All Forum Posts by: Doug Smith

We're the "Lending Expertise" half of the equation while we have "Capital Partners" we work with. The underwriting part is what we do on our side and then we the Capital Partners (Investment bankers) are the ones raising the capital. We're the ones managing the credit risk portion. 

There has always been a disconnect because of the term "banker". I came from retail/commercial banking, so I am a "banker" that made loans at commercial banks. If you work for a Wall Street firm, the term "banker" refers to an "Investment Banker". Bankers like me have formal credit backgrounds and really understand lending, but I admit, I stink at raising capital. Investment Bankers are great at raising capital, but typically don't have formal credit background. What usually happens is that Investment Bankers raise the capital, then they try to underwrite the loans. Often times, they feel confident in doing so, but it can bite them in the behind. Success in the lending world comes when you can marry a banker like me...the lending expert...with the investment banker, the capital-raise expert. Then you've got something. Most of the hard money lenders today are great at the investment banking part, but they've left out the actual lending experience. It's always been my experience that this is the big disconnect and, if we could all simply own up to our weaknesses, embrace our strengths, and find complimentary players, the lending process goes much, much better. Perhaps that's not answering your question, but that's my "insight" from a 35 years "lending banker" perspective. 

Hey James, I'm right down the road form Orlando in Tampa and we finance a lot of new builds and small builders. I think the strategy depends on the builder's situation. For instance, is the builder just doing a one-off "urban infill" property or are the building a sub-division like Lennar or DR Horton? The latter won't budge on price because what you pay is public info and they don't want to create a comp that drags down future sales. You might be able to get them to increase incentives, but they won't create a comp. Conversely, you might be able to get a small builder that's finished a project but needs to clear capital to move on to the next one to come down a bit. Builder margins have been compressing a bit and many of them have debt on the build. With properties sitting longer on the market, interest costs are eating them up and eroding that margin. We're doing quite a bit of stuff in that Orlando MSA right now...we actually have two closing this week. Let me know if you ever want to talk through what you're doing. 

Long-time Tampa-area investor/lender that knows that you're a "Flaming Heart" (few on here will understand that...but I saw you're from Effingham). I, myself, grew up 35 miles SW of Springfield and I went to Illinios Wesleyan. Now to answering your question, the financing options are different if you're going to live in the property. If it's "owner-occupied", there are more stringent rules with respect to the underwriting guidelines. Where in Florida are you trying to move? 

As I read post after post on BP with questions adkin to "I've decided to remove my own appendix, does anyone know where I need to make my first cut?", I felt compelled to say this. It's not always smart to DIY everything. 20 years ago I made the biggest mistake of my professional career. I was a successful bank executive and I decided to invest in a side business that was outside of my field of expertise. I decided I could save money and not use an attorney. Why not? I was a savvy business guy! The so-called parters ran up debt without my knowing, and, before you know it, I was on the hook for much, much more than I expected. Paying a few bucks to do it right would have saved me endless heartache. It's one thing to come on here and ask for simple advice or find partners to work with. It's complete lunacy to attempt, with no experience, some of the things people think they can do without professional help. To the newer investors out there, take it from an old pro...even the old pros ask for help and pay professionals to handle certain jobs. Paint a living room? Go for it. Rewire the house yourself? Pay the freakin' electrician. Oh...and another thing...realtors get a lot of hate and 95% deserve it, but if you are investing and get the right agent that really knows their stuff, they can be worth their weight in gold. Carry on. 

Interesting proposition. That's similar to how I started. I was a long-time lender/banker that was plugged in to a lot of banks. I had worked as a bank exec, special assets officer, and commercial lender, so I knew a lot of the players to buy NPLs directly out of banks. I also had the connections to not only get the properties back once we bought the notes, but also the contractors to pull off the renos. The one thing I didn't have was a lot of capital to pull it off. I did find there were a lot of folks that dreamed of real estate investment and had either capital or knew how to get it. We started small, build the proof of concept, and grew from there. We've moved into ground-up spec and lending more now, but providing my many years of know-how and partering with those with different skill sets was huge. I get how valuable your legal partners can be, but judging from a lot of the posts on here that are akin to "I've decided to remove my own appendix and save money...does anyone know where I can get 10-blade", most real estate investors will struggle to understand your value. I'll reach out to connect. Great post. 

 I was speaking at an IMN Note Conference a few years ago and a "guru" had taken several of his paid "students" to the conference. One of his students grabbed me after I came off the stage and peppered me with questions. I had a second speech the next day and, when I looked up, the guru was sitting there with a legal pad writing down everything. I pulled him up on Linked In from my room and the guy had no lending background whatsoever, but was getting paid $10K/year to mentor these poor people. Perhaps I'm in the wrong role...lol. These gurus are making more selling courses than I am actually running a fund of the assets. 

You're looking for a lender or broker, not a wholesaler. Wholesalers don't make loans. We do a ton in FL including the Central Florida market, but you'll want to make sure you don't currently have a prepayment penalty on the DSCR loan. A huge percentage of them do. Most DSCR loans weren't even available without a prepayment penalty back in the day, so you might want to look at your Promissory Note to make sure. DSCR rates have really improved over the past few months.

When I left banking after the last crash, we started by buying non-performing commercial loans out of banks. That being said, I had 15 years of special assets and lending background in commercial banks under my belt, so the DD part was something we had down. Then, when "notes" started getting more popular with novice investors, I attended a few conferences and saw gurus speaking that had ZERO formal credit background charging to teach people how to buy loans. It was flippin' scary. Regarding modeling, we created our own proprietary modeling system based on our experience in bank collections and special assets. We "back into" the "strike price"...the price we're willing to pay for a loan where we start with the ARV, then back off time-value of money in getting the property back, collection costs, rehab costs, profit margin, and several other items we add in. We do the math 2 ways...what if they pay us and what if they don't and typically go with the lower number. We pay close attention to the loan docs themselves and the assignment chain and alonges to ensure they are in tact. Also, you have to make sure you get and review the collection notes for each file. When you buy a loan you inherit the sins of the previous lender, so if they did something inappropriate, you're the one holding the bag. Bottom line, the gurus make note buying sound easy, but there are a lot of nuances, rules, and regs that many of them don't know. If you're going into that line of investing, make sure you know what you're doing and, if you're learning from someone, make sure their previous roles included a formal credit background and not "I was flipping burgers at Wendy's six months ago, then I learned how to invest in non-performing loans." Good luck to you, Charles.

I don't think that would be possible or good for the real estate market. First, the "risk free rate of return" is basically what the Treasury is doing. As of this morning (9/19/25), the 10-Year Treasury is right around 4.1% give or take. Long-term mortgages are funded by mortgage-backed securities and, to attract investors, they would have to provide a return that is North of what they could get "risk-free", meaning the Treasury. Why would an investor put money into an instrument with some degree of risk that yields lower than what they could get "risk-free" (risk-free in theory anyway)? The Treasury would have to basically go to zero and that would be apocalyptic for the economy. The only way to achieve a rate that low would be to stack so many points on the deal as to provide a yield high-enough to offset that for an investor. That wouldn't make sense for the borrower. My second point would be what we're seeing now is, in part, a result of those early-2001 crazy low rates. People have such low rates that they aren't "trading up" in favor of staying put. It's partially behind the low inventory and low sales volume. Many people can't justify the cost bump in rates and taxes if they traded up, so they are staying put. That's a great question. We'll have to find time to grab coffee soon since we're both in Tampa.