PL The Official Magazine of AAPL PRIVATE LENDER January/February 2017 The Official Magazine of AAPL January/February 2017
EVALUATING YOUR DEAL CHECKLIST BEST PRACTICES FOR A SUCCESSFUL 2017 MAKING ACCOUNTABILITY A WAY OF LIFE
FEATURE Ethics is at AAPLâ€™s Core
Leading Civic Financial to a Place Among the Elite PAGE 22
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2 PRIVATE LENDER
JANUARY | FEBRUARY 2017
New year brings opportunity to listen, learn and implement. by Linda Hyde
Many options available to those seeking financing for investment properties by Nema Daghbandan
Trending industry topics and news from around the world of private lending. a compilation
Impending reforms to Dodd-Frank could present a double-edged sword. by Jeffrey N. Levin
Self-directed IRA holders finding more freedom in how to invest in loans. by Clay Malcolm
Taking Civic Financial Services to a place among the private lending elite. with Jack Helfrich
Special Feature: Ethics
Best to have a checklist of set procedures when evaluating potential projects.
How the JOBS Act opens deal flow for nonaccredited investors.
Attaining and adhering to high standards is at AAPL’s very core.
by Jason Fritton
by Susan Thomas Springer
by Robert “Bobby” Montagne
Manage and Lead
Revamp of Regulation A has increased its viability for more companies.
Winning organizations make accountability a way of business life.
Marketing strategies that work and how to track their effectiveness.
by Chrissey Breault
by Elizabeth Morales
by Kevin Kim
This is a great way to start having your money work for you. by Allen Shayanfekr
Investing in private mortgage notes lets you become the ‘banker.’ by Abhi Golhar
How to make the most of your conference attendance in 2017. by Ruby Keys
JANUARY/FEBRUARY 2017 3
4 PRIVATE LENDER
PL PRIVATE LENDER
R. MICHAEL WRENN CEO, Affinity Enterprise Group
EDDIE WILSON President, Affinity Enterprise Group
LINDA HYDE Executive Director, AAPL
LINDA WIENANDT Editor-in-Chief
HEATHER ELWING-DIXON Editorial Assistant
CHRISSEY BREAULT Director of Marketing and Member Services, AAPL
TIM DRAPE Senior Account Manager, AAPL
EMILY BOWERS Designer
CONTRIBUTORS Nema Daghbandan, Esq., Jason Fritton, Abhi Golhar, Ruby Keys, Kevin Kim, Esq., Jeffrey N. Levin, Clay Malcolm, Robert “Bobby” Montagne, Elizabeth Morales, Allen Shayanfekr and Susan Thomas Springer.
COVER PHOTOGRAPHY Kyle Lau Private Lender is published bi-monthly by the American Association of Private Lenders (AAPL). AAPL is not responsible for opinions or information presented as fact by authors or advertisers.
SUBSCRIPTIONS Visit www.facebook.com/aaplonline or email PrivateLender@aaplonline.com.
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 prohibited. www.aaplonline.com Copyright © 2017 American Association of Private Lenders. All rights reserved.
A New Year Brings New Opportunity To Listen, Learn and Implement I love the start of the new year. At its heart, it is a fantasy of newness and clean slates—of the chance to do things differently and with more attention to purpose. In reality, it’s also one of the most challenging times of year for many of us, as we return from holidays and fly straight into the plate-glass window of an overfull schedule. We don’t often have time to consider all the underlying stuff that gives our work shape, character and meaning, and that time won’t ever appear on its own. But we can choose it. Even in the crazy spells—and maybe especially then, when we’re making so many important decisions. I personally am looking at trends within association management, real estate finance and the housing market. While setting New Year’s resolutions may not be everyone’s cup of tea, it can be a helpful way to make yourself accountable for all those goals you truly want to accomplish. Today, we have tremendous opportunity to listen, learn, and implement. As Clay Malcolm points out in his article, An Expanding Landscape, “Private Lenders are tasked with the challenge of determining their own regulations….” He was speaking specifically to working with borrowers and setting loan terms but I like the sentiment. Every one of us is tasked with determining our own way. Do you need to scale your business? Do you need to re-evaluate your event goals? Maybe it’s time to take a closer look at portfolio yields and take a path – or risk you haven’t before. The current political climate doesn’t necessarily allow us to have a clear understanding of what our compliance-based future may hold, but YOU ultimately hold the power to determine your own future. We at the American Association of Private Lenders and Private Lender magazine look at 2017 as we do every new year – a chance to rejuvenate, improve on successes, and maybe even reinvent a little of who we would like to be. Many of our partners have been introduced to our growing Private Lender team over the past several months, and soon you will start to see an even bigger change in how Private Lender looks! Regardless of the path you choose, we wish you a prosperous year of happiness and health. ■ (for printing)
(for spot color, silkscreen, or embroidery)
(for any black and white application)
Executive Director, American Association of Private Lenders
JANUARY/FEBRUARY 2017 5
Private Money Lending Software Powerful, Flexible, and Easy to Use Used by most AAPL members Dodd-Frank and RESPA compliant Service multi-lender loans or pools with ease Automate budget and draw process for rehab loans Handle ARM, Construction, and Commercial loans Built in Trust Accounting Enhanced reporting and forecasting Online investor access 24/7 Increase productivity and accuracy
800 . 833 . 3343 | the mortgageoffice.com 6 PRIVATE LENDER
WHAT’S CURRENT TRENDING INDUSTRY TOPICS
LIMA ONE EXPANDS TO CALIFORNIA
fund at the end of January and expects to manage assets in excess of $600 million.
Greenville, South Carolina-based Lima One Capital has expanded to California, with plans for a Fresno-area office
to open in the first quarter of 2017, according to chief
executive officer and founder John Warren.
The company specializes in providing financing for flippers, landlords and investor-owners of unoccupied properties and does business in 43 states. Warren saw opportunity in Fresno’s stable housing market and strong rental market. Among its loan products are FixNFlip for the real estate investor looking to purchase and rehab an investment property and Rental30 for those purchasing or refinancing single properties and portfolios. Web: www.limaonecapital.com Phone: 800-390-4212
PUTNAM FUNDING ANNOUNCES NEW LENDING PROGRAMS
KEN SCHLACHTER JOINS RAINSTAR CAPITAL GROUP Rainstar Capital Group, a multistrategy private equity firm based in Grand Rapids, Michigan, recently welcomed Ken Schlachter as a Managing Director of New Business Development. “We are excited to have Ken join our team to represent us in the Detroit market,” stated CEO Kurt Nederveld. “Ken has a strong track record across multiple industries over his career. His strong corporate finance and capital markets experience will greatly benefit our clients.” Rainstar Capital Group makes investments in consumer
Putnam Funding, a boutique bank specializing in debt and
distressed debt portfolios, small business merchant cash
equity funding for commercial real estate, recently introduced
advances, distressed mortgages, high growth companies
several new lending programs to serve its growing customer base.
and residential and commercial real estate. As a capital
In addition to its bridge and middle tier loan programs,
management and advisory firm RCG focuses on the growth
Putnam has rolled out new programs that offer qualified
of its portfolio acquisitions along with serving its portfolio
borrowers up to 100% financing using both debt and equity
companies and clients.
lending platforms. “Our initiative is to continue our path to disrupt the
“Rainstar Capital Group is poised for an explosive 2017,” noted Ken Schlachter. “I look forward to serving our
commercial real estate industry with state of the art lending
clients by providing invoice, purchase order, receivables
programs and exemplary customer service,” said Steven
and equipment financing solutions.”
Goldberg Putnam’s manager. “We want our clients to know that
Nederveld noted that Schlachter would be working
we view each loan as a partnership that is not just for the current
across multiple product lines but would focus heavily on
transaction but for all their lending needs going forward. Where
serving the firm’s small to middle market business clients
banks limit their underwriting to a strict matrix, Putnam looks
with their working capital needs.
at each deal individually based on its own merits. We are able to find value and security where most other lenders can’t.” Celebrating a record year of growth both in lending and raising funds, the company is launching its fourth income
Web: www.rainstarcapitalgroup.com Email - Ken Schlachter: Ken@rainstarcapitalgroup.com Email - Kurt Nederveld: Kurt@rainstarcapitalgroup.com JANUARY/FEBRUARY 2017 7
Sell your loans to PeerStreet quickly and efficiently PeerStreet provides unprecedented liquidity to the private lending industry. We are a platform for purchasing first-lien residential and commercial real estate backed loans.
PeerStreet can be your capital and technology partner Here are just some of the benefits of working with PeerStreet: • Free up capital so you can originate more loans • Reduce your overall cost of capital • Take the hassle out of working with multiple counterparties • Benefit from access to PeerStreet’s diversified investor base • Maintain borrower relationships • Gain a partner, not a competitor
This notice is issued with and forms an integral part of information supplied in the form of a printed document (“Information”) and should be particularly noted in connection with that Information. This document has been prepared by Peer Street, Inc. (“PeerStreet”) for informational purposes only and without regard to the particular needs of any specific recipient. All Information is indicative only and may be amended, superseded or replaced by subsequent summaries and should not be considered as any advice whatsoever, including without limitation, investment, legal, business, tax or other advice by PeerStreet. Any such advice should be sought from an appropriately qualified and/or authorized professional. PeerStreet does not guarantee the accuracy or completeness of the Information which is stated to have been obtained from or is based upon trade and statistical services or other third party sources. All opinions and estimates are given as of the date hereof and are subject to change without notice. The Information is not intended to predict actual results and no assurances are given with respect thereto. The Information is not an invitation, offer or inducement to acquire or dispose of, or deal in, any interest in security, or to engage in any investment activity. Strategies or investments of the type described herein involve risk and the value of such strategies or investments may be volatile. Such risks include, without limitation, risk of adverse or unanticipated market developments, risk of counterparty or issuer default, risk of adverse events involving any
PeerStreet’s Lender Platform
Please contact us to learn more about PeerStreet: Lender Onboarding Team firstname.lastname@example.org
(844) 733-7787 x707
underlying reference obligation or entity and risk of illiquidity. This brief statement does not disclose all the risks and other significant aspects in connection with transactions of the type described herein.
8 PRIVATE LENDER
WHAT’S CURRENT TRENDING INDUSTRY TOPICS
REALTYSHARES RAISES $20 MILLION MORE IN FINANCING San Francisco-based RealtyShares has raised another $20 million for its real estate investment funding platform, less than a year after it closed a $10 million round of financing. The company has raised more than $130 million for over 1,600 properties since its launch in 2013. Part of the capital it raised from new investor Union Square Ventures and previous investors Menlo Ventures and General Catalyst Partners will be used to market a new diversified equity fund targeting institutional investors as well as sales and marketing for its existing business lines. Available only to accredited and vetted real estate investors, RealtyShares’ website offers a mix of fix-and-flip loans, preferred equity and mezzanine products, joint venture equity and commercial loans alongside its capital partners. “RealtyShares will likely become a ‘one-stop shop’ for capital for real estate transactions – whether debt, equity, or mezzanine financing,” CEO Nav Athwal said in a statement. “Our preferred equity products have already begun to exploit a real void in the marketplace left by the dislocations of the Great Recession, and we expect that such products will soon lead to
lending technology will enable corporate banks to connect customers looking for loans with individual and institutional investors alike, all digitally. The increased automation of the lending process may attract younger borrowers who may not have a personal relationship with a lender, and by brokering the relationship between the private lender and the client, banks will be able to maintain relationships with individuals they otherwise might have had to turn away. “By embedding crowdlending into the overall credit lifecycle, a bank can maintain and expand its client base,” explained Jean-Cedric Jollant, a senior product officer at Misys, to Reuters. He added that the technology may also assist banks in “recapturing business from alternative finance marketplaces.” Given that Morgan Stanley recently estimated that P2P lending companies might originate up to $490 billion in loans globally by 2020, it should come as no surprise that banks want to keep a piece of that pie. Some lenders have already started forging into the P2P space by partnering with private lenders themselves or launching their own crowdlending operations. Misys is hoping to streamline the entire process for all parties involved, since the software would make it easier for
an expansion of our commercial lending business as well.”
conventional lenders, private lenders and borrowers to find
SOURCE: Tech Crunch
vendor said that it is currently “in discussions” with
the best solutions for their specific needs. The technology interested banks in the United States, Europe and India.
FINANCIAL TECH VENDOR LAUNCHES PEER-TO-PEER SOFTWARE FOR BANKS Although private lenders have long boasted that they
UPCOMING EVENTS Jan. 30-31, 2017 Alternative Lending Summit
are better than the banks, some might be heading back
Miami Beach, Florida
into “conventional” lending institutions in order to reach
This summit will bring together leading asset managers,
more borrowers if financial technology vendor Misys’
allocators, platforms and key service providers that shape and
new software works out as banks and the vendor hope.
influence the Alternative Lending landscape. The two-day
Misys recently announced that its peer-to-peer (P2P)
summit will feature one-on-one meetings and educational JANUARY/FEBRUARY 2017 9
10 PRIVATE LENDER
TRENDING INDUSTRY TOPICS topics from the front-runners in the alternative lending space.
LendIt’s 100,000+ square foot exhibition hall, lunch and two coffee breaks daily.
Web: www.contextsummits.com/altlending Phone: 908-379-3900
Web: www.lendit.com/usa/2017 Phone: 646-930-6366
Feb. 18, 2017 Think Realty Group Event San Diego, California Think Realty and San Diego Investment Club have teamed up for a day of networking, learning and dealmaking. In addition to real estate investment speakers and educators, the event includes a tradeshow packed with vendors offering tools and resources designed for the savvy real estate investor. Web: www.thinkrealty.com/events/san-diego Phone: 816-398-4053
April 4-5, 2017 IMN’s 4th Annual Real Estate Private Equity Forum Miami, Florida IMN is pleased to announce the 4th Annual Real Estate Private Equity Forum on Land, Homebuilding & Condo Development. Join IMN to discuss all of the critical issues in the real estate private equity sector. eb: https://www.imn.org/real-estate/conference/ W Land-Homebuilding-East-17/ Phone: 212-901-0506
March 2, 2017 Pitbull’s 42nd National Hard Money Conference Scottsdale, Arizona Pitbull’s conference is the oldest and largest organization
April 23-25, 2017 Activate 2017 Newport Beach, California
of its kind in the country: educating brokers, lenders, and
At Innovate, you learned the latest cutting-edge ideas. Now
investors as to the emerging opportunities that exist in hard
it’s time to take those ideas and apply them. Like a chemist
money lending. Pitbull’s success can be attributed to a track
who takes a dormant chemical and activates it, so too will
record of consistently producing quality events for industry
we take Innovate and activate it to help you continue to
professionals to network and grow their businesses.
grow your private lending business.
eb: https://pitbullconference.com/march-2017W scottsdale-2/
Web: http://geracicon.com/activate/ Phone: 949-298-8050
March 6-7, 2017 LendIt USA New York City, New York Join established and emerging online lending companies and investors at the Javits Convention Center in New York for two action-packed days of learning, networking and deal-making at the world’s biggest show in lending and fintech. Tickets to LendIt USA 2017 include all conference sessions with keynotes, panels and company demos as well as access to
June 24, 2017 Think Realty National Conference & Expo Baltimore, Maryland Join others in the real estate investing industry for education, networking and dealmaking. eb: www.thinkrealty.com/events/think-realty-expoW baltimore-dc Phone: 816-398-4053
JANUARY/FEBRUARY 2017 11
An Expanding Landscape Self-directed IRA holders are finding more freedom in how to invest in loans. by Clay Malcolm
he private lending landscape is coming into its own as a popular alternative to
loans from banks and other traditional lenders
who follow strict regulations for borrowers and 12 PRIVATE LENDER
loan qualifications. Private lenders are tasked with the challenge of determining their own regulations for borrowers and loan terms. At the onset of 2017, many online re-
al-estate based lenders are anticipating a potential correction in the real estate
market. Thanks to new regulations instated after the real estate crash in 2008, lenders
(depending on their individual situation).
vestor’s sister is looking to remodel her home
sector in the retirement industry. A new
account holder can originate a note with his
Self-directed IRAs are the fastest growing focus on private lending with retirement
plans has created the desire for more ways
for IRAs to invest in loans. Consequently, the desire for information about IRA investing strategies is high.
Just as it is advantageous for IRA providers
to educate their clients about the benefits and regulations of retirement investing, investor education and due diligence is key while
online marketplace lenders forge business
models that are more sustainable and compliant with emerging regulations.
The present landscape for private lending is
loans for a variety of purposes.
The More Information, the Better Both lenders and borrowers can benefit
from online lending platforms that offer inves-
tor information about the assets they provide. This way investors can understand how their money is going to be lent out, and borrowers
priate strategy for real estate investing if the values do take a downward turn.
A Different Mindset While many lenders may focus on large-
scale market trends, IRA investors can
operate in a somewhat different mindset
Options Abound Another option for IRA lenders is to
become involved with a local lending group, or create an alliance with other lenders
to joint-fund a project or initiative. If, for
instance, a solar energy enterprise is looking for investors, IRA holders can team up with other investors to support the startup.
Within the swiftly growing online lending
can agree to have their money deployed to
market is flooded with borrowers who want
consumers may want to consider the appro-
ing timeframe and interest rate.
has a dedicated channel. The same can be
confined to three or four banks. The lending
a leading asset in the private lending market,
lender controls the terms of the note, includ-
platform arena, IRA holders can participate
said with private lending – borrowers are not
proportions. However, with real estate being
or her IRA and provide the cash. The IRA
a little like the advent of cable TV: It’s no lon-
ger just three channels – every viewer interest
aren’t predicting a downturn of devastating
and needs a loan to complete the project, the
can choose a loan with terms and underwriting criteria that work for them. Concerning IRA loans, it may be advantageous for IRA
lenders to choose an account provider that
offers educational materials and continuing
education classes to fill any knowledge gaps.
IRA holders have many different strategies
available to their accounts. They can take
a personal route and lend IRA money to a
borrower who is close to them and who either doesn’t want to borrow from banks or isn’t
qualified to do so. For example, if an IRA in-
in fractional or whole loans. IRA holders
automatic loans through the platform, or
can choose loans that require approval and input from them.
Both private lending and IRA investing are
rapidly growing markets that will predictably become further wedded in 2017. Feel free to
contact New Direction IRA today to learn more about self-directed IRA private lending. ■ ABOUT THE AUTHOR Clay Malcolm is Chief Development Officer at New Direction IRA, Inc. He oversees most avenues of marketing, teaches continuing professional education and informal classes and webinars, and facilitates the training of business development and client representative teams at New Direction IRA Inc., a self-directed IRA provider that assists more than 12,000 clients nationally. Malcolm, who has more than 20 years’ management experience in various roles, draws upon his teaching background to develop the educational aspects of New Direction IRA and impart knowledge about self-directed IRAs to its clients and prospective clients. Malcolm received his Bachelor of Science degree in Communications from Northwestern University. www.newdirectionira.com/education
JANUARY/FEBRUARY 2017 13
ALPM pursues above-market returns for its investors/ clients by primarily investing in the historically strong and steady Texas real estate market.
A List Partners Management, LLC is a powerhouse team of real estate knowledge and experience providing high-yield alternatives through our managed funds for investors who want more for their money than the low interest rates offered by banks. Additionally, ALPM offers high yield opportunities for Non-US Citizens who are seeking investment options in the USA.
Investors receive semi-annual distributions based upon the net profitability of the fund, meaning that some periods may have small distributions and some periods may have larger distributions. The target of ALPM is to manage real estate transactions that yield greater than 12% annually. Investors may choose to receive a check for their semi-annual distributions or they may choose to reinvest their distributWion to build wealth by compounding their earned distribution. Compare our return rates to the rates banks offer on a five-year Certificates of Deposit, and see why ALPM offers a clear choice for the thoughtful investor.
Regional Center Fund
Each EB-5 project will be its own security filed with the SEC within A List Partners Regional Center. Whereas most Regional Centers offer only a tiny return for EB-5 investors, A List offers a 3% annualized interest rate to EB-5 investors, AND in some projects investors share in a small equity percentage of the project. For non-EB-5 investors investing through the Portfolio Interest Tax Exemption Program, the annualized returns are 8% of greater, AND in some projects investors will receive a bonus in addition to the annualized interest rate on the investment.
A List Partners Technology
Converting Cannabis Industry Legacy Money into Viable Investments
Frost Bank Tower 401 Congress Ave. Suite 1540 Austin, TX 78701 Phone: 512.687.6263
14 PRIVATE LENDER
A List Partners Mentorship Program Turnkey Option to Set Up Your First Capital Fund While being Mentored by Experienced and Successful Fund Managers
Finding Funding There are many options available for those seeking financing for investment properties. by Nema Daghbandan, Esq.
ccording to a study conducted by the
online real estate site Trulia.com, be-
coming a homeowner is still as important as
ever among consumers. In 2016, 75 percent of those surveyed said they dream of becoming
a homeowner one day, although 22 percent of
respondents expect it to become increasingly harder to acquire a mortgage.
If you are one of the lucky Americans who
already owns a home, yet is considering buy-
ing an investment property, pay attention to
these important ideas for financing your real
estate investment transaction.
How to Find Financing If you are new to the real estate invest-
ment world and have a clean credit report and low debt ratios, a traditional bank is
JANUARY/FEBRUARY 2017 15
your best bet for financing. Many of the
gages to investors with good credit. While
keeps on its books, rather than selling on the
expensive, you can still expect great rates
unions or smaller banks offer these types of
According to Bankrate.com, the average
The loans are typically a little higher priced
large banks can offer low rates on mort-
Portfolio loans are mortgages that a bank
investment money is typically a little more
secondary investment market. Many credit
that can increase your buying power.
loans to investors with multiple properties.
interest rate on a conventional 30-year home
than their big bank counterparts but have
loan (as of this writing at the end of 2016)
easier qualifying terms.
around 2.50 percent. These rates are some of
tively fewer regulations associated with them
If there was ever a better time to finance real
lenders by reaching out to local investment
is 3.65 percent, with 15-year rates hovering
Portfolio loans are useful, having compara-
the lowest in the history of mortgage lending.
and higher credit limits. You can find portfolio
estate, we haven’t seen it.
communities or asking your real estate agent.
16 PRIVATE LENDER
Real estate agents have an extensive network of lenders with which they work, and many
have nurtured those relationships specifically for the benefit of their clients.
Seller Carrybacks A “seller carryback” is a loan, or portion of
a loan, that the seller provides and holds. For real estate investors, seller financing is one
of the best options available. A property that is seller-financed means that the seller has
agreed to personally finance the mortgage at
a “market” interest rate with a specified down
payment. These loans typically have a shorter
••• determine your cash flow before considering
In 2016, 75 percent of those surveyed said they dream of becoming a homeowner one day, although 22 percent of respondents expect it to become increasingly harder to acquire a mortgage.
it as a rental property.
PRIVATE LENDING SOLUTIONS Successful and savvy real estate investors
are always seeking to build up their portfolio of properties. A financing strategy many of
there are also private money lenders that can
• Ability to choose from a wide variety of investments
lending can come from family or friends, but provide quick financing at comparative rates. House fix-and-flippers typically use this
type of funding to snap up below-market
priced rehab properties quickly. The rate may and sell the property, you can cut the annual percentage rate in half.
finance the entire property or the difference
Private Money Pools
available to the consumer. These loans are an
investors to provide real estate borrowers
ing with a minimum amount of documenta-
finance their properties. There has also been
escrow company can assist with drawing up
of crowdfunding for real estate. According
between the real estate value and the loan
Private lenders use funds pooled from
excellent opportunity to get immediate financ-
with quick access to the capital needed to
tion and regulatory headaches. A Realtor or
an explosion in this market with the addition
the mortgage docs.
to current regulations, accredited investors
Low Capital? Pursue an FHA 203(k) Loan
home value) are eligible to participate in such
FHA loans are a great strategy for fledgling
with more than $1 million (excluding their crowdfunding endeavors.
down payment of only 3.5 percent, an investor
Putting Your Retirement Funds to Work
costs allowed to be calculated into the loan
can legally use those funds to finance an in-
investors with little start-up capital. With a
can finance the purchase balance, with repair
If you own a Solo 401(k) or SEP IRA, you
balance. The only downside to 203(k) loans is
vestment opportunity. For years, people have
for one year before being able to rent it or
tail business or invest in one, but you can also
that the buyer will have to live in the property
been using their retirement funds to start a re-
place it on the market.
use it to finance your real estate investment.
when enlisting these types of high-LTV loans.
Why Use Solo 401(K) for Property Investment?
There are important details to consider
With a smaller down payment, your loan balance will be higher, which means it is vital to
• You can invest freely with the capital • Financing of real estate projects with tax-free, non-recourse loans
look to re-sell the property in the near future. The seller has the possibility to either
• Tax-deferral benefits associated with the capital
these investors utilize is private capital. Private
be high, but if you plan to quickly turn around term but are a great option for investors who
• Access to tax-free capital from the sale of
Using a Solo 401(k) plan to invest in real
estate comes with a few restrictions. First, you must put the capital gains or net income back
into your 401(k) plan. Second, all costs and ex-
penses involved with the investment property
should originate from the retirement account. While it does require a fair bit of due
diligence, investing into real estate is a great opportunity to take advantage of record-low mortgage rates and use them to make money. There are few better advantages in life than earning profits with “OPM” – Other People’s Money.
With the popularity of real estate crowd-
funding sites and an extensive selection of
private money lenders to choose from, access to capital should not be an issue, as long as
you are a responsible investor who has done his or her homework in advance. ■ ABOUT THE AUTHOR 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 the firm’s nonjudicial foreclosure practice and advises clients on all default related matters. He has closed hundreds of millions of dollars in loans throughout the country.
JANUARY/FEBRUARY 2017 17
Dodd-Frank: The End Is Near? Impending reforms to the Act could represent a double-edged sword for private lenders to the housing and construction industries. by Jeffrey N. Levin
banks. Whether these provisions will be
do deals. On the other hand, the possible
need to scrap the Dodd-Frank Act (the “Act”).
either way, changes could represent a dou-
tions where small lenders and community
transition team signaled that reform will
housing and construction industries.
n the campaign trail, candidate Donald Trump frequently discussed the
Following the election, the President-elect’s most likely come incrementally. The area
repealed or replaced remains to be seen. But ble-edged sword for private lenders to the On the one hand, private lenders may ben-
most likely to be tackled first encompasses
efit from easier lending requirements from
lending by small lenders and community
of capital—opening up more liquidity to
the portions of the Act that have hampered
18 PRIVATE LENDER
community banks and other bank sources
loosening of restrictions may create condi-
banks start competing more directly for the non-standard deals that are currently the
domain of private lenders. To get a handle
on what the future may hold, it’s valuable to look more closely at the Act to understand
what its impact and legacy on bank lending
has been up to now.
Capitol Hill actually understand the arcane
big banks, even he has voiced support for
Is Dodd-Frank on the Chopping Block?
the appetite of Congressional Republicans to
lines of Hensarling’s proposal, rather than
The President-elect’s argument to get rid
of the controversial banking regulations was a populist message: that Dodd-Frank made the large Wall Street banks an even bigger
threat to the nation’s economy and working
families, the opposite of what it was intended to do as the government’s response to the
2008 financial crisis. According to a state-
labyrinth of provisions the Act contains, so
take a hammer to Dodd-Frank is fairly limited. Furthermore, on the other side of the
aisle voluble legislators including Senators
Chuck Schumer and Elizabeth Warren have pledged a bare-knuckle, no-holds-barred
fight if President-elect Trump tries to make good on that campaign promise.
ment posted on the Trump official transition
Guess Who’s Calling Most Loudly for Repeal?
munity financial institutions have disap-
to completely repeal Dodd-Frank is mostly
remain on the hook for bailing out financial
Given the uphill political battle, it’s likely
Services Policy Implementation team will be
instead to deal with portions of the law that
and replace it with new policies to encourage
system, and particularly for small commu-
website, “Big banks got bigger while com-
The reality is that the loudest drumbeat
peared at a rate of one per day, and taxpayers
coming from the large banks themselves.
firms deemed ‘too big to fail.’ The Financial
that the new administration may choose
working to dismantle the Dodd-Frank Act
have restricted lending across the broader
economic growth and job creation.”
nity banks, which played little role, if any, in
The facts line up with the first part of the
President-elect’s argument. Big banks have only gotten bigger since the law’s imple-
the 2008 crisis.
The Trump administration will most likely
rely on a proposal from Rep. Jeb Hensarling,
mentation, with the Big Four—JPMorgan
R-Texas, who leads the House Financial
Fargo—now controlling about 45 percent of
to the President-elect. His bill—called the
struggle to compete as their compliance costs
Dodd-Frank altogether, but rather for elim-
their growth rate for small business loans
provision that lets the government dismantle
cantly lower than for the larger banks.
the Volcker Rule, which imposes restrictions
Chase, Citigroup, Bank of America and Wells
Services Committee and serves as an adviser
total bank assets. Meanwhile, smaller lenders
Choice Act—doesn’t call for abolishing
have gone through the roof, and, as a result,
inating several of its core parts, including a
and individual mortgages has been signifi-
failed banks. He also wants to do away with
reforming portions of Dodd-Frank along the scrapping it completely. Nominee Steven
Mnunchin is a Goldman Sachs alum who has voiced skepticism about Dodd-Frank.
Mnunchin spent more than two decades at Goldman, and later became a movie pro-
ducer and hedge fund manager. In a recent CNBC interview, the Treasury Secretary
nominee said that Dodd-Frank was “way too complicated” and indicated that his agenda was to strip back portions of the law that prevent banks from lending.
Even one of the original authors of the bill,
former Sen. Barney Frank, admits the Act
has aspects that need to be reformed. Frank
told a reporter from the Washington journal The Hill that he believes the law set too low
a threshold—$50 billion in assets—for banks to face increased regulatory burdens.
“That was a mistake,” Frank told The Hill. “We
should have made it much higher—$125 billion or more—and we should have indexed it.”
Other Democrats have signaled a willing-
ness to work in a bipartisan way on modest reforms to alleviate the burden on smaller
lenders, including Senators Sherrod Brown of Ohio and Jon Tester of Montana, accord-
ing to a recent Morning Consult report. Even Fed Chairwoman Janet Yellen has signaled
concern that the smaller lenders struggle to compete, due to the provisions of the Act.
on banks’ trading and investments, and to
Dodd-Frank and Community Banks
majority of its provisions are now engrained
Protection Bureau. The lowest-hanging fruit
sued by Dodd-Frank skeptics, most community
impetus to do so probably takes a back seat
that have restricted lending, particularly for
assets are actually in fairly good shape today.
However, repealing Dodd-Frank in its en-
tirety would be an uphill battle since the vast
weaken the reach of the Consumer Financial
in the banking system. Further, the political
would be to tackle the portions of the Act
to other items on the Trump team’s to-do
those small lenders and community banks.
and renegotiating trade agreements. Few on
nee for Treasury Secretary comes from the
list, like replacing the Affordable Care Act
Although President-elect Trump’s nomi-
Despite the many worrisome headlines is-
banks and small lenders with under $1 billion An easing of their regulatory burden would
be a boon for them that would likely result in somewhat more opportunistic lending.
JANUARY/FEBRUARY 2017 19
Number of Banks in Each Asset Class, 2003-2014
3500 # of Banks
3000 2500 2000 1500 1000 500 0
Less than $100m
$100m to $300m
$300m to $500m
$500m to $1b
Greater than $1b
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total Assets (2009$)
Dodd-Frank critics usually point to the
everything sold into the secondary market.
to accept borrowers that don’t meet the strict
ation today as proof that the new regulations
rowers met an “ability to repay” test—which
financial or reputational risk associated with
analysis, including from the Brookings In-
of the loan, tremendously raising the risk of
reduced number of community banks in oper-
are strangling them. However, more objective
The Act requires lenders to show that bor-
can be challenged in court for the entire life
conditions. Most lenders do not want the
loans outside the QM designation and simply don’t make loans other than Qualified Mort-
litigation for the lenders.
gages. Other community banks have simply
of consolidation, driven by macro factors like
nating parts of Dodd-Frank will help those
the requirements and compliance cost made it
tation of new technologies. Due mostly to
stand exactly how restrictive the Dodd-Frank
stitution, suggests the reduction in the sheer
numbers of community banks is more a result regional population shifts and implemen-
industry consolidation, the number of com-
munity lenders with less than $100 million in
assets has shrunk by nearly a third since 2003, while the number of institutions with greater than $300 million in assets has grown.
These community lenders already account
for nearly half of all small business loans,
particularly for the SBA program. However, they have been clearly held back with
mortgage loans, where they represent only about 15 percent of all residential lending.
Dodd-Frank dramatically reduced the willingness and ability of community banks to
make mortgage loans due to the broad risk retention requirements that it imposes on 20 PRIVATE LENDER
To understand how reforming or elimi-
community lenders, it’s valuable to under-
rules have been for them. The Act provides
stopped providing mortgages altogether, as
unreasonable without considerable volume.
only narrow exceptions to the risk retention
More Competition for Private Lenders?
tion called the Qualified Mortgage (“QM”)
Dodd-Frank focuses on the notion that it
characteristics that are deemed to meet the
community banks and other lenders in the
on their balance sheet, lenders face risk of
have stronger balance sheets now than prior
the QM designation provides a “safe harbor”
OCC capital requirement regulations. As
requirements. It provides for a designa-
While much of the controversy about
definition for loans with pre-established
has harmed these smaller lenders, in fact
ability-to-repay test. Even with just QM loans
asset classes of $300 million to $1 billion
litigation or sanctions because it is unclear if
to 2008 due to all of the onerous FDIC and
against legal challenges, or if it’s only a “re-
a result, successful efforts to get rid of the
still be challenged in court.
tional and community banks may well open
buttable presumption,” meaning they could Worse, the QM designation is a cookie-cut-
ter approach that limits the lenders’ flexibility
Dodd-Frank restrictions on smaller tradia spigot of new lending.
When considering whether competition
••• from banks could put a squeeze on private
Share of mortgage origination volume, by type
Mortgage credit availability index
SOURCE: MORTGAGE BANKERS ASSOCIATION
SOURCE: THE WALL STREET JOURNAL
the Mortgage Bankers Association. (Consider
lion in residential-mortgage loans just during
lender origination, it’s valuable to consider
the size difference. Current estimates of the
private lending industry range from $65 billion in annual mortgages to as high as $100
billion. While that’s an impressive range, it’s dwarfed by the conventional lending indus-
try that totals about $1.6 trillion, according to that Wells Fargo & Co. alone issued $43 bilthe first quarter of 2016.)
Over the past few years private lenders
have enjoyed a more robust growth rate than banks: in 2015, private lenders originated 68
percent more volume than in 2014, according to Mortgage Bankers Association’s Commer-
cial/Multifamily Annual Volume Origination Summation. That annual growth rate is
nearly double the 35 percent increase that
March 2012 = 100
Commercial bank Independent mortgage lender Credit union
commercial banks and savings institutions saw over the same time period.
However, with deregulation, banks’ growth
held up by political backlash—don’t forget
them perform essentially as the banks’
Dodd-Frank regulations may well increase orig-
interpret its repeal as a free pass for “too big
even the subprime parts of the construction
and independent mortgage lenders, causing a
2008 crash—the industry will continue to
has been mostly flat for the last several years.
top of their game.
restrictions will be eased for the traditional
tions of the Act that will help smaller lenders
lenders and community banks. If the Act and
sheet leverage and lend more. Rather than just
like the Basel III standards, are eliminated or
deregulation may be that the easing of credit
vigilant about increased competition from
private lenders that rely on them for liquidity.
rate will pick up speed. The loosening of the
that many on both the right and left will
ination and leverage for both commercial banks
to fail” lenders that played a big role in the
rise in the mortgage credit availability index that
reward those private lenders who are at the
It remains to be seen how fully credit
The most likely scenario is a repeal of por-
banking industry, including for the small
and community banks increase their balance
its regulations, as well as other regulations
more competition for deals, the flip side of
relaxed, private lenders will need to remain
restrictions on banks becomes a boon for the
banks on mortgages and other loans.
Rather than expand into direct loans that
To compete with banks, private lenders
don’t meet the QM designation, it’s quite
tion, ability to find deals and overall market
lenders will prefer to make individual or
will have to rely on their speed of originaexpertise. Even if Dodd-Frank reform gets
possible that community banks and other warehouse loans to private lenders, letting
intermediaries for non-QM mortgages and
sector. In that scenario, look for lower cost of
capital and greater liquidity to prime the private lending industry for even more robust growth in the years ahead. ■ ABOUT THE AUTHOR Jeffrey N. Levin is the founder and president of Specialty Lending Group and Pinewood Financial, which together provide a full suite of boutique private real estate lending services in the Greater Washington, D.C., area. Prior to launching SLG, between 1993 and 2007, Levin was a cofounder and CEO of iWantaLowRate.com and a cofounder and president of Monument Mortgage. Levin is a recognized authority on real estate investing and, as such, is a frequent author, lecturer and panelist. He earned a BA degree from The American University in Washington, D.C., and lives on Capitol Hill with his wife, Dunniela, a Canadian trade lawyer, and his two sons, Jack and Charlie.
JANUARY/FEBRUARY 2017 21
22 PRIVATE LENDER
Backed by a cohesive, committed team, Jack Helfrich looks for Civic Financial Services to join the private lending elite after just a few, short years of impressive growth.
JANUARY/FEBRUARY 2017 23
WITH JACK HELFRICH
ou can sense the exuberant
determination and excitement in Jack
Helfrich when he talks about Civic Financial Services and what’s ahead for the young
company. The Director of Sales is absolutely bullish on Civic, confident of reaching his
goal of funding $100 million in a month in the very near, bright future.
PRIVATE LENDER: Let’s start by having you
tell us about Civic Financial – origin, mission, values, goals, etc.
JACK HELFRICH: Civic Financial Services was founded in November 2014 to provide real estate investors an alternative financing source to conventional loans. Our vision for Civic is to become the largest private money lender
in the country by the end of 2017. In order to
reach that achievement we need to continue
to provide three things: the best service to our clients, competitive pricing and fast funding. PL: Who are the key team members at Civic, and tell us a bit about what they do.
JH: Civic is fortunate to have incredible
affiliations with some of the largest investment
groups within the real estate industry. Civic was
originated by HMC Assets, which acquires NPL’s throughout the United States, and Wedgewood Inc., one of the largest buyers of distressed
residential real estate in the country. Through
these affiliations, we have seasoned professionals working in all aspects of the residential real estate industry which we use to provide top
service to our clients here at Civic. For example, Wedgwood’s claim to fame is that they have
bought and sold a property on every street in
California (you read that correctly). They have
purchased over 35,000 properties in California
since their founding 30 years ago and have col24 PRIVATE LENDER
lected data on all of their properties, the amount of rehab that was required, the number of days the property sat on the market, their competi-
PL: What is it about Civic – structure, people, company culture – that makes it “hum”?
tors’ purchase price, the wait time on the market
JH: Civic is a unique place to work, while
ence, we offer insight to our clients’ investments
around for over 20 years, we are new and
for their competitors’ flips, etc. With that experithat other lenders can’t provide.
PL: What sets Civic apart from its competitors?
our parent company Wedgewood has been definitely have more of a startup “vibe” to our work environment. It is a collection of people
who have grown together as the company has grown, bringing us closer together and more
JH: Civic Financial Services is not just a stand-
focused on our common goals. While we have
ture. It falls under the umbrella of companies that
industry, we are still relatively small and
with Wedgewood and HMC Assets in particular,
sense the unity and collective determination
markets in which we lend. That means better val-
month end comes around.
funding and being able to advise our borrowers
PL: What do you see as the biggest challenges
alone company, but rather a piece of a larger pic-
been making waves as of recent in the lending
is Wedgewood Inc. These unique relationships,
nowhere near where we want to be. You can
allow Civic to be well informed in the real estate
of everybody in the office, especially when
uations for our borrowers, quicker turn times in through every step of the process.
facing institutions like Civic Financial?
JH: The biggest challenge of 2017 will be the
JH: I was born and raised in Marin County,
place. As new private money lenders jump into
to Los Angeles in 2007 to start college at Loyola
tions, rates and fees will be driven down. We
my real estate finance career at a conventional
addition of competing lenders to the market-
California, just north of San Francisco and moved
the industry to fund these investment transac-
Marymount University. After graduation, I began
believe Civic is in a good position to handle
lending group in Santa Monica. I learned the
petitive in the future. We have an entire capital
ers purchasing mansions along the hills of Los
function is to obtain cheaper money for Civic
financial statements of high-profile people in Los
these fluctuations and remain extremely com-
markets division at Wedgewood whose primary through a variety of channels including ware-
house lines, institutional capital and note sales. PL: What lies ahead for the industry, in your view?
processing side of A-paper financing for borrowAngeles. As a junior processor, I was exposed to Angeles and found that no matter how much
money someone has, the ability to qualify for a conventional loan was practically impossible.
Separately, I was always interested in real estate investment, so when the opportunity arose to
JH: When it comes to lenders, I think that the pri-
help start Civic Finan-
can obtain the lowest cost of capital. If you are a
I jumped all over it. I
vate money space will be dominated by whoever hard money lender and your funds are derived from a variety of investors (lawyers, doctors,
family, etc.) and your guaranteed return to those investors is anywhere north of 11 percent, I think that the days are numbered for those lenders.
Additionally, the Fed has established that they
will to continue to increase interest rates through
2017 which narrows the gap between convention-
JH: Again, the industry is shifting from a small
group of private lenders to a larger platform for Wall Street to deploy capital. To survive in the
near future, access to cheaper money has to be a priority for any private lending organization. PL: Now let’s turn to you. Tell us briefly
about your early years, schooling, career progression to this point.
onboarding new sales members for our offices in Los Angeles, Irvine, Boca Raton and Las Vegas.
Headquartered in Redondo Beach, California, my colleague Whit McCarthy and I are developing a
training program for junior account executives to try to harness some of the young graduates from schools like USC, UCLA, LMU and Pepperdine.
PL: What is it that you love about this business?
years until I assumed the role as Director of Sales
with my colleague Whit McCarthy in November 2016.
challenges ahead in private lending?
never ends. I am now tasked with hiring and
ecutive for two and a half
attractive when you compare the qualification
PL: How can one be best prepared for the
JH: My workday consists of responding to inquiries from our team of account executives, which
worked as an account ex-
PL: Where do you trace
and funding process for both products.
routine for you?
cial Services in 2014,
al financing and private lending. An increase of interest rates makes our products much more
PL: What is your workday like? Is there a “typical”
your interest in real
JH: My interest in real estate stemmed from my dad, who was a
commercial developer when I was growing up. He would show
me blueprints of the
new grocery stores that he was working on
and told me about his experiences visiting the sites.
JANUARY/FEBRUARY 2017 25
WITH JACK HELFRICH
JH: For me, whether it was on the sales side or
now in management, the best part of my day is
my time interacting with the people I work with.
UP CLOSE & PERSONAL
A lot of what I do on a daily basis consists of
problem solving, so when an account executive,
processor or an underwriter come into my office with questions on the structure of a deal, I love
working with them to come up with a solution. PL: Are you hopeful, wary or dubious about the economic outlook in 2017 and why?
JH: While nothing is for certain, in any
industry, I personally believe the economic outlook for the real estate industry is
looking promising. While many are waiting to see what happens with the new political administration, there are many promising
signs for the real estate industry, especially in the United States.
Foreign investors are still looking to
purchase real estate, and with recent taxes
and penalties in cities such as Vancouver, the
U.S. real estate market is becoming more and more welcoming to foreign nationals. And
lending firms such as Civic are great resources for foreign nationals who want to take
advantage of financing on their investments. PL: Who do you see as the leaders in the industry?
JH: There are a number of companies in the industry that we view as competitors—and I say that in an endearing way. Lone Oak is
one company that we compete with when it
comes to our wholesale product and the battle for broker business. Additionally, Mark Filler and his team at Jordan Capital do a quality business throughout the United States.
PL: Who has had the greatest influence on your 26 PRIVATE LENDER
Jack Helfrich Director of Sales Civic Financial Services www.civicfs.com If I weren’t doing this… I would be studying astrophysics in my pursuit of being the first person on Mars. When was a kid… I dreamed of growing up to play professional baseball. In 10 years from now, I see myself… At Civic in an expanded role. I believe that there is a bright future here and a tremendous opportunity for the company and myself as an employee in the future. The one piece of technology I couldn’t live without… I recently bought an Amazon Echo, which has voice-activated commands like “play music,” “read me the news” and “order an Uber.” It’s awesome. I keep current by… Reading the news as much as possible. There are a variety of websites I use, but Business Insider is traditionally my “go-to.” To keep a healthy work/life balance… I enjoy surfing, running and playing volleyball with friends. I live in Hermosa Beach, California, so the beach is a big part of my life (on the weekends). Work never seems to end, so I try to take advantage of down time by staying active.
My favorite way to relax and refresh is… Going to the movies and having a good dinner has always been one of my favorite things to do. Three things I tell myself when the chips are down… 1. W hat doesn’t kill you makes you stronger. 2. Trust your instincts. 3. D on’t take life too seriously; you’ll never get out alive. The best advice I ever received… When I was 12 I was golfing with my grandfather in Naples, Florida. I was playing poorly, so naturally I was pouting and whining up and down the course. On the ninth hole he looked at me and said, “If you aren’t going to be any good, at least be fun to play with.”
••• life (professionally or personally) and why? JH: Professionally, I would say my dad has been the greatest influence on my life. When I first
had the idea of entering the real estate industry, my dad was the one who recommended
starting off in finance to better understand how
transactions are structured. He used to say, if you understand how real estate is financed, you can
then branch into any other facet of the business. The rest is history. My mom definitely influ-
enced me the most from a personal perspective. Her positivity and creativity are characteristics I try to emulate every day of my life.
PL: How important are mentors? Who have been some of yours and how have they helped you?
JH: Mentors have been, and continue to be
incredibly important for me and my growth in business. When it comes to mentors I
don’t have to look any further than within
the walls of our Wedgewood office. Gentleman such as Gary McCarthy, Greg Geiser
and Dave Wehrly have all found tremendous success in their line of work, but their work
JH: Professionally, my biggest accomplish-
JH: I would recommend identifying what
for Civic’s first funded loan. That milestone
working from the ground up. As a junior
ment to date was signing the loan documents marked the completion of a long and vigorous process of developing every single aspect of
Civic Financial Services, including our guide-
processor, I learned the organization of loan
files, which helped me when I transitioned to a salesman. Being a salesman helps me now
lines, loan docs, disclosures, logo, pricing ma-
as a sales manager. Don’t take any position
we realized that we were a legitimate company
rience you have.
trix, marketing materials, etc. In that moment, with tremendous potential.
PL: What is on your professional bucket list? What do you have yet to accomplish?
JH: There is one item on my bucket list: to fund
$100,000,000 in a single month. It was only two years ago that we were at a dive bar in El Se-
gundo, celebrating the first month Civic broke $5 million. We joked what it would be like to fund a billion dollars in a year or even $100
million in a month. Today, Civic funds over $50 million per month and we intend to break $1
billion (and the $100 million per month mark) in 2017, which would place Civic at the top of
the list of private money lenders in the country.
ethic and leadership are what I most admire.
PL: What are some important lessons you
PL: What are your guiding principles?
the industry and how have they helped,
JH: I am a firm believer in treating people
industry that you are interested in, then
have learned as you have progressed through shaped and influenced you?
for granted and try to learn from every expe-
PL: What changes do you see in store for this industry?
JH: When you take a look at the recent
reports done on the real estate industry and the fix-and-flip industry in particular, you see that the percentage of buyers utilizing
financing is increasing. This is an excellent
sign for lenders because investors are starting to become more comfortable with the idea
of debt again. An excellent statistic to show
this comes from RealtyTrac’s second-quarter
(2016) report for U.S. home flipping – it states
that 68.3 percent of flips were purchased with cash. This may sound like a very low amount for what is financed, but this is the least amount since Q2 of 2008.
There is also the issue of the market
becoming saturated with investors as more
and more “mom and pop” investors enter the industry. There were about 39,775 flippers in the market, according to the same report—
the way that you would want to be treated.
JH: I have learned to use people as informa-
person when communicating with borrowers
experienced veterans to the industry from
enter the market it will be harder to purchase
information as possible. By learning from
increase of demand. This is just something to
unique sales pitch to cater to all borrowers, no
en’t trying to make flipping into a career and
I think that mentality helped me as a sales
and brokers by putting myself in their shoes. Also, in the private money industry, we see a varying degree of fraud on a monthly basis.
Another principle that I have developed with borrowers is “trust, but verify.”
PL: What has been your biggest accomplishment to date?
tional resources. We have hired skilled and
the most since Q2 2007. As more investors
whom I have learned and absorbed as much
properties at steep discounts, due to the
their experiences, I was able to form my own
keep an eye on. As long as new investors ar-
matter the experience level.
only want to perform one or two a year, the
PL: What suggestions do you have for those just starting out on a similar career path?
market should experience the same steady growth as it has over the last few quarters without too much oversaturation. ■
JANUARY/FEBRUARY 2017 27
Jon Hornik, Partner
MEET THE NATION’S GO TO ATTORNEY FOR PRIVATE LENDERS. With over 20 years experience in the private lending industry, Jon Hornik has earned the respect of both borrowers and lenders alike. Mr. Hornik currently represents and advises many nationwide private lenders. His expertise includes: Closing private money deals Licensing requirements Usury Predatory lending Underwriting Structuring Private placements 732.409.1144 | www.lhrgb.com 28 PRIVATE LENDER
Ensuring Your Portfolio is Solid When assessing potential projects, it’s a good idea to run through a checklist of set procedures. by Robert “Bobby” Montagne
o lender wants to be left holding the note on a property that won’t sell or
has to be foreclosed upon. The goal of an
learn the building industry also can provide value-add opportunities for the borrower. When assessing potential projects to
decision about funding. What may seem like a fair amount of additional work up-front pays back many times over by helping you select
ethical and successful private lender is to
include in your portfolio, the idea of following
the best, most profitable deals.
builders, resulting in gains for both parties
on each investment holds significant merit. A
property and do so, to some degree, for each
evaluate the many important considerations
portant. Remember, it’s not only the horse that
build mutually profitable relationships with and, in turn, additional deals. Due diligence
before funding the deal is in both parties’ best interests. A private lender taking the time to
set procedures before deciding “yea” or “nay” detailed checklist helps you drill down and of the deal so you can make an educated
Many lenders are comfortable qualifying the
deal. But qualifying the borrower is just as imwins the race, but the jockey as well!
JANUARY/FEBRUARY 2017 29
Qualify the Property A plethora of data for nearly every prop-
erty is readily available. The key to this abundance of data, however, is proper interpretation and extrapolation to gauge the viability and profitability of a potential deal.
Perform exhaustive property research The tried and true method of identifying
prospective properties is through a multiple listing service (MLS). An MLS listing offers hundreds of data points for nearly every
residential property, including sale history,
days on market (DOM), physical description,
data helps you gauge the appropriateness of
urban neighborhoods, are very specific about
on market. DOM data is especially valuable
allowed, how close to the property lines the
the proposed renovation and expected time
when determining the loan term and vitality of the submarket. You can further enhance the analysis by overlaying the CMA with
additional knowledge of the neighborhood, quality of other renovations and any other
You should know whether any taxes are
or title is unmarketable. Some sellers of
list-servs for current issues or problems.
ship and title issues, which are best discovered
Analyze results with an enhanced CMA
somewhat common, for a borrower and lend-
(CMA), which examines the sales statis-
tics for comparable properties in the same
ahead of time. It is less than ideal, though
er to spend a fair amount of time and money
property and see the neighborhood first-
hand. You might find that the MLS pictures are overly flattering or incomplete, or that
adjacent properties are dilapidated. Observing the property and its surroundings in
detail can give you a first-hand check of all of the MLS and CMA data and give you a true feel for the neighborhood.
without delay and additional expense.
be expensive, but it gives you greater assur-
ing that serious title issues cannot be resolved
neighborhood, the average days on market
planning even be done on the lot he wants
30 PRIVATE LENDER
It is imperative to make site visits to the
Get Independent Appraisals
Check zoning regulations
and the quality and level of finishes. This
have rules about everything from paint col-
on a project, only to find out just before clos-
neighborhood. A CMA also enables you to analyze the velocity of trading in the
about homeownerâ€™s associationsâ€”they often
distressed properties have complicated owner-
a detailed comparative market analysis
before he buys the property. And donâ€™t forget
Check existing liens or encumbrances: Tax and other public records are another important element of property research.
hood by checking local crime statistics and
You can then use the collected data to create
borrower understands these rules and ratios
ors to selection of materials.
owed on the property, encumbrances exist
Analyze results with an enhanced CMA:
addition can be, and so forth. Make sure your
adjustments that you feel are warranted.
lot size and nearby schools. You can obtain
even more information about the neighbor-
how much building per lot square foot is
Can the addition that your borrower is
to buy? Local zoning laws, especially in more
A full-blown third-party appraisal might
ance that the resulting price estimate ac-
counts for all significant factors. You can save money by settling for a simpler broker price opinion (BPO), but these are less intensive and detailed.
••• Qualify the Borrower The other half of the lending decision rests
on the profile of the buyer. In private money
lending, lenders often care more about the value of the property than the creditworthiness of the
borrower. That said, you may not want to lend to a person with, for example, no experience man-
aging a rehab and a checkered past. Trust is an
important consideration in any relationship, and
the lender-borrower relationship is no exception.
Responsiveness Does the potential borrower respond quickly
to your questions and your requests for infor-
mation? You shouldn’t have to chase material
information from the borrower. It’s your money, and even though the loan is collateralized,
you want to feel that the borrower understands
er has flipped and find out if there have been problems with the condition of the property.
Secret Sauce It’s very important to get to know your
borrowers face to face, establish a relation-
ship and form a solid human connection.
Some lenders never meet their borrowers,
which means they don’t get to evaluate first-
hand whether the borrower is someone they can trust. Look for traits that help achieve
success: organization, intelligence, responsibility, skill, empathy, maturity and honesty. In summary, many lenders know and follow
the steps just noted, but the real way to ensure
you are financing the right deal is to get to know your borrowers and establish trusted relation-
ships with them. This will help you to key in on
any red flags that could lead to potential defaults. In addition, a trusting relationship means you
can assist with problems sooner rather than later. In the long run, this will help encourage repeat borrowers, a win-win for all concerned. ■ ABOUT THE AUTHOR Robert “Bobby” Montagne is a real estate entrepreneur with three decades of experience in commercial and residential property development, finance and sales. Having successfully overseen $15 billion in career transactions, he is among an elite class of real estate innovators that have consistently delivered high-quality returns to partners and investors. A native of Fairfax, Virginia, Montagne earned a bachelor of science degree in economics with honors from George Mason University and a master of business administration from Virginia Tech.
your intense interest in the success of the deal.
Preparation Does the borrower have a realistic plan
and budget for improvements? You should be confident that the borrower’s scope of work represents the tasks that are necessary and
sufficient to achieve the target resale price.
History Notwithstanding the nature of a private
money loan, it’s wise to check the credit of bor-
rowers for past bankruptcies, foreclosures and
liens. Not necessarily a deal breaker, but a com-
pelling property in the hands of a questionable borrower may not make for a solid deal.
References Does the flipper/builder have a track record?
What do former lenders and associates have to say? The borrower may provide you with a list of references, but it behooves you to contact
others who are not on the list, if possible, and
see what they have to say. You can also contact
the owners or tenants of properties the borrowJANUARY/FEBRUARY 2017 31
Tearing Down Barriers How the JOBS Act opens deal flow for nonaccredited investors.
it will continue
• Net worth of $1 million or more, excluding the investor’s primary residence
Unaccredited investors—those who don’t
meet the above criteria—were excluded from making equity investments into privately
by Jason Fritton
According to the SEC, about 10 percent
of the population, or about 12.4 million
households, qualify as accredited investors, although others contend the number is far
lower. This means that the vast majority of ordinary citizens were effectively excluded from investing in equity crowdfunding.
But crowdfunding has since evolved from
when it was first introduced in the United
States over a decade ago. With the introduction of Title III, more investors can enter the market for raising capital. And with only a
small portion of accredited investors actively investing in equity shares of private compa-
nies, the JOBS Act is viewed as good for both investors and entrepreneurs.
From Wall Street to Main Street n historic fashion, investing opportuni-
nonaccredited investors—known as Title III (Reg-
Individuals of modest means now have more
ulation CF)—became effective on May 16, 2016.
freedom to participate in investment options that
crowdfunding rules from the Securities and
credited investors, Title III gives small businesses
limitations on nonaccredited investors prior to
Besides opening up a whole new world to
raising capital and takes a seat among other ini-
often $100 to $500, investors can now put their
bootstrapping, friends and family, angel investors
ise to be the next Google, Apple or Facebook.
ties for ordinary Americans took on new
meaning in the spring of 2016 when equity Exchange Commission took effect.
nonaccredited investors, Title III of the JOBS Act (Regulation CF) expanded options for entre-
preneurs to seek out everyday investors to raise capital and grow their companies via online
By opening up equity crowdfunding to nonac-
and early stage startups an alternative method of
this new legislation. With as little as $10, but more
tial capital-raise scenarios that typically include
money into a startup that they believe has prom-
and small business loans.
Until these changes, the sale of securities in
private companies were typically only accessible
designed to help small businesses raise capital
in equity crowdfunding, an individual had to
The Jumpstart Our Business Startups Act was
by easing certain securities regulations, and
although the legislation was signed in 2012, it
required the SEC to write new rules. The equity crowdfunding portion of the act that applies to 32 PRIVATE LENDER
weren’t available to them before due to previous
to accredited investors. This meant that to invest have one of the following:
• Annual income of $200,000 a year for the past two years (or a household annual in-
come of $300,000) with the expectation that
But this still isn’t an “anything goes” market-
place. The SEC placed limits on nonaccredited
investors in order to build safety and soundness into this new equity crowdfunding option:
• If a nonaccredited investor has an annual
income or net worth of less than $100,000, then the investor can invest the greater of
$2,000 or 5 percent of the lesser of his or her
annual income or net worth.
• If the investor has more than $100,000, then
the investor can invest 10 percent of the lesser of his or her annual income or net worth.
These limits are designed to provide import-
ant protections to ordinary investors while still opening up an avenue for small businesses to raise capital via online crowdfunding.
Nonaccredited investors are protected in other
decided to give it a try. It will take some time to see if its popularity wanes or grows.
The crowdfunding platforms offering the se-
lates into 46 successful offerings on WeFunder that have met minimum fundraising goals.
StartEngine and NextSeed are the No. 2 and
curities also have a number of requirements they
No. 3 platforms for Reg CF offerings to date,
risk of fraud on their sites, providing educational
statistics. Together, they’ve funded 16 compa-
must meet, such as taking measures to reduce the materials to shareholders and meeting require-
ments for handling investor funds, among others. There’s plenty to like about the new rules. The
based on funds raised, according WeFunder’s nies. SeedInvest, FlashFunders and Republic also are offering CF offerings.
Indiegogo, a well-known rewards-based
ways as well. The act requires that the sale of
use of an online platform can translate into a way
crowdfunder, is the most recent entrant. It created
third-party intermediary registered with the
ing it relatively easy for everyday investors to buy
investment bank and equity crowdfunder for
securities occur through a funding portal—a SEC and FINRA. The intermediary acts as a first line of defense against fraud by conducting due
diligence on issuers and curating the campaigns accepted onto its platform.
Investing in startups and small business
is still a risky proposition, one in which the
to raise money quickly and efficiently while makshares. Businesses raising money this way aren’t prohibited from simultaneously raising money other ways. So a startup could use the crowd to raise $1 million while simultaneously funding through other forms of debt or equity.
The investors who invest in a particular
a joint venture with MicroVentures, an online
accredited investors, to initiate an equity crowd-
funding portal. The venture launched with four Reg CF offerings Nov. 15, 2016, and as of Jan. 13,
2017, had already provided more than $1 million via equity crowdfunding.
investor could lose the entire investment or
company via equity crowdfunding are likely
An imperfect option
for many years. On the flip side, high risk can
shareholders these investors are vested in see-
III, there are also a few drawbacks.
one in which there may not be an exit option also mean high reward.
What the Title III means for entrepreneurs The philosophy behind the crowdfunding
portion of the JOBS Act is that access to capital
creates jobs and economic growth, and now busi-
nesses have a new way to access to capital that they didn’t have available previously.
With this new opportunity, a company can
raise a maximum aggregate amount of $1
million through crowdfunding offerings in a
to become company cheerleaders because as
ing the company succeed. Equity crowdfunder
While there are plenty of advantages to Title Legal fees and other fees, such as account-
SeedInvest views it this way: “More investors
ing or potential audit fees, may be an issue
gives a company the ability to turn its users into
quirements may be viewed as cumbersome for
means more supporters. A Reg CF campaign
brand evangelists with a vested interest in the future of that company.”
Reporting requirements give startups and
investors an open, transparent and struc-
tured dialogue to report and get feedback, SeedInvest notes.
for small startups. In addition, reporting re-
small companies that have to report annually
to the SEC and have to post information about their equity raise on their websites.
Companies can only raise a maximum of
$1 million over a 12-month period, and some
businesses will decide that amount is too small to be worth the costs and time involved to engage in equity crowdfunding.
12-month period. The aggregate amount of
Crowdfunding platforms give Title III a try
funding offerings during a 12-month period,
funding under Title III (Regulation CF) rules.
months before final Title III rules were imple-
platform had funded $19.3 million in Reg CF of-
the funding limit from $1 million to $5 million.
securities sold to an investor through all crowdmeanwhile, may not exceed $100,000.
It should also be noted that there are a
number of hoops to jump through, so whether companies will raise financing using Title III in a significant way still remains to be seen,
although early dozens of early adopters have
WeFunder has led the way on equity crowd-
TechCrunch notes that a “Fix Crowdfunding
Act” was introduced in March 2016, a couple of
As of Jan. 13, 2017, investors on the WeFunder
mented. Among its fixes is a proposal to raise
ferings that have reached their minimum funding
Although the legislation passed the House in July,
target. WeFunder says its fundings account for
about 66 percent of the entire universe of Reg CF investment filings. Said another way, that trans-
it has never been taken up by the Senate. With a
new administration taking over, the future of this legislation to adjust the act is uncertain.
JANUARY/FEBRUARY 2017 33
OneVest co-founder and executive chair-
man Alejandro Cremades published an open letter last May, right before Title III became effective, criticizing the structure and requirements under Title III.
“Nowadays startups on average raise, at a seed
stage, in the neighborhood of $2 million-plus. The fact that startups will have a limit of $1
••• fund Insider, which said founder Eve Picker is
targeting “transformational” real estate projects
by connecting developers and investors. As of Jan. 13, 2017, no investment options for nonaccredited investors were listed on the website, which also
offers deals to accredited investors, but there was a “coming soon” sign for such an offering.
The way that Title III is currently written
million per year will either force them to be un-
does not make real estate crowdfunding a very
in parallel to raise the remaining capital from
with some mechanisms in place to protect the
dercapitalized or conduct another type of offering accredited investors, which means more costs
from a legal perspective,” Cremades said in his letter, published on Crowdfund Insider.
“Moreover, it is a mistake that startups need
to take on upfront costs of up to $50,000 to
conduct financial audits before fundraising
and before even knowing if they would raise
any financing at all. It is a significant upfront
risk. Plus, let’s say the startups does raise capital via Title III, they will be forced to report to
the SEC on a periodic basis, which is certainly not going to be just sending them an email
with a brief update on the business. Lawyers will need to be involved and that will cost
money, on an ongoing basis,” Cremades wrote. Funding raising limits and costs are certain
to be impediments for some entrepreneurs, but with just a handful of months with the rules in
place, we’ve seen fairly robust activity on multiple crowdfunding platforms.
New options for real estate crowdfunders? To date, there hasn’t been a big rush
related to real estate in this new space, but we expect some interest to develop. A real estate developer or real estate investor could make a significant purchase with $1 million raised through equity crowdfunding.
FINRA approved Small Change as a Reg CF
funding portal last fall, according to Crowd34 PRIVATE LENDER
feasible option for nonaccredited investors. Even investor, real estate loans can be complex and
hard to evaluate —it’s not as simple as putting
your money in and getting it back out. While we here at Patch of Land applaud the expansion of the JOBS Act, in the interest of the investor, we
will be staying with Title II and maintain that our investors must be accredited. ■ ABOUT THE AUTHOR Jason Fritton, co-founder and executive chairman of Patch of Land, sets the company’s vision and leads efforts to accomplish the team’s mission of building wealth and growing communities. Fritton launched Patch of Land when the SEC implemented Title II of the JOBS Act in 2013 based on his vision to evolve real estate financing to be tech-enabled, data-decisioned and easily accessible to a marketplace of borrowers and investors. He has decades of experience managing and growing startup companies. Prior to Patch of Land, Fritton founded and developed a telecommunications design and procurement firm active in the public sector. Previously he served as director of digital marketing for a national retailer. Additionally he founded and developed several technology-based startups, including Startingline Networks, Tech@Cost and Virtual Realties. He studied biology at Cornell College.
JANUARY/FEBRUARY 2017 35
SPECIAL FEATURE: ETHICS
36 PRIVATE LENDER
Maintaining Accountability Instilling ethics and ensuring adherence to high standards of practice is at AAPLâ€™s core. by Susan Thomas Springer
xactly what are great ethics? Since the American Association
of Private Lenders began in 2009, the association has been com-
mitted to a professional code of principles and standards. The Code
of Ethics was written to inspire members and to help them make fair and responsible decisions. AAPL members agree to the Code, which
includes abiding by the laws, not discriminating, truthful advertising and being honest.
The Ethics Advisory Committee helps put those goals into action
on a day-to-day basis. There are currently five volunteer members. Here they each share how the EAC functions.
JANUARY/FEBRUARY 2017 37
SPECIAL FEATURE: ETHICS
WHAT IS THE STRUCTURE OF THE ETHICS ADVISORY COMMITTEE AND HOW DOES IT WORK?
The Ethics Advisory Committee is an unbiased, mediating
body consisting of five current members of AAPL who are
appointed to two-year terms. The Ethics Advisory Committee
is responsible for administering and enforcing the AAPL Code of Ethics. Should a complaint be filed, either electronically or by mail, alleging a violation of the Code, the complaint
adjudication process will begin. Individuals accused of violat-
ing the Code are given the opportunity to respond to claims
against them. Respondents can seek further review of, and also appeal, adverse decisions. The Committee considers evidence Ethics Committee members at play (front to back): Susan Naftulin, Nema Daghbandan, Kellen Jones, Mike Hanna and Jeffrey Tesch.
WHAT IS THE ETHICS ADVISORY COMMITTEE’S MISSION?
AAPL is uniquely positioned. There are no other large scale
national associations focused on this particular niche of lending.
provided by both the complainants and respondents to reach its decision. There are two outcomes to this process. The first
outcome is to find there is insufficient evidence to support the
claim that a Code violation has occurred. Both the respondent and complainant are notified that this is the Committee’s final decision, and the case is closed. The second outcome is that the individual is found in violation of the Code, the details
of which will be specified by the Committee, which then will
To a great degree, this area is mostly unregulated, as business
determine a sanction.
Lending Act, Real Estate Settlement Procedures Act and most
is provided by both sides of the complaint. The adjudication
ed environment, it is imperative that lenders in the space act
process. The right to due process is so important to the Committee
the eye of federal and state regulators. In the last few years we
respondent the ability to know who the complaint is coming from
purpose loans are exempt from regulations under the Truth in
The Committee works most effectively when sufficient evidence
state lending regulations. In order to maintain a less regulat-
process has been designed to ensure fairness and allow for due
ethically—not only because it’s good business, but to stay out of
that anonymous complaints will not be accepted. This gives the
have seen a dramatic expansion of federal lending regulations
in the event that the complainant is biased or submitting frivolous
promulgated through Dodd-Frank. For now, the regulations mostly leave private lenders alone, but one large bad
apple (excuse the bad pun), could bring a storm of regulations to a mostly unregulated world.
NEMA DAGHBANDAN Geraci Law Firm, Partner Irvine, California
38 PRIVATE LENDER
or malicious accusations. It also makes it easier for the Committee to determine the credibility of the evidence being presented when the source of that evidence is known.
JEFFREY TESCH RCN Capital, Managing Director South Windsor, Connecticut
Ethics Committee members, from left: Nema Daghbandan, Kellen Jones, Susan Naftulin, Mike Hanna and Jeffrey Tesch.
HOW DOES THE COMMITTEE PERFORM ITS DUTIES?
participates in, and apprise the Associationâ€™s leadership of trends, observations and notable highlights.
The Ethics Advisory Committee operates as a board made of
industry and Association-appointed volunteers. The board does its best to formally meet by telephone as often as possible to
discuss the affairs of the Association and the industries it serves,
with particular emphasis on ethics and governance. In addition
Cache Private Capital,
claim, the Committee is working to improve its operations by
to perfunctory tasks and occasional responses to a complaint or
Chief Operations Officer
codifying industry subjects and streamlining processes. The Com-
mittee strives to create content, prepare for the various panels it
JANUARY/FEBRUARY 2017 39
SPECIAL FEATURE: ETHICS
WHAT HAS THE COMMITTEE ACCOMPLISHED?
Two years ago the Ethics Advisory Committee was
tasked to establish a Code of Ethics that would be
followed by all members of AAPL, along with a process for filing a complaint with the committee for any code
violation. The committee worked together over the next
several months to define both the Code of Ethics and the complaint process, and get them published on the AAPL
customers, but should be expanded to include the ethics requirements and responsibilities of a private lender to its investors and other sources of capital.
SUSAN B. NAFTULIN Rehab Financial Group, President & Chief Operating Officer Rosemont, Pennsylvania
website. To further disseminate this information to the members, the Ethics Advisory Committee presents the
ABOUT THE AUTHOR
ence breakout sessions. Questions
Susan Thomas Springer is an Oregon-based freelance writer with a background in banking. Contact her at email@example.com.
Code of Ethics during the AAPL Conferrelated to the Code of Ethics were also incorporated in the Certified Private Lender exam.
MIKE HANNA Investmark Mortgage, Owner & Principal Addison, Texas
WHAT ARE THE ETHICS ADVISORY COMMITTEE’S MAIN CHALLENGES? In 2017, we hope to continue to contribute to the growth
of AAPL and work within the membership to continually
stress the importance of acting well within the law and with ethics and transparency in order to maintain the privi-
leged position private lenders currently enjoy as being
relatively unregulated. In
addition, the current AAPL
Code of Ethics primarily
focuses on a lender’s respon-
sibility to other lenders and its
40 PRIVATE LENDER
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Welcome Relief Regulation A revamp has increased its viability for more capital-seeking companies. by Kevin Kim
egulation A was established by the
Securities Act of 1933, but its restrictive
$5 million offering limit, coupled with exorbi-
tant compliance prices, made this exemption
financially impracticable for a significant por-
tion of capital-seeking corporations. However, new alterations have increased the viability of Regulation A by increasing the offering limit and implementing additional changes that
make it more appealing for certain companies. The updated exemption, also known as
Regulation A Plus (Reg A+), features a bifur-
cated securities framework about equity, debt and convertible debt securities. Tier 1 offer-
ings have an annual limit of $20 million, while Tier 2 offerings have a $50 million cap.
These two classifications share several
regulatory characteristics. The offerings are restricted to only American and Canadian
companies or start-ups with approved business plans. Investment businesses required
registering under the Investment Company
Act of 1940 or reporting to the SEC, business
development organizations, with blank check companies being excluded from using Regulation A Plus.
No ‘Bad Actors’ Allowed Additionally, any organization whose
executive staff previously engaged in certain fraudulent activity are considered “bad
actors” and are prohibited from using Regu-
lation A. Potential issuers must also remain 42 PRIVATE LENDER
JANUARY/FEBRUARY 2017 43
compliant and up-to-date with all applicable
unlimited number of private offerings and
maximums. All investors, regardless of ac-
Companies seeking either tier offering are
following the official filing of the offering
1 offerings. With the exception of securities
anti-fraud and security provisions.
also required to declare an offering statement on Form 1-A before selling any securities. Offering
general public solicitation either before or statement, as long as any resources used after filing have attached preliminary offering cir-
statements consist of an offering circular, which
culars or similar notices providing potential
and additional information that only needs to
circulars. Securities garnered via Regulation
is shared with investors, and specific exhibits
be filed with the SEC. Furthermore, Form 1-A
mandates, among other items, an overview of
the business and its utilization of proceeds, associated risks, financial standing, personnel bios and disclosure of executive salaries.
Regulation A allows for general solicita-
tions and marketing practices, permitting an 44 PRIVATE LENDER
investors a means to obtain updated offering A are not considered restricted securities and
creditation status, may take advantage of Tier to be listed on a national securities exchange,
Tier 2 is only available to accredited investors
or buyers whose investments do not exceed 10
percent of their annual income or net worthâ€” whichever is greater.
Tier 2 offering statements must incorpo-
thus freely tradable.
rate audited financial statements but are
Tier 1 and Tier 2 Differences Explained
whereas Tier 1 offering statements allow un-
Tier 1 and Tier 2 offerings differ in some key
aspects in addition to their associated offering
not required to be qualified under state law,
audited financial documents but must either be qualified or exempt from qualification
under relevant state legislation. Furthermore,
••• Tier 2 companies must provide audited an-
than their SEC qualified minimum amounts,
nual, semiannual and current event updates
demonstrating exceptional market interest.
qualified offerings, the only filing requirement
JOBS Act was implemented, the amended
to the SEC. For those Tier 1 issuers with SEC
Since June 2015, when Title IV of the
is exit reports submitted within 30 days of an
exemption has provided the opportunity for
While the Reg A market is in its relative
ticipate in qualified offerings from U.S.- and
offering’s expiration date.
infancy, it continues to grow exponentially. Just within the last few months, the SEC
Qualified 12 new companies for offerings. That brings the total to 74 businesses that
qualified in 2016, for a total scheduled $1.6 billion in capital raise, with the number
of approvals projected to increase over the next several months. It is estimated that 11
companies have already raised more money
non-accredited investors worldwide to par-
Canada-based companies. While the rules are designed to allow more mid-size or late start-
ups to raise capital across a wide-range of the
companies recently approved for A+ offerings, many are mature and a more suitable option
for this type of capital raise. With safeguards
in place and a strong group of newly approved Reg A+ offerings, building consumer confi-
dence and interest in this type of investment is
showing to be a roaring success. ■ ABOUT THE AUTHOR Kevin Kim is an experienced corporate and securities law attorney and Senior Associate with the Geraci Law Firm, a law firm dedicated to providing reliable and innovative legal solutions. Kim focuses his practice on real estate matters, specializing in private placements and other alternative investments for private lenders, real estate developers and other real estate entrepreneurs. His work includes ensuring clients are compliant with the applicable securities laws, structuring strategic partnerships and creating innovative solutions. Kim’s securities and corporate practice also includes preparing complex private and public securities offerings for alternative investment platforms for clients throughout the United States and abroad.
Contact Tom Schmidt at 785-889-1300 or firstname.lastname@example.org to discuss your IRA custody needs.
JANUARY/FEBRUARY 2017 45
MOST INTERESTING MAN in
HARD MONEY Meet Leonard Rosen, the CEO of Pitbull Conference as well as several other leading experts in the private lending industry this coming March in Scottsdale.
PITBULLâ€™S 42nd NATIONAL
HARD MONEY CONFERENCE Thursday March 2, 2017
A one day event for...
Real Estate Brokers, Lenders & Investors
Learn how to start & manage your own real estate fund Learn how to create alternate streams of revenue Learn how to raise capital Network with lenders actively deploying capital 46 PRIVATE LENDER
MANAGE AND LEAD
The Future of Leadership Winning organizations don’t just make accountability a priority, they make it a way of life. by Chrissey Breault
hroughout the last decade there was a considerable investment made in
Flexibility and Agility A research study from the Institute of
executive training. A poll conducted by
Leadership and Management suggests the
70 percent of Americans considers leader-
leaders will be flexibility. For future success,
researchers from Harvard University showed
leadership practices are adapted to the transforming context and carried out successfully.
single most important feature of future
managers will need to become more agile,
simple idea but a fact. In an increasingly
generated by changing workplaces.
ganization of almost any size. Businesses will
many leadership development programs
to cultural and technological changes that will
side their home markets or are part of a team
What will be the future of leadership?
job will be to ensure key management and
ship crisis a significant factor in the national economic decline. This is a very confusing
situation – on the one hand, we see a rising demand for leadership skills; on the other,
seem to fail to deliver their promised results.
responsive and adaptable to different needs Those managers will also need to be open
impact the core of enterprise operations. Their
Business globalization is no longer a
globalized world, it is still an issue for an or-
become aware that leaders who operate outthat stretches beyond borders require a host
of specific skills – from coping with ambiguJANUARY/FEBRUARY 2017 47
MANAGE AND LEAD
ity to having effective interactions or making decisions in unfamiliar environments. All those become increasingly challenging in new surroundings.
Increased Demand for Core Competencies A report published by the Institute of
Leadership and Management unveils another important future leadership trend to be an increase of interest in core skills such as
motivating direct reports, communicating
effectively, setting goals and delegating tasks. The changing settings are likely to impact
the performance of those core tasks – manag-
ers will be operating with less time on their
hands and in a much more complex working environment. In short, basic management tasks will become increasingly difficult to
perform and managers might require additional training to help them adapt.
Sustainability The U.S. Human Capital Effectiveness Re-
port from PricewaterhouseCoopers suggests that next to agility and talent, one of the
most important values in future leadership
al has been trying to tell you?
see collective leadership styles flourish all
of demonstrating social responsibility by
require a radical transition in thinking.
concern for the greater good.
collective leadership. It’s likely in a few years
mental issues – focusing on sustainability,
a brand-new form of leadership that will
term consequences of their decisions relating
new working environments, where adaptive
ing place in the leadership sector – the arrival
safety. Social responsibility will become em-
al but by a group of people.
Companies will need to learn how to mitigate
will be increasingly responsible for deliver-
ing this leadership style to drive innovation,
the workforce and business climate. Maybe
by an entire social network. Once Millenni-
will be sustainability, understood in terms
balancing achievable business results with a Sustainability is much more than environ-
managers will be looking toward the longto the environment but also to health and
bedded in business processes and managers
Another strong trend for the future is
we won’t see any heroic leaders anymore but
Generational Difference Management
perfectly match the requirements posed by
a major generational transformation that is tak-
challenges cannot be tackled by an individuMany organizations are already embrac-
ing insights about how their decisions impact
which is understood as a process initiated
this is something your marketing profession-
als take hold of leadership positions, you’ll
48 PRIVATE LENDER
over the place – but this new approach will
Finally, trend-watchers are acknowledging
of Millennials on the global leadership scene. the generational differences, which are guar-
anteed once Millennials get hold of executive jobs. Companies will also have to develop a
host of new strategies to make the most from the unique qualities of this generation.
Millennials are generally considered team
players and high achievers. They’re indepen-
their commitments and expect managers to follow up on actions promised with them-
dent but tend to follow rules. They’re confident
selves, colleagues and customers.
innovation is their natural world. All this can
Making Accountability Work
but they also trust authority. Technological
be expected to impact their leadership styles.
The Future of Leadership All-in-all, leadership is destined to change
radically. With many leaders feeling unpre-
pared for the economy around them, leadership development programs should flourish
and strive to provide training aimed at developing skills for addressing problems arising from globalization and current leadership gaps.
Expect to see more management policies
When attempting to restore or enhance
accountability, most leaders mistakenly start by defining the tasks people need to be held
accountable for. Instead, the first step should always be defining (with specificity) the
expectations for individuals, teams and the
company. This requires defining the target or
objective so clearly it minimizes the interpre-
tation of the outcome or result.
Start by defining the desired outcome or
result as clearly as possible. • What does your organization’s destination need to be?
• Where are you going and what will it look like when you get there (defined in ways
that matter and mean something to everyone – well beyond just the financials)?
• Get your team focused on achieving the right outcomes and using their brains to ponder, explore and determine the necessary actions or tasks.
Next, decide who will do what, by when,
promoting sustainability and witness a transition from the repressive, control-and-command management style to its democratic
assortment. When it comes to leadership of the future, we’ll finally see its human face
working as a growing factor in business success by many (global) brands.
In a more democratic workplace, how do you
build policies that help build real accountability? In a global economy, it is increasingly more
important to understand the wants and needs of those we serve; that is, the internal and external stakeholders. Having awareness of this means leaders must be able to shape the culture of
their organizations to address changing needs. Accountability is a word that gets tossed
around a lot in many organizations. Unfortunately, the reasons typically evolve around the lack of
accountability rather than how an organization is winning by holding each other accountable.
At the organizational level, accountability
is all about creating a culture where the right things get done, on time, consistently. In
cultures with real accountability, people say
they’re going to get something done and they do. Employees expect each other to uphold
JANUARY/FEBRUARY 2017 49
MANAGE AND LEAD
••• which frequently results in a negative outcome.
with what resources. As a leader, you should
to winning as a company or a team?” Make
– either on purpose or by default – does not
er than different interpretations of it.
significant initiative or task. Even when a team
clarify and constantly communicate it, so peo-
culture of accountability. The difference is,
question yourself, “How does this get us closer sure someone has clear ownership of every
Keeping your definition of winning a secret
support a culture of accountability. Instead,
is involved, you still need one person to be in-
ple never lose sight of it. Make it visual, make it
line of sight, peer pressure and follow-up.
toward the destination. This ignites the com-
dividually accountable to create the necessary When identifying the target, clarify the cur-
rent state as well as the end state, as this creates a critical baseline that enables measurement of progress or achievement of milestones. Then
transparent and regularly post progress made
petitive spirit and desire to win in most people. And it is one of the fastest ways to prompt brains to think about something.
Finally, measure results using both qualita-
assign the necessary resources to get it done.
tive and quantitative data. This helps to lessen
Closing the Accountability Disconnects
It also helps minimize employees going rogue,
uncertainty while keeping focused and engaged.
Providing ongoing feedback reflects reality rathEvery successful organization wants a
winning organizations don’t just make accountability a priority, they make it a way of life. ■ ABOUT THE AUTHOR Chrissey Breault is 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 Director of Marketing and Education Services with the American Association of Private Lenders.
One of the biggest disconnects in ac-
countability management involves assigning
resources and responsibilities when you don’t have clarity around the outcome. Without
carefully assessing the gap between where you are now and where you want to go, it’s impos-
sible to accurately allocate the right amount of time, money and resources to get things done.
Capital Provider for Private Lenders
When the outcome isn’t clear, organizations often discount what it will take to get there.
When things don’t go as planned, they tend to give up, stop following up and start behaving in a manner adverse to accountability.
Accountability also requires ongoing feedback.
Employees need to hear what they’re doing well,
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not so well and how they can improve. This rarely
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happens unless there are formal systems and
To nurture accountability, feedback must
become a way of working every day versus
a seldom used and often-awkward management responsibility. Additionally, effective feedback always compares actual performance to excellence or the desired state,
thus reinforcing the importance of defining winning from the beginning. 50 PRIVATE LENDER
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Make the Most of Your Marketing in 2017 Whatever strategy you choose, do it with purpose, track it and make your decisions based on your data. by Elizabeth Morales
ith so many new marketing trends
taking place these days, how do you
Maybe you are doing great by attending
tradeshows, but your social media is neglect-
• Price: What does the market say about it? • Promotion: How, when and where can
go about choosing the ones for your business?
ed. Maybe your email marketing is doing
does that mean? It means you need to be
and few between—or totally nonexistent.
A Web ‘Identity’
good old “4 Ps:”
plete strangers and their five yellow stars, it is
Pick what makes sense. But what exactly
tracking every penny spent in marketing
and figuring out where your biggest ROI has been. Continue to invest in that which has
great, but your customer experiences are far Perhaps it’s time to go back and revisit the
given you the greatest returns, and see where
• Product/Service: How does your prod-
plan of action for them.
• Place: How can buyers find you?
your weak points are to further develop a
52 PRIVATE LENDER
you reach your audience?
uct/service solve a client’s problem?
Since we live in an era where we trust com-
imperative that you have a web presence and,
within it, a way for people to see who you are.
Sure, it is great to have an engaging website,
but how about a place where people can read
testimonials from some of your customers?
cautionary step on your part.)
you have (with their permission), or you can sign up with a customers’ review company
2. Be sure you know where every email address in your database came from.
such as TrustPilot.com or Bazaarvoice.com.
These companies contact customers on your behalf and authenticate the reviews. The
catch is, if someone leaves a bad review of
your company/service, there is no way to bring
3. Make sure you have permission to send emails to these addresses. The best way to accomplish the third item
is to obtain emails by having people text a
company, and getting a response with a
number you get from your email servicing
If email marketing is the piece you have
request to put in their email address. This
this is one that is fairly inexpensive—rang-
of getting emails, but instead it is all done
depending on number of email addresses
proof there is: the person actually requested
been neglecting in your marketing plan,
way you never get involved in a “paper way”
ing from free to less than $200 per month,
electronically and you have the greatest
you have and number of emails you send on
to be part of your email list.
a monthly basis.
Among the most well-known companies
What if you haven’t yet started with vid-
your email, who clicked on what link, who
to create an inexpensive, professional video
leted your email before opening it and, finally, who reported you as spam.
One spam report for every 1,000 emails
sent does not raise a red flag. Anything above
company such as KillerExplainerVideo.com about your company/service. Why are they
so affordable? Because they use templates— hundreds of them, so you have plenty from which to choose.
If you wanted to pay for your own video
that will and may cause these companies to
and not choose from a template bank, it
very cautious of their own reputation with
for a 60- to 90-second video. Some of the
drop you as a customer, as they are always
the federal government. If any of these companies is seen to be sending spam email, it can get shut down.
There are three ways to avoid having your
company dropped from an email service
company for too many spam reports (that means someone clicks on “Spam” at the bottom of your email):
1. Do not buy email lists. (This is a good,
send out. Your response rate will increase because people are more inclined to respond to a personalized video than to a simple email.
But why video all together? Here are some
statistics that may surprise you. According to HubSpot:
• “Real estate listings that include a video receive 403 percent more inquiries than those without.”
• “50 percent of executives look for more
information after seeing a product/ser-
Video eos? Then do it now! Don’t know how? Get a
never received your email and why, who de-
hearing back from them. You can use Bomb-
vice in a video.”
and InfusionSoft.com. These companies will
do a great job giving you data on who opened
clients or contact prospects if you are not
Bomb.com and make a video of yourself to
it down. Once a review is up, it is up forever.
are Mailchimp.com, ConstantContact.com
On the same topic, a different kind of
video you can use is one to respond to your
You can do that yourself, by posting the ones
could cost you anywhere from $500 to $5,000 companies to keep in mind are ExplendidVideos.com or VideoZeeInc.com.
Remember, these last two are if you want
• “59 percent of executives would rather watch a video than read text.”
• “More video content is uploaded in 30 days than all three major U.S. T.V. net-
works combined have created in 30 years.” Any questions still on the need and benefit
for videos on your site? The data is clear.
Social Media If social media is your neglected piece,
become active on LinkedIn and Facebook, to begin with.
You will get a lot out of your interactions
to give the idea and have the video company
on LinkedIn. The idea is to keep yourself
writers produce a script, have the creative
product/service, they will think of you be-
review and suggest new things, have their
active so when people have a need for your
team sketch the video, get a person to do
cause you are present in their minds through
you. Sure, it will be more money but it will
relevant and informative. People are very
voice work, and finally get it approved by be totally unique to your company.
your postings. Make sure your postings are choosy with what they read these days.
JANUARY/FEBRUARY 2017 53
Do the same on Facebook on your person-
al page to promote yourself and also open
a Facebook Business page to promote your
business. You can try doing some Facebook advertising and see how it goes. The trend
has been that it works great on B2C and not so much for B2B.
You will not be doing much Instagram or
Snapchat unless your audience is Generation
••• that information. Don’t make a big pitch
about your service, but instead show people the value in knowing you and sitting down
ABOUT THE AUTHOR
Elizabeth Morales is the Business Development Director for Applied Business Software, makers of The Mortgage Office, a leader in private lending loan servicing software. She has a proven record in senior operational roles and is known as an inspirational leader and a data-driven marketer. She has created full-scale marketing platforms; handles media, public relations and brand management for ABS; and is a strategic planner and forward thinker. Morales has a Bachelor of Arts degree in Spanish Literature and a Masters degree in Business Administration. You can contact her at email@example.com.
the more attendees you will have and the
Blogs Apply this rule to blogging as well. If you
can only do one thing in 2017, blog. It keeps
thinking about it.
keeps you at the forefront of your business.
Website What is better than a cool-looking
website? An interactive website. Yes! A big trend coming up in 2017 will be interactive
websites. This contributes to the experience your visitor has on your site, (the visitor ex-
perience being one of the key factors search engines look at when determining your
organic rank position). It sends the message that you appreciate their visiting your page and really care about their opinion. Make
their comments untraceable so people feel comfortable leaving you their feedback.
Live Interaction Along the interactive experience, if you are
at a tradeshow or anywhere where you would like to get live audience participation, you
can use PollEverywhere.com. Your answers
will be displayed immediately on the screen. This beats the good old “raise your hand if …” question.
Webinars Webinars are still a way to get your mes-
sage to a lot of people at the same time. Make sure your webinars provide rich content for the folks attending. Figure out what your
prospects want to know from you and share 54 PRIVATE LENDER
make your decisions based on your data. ■
for your webinars. The better the content,
Z (13- to 24-year-olds). However, if not now, they will be 5 to 10 years from now, so start
this 2017, do it with purpose, track it and
your content fresh, it is great for SEO, and it One of your main goals should be to estab-
lish yourself as an industry leader. Blog away. Whatever you chose to do for marketing
C A P I T A L
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56 PRIVATE LENDER
The Crowdfunding Advantage If you want your money to work for you, this is a great way to get started. by Allen Shayanfekr
nvesting your money is a challenge. You’re tying up your funds for quite some time,
letting someone else have access to them,
while you twiddle your thumbs and wait for the magic moment when you’ll have that
construction project. For renovation and
ground-up projects, you’ll see real progress being made to increase the value of each project selected by you, the investor.
money back again. Whether you’re investing
Low Investment Minimums
hoped, ultimately have plenty of money for
getting started, you’ll rest easier knowing
move forward with some other major event in
of these companies for as little as $1000.
money to help improve your profits and, it is retirement, to fund a child’s education, or to
your life, you need to know that your money is going to work for you. Ideally, you want to get it started fast so that you can see substantial gains in your portfolio as soon as possible.
Real Estate Crowdfunding as a Passive Investment Option Often with projected double-digit net
return on each investment, you have the
If you’re feeling a little uncertain about
you can get in on the ground floor with many That means that you can take a chance with a minimal amount of money to get started,
then increase your investments as you learn how effective real estate crowdfunding can be. Of course, the more you have to invest,
the more you stand to make. That initial step into a new investment strategy, however, can
be a difficult one. Knowing that you can start small and work your way up helps you take
chance to see investment results that you’ll
the first step more easily.
especially true if you diversify your portfo-
Low Risk Alternative Investments
ments mature at staggered times throughout
choose from a variety of projects or focus on
you, real estate crowdfunding is a great way
needs. As an investor, you can decide how
love with real estate crowdfunding. This is lio and arrange things so that your invest-
the year. If you want your money to work for to get that started.
When you work with a company like
Sharestates.com, you have the option to
Real estate crowdfunding allows you to
one, depending on your current investment
much risk you’re comfortable taking at each financial level. Some investors prefer to stay
with locations with which they are very famil-
choose the exact investment you’d like.
iar, while others look for the economics in the
drive down the road where the properties are
investors can be certain the company has tak-
These are real, tangible assets. If you were to located, you would be able to see a building and/or possibly a renovation or ground-up
deal. Either way, at Sharestates, for instance,
en a deep dive into the underwriting, making sure the risk is as minimal as possible.
JANUARY/FEBRUARY 2017 57
Monthly Returns for Real Estate Crowdfunding Investors For monthly cash flowing projects, inves-
reward. There are opportunities that offer a
charges a small fee to the sponsor as well as
ments with a balloon/profit share at the end
ty offering. This is how Sharestates comes up
hybrid of debt and equity--monthly pay-
tors will see their distributions arrive into
of term, along with the return of principal.
tion of the investment. For equity projects,
the risk for each project. Depending on over
at the end of term--making the investment
sorâ€™s track record, a grade is determined that
their accounts once a month for the dura-
Sharestates uses a grading system to assess
to the investor for servicing the loan or equiwith its projected double-digit net returns.
interest and principal are generally paid back
30 variables including the LTV and spon-
Transparency of Real Estate Crowdfunding Platforms
riskier with the potential for a much higher
equates to an interest rate. Then, Sharestates
a company like Sharestates, you can avoid
58 PRIVATE LENDER
Through real estate crowdfunding with
••• many of the headaches and non-transparen-
crowdfunding, you can start small or go
project worth investing in. ■
your own. They make it easy to start building
Sharestates, there’s no effort involved for
ABOUT THE AUTHOR
cies that come with investing in real estate on your real estate investment portfolio. Even better, the associated risks have already been figured
out. You can go through the available profiles and look at something that you can understand: properties,
economics, and exactly what the developers have planned for the project. Real estate
crowdfunding offers a tangible investment opportunity that you can understand.
When you take the plunge with real estate
big--it’s all up to you! With a company like you except that which occurs behind a
computer screen. You don’t have
to deal with contractors, determine what’s needed for the
property, or discuss zoning regulations. You just have
to make the investment and
watch the returns build up. Ready to give real estate
crowdfunding a try? Whether
you choose Sharestates or another
crowdfunding portal, the experts are ready to answer your questions or help you identify a
Allen Shayanfekr, Esq., is the CEO and Founder of Sharestates, which offers investors direct access to real estate investments through an online marketplace and enables property owners and developers (aka sponsors) to gain access to capital quickly and at a competitive rate. Shayanfekr’s legal expertise (currently admitted to practice law in New York and Connecticut) in securities law is paramount to Sharestates’ ability to promote and produce public and private offerings in a highly regulated space. He interacts regularly with the Securities and Exchange Commission, in addition to spearheading daily operations at Sharestates. Shayanfekr received his J.D. Magna Cum Laude from Touro Law Center, where he graduated in the top 6 percent of his class, and his B.A. in Political Science from New York University.
JANUARY/FEBRUARY 2017 59
Role-Playing – For Real You can become the ‘banker’ through investing in private mortgage notes. by Abhi Golhar
ouldn’t it be nice to play the role of
a bank with your investment funds?
You’d get to receive above-market returns
while avoiding the incredible volatility of the stock markets.
You may be surprised to learn that becoming
a lender is rather simple. There’s no shortage of people who need financing, and the powerful
collateral of real estate makes lending to home-
owners safe, effective and nearly pain-free with proper agreements in place.
You’re about to learn a fascinating al-
ternative investment option called private mortgage note investing.
What are Private Mortgage Notes? Private mortgages, also called mortgage
notes, are carried by non-traditional lenders for a higher rate of return than what banks receive. They can be offered by individuals
like yourself, or companies not in the busi-
ness of income-based lending practices.
While you can write up a mortgage note
yourself, including the interest rate and other payment terms, it’s usually better to have a
How much can I expect to make?
gage on your behalf. The cost is nominal, and
nothing is set in stone. However, it is fairly
extremely complicated lending and securi-
13 percent range even when the mortgage rate
professional loan originator create the mort-
As with all investment opportunities,
the convenience of not having to deal with
typical to receive returns in the 10 percent to
ties laws is well worth it.
offered to the borrower is in the 8 percent to
60 PRIVATE LENDER
10 percent range.
How is this possible? The mortgage note
itself is often passed from investor to investor at a discount. The first investor has many reasons to discount a note for a lump sum payment.
Perhaps he’s a real estate investor who needs
money for a down payment on a new investment
investors looking for safe, high-yield returns.
time. The difference is that instead of being paid
more favorable terms that heâ€™d like to purchase
What are the downside risks?
ual, often at a higher rate of interest. Increased
note heâ€™s about to sell you. Some note brokers
similar to corporate bonds, in that you receive
property. Or, there is another note with even
right away, if only he could raise cash from the specialize in trading these discounted notes to
Private mortgage notes are functionally very
a fixed payment over a pre-specified length of
by a company, you are being paid by an individ-
risk that comes with individual borrowers is
offset by the strong collateral that the mortgage obligation is attached toâ€”namely, the house.
JANUARY/FEBRUARY 2017 61
In the worst-case situation, the mortgage
note falls into nonperforming status, as the borrower ceases payment as scheduled. In
this case you have several options: you can restructure the payments due to hardship, foreclose on the home, or simply sell the
nonperforming note to another investor who specializes in buying nonperformers. In any case, you’re protected as long as you invest
in notes that have a high amount of equity in the underlying asset.
Determining equity in the asset Partnering with a local real estate agent
who has an eye for real estate investments is critical to your success in valuing an asset.
Why? Agents can pull comparables for the subject property in a matter of minutes to
••• give you a full scope of active, pending and
• Not to cross major intersections, railroad tracks, or bodies of water
of the asset. A factor to remember is the
Getting educated with the local real estate
sold properties within a few square blocks
velocity of product in the marketplace (“days on market”). A low number helps to solidify potential exit strategies for your borrowers and increase your confidence in the deal.
In order to find the right comparables to
determine the value of the asset, I suggest using the following search metrics:
• Less than 0.25 miles and a maximum of 0.50 miles from subject property • Sold homes within 30, 60, and 90 days from subject property • Similar bedroom, bathroom and square footage configuration
WORKING FOR INVESTORS. Safeguarding YOUR Financial Interests.
market and its inner workings is very important in order to realize high returns with private mortgage investing. If you are not well versed in real estate or valuation of assets, practice! And remember, it’s never too late to start! ■ ABOUT THE AUTHOR Abhi Golhar is the host of “Real Estate Deal Talk” and Managing Partner of Summit & Crowne. Abhi uses a “valueadded” approach to invest in real estate renovation, new construction and development opportunities in the Southeast United States. He actively educates and works with investors to deploy market-driven strategies that yield success. He holds a B.S. in Electrical Engineering from the University of Michigan. You can find him on Twitter, Snapchat, and Instagram - @AbhiGolhar.
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Visit our website or call to request a proposal today!
REIGuard.com / 888-741-8454
REIGuard is the brand for the residential real estate insurance Program offered by National Real Estate Insurance Group, LLC and serviced by Affinity Group Management, Inc.
62 PRIVATE LENDER
JANUARY/FEBRUARY 2017 63
The Conference Advantage Pick your business conference opportunities carefully, then make a plan to get the most out of your attendance. by Ruby Keys
ast year was a very busy one for us all, and now it is time to dive into 2017â€”
discovering new ideas and improved strat-
leagues, it also offers a process for networking with other professionals, getting up to speed
on current business trends and planning how
the most out of every conference that you do attend or sponsor.
With the election over and new adminis-
to build a bigger book of business.
tration coming into the White House, chang-
these opportunities is through professional
work and attending the meetings that matter
quickly. There will be new markets and new
seem like a chance to take a step away from
ence opportunities to choose from, and only
egies and identifying prospective business
opportunities. One way to take advantage of business conferences. While these events may the office and spend time with friends and col64 PRIVATE LENDER
Finding the right balance between office
to your business is key. With so many conferso many you can attend, it is essential to get
es in the business climate will be happening opportunities, along with the challenges of
competing with existingâ€”as well as emergingâ€”competition.
What will you do to make your business
stand out? Professional conferences are a
way to get a step up on your competition and
discover new ideas and strategies for growing your business.
Here are some of the ways you can get the most
out of attending business conferences in 2017.
Identify the Value of Each Conference There will be many panels and lectures to
choose from this year. Identifying and com-
mitting to the ones that will provide the most benefit is key to growing your business. Be-
fore allocating hundreds of dollars and booking flights, carefully examine the schedule of the conference to ensure it aligns with your
business goals. Review the list of presenters and their background for the information
they are providing. Look at the length of time allocated for each topic of interest, and if the presenter will be made available for Q & A.
Often, a business conference can provide
the best opportunity to find new clients
or future business partners. Find out the
keynote speakers and who will be attending. Most events will be promoted on social me-
dia or the sponsor’s website, providing a good representation of the type of people who
plan on attending. Recognize the networking
value of each conference, and determine how networking with other attendees—whether
competition or peers—can benefit your longterm business strategy.
you don’t do proper planning beforehand,
professionals, be sure to bring plenty of
loss. Set a goal and do your best to make
material you wish to distribute. Be ready to
you may end up writing it off as an overall it happen. How many new clients do you expect to walk away with?
Before the conference, familiarize yourself
with the panels and speakers who have con-
business cards and any other brochures/
provide service or product demonstrations
on the spot, as you may have an opportunity
to turn prospective clients into actual clients at the conference.
firmed participation. Review the agenda. Note the key addresses that you want to attend and
Attending the Conference
apply to your business. Draw up a list of im-
make a walkthrough of the facilities so
make sure you take notes on how this could
portant points you want to focus on, and the types of questions you would like to see an-
swered at the conference. If you are attending an online conference, keep a list of questions
to ask at the appropriate time. Research other
professionals who will be attending and make a note of those you would like to meet and interact with at the event or in the future. Technology is playing a bigger role in
today’s business conference scene. Many conference providers are using web applications like Whova, Skype and GoToMeeting to pro-
vide up-to-date information and reach a larger audience via live streaming. For instance, with the Whova app, attendees can get pre-
event information, confirm presentations, get updates on program changes or announcements and offer a personalized approach
for participants to interact directly with the
speakers and other attendees. It’s important to familiarize yourself with the technology
that will be made available, and use it to your advantage during the conference.
On the day of the conference, plan to
that you may familiarize yourself with the
surroundings and amenities being offered. Some sponsors of larger conferences will provide a map of the conference location
on their event app. If there is a registration
requirement, make sure you register early to avoid the rush. While everyone else is stuck
in line, you can spend some quality time with colleagues or network with prospects.
If there are multiple sessions at the confer-
ence you are attending, make a plan to focus
on the panels that have the most influence on your business. Communicate with peers who
are attending the same sessions to get varying views on the information being presented.
Make notes of the information provided and
follow up on your concerns or questions with the speakers or conference sponsors.
While in attendance, prioritize the ses-
sions you will be attending and determine
how you can use them to further your busi-
ness. This outline will allow you to maximize the amount of information you will be able to learn and retain. Actively participate in
Prepare Yourself for the Conference By the time a conference approaches, you
should have a good idea of the types of topics that will be discussed. Coming up with a
well-formulated plan will better prepare you to benefit from the information provided. If
Get Organized Getting prepared for the conference with
the right equipment is imperative. If it’s
important, you’ll have your laptop or tablet, so ensure you pack your charger cables
or extra batteries. If you are planning on
pitching clients or networking with business
the conference through question-and-answer sessions by using the event app or Twitter
hashtag to communicate with peers. Through involvement in the larger conversation, you can get additional exposure to prospective
clients and have a platform to provide your personal views and insights.
JANUARY/FEBRUARY 2017 65
After the Conference A conference is only as worthwhile as the
information and contacts you come away
with. Outline the information you received and emphasize what you found most
beneficial. Be sure to follow up on the most important points with the conference orga-
nizers and see how they can assist. Check back with the event app or conference
sponsor to see if you can obtain a transcript of the conference or additional information about the subject matter; typically, most
presenters will want you to have a copy of their PowerPoint presentation.
Face-to-face meetings are an excellent
way to personalize your relationship with
clients. However, just because you exchanged business cards does not mean a prospect
or potential business partner will call you.
Make a list of the contacts you made in the order of importance that they hold to your
company. Make an intentional effort to reach out to each person, shortly after you return
to the office. Prepare a good initial email or
letter as a professional introduction to your company and the products or services you provide. Remember, personal touches are
key. Make sure to include why you had the
pleasure of meeting them and how the two of you can benefit one another.
Practice What You Have Learned Whether a company is large or small,
marketing will always play a role in its
success. A marketing campaign can take
many forms. There is word of mouth, social media marketing (SMM), search engine
marketing (SEM), internet marketing, or
business-to-business networking. Profes-
sional business conferences can also play a
significant role in providing the information, training and legal guidance for presenting 66 PRIVATE LENDER
••• your message better to clients and prospects.
ABOUT THE AUTHOR
ences and make a plan to implement it into
Ruby Keys is the marketing and communications coordinator at Geraci Law Firm. She graduated from Vanguard University with a degree in communications with an emphasis in marketing and public relations. Keys joined Geraci Law Firm to promote all aspects of the law firm and run Geraci media division. Keys focuses on the marketing and communication details for the firm to include working closely with the media departments of professional organizations such as American Association of Private Lenders. She plans all Geraci media’s corporate conferences, facilitates the dissemination of the company newsletter and handles all other aspects of marketing and public relations within the firm and media company. Visit www.geracilawfirm.com or email her at Ruby.Keys@geracilawfirm.com.
Use what you’ve learned at your confer-
your marketing campaigns. Take the incredibly valuable insights you’ve discovered and
determine how to best incorporate them into your business model. Record and share what you’ve learned with co-workers and management. Have a discussion on how you can use the information to your advantage.
Whether you plan on attending one or a
dozen conferences this new year, the most valuable advice you can get about confer-
ences is: Do more than simply attend, and make sure you have a plan in place. ■
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