All Forum Posts by: Ann Howell

One of the aspects of the real estate industry that interests me is the abundance of niches.  I'm excited by the different ways in which entrepreneurs can pursue opportunities in this industry.  I'm interested in notes from a different perspective: as an originator.  

While I've participated exclusively as a borrower of capital to purchase investment property to date, I like the idea of using my capital to make loans secured by real estate. The real estate finance market for small scale investors seems less efficient and I wonder if it may offer better opportunities for competitive returns than traditional real estate investment avenues such as purchasing SFR's or small/medium multi-family property to rent. Additionally, my experience with banks and other traditional mortgage lenders has been frustrating. I've found their lending standards unreasonable and experienced an unwillingness to explore (or inability to comprehend) creative financing options, especially when investment property is concerned.

For some time I've wondered if the market for non-conforming real estate finance and investor loans is underserved.  Since I seldom encounter discussions along the lines of "how do I become the bank?", I've struggled to gather adequate insight into the mechanics of starting a mortgage finance business and becoming a lender.  I'm curious to hear from the private lenders, nonbank finance professionals and mortgage originators:

• What moved you to pursue this side of the real estate industry?  What appeals to you about this aspect of the real estate industry?
• In mortgage lending, how is growth of a lending operation constrained?  Is the scale of lending operations limited to personal capital and capital pooled from other private investors or are bank lines of credit a viable source of funds to use to originate new mortgages?  What is the typical size of these lines of credit and what factors determine access to and volume of revolving funds that can be used to originate mortgages?
• What are the key challenges to starting out as a lender?
• What are the key challenges in growing a mortgage finance operation beyond finding credit worthy borrowers, complying with state and federal regulations and evaluating the quality of collateral to lend against?  
• What resources do you recommend to those looking to start a mortgage finance operation?

I don't seek trade secrets or sensitive competitive insight.  Consider this as an honest inquiry into the basic dynamics of mortgage lending.  I'm interested in getting started as a mortgage lender as I suspect there may be an opportunity to build a small/medium business in serving small time investors.  Before jumping in blind, I want to qualify whether it's worth pursuing or if it's plagued by complexity, constrained by red tape and/or has unreasonable capital requirements that constrain growth.  Any advice to a newbie looking to qualify this as a worthwhile endeavor would be greatly appreciated. 

I am evaluating these turnkey companies as well and plus some more. I am yet to have my first call with MemphisInvest, they have a lead time of a week or so to set up a call apparently.

Norada gave me mixed signals, the properties seemed overpriced for the market. Make sure you ask them their definition of A, B and C neighborhoods. Plus there are pros and cons of them not being local to the market.

JWB - they haven't yet shown me any offerings or real numbers, but some past case studies based on which I ran some cash on cash return calculations myself. They do not meet the range what we keep hearing here as 'good' for investment. I am yet to understand what is their USP, what keeps them going. They also strictly need you to use their own property management and if you sell your property, you do need to use them as your broker. Also things like they get to keep the tenants late fee. Take a look at the copy of their property management agreement at their website.

Anyway there is one thing I can tell you, all these companies show returns based off of different calculations and they also differ in what they include and exclude in their math. If you want to compare apples to apples, make sure you have your own excel spreadsheet.

Please DM if you want more info.

I also had a general question to the group, When you all do cash on cash return calculations, the 200-300 cash flow that you say- is that including or excluding the principal you are paying on your loan?

Do you also consider the tax savings, to meet the 200-300 cash flow?

BP's calculator does not use these two to meet the cash on cash return, so far as I understand.

Does crowd funding pay you monthly? I do trust deed investing and that pays monthly. Basically, Trust deed investing is you find a borrower and lend him money. The Borrower give you collateral worth more then what your giving in cash. The Borrower then pays monthly for the cash.