SPECIAL FOCUS: INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
The Official Magazine of AAPL March/April 2018
Erica LaCentra How she’s shaking up marketing in private lending
FAIR HOUSING &
WHAT’S CHANGING IN 2018 URBAN REVITALIZATION
THE CRITICAL ROLE OF PRIVATE LENDERS ALTERNATIVE ANGLE
PRIVATE LENDING ENERGIZES FIX AND FLIP MARKET MARCH/APRIL 2018
07 WHAT'S CURRENT
Tr ending indu s t r y topic s and new s f r om ar ound t he wor ld
o f pr i v a te len ding .
10 LEGISL ATION
Fair H ou s ing & Fair L ending Pr o tec t ion in 2018 by J ef f Levin
14 BUSINESS S TR ATEGY
14 Private Lending’s Critical Role in Urban Revitalization by B obby Mont agne
18 Fix and Flips in Real Estate IRAs by Clay Malcolm
24 P i t f all s o f Tr u s t Dee d I nve s t ing by C ar r ie Cook
W ha t t he N ew H M DA C hange s M ean f or B u s ine s s Pur pos e L oan s
by Jaspreet K aur and B r yan Reding ton
32 MANAGE & LEAD
5 Simple Tips to Fix Flawed Marketing by Chr is sey B reaul t
36 LENDER LIMELIGHT
B r ea t hing N ew L i f e I n to Nic he M ar ke t ing wi th Er ic a L aCentr a
42 SPECIAL FOCUS: INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
42 The Bill That Changed Everything for Women Business Owners
48 E ncour agemen t , N o t E n t i t lemen t , C r ea te s Succe s s f ul Women L ea der s by H eather A . Elwing
50 F ocusing on the Finance Gender Gap by James Har t
56 W omen are Key to Empowering Other Women by Chrissey Breault
60 W omen- Owned Business Stat s
62 ALTERNATIVE ANGLE
Pr i v a te L ending E ner gize s "Fi x and Flip" M ar ke t by Rober t Greenberg
66 L A S T C ALL
E mpower e d E mploye e s ar e Key to E n t r epr eneur ial Succe s s
wi th J ef f rey Tesch
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PUBLISHER'S LET TER
R. MICHAEL WRENN
Chairman, Affinity Worldwide
MOVEMENTS SPUR NEW GROWTH AND POSSIBILITY
Early spring brings expectancy, new growth and possibil-
is palpable. Our country has celebrated Women’s History
electric. The #MeToo and #ShePersisted movements are
CEO, Affinity Worldwide
ity. This year, the change in the air, figuratively and literally,
Executive Director, AAPL
Month every March since 1987, but 2018 feels different, even
creating much-needed change, and there is a renewed national discourse on civil rights and equality.
Editor in Chief, Private Lender Director of Marketing & Member Services, AAPL
Senior Account Manager, AAPL
Chrissey Breault, Laura Chalk, Carrie Cook, Heather Elwing, Robert Greenberg, James Hart, Jaspreet Kaur, Jeff Levin, Clay Malcolm, Bobby Montagne, Bryan Reddington
COVER PHOTOGRAPHY Royale Kuljian
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.
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In this issue of Private Lender, we highlight how private lending and market trends are affected by the current
tinkering of government regulations. We mostly focus, however, on the progress
women have made in the finance and real estate industries, where equality still is
challenged. We consider how to ensure a level playing field and examine how women leaders benefit society as a whole. We have interviewed industry women about their experiences and what drives them to make positive impacts and to succeed. Our Lender Limelight subject, Erica LaCentra, recounts how she planned and imple-
mented a successful marketing campaign to grow RCN Capital from a regional to national lender, and she shares her dreams for mentoring other young women.
I am reminded of the quote, “A rising tide lifts all boats.” The tide our country swells upon carries it slowly toward a more equal and steady existence for all her citizens,
though sometimes holes appear in the bottom of the boat and work to slow us down. The holes impact the whole boat, not just the groups they target. That’s because
there’s always a ripple effect. But, each time we plug one of the holes with positive
change—programs that strengthen the boat’s foundation and ensure everyone rises
to his or her full potential regardless of gender, race or any other differentiator that
we have allowed to separate us in the past—our country gets stronger, grows more prosperous and enjoys more peace.
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 © 2018 American Association of Private Lenders. All rights reserved.
May we all consider what we can do within our own spheres of influence to help the boat rise.
Executive Director, American Association of Private Lenders
The American Association of Private Lenders is an Affinity Worldwide Company. MARCH/APRIL 2018
WHAT’S CURRENT TRENDING INDUSTRY TOPICS AND NEWS FROM AROUND THE WORLD OF PRIVATE LENDING WOIDA JOINS ALPHAFLOW
AlphaFlow has hired
Chris Woida as its co-chief investment officer. Most recently, Woida was the
head of Index Solutions at Axioma, where he led the expansion of the firm’s
business into fixed income and derivatives. Before Axioma, Woida was at
Blackrock as a founding
member of the Factor-Based
photo courtesy of warrenforgovernor.com
LIMA ONE’S WARREN ENTERS GUBERNATORIAL R ACE John Warren, CEO of Lima One, has announced he’s running for governor
of South Carolina. Warren, a 38-year-old Marine veteran, is seeking elected office for the first time. Warren started exploring a run for governor in
December when he put $50,000 of his own money into a campaign account. He said he waited to announce his candidacy, so he could hire a new CEO for his company and organize his campaign staff.
Strategies Group and the
lead investment strategist for its flagship-style factor hedge fund.
SILVER ARCH CAPITAL PARTNERS CLOSES $15 MILLION LOAN Silver Arch Capital Partners, a national private lending firm, closed on a
$15 million land loan for a 22-acre waterfront property in south Philadelphia.
The borrower used the loan proceeds to purchase two of the site’s six parcels at 1401 and 1401 R-S Christopher Columbus Boulevard. A mixed-use
development is planned that includes up to 235 luxury townhomes along
the Delaware River, boat slips for owners' watercraft, outdoor recreational activity and a riverfront cafe.
WHAT’S CURRENT TRENDING INDUSTRY TOPICS AND NEWS FROM AROUND THE WORLD OF PRIVATE LENDING NEW CTO
Anchor Loans has added Harpreet Singh as chief technology officer. Singh will
play a key role in shaping Anchor’s technology strategy as the company embarks on its next phase of growth. As CTO, Singh will be responsible for driving strategic, cross-company initiatives to maximize Anchor Loan’s impact with investors.
NOBLE CAPITAL CONSOLIDATION Noble Capital has consolidated its private lending,
retirement and real estate businesses under the Noble Capital corporate brand. Acute Financial, Noble’s retirement division, will become Noble Capital Retirement. Emerge Real Estate, the company’s asset management division, will become Noble Capital Real Estate. Noble Capital’s consolidation is part of an ongoing initiative to streamline processes to accommodate the increase in its business.
FINTECH AWARDS PRESENTED LendIt Fintech Industry Awards has named its 2018
finalists. The awards include 21 categories, including Fintech Innovator of the Year, Excellence in Financial Inclusion, Most Innovative Bank and Top Real Estate
Lending Platform. Four of the six top lending platform finalists are members of the American Association of Private Lenders: Sharestates, PeerStreet, LendingOne and LendingHome.
SHARESTATES ENTERS ARIZONA MARKET
Sharestates has announced its
inception into the Arizona Banking
Department roster of lenders. Sharestates A APL MEMBERS MAKE HOT 100 LIST Several members of the American Association of Private Lenders (AAPL) made
Mortgage Professional Americaâ€™s Hot 100 list. The list showcases 100 movers and shakers who are redefining the mortgage industry in America. AAPL members who made the list: J ohn Tedesco, Appraisal Nation Erica LaCentra, RCN Capital J erry Delgado, Applied Business Software (The Mortgage Office) Brandon Matyas, Finance of America
will be offering its
loan products to the
real estate speculation and development
community across the state.
Tom Hutchens, Angel Oak Mortgage Solutions
PEER STREET INTRODUCES 30-DAY NOTES PeerStreet has launched 30-Day Notes, their new investment product. The company introduced 30-Day Notes quietly in October 2017 as a pilot program to test investor appetite. PeerStreet is now offering it monthly. The product is designed to provide
investors more liquidity by allowing them to invest in notes with 30-day terms. They can put short-term cash to work in real estate backed loan investments in a com-
pletely new way. PeerStreetâ€™s proprietary software and a team of real estate professionals vet the notes for quality before they are offered to investors.
Fair Housing & Fair Lending Protection in 2018 The quiet battle over Obama-era regulations by Jeff Levin
f you think you missed some knock-down, dragout battle over the nation’s fair housing and fair lending protections, you would be wrong. There
certainly has been some knocking down of regulations since last summer, but the Trump administration has gone about this quietly.
The administration has engaged in a cabinet-level effort to
significantly change the way in which the federal government manages fair housing and lending practices. The administration’s agenda is broad and likely to fundamentally alter the housing and lending situation for millions of Americans. Yet it has received relatively scant attention from the media. It’s critical for private lenders as well as those in the construction and development industries to stay abreast of these develop-
ments. There will be an impact on lending for housing starts, public/private partnerships, block grant funding, CFPB regulation and more. The three pieces of legislation being tinkered with:
01 T he 1968 Fair Housing Act. 02 T he 1977 Community
Reinvestment Act (CRA).
03 T he 2010 Dodd-Frank
Wall Street Reform and Consumer Protection Act (Dodd-Frank) , specifically the office of the Consumer Financial Protection Bureau (CFPB).
FAIR HOUSING ACT The Fair Housing Act was passed in part as a response to the urban rioting that swept the U.S. in 1967. A commission established by President Lyndon Johnson identified racial segregation as the cause of the social unrest. Congress passed the bill in 1968 after the assassination of Dr. Martin Luther King, and Johnson signed it into law soon after. Over the decades, the Fair Housing Act was expanded in terms of its protections. It now covers race, color, religion, sex, national origin, disability and families with children. In 1988, Congress beefed up the law’s enforcement mechanisms and increased penalties for violators.
The U.S. Department of Housing and Urban Development (HUD) is vested with the primary oversight, implementation and enforcement of the Fair Housing Act. In 1995, HUD began requiring jurisdictions to complete a formal plan for desegregation. These plans were to include obstacles to fair housing and remediation efforts to overcome them. The rule allowed HUD to deny block grant funds for any jurisdiction that failed to comply. In practice, these rules were loosely enforced and became mostly a bureaucratic exercise. During the Obama administration, HUD issued sweeping new rules to address perceived gaps in enforcement. The new regulations, which included the Affirmatively Furthering Fair Housing (AFFH) rule, increased the pace and scope of enforcement over racial disparities in communities. In 2016 HUD issued another regulation to build on its desegregation enforcement. Called the Small Area Fair Market Rent Rule (SAFMR), this rule increased the purchasing power of Section 8 rental vouchers for low-income families, so they could more easily move out of poor neighborhoods. Last year HUD announced that it was suspending this rule, prompting the NAACP Legal Defense Fund and other civil rights groups to file a lawsuit.
The court ruled against HUD’s suspension of this program in January, claiming it violated the Administrative Procedures Act. Soon after, HUD took aim at the AFFH rule. In 2017 HUD administrators reviewed 49 AFFH submissions from over 1,200 jurisdictions receiving block grants. About one-third of them were returned to the local communities to be revised, and two-thirds were accepted. Meanwhile, most jurisdictions have not sent in any compliance reports. With these statistics in mind, HUD did not attempt to repeal the AFFH rule. Instead it quietly published a notice in the Federal Register that it was
delaying the deadline for AFFH submissions until 2020. The third tack taken by the Trump administration is more likely to have a deeper impact on HUD’s activities than any soft-pedaling of the Obamaera desegregation rules. Under budget director Mick Mulvaney, the Office of Management and Budget (OMB) proposed to cut $6 billion from HUD’s fiscal year 2018 budget of $40 billion. If HUD funding is reduced in the final federal budget, the impact would be felt across all HUD programs, including Section 8 vouchers and block grants to support new affordable housing starts.
COMMUNITY REINVESTMENT ACT The CRA was passed in 1977 to encourage banks to increase lending to people living in lowand moderate-income neighborhoods. The Fair Housing Act and other fair lending laws already on the books addressed discriminatory practices that had historically harmed minorities and women. The CRA was designed to stop banks from rejecting loans from low- and moderate-income communities as a whole. It took specific aim at a discriminatory practice called “redlining.” The practice caused loans
to borrowers in low-income neighborhoods to be denied outright, or to be encumbered with higher interest rates than for borrowers of comparable income levels who lived in more affluent or suburban neighborhoods. The Treasury Department is responsible for implementing and enforcing the CRA. Every few years a lender is assessed for its compliance to the CFA based on a four-tier score:
01 Outstanding. 02 Satisfactory. 03 Needs improvement. 04 Substantial
Banks in the third and fourth buckets face remediation and are blocked from M&A activity until they improve their score. The CRA has been criticized in some quarters, particularly by some financial institutions, as having devolved into a bureaucratic compliance exercise that’s out of step with today’s lending practices. Last summer, the Treasury Department issued a regulatory reform report that fired a warning shot about the ruling, stating that regulators needed to better align the benefits arising from banks’ CRA investments with the interest and needs of the communities
they serve. The brief assessment in the report also stated that the “supervisory and regulatory framework” for CRA obligations needed to be improved. T he biggest area of criticism is that CRA assesses banks based only on areas where a physical branch exists. In the era of mobile banking, that practice provides an unfair advantage to some banks and fintech lenders because they can underwrite higher-quality loans in areas where they have no physical presence and skate over CRA requirements. Meanwhile, other lenders,
like community banks, grapple with the tougher loans to stay compliant with CRA.
Another criticism of the CRA is the perception that it has been diluted to more of a consumer compliance “hammer” rather than a law overseeing lending standards. Critics point to the OCC’s recent CRA enforcement actions against Wells Fargo in connection with its consumer deposit accounts fraud. For private lenders and borrowers in the construction and development sectors, the Trump administration’s approach to CRA will be important to watch. On the
one hand, the administration may take genuine steps for common sense reform. Leveling the playing field for CRA may make community banks and smaller lenders better able to compete and offer lower rates on projects in poorer neighborhoods than they currently can support due to their compliance burdens. On the other hand, a wholesale rollback of CRA protections under the guise of reform could create greater demand for financing—and challenges for developers to get it—in low- and middle-income urban communities. There’s not likely to be much movement in either direc-
tion until after the midterm elections later this year. During the second half of Trump’s term, however, very significant changes are likely to happen.
DODD-FRANK ACT The 2010 Dodd Frank Act emerged as a bipartisan response to address the global banking failures of 2008 and the Great Recession. About a year after the legislation passed, the CFPB was created. Shortly after that, Congress created the Office of Fair Lending and Equal Opportunity (OFLEO) as a division of the CFPB to focus exclusively on policing discriminatory lending patterns. OFLEO works with bank examiners and coordinates with the CFPB’s enforcement team, state regulators and Department of Justice attorneys when violations are found. Under its first administrator, Richard Cordray, the CFPB investigated hundreds of thousands of complaints from consumers and extracted more than $12 billion in fines and consumer refunds from lending institutions. The OFLEO division led the charge on ferreting out alleged racial bias within all this regulatory activity and took action on several high-profile cases. The Home Mortgage Disclosure Act's Regulation C was revised with OFLEO’s direction so that, beginning in 2018, lenders must
collect a more comprehensive set of mortgage loan data to allow regulators to better pinpoint and address potential discrimination in the mortgage market. The Trump administration came into power promising to either eliminate or strip the oversight powers of the CFPB. When outgoing administrator Richard Cordray left, Trump handpicked his OMB chief Mick Mulvaney to take on a second role and helm the CFPB on an interim basis. Recently Mulvaney stripped OFLEO of its enforcement powers, under the rationale that he is moving those activities to another part of the CFPB—to the Office of Equal Opportunity and Fairness (OEOF), which is part of the director’s office and under his direct supervision. He instructed OFLEO staff to refocus on advocacy, coordination and education.
WHAT'S IN STORE? As of this writing, the Senate is working on a bipartisan budget deal for the next two years. It’s fair to predict that Congress is not likely to get a lot of new legislation to the President’s desk during this midterm election year. Still, participants in the private lending industry, as well as in the construction and housing sectors, should keep a close eye on what the executive
branch is doing with fair housing and fair lending regulations. If HUD loses out at the budget table, there would be a big negative impact on funding for private-public partnership projects and valuations for rental properties, given the loss of funding to block grants and Section 8 housing support. If HUD basically stops fairness enforcement, it may take years for the laissez-faire regulatory stance to impact the sector. The Treasury’s oversight of the CRA should also be watched. Good reform may help small institutions, including community banks, compete better against other lenders—including hard money lenders—for projects in low-income communities. The drama in the CFPB is probably the most important to watch. It’s fair to say that global lenders love the handsoff approach Mulvaney brings to his department. Whether you think the administration is in the process of abandoning its responsibility to protect consumers from predatory lenders—or setting good lenders free from the shackles of overly zealous and unelected regulators—it’s clearly going to have a positive impact on the biggest financial institutions. The under-the-radar way enforcement activities are now being relinquished suggests that big lenders have a path to relax their
lending standards and practices and become even more competitive in all kinds of markets. Either side of the aisle should recognize that the next few years of regulatory activity will have a profound and lasting effect on the American economy. ∞
ABOUT THE AUTHOR
JEFF LEVIN 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. Before launching SLG,
between 1993 and 2007, Levin was a co-founder and CEO
of iWantaLowRate.com and a co-founder and president of Monument Mortgage. Levin is a recognized authority,
lecturer and panelist and is
also a member of the American Association of Private
Lender’s Education Advisory Committee. He earned a bachelor’s degree from
The American University in Washington, D.C.
BUSINESS STR ATEGY
Private Lending’s Critical Role in Urban Revitalization By providing capital to infill developers, private lenders contribute greatly to the renewal of cities. by Bobby Montagne
Revitalization—it’s happening in cities across the country from Atlanta to Detroit to Memphis. As reflected in census data, a diverse mix of residents are moving into urban areas, bringing new life to once neglected neighborhoods. And companies are moving back as well, in part to better appeal to young professionals. In Chicago, McDonalds moved its headquarters out of the suburbs and back to the West Loop of Chicago, joining Heinz and ADM.
Housing prices are responding. Urban ZIP codes across the country continue to report double-digit or even triple-digit ROIs on flipping projects. Housing in neighborhoods previously considered transitional is hitting high-water marks in price and drastic reductions in days on market. In addition, housing inventory in the U.S. is near the lowest level in decades. Infill development simply makes sense for addressing all these issues. This type of revitalization maximizes efficiency by renovating aging housing stock and developing vacant lots. It makes both economic and environmental sense. It also brings myriad opportunities for real estate developers and private lenders.
FROM CITIES TO SUBURBS AND BACK In ancient times, cities developed along rivers and trade routes. They created a commerce hub, and their compact design was practical and protected their citizens. Today, cities serve a modern version of much the same purpose: they are a commerce and transit hub that uses land and resources efficiently. Interestingly, suburbs were never far behind the development of cities. Some of the earliest suburbs were located outside the ancient city of Rome.
“It [revitalization] brings myriad opportunities for real estate developers and private lenders.”
Living outside the city was considered living in suburbium or “below or outside the city walls.” Although residents traded the relative safety and convenience of living within a walled city, life outside the walls was cheaper and less crowded. By the mid-1800s, London was the largest city in the world, and the trend to move away from the crowded and unsanitary urban conditions increased with the development and expansion of public transportation. In the U. S., the end of World War II brought rapid economic expansion and a housing shortage that pushed large numbers of middle-class families outside the cities into planned and newly constructed suburban communities. This timing also dovetailed with the large-scale adaptation of manufacturing technology to mass-produce housing, so creating “cookie-cutter” neighborhoods was easier and cheaper than ever. The media portrayed moving to the suburbs and owning your own single-family home, yard and car as a middle-class “American Dream.” However, some of Americas
largest and most vibrant cities started to empty out because of suburbanization. From the 1960s to the 1990s, suburbanization led to population drops and a general hollowing out of cities, with increases in blighted or abandoned homes, losses of restaurants and retail options, and decreases in public transportation as well as school quality and choices. But since the 1990s, the trend has generally reversed. “Smart growth” and “town center” concepts have become increasingly popular in the suburbs. These ideas have integrated more pedestrian-friendly shopping and amenities as well as jobs into some suburban areas and have increased the transportation options between many suburbs and cities. Other suburbs have simply been integrated into the cities they used to surround as the cities continued to spread outward. And some of the largest U.S. suburbs such as Virginia Beach, Virginia, and Mesa, Arizona, have largely become their own cities, with populations greater than some of America’s oldest and largest true cities.
From baby boomers to millennials and Generation Xers in-between, many homebuyers recognize and appreciate the value of smaller yards, shorter commutes and walkability found in urban areas. The millennial’s rate of car ownership is the smallest of any generation, making urban living more practical. More baby boomers than ever are choosing to stay in cities or small towns and “age in place” rather than move to traditional retirement areas that tend to be sprawling suburban communities. Generation Xers, in their peak earning years, are primarily following jobs, which tend to be in more urban areas. All these trends have led to more people across all generations moving back into the cities or urban centers, or not ever leaving them to begin with.
HOW DOES THIS AFFECT PRIVATE LENDING? As increasing numbers of people have been resettling in cities for the last 20 or so years, another trend has become clear. While they appreciate the charm, history and convenience of cities and the housing stock in them, homeowners largely don’t have the time, knowledge or interest in remodeling the older urban homes themselves.
BUSINESS STR ATEGY
The National Association of Realtors increasingly reports that urban buyers want everything to be already renovated and updated when they move in. Millennials are often coming from apartments full of new furnishings and amenities and don’t want to settle for less. Generation Xers are busy with kids and careers, and the Silver Generation is largely of retirement age. This leaves a lot of room and opportunity for home renovators or flippers to create the “move-in ready” homes that buyers want. According to ATTOM and other national flipping data, many urban neighborhoods and ZIP codes have flipping rates of 25 percent or more of all houses sold. When roughly one in every four houses sold in a neighborhood is a flip, that neighborhood is transforming quickly and has lots of opportunity for private lenders to fund projects.
INFILL DEVELOPMENT: SUPPLY, CONSISTENCY AND VELOCITY Most cities have a large supply of houses more than 50 years old that need varying degrees of renovation, as well as many neglected buildings and vacant lots. Infill development is
largely defined as the process of developing vacant properties within existing urban areas, though the definition is often expanded to include major refurbishing of existing homes or buildings as well.
one neighborhood in one city in the U.S. The density of U.S. cities makes funding flips there, versus in the suburbs, easier and more cost effective for real estate investors and private lenders.
The many benefits of infill development have been widely reported and accepted for years. Harvard University’s Urban Infill Housing Report states simply that “urban infill housing sparks neighborhood revitalization” and includes many benefits: reusing existing properties that are often eyesores, using existing infrastructure, bringing tax dollars to local governments, revitalizing inner-city communities, using public funds efficiently and supporting mass transit and other amenities.
INFILL DEVELOPMENT IS HERE TO STAY
One thing that private lenders like about urban neighborhoods is the volume and the consistency of the housing stock there. For example, there are roughly 5,000 Wardman row houses in the Petworth neighborhood of the District of Columbia. Built between 1910 and 1920, an estimated 4,000 are still in need of renovation. Because of the consistency in size, style and velocity of trades, it’s easy to determine what one of these houses should sell for “as-is” and “after renovation” as well as how quickly it will trade. That’s valuable information for lenders to know when deciding whether to fund a flip there. And that’s just
To encourage and facilitate revitalization, there are numerous federal, state and city programs to help even small-scale flippers and developers renovate infill properties. Property tax abatement, greater density allowances, speedy approval of projects, assistance with permitting in historic areas, gap financing and fee waivers for infrastructure hookups are a few of the incentives offered across the country. In Memphis, the DMC (Downtown Memphis Commission) practiced what they called strategic market intervention to save a century-old Main Street building. They bought the property and then resold it at a substantial discount to a developer who promised to create an approved and vibrant mixed-use building. While the suburbs and rural areas of the country will always fill a need and appeal to many, the renewed appeal of urban centers is here to stay. That means revitalizing neighborhoods is here to stay as well, primarily through infill
development. There are now even infill models for aging suburban communities, following much the same model as the urban infill model. By providing capital to infill developers, private lenders contribute greatly to the revitalization of cities across the U.S. ∞
ABOUT THE AUTHOR
BOBBY MONTAGNE Bobby Montagne is the
founder of Walnut Street
Finance, a leading private lender in the mid-Atlantic
and member of the American
Association of Private Lender’s Education Advisory Committee. Walnut Street Finance
is the sponsor of the Walnut
Street Finance Fund II LLC, a $30 million private lending
fund offered under SEC Rule 506. It allows investments as
low as $50,000 and provides a preferred dividend of 9 percent with no fees.
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BUSINESS STR ATEGYÂ
FIX AND FLIPS IN
REAL ESTATE IRAs by Clay Malcolm
uy low, sell high. Finding stocks or other publicly traded securities at the right bargain may prove difficult, but an underpriced property can be tough to miss. Unlike the
countless factors that may affect stock values, a leaky roof, outdated appliances, and shag carpet from the 80s can be replaced and the value of a property can be directly restored. That’s what has motivated fix and flip investors for decades. As with any alternative strategy, more investors are beginning to understand the lucrative potential of supplementing their personal investments with a real estate individual retirement account (IRA) . You may have seen advertising about retirement plans that hold property, precious metals, promissory notes or other such assets and wondered about the viability or flexibility offered through self-direction.
Let’s address a few common inquiries about flipping real estate with an IRA.
WHEN PUTTING THE “FIX” IN “FIX AND FLIP,”WHAT ARE MY OPTIONS FOR COMPLETING MAJOR REPAIRS? When investing with personal money, you can implement any measures to repair or upgrade a property. Real estate investors may view flipping as an opportunity to combine their business talents with their expertise in plumbing, construction, electrical work or other related fields. Using the do-it-yourself approach, an investor can mitigate costs and earn a greater profit on the back end. If you’re not well-versed in renovations, services for hire can handle the dirty work while you tack any expenses onto the final sale price. IRA investors only have the latter option. The IRS requires a degree of distance between
account holders and their retirement assets. As such, an IRA holder could not perform physical upkeep or contribute sweat equity of any kind. Doing so would constitute a prohibited transaction and risk the taxable distribution of the asset. You may hire professionals to perform services on behalf of your IRA. Any applicable expenses have to be paid by the IRA and never from your own pocket. Platforms for account management that feature free online bill pay make it easier than ever to issue IRA funds for repair costs, allowing you to ensure full IRS compliance without sacrificing convenience. That means you’ll not have to budget your personal income for the periodic expenses that arise with your IRA-owned real estate.
HOW CAN I FIND A BUYER FOR MY FLIP? You may qualify and select a buyer in the same way you would when investing your personal funds. The only key difference lies in a short list
of disqualified persons from whom an IRA may not derive direct benefit. These persons include the account holder, direct family members such as parents or children, their spouses or any fiduciaries to the IRA. Non-disqualified individuals include indirect family members (siblings, cousins, etc.), close friends or existing business partners, so the spectrum of potential buyers is still very broad.
WHAT IF MY IRA CAN’T AFFORD THE HOUSE? Some believe that an IRA cannot finance a property, but this is entirely untrue. When you pursue a personal loan, a bank or third-party lender will examine your credit, determine an appropriate term and interest rate and request collateral as security. A retirement plan won’t be viewed as a human being with a credit rating, but that doesn’t mean you can’t finance a real estate project with your IRA. Typically, a retirement
BUSINESS STR ATEGY
plan will need to seek a nonrecourse loan. Your personal (i.e., non-IRA) holdings could not be offered as leverage in this loan structure. The IRA-owned investment property would serve as collateral, and you would not be allowed to pledge your own cash or assets. Given the limited security involved with non-recourse financing, you may expect a somewhat arduous process in finding a lender willing to take a chance on your retirement asset. This is merely another myth surrounding loans available to IRAs. The market for
non-recourse lenders has steadily risen, and access for IRA investors has never been greater. In fact, hard money nonrecourse loans for 90 percent, 95 percent or other considerable percentages of property deals are becoming commonplace. As real estate IRAs become more popular, there’s a possibility that your neighborhood bank has already dedicated a portion of its business to non-recourse financing. If it doesn’t, there are resources available to identify potential lenders for your IRA. Once the sale is complete, how do I manage capital gains taxes?
Profits from personal real estate sales will generally be subject to capital gains taxes. The exact conditions of your situation may warrant a conversation with your accountant or tax professional. Self-directed IRAs with the traditional IRA tax advantage, on the other hand, allow investors to defer taxes on earnings until the funds or assets are distributed (withdrawn). Rather than pay taxes on capital gains in the year you earn them, you’ll pay income taxes on distributions (hopefully, at a lower tax rate). Qualified distributions from a Roth IRA can be completely
tax-free, regardless of how well your assets performed over the years. Therein lies the beauty of IRA investing—earnings can be retained and reinvested instead of taxed on an annual basis. You have the power to schedule taxable events according to your goals and financial circumstances.
WILL I EVER HAVE TO WORRY ABOUT TAXES WITH A REAL ESTATE IRA? As discussed above, you won’t have to pay taxes on your IRA
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earnings until you begin taking distributions, or not at all with a Roth. However, your IRA may incur taxes with real estate strategies that use non-recourse financing. Some ongoing earnings or sale profits from a financed property will be considered unrelated debt-financed income (UDFI), on which your IRA may have to pay unrelated business income tax (UBIT). Taxes will apply only in relation to the debt percentage. For instance, if your IRA owns 50 percent of a property, finances the other 50 percent and sells it for a $100,000 gross profit, only the net profit related to $50,000 of those earnings will be subject to UBIT, which is calculated using the current trust and estate rates. Unrelated business taxable income (UBTI) may also affect your fix and flip investment model, and therefore, UBIT. UBTI occurs when taxes on operating business income are passed through to investors prior to the payment of business taxes at the corporate level. Because the IRS often regards a flipping operation that is not “housed” in a C corporation as a business, profits for your real estate sales may fall under UBTI. Your retirement plan may therefore owe UBIT on fix and flip earnings even in the absence of debt leverage. UBIT may seem to contradict the tax advantages that an IRA
provides, but always remember that these taxes only apply when your account is making money and only after debt has boosted your purchasing power. Your IRA may not have the funds to flip properties outright, for which debt leverage can provide a leg up and UBIT may exist as a cost of doing business. When addressing UBTI, it may prove useful to weigh your options in light of the new tax legislation. Adjusted tax brackets for C corporations, pass-through entities and limited liability companies have prompted new considerations for business structures and are certainly worth bearing in mind when thinking about flipping properties with an IRA.
CAN I EXECUTE A 1031 EXCHANGE WITH AN IRA? Internal Revenue Code section 1031 stipulates a particularly intriguing tax advantage that all real estate investors using debt should be aware of. In a transaction known as a 1031 exchange, any taxable earnings (UBIT in this scenario) from a real estate sale may be deferred if those earnings are reinvested into a like-kind investment property. In other words, as long as your sale profits roll into your next project, you won’t have to pay any taxes until you eventually break the cycle. This applies to capital gains taxes for personal investors and UBIT for an IRA.
IRA investors can initiate a series of 1031 exchanges to gradually eliminate UBIT altogether, though the debt amount from the previous investment property must be matched to maintain a like-kind status. UBIT is not a penalty, but rather a cost, to your IRA for certain investment situations. It is always prudent to know the UBIT rules when deciding which investment structure to initiate. For instance, the debt percentage of a property is calculated using the previous 12 months’ debt percentage. One application of this fact is that an IRA can pay off the debt service on a property, wait until 12 full months have elapsed and sell that property with no UBIT calculated on the sale proceeds. Why? Because the debt percentages of the previous 12 months average out to zero. There’s no UDFI and, therefore, no UBIT. In many ways, making money by fixing and flipping real estate is very similar when comparing investments with personal funds and those with tax-advantaged retirement dollars. However, as we’ve seen, using a self-directed IRA not only allows you to leverage your existing experience but also presents opportunities for even greater earnings once the tax benefits of your specific plan are realized later in life. ∞
ABOUT THE AUTHOR
CLAY MALCOLM Clay Malcolm is the chief development officer at New Direction IRA Inc., a self-directed
IRA provider that assists more than 12,000 clients nationally. 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.
Malcom, who has more than
20 years’ management expe-
rience 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
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BUSINESS STR ATEGY
PART 3 OF A 3-PART SERIES
PITFALLS OF TRUST DEED INVESTING: LACK OF DIVERSIFICATION by Carrie Cook 24
Trust deed investing is generally considered a safe investment, but there are risks—just as there are for any investment. In this three-part series, we are tackling some of those risks. In the last two issues of Private Lender, we addressed conflict of interest and loan-to-own underwriting. We conclude the series in this issue, with a look at lack of diversification.
PITFALL #3 – LACK OF DIVERSIFICATION When you invest in the stock market, do you put everything in your entire portfolio into one stock? Would you put your entire life savings into one property? Of course not, it just doesn’t make sense. If you allocated $100,000 of your portfolio in trust deed investments, you should not put the whole $100,000 in one trust deed investment. You need diversification across borrowers, location and asset type.
If you are investing in trust deeds and you are with a mortgage broker who specializes in only one state, that is not diversification. If you invest with a company that only has one borrower, is that good diversification? What if the borrower mismanages funds one year and files for bankruptcy? Or maybe the borrower is only underwriting loans on residential property. Would that be good diversification? No, that is lack of diversification—and that is a huge pitfall. When you are looking at investing in trust deeds, you do not want to put all your eggs in one basket.
SOLUTION #3 – LACK OF DIVERSIFICATION If you are investing through a mortgage broker, you want to invest with a company that does not make you put a huge amount of your principal into one loan. A low barrier to entry allows you more diversification. An investment that allows a $10,000 minimum investment provides more diversification within your portfolio than an investment that starts at $100,000. If you do have $100,000 to invest in trust deeds, you want to diversify and put it into several loans.
There are four ways to maintain diversification with trust deed investments.
01 Investing with several
borrowers. Not just one, not just two, but several different borrowers so that you have options when putting your funds into their projects. Remember, if a borrower has a loan in default, it is not typically one loan, it is their entire portfolio. If you have all your investments with one, you may be in for a long ride should the borrower have financial problems.
BUSINESS STR ATEGY
02 M arket diversification.
“You need diversification across borrowers, location and asset type.”
This option is probably the least considered, primarily due to location familiarity. When making this decision take into account the last real estate collapse. A well-diversified trust deed investment portfolio weathered the storm, since not all markets reacted the same to the downturn. Some experienced a 90 percent correction, while others only 10 percent. Every market
KNOW YOUR SANDBOX... THEN EXPAND IT
Continuing to add
NEW MARKETS IN 2018
has varying degrees of market drivers and conditions that you must consider. No two markets are the same.
03 D iversification within
loan type. Your options in this category are the most robust, and you should consider them carefully because market conditions drive demand with loan type. Options may include, but are not limited to, land acquisition, development and construction of single
and multifamily residen-
tial and commercial office and retail space. This category may also include bridge financing on existing income-producing structures for short durations until bank financing is obtained. Depending on market conditions, not all the options may be appropriate.
Consider the rule of supply and demand when making this decision. You would not want to invest in commercial office
ABOUT THE AUTHOR
space in a market that has 70 percent commercial office space standing available inventory and the remaining 30 percent at less than 50 percent occupancy. Steer clear of this loan type in that market. On the flipside, a market with one month of home inventory with job creation of nearly 10,000 entering the market in the next 60 days due to a new Google headquarters opening may be a good time to invest in a single-family development project 10 miles from the Google headquarters.
04 Diversifying in the
term or duration of the loan. You may be asking yourself, why? A typical real estate investment is for many years, whereas trust deed investments are short-term, typically six to 12 months. This is primarily due to the
higher rates charged. A borrower cannot afford to pay the higher rates for long periods of time, thus moving through the project quickly or obtaining better financing within short order. If you are strategic with when you invest your funds with trust deed investments, you could create a monthly or even quarterly schedule based on loan maturity dates. Do not get caught in a long-term real estate investment that does not provide flexibility for payoff of redemption for long periods of time, unless you have a crystal ball and know what is going to happen with the value of real estate in the next three to five years.
It is hard enough to find one good mortgage broker, but challenge yourself to find two to accomplish an even better blend
that gives you more options to minimize your overall risk and to protect and preserve your principal.
PULLING IT ALL TOGETHER
Carrie Cook is the president of Ignite Funding; CEO of Preferred Trust Company
and COO of iManagement
Group. Since her appointment at Ignite Funding, Cook has led the team to fund more than $315 million in loans
with investor capital. Cook
currently manages a capital
Now that you know about some of the pitfalls of trust deed investing, you will be acutely aware of what to watch for regarding conflict of interests, loan-to-own underwriting and lack of diversification risks. Instead of falling into those traps, you can look for a mortgage broker who is working on behalf of both the borrower and the investor, who is invested in the performance of the loans they underwrite and who encourage investors to diversify not just within their trust deeds, but within their entire portfolio. âˆž Parts 1 and 2 of this series are
client database totaling more
than $85 million in real estate investments and is a licensed mortgage broker with the
Nevada Mortgage Lending
Division. As chief executive officer of Preferred Trust Company since August
2014, Cook redeveloped the custodial services business, ensuring clients effectively and accurately utilize their retirement funds to invest
in alternatives such as real estate, metals and LLCs.
Cook oversees the custody
of approximately $250 million in client investments and
cash holdings. As the COO
of iManagement Group, she specializes in managerial
services of investment funds.
available at www.aaplonline.com
What the New HMDA Changes Mean for Business Purpose C Loans Lenders are required to submit specific information acquired during the application process. by Jaspreet Kaur and Bryan Redington
ongress enacted the Home Mortgage Disclosure Act (HMDA) in 1975 to ensure that banks and lending institutions follow fair lending practices.
HMDA requires certain lenders to collect, record, report and disclose information about their mortgage lending activities. Why does it matter this year? It now applies to business purpose loans. Under the new HMDA rules that became effective Jan. 1, 2018, lenders are required to submit
specific information acquired during the application process to the Consumer Financial Protection Bureau (CFPB) via the new HMDA platform. Loan data collected for the fiscal year 2018 will be required to be uploaded to the HMDA system no later than March 1, 2019.
DO YOU NEED TO REPORT UNDER THE NEW RULES? If a lender meets the following threshold test, it must collect and report HMDA data to the CFPB:
01 T he lender has a home or branch office in a
Metropolitan Statistical Area (MSA), or
02 The lender received applications for, originated or purchased five or more home purchase loans,
two preceding calendar
years, or 100 open-ended lines of credit in each of the two preceding calendar years.
DOES IT APPLY TO ALL TYPES OF PROPERTY?
home improvement loans or refinance mortgages on property located within an MSA; and
03 T he lender originated at
least 25 closed-end mortgage loans in each of the
The above threshold test applies to any closed-end loan or openend line of credit that is secured by a dwelling. Most importantly, this now includes any business purpose loan secured
by a dwelling. The new HMDA rule is focused on the type of property, not the purpose of the loan; therefore, both business purpose and consumer purpose loans are reported under the new HMDA rule. The definition of â€œdwellingâ€? under HMDA is somewhat nuanced. It is any residential structure that includes detached homes, condominiums, manufactured homes, multifamily housing, apartment complexes and so on. It does not include personal recreational vehicles,
boats or temporary housing such as dorms, hotels or hospitals. For mixed-use properties, where there is both a living space and commercial aspect, if the primary use of the property is for a residence, it will be subject to HMDA.
WHO IS THE RESPONSIBLE PARTY FOR REPORTING? The entity or person making the credit decision for a loan
application is responsible for reporting under HMDA. Lenders making loans using their personal capital or a private mortgage fund are typically regarded as the entity making the credit decision. Some brokers have the authority to make credit decisions themselves before sending potential deals to investors. Regardless, the party that makes the ultimate decision to extend or not extend credit is responsible for collecting and reporting the HMDA data.
ARE ANY TYPES OF LOANS EXEMPT FROM HMDA? Loans that are considered “temporary financing” are exempt from HMDA reporting. These are loans that are designed to be replaced by permanent financing by the same borrower later. Because the loan is required to be replaced by the same borrower, so-called fix and flip loans would not fall under the temporary financing exclusion.
WHAT DATA DO YOU NEED TO COLLECT AND WHEN? This year, there are 110 different data points a lender must collect for each loan for which
the final action was taken on or after Jan. 1, 2018. These data points include loan type, loan amount, type of action taken, ethnicity, race, sex and income, among others. The CFPB has assigned specific numeric codes to each of the data points, which the lender specifies on the collection tool.
collection year is a transition phase, and they are looking for lenders to demonstrate a good faith effort in complying. As of the writing of this article, the Home Mortgage Disclosure Adjustment Act (H.R. 2954) has passed Congress and is waiting to be heard by the Senate Committee on Banking,
Housing and Urban Affairs. The bill, if passed, would significantly increase the qualifying reporting threshold for HMDA and would relieve many private lenders of their reporting requirements under these new rules. ∞
HOW DO I REPORT? The CFPB has launched an HMDA LAR formatting tool, available online, through which a lender can record its HMDA data. The data are then submitted through the HMDA portal by March 1 of the following calendar year. Therefore, if a lender is collecting data this year in 2018, all the data are to be submitted to the CFPB by March 1, 2019. Note that the CFPB also imposes a quarterly requirement in which lenders are required to ensure the completeness of the collected HMDA data within 30 days after the end of each quarter. So, do not wait until February 2019 to start compiling the required data.
ABOUT THE AUTHORS
Although HMDA data collection and reporting seems burdensome and costly, it is important to incorporate these new rules into your lending practice. The CFPB has made a statement that the 2018 data
struction loan documents;
Jaspreet Kaur is an associate
Bryan Redington is a
section of the Geraci Law
the Banking and Finance
in the real estate finance
Firm. She leads the firm’s
consumer compliance practice and is familiar with state and
federal consumer regulations, including TILA and RESPA.
Kaur’s experience includes representing lenders and
brokers; preparing commercial, residential and con-
and drafting assignments,
modifications, subordination agreements and custom agreements. She is also
experienced with negotiating
the terms of transactions, title matters and closing loans.
transactional associate in section of Geraci Law Firm. Redington obtained his
bachelor of arts degree in
American Law History from
the University of California, Berkeley in 2010 and graduated from University of Oregon School of Law
in 2016. Redington's experience includes representing lenders and brokers,
preparing loan documents, as well as drafting assign-
ments, extensions, modifications and agreements.
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MANAGE & LEADÂ
Simple Tips to Fix Flawed Marketing
by Chrissey Breault
If you want clients who are not your mom or grandma, you must market for your business to grow. Marketing isn’t exactly rocket science, but it’s more than just pretty pictures and strategically placed fonts. Marketing is how you communicate your company’s or product’s value and build relationships with potential clients. There’s not a single “right way” to go about marketing, but here are five things to avoid.
YOU DON’ T HAVE A TARGE T AUDIENCE . Marketing to “anyone with money” is not a marketing strategy—it’s a waste of your time. Having a defined target audience will help you develop your branding, marketing strategy, marketing copy and the products or services you offer. If you’re trying to appeal to everyone, you’re probably appealing to no one. The more specific you can be about who your product or service is intended for, the better. SOLUTION 1
DEFINE YOUR TARGE T AUDIENCE . Then, figure out what makes it tick. Learn where they hang
out online. What social media platforms are they active on? What communities do they belong to? What blogs do they read? What problems do they have? PROBLEM 2
YOU DON’ T HAVE A S TR ATEGIC PL AN. You can spend hours and hours on marketing, but if you don’t have a strategic plan, you could be wasting precious time. You can’t just post whatever you feel like on social media, spend hours writing blog posts or creating free downloads without a goal in mind. Your marketing actions should always have a purpose, and you should be leading your clients down an intentional path.
MANAGE & LEAD
THINK ABOUT YOUR CLIENT'S JOURNE Y. Sometimes it’s easier to work backward from your end goal and reverse engineer your content paths. Mapping out a strategic plan will not only help you figure out what content you need to create and share, but it will also keep you on track to accomplish your goals.
Y OU PLAN, BUT DON’T ACT. What’s worse than not having a strategic plan? Taking time to plan and then not acting. You can research and strategize and plan for months, but if you don’t act, you fail before you even get started. It’s easy to get caught up in doing everything “just right.” Remember, there’s no such thing as a perfect plan. You can adjust plans as you go.
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Some—or most things—will not go as planned. You need to learn to adapt. It will all be OK. SOLUTION 3
SE T A SIDE TIME E ACH WEEK SPECIFIC ALLY FOR MARKE TING AC TIVITIE S. Put those activities on your calendar. Find an accountability buddy. Do whatever you need to do to make sure you’re dedicating time to acting rather than just making to-do lists. If taking action is holding you back, try setting specific goals to help move the needle forward. For example, instead of putting “do guest blog posts” on your to-do list, set a goal to pitch five different websites with specific guest blog ideas. Instead of scrolling through Instagram and liking pretty photos, set a goal to connect with 10 potential clients and actively engage with their content by leaving meaningful, not spammy, comments. PROBLEM 4
YOU AREN’ T CONSIS TENT. For 99.99 percent of people, success doesn’t happen overnight. If you’re not showing up consistently to connect with your audience, to build brand
awareness and to promote your products or services, then you are doing yourself and your business a disservice. Consistency breeds credibility. Marketing isn’t something that you can do for a hot minute until you get busy and forget about it. Only a fraction of your audience is seeing your social media posts or reading your blog posts or opening your emails. If you’re not being consistent, you’re not maximizing your reach. SOLUTION 4
SCHEDULING AND AUTOMATION ARE YOUR BFFS. When it comes to social media marketing, scheduling your posts in advance is a major timesaver. Create an editorial calendar for your blogs, vlogs, etc. and post as frequently as you can and be consistent. Also, remember: Quality above quantity, always. Set up a regular schedule for email marketing. Using automation can save a lot of time and ensures that you’re communicating consistently. Just keep in mind that your social media efforts will perform better when you don’t forget to use your own voice. Automation is helpful, but it doesn’t mean you should be completely hands off once you are done scheduling posts.
YOU AREN’ T PAYING AT TENTION TO YOUR ANALY TIC S.
ABOUT THE AUTHOR
The only way to really know if your marketing is working is to track your results. SOLUTION 5
SE VER AL TOOL S ARE AVAIL ABLE TO TR ACK YOUR MARKE TING AC TIVITIE S. Every social media platform or scheduler has its own analytics. Set up Google Analytics for your website or blog. Your email marketing service probably has built-in analytics as well. For your analytics to be relevant, establish specific goals. For example, if one goal is to use Pinterest to drive more traffic to your website, then track your referral traffic from Pinterest and identify which pins or boards are driving the most traffic. That way you can do more of what works and less of what doesn’t.
CHRISSEY BREAULT Chrissey Breault is the director of marketing and member services for the American
Association of Private Lenders (AAPL). Before joining AAPL, Chrissey worked in county
government as a communications expert. Her more than
15 years in communications
and marketing started in the
hospitality industry with Hilton and Marriot brands. For more than seven years, Chrissey
managed midmarket hotels
along the East Coast and the Deep South. She holds an
associate degree in hospitality and travel from Bradford
School in Pittsburgh, Pennsyl-
vania, and holds certifications in Adobe Web Design and volunteer management.
It’s not possible to grow your business—online or offline— by just doing a single activity. Growth only comes when you continuously improve and enhance your services to deliver the best possible experience for your clients. ∞
LENDER LIMELIGHTÂ WITH ERICA LaCENTR A
Breathing New Life Into Niche Marketing Erica LaCentra is shaking up marketing in the private lending space. by Laura Chalk
LENDER LIMELIGHT WITH ERICA LaCENTR A
“There is no easy recipe for success. Realizing that allows you to look at things objectively and make the most out of every new opportunity.”
Erica LaCentra, marketing manager of RCN Capital, is responsible for planning, developing and implementing the company’s strategic marketing plan. Since her arrival at the company in 2013, RCN Capital has grown from a regional to a national lender. Others in the industry are taking notice. Private Lender caught up with LaCentra to learn more about her strategies and what makes her a powerful force in the private lending space.
Tell us about the marketing strategy you follow and how you implement it.
When I started at RCN Capital, which was Rehab Cash Now at the time, the marketing position had been vacant for over three months. Most of the company’s materials were outdated. On top of that, plans for a rebrand were in the works. I decided to focus my initial efforts on the rebranding. That started with building out the look and feel of RCN Capital and developing core marketing materials. Then, to ensure a smooth transition, I developed major print and digital campaigns centered on the change from Rehab Cash Now to RCN Capital. Finally, I focused on creating a marketing mix that would ensure that RCN Capital
was constantly in front of its core audience. The goal was to make sure customers in our industry grew to know and trust RCN Capital as a serious player in the space. These steps were the building blocks of positioning the company as a leading nationwide private lender. Were there any road bumps during implementation? How did you adjust? The transition was harder than I anticipated. Many employees were hesitant to let go of the Rehab Cash Now brand and embrace RCN Capital. To make the transition more seamless from an internal and external perspective, I decided we would run shortterm, dual-branded campaigns so that when people saw Rehab Cash Now, they would immediately think RCN Capital. Once the connection was established,
and not think about how your job fits into the grand scheme of things. Winning that award gave me an opportunity to reflect on all the things I have accomplished. It was such a satisfying feeling to be recognized in the industry for all the hard work and effort I’ve put in over the years. Do you set personal and professional goals? LaCentra makes sure to stay visible in the public lending community; pictured here at Geraci's Innovate Conference.
we phased out Rehab Cash Now and focused on building up the RCN Capital brand. Then we got back on track with the initial marketing plan. How did your education and background prepare you for becoming a marketing manager? I started my college education studying for a degree in interior design. That gave me the opportunity to take a year-anda-half of foundation art classes in addition to core business classes. Although I ultimately changed majors and graduated with a degree in advertising, I think getting that mix of creative classes and business classes helped set me up for success in marketing. I don’t think I would have felt nearly as comfortable building out our brand image and voice without that creative foundation.
What has been your biggest challenge? My biggest challenge was learning the intricacies of the private lending industry on the fly. When I graduated from college, I wanted to work for an agency that focused on marketing consumer products. I had never anticipated ending up in such a niche industry. When I started, I knew very little about real estate investment financing, but I knew that to effectively market RCN’s products, I had to learn as much as I could as quickly as possible. I am so grateful to the co-workers who didn’t get tired of my constant streams of questions and provided me with all the information I needed starting out. Even now I make a point of continuing to
learn about our industry. I can honestly say I am fascinated to see the progression of private lending, and I love reading about where it is going. What’s been your greatest accomplishment? My greatest accomplishment was winning the American Association of Private Lenders’ Member of the Year Award. My five years at RCN have been a truly incredible experience. Stepping into a company and immediately being able to contribute to its future success and being a part of the journey through the bad and the good is unlike anything I have ever experienced.
I think it’s important to set personal and professional goals for myself so that I can track my progress and see how far I’ve come. Many of my personal and professional goals go hand in hand. I am very fortunate to work for a company that provides me with a lot of the resources I need to achieve those goals. Starting out, I knew that I wanted to actively contribute to this industry, but I really didn’t know where to begin. Working for RCN has opened a lot of doors for me and given me access to opportunities like contributing my knowledge through articles in industry publications and teaching educational sessions at conferences.
Often it can be easy to get caught up in the day to day
LENDER LIMELIGHT WITH ERICA LaCENTR A
How do you define personal success?
Do you have any female mentors?
There is no easy recipe for success. Realizing that allows you to look at things objectively and make the most out of every new opportunity. I believe success is determined by how much you’re learning—about your business, your customers, your industry, your competitors and yourself. If you’re constantly working to improve yourself and your business, that is success.
I have met some incredible women over the years that I owe a lot of my success to.
The first person to take a chance on me, that ultimately led to me getting my foot in the door at RCN Capital, was the executive director of a ticket broker conference hosted by RCN’s sister company. At the time, I had a secretarial position
at RCN’s sister company and was trying to find any way I could to transition into a marketing role. The executive director commuted into the office from New York City, and I volunteered to pick her up and drop her off at the train station every week. During those 20-minute car trips, I would pick her brain about the industry, what her team was working on and how I could get involved. She not
only was happy to share her knowledge with me, but she appreciated my desire to get involved. After several months, she invited me to work at the conference. That opportunity led to me meeting the managing director of RCN Capital. I am so appreciative of all she did for me and everything she taught me. I also consider Chrissey, the director of marketing and member services at the American Association of Private Lenders
LaCentra with Ruby Keys presenting Marketing to Different Generations at Geraci Innovate Conference.
to be a mentor as well as a great friend. I admire all her efforts and her hard work. I truly appreciate that I have someone I can consult with who is in a very similar role and understands the pain points of marketing in the private lending industry. Finally, I couldn’t talk about female mentors in my life without giving a shoutout to my mom. She is one of my biggest supporters and has always been someone I’ve tried to emulate in life. I credit my strong work ethic and drive to my mom, who constantly busted her butt throughout my childhood.
How do you spend your time away from work?
so satisfying about a killer workout after a tough day.
I try to spend my time away from work with friends and family. I regularly visit friends around the state. About once a month, I try to make it back to my hometown in Massachusetts to spend time with folks. I’m also a big foodie, so I spend a lot of my free time cooking, trying out new recipes and visiting new restaurants. Finally, I’m a big proponent of fitness as an outlet for stress, and I’m a big fan of kickboxing. There is something
How would you like to one day be remembered? I want to be remembered as someone who mentored and inspired others to pursue their passion of marketing and advertising. I hope to work with young marketing professionals and help them become innovators in their profession, as so many people have helped me along the way. ∞
ABOUT THE AUTHOR
LAURA CHALK Laura Chalk is public
relations manager for Affinity Worldwide.
She can be reached at
(816) 398-4111, ext. 86172 or
email@example.com. MARCH/APRIL 2018
INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
The Bill That Changed Everything for Women Business Owners As the 30th anniversary of H.R. 5050 approaches on Oct. 25, 2018, the National Association of Women Business Owners
Egypt, 3100 BCE
Egyptian women hold equal financial rights with men. They are able to acquire, own and dispose of real and personal property in their own names.
Margaret Brent arrives in the colony of Maryland and is the first female lawyer in North America. She was involved in more than 100 court cases and was a major landowner.
(NAWBO), the first advocacy organization for all women business owners, released the following white paper to commemorate and celebrate the historic legislation.
t’s hard to believe, but as recently as the 1980s, women who dreamed of owning businesses faced myriad barriers, including the inability to get a business loan without a male co-signer, difficulty getting federal contracts, not having a seat at the policy table and lack of gender-sensitive entrepreneurial education and training. These obstacles were
due, at least in part, to a lack of
understanding about the impact of female business owners. “An SBA publication called ‘The State of Small Business’ had a chapter on women-owned businesses, which mistakenly believed, based on extremely limited data excluding larger corporations, that almost all women-owned businesses were home-based . . . with sales per year of under $10,000,” recalled Virginia Littlejohn, co-founder of Quantum Leaps and its president of innovation and strategic innovation.
The National Association of Women Business Owners and other groups had long been advocating for better business policy. The Small Business Administration report demonstrated how little was known about the complexity and diversity of women-owned businesses (WBOs) and the offbase thinking and approach to public policy that had resulted. This became the catalyst for a more concerted effort. Led by NAWBO’s then-president, Gillian Rudd, a group of women,
In Pennsylvania, women are able to own and manage property if their husbands are incapacitated.
The Colonies adopt the English system, which does not allow women to keep their earnings or own property.
SPECIAL FOCUS INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
including Littlejohn, pushed presidential candidates and members of Congress to provide more policy support of female entrepreneurs. At a news conference on the steps of the U.S. Capitol in late 1988, Rudd call out the SBA on its misguided report. “She said we need data and research on women owners, banks need to stop demanding that men sign for loans for women and need more education and . . . [business] counseling across the country to help women to grow their businesses even more,” said Dr. Terry Neese, a serial entrepreneur and CEO/president of the Institute for Economic Empowerment of Women. Through intense lobbying, strategic communications and grassroots political actions, NAWBO educated elected officials and agency staffers on the economic impact of WBOs. They showed how much more job growth, wealth generation and trade could be produced if women had the same support and access to business ownership as men.
GAME-CHANGING LEGISLATION Eventually, U.S. Representative John LaFalce, D-N.Y., authored H.R. 5050 and President Ronald Reagan signed it into law in a Rose Garden ceremony on
Elizabeth Morales Marketing & Communications Director The Mortgage Office by ABS, Inc. What do woman bring to the finance industry?
The same thing that men bring: insight, knowledge and expertise. Women also bring a sixth sense. Men know that.
Women’s Business Centers. The WBC program created entrepreneurial support for and by women. “WBC’s provide not only business education, but a supportive environment that helps build self-efficacy and confidence,” Pianalto said. Today more than 100 centers in 48 states and Puerto Rico have helped more than 2 million women start and expand businesses.
03 Created the National Women’s Business Council.
Oct. 25, 1988. “It truly was the Big Bang,” says Littlejohn. “It transformed the landscape for women’s entrepreneurship.” Among its many provisions, H.R. 5050:
01 Eliminated state laws
requiring women to have a male relative or husband co-sign a business loan.
“One of our witnesses for the H.R. 5050 hearings didn’t have a husband, brother or living father available, so her 17-year-old son had to co-sign the loan for her,” Littlejohn recalled. “The stupidity of this really surprised the House Small Business Committee and propelled us to put language to change this into the legislation.” Loreen Gilbert, president of the WealthWise Financial
Services, agreed. “If I had to rely on a male, it would be my brother, who’s very bright, [but who] has no interested in being part of my business,” she said. “Thankfully, we had people ahead of us who paved the way for women owners and made it possible for someone like me to grow my business, buy the building I’m in and move the needle—and do it on my own.”
02 Established the Women’s
Business Center Program.
“The biggest impact of H.R. 5050 was the recognition that women are subjected to discrimination in entrepreneurial developments due to their gender,” said Antonello Pianalto, previous president and CEO of the Association of
“The fact that the NWBC was created specifically to track women business owners and report back to the president, Congress and the Small Business Council offered us a voice,” said Teresa Meares, founder of DGG Uniform and Work Apparel and former chair of the NAWBO board of directors.
04 Required the Census
Bureau to include women-owned C-corporations when reporting data.
Before 1988, government agencies tracked mostly self-employed women but overlooked larger women-owned enterprises. Adding other forms of business to the data sets was “really important to combat the assumption that women business own-
1771 ers were doing beadwork at home selling on the weekends, which is a great home-based business, but it certainly wasn’t a true picture of the commerce of women," said entrepreneur and consultant Kathleen Diamond. The bill also required the Women’s Bureau at the Department of Labor, the SBA Office of Advocacy and other government agencies to report to the Office of Federal Procurement Policy on public procurement with women-owned businesses.
CONTINUING THE FIGHT On the 30th anniversary of H.R. 5050’s passage, it’s important to reflect on this revolutionary legislation and its place in American women’s history. “We should all be aware that institutional biases against business owners existed in this country only 30 years ago,” said NAWBO National Board Chair Kathy Warnick. “We can celebrate how far we have come and assess how much further there may still be to go.”
investor money goes to womenowned businesses,” said Molly Gimmel, CEO of Design To Delivery Inc. Added Pianalto: “Women start their businesses with half as much capital as men, and only 4 percent of commercial loan dollars go to women-owned businesses. Last year, women received only 2 percent of venture capital dollars, a decline from previous years.” Pianalto said researchers estimate that if women started their businesses with the same amount of money as men, they could
New York is the first state to require a woman’s consent for her husband to sell any property she brings to a marriage.
Mississippi is the first state to grant women, with permission from their husbands, the right to hold property in their own names.
H.R.5050’s impact extends beyond equity to the economy. “Owning a business is one of the most effective ways for women to secure a financial future for themselves, provide for their families, exercise their commitment to their communities and drive our country’s economic growth,” noted SBA Administrator Linda McMahon. “The data speaks for itself,” she continued. “Women own almost 10 million businesses in the U.S. and employ more than 8 million workers. They pay out more than $264 billion in wages and salaries to employees and contribute $1.4 trillion in sales to our national economy.”
The original white paper with additional commentary is at www.nawbo.org/ hr-5050-white-paper
SOME AREAS STILL NEEDING ATTENTION Access to Capital 2.0: “Even
without needing a male co-signer, it’s still difficult for many women to get the financing they need to grow their businesses. Not just from banks—only a small percentage of venture and institutional
create 600,000 jobs in five years. McMahon said the SBA increased 7(a) loan lending to women-owned businesses to $7.5 billion in 2016—almost $300 million more than in the last fiscal year—and increased 504 loan lending to almost $1 billion, up $277 million from the previous year.
Women in Maine became the first to be granted the right to “separate economy,” allowing them to work and control their own money, separate from their husband’s money.
New York passed the Married Woman’s Property Act, allowing women to enter into contracts on their own, collect rents, receive an inheritance in their own right and file a lawsuit. MARCH/APRIL 2018
SPECIAL FOCUS INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
Board Representation: “The next biggest hurdle women businesses owners need to strive toward is representation on corporate boards,” Gilbert said. According to Deloitte and the Alliance for Board Diversity, women and minorities occupied about 31 percent of Fortune 500 board seats in 2016. The figure is rising slowly, yet these boards remain 80 percent males.
“Right now, one woman on a corporate board isn’t enough— we’d like to see more than one,” said Gilbert.
after five years, compared to 50 percent who did not receive help,” Pianalto said.
Melissa Martorella Transactional Associate Geraci, LLP What would you tell your younger self
about going into this sector of finance? Be confident and know your worth. Sometimes people will use age, race or gender to discredit you, but stay strong and persistent and they will understand your value.
Littlejohn says it’s time to re-evaluate the effect of the 51 percent requirement for certification to better understand the degree to which this keeps women-owned businesses smaller than they could be. The 51 percent requirement states that a business must be at least 51 percent directly owned and controlled by one or more women who are U.S. citizens. “Can this problem be partly solved by having women investment funds investing in women-owned businesses to enable them to stay 51 percent or more female-owned?” she said. “Should there be more of a focus on women-led businesses, and less focus on the 51 percent?” Economic-Impact Data: “We
need more deep research on the real economic impact that
women-owned businesses can have on job creation, GDP and innovation,” Littlejohn noted. Specific queries include how to create more employer firms and foster more female entrepreneurial unicorns, how tackling child care issues could affect WBOs and which good and best practices can we learn from other countries. Infrastructure and Innovation:
Regional and local entrepreneurial ecosystems are fundamental to ensuring the success of WBOs. These groups generate grassroots and governmental initiatives to promote more infrastructure to support business formation, growth and innovation. “Women business owners have a lot of power within their reach to make sure that various
domains of their local ecosystem are working together,” Harris said. “Incubators and accelerators . . . are refining their practices and developing more effective approaches than ever to support women entrepreneurs.” There are also opportunities to create policies and programs that promote digital inclusion, support WBOs in tech transfer and connect women-owned enterprises with scientists and inventors. Minority Support: Women of
color are starting businesses in record numbers, creating opportunities for targeted support and engagement. “Research shows that when business owners receive training and business assistance, 80 percent are still in business
According to the Census Bureau’s survey of female business owners, in 2012 (the most recent year surveyed), nearly 3.8 million businesses were owned by women of color: 1.5 million black-women-owned businesses in the U.S., 66 percent more than in 2007; 1.4 million Latina-women-owned businesses, an 87 percent increase; and 749,197 Asian-women-owned businesses, up 43 percent. Public Procurement: “The United States federal procurement market represents one of the largest markets in the world—over $400 billion—and the federal government has a goal to spend 5 percent of federal contract dollars with women-owned small businesses,” Harris explained. “As of the end of FY 2017, that goal has been met just once—in FY 2015.”
Getting more WBOs involved requires two things: more women competing and more agencies contracting. Policy changes would enable more enterprises to go after lucrative contracts. Among the biggest agencies, however, only the Department of Health and Human Services exceeded the goal of 5 percent, said Harris. Others include the Department of Defense at 4.1 percent, NASA at 4.05 percent, the Department of Veteran
Affairs at 3.04 percent and the Department of Veteran Affairs at 3.04 percent and the Department of Energy at 1.2 percent. “If each [agency] had spent a full 5 percent of dollars with women-owned businesses, the share of government contracts going to women business owners would have been closer to 9 percent,” Harris said. WBC Expansion: “We need
to change the mandate of the Women’s Business Centers so that they can have a bigger focus on growth,” Littlejohn noted. A more balanced approached would enable support for business growth and poverty allevi-
ation. Business growth is critical as women-owned businesses get larger and more complex and require different resources to do so. Poverty alleviation is still relevant, according to a report from the Federal Reserve Bank of St. Louis because families— and particularly families of color—have experienced “relatively low cumulative increases in long-run wealth” since the Great Recession.
opportunities to continue to move things forward ourselves,” she said. “We want to appreciate what we have and enjoy our success, but we must keep working. It’s possible. Don’t think it’s not, even if it seems like an uphill battle. These battles can be won.” ∞ © 2018 by the National Associa-
tion of Women Business Owners
(NAWBO). Used with permission.
Addressing these challenges requires WBOs to lobby at every level of government and get more directly involved in helping one another, Gilbert said. “Women must look for
Founded in 1975, the National Association of Women
Business Owners is the unified voice of America’s nearly
11.6 million women-owned
businesses representing the fastest growing segment of
the economy. NAWBO is the
only dues-based organization representing the interests
of all women entrepreneurs
across all industries. NAWBO develops programs that help navigate women entrepreneurs through the various stages of their business
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SPECIAL FOCUS INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
ENCOURAGEMENT, NOT ENTITLEMENT, CREATES SUCCESSFUL WOMEN LEADERS Belinda Savage paid her dues as a Wall Street trailblazer—now she's inspiring a new generation of women to go for the gold. by Heather A. Elwing
“Be smart.” That’s Belinda Savage’s advice to women in maledominated industries. Savage, of MidAtlantic IRA, knows all too well what it’s like to be a woman in a male-dominated industry like finance and real estate. She started working on Wall Street when she was just 17 years old, and she’s been in finance and real estate ever since. “You're going to have to work 300 percent harder than they [men] do. You need to become their friend. In other words, stand shoulder to shoulder with them. Don't cry. Don't make excuses. Don't tell me you're hormonal, whatever. I don't want to hear any of that. Get your job done and do it right,” she said. When Savage jumped into the game, she was quite young— younger than most who were
entering the Wall Street game. She started college at age 16. By 17, she was on Wall Street working as a research assistant. And by age 24, she was one of the first six women to become a bond trader. Savage worked both the national and the international desks. She was amazed that she and her colleagues did not have computers to calculate their numbers. They did all compu-
tations by hand, calculating 500 stocks per hour on the hour to report to Reuters, The Associated Press, the Dow Jones and the Wall Street Journal. It took guts and perseverance to work in such a male-led industry, especially in a time when women were praised for being homemakers. But she kept up, and she persevered. Savage not only made history herself as one of the first female
bond traders, she also worked with others who made Wall Street history too: Muriel Siebert, the first woman to buy a seat in the stock exchange; Ray Crock of McDonald’s; Jerry Farber of the Farber Fund; and even David Rockefeller at the Manhattan Bank. Her mentor, Milton Friedman, won the Nobel Prize in economics in 1976. What is your advice when working side by side with male counterparts? Savage: Guys love it when they can be challenged. Men love that. I'm not saying to be aggressive. Just do it in a way that you do it best. There's a couple of women I know, and they're real flirts. They try to
1862 use their womanly ways to get business. I roll my eyes, and I walk around and think, ‘Really? That's the way you want to be known?’ That is the worst excuse in the world. I simply believe in being a professional. Know your business. Understand how to negotiate a deal, how to make business contacts, how to bring people together. Be a solution maker, not a problem maker.” Did you face adversity, and were you accepted? No adversity whatsoever. If you kept your mouth shut and you learned, and you pulled your weight, you were one of them [the guys]. You had to do your job. You better learn fast, and you can't be afraid. You can't sit there and cry about it. They don't put up with that crap. You have to be accessible once you learn your industry skills, but you also have to be teachable as you're coming up the ranks. Don't allow your pride to get in the way. … You've got to learn to say, ”I was wrong. I did it wrong.” And then be gracious. That's it. What strengths must women have when it comes to leadership roles? You have to balance so much more, because most women want families and a career. Families do keep us very focused. When it comes to
qualities, we're nurturing, we're compassionate and we're supposed to be those things. It's funny. I just looked at an article this morning from Inc magazine on the five qualities of a great leader. One of them is to be compassionate, to understand where other people stand in the marketplace and say, “What if I was standing there?” That's easier for us to do than men. What advantages do women have in the workplace, and how do we create change? Women have the unique position of being able to go to a man in power. We can actually speak to a man in a way that some men cannot to each other. We can bring forth change within the walls of a company, a structure or an organization by using our own innate communication abilities. We can plant ideas in the head of the man in charge to let them germinate. Now, I won’t say the woman who does this will get the credit all the time—but I have seen it in both lights. I do have to tell you in the last two companies that I've been in, men have applauded me generously. I didn't ask for it, but I was thankful that I got it, because I worked very, very hard. I wanted to be acknowledged for my hard work.
get nasty. Don't get critical. We have to be encouragers. We must set the standard, a higher standard. You don't do it by becoming a victim. You do it by setting the tone, by your work ethic and your moral ethics. That's the point, that’s how we will create change. ∞
The U.S. Homestead Act passed, making it easier for single, widowed and divorced women to claim land in their own names.
ABOUT THE AUTHOR
California law established a state savings and loan industry. It recognized the full financial independence of women and guaranteed them control of their money. Also in that year, the San Francisco Savings Union approved a loan to a woman.
HEATHER A. ELWING Heather A. Elwing is
editorial manager for Private Lender and
editorial assistant for
Think Realty Magazine.
She is a licensed Realtor in Missouri and holds
degrees in journalism and public relations.
She is dedicated to the
education of those interested in private/hard
By the turn of the 20th century, every state had passed legislation granting married women the right to keep their own wages and to own property in their own name.
money lending and real estate investing.
I think that as women, we have a responsibility to be very careful how we view the person next to us. Don't get catty. Don't
SPECIAL FOCUS INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
Focusing on the Finance Gender Gap Women still lag in leadership roles, even though they bring serious strengths to the job. by James Hart
espite the gains women have
sionally, there is
still a persistent gap when
it comes to finance and real
estate, especially at the top of the org chart. A couple of
years ago, reporters looked at 50 of the world’s largest financial firms—leaders in lending, asset management, insurance 50
and professional services—to see how many women versus men they employed. The results were mixed. Women accounted for more than half of those companies’ workforces. Among the junior ranks, women represented almost 60 percent of the head count. But women filled only 25.5 percent of the top leadership positions, the Financial Times found.
In some regions, it was worse— only 6.9 percent of senior positions at Asian-based companies were held by women. Globally, 2 percent of bank CEOs are women, and they occupy fewer than 20 percent of banks’ board seats, the International Monetary Fund reported. (Though women are more likely to serve in leadership roles at savings banks and in low- and middle-income countries.)
If you look at commercial real estate only, women account for 35 percent of the industry’s U.S. workforce, according to a 2015 survey from the Commercial Real Estate Women Network. And when it comes to pay? Median pay for women in the industry was around $115,000 while it was $150,000 for men, the CREW Network reported.
The First Women’s Bank of Tennessee opened to serve women customers only. All the bank’s employees were women.
The Fair Labor Standards Act established the federal minimum wage to eliminate pay differences between men and women for hourly occupations.
Congress passed The Equal Pay Act, promising equitable wages for the same work, regardless of the worker’s race, color, religion, national origin or gender.
According to the CCIM Institute, only 550 (or 13 percent) of its Certified Commercial Investment Members are women—still an improvement from 1984, when the total was around 100 women.
THE ADVANTAGES OF WOMEN IN LEADERSHIP But when women do serve in positions of leadership?
Their organizations tend to thrive. The Peterson Institute for International Economics (PIIE) studied nearly 22,000 publicly traded companies around the globe in an array of fields. They found a correlation between companies with higher profitability and greater numbers of women in top positions.
Unfortunately, fewer than 5 percent of the companies that PIIE studied had women CEOs. Almost half lacked any women in the ranks of their senior leadership. The Korn Ferry Institute interviewed nearly 60 women CEOs to discover what qualities, experiences
Title VII of the Civil Rights Act passed, prohibiting sex discrimination in employment. The Equal Employment Opportunity Comm ission was created.
SPECIAL FOCUS INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
and skills had allowed them to achieve the highest position in their company.
Noelle Wheeler President Nationwide Mortgage Does the gender gap still exist? Yes. Since most of the people in the industry have been men, it’s logical to assume that a man is more skilled or has more experience in a given job. If we stop assuming and guessing people’s competence, we can work toward decreasing the gender gap.
One thing that researchers noted: The surveyed women tended to rank much higher for humility and lower for confidence. In some respects, that can be a drawback because women are less likely to publicly take credit and push for promotions. But it could also be a strength. Women CEOs were more likely to realize what they didn’t know and seek help. They were more
likely to leverage teamwork to achieve greater results. It takes women about 30 percent longer to reach the CEO level than it takes men, the Korn Ferry Institute found. They’re usually about four years older than men in comparable positions. "The impact of having more women in senior leadership on net margin, when a third of companies studied do not, begs the question of what the global economic impact would be if more women rose in the ranks,"
said Stephen R. Howe, Jr., EY's U.S. Chairman and Americas Managing Partner. EY helped fund the PIIE study. "The research demonstrates that while increasing the number of women directors and CEOs is important, growing the percentage of female leaders in the C-suite would likely benefit the bottom line even more."
ADDRESSING ROOT CAUSES OF THE GENDER GAP Culture and expectations are part of the problem. The CREW Network found that men in commercial real estate were more likely to aspire to the most senior positions—40 percent of those surveyed wanted to end up with a C-suite position, while 39 percent wanted to be senior vice presidents. For women, though, only 28 percent wanted to be C-suite. They were more likely to set an SVP role as their career goal. That was echoed in the Korn Ferry survey of women CEOs. Only five of the 57 women interviewed had long desired to be a CEO—and three of those took the job out a sense of obligation. At companies where women were only 1 in 10 of senior leaders, almost 50 percent of men thought women were
“well represented”—and about 1 in 3 women agreed with them, according to the Women in the Workplace Survey from McKinsey and Lean In. Women were also more likely to have their careers affected by their marriage or family— 20 percent of respondents, compared to 8 percent of men.
There’s also the reality of sexual harassment. A recent survey of women in housing finance showed that more than 70 percent of respondents had been sexually harassed, but only 20 percent told a manager, the Mortgage Bankers
Association and its mPower networking group reported. The incidents were more likely to happen when women professionals were early in their careers. About 90 percent of those who had been harassed were in their 20s at the time.
ENCOURAGING THE NEXT GENERATION The good news is that different organizations are creating resources to support women professionals as they advance their careers.
The Seattle Association of Professional Mortgage Women formed.
The National Association of Professional Mortgage Women was chartered to organize local associations throughout the US.
It became illegal for “help wanted” ads to specify gender.
Tammie Tirres Senior Advisor Advocate Noble Capital What changes should be made to create a balance between men and women in the finance industry?
People should be compensated and given responsibility based on their performance rather than on their gender. Also, if more women were in leadership roles, they would provide more role models for younger females.
The Equal Credit Opportunity Act (ECOA) passed, making it illegal for creditors to discriminate against credit applicants. Before passage, banks required single, widowed or divorced women to bring a man to co-sign credit applications.
SPECIAL FOCUS INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
The CRE Finance Council, an industry group for commercial real estate finance, operates the CREFC Women’s Network, a subgroup that pushes for professional development of women in the field. The Mortgage Bankers Association’s mPower (www.mba.org/get-involved/ mpower) group for women delivers educational events, networking opportunities and other assistance.
“What started out as a hunch and was tested with a few starting events, we realized very quickly was filling a void,” Marcia Davies, the Mortgage Bankers Association’s chief operating officer, said in late 2016, when mPower’s online platform launched. “And the positive feedback we have gotten since clearly indicated that we not only are filing a void, but we also struck a nerve and need that’s out there.”
Simply encouraging women and opening their eyes to their potential can make a difference. As Jane Edison Stevenson and Evelyn Orr of the Korn Ferry Institute shared in the Harvard Business Review: “It wasn’t until that conversation,” one woman recalled, “that I even imagined anything past manager, forget CEO. I really just wanted a good job with a good company. That conversation was a bit of a wake-up call.” ∞
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SPECIAL FOCUSÂ INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
WOMEN ARE KEY TO EMPOWERING OTHER WOMEN
by Chrissey Breault
Women can be a powerful force when they work to strengthen one another.
What does it take for women to support each other to reach their full potential? More to the point—why is it important? Simply put, when women help other women, it benefits all women.
Put aside the idea of competition—that helping someone else, whether male or female— somehow diminishes your chances for success. The reality is that one woman’s success is another woman’s success. There are several ways women can challenge themselves to be better partners with other professional women, rather than compete for opportunities, and open doors for all women to succeed.
MENTOR ANOTHER WOMAN Offering to mentor is an easy, high-impact way to make a difference. You can lend your ear, offer advice, share the wisdom you’ve gained through your own experiences and offer general support. That’s the easy stuff. The real challenge is holding each other accountable when you see someone making a bad decision, not thinking clearly or behaving poorly. Those are things that can damage companies and reputations. Everyone has heard the adage “bad behavior is bad for business.” Be a mentor that speaks honestly. Don’t be concerned about being considered aggressive, unemotional or too competitive. The day has come that
those stereotyped leadership traits—traditionally viewed as masculine—are shifting for women entrepreneurs. Women should be doing everything possible to encourage each other—and that sometimes means having hard conversations with other women, so they can put their best foot forward. It can do more harm than good if we choose to keep quiet instead of voicing concerns. This is not the same as thinking that everyone has a right to their own opinion about their business. Nothing is less helpful than receiving advice from someone who suddenly knows everything about everything just by looking at you. What it does mean is that you must be brave enough to give negative feedback when it is the right thing to do. To be a true, supportive mentor of other businesswomen, you must be honest. It can be uncomfortable to speak up about unethical or bad behavior, but pretending it isn’t happening means you choose to support the wrong thing. You don’t have to build a campaign around continually finding flaws and faults, but when you choose to remain silent when you know something is wrong, you make yourself part of the problem. That is not support.
The first womanowned commercial bank, First Women’s Bank, opened in New York City.
The Pregnancy Discrimination Act passed. Women could no longer be dismissed from jobs for becoming pregnant.
The Equal Employment Opportunity Commission defined sexual harassment.
Kirchberg v. Feenstra set precedent that a husband does not have the right to take out a second mortgage on property held jointly with his wife, without her knowledge and consent.
SPECIAL FOCUS INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
SPEAK OUT AGAINST GENDER BIAS Yes, gender bias exists. Yes, it’s a hot-button item. And the reason it exists is not always because others are malicious. Bias is part of human nature. It is also something that can easily be overlooked. You can be watchful and aware—and be brave enough to speak out when you see it happening. Remind yourself to give the other person the benefit of the doubt.
“Believe in the best of the person across the table from you, assume that they are good people and give them a respectful interpretation,” said Sallie Krawcheck, author of Own It: The Power of Women at Work. Pull someone aside to discuss what you heard or witnessed in whatever way works best for you. But don’t let it just slip by. Sometimes that means recognizing women biased against other women. When historically chasing the single
Erica LaCentra Marketing Manager RCN Capital What advice would you give other woman searching for their industry voice?
Don’t be afraid to make yourself heard. I think so many women don’t voice their opinion in the industry because they fear that others will reject what they say. Diversity and new ideas are the only things that will allow our industry to adapt and grow. Find your voice and don’t be afraid to put yourself out there.
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seat for a woman at the table, it can be hard for some to change perspectives. Whatever you decide about gender bias in your workplace, don’t do nothing. Speaking out breaks patterns of bias and helps to create healthier and more collaborative environments.
HELP OTHER WOMEN BE HEARD
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Sit front and center. Women tend to gravitate away from positions that convey status, and they get fewer opportunities to speak in group discussions. Don’t let a testosterone-filled room drown out a great idea that a woman presents. When you hear a woman colleague
state an idea, share a report or express an opinion, help her be heard. When the man next to her makes a poor decision to put his hand on her arm to silence her, ask her a question about what she said. Have her repeat what she said. Recognize her hard work. Always respectfully turn the focus back and allow her to finish her thoughts. You may have heard the story about President Obama’s female staffers' strategy to make sure their voices were heard. Much of the president’s senior staff were men who had worked on his campaign and subsequently filled his cabinet. The women had a “tough circle to break into,” according to Anita Dunn, who served as the White House communications director at the time.
1988 The women on staff adopted a meeting strategy they called “amplification.” When a woman made a key point, other women would repeat it, giving credit to its author. It forced the men to recognize the contribution and denied them the chance to claim the idea as their own. It didn’t go unnoticed by Obama. The women started to be called on more often, including the junior aides. When women stay quiet, status suffers. Women who speak less in group discussions are seen as having less influence.
NECESSITY IS THE MOTHER OF INVENTION Today, extraordinary organizations are helping and celebrating
women in all industries and walks of life. They cover an embarrassing number of issues women continue to face—from domestic violence, veteran care and human rights to economic independence, entrepreneurship and the wage gap. These organizations are powerful, and they are changing the game for women and for the future of girls. Several of these organizations were founded to pierce maledominated fields and provide women more opportunities to break into industries such as finance, tech and politics. Most were born out of the desire to embrace feminism and offer equal opportunities to all women. It’s not a secret that opportunities for women often come from other women, especially in male-dominated fields.
Supporting and encouraging each other isn’t just about creating a better workplace for women, it’s bout inspiring leaders that continue to empower others to reach their full potential. ∞
ABOUT THE AUTHOR
Chrissey Breault is the director of marketing and member services for the American
(AAPL). Before joining AAPL, Chrissey worked in county
government as a communications expert. Her more than
15 years in communications
Executive Vice President National Real Estate Insurance Group
The Supreme Court ruled in Ledbetter v. Goodyear that women must sue for discriminatory pay as soon as it occurs.
Association of Private Lenders
The Women’s Business Ownership Act passed. It contained amendments clarifying that the ECOA applied to business and commercial loans.
and marketing started in the
President Barack Obama signed the Lilly Ledbetter Fair Pay Restoration Act, allowing people to sue for pay discrimination even if more than six months passed.
hospitality industry with Hilton and Marriot brands. For more than seven years, Chrissey
managed midmarket hotels
Is the Equal Opportunity Act enough? No. Women need to speak up and advocate for equal rights when we see an inequality. Not just a male/female inequality, but any inequality—race, religion or sexual preference. Be your own advocate.
along the East Coast and the Deep South. She holds an
associate degree in hospitality and travel from Bradford
School in Pittsburgh, Pennsyl-
vania, and holds certifications in Adobe Web Design and volunteer management.
Massachusetts passed a law that forbids employers to ask about salary history. It also requires men and women to be paid equally if they do “comparable work.” MARCH/APRIL 2018
SPECIAL FOCUS INFLUENTIAL WOMEN SHAPING PRIVATE LENDING
WOMEN OWNED BUSINESS STATS WOMEN
OWNED FIRMS ACCOUNT
of all privately held firms
THE MOST WOMEN OWNED FIRMS CALIFORNIA TEXAS
NEW YORK GEORGIA
11.3 million businesses are women-owned in the U.S.
2.9 million firms are majorityowned by women of color in the U.S.
TOP 5 CITIES
1 in 5 firms with annual revenue of $1 million or more is woman-owned
OWNED FIRMS of all women owned firms have revenues of 1 million or more
NEW YORK CITY LOS ANGELES MIAMI
Source: http://www.womenable.com/content/userfiles/2016_State_of_ Women-Owned_Businesses_Executive_Report.pdf
Source: https://www.bizjournals.com/bizwomen/news/profiles-strategies/ 2016/10/the-truth-about-the-gender-divide-in-real-estate.html?page=all
average income for residential Realtors of all genders in 2015
WOMEN IN THE U.S.
$148,945 average earned by women in commercial real estate in 2015
INDUSTRY Accountants & Auditors
Source: Bureau of Labor Statistics, “Table 11: Employed Persons by Detailed Occupation, Sex, Race, and Hispanic or Latino Ethnicity, 2016,” Current Population Survey (2017).
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PRIVATE LENDING F ENERGIZES “FIX AND FLIP” MARKET
lipping houses is becoming more challenging as profits get squeezed by higher home prices and increased competition. Home flippers can still
be successful in these market dynamics if they flip with smarts and discipline. Private lenders still have plenty of opportunity to tap this market too.
Financing helps flippers overcome market challenges. by Robert Greenberg
Home flipping has grown exponentially in popularity in recent years. Certainly, many were attracted by bargain home prices in the wake of the
housing crisis. More recent entrants may be enthralled by television shows that make the process appear quick, easy and full of fat profits. As a testament to the increasing competition in the fix and flip space, ATTOM Dataâ€™s Daren Blomquist, who crunches home flipping statistics on a quarterly basis for the real estate research firm, notes that the number of entities flipping single-family homes reached a 10-year high of 43,694 in the second quarter of 2017, the highest number since the second quarter of 2007.
As the competition increases and prices rise, the inventory of affordable homes for purchase is dwindling. The nationâ€™s foreclosure crisis peaked nationwide in September 2010, with approximately 120,000 completed foreclosures occurring during that single month, according to CoreLogic data. There have been approximately 7.8 million completed foreclosures nationally since the beginning of 2007. Last year, serious delinquency and foreclosure rates reached their lowest levels in more than a decade, signaling
that the housing recovery is on solid ground. Distressed properties remain a major acquisition target for home flippers, with about 39 percent of flipped homes purchased either in the foreclosure process or as REOâ€”far lower than the peak in 2010 when the percentage was as high as 70 percent, according to ATTOM Data. Flippers look for these pockets of distressed housing because these areas also tend to be locations with strong rental markets, giving flippers a consistent pipeline of demand from
buy-and-hold real estate investors seeking turnkey rentals.
DWINDLING DISCOUNTS Discounts have completely disappeared in some major markets such as Kansas City, where investors are typically paying a premium on the purchase price. Discounts are nearly gone in other major metros such as Dallas-Fort Worth-Arlington, where flippers are getting a negligible discount of -0.8 percent, according to ATTOM Data. Purchase
discounts are also soft in places that include Austin-Round Rock, Texas (-1.6%); Salt Lake City (-5%); and San Jose-SunnyvaleSanta Clara, California (-8.2%). Conversely, large discounts are still possible in cities that still have a foreclosure overhang such as Pittsburgh; the Philadelphia-Camden-Wilmington metro; Akron, Ohio; YorkHanover, Pennsylvania; Cleveland; New Orleans; Flint, Michigan; and many others. Even with the lack of discounts, the nation’s recovered housing market offers good news for flippers: Home prices have
continued to rise rapidly in many markets, providing a hedge by helping flippers on the back-end when they get ready to sell. Nevertheless, rising homes prices can also price flippers out of some markets on the front end. Some of these challenges may dampen interest in flipping this year, but that remains to be seen as the numbers start to come in after the first quarter. Preliminary numbers gathered by ATTOM Data at press time for full-year 2017 indicate that 2017 will likely mark an 11-year high in home flipping. Blomquist wonders, though, whether that
trend will continue into 2018. The headwinds of acquisition prices, competition and rising interest rates could dampen interest.
USING LOANS AS LEVERAGE Those using all cash for their purchases will be limited by rising home prices, but flippers using financing will have the opportunity to use leverage to expand their flipping portfolio at a faster rate. New lenders entered the marketplace about five years ago to
provide some creative spins on the traditional hard money loans that have been the mainstay for flippers. These products have included bridge loans, refinances and crowd funding. The increased competition among lenders going after real estate investors, coupled with the use of sophisticated technology and algorithms used in online lending platforms, has also brought down the cost of borrowing. It’s a good news story for today’s real estate investor who has more financing options at a lower cost. These additional loan products have served to re-energize the
Innovat ve Lending With my 5th flip underway, Angel Oak Prime Bridge has successfully helped me build my business by offering unique programs that aren’t available through other lenders. By financing all of the closing costs in the loan amount, my bottom line is much more transparent, leaving more room for me to focus on my next deal.
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home flipping market over the past five years while widening access to capital. The introduction of online lending platforms has allowed flippers to access a new source of financing regardless of where they live or where they plan to flip a home. More than a third of flippers used financing on their flips in 2016 and 2017. That percentage rose to 36.3 percent in the second quarter of 2017, the highest since the third quarter of 2008, according to ATTOM Data. This is far different from how flipping used to be financed. As few as 10 years ago, the typical hard money loan would have cost a flipper 15 percent interest (or more), and financing would have typically come from a local lender. Now, investors can find short-term rehab loans with single-digit interest rates and get them over the internet in as little as seven days (sometimes even faster). This year’s expected modest rise in interest rates likely won’t affect real estate investors’ willingness to consider financing options. However, investors who hope to sell their homes to firsttime homebuyers in the affordable housing sector via Federal Housing Administration (FHA) products may see demand wane from these buyers. Often firsttime buyers are very sensitive to interest rate hikes that may price them out of the market.
There is a silver lining in the recent jobs and wage gain news that could temper that interest rate risk on the affordable end. Average hourly wages rose 2.9 percent in January, the highest level since 2009, while unemployment remained unchanged at 4.1. percent. The number of workers filing for unemployment claims also dropped to a 45-year low in February. Together, these economic indicators bolster the prospects of further wage growth this year, which should help soften the blow of rising interest rates.
LOOKING TO TERTIARY MARKETS Still, home flippers and the private lenders who serve them will need to look for strategies to keep profits up and expenses down to find success in today’s more challenging market. One strategy is to consider flipping in tertiary markets that have outperformed large metros. “Tertiary markets are receiving a lot of interest, and some of the biggest increases in the home flipping rates that we saw in the third quarter were in tertiary markets,” Blomquist said. The three markets that saw the biggest year-over-year increases in home flipping over a year ago were all in tertiary markets. Baton Rouge, Louisiana, had the biggest year-over-year percentage change, up 140 percent,
followed by Winston-Salem, North Carolina (up 58%) and Salem, Oregon (up 51%). Other tertiary markets that saw significant interest included Buffalo, New York; Tulsa, Oklahoma; Greenville, South Carolina; and Chattanooga, Tennessee. “Flippers are migrating to those markets because they have some combination of more distressed inventory that they find at a discount or just lower price points,” Blomquist said. He believes the momentum behind the tertiary trend is likely to continue into 2018 as the capital chasing returns will be interested even if it’s in tertiary markets. Financing and lending technology likely will help “grease the skids” of this phenomenon.
ABOUT THE AUTHOR
ROBERT GREENBERG Robert Greenberg is chief
marketing officer for Patch of
Land. His professional experience includes over 25 years in marketing, working with
familiar consumer brands such
as Pepsi-Cola, Anheuser-Busch and Sara Lee as well as B2B
experience in retail, technology, finance and real estate.
Recently, he led the marketing efforts for B2R Finance, where
Flippers will have the option of using a locally based hard money lender, but they will have many other lending options as well. Today’s national, sophisticated online lenders are willing to lend in these smaller markets and don’t require a bricks-andmortar presence to lend in a particular city.
he helped originate more than
These many financing options should continue to energize the flipping market as it moves further from a distressed, all-cash marketplace into one that focuses more on at-market homes purchased with financing that allows leverage and faster portfolio growth. ∞
automation and CRM platform
$1 billion of real estate investor loans that led to the industry’s first-ever multi-borrower sin-
gle-family rental securitization. At B2R, he was responsible for branding, corporate commu-
nications, lead generation and integrated marketing efforts.
He was responsible for leading the development and implementation of the marketing that helped to deliver sales
management and operational efficiencies to enhance the
customer experience for real estate investors nationwide.
L AST CALL WITH JEFFREY TESCH
Empowered Employees Are Key to Entrepreneurial Success
always wanted to be an entrepreneur. At an early age, I delivered a paper route, then ran a lawn cutting business, and later speculated in concert tickets.
These experiences confirmed that I wanted to work for myself.
So, when I graduated college—with a business management degree and all the wisdom that had been imparted to me—I took my first steps toward that goal. I decided to buy my first Subway franchise. I knew that if I just worked hard enough and told my employees what to do, I would be successful and make a boat load of cash in the process. Let’s pause for a minute and reflect on the part where I thought achieving success was as simple as telling my employees what to do. Turns out there is a lot they don’t teach in business school. No one ever mentioned the challenges of trying to manage a business when you are 22 years old, and virtually all your employees are older than you. There
was no class on how to get folks to buy into your vision. I quickly realized that for my restaurant to be successful, I had to figure out a way for employees to feel like they were part of the mission, as opposed to feeling like they were just along for the ride. During the next 18 years, I learned how to empower my employees. I discovered how to ensure they weren’t just cogs in the machine, but integral decision makers who had real autonomy. Through trial and error, I started to learn how to build a team. Fast forward to 2010, when it was time to start the next chapter in my entrepreneurial life. Thanks to the successful business I had built, I could now invest those earnings in my true passion: real estate. A successful software mogul presented me with a unique opportunity. The vision was to build a hard money lending company from the ground up. This would be a true startup. There was no playbook for creating a new business in an industry that, at the time, was seen as some-
what seedy. Never mind trying to figure out how to scale that business to a national brand with real financials. But it was very clear to me that if I was going to have a shot at being successful in the venture, I had to draw on my past experiences of hiring the brightest, hardest working folks I could find. That also meant I had to focus on the employee empowerment strategies that I had worked out at my previous business. Without that experience, I never would have been able to make RCN Capital one of the most respected national fix and flip lenders. The reality is, if you expect to build a company that is successful in the eyes of the owner, management and all team members, you need to realize it is not always about you. Thankfully, I was fortunate enough to learn this lesson early on through two very different career paths. As I continue to manage RCN Capital, the lessons from my past still ring true and play a crucial role in the company’s future. ∞
Nov. 4-6, 2018 #AAPLAnnual
e t a D e h t e v a
Confe l a u n n A ers’ 9 d n e L e t a f Priv ociation o th
AAPL hosts private lending professionals from around the country to enable you to network, share ideas, and discover solutions to today’s challenges.
At AAPL’s 9th Annual Conference, you’ll have access to the largest gathering of your peers. People who you can relate to, learn from, and actively contribute to the best thinking in private lending.
Join us at Caesars Palace as we seek to shape the future of private lending together!