esq., Geraci Law Firm

Special Features 8 Essay

From Tragedy Comes Choice Why I choose to Empower My Words

By Alan Peterson, Joy Driven Life

18 Trend Report

Still Not Originating with a Roth IRA? Now May Be the Time.

By Clay Malcolm, New Direction IRA

20 Industry Spotlight

22

10

Michael Tedesco

CEO, Appraisal Nation, LLC

22 Cities to Watch

Boston, Massachusetts

By Max Berger, Geraci LLP

24 Upcoming Events 26 Loan Home

4 Originate Report | February 2018

16

www.originate.report 5

FEATURE

OR: How was 2017 for you?

Bob: Record breaking!

OR: Any challenges in 2017?

Bob: After the re-tool from the 2008 meltdown and

our recovery through 2013, my goal with JCAP Private Lending was to be a boutique hard money company.

We did fine through the meltdown. However, I thought this new season would look a lot like a few high-yield loans, learning to golf, and lots of travel. Well, a few loans turned into lots of loans. I stink at golf, but I did squeeze in some traveling. The biggest challenge became money. Would we have enough ready capital to close all of the loans that we wanted to fund? 2017 became the year of fundraising.

Bob Eakin, CEO

JCAP Private Lending: Old-School & High Touch

By Originate Report Staff JCAP Private Lending is a direct hard money lender, funding most of its business in Southern California. CEO Bob Eakin started his lending career as a loan officer in the late ’80s and was named one of the Top 50 Loan Originators in the USA before progressing into an ownership role.

JCAP Private Lending is known for its ability to close quickly. “We are not the cheapest, but we are the fastest,” Eakin says.

I had heard the stories about lenders delaying closings because of running out of money. I really did not want to be one of those companies. So I hit the road: conventions, lunches, coffees, and lots of stinky golf! As I reflect back on 2017, we made it. No delayed closings due to money. In fact, we now have an over-supply.

OR: What is your greatest challenge for 2018?

Bob: Underwriting and deal flow. A friend of mine

warned me that when money is not the issue, the trap is to make bad decisions to get the money on the street.

We have already seen some crappy deals in 2018. Our challenge is going to be to avoid deals that we should not be in…We are lenders, not property owners. I want to lend people money that can and will make their payments and pay back their loans. Our goal is not to acquire property through lending.

Originate Report (OR): Tell us about the first deal OR: Is your structure typical of other lenders? that you ever closed.

Bob: No, we are not a fund. JCAP Private Lending Bob: In 1988, I closed a construction loan on a spec works on a fractionalized model. Our investors take ei-

JCAP Private Lending is an old-school, high touch lender. We are attacking the deal flow challenge by increasing the sales staff. We are a people-centric company. The goal is to have everyone know everyone — people working with people to safely close more loans quickly.

OR: Do you ever invest personally in the loans that you

Deal flow is the other big challenge. If we see more loans, we will write more loans. JCAP Private Lending is an old-school, high touch lender. We are attacking the deal flow challenge by increasing the sales staff. We are a people-centric company. The goal is to have everyone know everyone — people working with people to safely close more loans quickly.

house in Anaheim Hills, Calif. A builder thought that if they built mansions near Anaheim Stadium, the baseball players from the Angels would be standing in line to buy them. It was a great idea, but they had no idea how to get the money…neither did I. However, my friend (the builder’s CFO) said that if I could find the bank that would do the loan, he would package it for me. I opened the yellow pages and started calling banks that morning: “Do you do construction loans? Do you know who does?” It took all day, but at the end of that day I found a small community bank that ultimately funded the loan.

My commission was $10,000…and a business was born!

OR: What makes JCAP Private Lending different than other hard money lenders?

Bob: We are fast. As a former top producer, I understand how crucial it is to close quickly. We have closed loans “next day.” Usually we are ready and waiting for everyone else so that we can close.

ther a portioned or whole interest in the promissory note. Then their beneficial interest is secured right on the deed of trust. I chose this model so that there would be no chance of impropriety with funds. I believe it is the safest model for the investor. originate?

Bob: I have a position in most of the loans that we

produce. Our loans are a sound investment, and I want to be in them too. I am the chief underwriter at JCAP Private Lending. I underwrite like an investor, because I am an investor. If I am not in a loan, it is usually because another investor talks me out of my position. (The people pleaser in me pushes me out of my investment for the benefit of another from time to time. Rats!)

non-owner residential to $5 million.

Bob Eakin is the CEO of JCAP Private Lending. He can be reached at Bob@Jcap.net. JCAP Private Lending offers shortterm, low loan-to-value real estate loans offering safe, high-yield investments for our investors, while quickly solving a short-term problem for our loan clients. We are committed to bringing unparalleled professionalism and service to our community.

6 Originate Report | February 2018

OR: Do you have any niches?

Bob: Our focus is firsts and seconds, owner and

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ESSAY

Peterson speaks with an attendee at the 2017 MyEO Women of EO Summit.

CREDIT: Alan Peterson

From Tragedy Comes Choice:

Why I Choose to Empower My Words Are you joy-driven or fear-driven?

Identify the motive behind words and actions to create your legacy.

By Alan Peterson, Joy Driven Life

A

Alan Peterson shared his story with an audience of global women entrepreneurs at the Entrepreneurs’ Organization’s 2017 MyEO Women of EO Summit in Athens, Greece.

It’s the most powerful personal development question I’ve ever been asked: “What is the motive of your expression?”

In other words, what is the core reason―the why― behind the essence of how you communicate? Of the words that you use? Of your daily actions and decisions?

I first realized the impact that one’s motive of expression can have on another person after a life-altering experience on 21 June 1986.

It was 120 degrees in Arizona. As we often did, my friend Eric and I were floating down the river in inner

tubes with ice chests and beers. But this time we went all the way to Parker Dam. About 100 feet before Parker Dam, there’s a thick rope with buoys and skull-and-crossbones signs: “Danger. Do Not Cross!”

To a healthy 20-year-old, that’s an invitation saying, “Come. Welcome. Cross.” Minutes later, Eric and I stood on top of the dam. I don’t remember who said what or who decided first, but we looked at each other, we looked down and then―we jumped!

What looked peaceful from above was actually ice-cold water churning in vast, powerful circles that tossed us about like ragdolls. As a trained lifeguard, I thought I could swim out of anything. Not this.

I became extremely fatigued within minutes. I saw Eric only once in the swirling water as our paths crossed. I’m sure he saw in my eyes what I saw in his: fear, and the recognition that we were in trouble. That was the last time I ever saw my friend.

Then the current pulled me to the center of the dam where I was yanked down violently.

CREDIT: Alan Peterson

8 Originate Report | February 2018

The water turned green, then got darker. My ears popped as I

neared the bottom of the dam. I was trying to get to the surface, but no matter how hard I swam, I made no progress. After a very long time, I popped up.

I took the biggest gasp of air I’ve ever taken because I’d never been held underwater for so long.

Luckily for me, the dam keeper checks the water levels at 4 p.m. daily. He saw me and threw a life-ring with a thick yellow rope. Somehow, I got it around my waist. I was completely spent.

He pulled the rope as fast as he could, but I was pulled back to the center of the dam. I screamed, “Please don’t let me go down!” I knew I wouldn’t make it a second time.

Despite his efforts, I went down again. I felt the thick rope snap like kite string.

Once again I tumbled. I somersaulted. I went down. My ears popped.

But this time, it felt like I stepped out of that thrashing body. In a trancelike state, I felt peace. I had but one thought, “How can it end like this?” I had big plans to study abroad and travel the world. To start companies, create adventures, to make an impact in the world…I wasn’t done yet. I had hardly started.

Eventually, back in that thrashing body, I surfaced. Paramedics and firemen threw another rope, pulling me to safety before the violent water claimed me again.

I crawled up on the rocks asking, “Where is my friend, Eric?” I knew the answer by the look in their eyes: they never saw him.

I spent a sleepless night in the hospital. I ruminated over the following question: “How could I face Eric’s mom?”

I knew I screwed up. I felt responsible and ashamed.

The next day, I went to see Eric’s mom. I remember parking on their long driveway, my friends calling out, “Alan’s here, Alan’s here.” But the calls were in my background because all I could see is Eric’s mom walking down the driveway, straight for me. I was trembling.

She walked right up to me, gently put her hands on my face and softly declared, “Alan, life has great plans for you! Life has great plans for you.”

Life has great plans for you!? Where could such words come from after she just lost her son?

Do you think those words were impactful to me? They changed my world. It was a declaration. An expectation.

An obligation to honor what was lost, for the rest of my life.

So, please consider in your own life: What is the motive of your expression?

Do you think those words were impactful to me? They changed my world. It was a declaration.

An expectation. An obligation to honor what was lost, for the rest of my life.

Are you deciding, acting and choosing your words from a place of scarcity or abundance? Are you communicating to get something―or to give something? Is your speech limiting―or are you creating limitless opportunities and aspirations for others?

Do you make mostly “I” statements―I did this, I did that―or are you compassionately curious about others?

Are you thinking and listening to respond or to understand? To be right and not wrong? From the head or from the heart?

I’ve thought about that a lot over these past 31 years― what was the motive of her expression? She could have said a lot of impactful things―good, bad and ugly.

But she chose her words carefully and with them, she changed my life.

Motives of expression are either fear-driven or joy-driven. Which are yours?

To empower your words, you must identify where your words come from, change them accordingly, and then understand that you create a legacy through words, actions and decisions. What will your legacy be?

I’d like to think that if Eric were here, he would say, “Mom, was right; life has great plans for you!”

Life has great plans for you, too. So, think carefully about your thoughts.

Because thoughts become words.

Words become actions.

Actions become habits.

Habits become your character.

And, your character becomes your destiny.

Empower your words. By doing so, you will empower your world. © Alan Peterson, Joy Driven Life, 2017

Alan Peterson is an Entrepreneurs’ Organization (EO) member in Orange County, California; a serial entrepreneur (CEO of The Peterson Group (www.go4tpg.com), and a couple online e-commerce businesses), and a keynote speaker and creator of transformational workshops and retreats through his passion project, Joy Driven Life (www.joydrivenlife.com). This article has been modified from Alan’s speech transcript with permission. CONTACT: apeterson@go4tpg.com

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FEATURE

Winning as a California Mortgage Loan Officer in 2018

By JCAP Private Lending Staff

W

hen people ask you, “Why become a loan officer?”, you might respond, “It’s the money!” True, most mortgage loan officers have the potential of making $100,000-plus per year. Great mortgage loan officers specializing in hard money loans or conventional real estate loans can even add a zero to the above figure. As you set your goals for 2018, consider the following:

Tip #1: Always be friendly and positive.

Whether on the phone or in person, always greet everyone with a smile, even for the difficult co-worker or client. You never know who will refer your next deal.

When you appear at ease, those around you will feel comfortable speaking with you and entrusting you with their loan needs.

10 Originate Report | February 2018

Tip #2: Respond instantly. We hear over and than the expectation, the client is impressed. And when

over again, “We went with you because we heard from you first.” It’s been said that if you return your messages, you are already in the top 20%. If you are the fastest to respond, you are poised to enter the top 1%.

Tip #3: Try everything that is marketing.

Sales is like fishing; you should try all of the spots to get the most fish. Keep what works, discard what doesn’t.

Loan originators should take a pie approach to marketing and use multiple approaches. If there is a market shift away from what works best, your other pie slices will still work.

Tip #4: When you have accomplished a goal for your clients, let them know. Also,

when they thank you for getting the job done, remind them to tell their friends. When you are more successful

they are happy, ask for referrals.

Tip #5: Thank people. By expressing gratitude

for their business, you show that you appreciate them, and everybody likes to feel appreciated. They will remember you, come back to you, and send their friends.

Buying a home requires a lot of time and effort on the buyer’s part to get the best loan available. Instilling confidence in the home buyer and the real estate agent is the key to long-term success. Good rates are important for California mortgage brokers, but performing like a top home loan professional is your best path to success.

CONTACT JCAP Private Lending | jcap.net

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www.originate.report 11

FEATURE

Does it Make Sense to Buy a New House Before Selling the Old One?

By Edward Brown, Pacific Private Money

12 Originate Report | February 2018

Y

our client is interested in moving. They need to sell their old house first before buying a new one, right? After all, they don’t have enough of a down payment for the new house without selling the old one, and they are pretty certain their bank will not qualify them for two mortgages.

The homeowners are in a dilemma: Houses in their area are currently receiving multiple offers. Inventory is low. Sure, they can sell their house under the same circumstances, but will they find a new house so they can simultaneously move from the old house to the new one? Unlikely. Do they sell the current house, move to a rental [or hotel] while they identify and close on the new house? Is the extra hassle of moving twice and the added stress worth it? Is it worth the added costs of securing a second mortgage until you sell the old house? How much is peace of mind worth?

These questions are a reality in many parts of the country, specifically in the San Francisco Bay Area, because of the real estate rebound after the Great Recession. According to Jeff Stricker, a real estate professional with Alain Pinel Realtors specializing in the Silicon Valley in California, many clients are faced with these exact situations, as property is swooped up soon after it hits the market, and often with multiple offers over the asking prices. Strickler states that, although it is great for his clients as sellers, those same clients face challenging hurdles when buying a replacement property. They compete against other buyers, some with cash-only offers, who are willing to bid far beyond the asking price. Some continues on page 14

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Does it Make Sense to Buy a New House Before Selling the Old One? continued from page 12

buyers are so frustrated with the process of competing and getting outbid that they act in ways they normally would not: Overbidding, settling for a less-than-ideal house, and the list goes on.

Strickler, however, decided to think outside the box.

What would happen if the buyer purchased another house prior to the sale of the old house? Is it possible given the recent banking regulations that developed due to the mortgage meltdown in 2008? Due to Dodd Frank rules that placed inordinate restrictions on the homeowner’s ability to obtain financing, many people are unable to get loans for which they previously qualified.

The following calculation(see graphic) makes the following assumptions: • It takes nine months to close on a new house after selling the old house, • Houses in the area (both old and new) appreciate at 1% per month, • I nterest earned on bank deposits are 1% per annum , • Storage costs are $1,000 per month, • Homeowner does not qualify for a conventional bank loan and must use a private loan company, • The costs for the private loan are 9% plus 2 points, and • The interest rate on the old house is 3% per annum.

purchasing the new house now rather than waiting to first sell the old house and then buy the new house.

As you can see, in a rising market where the new house is worth more than the old house, there is a significant benefit to using a private loan to purchase the new home and sell the old one at a later date. Waiting nine months to acquire the new house has tremendous opportunity costs compared purchasing the new house right away and eventually selling the old house.

opportunity. The ability to purchase right away means they can start looking at new houses before selling the old. This also allows them time to make any repairs or otherwise maximize its value prior to placing it on the market.

Aside from the economic benefit, other factors need to be considered: the lack of stress of moving twice and the ability to purchase immediately. In today’s market, sellers are not willing to take contingent offers. Can the homeowner budget for both houses at the same time while waiting for the old house to sell? Is the market rising? How long will it take to sell the old house? These are just some of the issues to consider before deciding. However, no one wants to miss out on the right

Strickler came up with a spreadsheet in which, if he plugged in some assumptions, he could figure out if it would make economic sense to acquire a new house before selling an old house. The other part of the equation was to find a lender who would allow for a homeowner to purchase a new home without first selling the old home, thus carrying two mortgages at the same time.

Since most conventional lenders would not touch this, Strickler looked to alternative sources. He found a company called Pacific Private Money, in Novato, Calif. that specializes in such a product.

Pacific Private Money can lend enough to the borrower to purchase the new home if there is enough equity in the old home to justify a combined Loan to Value [LTV] of 70% or less. Sometimes, if there is not enough equity in the old home, the borrower needs to add cash to bring the LTV to 70%. This can solve many issues for the homeowner. First, the new home can be identified without adding pressure since the homeowner is still living in the old house until the new house closes escrow. Second, the stress of moving twice is eliminated.

Third, and probably the best [and possibly most surprising] is that this solution may actually cost less in terms of increasing net equity when the new house is more expensive house than the old house.

In a rising market, the earlier the purchase of the more expensive new house and the delay of the sale of the old will increase the net equity to the homeowner more than the costs associated with carrying two mortgages.

For example, let’s assume the old house is worth $1 million and there is currently a first mortgage of $200,000.

The homeowner desires to purchase a new home for $1.4 million and has $100,000 in the bank for a down payment. We will look at two scenarios: The first is where the homeowner sells the current house, rents for a period of time, and then purchases a new home; the second scenario is where the homeowner borrows the money to secure the new home while owning the old home.

Obviously, there are many moving targets with both scenarios, such as how much it will cost to rent a place [in the event of selling the old house first] as well as time needed to identify and close on the new house, storage costs for belongings, the cost of obtaining a private loan, and the appreciation assumptions for both houses.

14 Originate Report | February 2018

Although assuming a 1% per month appreciation of real estate may seem aggressive, the San Francisco Bay Area, and specifically the Silicon Valley, has experienced such growth. However, even if we lower the appreciation to ½% per month, we still see a fairly significant benefit to

Once homeowners know there is potential to purchase a new house before selling their old house, they can obtain a commitment letter from the lender. Of course, homeowners should see if they qualify for a conventional loan first, but they should keep their minds open to procuring a private loan should the bank turn them down.

ABOUT THE AUTHOR: For over 20 years, Edward Brown was CEO of a $40 million alternative lending company based in Marin County. Today he assists Pacific Private Money with capital raising and investor presentations. Edward is also the host of two radio shows: The Best of Investing with Mark Hanf and Sports Econ 101, a national sports and business show. Brown earned his bachelor’s degree in accounting and master’s degree in taxation from Golden Gate University, and he has held licenses and certifications including Real Estate Salesperson, Insurance License, Series 7 Securities License, Tax Preparation License, and Certified Fund Specialist.

CONTACT: (415) 299-0330 | edward@bestofinvesting.com | bestofinvesting.com

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To discuss submitting original articles, or for general Originate Report questions, email us at submissions@originate.report.

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FEATURE

Mortgage Rates Rise Slightly in December, as Originations Drop

By Aruna Hatti, Esq., Geraci Law Firm

M

ortgage rates rose during mid-December, according to a recent report. The numbers climbed the charts modestly during the week of December 11, 2017, which left few banks raising mortgage rates, to the benefit of homeowners as well as buyers.

The slight hike in mortgage rates for December placed the average lender on a better track to take advantage of a notoriously slow origination holiday period. The numbers from the second week of December increased just enough to re-establish the levels that experts saw during the previous week. Bonds, which are vital factors driving mortgage rates, weakened throughout the day on Monday, December 18, 2017.

The Mortgage Bankers Association’s Weekly Mortgage Applications Survey showed a 2.8% drop in mortgage applications for the week ending December 29. The numbers accounted for the Christmas holiday; however, on an unadjusted basis, applications were down 42% from the previous two weeks.

In all, 2017 fared well with respect to rising mortgage rates. Although, many expected rates to rise considerably after Donald Trump’s election in November, rates have so far remained relatively low from an absolute standpoint. Recent signs of growth present the possibility of more rate hikes in the future, however, which may result in higher mortgage rates for borrowers moving forward.

16 Originate Report | February 2018

The number of loans being refinanced also dropped, with the Refinance Index falling 7% from two weeks previous. However, the Purchase Index jumped up 1% over the same period.

With the potential for rates to continue an incremental increase in the coming months, it is a good time for consumers considering refinancing to explore their options. Although there is a shortage of inventory, buyers are in an excellent position to take advantage of low mortgage rates before the Fed decides on future increases.

The amount of refinancing applications rose slightly to 52% of all originations, while purchase contracts remained steady over the holiday week.

The number of FHA loans also rose slightly to 10.4% of all applications, up from the 10.3% seen last week. Veteran’s Affairs share of applications jumped from 10.6% to 11.2% last week.

FHA 30-year fixed-rate mortgages held relatively steady at 4.17%, only a slight bump over the 4.15% of the previous week.

The average interest rate for a 30-year fixed-rate conforming mortgage held steady at 4.25% over the past couple of weeks, while the adjustable-rate share of mortgage applications decreased to 5.3% of all originations.

Jumbo 30-year fixed-rate mortgages dropped to 4.13%, from the 4.21% seen the previous week. The average interest rate for 15-year fixed mortgages decreased from 3.66% to 3.65%. Also, 5/1 adjustable-rate mortgages fell to 3.4% from 3.56% during the previous week.

With the potential for rates to continue an incremental increase in the coming months, it is a good time for consumers considering refinancing to explore their options.

Although there is a shortage of inventory, buyers are in an excellent position to take advantage of low mortgage rates before the Fed decides on future increases.

With the recent tax-cut package taking effect January 1 hopefully spurring economic growth, and with it, rising rates, for those seeking purchase money or mortgage refinancing, now would be the time to explore what the market has to offer.

ABOUT THE AUTHOR: Aruna Hatti has over 15 years of legal experience representing clients in transactional and regulatory matters. She has extensive experience in assisting real estate developers and small to mid-sized companies with finding creative and practical solutions to deal-making. Ms. Hatti reviews, negotiates, and drafts purchase and sale agreements, leases, subordination agreements, licensing agreements, and custom agreements. Ms. Hatti also advises clients on environmental matters, including redevelopment of contaminated real estate, environmental liability transfers, and the mitigation of environmental risk. Ms. Hatti is a graduate of Vanderbilt University School of Law. At Vanderbilt, Ms. Hatti was an Articles Editor for the Vanderbilt Law Review. Prior to law school, Ms. Hatti obtained her BA in Government from Cornell University.

CONTACT: (949) 379-2600 | aruna.hatti@geracilawfirm.com | www.geracilawfirm.com

www.originate.report 17

ings are five years old and she reaches age 59 ½, she

TREND REPORT

can take a tax-free distribution of the $825. Her tax burden is 3% lower than it would have been last year

Still Not Originating with a Roth IRA?

and, by the time she reaches age 59 ½, her profits will

be far older than five years and no longer subject to taxes. As such, on New Year’s Eve 2025, Susan won’t

have to worry about her retirement income when her marginal tax bracket of 22% is scheduled to expire.

Now May Be the Time.

Other investors whose portfolios are situated in Tra-

ditional IRAs — the pre-tax counterpart to the Roth

— may also think about executing a Roth conversion under these tax circumstances. The plan holder would

By Clay Malcolm, New Direction IRA

W

hen it comes to options for long-term

putting those preconceptions to rest. Specifically re-

pears to be out: The alternative assets

taxes on their contributions without retaining those

retirement investing, the secret ap-

you know and trust can consistently outperform Wall

Street, even as the markets ascend to record territory on a near-daily basis. Loan originators have always relied on their tried and true business practices for pri-

mary and supplemental income. A growing number of

lending professionals have also discovered the substan-

tial tax advantages of incorporating familiar strategies into their self-directed retirement plans.

When lending money with an IRA, 401(k), or health

tax-deferred or tax-free benefits of the plan itself.

Roth IRAs provide a particularly interesting set of advantages for loan originators — or any alternative investors — to contemplate. This plan type allows post-

tax annual contributions of up to $5,500 (under age 50) or $6,500 (age 50 and above) and tax-free growth

throughout the life of the account. The power of a Roth IRA is therefore realized later in life; as Roth-held

For some, self-directed retirement investing has a rep-

utation for involving difficult processes, but integrated technology and expanded online offerings are quickly

18 Originate Report | February 2018

and zero taxes later with a Roth.

hicle that encourages American investors to pay taxes sooner rather than later.

Roth IRAs empower investors to take advan-

gate uncertainty down the road. For example, $75,000 per year. Her new marginal tax rate is 22%, which represents a 3% drop from 2017. Susan is 35 years old and elects to make a maximum allowable contribution of $5,500 to her Roth IRA. She then originates a one-year loan of the full $5,500 balance at an interest rate of 15%. By year’s end, Susan’s Roth IRA has grown to $6,325 with a profit of $825.

tribution, but once her earn-

out ever incurring taxes.

lower taxes now

now may be the time to re-consider an investment ve-

they are qualified Roth distributions (the parameters IRA could collect loan payments for many years with-

unscathed, but it also provided a new incentive to pay

of legislation that gives tax breaks only through 2025,

Susan will have to pay

of which are addressed below). In other words, a Roth

IRAs. Our new tax law left Traditional IRAs relatively

certain situations. However, with the recent passage

assets create income, the plan holder may withdraw

earnings without any additional tax liability provided

the tax-deferred contributions offered by Traditional

but the distribution process may not be conducive to

Susan is an unmarried taxpayer who makes

to the IRA in turn. This income will always bear the

vided their holders with significant tax benefits, as did

withdraw Roth contributions without duplicate taxes,

and interest rates, just as you normally would. With while principal and interest payments would flow back

could grow tax-free thereafter. Roth IRAs already pro-

funds for desired and immediate use. You can always

tage of lower taxes in coming years and miti-

an IRA, loaned money would move from the account

manner as a Roth contribution), but those holdings

garding Roth IRAs, investors may be wary of paying

savings account (HSA), you can qualify prospective borrowers and establish conditions, such as loan terms

pay taxes on any converted cash or assets (in the same

taxes on her $5,500 con-

ABOUT THE AUTHOR:

Clay Malcolm is Chief Business Development Officer at New

Direction IRA, Inc., a provider of self-directed retirement plans that hold alternative investments.

With over 20 years of management experience, Clay draws upon his comprehensive processional background to cultivate an education-based culture and impart knowledge about self-directed IRAs to clients and partner issuers.

CONTACT: 877-742-1270 (Ext. 113) | cmalcolm@ndira.com | www.ndira.com

www.originate.report 19

SPOTLIGHT

Industry Spotlight: Michael Tedesco CEO, Appraisal Nation, LLC

20 Originate Report | February 2018

MT: The people. We can talk products and innovation all day, and I recognize the world we live in is constantly changing and Appraisal Nation stays at the front of that change leading the way for our clients. However, the relationships we build, the connections we foster that is truly where I garner my passion from.

To get to be a part of so many people’s lives and to know that in some small way Appraisal Nation is helping Americans live out the American dream that excites me every time.

M

ichael is a highly recognized industry executive with over 20 years of experience. From 1995-2000 Michael worked in loan origination and retail bank management before joining Lenders Service Inc. (LSI) in 2000. After serving as a leader for the appraisal department of one of the nation’s largest mortgage service companies, in 2005 he launched Appraisal Nation as a regional appraisal firm. In 2007 Michael expanded Appraisal Nation to a Nationwide AMC. In the past 12 years he has led Appraisal Nation to a Top 50 Mortgage Service Provider in America (Mortgage Executive magazine), been named Housing Wires Top 40 Rising Stars reshaping the mortgage industry, and honored by the MBA of the Carolinas with their distinguished President’s Award.Under his vision Appraisal Nation thrives in all channels of lending and has over 800 Clients and growing, being named #842 and #1265 in the Inc.5000 the last two years.

Originate Report: How did you get started with Appraisal Nation?

Michael Tedesco: I started Appraisal Nation out of necessity. Back in the early 2000s none of the AMCs were focusing on small to midsize lenders. All of their attention rest in the top 50 lenders. I believed that all lenders, regardless of size, regardless of channel of business, should be able to have the benefits and cost savings that and AMC can provide. I also felt that a successful AMC would need the understanding and knowledge of the lending side as well as the appraisal side. When I found the right partners, an appraiser, a 20 year AMC veteran and myself, we began building out one of the most complete appraiser networks in the country. In 2007 we launched and never looked back.

OR: What is it that excites you about the Mortgage Industry?

OR: What sets Appraisal Nation apart from the other AMC’s?

MT: Relationships. Many vendors talk relationships and partnerships but we live it. We have it incorporated into our life blood. It is more than just our Mission Statement, relationships are our very essence. We turn simple vendor lender partnerships into friendships, and in time into family.

OR: How did you get started in this industry?

MT: I was a young 19 year old loan officer, which seems like an entire other life ago now. Back then I loved closing loans and helping people become home owners, or doing a refinance to help someone send their child to school or consolidate or their debt to payments they could afford. So many situations left with happy handshakes and great smiles. I still remember many of them today and I still enjoy helping our clients now, just on a different scale.

OR: What tools are essential to making Appraisal Nation succeed?

MT: In real estate they say location is everything. In vending, whether it’s our Title side or Appraisal side I believe our people are everything. We have a great system that’s integrated on every major platform but it’s the people behind it that matter most. From our expert appraisers in the field, to our 100 plus customer service reps, to our executive management team, having the right people all sharing the same vision makes all the difference.

OR: What are some of the biggest challenges that Appraisal Nation faces?

MT: In our constantly changing and ever litigious state, making sure regulations are always met can be demanding. Luckily we have a great Director of Compliance, Chief Appraiser, and Legal Team that stay ahead of all of this. Not to say we don’t have our growing pains in other areas, with over 800 lenders throughout all different channels of business you’re going to hit some pain points, but for us being able to communicate quickly with our clients and flexible to our design allows us to overcome any issue.

OR: What has been the most important factor in your companies growth?

MT: Without a doubt the two biggest reasons for our success is our organic growth from present client referrals and the success of our hands on customer service model. No bigger compliment can be had then when one of your clients refers one of their peers to use

you. I cannot even count the number of times this constantly happens. I am humbled and amazed at how our model resonates with what people need.

OR: What or who has been your greatest influence in business and why?

MT: I have been very fortunate to have many great people around me for a long time. I moved out on my own when I was only 17 and thought I could take on the world all alone but soon found out that people really are your greatest asset. I like the expression, “it takes a village”, I know for me that’s very true. Everyone I have in my life has helped to create, grow, and expand Appraisal Nation. My wife, my business partners, my brother, my children, my employees and even our clients, all encourage me to be a better man then I was yesterday and in turn a better AMC. OR: What CRM Software do you use and why?

MT: Appraisal Scope is our front facing system and it is great software, very user friendly and able to modify for specific client needs. Internally we created our proprietary AN Life which helps us with everything from interoffice global calendar events to internal file communication.

OR: What are some of your goals for 2018?

MT: A 1000 Clients, a hundred million in Gross Sales, and to see the Aurora Borealis. I’ll take two out of three, but I’m seeing the lights this year!

OR:: Have you had to learn any lessons the hard way?

MT: “Don’t put all your eggs in one basket”. This was a very valuable lesson for us back in 2012. We were able to secure one of the largest wholesale lenders in the country at the time and we did an excellent job with them for a couple of years. As we kept exceeded their performance levels our volume with them kept increasing. We kept hiring and training and even built out a facility to support the growth. Then one day I get the call from their CEO that they built their own AMC and would be migrating over. Next day worked stopped. I looked at our reports and they had ballooned into 65% of our business. It was a devastating loss. We spent so much time servicing them that we didn’t focus on any channels to offset them. We spent the next 5 years diversifying. Now we have over 800 Clients in 4 different verticals of business and are biggest client is only 9%.

OR: What is one piece of advice you have learned and carried with you throughout your life?

MT: When I was a young boy my pastor, who was like a grandfather to me, use to have a wooden duck in his house. I remembering asking why and he told me he had it to remind him “to be like a duck”. He explained, “As things in life come at you learn to let the negative roll off you like water on duck. Learn to use the water as your place to sail, and look graceful but to do this you have to never stop kicking your legs underneath the water.” He taught me Grace under pressure and from that I learned nothing worthwhile is easy, and if you stop kicking you could sink. So hold your head up and kick like hell.

CONTACT Michael Tedesco | mike@appraisal-nation.com www.originate.report 21

CITIES TO WATCH

Old State House, Boston, Massachusetts 22 Originate Report | February 2018

Cities to Watch:

Boston

By Max Berger, Geraci LLP

There are very few American cities with more historical significance than Boston. Founded all the way back in 1630, this Massachusetts town was the focal point for some of the most significant moments

in our nation’s past- including the Boston Tea Party, the Siege of Boston, and the Battle of Bunker Hill.

B

eing no less influential today, the city is a hub

Fenway Park: Sports fan or not, you don’t want to

for academic study and research- most nota-

miss a game at Fenway Park. As the oldest ballpark in

the most prestigious universities worldwide. Because

historic games- and has held the World Series ten times!

bly it is home to MIT and Harvard, two of

of its internationally renowned status, it also attracts

countless entrepreneurs and a wealth of startups. For Bostonians, sports are also a central part of the city’s culture and identity. With world-famous stadiums like

Fenway Park and a fierce sense of loyalty to their teams

(the Patriots and the Red Sox in particular) Boston is a haven for sports fans.

Major League Baseball, Fenway has hosted some truly The home of the Red Sox is so beloved by Bostonians, it

has even been declared a national landmark. Book your tickets now though, because the park is also one of the smallest venues in the country by seating capacity.

Copley Square: Located in the Back Bay area, Cop-

ley Square is a beautiful place to spend an afternoon.

Boston, MA Economy:

• Major industries: Education, biotechnology, tourism, financial services • Minimum wage: $11 per hour • Cost of Living: 3% above national average

Housing:

• Median Household Income: $63,082 • Median Home Price: $561,600 7.8% increase from last year • Median Rent Price: $2,700

Job Market:

• Forbes List - #30 Best Places for Businesses and Careers • Unemployment: 3.7% • Job Growth from 2016: 2.1% that’s not your style, try Highland Kitchen for more traditional American comfort foods- and great cocktails!

Try Giulia for some of the best Italian cuisine around,

or Loyal Nine for great seafood with an East Coast

flair.

Entertainment

If you find yourself looking for a fun way to spend

your evening, you could do a lot worse than the Bos-

ton Opera House- see one of the touring Broadway shows, concerts, ballets, and more. Check out Boston’s

House of Blues for top-tier concerts, food, and at-

mosphere, or visit Laugh Boston for one of the city’s best comedy clubs.

Nightlife

For one of the hottest spots in Boston, check out the

Tunnel nightclub- with a slick, modern aesthetic and

impeccable music selection, this is about as trendy as

it gets. For a uniquely historical drinking experience, visit the Green Dragon Tavern. This bar has ex-

Downtown from the Boston Harbor

Must-visit Locations

Boston National Historical Park: If you’re in-

terested in learning more about the significant role that Boston played in the American Revolution, then you

can’t miss a tour through the Historical Park. If you take the Freedom Trail through downtown then you’ll hit almost every major site that the park has to offer, in-

With an inimitable fusion of the classic and modern city aesthetic, this is one of the most beautiful spots in Bos-

ton. The Trinity Church is an architectural marvel and

the historical high point of the area, along with the Boston Public Library. The nearby Prudential Center

also makes a perfect detour for shopping and great food.

cluding Faneuil Hall (one of the country’s most visited

Dinner

Paul Revere’s house.

Top Chef’s Carl Dooley at The Table at Season to

tourist sites), the Charlestown Navy Yard, and even

Speaking of great food- start your night off right with

Taste, with a French-inspired four-course prix fixe. If

isted in some form since 1654, and was frequented by

Paul Revere and the Sons of Liberty long ago! If you’re

looking for one of the most unique spots in town, visit the Frost Ice Bar where everything (paintings, sculptures, tables, chairs, and even glasses) is made of ice.

Max Berger is a Marketing Assistant at Geraci LLP and supports all marketing campaigns, projects, and events throughout the corporation and contributes to the execution of the firm’s growth.

CONTACT: (949) 379-2600 m.berger@geracillp.com

www.originate.report 23

UPCOMING EVENTS

All event dates subject to change.

Please visit conference websites for agendas and details.

Upcoming Events

Don’t be left out! Showcase your upcoming event here!

Contact Ruby@originate.report for more information.

2018

FEBRUARY

Innovate 2018 Conference MARCH

February 7-9, 2018, Newport Beach, CA www.geracicon.com

APRIL

MAY

Activate 2018 Conference JUNE

May 9-11, 2018, Los Angeles, CA www.geracicon.com

JULY

AUGUST

Captivate 2018 West SEPTEMBER

September 9-11, 2018, Las Vegas, NV www.geracicon.com

OCTOBER

Captivate 2018 East NOVEMBER

DECEMBER 24 Originate Report | February 2018

October 10-12, 2018, Boston, MA www.geracicon.com

GERACI LLP PRESENTS

2 0 1 8 • C O N F E R E N C E Activate teaches you how to make more money in the alternative non-bank lending space.

How? It takes ideas you learned at Innovate and breaks them down into the building blocks you need to implement into your lending business.

Should you be there? Only if you want to make money.

What they said about Activate 2017: “I picked up two great lenders [at Activate]...It’s an awesome conference and we’ll never miss it” Wendy Sweet, Carolina Hard Money “You could have a conference like this via Skype...

This is still a human-to-human business and [people] do business with people they trust.”

Mark Hanf, Pacific Private Money “Everybody is on the same page here [at Activate]” AJ Poulin, The Mortgage Office

May 9-11, 2018 Sofitel Los Angeles • Beverly Hills, CA www.geracicon.com/activate

For more information about attending, sponsoring, or speaking, contact Ruby at Ruby@Geracicon.com www.originate.report 25

LOAN HOME

Help Make Dreams Come True.

Are you a lender? Advertise with Originate Report’s Loan Home and be seen by 35,000 industry professionals each month.

Contact our Loan Home director at alicia@originate.report or (949)383-4788.

MU

M XI LOA MU N $ Co M mm LO A e N Co rcia $ ns l

COMMERCIAL LOAN HOME Do you want to find your loan a home?

That home can be found here, in these lenders.

www.helveticagroup.com loans@helveticagroup.com (310) 575-3301

100K 10M √

√

√

√

Direct Lender

√

75/30 √

√

JCAP Financial Group www.jcap.net info@jcap.net (949) 622-6199

um

er

√

√

Direct Lender

26 Originate Report | February 2018

√

idg

√

√

√

√

√

√

√

√

EB-5

√

Direct Lender

150K 5M

√

80/30

√

70/5

√

√

√

√

√

√

√

* TX

Direct lender against Texas Real Estate—EB-5 loans and projects in most states.

√

√

√

√

√

√

√

√

√

√

√

√

70/2

√

√

√

√

√

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√

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√

√

California Properties, 1st & 2nd TD’s

√

√

√

√

√

√

* CA

√

√

70/30

√

√

√

√

√

√ 2017

www.pacificprivatemoney.com loans@pacificprivatemoney.com (415) 883-2150

√

* AZ, CA, CO, CT, DE, FL, GA, IL, MD, NV, NJ, NC, PA, SC, TX, VA, WA

Direct Lender

Pacific Private Money

√

Br

√

100K 50M √

250K 5M

√

e Co rpo ra Ac t ion s qu isi / Tru No tion sts/ L tes s a nd ega De l En Pu ve t rch lop ities as me Re ed nts ha b Bla / Re nk mo de et Se Loa led/ co ns Re nd no M va Jo ted int ort g Ve ag Fo ntu es rei r gn es Na Ot t io he na r ls MA XL o Ch an-to urc -Va he lue s/ (% La Te nd ) m ple / MA (B X s/ Au are tom / Co Syn Term ag m (yr o me o Re tive s rci gues ) tai al/ l (S Lo h En t) ter ops/ tai St r Ga nm ip Ma s S en lls tat t ) ion Le s isu re Ho (Go sp ita lf Co Mi lity ( urse xe d- Hote s/ M ari ls) Re use sid Pro Indu na) en s p Ra tial er t ie trial Inv nc es s h tm Se es a en lf-s nd tor Fa t Pro pe ag rm Re rtie s sta e s ura Of nts f ic e

LO MU AN $ Co M mm LO A e N Co rcia $ ns l

MA XI

100K 3M

SFR

www.alistpartners.com scott@alistpartners.com (512) 687-6263

√

TYPES OF PROPERTIES WE LEND TO

Direct Lender

A List Partners Management, LLC

√

*AZ,CA,CO,FL,GA,IL,IN,LA,ME,MD,MA,MI,MN,MS,MO,MT,NE,NH,NJ,NM,NY,NC,ND,OH,OK,OR,PA,RI,SC,SD,TN,TX,UT,VT,VA,WA,WV,WI,WY

UM NI M MI

www.weapproveloans.com robert@accmortgage.com (877) 349-0501

√

* = states lending in

ACC Mortgage

√

2017

LENDER

√

TYPES OF LOANS

PRIVATE MONEY LOAN HOME

Do you want to find your loan a home?

That home can be found here, in these lenders.

√

* = states lending in

Helvetica Group

MA

MI

NI

LENDER

TYPES OF PROPERTIES WE LEND TO

um e Br idg r e Co rpo ra Ac t ion s qu isi / Tru No tion sts/ L tes s a nd ega De l En Pu ve t rch lop ities as me Re ed nts ha b Bla / Re nk mo de et Se Loa led/ co ns Re nd no M va Jo ted int ort g Ve ag Fo ntu es rei r gn es Na Ot t io he na r ls MA XL o Ch an-to urc -Va he lue s/ (% La Te nd ) m ple / MA (B X s/ Au are tom / Co Syn Term ag m (yr o me o Re tive s rci gues ) tai al/ l (S Lo h En t) ter ops/ tai St r Ga nm ip Ma s S en lls tat t ) ion Le s isu re Ho (Go sp ita lf Co Mi lity ( urse xe d- Hote s/ M ari ls) Re use sid Pro Indu na) en s p Ra tial er t ie trial Inv nc es s h tm Se es a en lf-s nd tor Fa t Pro pe ag rm Re rtie s sta e s ura Of nts f ic e

TYPES OF LOANS

* CA

Look for this Lender’s Ad in this issue of Originate Report

www.originate.report 27

PROVIDING PEACE OF MIND As a full service law firm that caters to the private lending industry, Geraci’s team of bankruptcy, banking and finance, litigation, securities, corporate, and real estate attorneys has provided our clients with peace of mind for over a decade.

Let us deal with the legal side of your business—so you can stay focused on what’s really important.

28 Originate Report | February 2018

Geraci Law Firm | 949.298.8050 | www.geracilawfirm.com