Originate Report - July 2019

JULY 2019

THE OFFICIAL MAGAZINE OF GERACI

INDUSTRY SPOTLIGHT:

Allen Shayanfekr Sharestates

MONEY360 CREATING CREDIBILITY IN

PRIVATE CAPITAL

INSIDE: WEBINARS

AFAS PRIVATE LENDING STORAGE, BABY! www.originate.report 1

2 Originate Report | July 2019

CONTENTS JULY 2019

FEATURES 16 Storage, Baby!

Recession Proof, or is it?

By Dan Kryzanowski, Rocket Dollar

6

18 Seven Ways Webinars Will Grow Your Business Ramona D’Cruz, Geraci LLP

21 AFAS Are Here to Stay Ian Group, ProDeal360

28 Don’t Just Survive: Thrive in the Ever-Changing

Environment of Private Money Lending

By Bill Fairman, Carolina Hard Money

13

32 Private Lending as a Retirement Hedge

Clay Malcolm, New Direction Trust Company

34 Tips for When Your Borrower Files Bankruptcy

Alexa P. Stephenson, Esq.

WHO TO KNOW 6

16

Profile

Money360: Creating Credibility in Private Capital Charles Peckman, Originate Report

13 Industry Spotlight

Allen Shayanfekr, Sharestates

IN EVERY ISSUE

18

10 Industry Job Watch 24 Cities to Watch

Atlanta, Georgia

Originate Report Staff

36 Upcoming Events 38 Lender Directory

28 www.originate.report 3

Revenue diversification

Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial

TODAY’S MARKET OPPORTUNITY: •

•

•

100 billion dollar non owner-occupied investment space SFR ’s 1-4 Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial Diversify product offering and add new revenue opportunities you may be missing out on Legally compensate your most prized relationships (Realtors) for referrals

WHAT TO LOOK FOR IN A BROKER + CAPITAL PARTNER RELATIONSHIP: • • •

Concierge across product offering with underwriting, training, service and support Dedicated call center for loan origination support and fund control Marketing materials provided including product tear sheets, pitch decks and web banners

In today’s market, refinancings have limited availability and there’s not much new housing inventory to lend against. For mortgage Brokers, this means the obvious; there are a lack of transactions in the market to profit from.

For shops that are only doing refinance or traditional mortgages, opportunities only come around every 5-7 years. You’ve got to have a big client base to have volume. With financial products across SFR ’s 1-4 Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial, the sales cycle is faster, there is significantly higher recurring business, and a few lenders have teams dedicated to helping you succeed.

BROKERS, PARTNER TODAY

4 Originate Report | July 2019

Think of it as a new product offering which results in the diversification of your potential revenue. All of this is well within reach, and much easier than you may think.

The NON-O/O investment space is a 100 billion dollar industry that has come full circle since the last market downturn. Over the last decade private lending has been growing, and the comeback of property investors is at an all-time high.

Here’s what it takes to do these types of loans and a good private lender will handle these things for your Brokerage…

• • • • • • •

Review and process loan applications Document collection Facilitate Appraisal Coordinate Title & Escrow Complete underwriting Facilitate Funding Pay you

Traditional Realtors and Mortgage Brokers have the misconception they need an NMLS license to be a lender in this product space. The main point in dealing with a private lender is while they primarily fund SFR’s, these loans are governed under commercial guidelines.

Thus we are not governed under RESPA, TRID or TIlLA. These loans are funded only into business entities allowing 7-10 business day closings and can pay anyone under a Brokerage license a referral fee or commission on the HUD at closing.

There are two avenues a Brokerage launching this type of product to Real Estate professionals can expect to see. You can be a Correspondent Partner (the lender would fund in your name)

http://triumph.capital/brokers

or an Origination Partner (the client would see the lender’s name on the HUD). Most deals are funded under a single set of product guidelines allowing training, underwriting and servicing to be easily understood.

CORRESPONDENT PARTNER (CP): You look and feel like the lender, a complete white-label product.

ORIGINATION PARTNER (OP): Traditional Broker + lender relationship, lender shows on HUD. A full concierge service for Broker partners handling everything from A-Z is an entirely new model for private lending and Mortgage Brokers / Real Estate professionals. Working with a direct lender enables Mortgage Brokers to keep the lion’s share of the profit and have the potential to earn from the yield spread as well, all while monetizing on much more frequent lending transactions, instead of the normal 5-7 year customer lifecycle.

There many private lenders chasing this strategy and it’s safe to be wary of who to work with.

While choosing a partner, look for someone who understands the business and has a strong reputation for closing transactions. You’ll also need support with marketing materials. Having the right documents and product tear sheets (one-pagers) for conversations, trade shows, etc. is helpful in positioning the opportunity with your existing book of referral business from Realtors.

For more information call

877-450-9741

ROB JENNINGS robert@triumph.capital

GEORGE O. FLINT goflint@triumph.capital

CEO Geraci LLP ANTHONY GERACI Anthony@Originate.Report

Letter

from the

Editor

Vice President Geraci Media RUBY KEYS Ruby@Originate.Report Editorial Director MAX BERGER Max@Originate.Report Art Director LYNDA HIGHT L.Hight@Geracillp.com CONTRIBUTORS Max Berger • Edward Brown Jonathan Bursey • Charles Peckman Ruby Keys • Romney Navarro

FOUNDING UNDERWRITERS

MARK HANF President, Pacific Private Money

ORIGINATE WEBSITE www.originate.report GERACI LAW FIRM www.geracilawfirm.com MEDIA WEBSITE www.geracimediagroup.com

Welcome to our July Edition of Originate Report!

“To improve is to change; to be perfect is to change often.”

-Winston Churchill Change is an inevitable factor of life, and a necessity for personal and professional growth. To mark the 2nd full year of Originate Report Magazine’s publication, we have embraced this idea wholeheartedly. You may have noticed some aesthetic differences already, but we are making more systemic changes as well, in terms of both content and distribution- read on to find out more!

In this edition you will hear firsthand from one of the major players in our industry, Gary Bechtel with Money360.

You will also be introduced to Allen Shayanfekr with Sharestates. Don’t forget to check out this month’s guest articles, either- we have a few new contributors with content that you won’t want to miss.

To Growth and Change,

Max

Max Berger Originate Report Editorial Director

CONFERENCE WEBSITE www.geracicon.com www.originate.report 5

PROFILE

A regular fixture at Geraci conferences. Money360 knows networking with other powerhouses is key in this industry.

MONEY360 CREATING CREDIBILITY IN PRIVATE CAPITAL

“I

By Charles Peckman, Originate Report

borrowers and intermediaries during its admittedly short existence.

In the chaotic aftermath of the 2008 financial crisis, Bechtel said a

shifting

marketplace

–

along

love doing deals. Like a lot

Bechtel says his 30+ year career has

with advancements in technology

of people in this business,

given him the opportunity to apply

– contributed to a myriad of new

I’m a deal junkie.”

the knowledge he has garnered

business

throughout his storied tenure in the

Gentry’s vision for Money360.

With management and production positions

lending market, servicing countless

at

Extensia

opportunities,

including

mortgage lending space.

Financial,

“In 2014, the distressed debt business

Grubb & Ellis Company, Meridian

Founded in 2014 by current CEO Evan

had tapered off, so Evan saw an

Capital, Johnson Capital, FINOVA

Gentry, Money360 is a vertically

opportunity

Realty Capital, Pacific Southwest

integrated integrated, nationwide

lending space to bring to bear

Realty Services, The Alison Company

direct lender that makes small to

some of the things he had learned

and Hometown Commercial Capital,

mid-balance commercial real estate

at

Gary Bechtel’s resume practically

loans of $3 million to $25 million.

ventures,” Bechtel said. “Initially, he

speaks for itself. But in his current

Located in idyllic Ladera Ranch,

raised capital from high net worth,

role as the President of Money360,

Money360 has proven itself as a

accredited investors and placed that

a California-based mortgage lender,

mainstay in California’s immense

in bridge loans, and that’s really how

6 Originate Report | July 2019

his

in

previous

the

commercial

entrepreneurial

the business got started.”

in 2015, and we now stand at 37 employees. In 2015, we closed the

With the formation of the company’s

year at approximately $50 million

first debt fund in 2015, Bechtel

of total volume since inception, we

said he was brought on soon after.

are now at roughly $1.4 billion since

Throughout his career, he added, he

inception – this substantial growth

has run and/or expanded commercial

has happened over a relatively short

real estate businesses as either an

period of time.”

intermediary originating loans or running origination platforms or as

Despite the company’s growth during

overseeing lending platforms – and

this time, Bechtel said the early days

as the business grew, Money360

of Money360 were not without their

needed

ups and downs.

an

experienced

subject

matter expert in the field.

“Building something from the ground “I was brought on with that interest

up is incredibly difficult, mainly

in mind,” he said. “We began ramping

because you just don’t have any

up the business in 2015 and really

brand recognition,” he said. “I think

in earnest in 2016, when we began

that’s where the hiring of highly-

hiring more origination personnel to

experienced people comes into play.

generate deal flow and back-office

When we didn’t have that brand

personnel to process the loans. From

awareness, the people we brought on

there, we have grown substantially;

gave us credibility. For the first year

I think I was employee number six

of our existence, we were relying on

the reputation and credibility of the people we hired. As time went on and we were closing loans regularly, the Company’s reputation as a reliable capital provider was established” Outside ideals

of and

shifting the

marketplace

aftermath

of

a

financial crisis, Bechtel said the success of Money360 thus far can be traced back to one simple factor.

“I think our success is attributable to the team we’ve brought on – one of the things we’ve done since creating the platform is hiring incredibly seasoned, talented people within their specific role in the firm,” he said. “Typically, our people have around in

their

25

years

specific

of role.

experience Whether

that means you’re an originator, underwriter, processor, closer, or senior management, everyone has decades of experience and billions of dollars in the commercial real estate finance sector, and I think that’s played well with the intermarries and investors we work with.”

Money360: Continues on pg. 8

www.originate.report 7

MOney360: Continued from pg. 7

It is important to keep in mind, Bechtel added, that experience is meaningless without a proven track record and bar-none attention to an ever-expanding list of clients.

“Credibility

in

this

business

is

everything,” he said. “If you hire highly talented, highly experienced people who are tenured and have been through the cycles and can draw upon those experiences of structuring

and

re-structuring

loans, again, I think that’s what has

difficult to pinpoint a singular reason

deploy money in the space, those

for this increase, he added there are

players won’t be in the business a

a number of factors that have led

year or two from now. But companies

to the piqued interest of lending

like Money360 will be here because

professionals. These elements, he

this is our area of expertise and sole

said, include the skyrocketing of the

focus: we’re building a platform for

CLO (collateralized loan obligation)

the long-run.”

market

and

investors

becoming

frustrated with a lack of opportunity

As more lenders enter the bridge

to deploy the capital they have raised.

lending

space,

Bechtel

said

Money360 has thought long and “A lot of these players have come in

hard about how best to differentiate

knowing that they can make loans

itself from the competition; although

on their lines or balance sheets, and

this differentiation can seem quite

ultimately go to the CLO market

difficult at times, he said it is a

for liquidity and leverage – I think

“welcome challenge.”

separated us from many lenders that

you’ve seen a lot of people who were

are both in the market or have tried

in some other aspect of the lending

“It doesn’t always come down to

to enter the bridge lending space.”

business, be it CMBS, Mezzanine

price,” he said. “Some of these new

or Equity, and I think for all of the

entrants I mentioned try to compete

Bechtel said that in the past few years

reasons I’ve outlined before, some

on price and they try and compete,

the bridge lending space has seen

see the potential that the bridge space

possibly, with higher leverage, so

increased interest – and competition

provides,” Bechtel said. “My view

the market has become frothy to

– from startups and established

is that when the business changes,

a

lenders alike. Although he said it is

slows down, or they are not able to

having been through these cycles,

8 Originate Report | July 2019

certain

degree.

Unfortunately,

this is something reminiscent of

as hard as it is to

what we saw in 2007 in the CMBS

believe, we’re fine

[commercial

with that. We take a

mortgage-backed

security] world.”

long-term approach to

this

business,

That world, he said, has some

and we want to be

attributes of today’s bridge lending

able to honor our

space.

commitment

to

our

in

borrowers

“The business was crowded, there

the future funding

was a lot of money, and there was

obligations we may

some very aggressive underwriting

have and protect our

and

business,

investors as much

recognizing they could securitize

as we can from any

that product and really have ‘no skin

kind of impairment

in the game,’” he said. “Although that

of the loan.”

pricing

to

win

has changed since there is a minimum risk retention required of an issuer,

Aside from the sheer

but my concern – and we’ve already

pricing

begun to see this with some of the

Bechtel

new entrants into the space – is that

that

Money360’s

they are becoming very aggressive

clients

have

on pricing and structure to try and

to expect a level of

win business and that is fine today,

professionalism from his team, and

but potentially that could bite them

can sleep soundly knowing that his

and their investors in the future.”

team will follow through on their

component, also

said come

honestly, we wouldn’t have been able to fund as much as we have in such a short period of time if we weren’t reliable and credible . Aside from

commitments. Bechtel said he is

focusing solely on pricing, it’s our

Although Bechtel said it can be easy

proud when prospective and current

ability to structure the loan as close

to get caught up in what competitors

clients refer to Money360 as a

as we can to the borrower’s ask and

are doing, he added it is crucial to

“responsible, reputable” source of

mitigate risk as much as possible,

remain steadfast in the principles

bridge lending.

but also provide the confidence that

and

practices

his

company

we’ll be there for them in the future.”

has

established.

“What sets us apart, I believe, is what lies between the ears,” Bechtel said. “We’ve been through the cycles – and given our team’s decades of experience – we’ve seen

“Building something from the ground up is incredibly difficult, mainly because you just don’t have any brand recognition,”

what can happen when you stretch

Another component of the company Bechtel said sets them apart is Money360 proprietary technology platform, 360Live and specifically My360,

an

interactive

client

portal designed to create a better transparency of the commercial real

and aggressively underwrite these

estate process. Anyone associated

transactions, so we ‘stick to our

“We’ve established a proven track

with a loan in closing has access

knitting.’ If we lose a transaction to

record with an experienced group of

to

someone who is going to come in

people that have proved themselves

and aggressively lend or over-lend,

over and over again,” he said. “Quite

this

portal,

enhancing

the

Money360: Continues on pg. 10

www.originate.report 9

or

Money360: Continued from pg. 9

traditionally painful process of email and drobox.

Up until this point, Bechtel said it has been common practice for the loan process to take place “behind the firewall,” which can not only hinder the borrower/lender relationship but also the origination and processing process as a whole. My360 allows borrowers to track the status of their loan in real time, while also securely uploading

documents

and

other

the

intermediary

community.

we can do in the confines of our own

Bechtel said it is important to hear

lending platform. Taking Money360

the questions and concerns of the

from a smaller enterprise to what

investor

it is today has been very satisfying,

while

refraining

from

“bashing” newcomers to the space.

and that’s partially because we all believe in what we are doing here.”

“I will never, nor will anyone in our company, speak badly about one of

The relationships between all parties

our competitors as I don’t want to be

involved – intermediaries, borrower,

talked badly about either,” he said.

investors and employees – Bechtel

“But we will emphasize to them that

said the validation and recognition

pricing and leverage isn’t everything

of the success that comes with that

– viability, reliability and staying

is rewarding. But despite this vocal

power are key to a long relationship.”

support, he said there is “always work to be done.”

important pieces of information to

To Bechtel, that relationship extends

via computer or mobile devices.

not only between a borrower and

“We

lender, but between an employee and

Money360, and that is something

their company.

that I took on when I was first hired

As part of Money360’s branding and educational efforts, Bechtel said

have

very

large

goals

at

in 2015 – I think we’ve done a very

he has been fortunate to travel and

“Jumping into a new transaction to

good job of setting ourselves apart in

speak on bridge lending and hear

try and win it for the firm may seem

a very crowded space, and we plan

about some of the short-comings

impossible at times, but it’s incredibly

on doing so as we continue building

of potential competitors – when

rewarding – we have to realize our

this platform for the future.”

sitting down with potential clients

strengths and weaknesses, and what

CONTACT: For more information on Money360, email Gary at garybechtel@money360.com

INDUSTRY JOB WATCH

LOOK WH

O ’S

HIRING!

Looking to fill a posit Originate ion? Adve Report’s rtise it Industry of thousa Jobs to g here in nds of qu et it in fro alified ca nt ndidates Contact . us at (94 9) 629-3 961.

Money360, Inc., Ladera Ranch, CA Commercial Real Estate Loan Underwriter must be able to evaluate loan opportunities, including, the real estate collateral securing the proposed loan, the surrounding market and demographic area and the adequacy of the loan structure of the transaction and/or relationship.

Primary duties include the underwriting of commercial real estate and bridge loans, reviewing loan documents, spreading financial statements, evaluating borrow/ guarantor financial support and management, and developing rationale for pricing decisions. The role will be responsible for all aspects of a proposed loan from the time the borrower executes the term sheet through closing.

Interested parties should contact Paul Cleary.

CONTACT: paulcleary@money360.com | www.money360.com

10 Originate Report | July 2019

PRESS RELEASE

GERACI MEDIA ORIGINATE REPORT MAGAZINE CELEBRATES 2-YEAR ANNIVERSARY IRVINE, Calif., July 09, 2019- Two years ago, Geraci released the inaugural edition of its industry magazine, Originate Report, targeted primarily at mortgage loan originators. This month, Originate Report commemorates its 24th edition, and thereby its 2-year anniversary. To mark the occasion, the magazine has been upgraded with a new look and fresh content. With brand-new content writers, new featured columns, and an expanded array of relevant topics for lenders, the Geraci Media team is working hard to keep readers as engaged as ever. The team wishes to express gratitude to their readers and advertisers for making Originate Report a huge success.

The magazine has also transitioned from print to digital as its primary medium, creating opportunities for more interactive content and broadening its audience. It will remain easily accessible to its original readership of loan originators, lenders, investors, and other professionals in the non-conventional lending industry, and physical copies of the magazine will still be found at all Geraci events.

Commenting on his experience as a contributor to the magazine, Romney Navarro from the executive team at Streamline Funding stated, “Oftentimes in our relatively niche business of non-conventional lending, you find it difficult to get your message out to the right audience. This is especially frustrating when your specific message can help somebody grow their business responsibly. I was thrilled to provide content to the magazine; first, because the people at Geraci are the authorities in spotting talent in our space and I felt honored to share my story with them. Secondly, because unlike others who have tried in the past, they have created a respected and well-circulated platform to share that story.�

Originate Report magazine is distributed to thousands of loan originators, lenders, investors, and other professionals in the non-conventional lending industry. It has become an essential resource for its audience, providing valuable and timely content each month to help readers stay up-to-date on current industry trends and grow their businesses. Originate Report also provides a platform for professionals in the lending space to promote their services through both advertisements and the lender directory.

Please visit https://originate.report/ to gain access to all previous editions of Originate Report. If you are interested in contributing content or advertising, please contact m.berger@geracillp.com to receive updated media and editorial kits.

Max Berger | 949.379.2600 | m.berger@geracillp.com www.originate.report 11

SPOTLIGHT SPOTLIGHT

INDUSTRY SPOTLIGHT Allen Shayanfekr

Co-Founder and Principal, Sharestates

12 Originate Report | July 2019

A

llen Shayanfekr is the

and compliance was pivotal for

for

CEO

launching Sharestates as a pioneer

while

and

Co-founder He is

in the real estate crowdfunding

an entrepreneur with cross-

industry. Under his leadership, the

functional expertise in real estate,

company reached profitability in

law, technology, and f inance.

merely 13 months. Allen now leads

Allen’s Juris Doctorate (JD) with a

platform innovation for Sharestates,

background in securities, regulation,

optimizing

of

Sharestates.

the

user

borrowers also

and

investors

spearheading

the

development of new loan products and capital markets relationships.

To date, Sharestates has loaned nearly $2 Billion to real estate developers

and

returned

nearly

$750 Million in investor principal.

experience Q: How have you seen Sharestates grow and expand in the last few years?

Since inception, the company has originated over $1.8 billion in real estate loans; because of that massive growth, the staff has gone from a team of 4 people to over 100. In just 4 years we have become one of the largest private lenders in the country.

Q: What has been one of your biggest successes and one of your biggest failures in your career?

Our biggest success has been our massive growth in private lending coupled by stable, reliable returns for our investors. I attribute that to our incredible team who have worked tirelessly to bring the vision we had for Sharestates to life. I view failure as part of the path to success.

In other words, I don’t believe we have ever failed, rather we have learned

and

persevered.

Failure

always presents an opportunity to improve.

Q: What does your typical day look like and how do you make it productive?

Family and work are the most important aspects of my life, so I make time for each every day. I have Allen Shayanfekr, Sharestates

Allen Shayanfekr: Continues on pg. 14

www.originate.report 13

Allen Shayanfekr: Continued from pg. 13

found that the secrets to productivity are time management and effective delegation. After five years of building Sharestates, I cannot still be involved in every area as I once was, so I have placed leaders across our team to take on day to day operations while I carry out the strategic vision of the company.

Q: How has your company vision

we first started would have saved me

Q: What is a recent trend in

from a significant amount of stress.

the private lending industry that

Q: What is something that most people don’t know about your company?

Most people don’t know that we started a 506C called Share4Kids,

have always been a focus for our

and also the growing potential for

company. It felt natural to officially

mergers. As the industry has grown

create Share4Kids in support of the

and platforms have really developed

was our shift from both equity and debt products to focusing solely

“Our biggest success has

on debt. When we first started

been our massive growth in

Sharestates, we wanted to offer

private lending coupled by

both options but quickly realized

stable, reliable returns for our

that our core business, and what we

investors. I attribute that to

were really passionate about, was

our incredible team who have

funding deals. So we shifted our

worked tirelessly to bring the

focus and grew our client base with

vision we had for Sharestates

short term fix and flip bridge loans.

to life. ”

phase of their project to the next, including 30-year rental loans.

Q: What advice would you give your younger self?

I would tell my younger self that it will all be worth it. There were so many times throughout this process that we didn’t know how, or even if, things were going to work out.

We have made countless sacrifices to ensure that this dream became a reality. To have that assurance when

14 Originate Report | July 2019

pan out. I think one of the most platforms that are still left standing

participate in each year.

programs to carry them from one

and private lending industries would

back and community development

I think the biggest change in vision

entire investment process by creating

see how the real estate crowdfunding

exciting trends now is to see the

many charity events we host and

our borrowers throughout their

We have been waiting since 2012 to

benefiting children in need. Giving

evolved from Day 1 to Today?

We have since been able to support

excites you?

their core competencies, we are seeing even more opportunities now for platforms to work together. I’m really excited to see what the next few years hold for private lending.

Q:

What

is

one

book

that

you’d recommend other industry professionals should read, and why?

The Ultimate Sales Machine, written

Q: What does success look like for

by Chet Holmes. We have provided

you?

the majority of our staff with a copy

I think the concept and the look of

of this book. The key takeaway from

success have changed significantly

the book is efficiency, and in a fast-

for me over the years. Of course,

growing company, we are always

beating our targets and constantly looking for ways to create a better product for our users is always going to be a part of feeling successful. But more than that, I think being proud

looking for ways to streamline our business.

Q: What is your favorite quote?

of the man I am for my family and

“My favorite things in life don’t cost

my loved ones has become a much

any money. It’s really clear that the

bigger aspect of my definition of

most precious resource we all have

success.

is time.” – Steve Jobs

CONTACT: (212) 201-0750 | hello@sharestates.com | sharestates.com

Family Entrepreneurship “The buck stops here”

Real Estate Finance Corporation is a family owned and operated business based in Scottsdale, AZ. The saying “The buck stops here”, could not be embodied more than by this boutique firm. “It’s our name on the line, our reputation - not just as a business but as a family” said Alesondra Mora, Operations manager, niece to CEO/President Adam Child.

There is a personal stake in each deal and interaction.

We are here to build a legacy.

Let us help build y o u r s .

Contact our team today to discuss your potential investment opportunities.

14362 N. Frank Lloyd Wright Blvd., Ste. 1000, Scottsdale, AZ 85260 NMLS 1433420 | Phone (480) 477-7730 | refcorpaz.com | investorservices@refcropaz.com www.originate.report 15

FEATURE

Storage, Baby!

RECESSION PROOF, OR IS IT? n Utopia, Texas, there is an

completely troll the aforementioned

opportunity for you to instantly

claims. The truth, of course, lies

receive

somewhere in the middle. Let’s hear

double-digit

returns

storage service with pick up and delivery, shares that “2017 and 2018 were record construction years for self-storage, but occupancy rates are still holding strong at 90%”

By Dan Kryzanowski, Rocket Dollar

I

of Callbox Storage, a full-service

That said, Bainter notes, “I would not say the market is recession proof, but I would say it is recession resilient.

from the experts.

Any time there is a recession it puts

political and economic conditions.

Is Storage Recession Proof?

people are willing to spend on things

Added bonus, you will also become an

For the past two years, every major

expert on this sector in less than 12

conference highlights “get prepared,

months. Finally, there is an endless

market is oversupplied…” and all

supply of commercial and consumer

we’ve seen is growth! claims Scott

need for storage as families living

customers, and for some reason,

Worden of CallPotential. Worden,

situations may change.”

nobody else is interested in Utopia.

an expert in technology and astute

on a property in a recession-proof market that is truly uncorrelated with

pressure on the amount of money and this would include storage.

However, the other side of the coin is that a recession can create some

alternative investor, doubles down

Scott

As you digest this mythical town

with a resounding “Yes, (storage is

Storage and a longtime real estate

(though Texas does have a Paris, Gun

recession proof) over time, especially

veteran relatively new to the storage

Barrel City, and Loco), many folks

when you look at the prices sold.”

space, shares that “self-storage has

either wholeheartedly evangelize or

Kyle Bainter, Co-Founder and CEO

the lowest foreclosure rate across

16 Originate Report | July 2019

Mednick,

CEO

at

Square

industry’s

recession

resilience

sharing that “when people lose their jobs they want their stuff, when things pick up they still use it (storage).”

Knobler cautions though that specific 3-5 miles pockets are not resistant to becoming oversupplied.

Finally, Adam Kensky, Co-Founder and Owner of Triad Investments, like Mednick a newcomer to storage, notes that even during a recession, you can operate storage at a lower occupancy (i.e. higher vacancy) and run a good business, with breakeven a lot lower than other asset classes, such as multi-family.

Kensky

also

recognizes

that

Millennials are “career renters” living other real estate classes, such as

Mooney also stays proactive on

apartments.”

national economic swings, as he suggested

less

aggressive

rate

Mednick also abides by the industry’s

increases for existing customers

longtime rule of thumb that a three

back

mile radius is “really your market”

thereafter

and that people will only drive 19

banking

minutes to their storage facility.

with some stores hit harder than

in

2008. hit

Charlotte hard

industry

was

when

took

refers

a to

the hit, more

in smaller spaces and candidates to be longtime storage renters.

Should I Do Storage?

Once again, this is a very personal decision. Mednick made the move, though after three decades on the commercial and residential side.

Kensky maintains his fix-and-flip

others.

Alvino

Recession resistant in a 3-5

recent

examples,

mile radius Jim Mooney, Vice

with a strong digital presence can

Tune in next month, for the final

President of Operations at Freedom

withstand a local downturn.

article of this series, as we get our

when

stores

business, now entertaining groundup development along with storage.

hands dirty with the experts on

Storage Management, and Christina Alvino, Founder & CEO of FineView

Dave Knobler, Director of the National

marketing, operations, and buy vs.

Marketing, focus on the 3-5 mile

Self Storage Group at Marcus &

build dilemma.

radius with deep insights across hundreds

of

properties

Millichap,

sums

up

the

storage

across

the country. Mooney and Alvino, consistently recognized among the industry’s top operator and marketer, stress that storage is a market driven business - recession resistant - based

ABOUT THE AUTHOR: Dan serves as EVP at Rocket Dollar and Capital Partner for Pinnacle Storage Properties. Dan has gone loco in Paris, finding his utopia inside a climate controlled 10*10 storage unit on those hot sunny days in Austin, TX. Visit with Dan at Captivate in Las Vegas.

CONTACT: dan@rocketdollar.com

on local factors. www.originate.report 17

FEATURE

Seven Ways Webinars Will Grow Your Business

W

ebinars have grown in

Just how beneficial can a webinar

popularity

recent

be to your business? Here are 7

years and have become

reasons why webinars are a fantastic

an important marketing tool. These

their computer screens.

People from all over the world can attend, providing your brand or product with the potential to see

By Ramona D’Cruz, Geraci LLP

in

engage with a larger group over

marketing strategy.

live web-based seminars can connect

huge results. This global reach creates networking opportunities for

building

relationships

and

partnerships.

you with leads from all over the

1. Global Reach:

2. Be Considered an Industry Leader:

world. They encourage interaction

Webinars are a cost-effective way to

Your audience has invested time

by allowing the audience to ask

extend your reach globally. Rather

in

questions or provide feedback in

than pay for flights and hotels to

the

real-time.

meet with individual leads, you can

share. They’re expecting valuable

18 Originate Report | July 2019

registering

and

information

listening

you

plan

to to

takeaways from the webinar, even

webinars. After hosting a webinar

is essential to show both new and

something they can put into place at

you’ll have metrics to measure how

established leads how your product

their own company. This positions

well it performed. These metrics

or service can improve or enhance

you and your brand as an industry

include the number of attendees,

their workplace.

leader, or expert.

number of those registered, and total

3. Audience Engagement: Webinars can give your audience the chance to ask questions and provide feedback. This is valuable

views. The webinar can and should

7. Expedite the Sales Process:

be recorded for you, the audience,

Depending on the prospect, the sales

and affiliates to share with others,

process can be slow. Businesses

growing the results even more.

want to convert a lead into a customer quickly. Webinars can play

because you can address concerns, reservations,

or

any

lingering

questions they may have about your training or product in real-time.

You can customize your presentation to your audience based on their questions and feedback to keep them engaged. Ask them to take an

a significant role in expediting the

“Webinars are a cost-effective

sales process.

way to extend your reach globally. Rather than pay for

While it’s certainly important to

flights and hotels to meet

provide

with individual leads, you can

useful

information

and

tips to your audience, it’s equally

engage with a larger group

important to share how your brand or

over their computer screens.”

business can help them achieve this.

How can your product be a solution

action, such as completing a task

6. Build Trust & Generate to their problems? Your webinar should show the audience the value increase audience participation and New Leads: or answering a question. This will interest.

Each time a person completes your

of your brand. Garnering interest in

webinar’s registration form they

the product and its potential impact

potential partnership. Webinars adds

There are numerous benefits to

4. Invite Guest Speakers to should be considered a new potential is the first step in completing a sale.

Increase Engagement: lead, whether it be for a sale or a Include guest speakers, such as

industry leaders or affiliates, to speak during your webinar. These individuals should be familiar with your industry and value of your product. They will be able to educate the audience on the benefits or impact, validating information you have or will be sharing.

By inviting a guest speaker, you can also increase the webinar’s attendance by including your guest’s audience and following. This can grow the number of leads you may gain substantially.

5. Results: Results can be seen quickly from

a personal interaction that videos

hosting a webinar. Though this article

and commercials don’t. Webinars put

only touches on a handful of them,

a face and name with your product

it should be clear that webinars are

making you approachable, human,

an effective tool for engagement and

and someone they can trust.

growth. As you take these benefits into account, you should begin to

Educating them on how your product

think how you can use a webinar

can benefit their company is the first

for lead generation and to increase

step in opening the door to future

traffic, which will yield great results

discussions

for your business.

and

partnerships.

It

ABOUT THE AUTHOR: Ramona D’cruz is the Media Assistant at Geraci Media. She recently joined the company and helps her team with various aspects of the Media firm by creating social media posts for the different social platforms, registering attendees for any one of our five conferences we hold each year, and whatever else she is able to do! Ramona graduated from CSULB with a degree in Sociology and decided to pursue higher education by enrolling in a MBA program, with a concentration in Marketing. CONTACT: r.dcruz@geracillp.com

www.originate.report 19

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20 Originate Report | July 2019

FEATURE

AFAS ARE HERE TO STAY

By Ian J. Group, Esq., ProDeal360

W

hen you underwrite a

a partner at Geraci who manages

headwind in the works: technology.

loan,

the Real Estate Finance Group, says

In 2018, an Originate article by

down

that his firm relies heavily on AFAs:

Robert Greenberg titled “The Future

to risk. It is no surprise then that

“Parties to a transaction are looking

of Lending is Through Automation

lenders are becoming wiser to a

for certainty in timing and transaction

and

growing trend in the industry used

costs. When a fee is agreed upon at the

mortgage lenders have seen annual

to thwart the risk of unpredictable

outset of the transaction, both sides

growth rates at 30%, with the ability

closing

can have peace of mind about the

to process applications 20% faster

arrangements (“AFAs”).

value of the services being delivered.”

than traditional counterparts.

An alternative fee arrangement is

As a lender looking to take advantage

As lenders use workflow automation,

a departure from the traditional

of AFAs, the data shows that you need

transaction management platforms

billable hour structure by which

to be proactive. Of the law firms that

clients are able to close with more

offer alternative fee arrangements,

predictable

the

always

costs:

calculation

boils

alternative

fee

controlled

fees.

the Altman Weil report said that

non-billable

hour

72% of those firms were doing so in

are

reaction to client requests. Contrast

removing the risk of any unforeseen

this with the fact that only 28% of

costs at closing, ensuring greater

those law firms were responsible

predictability for their borrowers

for initiating such arrangements.

and their bottom line.

A recent Bloomberg survey also

By fee

and

requesting

arrangements,

lenders

supports this assertion: only 22% If you haven’t considered AFAs for

of respondents from national law

your business, now is the time to get

firms (i.e. firms with revenue under

on the bandwagon. Legal consulting

$10 million) said their firms have

firm Altman Weil reported back in a

adopted alternative billing models.

2016 study that 88% of law firms are

Approximately 50% of firms with

“initiating conversations with clients

revenue in excess of $1 billion have

about pricing and budgets.” Ninety-

adopted these structures.

seven percent of those firms maintain alternative fee arrangements with

While client demand is driving this

their clients. Nema Daghbandan,

trend, there is another oncoming

AI”

reported

that

online

and machine learning to close and underwrite

their

deals,

lawyers

are not yet responding to the tools making things faster. Per a 2019 Bloomberg

Analysis

titled

“Law

Firms Respond to Demand for Alt. Fee Models,” Legal Analyst Meg McEvoy reports that only 25% of law firms had implemented any changes to their billing model as their use of legal technology increased. This won’t always be the case, however.

As clients and firms both make use of newer technology (all of those tools are available for lawyers as well!), firms can continue to bill at their rates and still maintain higher levels of profitability . . . they just need AFAs. AFAS: Continues on pg. 22

www.originate.report 21

AFAS: Continued from pg. 21

So what are the most popular AFAs that you can discuss with your counsel today? Here are four general types: 1. Fixed Fee A fixed fee is an all-in price for a specific matter. This arrangement is ideal for high volume lenders. This type of AFA works best within a longterm relationship between firm and client where the firm is familiar with the client’s business and workflow.

2. Periodic Flat Fees Building on the flat fee model above, clients and firms can also structure a predetermined flat fee billing over a period of time, such as a month or year. Periodic flat fees might also incorporate volume discounts based on the amount of work anticipated during a specific time period.

3. Fixed Fees with Collar This arrangement is based on hourly rate billing but contains a range above and below a budgeted amount called a collar. If the legal fees are below the collar, the client pays the difference; if the fees are above the

market already offering AFAs, your

not only streamline your business but

service providers have, at the very

also require your service providers

least, started to consider these

adapt to your workflow.

billing models, and so should you.

The above examples do not represent

This shift is inevitable because cost

the entire world of AFAs. In fact,

control comes down to an improved

firms have entire departments built

user experience. Just as borrowers

to structure AFAs. And remember:

are gravitating to platforms with

the current data shows AFAs are

quicker

overwhelmingly client-driven. While

closings, lenders are looking for the

your firm may have thought about

same thing. Whether it’s through

AFAs, it is in your interest to do your

AFAs or adopting technology, we are

research and figure out what you

in the midst of a significant change

want.

in the way in which we all control

approvals

and

faster

risk. Now that you’re wiser to these So how do you get in on the AFA

trends, how will you leverage the

action? For your existing service

data?

providers: ask. If you are looking for new lawyers, make AFAs part of

Sources:

your search’s success criteria. Firms

· 2016 Law Firms in Transition, An

today know AFAs are necessary to be

Altman Weil Flash Survey (http://

competitive. “As a law firm, [Geraci]

www.altmanweil.com//dir_docs/

often times earns less using an AFA

resource/95e9df8e-9551-49da-9e25-

than [they] would have using a

2cd868319447_document.pdf)

traditional hourly billing model as the transaction is more complex than

· Meg McEvoy, Law Firms Respond to

originally anticipated or understood,

Demand for Alt. Fee Models (https://

but [Geraci] believes that AFAs are

news.bloomberglaw.com/bloomberg-

here to stay and are generally a great

law-analysis/analysis-law-firms-

way to practice,” says Daghbandan.

respond-to - demand-for-al t-feemodels), June 17, 2019

For the lenders out there that are unable to convince their counsel to

· Robert Greenberg, The Future of

provide an AFA, take action by using

Lending is Through Automation and

between a client and recently-hired

cost-cutting

AI,

counsel.

those platforms and tools that focus

report/future-lending-automation-

specifically on scalability. This will

ai/) August 14, 2018

collar, the client gets a discount. You might see this type of arrangement

technology.

Leverage

Originate

(https://originate.

4. Broken deal discounts Not all deals close so having an arrangement

with

your

lawyers

regarding broken deal fees will give you greater predictability.

With a growing percentage of the

22 Originate Report | July 2019

ABOUT THE AUTHOR: Ian Group is the Head of Customer Success at ProDeal, a high-growth technology company focused on securing and automating transactions. Prior to joining ProDeal Ian was an associate in the global real estate group at Hunton & Williams LLP where he represented developers and institutional lenders in large commercial real estate transactions. CONTACT: ian@prodeal360.com

PRESS RELEASE

RCN Capital Announces CEO Transition Plan COMPANY COMMENCES BOARD OF DIRECTORS SEARCH PROCESS

SOUTH WINDSOR, Conn. (June 24, 2019) – RCN Capital, a leading nationwide direct private lender, announced today that Don Vaccaro will be stepping down as Chief Executive Officer. Mr. Vaccaro will be leaving his current role effective June 30, 2019.

Jeffrey Tesch, RCN Capital’s current Managing Director, will be stepping in as Vaccaro’s successor. Mr. Tesch, who has been with RCN Capital since its founding in 2010, led efforts to develop the company into a national brand within the private lending industry with a focus on superior customer service and transparent loan products for a diverse customer base.

“It is truly a privilege to have been named the Chief Executive Officer of RCN Capital. I want to thank all of my employees that have contributed to the company’s success and have made RCN what it is today,” said Jeffrey Tesch. “I look forward to continuing to lead the company’s growth efforts through our partnerships and strategic relationships. Under my leadership, RCN Capital will continue to take great pride in setting the highest ethical standards in the private lending industry and moving our space forward as a whole.”

The company has begun the process of assembling a Board of Directors with extensive experience in real estate finance. The Board will provide additional oversight to assist with RCN Capital’s continuing growth initiatives.

Since its inception in 2010, RCN Capital has underwritten more than 4,600 loans and overseen more than $1 billion in originations throughout the United States. In 2018, RCN Capital reported record growth by originating 1,077 loans for a total of $262M. RCN Capital is a national, direct, private lender. Established in 2010, we provide short-term and long-term commercial loans ranging from $50k to $2.5M+ for the purchase of non-owner occupied residential and commercial properties, financing of renovation projects and bridge funding. We lend to experienced real estate professionals, investors and contractors throughout the country. We value referrals; brokers are protected.

For more information on our company or our loan programs, visit our website at www.RCNCapital.com.

Erice LaCentra | 860.432.4782 | elacentra@rcncapital.com www.originate.report 23

CITIES TO WATCH

CITIES TO WATCH:

ATLANTA, GEORGIA

By Originate Report Staff

F

ounded in 1837, at the end

US

its

temperature of 52.5F. The City

of the Western & Atlantic

spectacular botanical gardens. In

gets quite a bit of rain over an

railroad line, the City was

2010, Atlanta was the 20th most

average of 117 days with rainfall,

originally named “Terminus,” with

visited City and is home to multi-

and average annual precipitation

the name later changed to Atlanta.

national

of

Atlanta

is

now

considered

the

capitol of the Southeast and is a growing metropolis nestled in the foothills

of

the

Appalachian

Mountains chain with the lush

cities,

showcased

corporations

by

CNN

and

47.12

inches.

Spring

is

an

Coca-Cola. The City’s population of

especially stunning time of year,

5.5 million continues to grow, along

when beautiful blooms populate the

with its economy, and the City is

greenbelts and Atlanta’s outdoor

quickly becoming a global economic

festival season kicks off.

powerhouse.

In terms of weather, Atlanta is

Must-see locations

located in the middle of the state

With such a rich and inviting history,

and has a generally warm and

you could spend weeks exploring

humid climate. The annual average

Atlanta’s many historic landmarks,

temperature for the City is 61.4F,

but it is easier to catch most of them

cities in America and has some of

with an average high temperature

with Georgia’s Historical Markers

the most extensive greenery among

of

tour. Metro Atlanta has 650 historical

Chattahoochee National Forest to the north and historic Savannah to the Southeast. The City of Atlanta is considered one of the prettiest

24 Originate Report | July 2019

70.3F

and

an

average

low

Atlanta, GA

• Median home price: $218,000 • Home price change: 8.2%

Economy:

• Major industries: Financial Services, Technology, Telecommunications, and a burgeoning movie production industry

• Homeownership: 41.28% • Median rent price: $1,850 (for a two bedroom apartment)

• Minimum wage: Georgia’s minimum wage is $5.15/hour, but typically the federal minimum wage of $7.25/hour

Job Market:

applies

• Unemployment: 4.1%

• Cost of living: Atlanta is #11 on

• Job growth: 2.3%

Forbes List of Best Places for Business

• Loan originator average salary:

and Careers. Cost of living is stable at

$75,469 (6% below the national

only 2% above the national average.

average) • Job growth: 1.6 percent

Housing:

• Loan originator average salary:

• Median household income: $63,986

$68,353/yr (according to Glassdoor)

markers alone. Also, be sure to check

Nightlife

bars, and live-music venues popping

out the Atlanta Botanical Garden

Although Atlanta places prohibitions

up each month. If you want to

on restaurants serving alcohol from

celebrate

Saturday at midnight until after

and midtown nightspots are plenty

church on Sunday at 12:30 pm,

and provide ample entertainment

nightlife still plays an integral role

options

on Piedmont Avenue, or spend the day brushing up on history at the Atlanta Cyclorama and Civil War Museum. Other popular must-see attractions

include

the

Georgia

Aquarium, the Fox Theater, the Fernbank Science Center, and of course, the Georgia State Capitol.

Another must-see is the old city streets

in

Underground

Atlanta.

While it has begun redevelopment,

after

for

dark,

all

age

downtown

groups.

in Atlanta’s downtown shopping and dining complex. There is a little bit for everyone in Atlanta’s nightlife scene. Whether you want to relax with friends at a quiet cocktail bar, catch some sports at a neighborhood pub, or dance away the night at a contemporary nightclub, you can find

many shops and restaurants line the

it all in Atlanta. The nightlife in the

historic underground street scene

city is an ever-changing environment,

in a unique shopping experience.

with

new

coffeehouses,

sports

Dining Eating well in Atlanta is easy to accomplish with more than 12,000 restaurants

in

alone.

city’s

The

transportation

metro

Atlanta

ease-of-access

system

and

its

proximity to local fresh produce help make dining out on fresh and Cities to Watch: Continues on pg. 26

www.originate.report 25

Atlanta, you may want to check out

America as a county. While Atlanta is

home-grown favorites at American

a modern city with all the attractions

The city center is home to a diverse

Roadhouse or visit the Blue Ribbon

and events of a major metropolis,

group of ethnic dining options, with

Grill for Southern favorites such as

prices to fit any budget. Downtown

hand-cut steaks and fresh fish. More

Atlanta offers luxury dining at Joel’s

casual dining spots include Max

in Buckhead, or if you are looking

Lager’s, where you can get a wood-

kids include sports arcades, water

fired pizza while sampling some of

parks, museums, wildlife shelters,

their many ales and lagers made on

art functions, and other events that

Cities to Watch: Continued from pg. 25

affordable fare a foodie’s delight.

for a more casual meal, check out the acclaimed onion rings at North Avenue Varsity Drive-In. Whether you’re in the mood for a romantic dining experience by candlelight or finger-licking barbecue and beers, there is something for everyone in Atlanta. There is an excellent selection

of

dining

options

in

the premises. For healthier eaters, check out the Flying Biscuit Café, where you can feast on fist-sized biscuits, turkey and veggie burgers, and fresh-made organic pancakes.

Atlantans are most proud of their history and love to show off their historical landmarks to millions of visitors each year. Attractions for

help young people learn, plan, and explore. Atlanta offers day trips and weekend getaways to small-town festivals, the northern mountains, or its sunny, east coast beaches.

Depending on the season, you can also pick up an Atlanta Braves MLB

Attractions

game, watch the Atlanta Falcons play

Southern states like Georgia have a

ball, or if you’re a racing fan, catch

many more delightful eateries just

rich history and played an integral

NASCAR laps just west of the city in

outside the metro area. If you’re in

role in the growth and development of

Talladega.

downtown Atlanta, but there are also

26 Originate Report | July 2019

www.originate.report 27

FEATURE

Don’t Just Survive:

THRIVE IN THE EVER-CHANGING ENVIRONMENT OF PRIVATE MONEY LENDING

By Bill Fairman, Carolina Hard Money

R

ate compression, peaking

could probably agree that I’ve seen

fewer deals. Hey West Coasters,

home

my share of market cycles.

believe it or not, there are states

prices,

and

oversupply in the luxury

markets! Oh my!

with great Real Estate deals other The key is to understand that there

than just California and Arizona. The

are always cycles in every market,

price of admission is much lower,

If you’re a small-to-midsize private

some are longer than others and

and this also helps you to diversify

lender, these are just a few of the

every geographic market is a bit

your portfolio outside of just one

scary realities that you will have to

different, but nevertheless, markets

geographic area. Just sayin’.

face as we move forward in these

are always changing. With so much

next few years.

change, it’s hard to get bored.

Wall Street Funds like this space as well, and their cost of capital is

The question you should be asking

Rate Compression

yourself is: How can we take these

If you’re a private lender on the west

However, there are benefits for the

obstacles

into

coast, you’ve been dealing with rate

smaller players.

opportunities so we can thrive in

compression for a while. Why? I’m

this market cycle, not just survive it?

glad you asked.

and

turn

them

much lower than the smaller funds.

Not only have they added legitimacy to the hard money lending space, but

With 30 years of experience in the

For one, there is a lot of competition.

now some Wall Street Funds only buy

mortgage

Too many private lenders chasing

closed loans and have no interest in

banking

industry,

you

28 Originate Report | July 2019

originating loans… So now they need

to give your better borrowers an

after a serious fix & flip professional

you for deal flow.

even lower rate without hurting your

when most are bankable (or can raise

margins.

their own capital)’, consider this:

rate differential. This gives you the

Peaking Home Prices

While they are bankable, speed is

ability to offer lower rates and still

The good news is that higher home

still king in this business. In most

keep your higher yields.

prices in most areas is due to supply

cases, the professional started their

and demand issues, not speculation.

career with hard or private money,

Many will allow you to arbitrage the

For example, if you make a $100,000

and they understand the benefits. If

loan with 2 points and 10% interest

The bad news is that typical fix & flip

things begin to turn south for one of

only for 12 months, you would make

lenders do not have enough workable

their assets, do you think the banks

$12,000 over 12 months, a 12%

deals. A couple of considerations

will “work it out” with them? Of

return.

could be fix to rent deals, and calling

course not.

on the serious fix & flip professionals.

Assuming that same $100,000 loan

Smart investors always have their

sold to a secondary market partner

The fix to rent loans are typically

private/hard money lender at the

at 8%, and you keep the 2 points

smaller amounts and shorter term,

top of their contact list and you can

PLUS the 2% difference in interest

but they are a good option to keep

bet who they will be calling first

each month, theoretically, taking

deal flow moving. You never know,

when a deal presents itself. They’re

the freed up capital and making one

you might even find a secondary

calling the lender that’s easy to

new $100,000 loan each of the next

market partner that will buy, or table

work with and uses common sense

eleven months, you could then make

fund a longer term rental loan which

in underwriting a deal - but that

$37,000 on the original funds.

helps add more revenue.

lender also needs to be somewhat competitive in their pricing.

At a 37% return, you can now afford

If you’re wondering ‘why would I go When that investor gives you a call for a great lending opportunity, you can be competitive in your pricing because now you know how to use your secondary partners more effectively. Besides, you’re not trying to get all of their business, just a small piece.

Another added benefit to working with the professional fix & flipper: Efficiency in your own business.

The professional isn’t likely to waste your time pitching deals that won’t work. They’ve been there, done that enough to know when a deal will be worth the due diligence.

The professionals also use the right Private Money Lending: Continues on pg. 30

www.originate.report 29

Private Money Lending: Continued from pg. 29

marketing tools which make it more likely they will find the good off market deals with plenty of margin, unlike

the

“I-saw-it-on-HGTV”ers

and part-time flippers.

to make five $100,000 loans rather

legal & accounting council, learn

than one $500,000 loan… Even if

about software solutions that can

we do make our money based on the loaned amount, not the amount of loans.

Worst case is you have to take one

help make you more efficient, and learn more about the many other facets of being a business owner in the private lending space.

back and rent it out for close to what

Flattening of Luxury Markets your expected return was going to Most importantly, you will meet and Here are some recent statistics from Attom Data Solutions for the third quarter of 2018 regarding US Vacancy Rates: Gary, Indiana topped the list with a staggering 19.42% - the local economy was hit hard in 2008 and

be, right? Try to get the same result for a million dollar home that you had to take back and now can’t sell.

Probably not going to happen.

connect with like-minded people.

Like-minded people that share best business practices, help you better understand the temperature of the

So how can you predict the exact

market in different geographic areas,

moment the market cycle changes so

and a lot of times can become long-

has not yet fully recovered.

you can pivot your business model

The big surprise for me was Hilton

and thrive in this new cycle? I hope

Head Island, South Carolina coming

you have a magic crystal ball.

in second at 16.90% - a large

term friends.

My business partner and I are

percentage of homes on HHI are

The short answer is, you can’t.

involved

second/vacation

as

Well, not by yourself anyway. It

Mastermind Communities as well.

we all know, a leading indicator of

takes a team, a network of people

consumer confidence is a drop in the

that are looking at all of the leading

They are our best insurance policy;

purchase of luxury items, such as

indicators.

homes

and,

secondary homes.

There are a few networking events There is also an oversupply of class

that are specific to the private lending

A, mixed-use residential condos &

space, however my two favorites

townhomes in larger metropolitan

are GeraciCon Events and American

areas. Most single family residential

Association of Private Lenders. Both

construction is in the more expensive

Geraci and AAPL have very well run

price range as there are very low margins in the affordable housing space.

Even in my backyard, Charlotte, North Carolina, it’s taking much longer to sell the homes that are considered to be luxury than last year at this time.

Let’s face it. It’s much easier to make one large loan instead of a few smaller loans, but it’s also much safer

30 Originate Report | July 2019

non-profit events throughout the year.

These events are where you will

in

several

Real

Estate

they provide us with early insight into upcoming market changes so we can begin to pivot our business to thrive in the next cycle.

Don’t be afraid of ever-changing market cycles. Embrace and thrive.

Once the cycle is complete, you’ll already be positioned to thrive on the other side.

meet secondary market partners, ABOUT THE AUTHOR: Bill began his career in the mortgage banking industry in 1989 as a residential mortgage loan officer with The Money Centre, a Charlotte NC based mortgage brokerage. After eleven years with The Money Centre, Bill went on to become Regional Sales Manager for several other wholesale mortgage companies, the last a Wholesale Commercial Mortgage Lender.Bill was one of the few that successfully made the transition from residential to commercial lending and was assigned the duty of hosting the company’s half-day seminars teaching residential mortgage professionals how to underwrite commercial loans.

CONTACT: bill@carolinahardmoney.com

You’re going places.

Don’t stop until that place is the top.

If you’re a loan originator looking to build your business and gain insight from the nation’s top mortgage brokers, bankers, lenders, and lawyers, Originate Report is for you. Distributed to 35,000 professionals in the private lending industry every month, this is where you come to see and be seen.

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

behind you all the way. find us online at www.originate.report www.originate.report 31

FEATURE

Private Lending as a Retirement Hedge

avenue may be easier to engage than you think. A self-directed IRA (which can be a Traditional IRA, Roth IRA, or another such retirement

By Clay Malcolm, New Direction Trust Company

T

plan) can originate private loans in a similar manner as an individual.

he last year-plus has been a

continued to pressure Wall Street.

turbulent ride for the stock

401(k)s, pension plans, and any

market.

touching

other retirement accounts situated

all-time highs in early-2018, the

in publicly traded equities have

major stock market indexes sunk

been along for the ride and can bring

into a lengthy correction before

understandable unease to investors

rebounding to highs in October. The

as

dip that followed and persisted into

Retirement

December was even more dramatic

to be a long game, but uncertain

as the indexes flirted with bear

times such as those of 2018-2019

market territory, generally regarded

can

at a 20% drop from a recent high and

anyone looking to retire in the near

an ugly threat to the decade-long

term. At a minimum, stock market

bull run stock investors had enjoyed

corrections can produce headaches

There

since 2008. Stocks pushed toward

and lead one to consider alternative

differences

highs for a third time in early-2019,

investment avenues.

loans with personal money and

but again bounced downward as

Fortunately, those avenues readily

with

economic

exist. As a private lender, one such

are certainly worth considering

and

After

geopolitical

risks

32 Originate Report | July 2019

account

be

values investing

especially

fluctuate. is

meant

damaging

to

You, as the account holder, have the flexibility to qualify potential borrowers and make final decisions on loan durations and interest rates. You can even secure an IRAowned loan with collateral if you so choose. Once you’ve settled on a loan agreement, your IRA custodian would issue the funds from your IRA’s cash position and you would begin collecting payments on behalf of your IRA. are

some

important

between

originating

retirement

money,

which

before initiating a private lending strategy with a self-directed IRA.

Tax-Advantaged Income When

you

generate

income

by

lending your non-retirement money, you may be subject to annual income taxes. Just as stock investors can avoid capital gains taxes (assuming the market cooperates by providing gains instead of losses) by investing with their retirement plans, loan income earned by your self-directed IRA is tax-deferred or tax-free. The IRS does not penalize the holder or diminish the tax benefits of the account simply because it holds alternative assets. Some IRAs allow you to deduct contributions from your income while enjoying tax-deferred growth, while other accounts offer tax-free distributions for qualified account holders. In either case, the tax advantages inherent to your particular account will not be affected by your chosen asset class.

Prohibited Transactions Prohibited

transactions

most

commonly occur through intentional or

unintentional

“self-dealing”

practices in which the account holder derives a direct benefit from his or her IRA investment.

Lineal family members such as the account holder’s spouse, parents, or children are equally disqualified from conducting business with the IRA. Friends, business partners, or

non-lineal

family

members

like siblings or cousins are nondisqualified in this regard and may participate in an IRA investment at the discretion of the account holder.

Keep the Money Separate

Whether stocks are 20% up or 20%

Account holders are allowed to

down, it seems there will always

collect payments on behalf of their

be a demand among individuals

IRAs as long as they forward those

and small businesses for capital

payments to their IRA custodians.

via loans. The whims of the stock

The investor must always ensure

ticker—which lie well out of the

that earnings attributable to the

individual

IRA investment do not end up in his

can expose one’s retirement in

or her pocket. In other words, the

undesirable ways. By incorporating

IRA is the “lender” and therefore

a private lending strategy into your

receives the principal and interest

retirement portfolio, you can utilize

payments; to retain such payments

an approach that you know and

on a personal basis would constitute

trust, maintain a measure of control

a

be

over that approach, and hedge your

considered a distribution, and

retirement against stock market

could result in IRS penalties.

volatility.

prohibited

transaction,

investor’s

control—

ABOUT THE AUTHOR: Clay Malcolm is Chief Business Development Officer at New Direction Trust Company, a custodian of self-directed investment accounts that hold alternative investments. Mr. Malcolm provides preliminary and continuing education to anyone interested in promissory notes, real estate financing, and other loan structures as assets in IRAs, 401(k)s, and other such tax-advantaged or taxable investment plans.

CONTACT: cmalcolm@ndtco.com

www.originate.report 33

FEATURE

Tips for When Your Borrower

Files Bankruptcy

By Alexa P. Stephenson, Esq.

Y

ou’re a lender or secured creditor.

Your

individual, or third party.

the necessary recording information

borrower

filed bankruptcy. There’s

of the loan documents so they have all

What court the case was filed in

to present to the court.

now a stay in place prohibiting you

Different deadlines and rules apply,

from taking any action to enforce

depending on the specific district

3. Other loan documents

your lien against the property. What

court the bankruptcy case is filed in.

Other loan documents from loan origination

do you do now?

are

useful

for

your

Contact bankruptcy counsel, like

What chapter bankruptcy was filed

attorney in determining the full

Geraci Law Firm, to figure out

A debtor can file a Chapter 7, 11, 12,

extent of the borrower’s default on

the best options moving forward.

or 13 bankruptcy petition. There are

the loan. For example, debtors often

However, as we all know, attorneys

different rules and strategies for

claim a property is their primary

are expensive. Is there a way to get

each.

residence when they actually signed a Notice of Non-Owner Occupancy

the benefit of an attorney while keeping your attorney’s fees and

Case number

during origination.

costs as low as possible? Yes!

Your attorney will need to look up

certificate

Here’s the information your attorney

what documents were filed in the

declaration of non-owner-occupancy,

will need up front to give you the

case, as well as the deadlines that

and

best strategy moving forward, while

the court has already set.

executed during loan origination will

other

of

Providing a

business related

purpose, documents

help your attorney prove the debtor

also keeping your attorney’s fees down. If you give this information

Whether the debtor has an attorney

has a history of lying and breaching

and documentation to your attorney

If

the provisions of the note and deed

at the outset, you’re one step closer

themselves, there is a good chance

to getting paid in full.

the bankruptcy case will be dismissed

1. Notice of Bankruptcy Case Filing

the

debtor

is

representing

of trust.

early on for failure to file documents

4. Foreclosure documents

required by the court.

Copies of the Notice of Default, Notice of Trustee’s Sale, and Trustee’s

This is the document that most debtors will send to a loan servicer

2. Security instruments

Deed Upon Sale are necessary so

or foreclosure trustee immediately

The security instruments, including

your attorney can determine what

upon filing bankruptcy. The Notice

the promissory note, deed of trust,

stage of the foreclosure process you

of Bankruptcy Case Filing includes

assignments, and modifications, are

reached before your borrower filed

a lot of relevant information your

vital to establish a lender’s interest

bankruptcy.

attorney will need, including:

in the property. Judges often require

of these documents are best so the

Who filed the bankruptcy

the security instruments to be filed

court can take notice of the recording

Sometimes your borrower is not

with the motion for relief from stay

information in the motion for relief

the person who files bankruptcy;

and proof of claim. Be sure to send

from stay and any other documents

sometimes

your attorney the recorded versions

filed with the court.

it’s

an

affiliated

34 Originate Report | July 2019

The recorded copies

5. Accounting

8. Appraisal

Your prior communications with the

The court and bankruptcy trustee

One of the most common reasons

borrower also give your attorney

will need to know the amount

lenders receive relief from stay is

a sense of the lender/borrower

of your claim as of the day the

that the property has little to no equity cushion. While some judges

relationship,

bankruptcy case was filed. Providing your attorney with a recent payoff

allow

demand

will

(BPOs) to determine equity, the vast

allow your attorney to file out the

majority require a full appraisal and

necessary documentation with the

may even require the appraiser to

court, including a proof of claim and

testify in court about their valuation.

and

accounting

motion for relief from stay. It also provides the court with a detailed history of the borrower’s default on

Broker’s

Price

Opinions

9. List of borrower’s known assets Sometimes borrowers, intentionally

the

extent

of

the

default, and whether the borrower will be taking further litigious action to halt the foreclosure sale.

Takeaway How you, your lender, your loan servicer, trustee

and

your

organize

the

foreclosure loan

file

for quick dissemination to your bankruptcy attorney can reduce your

the loan.

or otherwise, exclude assets from

6. Proof of Insurance

lying about what assets are part of

thousands, of dollars. In addition to

the bankruptcy estate is considered

having the documents above ready

fraud and is punishable by fine or

to go the minute the borrower files

even jail, it is important for your

bankruptcy, having the documents

attorney to know whether the debtor

organized and presented in the

has committed this fraud. If so, your

correct format plays an equally

attorney can inform the U.S. Trustee

big part in keeping attorney’s fees

their bankruptcy schedules. Since

A lender can be entitled to relief from stay if the debtor has failed to provide proof of insurance in violation of the note and deed of trust.

Knowing

whether your borrower has kept the property insurance current and having proof of same will let your attorney know whether relief from stay on this basis is an option. Your attorney can also bring up the lack of insurance with the bankruptcy trustee at the meeting of creditors at the beginning of the case.

7.

Preliminary Title Report, or preliminary

title

report,

get the U.S. Trustee to take further punitive action against the debtor.

10.

Communications with the

borrower It is important for your attorney to know the background between you

Trustee’s Sale Guarantee (TSG) A

of the missing assets and potentially

or

Trustee’s Sale Guarantee, will help your attorney determine how many liens are on the property so he or she can get a sense of whether the property has a significant equity cushion. If the property is overencumbered, you may be entitled to relief from stay to foreclose.

These documents also will help your attorney determine the lienholders entitled to notice if and when a motion for relief from stay is filed.

and the borrower. If your borrower made promises about repayment or threatened to transfer the property

attorney’s fees by hundreds, if not

down. For example, having these documents ready to go in one legible .pdf file per document saves at least an hour of time of attorney review and permits the attorney to, at a glance, determine the best strategy.

If you are a lender, loan servicer, or secured creditor and your borrower filed

bankruptcy,

questions

about

or the

you

have

bankruptcy

filing

process, contact the Geraci Law Firm

bankruptcy, your attorney could use

today. We are happy to give you a

this information to potentially get

free initial consultation on your

you relief from stay to foreclose.

bankruptcy matter.

to

someone

else

before

ABOUT THE AUTHOR: Alexa Stephenson is an Associate Attorney in the litigation department of the Geraci Law firm.

Ms. Stephenson graduated cum laude from Chapman University School of Law in 2016. At Chapman, Ms. Stephenson was the Senior Symposium Editor for the Chapman Law Review, President of the Chapman Women Lawyers Association, and received five CALI awards for the highest class grade.

Ms. Stephenson’s experience includes Chapter 7 and Chapter 11 bankruptcy proceedings and California motion drafting and procedure. CONTACT: a.stephenson@geracillp.com

www.originate.report 35

UPCOMING EVENTS 2019 EVENTS CALENDAR

AUGUST 21-23, 2019 | COSMOPOLITAN HOTEL, LAS VEGAS Where deals and capital meet! Join us for our flagship show of the year in Las Vegas! Captivate will turn its attention to the real need in the non-conventional lending industry: capital. Our Captivate Conference will connect lenders and investors and show you the tools you need to grow your business. With two and a half days of networking, Captivate will connect top sponsors directly with high net worth individuals who are looking to make their next business deal. All attendees will have access to network with one another through an app prior to the event. Join us in Las Vegas for good times, great memories, and valuable connections!

Showcase Your Upcoming Event Here Alicia Carter at a.carter@geracillp.com for more information.

36 Originate ReportContact | July 2019

You have knowledge. You have ideas.

Let us showcase your voice.

Currently we’re looking for articles showcasing: Business Development • Fintech/Newest Loan Programs • Automation in Today’s Evolving Society • Upcoming Trends & Changes • Marketing & Outreach Essential Tools & Technologies • New Legal Issues and Regulations.

Another idea? We’d love to hear that, too.

Write for us. Email submissions@Originate.Report for more information.

www.originate.report 37

Lockett-N-Homes www.lockettnhomes.com Info@lockettnhomes.com

Direct Lender

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

Direct Lender

*All 50 States

5M

AL, AK, AR, CA, CO, CT, DE, FL, GA, HI, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MO, MS, MT, NE, NH, NJ. NM, NC, OK, PA, RI, SC, TN, TX, VA, WA, WV, WI, WY

50M

AK, AR, AZ, CA, CO, CT, DE, FL, GA, IL, IN, AI, KS, KY, LA, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, OH, OK, OR, PA, RI, SC, TN, TX, UT, VT, VA, WA, WV, WI, WY

5M

50K 100K 150K

55/33

Direct Lender

75/30

JCAP Private Lending www.jcap.net info@jcap.net (949) 236-6600

10M

Direct Lender

100K Helvetica Group www.helveticagroup.com loans@helveticagroup.com (310) 575-3301

*AZ, CA, NV

LET LENDERS KNOW YOU FOUND THEM IN 38 Originate Report | July 2019

*CA

REV. 06.25.19 2019

Direct Lender

* = STATES LENDING IN

Fidelity Mortgage Lenders, Inc. www.fidelityca.com psteigleder@fidelityca.com Peter Steigleder (818) 422-8879

75/2

50K

LENDER

90/30

H O M E

TYPES OF PROPERTIES

70/30

L O A N

15M

2019

TYPES OF LOANS

MI NI MU M LO MA AN XIM $ UM Co LO mm AN er $ Co ns cial um Br e r idg Co e rp o A c rat i o qu ns i /T No sitio ru s ns te s a n ts/ L Pu eg dD rc h a ev e l o l Ent Re ased itie pm ha s en b ts Bla / Re mo nk S e e t Lo d e l e co d/ nd ans Re Jo no int Mor va tg V te d a en Fo ge t re i g n u re s s Ot h e N at i r on als MA XL OA NCh TO ur -VA ch LU es La E( /T nd % em (B )/M Au ar p AX les to m e / /S TE Co o RM Re mm yn t ag t a i i ve (YR e og l( rc i S) S En ue al/ s te r h o p L s o t ai / t ) Ga S nm tri sS en pM all Le t at i o t isu s) ns re Ho (G sp olf i Co Mi t alit ur y( xe se d H R e - u s e o te s / M ls) sid ar Pr ina In e o n p Ra d ) n c t i a l I e r t i e u st r he nv s ial sa Se es tm lfnd s en Fa R e to ra tP ge rms st a ro pe rti O f u ra n fic es t s e

LENDER DIRECTORY

TYPES OF PROPERTIES

Direct Lender

Zinc Financial Inc. www.zincdinancial.com office@zinc.net Tom Valentino

Direct Lender

SFR

CA, CO, HI, TX, WA

90/2

10M 50M 2M

100K 50K

65-5*/70/5*

Sunset Equity Funding www.sunsetequityfinding.com lending@sunsetequitygroup.com (833) 786-7381 Los Angeles, CA 90010

*CA

75/5

Direct Lender

*65% For commercial and mixed-use and 70% for multi-family and residential investment. 5 years (custom terms are available)

NATIONWIDE EXCEPT ALASKA, SOUTH DAKOTA, NORTH DAKOTA

90/2

Sandstone Capital, Inc. www.sandstonecapital.net josiah.p@sandstonecaptial.net Josiah Puder (310) 909-8555 Ext. 1040

10M

Direct Lender

200K Redwood Mortgage Corp. www.redwoodmortgage.com RMC@redwoodmartgage.com (800) 659-6593 San Mateo, CA 94402

AL, AK, AR, CA, CO, CT, DE, FL, GA, HI, IL, IN, AI, KS, KY, LA, ME, MD, MA, MI, MS, MO, MT, NE, NH, NJ, NM, NY, NC, ND, OH, OK, OR, PA, RI, SC, TN, TX, VT, VA, WA, WV, WI, WY

REV. 06.25.19 2019

Direct Lender

* = STATES LENDING IN

Patch of Land www.patchofland.com originations@patchofland.com (888) 250-2216 Sherman Oaks, CA 91403

50K

85/2

3M

50K

LENDER

TYPES OF LOANS

MI NI MU M LO MA AN XIM $ UM Co LO mm AN er $ Co ns cial um Br e r idg Co e rp or at i Ac on qu s/ i Tru No sitio s ns te s a n ts/ L Pu eg dD rc h a ev e l o l Ent Re ased itie pm ha s en b/ ts Bla Re m nk o e de t Se c o Lo a n l e d / nd s Re Jo M no int or va tg V te d a e Fo ge nt re i g n u re s s Ot h e N at i r on als MA XL OA NCh TO ur -VA ch LU es La E( /T nd % em (B )/M Au ar p AX l es to m e / /S TE Co o RM Re mm yn tiv ag t ai e (YR er l( cia ogu S) Sh En es l/ o te r Lo t ai ps/ t) Ga St nm rip sS en Ma Le t at i o t lls isu ns ) re Ho (G sp olf it a Mi lity Cou xe rs e (H d R e - u s e o te s / M ls) sid ar Pr ina I Ra entia oper ndu ) nc st r tie l I he nv s ial sa Se es tm lfnd s en Fa R e to ra tP ge rms st a ro pe u ra rti Of nt fic es s e

ADVERTISE WITH ORIGINATE REPORT’S LENDER DIRECTORY AND BE SEEN BY 35,000 INDUSTRY PROFESSIONALS EACH MONTH. CONTACT US AT (949) 379-2600

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ORIGINATE REPORT! www.originate.report 39

IT’S NOT JUST ABOUT IDEAS. IT’S ABOUT THE EXECUTION. WE PROVIDE PEACE OF MIND

Geraci LLP is a law firm, media, and consulting company that caters to the non-conventional lending space.

We are the “go-to” provider for all lending-related matters and are your resource to help you grow your business.

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90 Discovery Irvine, CA 92618 | Phone: 949.379.2600 | Fax: 949.379.2610 www.geracillp.com | www.geracicon.com | www.geracimediagroup.com 40 Originate Report | July 2019

*All 50 States