The evolution of an entrepreneurial spirit
Kristina Sawyer, director of loan operations for Arixa Capital, shares her real estate story and what she has learned to help others on their path to success.
What is your start-up story? Why real estate?
I knew I had an entrepreneur mindset when I was sixteen; my father offered me $300 to pull the weeds and clear the brushes on a rental property. Entrepreneurs think action, so I acted and hired a handyman to do the job for $150, leaving me with pure profit. I was hooked.
At 21, I purchased my first investment properties: two adjacent five-plexes. I managed the properties for the owner, and when he was ready to sell, I purchased them off-market. Then I purchased a four-plex through an owner-occupied FHA loan. I lived in the smallest unit while the other three paid my mortgage. I earned an extra $200 per month of cashflow, which allowed me to build a reserve for capital improvements, turnovers, and emergencies.
Then at 24, I refinanced my four-plex, pulled out some cash, and moved to the beach of Los Angeles to build my career and continue to build my portfolio. This, my friends, is the power of leverage.
What does success mean to you, in terms of your occupation? Describe a situation in which you experienced this kind of success and what you believe led up to it.
In my career, I have seen the good, the bad, and the ugly in real estate and private lending. I was an investor during the downturn, and it was not pretty. I have worked in different segments of the industry, in many positions, and the knowledge I have gained through this process has provided a path to become a creative-solution provider for clients. Helping others reach their financial goals and becoming their lending partner is what professional success means to me. I contribute my success to my versatile background in operations.
I was fortunate to start my career with Portfolio Property Management. The value-add service was to work on landscaping, turn units, remodel, rent increases, and all the details in between. This is where I learned the ropes of managing investments.
On the acquisitions team with Portfolio Properties, I learned the skill of valuation, cap rates, rent rolls, comparable sales, and how to review preliminary title reports.
Then I joined the loan team with Portfolio Funding, brokering loans on commercial assets, multifamily, and mobile homes. I learned how to collect, review, and submit the due diligence packages to lenders.
All these positions played a pivotal role in my career growth and led me to become the Director of Loan Operations at Arixa Capital. Our focus is providing short-term bridge or construction loans to real estate developers.
Describe a situation in which you utilized creative means that resulted in a deal that might otherwise wouldn’t have happened?
An investor with a strong portfolio of multifamily properties was presented with an opportunity to purchase an investment at a discount if he could close in two weeks. This borrower was not liquid at the time for the 20 percent down payment and closing cost. Arixa Capital provided $4.7M in financing for the purchase of a 12-unit multifamily property in Los Angeles, CA. The borrower benefited from Arixa’s creative solution by cross collateralizing his already-owned 16-unit multifamily property in Beverly Hills, CA. By doing this, we utilized the equity in the crossed property to provide max proceeds (74 percent CLTV).
Another example is the refinance and construction completion loan of a 35-unit, single-room occupancy, multifamily property in Ventura, CA. The developer had built equity into the project and needed additional funds to finish. Arixa’s solution was tailored to the sponsorships need to cover delinquent taxes, an interest reserve, points and closing cost. Arixa cross collateralized their retail property to provide max proceeds (67 percent CLTV).
These are examples of us using our balance sheet to solve a borrower’s need without putting our investors at risk.
What advice do you often give newbie real estate investors? What do you often say to seasoned investors?
- Don’t adopt your tenants. It’s hard to hear your tenant’s problems and not try to help.
- Allowing them to live rent-free is not a burden you can carry and still make your mortgage payments.
- Be an investor, not a landlord, and understand the difference. Being a landlord takes away the enjoyment of investing, hire a property management company.
- Hire the experts in their field and focus your time on what you do best and what you most enjoy. Trying to save a penny doing it yourself will only cost you more money in the long run. After all, time is money.
- Whom you do business with makes a difference. Vet and hire the right GC; vet and choose the right lender. The lowest bid or cheapest rate isn’t always the best or most inexpensive outcome; a lower rate doesn’t save headaches.