All Forum Posts by: Marshall Robins

Hey good folks of BP. 

I come to you hat-in-hand, looking for the collective expertise I've come to enjoy here. 

I work for a portfolio lender as their point person for construction loans, and now I'm trying to grow the division. I'm struggling to generate extra lead flow from builders, mostly because it's so difficult to identify folks that are doing ground up, business purpose construction. 

If anyone has any experience or success with this, I would greatly appreciate your input. 

Cheers,

Marshall

To echo the rest of the group, if you're planning on holding the property, a DSCR is likely your best bet, assuming your investment property is in a rental area that supports the debt service. 

There aren't too many areas other than HCOLs that support current rates in terms of debt service, so I would run the numbers with a generous ~15% cushion. 

If you're looking to do a fix and flip or something like that, there's no reason why private lending couldn't work for you. Typically interest only, construction bridge loans are great for that kind of transaction. 

Totally up to you but let us know what you go with! 

Hey Kevin, 

I'm glad you could get set up with a bank! New York is a tough state to lend in for a private lender. We lend out of California and get requests all the time for reputable NY lenders and we just don't have any on hand. I wish we did so I'll be keeping my eyes on this thread! 

Happy holidays. 

A great resource that's a one to one for starting with you own capital is the Private Lenders podcast. 

They do a good job of regularly releasing episodes and they frequently talk about starting out with their initial capital pool and growing their business. 

Might be useful for passive learning. 

Hey Jasa, 

I would imagine there are going to be a bunch of folks jumping in there to lend their expertise, so just because I'm first, doesn't mean I'm right, but: 

Generally that initial loan needs to be secured by real estate. So that's your first major hurdle. You'll only be able to cash out a certain percentage of that existing equity.

So let's assume you have significant enough equity in a property to pool together a reasonable amount of starting capital.  

By the time you take out a trad. cash-out refi, you'll be eating a bunch of fees, which will chew into your theoretical 5% arbitrage spread. 

Now you'll need to source a new lending opportunity. Depending on the opportunity type and the licenses you have, that will either be pretty hard or really hard. 

But remember, you're now on the hook for ~7% payments on the refi, so while you're looking for borrowers, you're likely chewing back into your capital pool to make those payments. 

Now you have x% of your original property equity, less cash-out fees and however much you need to pay to service the original loan while you're doing business development. 

The next big hurdle: You'll need to basically perfectly match either the loan or loans you lend on to the amount you pulled out to make that theoretical 5% spread on the arbitrage. 

There is a world where you could use a HELOC, but the line of credit you'll be able to get won't be big enough to justify the labor that goes into underwriting and servicing. 

Again I could be wrong, and I don't want to be a Debbie Downer, but this seems like a tough road. I also don't know if it's legal. 

 Ahhh, that makes sense. Apologies - I hadn't realized you had cross-shopped between AgSouth and Vystar for the same loan prod. 

And Vystar wanting the land and the construction to perm makes a lot of sense given the terms they're offering. They want something with a profitable recourse would be my guess. 

Thank you so much for sharing! I do land acq. and construction loans everyday so if you have any q's when you get close to breaking-ground, let me know! 

We don't lend in Georgia, but I'm always happy to look at numbers. 

Hey Brian, I wanted to go ahead and throw my hat in the ring. We've been in the private lending space for 50+ years and would love to learn a bit more about your projects. 

Do you know what the Loan office with AgSouth meant by 25% down? Is that 25% down on the total construction costs when you choose to break-ground? 

I don't know if this is your first ground up construction loan or not, but I would ask about who administers draws for the loan. Some lenders handle draws in-house, some outsource and depending on who they outsource to, this can become a real crunch. 

Also, I would imagine the construction holdback is larger than the total loan because they're carrying lender contingency and interest reserves on the holdback? 

 Of course! And consider me shocked! Even for a credit union that's pretty aggressive, and at a high level, seems like a great deal. 

Out of curiosity, what are your plans for the land?