PL PRIVATE LENDER
TRUST DEED INVESTING IN YOUR ARSENAL
THE OFFICIAL EZINE OF AAPL MAY/JUNE 2015
New!
FACTORING SMB Financing Tool of Choice
Abhi’s
DELETE vs. DON’T DELETE Censoring Comments on your Social Sites
REAL DEAL TALK
Lender Limelight
DAVID OWEN Considerations for Multi-State Brokering Loans without
Lenders & Brokers
Burning Relationships
Break Free of Traditional
Business Trends
Private Lender May/June 2015
CONTENTS 4
Private Lender Contributors
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Lender Limelight David Owen
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Is Factoring becoming the SMB Financing Tool of Choice? By: Mike Ponomarew
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What’s Current News & Updates from AAPL Members and Partners
14
Break Free of the Traditional “Law” Business Trend and Transition into the Business of People. By: Kim Caldwell
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To Delete or Not to Delete: Censoring Comments on your Social Sites By: Chrissey Breault
22
Abhi’s Real Deal Talk Investor Perspective: 1693 Hosea L. Williams Dr.
28
Questions and Considerations for Multi-State Lenders and Brokers By Nema Daghbandan
32
Adding Trust Deed Investing to your Arsenal By Rick Melero
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Brokering Loans without Burning Relationships By Kellen Jones
•••CORNER OFFICE•••
Matt Benson, Executive Director
Q
uick: What comes to mind when you think of success? Maybe a corner office and the expense account to match? Ten bajillioun LinkedIn followers, including but not limited to all your now-regretful and envious ex-employers? Yourself, on a desert island, with a significant other of your dreams, mixing margaritas or rum runners? Whatever you picture – no judging! – I hope the image motivates you and makes you happy.
No matter how you define success, the American Association of Private Lenders is an organization with a firm belief that education opens doors. AAPL also believes that knowledge can be acquired and skill-sets developed anywhere – as Abhi Golhar is demonstrating in Private Lender’s latest feature section, “Abhi’s Real Deal Talk.” Learning is unavoidable and happens all the time. Learning through perspectives can enhance our understanding of the industry around us, provide us with more and maybe greater opportunities for success which can help make our corner office dreams come true. We can’t wait to toast to your successes. Now, who wants to make a margarita with me?
PRIVATE LENDER May/June 2015 Production Manager/ Chrissey Breault CEO Michael Wrenn Art & Design Executive Director/ Matt Benson Advertising and Sales Linda Hyde Editor-in-Chief David Lang Private Lender is published semi-bi-monthly by the American Association of Private Lenders (AAPL). AAPL is not responsible for facts or opinions as presented by authors and advertisers. For Subscriptions: Visit www.facebook.com/aaplonline or email PrivateLender@aaplonline.com. For Back Issues: Visit www.issuu.com/aapl, email PrivateLender@aaplonline.com, or call 913-888-1250. For Article Reprints or Permission to use Private Lender content including text, photos, illustrations, logos, and video: E-mail PrivateLender@aaplonline.com or call 913-888-1250. Use of Private Lender content without the express permission of the American Association of Private Lenders is expressly prohibited. Copyright © 2015 American Association of Private Lenders. All rights reserved.
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PRIVATE LENDER CONTRIBUTORS •••••MEET A FEW OF THE TALENTED INDIVIDUALS WHO HELPED BRING THIS ISSUE TO LIFE.••••• CHRISSEY BREAULT A Pittsburgh native and Hospitality major; Chrissey started a part-time photography and design business in 2009, while working full-time in local government communications. She is currently the Director of Marketing and Education Services with the American Association of Private Lenders. Follow Chrissey @CBExpressions or join her on LInkedIn. Beware: She takes too many pictures of her dog and does not have a filter! KIM CALDWELL Kimberly Caldwell is the Communications Director at the Geraci Law Firm in Irvine, California and a native of Southern California. She is a communications and marketing expert and has been active in the legal industry for the past year. She recently received her Master’s of Science Degree in Leadership and Management from the University of La Verne in 2014. Call Kim at (949) 379-2600 or email her at kim.caldwell@geracilawfirm.com and ask us how we can help you become stronger. NEMA DAGHBANDAN Nema Daghbandan’s practice encompasses all facets of real estate transactions representing lenders and brokers, including loan documents for commercial, residential, construction, multi-family, servicing agreements, spread agreements, assignments (of all types), leases, lien releases, procurement agreements, intercreditor agreements and subordination agreements throughout the country. He also leads Geraci Law Firm’s non-judicial foreclosure practice and advises clients on all default related matters. Mr. Daghbandan has closed hundreds of millions of dollars in loans throughout the country. You can reach Nema at nemad@geracilawfirm.com.
ABHI GOLHAR Abhi Golhar is Managing Partner at Summit & Crowne Partners, an Atlanta-based real estate investment firm. Since 2003, Abhi has utilized a “value-added” approach to capitalize on real estate renovation, new construction, and development opportunities in the Midwest and Southeast United States. He actively educates and works with seasoned debt and equity investors to employ market-driven investment strategies that yield success. Abhi holds a BS in Electrical Engineering from the University of Michigan. You may find him tweeting @AbhiGolhar, delivering massive value to investors at #RealEstateDealTalk, sending a market trends newsletter at abhi@summitandcrowne.com, or connecting on LinkedIn.
KELLEN JONES Kellen Jones is President at FundingDatabase.com and Chief Operations Officer at Cache Private Capital. For the last decade, he has worked in lender relations, disposition, underwriting, marketing, fund management and origination-- culminating with influence in over $500 million in private loan transactions. Jones is a fixture in the Mountain West entrepreneurial community and active in the national real estate market, assisting borrowers, businesses and start-ups find access to capital. Jones mentors at Utah Business Week and consults with companies in several sectors. He holds a BS in Interpersonal Communications from Southern Utah University.
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Private Lender
PRIVATE LENDER CONTRIBUTORS RICK MELERO Rick Melero is Co-Founder and Principal of the HIS Capital Group, a collection of entrepreneurial real estate and lending entities. Operating from a core foundational belief of paying it forward and being of service, Rick has led HIS and various strategic alliances in the acquisition and creative restructuring of over $500 million in assets spanning 5 countries. From his humble beginnings as a wholesaler, he has established a reputation as a leading business strategist, negotiator, advisor, and educator within the industry.
MIKE PONOMAREW Michael Ponomarew joined the Factoring industry in 1999. He is the Founder and CEO of The Finance Institute. Managing Director of The InvoiceXchange. Factor member that managed $750+ Million in Factoring transactions. Acclaimed industry educator that has taught over 5000 business professionals, consultants and business owners how to profit in the lucrative Factoring industry. Contributing author industry publications and blogs, guest and key note speaker. Established and vended three successful businesses prior to joining the alternative finance and private lender industry.
PRIVATE LENDER
THE OFFICIAL EZINE OF AAPL JULY/AUGUST 2014
IVAN OBERON On Moving Forward & Giving Back Back To Basics: Business Planning 101 How To Avoid Being Blacklisted by Google JOBS Act Crowdfunding and SBRE Funds
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“HELPING PEOPLE ACHIEVE THEIR GOALS IS MY BIGGEST MOTIVATOR” 6
Private Lender
David Owen David has a proven record as a fund manager, works with a high level of ethics, and has been a very interactive and loyal member of the American Association of Private Lenders since the beginning. He’s recently made a big change in his professional life and was able to find time to talk to us about what’s new! PL: Thank you for taking a little time out of your schedule to take time for us today, we know it has been hectic! What can you tell the Private Lender readers about your new endeavor? DO: A List Partners REI Fund I is managed by A List Partners Management, LLC, of which I am the managing partner. Unlike most private funds which are private lenders our fund is focused on buying REO properties from other funds and turn them into performing properties to sell to investors or home-buyers. Additionally, we look for projects in real estate like fix and flip, new construction, buy and hold and developments. When considering projects our target annualized ROI is 20% or better. The fund can make loans but our preference is to send loans to private lenders who are in the business of lending so that we can keep our focus on owning and managing real estate. Our long term plan is to convert the fund into a privately held Real Estate Investment Trust. We have a large management team who works with me. Most of them are licensed Realtors as our management company is also a licensed real estate brokerage in Texas. These team members seek out projects, manage the projects that we have and market the finished projects to home-buyers and investors. Two of our team members are focused on Internet marketing and digital presence. One of our Realtors is responsible for the social media marketing and works with the Internet marketing team.
Two team members are being groomed to become a managing partner of the fund. I am very blessed to be working with a group of very talented and dedicated people who love real estate and who have a passion for turning ordinary real estate into treasures. Additionally, we are working through the application process for approval to own and manage a Regional Center. Once approved we will be managing private funds for EB5 investors. Some of our team are focused on building this new management company under our existing management company and brand. Once completed, we will be able to help other private lenders raise large sums of money for real estate development projects that have a 3 to 5 year term to complete. PL: We have had the opportunity to interact with some of your team members and agree that they are pretty fantastic! Are there any projects that you are working on that you can share with us? DO: Currently we are working on completing a rehab project that we purchased as an REO property from a private lender. The original borrowers had no idea of how to rehab and property. We ended up having to remove most of the work they had done on the property and start over. It is a very profitable project in the Alamo Heights area of San Antonio. We have started two duplexes as a ground up construction project in Austin. By the time this article is published, we will have purchased three more REO properties in San Antonio from a private lender – all single family fix and flip properties. PL: What made you choose this business as one to be in? DO: After spending 6 years building the wildly successful Pride of Austin funds with Robert Buchanan into a
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•••LENDER LIMELIGHT•••
powerhouse private lender, I realized I was bored with being a lender. What excites me is buying, selling, managing and developing real estate. I came from a family of real estate professionals, and was an exceptionally successful Realtor before launching the Pride of Austin funds with Robert. I wanted to get back to what excites me and challenges me.
recognitions? What where they? DO: Education or professional? The two professional recognitions I am most proud of are the Certified Fund Manager designation I earned from AAPL and being inducted into the Master’s Council of Private Lenders by Leonard Rosen. If you want education accomplishments I can certainly provide a list of my degrees.
PL: With all your experience and successes, what kinds of mistakes have you seen professionals make when it comes to their investments? DO: Private Lenders will sometimes get silly with other people’s money and make loans that are questionable. Lenders also forget that they are best suited for lending and in most cases not property management. If they do not have a background in real estate they can make costly mistakes when it comes to maintaining their REO properties. Hence, a fund like ours to take those challenges from them so that Private Lenders can do what they do best; lend money. Investors in general make mistakes by not paying attention to their investments. Most of them act like sheep and assume that big banks and Wall Street have their best interest at heart. They don’t. Investors should explore options to add to their investment strategy; options like private funds.
PL If you could sing one song on The Voice, what would it be? DO: To begin, The Voice would never even let me audition. Singing is not one of my skills. But if I were to sing on The Voice I’d probably sing ‘Hallelujah’ by Leonard Cohen. It resonates with me spiritually.
PL What influences or motivates you? DO: Helping people achieve their goals is my biggest motivator. There is nothing more satisfying than knowing that when I die I have helped people achieve their goals and in some cases helped them build financial stability and wealth. That is gratifying to me. PL: What you would do differently if you could do it again? DO: Now that is a difficult question to answer. I do not have regrets so it is hard for me to consider what I should have done in the past. When I was in college, a very wise nun told me never let your past dictate your future. That is one of my life mantras. Sure I have made mistakes but I simply learn from them and move on. PL: Have you received formal
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Private Lender
PL: What do you complain about? DO: (Laughing) Not having a perfect athletic body. Not having enough time in the day to spend hours at the gym in order to build it. PL: Who’s your hero and why? DO: Hands down that would be my mom. She never lets adversity stop her from living. For her, challenges are to be met head on and not run from. Her degree of patience is Saint-like. If she does not know something she researches for the answer. She never has an unkind word to say about anyone. She sees the world through wonder and reason. She puts others before herself and her ability to accept and love others is uncanny. Her filter of caution is always working in the background. PL: What did you want to be when you grew up? DO: I don’t really have a memory of wanting to be in any particular profession when I was younger. I considered many and all of them have one thing in common; helping people. And, to be honest, every professional job I have held has an element of helping people become better people while achieving their goals and dreams. PL: What’s the best advice you’ve ever received? From whom? DO: There are three philosophers that I have studied and thoroughly read who have shaped in some ways how I view the world. Here is a quote from each of them that I contemplate often when interacting with people and with situations. St Thomas Aquinas: “Beware of the person with one book.” Maimonides: “Teach thy tongue to say ‘I do not know’, and thou shalt progress.” Aristotle “All men by nature desire knowledge.”
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•••BUSINESS STRATEGY•••
IS FACTORING BECOMING THE SMB FINANCING TOOL OF CHOICE? BY: MIKE PONOMAREW
R
ecorded history reveals that the concept of turning future payments into cash (or cash equivalents) dates back thousands of years. Much like today, the need for liquidity, or “cash” to pay everyday expenses, has always been a great need. Think of the days when merchants would travel the seas in search of various treasures. Ships would be filled with those in need of food and necessities to survive. Financiers offered payments against future rewards as a means to earn a return on their investment. This financing was an integral part of the success in establishing world trade. Thus, the concept of factoring was born dating back some four thousand years. Prior to the 1980’s, factoring was used primarily in the garment, textile, and furniture industries – typically only available to larger companies. Entrepreneurial funding companies, changed all this in the late 1990s.
challenges.
What is Factoring? The definition of Factoring is simple: The purchase of business to business (B2B) or business to government (B2G) accounts receivable for products delivered or services that were rendered in the past, at a discount. Factoring is NOT A LOAN and NO INTEREST is charged. It is simply the discounted purchase (sale) of a company’s non-performing asset accounts receivable – an invoice that is paid over time.
Is Factoring just for a few selected industries? Factoring related transactions are somewhat vast. By definition, invoices must be from one business to another business or, from a business to the government for a final sales transaction.
Today, businesses are holding onto “Today, more companies their cash for long as they can. That Today, more companies than ever are than ever are turning to means suppliers to these business are turning to factoring to get the money becoming “stretched out” with regards factoring to get the money they need fast. Yet some companies still to payment. Companies that were they need fast.” consider factoring to be the last effort accustomed to receiving payments on by a business in trouble. Historically, their invoices in 30 days are now faced factoring was used to finance struggling with the reality that the payment cycle is now surpassing business, but the recent credit crisis and bank meltdown 60 days or more. The trickle-down effect of this is (2008) has changed all of that - SMB business bank tremendous. loan application decline rates are reaching epidemic proportions. Without the needed cash flow, companies are forced to make tough decisions. Employees are being let go Cost. Some companies assume factoring has (no money for payroll), supplier payments are delayed overwhelming costs. However, the reality is factoring (resulting in delayed or canceled shipments for future costs have been on a steady decline since 2008. Why? orders), delaying payment of operating expenses Supply and Demand. Today, there are more factoring (negatively affecting the company’s credit history which companies than ever, which results in lower costs and will adversely affect their purchasing power), payment of flexible terms as they compete for clients. Today big taxes are delayed (resulting in judgments and tax liens). brand companies, big box retailers including Walmart By selling some or all of their invoices to a funding source have entire departments dedicated to working with their called a factor a company can receive immediate debt vendor’s factoring company. These big name brand free working capital to sustain the day to day operating
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•••BUSINESS STRATEGY••• retailers recognize that a factoring company has deemed their vendor as credit worthy and safe to do business with - a win win situation. As more companies embrace the many benefits of factoring, the face of the factoring industry will continue to change forever. Today, factoring is becoming the alternative business financing tool of choice, in many cases - the only choice.
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WHAT’SCurrent NEWS & UPDATES
LOS ANGELES – Patch of Land, a crowdfunding solution for real estate financing that brings together borrowers and lenders through an online platform, announced that the largest ever, entirely crowdfunded residential home loan was fully funded through Patch of Land. The Covered Wagon Investment Group, boasting over 60 years of real estate and property development experience, purchased the 16,000 square foot suburban family estate in Arcadia, California with plans to renovate and increase its value to $3.3M.
“We are proud to announce that in under four weeks, Patch Of Land has funded the largest ever crowdfinanced residential home loan valued at just under $1.9M entirely through individual accredited investors. Though Patch of Land pre-funds every loan, the speed at which loans have been funding, and how quickly our company and industry continues to grow, affords us great confidence that this will not be the last deal of its kind,” said Jason Fritton, CEO and Co-Founder of Patch of Land. The Arcadia home sits on a one third acre plot and will be increased to 4,800 livable square feet. The $1,890,000 loan was fully funded as of May 20th through 63 investors from all over the country, each of whom played an integral part in the funding process. Other highlights include:
• Over 1/3 Acre of Land (15,935 sq. ft.) • Appraised at $3.3M w/ Renovations • 4 Bedrooms, 3 Baths, 2 Stories, 14 Total Rooms • 3-Car Garage • Premium Finishes The size in which Patch of Land can lend is not the only aspect to be marveled. The speed at which they can lend is also making history across the industry. Patch of Land is proud to share that they’re funding deals around the country in record time. The company
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recently funded an Elizabeth, New Jersey multi-family property in less than an hour. Recent rapidly funded loans include the following properties:
• 223 S. 2nd St., Elizabeth, NJ 07206 – $160,000 funded in under one hour
• 1336 Downs Ave., Charlotte, NC 28205 – $100,000 funded in 4 days
• 7373 E. Fremont Dr., Centennial, CO 80112 – $264,000 funded in 4 days
The powers of ‘peer-to-peer’ and of individuals investing in professional borrowers continue to increase property values through their work on real estate across the country. With Patch of Land’s pre-funding first mechanism, borrowers are able to get their funding right away, and then investors can review the loan and project before making a determination of whether they want to invest. In the case of Arcadia, the borrowers did not have to wait 30 days to receive the money; they have already begun the rehab process on the property and investors have already begun to accrue interest. KANSAS CITY - Liquid Logics and the American Association of Private Lenders are embarking on a new partnership. Liquid Logics is a Kansas City based company who is the first Cloud-based Loan Origination Systems built around the borrower’s experience. NATIONWIDE - Realty Mogul is currently hiring smart, driven individuals who know how to execute and thrive in a fast-paced environment. Visit the Realty Mogul website to discover the opportunities. LOS ANGELES - AssetAvenue is looking to fill several positions: for a Chief Technology Office (CTO), Front-End Engineer (JavaScript), Jr. Staff Accountant, and several others. Visit the AssetAvenue website to discover the opportunities. Submit your current news, updates, or job opportunities for possible inclusion in the next issue of Private Lender. Send details to PrivateLender@aaplonline.com
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•••BUSINESS STRATEGY•••
BREAK FREE OF THE TRADITIONAL “LAW’ BUSINESS TREND AND TRANSITION INTO THE BUSINESS OF “PEOPLE” BY: KIM CALDWELL
W
e have seen the lawyer stereotypes splashed all The real issue at hand is over the last few years the trend over the media for decades now. Lawyers have and push in legal marketing has been focused on merely been depicted and stereotyped as ambulance “collecting” people instead of “connecting” with them. Law chasers, liars, cheats, pit bulls, good ol’ boys, ghosts firms are merely “collecting” website, social media, google and sharks. It can seem like a frightening and daunting plus and traffic but where are they getting a chance to task for someone to find a lawyer who make a genuine human contact with genuinely cares for them as a person their lawyer? Having 70 very passionate “A culture where the and who takes the time to ensure the and ecstatic people who love working customer is feeling legal solution fits very unique needs of and have connected with the firm lawyer connected and empowered the client. and who in turn refers people back to the will lead to success.” firm is exponentially more effective than In today’s ever evolving and having 7,000 “likes” who only signed up competitive law firm landscape it is win a contest. absolutely necessary for lawyers to stand out amongst the crowd, exit the legal business and transition into the people business. How can this be effectively transitioned? This can be easily executed by creating loyal life-time fans who will return multiple times to solicit business and refer to their communities.
Value can be easily added to any legal transaction by deliberating trying to develop personal, long lasting relationships with clients in order to help them make better decisions as they travel along their lifelong business paths. Dedicated consistent communication and following a globalized approach to communicate with lawyers who are accessible 24 hours a day, seven days a week, via email and cell phones. Lawyers can cultivate and nurture these strong friendships and instill trust with clients by being personal, transparent, creditable, responsive, and genuine. Treat the client as though they are a trusted friend or a beloved family member. Clients should be viewed as people instead of numbers in a legal transaction. How does that translate to booming revenue and increased client base? How does one take the traditional “law” business model from “perceived value” which is viewed and communicated through deliberate marketing messages splashed across firm websites, social media platforms, and email blasts to “real and genuine” value and sprinkle in the “why should the client care factor?”
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Clients will always feel cared and supported when their lawyers are responsive and consistently answer their phone and return calls within hours. Lawyers should focus their maximum efforts on developing the three E’s with their clients on a regular basis: engage, equip, and empower.
A firm culture where the customer is feeling connected and empowered will lead to success. This type of culture can only be cultivated and nurtured by the firm leadership and absolutely necessary to successful revenue growth and loyal clientele. Lawyers need to offer their clients their ear and genuinely listen to what their clients are saying. When lawyers are perceived by clients as accessible, transparent, communicative, responsive, dedicated, strong lifelong business relationships and coalitions are created. Clients will remain loyal to lawyers they trust for a lifetime. They will also refer their friends, family and social communities, there is power in these numbers. One person is told for every good thing you do and ten people are told for every wrong thing you do. Word of mouth marketing is considered the most valuable form of marketing that consumers trust above all other marketing efforts. Word-of-mouth marketing is most likely to drive revenue growth for a law firm, according to Forbes.
“Working with Geraci Law Firm has been an incredibly valuable experience for us. They are the most knowledgeable and dedicated authorities in real estate based private lending. We always feel that Geraci really understands our organization and what we need to help others with their success.� ~ Matt Benson, Executive Director, Directo American Association of Private Lenders. WILL YOU BE OUR NEXT SUCCESS STORY? Call us at (949) 379-2600 or email our Director of Communication, Kim Caldwell, at kim.caldwell@geracilawfirm.com and ask us how we can help you become stronger.
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•••BUSINESS STRATEGY•••
TO DELETE OR NOT TO DELETE: CENSORING COMMENTS ON YOUR SOCIAL SITES BY: CHRISSEY BREAULT
A
s in any service to the public, at some point someone is going to be upset about something you said, did, or believe. Do you need to lose sleep over it deciding whether to delete it, pretend it didn’t happen, or to leave it up and respond? Simply stated: No. Understandably there may be a struggle with this. On one hand we strive to be transparent about our businesses; on the other hand we have these businesses to put food on the table and that happens to involve specific services and products. Sometimes fueling a debate about certain realities probably isn’t good for business.
Being “Social” has its Risks Much of the reason more businesses don’t accelerate faster is because someone is afraid of risk. What if it fails? What if people think we’re stupid? What if we lose a customer? Let’s try to think about that risk as a calculated risks instead. It doesn’t mean you should run off and do stupid things. It means that you work hard, think deep, and do things that have a chance of success. Risk-taking is a necessary part of any business model and social strategy. Without it, little is accomplished and customers quickly become bored with your product, service, or program. Not only does risk open up the door to new possibilities, but it also shows your audience that you genuinely care about the industry, users, services, or products. Properly calculated risks can uncover new markets, new audiences, and new capabilities. It forces people to set aside fears and take strides toward future success. Too many people give in to the voice in their head that
says, “This isn’t the right time” or “This didn’t work last time.“ You need to learn to move past those types of insecurities. When you do, you will be lead to new levels or success. When deciding on your social strategy you should be devoted to identifying possible risks. A large part of taking calculated risks involves pinpointing the potential negatives and forming plans for putting out fires after the implementation. By evaluating risk in advance, you can more accurately aim for success. If you are going to create a forum where customers can discuss anything, you should be open to allowing the discussion to be negative. Of course, there is a limit: spam, swearing, or hate posts (typically) should be deletable. Hopefully you have created a community guideline that states your policies.
Managing your Communities Social media policies and guidelines provide your business a framework to carry out your social media strategy and implement your social media tactics. They can also have a direct impact on the success of your social media endeavors. Here are some major benefits of social media guidelines:
• Provides a way to implement your social media
strategy and improve your social media performance.
• Gives everyone the information they need to work together.
• Makes it easier to build your social communities online.
• Makes it possible to respond to emergencies before they get out of hand.
THE EXPERIENCE FACTOR For people just beginning with social media (less than 12 months of experience), 51% spend 5 or fewer hours per week. However, of folks who have been doing this for 2 years or longer, at least 65% spend 6 hours or more per week on social media activities.
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•••BUSINESS STRATEGY•••
Today, it is a necessity to monitor your social accounts for negative comments about your business because a crisis can grow very fast. You’ll want to have clear guidelines for those in your community as well as for those who manage or monitor each platform. It is important to know how and when to respond to any social media attack and have your action guidelines ready to respond to a negative situation before something gets out of hand. One of the first things to keep in mind is that your “response” team should have both social media and business expertise. You will need to delegate enough resources to maintain an on-going presence on your social sites. This will help you to implement the steps you need in crisis management.
Who interacts on your behalf? Those interacting and engaging on social media can greatly benefit with guidelines adapted to your business needs. On one hand, the people interacting on behalf of your company must be knowledgeable of various legal terms and what they mean in your business environment. Terms
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10% return, paid monthly pays $416.67 per month $50k minimum return of capital after 3 years
Social Media Celebrity They are lurking all around you! An employee celebrity is someone in your organization who has a positive reputation apart from or in addition to your corporate brand. Social media is a great opportunity for amazing personal branding in addition to corporate branding. A shift in power needs to happen when employees become celebrities and begin to see themselves as talent rather than an average (or above average) employee. such as: defamation, endorsements, intellectual property, and any form of wrongful disclosure. They need to be aware of global implications on your online communication and avoid inappropriate comments about competitors or others online. On the other hand, they must also remain positive, be helpful, add value, and be transparent. Those individuals have to be entrusted with cultivating relationships and building community on your social media profiles. It is not always easy to balance all of this criteria, especially for those who are new to social media. Hopefully, you now see where good guidelines can be critical.
Big Companies vs. Small Companies Most big companies almost always have existing communication policies and those guidelines should also apply to social media communications. It would be smart to make sure they address the specific dos and don’ts. The question of managing social media celebrities should also be considered for your social media guidelines. Smaller companies may not need all these policies and guidelines. With fewer staff and less time available, smaller companies may decide it’s quicker to “block” people who leave inappropriate comments.
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They might just need one well-crafted set of guidelines, some good judgment, as well as an understanding of social media and the company’s online strategies. Where smaller companies tend to go wrong is thinking they don’t need social media guidelines at all. Smaller companies can benefit greatly from one, because it will:
• Keep them focused on their social media strategy, • Permit them to benchmark their progress and better evaluation what to do next,
• Let them manage the time they invest in social media better.
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•••BUSINESS STRATEGY••• You don’t need to reinvent the wheel The easiest way to create social media guidelines is to research other companies similar to yours. Reach out to those social managers and ask them questions. Secretly, every social manager want to feel that “celebrity” status. If you find someone who isn’t willing to help, then it is up to you to decide if the culture of that company is equal to yours. Do you really want to match what they are doing? The best part is that the more you engage on social media the more you will learn. Don’t be afraid to “break” something. Seeking input or feedback can help you tweak your guidelines from time-to-time to fit in with how your company communicates and the changing trends. Be excited for the discovery process and the implementation of your community guidelines – you can only reap the benefits. Crowdsourcing: the practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people and especially from the online community rather than from traditional employees or suppliers.
Types of Business Gains Possible with Social Media 10%
• Increased revenue • Higher customer loyalty • Reduction in travel costs
15%
• Reduction in communication costs • Increase in successful innovation & ideas • Decrease in operational costs
20%
25%
30%
• Higher customer satisfaction • Improved connections between departments and internal teams • Increased productivity by overcoming distance and time zone barriers to collaboration • Increase in access to expertise • Rapid new hire ramp-up • Quicker location of experts • Less time spent looking for information • Improved external collaboration with suppliers, partners, and industry colleagues
35%
• Increase in collaboration • Faster customer care processes
50%
• Developed a higher awareness of organization within market • Identified and attracted new customers Source: Network Solutions, University of Maryland
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21 Private Lender
Abhi’s
REAL DEAL
PERSPECTIVE #RealEstateDealTalk
•••PERSPECTIVE•••
1693 Hosea L. Williams Dr. T
his case study outlines a story and the deal specifics of a residential flip opportunity located at 1693 Hosea L. Williams Drive in Kirkwood, Atlanta, GA we purchased in late 2013. It was a project where we, the borrower, Summit & Crowne Partners, created substantial value for our lender to work together and capitalize on market trends, proper due diligence, and our experience and insight of the area. I will be offering visuals to illustrate the analysis of the local market that led to the decision of purchasing the property through the sale of the home. This evolution will be discussed in the following manner: The Hunt, A Discovery, Initial Numbers and Thoughts, Challenged, Epiphany, and Final Outcome. In this issue, we will cover Hunt, Discovery, and Numbers. You will have to tune in to the next issue to read about the Change-Up and Final Outcome. I promise, it will be worth it! To obtain specific images, copies of raw data, or for questions about this opportunity, connect with me at abhi@summitandcrowne.com.
The Hunt
The first step we took was to identify areas in which arbitrage opportunities may exist, either for renovation or new construction. At the time we purchased this home on Hosea, the local market was trending upward for Kirkwood, a neighborhood in East Atlanta which is showing heavy real estate activity, low days on market for sales, and absolutely on fire; making finding deals more difficult in the area. To illustrate this, as of May 25, 2015 we are under contract on a home less than 0.5 miles from Hosea for a purchase price of $65,000. I noticed the lot next door was for sale and called the owner. The asking price: $125,000 with no room for much negotiation. Clearly we’re in a seller’s market and deal-making is becoming more competitive. Back to Hosea. Some indicators we researched included, but were not limited to: Population density, median household income, median house/condo, median gross rent, average household size, median age, percentage of people with bachelor’s degrees, and percentage of people who are renters. Using these indicators and others sourced from city-data.com, a public website for searching local data, we teamed up with data mapping expert, Zach Liu who lent us his expertise to visualize data by generating maps from ArcGIS. The data obtained was mostly from the year 2011, but we didn’t consider it to be very out of date as it was still relevant. Map A (top, next page) is a representation of population
density measured as person per square mile within four counties: Dekalb, Cobb, Gwinnett, Fulton, and Clayton. Liu commented, “As expected, the spatial pattern is a concentric rings form, with downtown Atlanta at the center. The highest density area is surrounded by east and south of I-85, west of I-285, and north of I-20. As it goes further from the center, the density drops gradually. About four or five rings can be identified from the map.” Similar maps were generated for the additional indicators I noted above. A grouping analysis was also created for all zip codes based on multiple indicators we chose, as illustrated in Map B (bottom, next page). From this data, Liu commented: “First, the green areas have the highest income, property value and highest educational level, and obviously the lowest poverty. The density is considered to be average, meaning there are prosperous zip codes in both urban and suburban areas. The percentage of renters and household sizes are below average, but not by much. Second, the blue areas can be described as renting professional working class areas. The median income is average and above average, but not as high as green areas. The educational level is high while the average household sizes are low, indicative of many young, single professionals. The population density and percentage of renters are both very high, which shows these are relatively hot rental markets in the city.
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•••PERSPECTIVE••• MAP A: Population Density
MAP B:Grouping Analysis
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•••PERSPECTIVE•••
Third, the yellow areas can be considered as mature, middle class suburbs. Most of the indicators are average and just above average. The population density is low while the household size and median age are high. Lastly, the red areas are categorized as low income, low property value, and low educational level. The poverty level and renter percentage are high as well. ” From this analysis, we determined 30317 was a good starting zip code for our search. We then sought additional confirmations of Liu’s findings by speaking with our team of real estate agents, fellow builders, and real estate investors. They, too, confirmed Liu’s findings and suggested home prices in certain pockets of the zip code could break through previously known ceilings. And most importantly, from our prior experiences in working with school systems, we knew that the schools in the area were undergoing change and getting better, drawing families to the neighborhood at a rapid pace. Therefore, we identified a few guidelines that would help us identify the best opportunities to purchase:
• • • •
Price: less than $100,000
decided not to engage the deals we found. It wasn’t until I checked my LinkedIn inbox, that I discovered a gem. A wholesaler had heard about my criteria and sent me a quick note with an address and a price. He noted it was a 3 bedroom, 2 bathroom, 1,430 square feet, rough condition, and needed a little bit of work.
Initial Numbers & Thoughts
Without walking the property or entering into price negotiations with the seller, these were the numbers for this deal we considered for renovation:
• • • • •
Purchase Price: $110,000 Earnest Money: $500 Renovation Budget: $150,000 After Repair Value (ARV): $340,000 Estimated Net Profit: $22,328.13 after lender interest, closing costs, and agent commission.
• Timeline to complete the renovation: maximum of 6
2 bedroom, 1-2 bathrooms
months
Retail days on market: less than 45 Renovation with no permits
Here’s a quick note on data analysis: though data is important to prove an area worthy of investment, it is equally as important for investors and lenders not to make a habit of becoming paralyzed or overwhelmed with data. Use it to make decisions, and then act on those decisions. Sometimes, I notice lenders hesitate to work with a new investor because a deal went south with another investor. Don’t let this be you! Remember, seasoned real estate investors will be happy to provide all due diligence performed and needed, offer a tour of previous and current projects, and discuss their successes and failures. How do I know that? Because it’s a courtesy we offer to all of our lenders and investors.
From the initial due diligence and comparable searches of activity within 0.5 miles and a timeline of less than 6 months, we determined the ARV for this home would be $340,000 and would sell within 30 days after completion of the renovation. Overall, it looked to be a decent flip opportunity, or so we thought until we walked it. Enter an ugly home...
A Discovery!
My partner and I had countless conversations with wholesalers, real estate agents, builders, and contractors hunting for available inventory we could purchase that met our criteria. After some basic due diligence, we wondered if we found strong candidates, so we decided to have drive by and have a look. Needless to say, disaster struck and we
Image A: Front of house
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•••PERSPECTIVE•••
original brick. Upon inspection, we found instances where the original brick was compromised and subsequent repairs would require extensive work.
2. Faltering rooftop structure. The roof on the property
had caved in many areas and would also require extensive work.
3. Foundation challenges. When walking through the
property, we saw signs which pointed to diminished structural integrity of the property and this too, would require extensive work to have corrected.
Image B: Front porch of house
To make matters worse, there were two additional factors not in our favor: a warming market and a stubborn seller. An inherent challenge for real estate investors in a warming market is competition on the same deal; which is
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Image C: Windows on East Side of house
My association legitimizes and protects me in an unregulated environment.
The first question we asked ourselves after completing our walk-through and inspection of the exterior was: “We’re going to pay $110,000 for this?”
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No way.
Challenged
I’ll save you the pictures of the interior, but this little gem had more problems than a rusted, run-down old car from the 50’s. It was immediately evident that this renovation project needed significantly more work than we were led to believe. A few small challenges we needed to address with the seller included:
1. Exterior “fake” brick. One of the reasons that
I
am better than ever with the American Association of Private Lenders beside me.
properties are layered with additional brick would be to remove any sight of pre-existing issues with the
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26 Private Lender
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•••PERSPECTIVE•••
Image D, Zillow
exactly what transpired. The seller was considering three other offers and we needed to think about how we could stand out from the crowd and build a relationship with the seller. We also kept in mind that the seller didn’t want to negotiate on price because they thought it could be renovated fairly easily. Overall, it was beginning to seem that doom would cloud another renovation opportunity, especially at a purchase price point of $110,000. So we decided to take a page out of our lender’s playbook and deployed three strategies:
1. Email the seller a letter of opinion to explain the situation.
2. Conference call with all parties including: buyer,
seller, lender, wholesaler to reassure the seller the logistics would be handled professionally and seamlessly.
3. Walk the property with the seller and point out the compromised areas.
the following:
• • • •
Built a strong relationship with the seller, educated the seller, decreased the purchase price to $68,500, and won the deal (Image D, above).
But it didn’t stop there. We won the property and purchased it (with a few last minute hiccups) with the following terms: 15% down, 5% closing costs and origination, and 15% interest. A month or two later, as we were finalizing the designs, drawings, plans, and additional changes we would need to make to the home, we decided to shift completely in a different direction. Doing so mid-stream would have a severe affect on the capital structure, timeline, and processes for this deal. Find out what happened in the next issue of Private Lender.
The strategies worked marvelously and we accomplished
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•••LEGAL•••
QUESTIONS AND CONSIDERATIONS FOR MULTI-STATE LENDERS AND BROKERS BY: NEMA DAGHBANDAN
M
odern technology and enterprising companies are creating an environment where lending opportunities are no longer just local. One of the most common questions I receive from clients is whether they can lend outside of the state they operate in. However, there are a few questions and considerations that a lender or broker should know before lending out of state.
property, (2) make loans secured by any real property, and (3) act as a broker to a borrower or an investor for a loan secured by any real property. Nevada does not distinguish between business purpose loans and consumer loans, nor does it make any qualification for commercial or residential property.
is necessary to: (1) purchase loans secured by any real
These three states provide a small sample of how different the regulators in each state treat mortgage lending and emphasize the importance of understanding the statutes and regulations in each state prior to lending or brokering there.
Colorado. In direct contrast to Nevada, Colorado only requires a license if the loan transaction involves a “residential mortgage loan”, which Colorado defines as a What licenses are necessary when consumer purpose loan which is secured by a 1-4 family lending or brokering? residential property. So long as the lender or broker is One of the most common misconceptions is that strictly making or brokering business purpose loans (loans private money loans (loans which are which are not for personal, family or for business purposes) are exempt from household purposes), no license will licensing requirements in every state. In “Lending in multiple states be required to make or broker loans in certain states, this may be true, but the Colorado. can be exciting and lucrative answer lies in the statutes and regulations especially if you are located Florida. Florida is a hybrid between of each and every state. in a highly competitive and Nevada and Colorado. A lender may A state by state analysis is helpful to saturated lending market...” make a business purpose loan so demonstrate how different each state long as the lender is an “institutional can be: investor” and the borrower is not an individual. An institutional investor includes an accredited Nevada. Nevada is one of the most stringent states investor. regarding licensing requirements. In Nevada a license
Beyond mortgage broker and lender licensing, one has to be cognizant of ancillary activities which may also require a license; for example loan servicing. Loan servicing can become even more complicated because even if a state does provide for a mortgage servicing license, a mortgage servicer may be considered a “debt collector” and require a debt collection license, especially if the servicer is servicing defaulted loans. Other than licensing, a lender or broker should also
28 Private Lender
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•••LEGAL•••
consider whether their company is required to register with the state as a foreign company conducting business in the state. However, many states exempt lenders from this requirement.
Can I use my preexisting loan documents when lending out of state? No. Every single state has a different procedure to allow for the mechanism of foreclosure. States like California, Texas, and Mississippi utilize a Deed of Trust and allow for foreclosure without the use of the courts, in a process known as a non-judicial foreclosure sale. Conversely states like New York, Delaware, and Oklahoma all utilize a Mortgage Security Instrument instead of a Deed of Trust. New York and Delaware generally require the use of the judicial process to foreclose, whereas Oklahoma permits judicial and non-judicial foreclosures. At a minimum, the appropriate method of foreclosure must be accurately reflected in loan documents for each state in which a party is lending.
30 Private Lender
This issue becomes even more complicated when the loan is a construction loan or the lender intends on holding back loan funds at the outset of the transaction. For example, certain loans brokered by a licensed broker in California must follow stringent guidelines, which may include depositing the hold-back funds with a third party funds control agent. In New York, a purchase money loan with a construction hold-back is commonly split between a first and a second loan to protect the acquisition money from being subject to attack by potential mechanics lien claimants. Beyond the issues of foreclosure and construction funds, many states are nuanced and require special provisions for certain loan terms. For example, states like California and Florida require clear disclosures regarding balloon payment loans. Georgia requires loans secured by 1-4 family residential property to include a foreclosure disclosure. Additionally, most states vary concerning their regulation of maximum late charges, grace periods and maximum rates of interest.
•••LEGAL•••
Other Considerations Advertising. Nevada, California, Oregon, and other states which are highly regulated, lenders need to be particularly careful about their advertisements. Our law firm has interacted with numerous regulators nationwide who notified our clients of improper advertisements. Regulators in highly regulated states strictly construe what it means to “hold oneself out” as being able to make loans and will require lenders to become licensed. Simply stating a lender makes “loans in all 50 states” or showing photos of loans closed in states which require a license could cause scrutiny with certain state regulators. Closing Process. When making loans across the country you must become proficient in understanding the closing procedures. By way of example, in certain states title companies issue preliminary title reports while in other states title companies prepare title commitments. States such as California and Washington utilize licensed escrow companies to facilitate loan closings whereas states like New York and Florida almost exclusively use licensed attorneys as closing agents. There are even local customs that can change within a state. For example, Southern California often uses a separate escrow company which has no affiliation to the title company to act as settlement agent and Northern California almost exclusively uses title companies as the only settlement agent. Foreclosure. A major consideration for lenders thinking of entering into different states should be the time and expense required to foreclose. It is important to understand which states allow for a non-judicial foreclosure process which tends to be less expensive and more efficient, and those states which require the use of the courts to foreclose, which can take much longer and increase foreclosure costs. States like New York, New Jersey, Florida, Hawaii, and Illinois which are all judicial foreclosure states can take two to three years to foreclose on average. Whereas in states like Texas, California, Delaware and New Hampshire, the process generally takes less than six months. Lending in multiple states can be exciting and lucrative especially if you are located in a highly competitive and saturated lending market like California. While this article is not meant to be an exhaustive list of questions and considerations, it has hopefully provided you with a snapshot of some pertinent issues to consider. Interested in writing for Private Lender and getting in front of thousands of real estate finance professionals? Contact us today! PrivateLender@aaplonline.com
Don’t miss your chance to hear from specialists in rehabbing, wholesaling, REO properties, note-buying, multi-family investments, finance, insurance, legal matters, accounting and more! Whether you’re just getting started or have investing experience, The REI Expo is a great resource for all of your investment needs.
REGISTER TODAY! www.REIExpo.com Powered by PREIMA
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•••FINANCE•••
ADDING TRUST DEED INVESTING TO YOUR ARSENAL BY: RICK MELERO
A
rbitrage, the art of making money on the spread is certainly not a new concept and the savvy investor understands that the movement and management of capital is the key element in its growth. Deploying their funds using a variety of techniques and strategies designed to earn double-digit returns while minimizing risk is also crucial in building a portfolio that can withstand market fluctuations profitably.
term of the note. If you require immediate liquidity there is a vigorous secondary market for trust deeds.
Intensive knowledge required to independently invest
From vetting borrowers, assessing deals on their merit, and conducting due diligence on the borrower and the property, to securing the proper paperwork and legal compliance, When implemented correctly into a long “...you are putting your money there is a lot involved for the “partterm investment plan trust deed investing into loans backed by real timer” to handle on their own. Seeking has proven to be a solid technique in the estate; you are not investing experienced professional real estate investor’s arsenal to generate monthly in real estate directly.” and legal counsel is advised as a income while limiting risk. The current small flaw in the documentation or due economic climate has provided a financial diligence of a trust deed investment “boom” not just for professional real could make an otherwise very secure investment become estate investors, but for novice investors who have taken considerably risky control of their capital by re-positioning their retirement accounts for significantly higher returns secured by Possibility of default issues a tangible asset. Ultimately the goal of the trust deed investor is to diversify or provide a “hedge” by investing Provided you have structured everything properly you in multiple deals, spreading the risk while collecting will always be able to take control of the property if the generous monthly payments. To determine if investing in borrower defaults. In most cases you will be able to sell trust deeds is a good fit for your portfolio, let’s take a look a property given sufficient time for more than the loan at some of the pros & cons: you made. Again, the extent of your diligence on the note acquisition will determine your fate.
Little opportunity for capital appreciation
With trust deed investing, you are putting your money into loans backed by real estate; you are not investing in real estate directly. Which means there is little chance for capital appreciation earned when the property in question increases in value, as that remains a gain for the borrower holding title to it and making the loan payments faithfully. The bottom line is you give up the potential for capital upside profits in exchange for monthly income.
Liquidity Your capital is typically tied into the investment for the
32 Private Lender
Pros:
• Higher returns than the typical “safety net”
investments such as CDs, Bonds, Annuities
• Prime market conditions providing a host of
borrowers who will gladly pay you a premium for your money and the speed/time frame in which you can provide it
• Tangible asset providing a secured investment • Passive investment options, explaining the
popularity of professionally managed firms that provide turnkey trust deed investing programs.
This can be the perfect lifestyle investment property system. However, the performance and stability that makes this investment vehicle so appealing depends greatly upon who does the selecting and servicing of the loans. For most investors, a full-fledged trust deed investment company with loan origination and servicing capabilities is the safest and easiest choice. In most cases, these firms should be specifically licensed for real estate lending and investment sales, and be capable of handling all aspects of a trust deed investment, including evaluating lending opportunities, securing appraisals, researching title and encumbrances, originating loans, billing and collecting loan payments, distributing investor yields, handling payoff and returning or reinvesting investor principal. In the event of repayment problems, these firms also handle workouts, help investors understand their foreclosure and refinance options, and act as intermediary between investor and borrower. The most fully integrated firms can handle the sale of foreclosed property and/or manage rental properties on behalf of investors as well.
Secured private real estate loans such as trust deed investments are one option that many affluent individuals are evaluating for their portfolios. Backed by real estate collateral and offering impressive yields, trust deeds can provide meaningful portfolio diversification, steady income and very acceptable levels of safety.
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Interested in writing for Private Lender and getting in front of thousands of real estate finance professionals? Contact Chrissey at PrivateLender@aaplonline.com to learn how! (It’s so easy!)
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•••MANAGE & LEAD•••
BROKERING LOANS WITHOUT BURNING RELATIONSHIPS BY: KELLEN JONES
P
rivate lenders rely on loan brokers for deal flow and assistance in stacking files. Although this is a necessary function to many organizations, the benefits of a broker can often get eclipsed by the problems some cause. On one hand, it’s important the broker is engaged and adding value to justify any fee. But the broker must recognize the lender’s protocol, and know when to step aside. In order to be a boon to lenders without burning bridges, here are a few guidelines for private loan brokers to adhere to:
made that money and trusted a manager to make a loan with it. Most lenders don’t even make money until a loan closes, but there are brokers who try to justify their “time is worth more.” Time, even effort, pale in comparison to the weight of liability and fiduciary responsibility. Brokers should be reasonable in what they expect and charge, especially if there is a chain of multiple intermediaries expecting to be paid.
3. Pick a lane. The most successful brokers know a select group of go-to “Too often, brokers are sources, and stick to what they know. 1. Don’t claim you’re a lender. It’s charged with a task of “Feast Or Famine Brokers” claim to bad for the industry when loan brokers conveying information and do everything, and spend their time misrepresent themselves as a direct requests but end up lacing peddling deals that have a low likelihood money source. Brokers get creative by the loan package with their to close. It’s a poor practice for brokers titling themselves in a way that confuses to market services not only as a direct borrowers. For instance, many say they own influence...” source, but one that does every type of “provide capital to borrowers seeking deal, internationally, at the best terms real estate financing.” It can take weeks for a borrower possible. These brokers believe that if they claim to do it to realize that by “provide,” the broker meant they would all, they’ll capture and control all the deal flow. In reality, make an introduction to the capital source (or, ironically, deals sit on the wrong desk for too long, and the market another broker). for that deal often dies while the broker tries to deliver on There aren’t many things as frustrating to private the promises that attracted the borrower in the first place. lenders than when a deal is submitted from a broker 4. Let the lender do their thing. Get your NDA or Fee who has already taken an upfront fee. If the lender then Agreement in place and ask the lender what they propose contemplates a legitimate fee for real travel or legal costs, by way of communicating with the borrower. Many lenders the borrower is less likely to pay a second fee. want to speak directly to the borrower from the beginning Borrowers and lenders alike respect brokers much of the underwriting process, present their own terms, and more for being transparent. Establish yourself as an communicate with unlimited access to the borrower. If intermediary that lenders want to do business with and this is the case, have confidence in your agreements and borrowers know they can rely on. Add value in exchange require to stay in the loop, but provide the space needed for a success fee. for the lender to make a decision. Others prefer to filter 2. Don’t overvalue yourself. Regardless of how information through the broker. Brokers should follow the valuable a broker is to a transaction (and yes, we know the lenders’ lead and convey things exactly as instructed. parties would have never met without you), understand Too often, brokers are charged with a task of conveying that lenders who write checks are taking risks that information and requests but end up lacing the loan outweigh the value of an introduction. Brokers who beg package with their own influence. beyond industry standards for as much compensation as 5. Don’t pilfer the credit. Rather than giving credit to the lender makes are simply delusional. When a lender those who extend credit (lenders), brokers sometimes makes a loan, that capital, whether it be funded by an represent themselves as the funder out of fear that institution or individual, represents hard work. Someone
34 Private Lender
•••MANAGE & LEAD•••
stock photo
prospective borrowers will apply directly. It is okay for brokers to make public announcements about their services, but the line is crossed when they use a lender’s performance as their own. Brokers providing more of an active role have every reason to use that experience to attract more business, but should clearly define who did what in getting the deal closed. 6. Tenacious, not rapacious. Brokers should get into the habit of following up with the borrower every day or two to collect what the lender is requiring. That kind of tenacity is an asset to any deal. Brokers should refrain from badgering a lender for an update when a system is clearly outlined. There are always brokers that demand to be the lead on every phone call, which gets in the way of principal-to-principal interaction. Preempt what the lender may request, but never extend promises or commitments until instructed otherwise. Work with the lender to collect all the needed items quickly. Brokers who bombard each side with information and questions sometimes appear desperate. There must be a balance between not communicating enough, and wasting everyone’s time. 7. Be loyal. Brokers should make decisions that ensure future business from lenders and borrowers.
Too often, brokers will take a side that isolates them from doing business with either party in the future. If a deal dies or changes because the lender identifies risks that weren’t previously discovered, brokers should argue that decision. If a borrower finds a better lending solution than the one the broker is pursuing, the broker should show support rather than disdain. It should be evident to lenders and borrowers that the broker truly wants the best for its client. Constructive advice or counsel is one thing—but disagreeing with a lender’s terms, structure, or decision shows immaturity, and will likely end the relationship. 8. Be wise with your resources. As brokers taste success, it is prudent to set aside a portion of the income to build a business. Brokers have a hard time making the jump to a more credible business because when a deal closes, there is a tendency to “catch up” or buy a new car. And when brokers get a taste of success in private lending, their appetite grows. Not enough brokers determine ways to bring a consistency to their income by standardizing systems. Few brokers commit to a discipline they know can pay dividends. Brokers who define their business and stay the course have a better chance of building a reputation in the industry.
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