One-to-One with Matt Neisser: How Private Lending Works for Investors | Think Realty | A Real Estate of Mind
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One-to-One with Matt Neisser: How Private Lending Works for Investors

LendingOne helps real estate investors across the country secure the financing they need to build bigger, more profitable portfolios.

The direct private real estate lender, headquartered in Boca Raton, Florida, provides bridge loans for fix-and-flip deals, as well as longer-term financing for properties that investors hold onto for years.

Curious about private lending, but still a little new to this funding source? Matt Neisser, LendingOne’s COO, spoke with Think Realty about the most important things you should know.

 

What do private-money lenders like to see from investors who are seeking financing?

We look for investors who have a well-thought-out plan that they can execute. That includes having comps that

Lending One COO Matt Neisser
LendingOne COO Matt Neisser

make sense, a good idea of a property’s repair costs and a team of contractors ready to go to work.

You also should understand the market you’re investing in. For newer investors, I highly advise them to operate in the market they’re comfortable with, or even live in. By targeting a neighborhood within a 20-minute drive of your house, you will be more likely to know its strengths and weaknesses, its potential problems and opportunities.

What kind of advice would you give someone who’s seeking a private-money loan for the first time?

The first question they should answer is, are we a good fit for them right now? That is, are they ready to work on multiple projects at the same time, and do they need the leverage that our loans can offer?

Some investors like to pay only cash for any properties they acquire. But that ties up their resources and can limit them to one deal a year. By seeking financing, they can do more and grow their portfolio of properties faster.

 

What do the investors who consistently get approved for financing do differently?

Once someone’s done one transaction with us, they’re much more apt to be approved again.

But generally, someone who has done 10 or more transactions has seen the good, the bad and the ugly of real estate. They’ve learned from their mistakes, so they’re nimbler and can react quickly when problems arise.

For example, they probably won’t overestimate the after-repair value (ARV) of a property. They also know to include a buffer in their repair budget in case there are any cost overruns. A cushion of 10 percent is a good idea.

 

What are the most common mistakes that borrowers – especially new ones – make?

The No. 1 thing we see is the idea that you don’t need to put down any of your own money, or very little of your own. There might be a few lenders out there like that, but that’s not typical.

Another is not knowing where to invest. Some applicants might have taken a course and are now very excited about getting into investing. But before they try to line up financing, they should know what areas they’re targeting. That’s because finding a good property, finding the right deals, is hard.

They should also be careful not to rely on Realtors and other third parties to tell them if a deal is good. They’re trying to sell you something, after all. If you don’t know the market, the deal might not materialize like you expect.

Any other common misconceptions?

Our rates for fix-and-flip loans are between 8.25 percent and 13.9 percent for up to 12 months, while rental loans, with terms of five, seven and 30 years, come with rates of 5.75 percent to 9.9 percent. So one of the first things you’ll hear is, “My regular mortgage is at 4 percent.”

But a regular mortgage won’t let you do what we do. While borrowers do have to put up some of their own money when working with us, the down payment is lower than a traditional loan through a bank. We also understand that, as an investor, you’re going to create value by improving the property.

And we offer speed, an important factor in real estate investment. Closing through a bank might take 60 days. Our bridge loans are usually closed in 10 to 14 days.

 

Why is it important for investors to build a long-term relationship with a lender?

It’s the time component. You want someone who can close on time and reliably. You want a sense of certainty that, once you’ve made an offer on a property and put up your earnest money, that your lender will deliver that check for you.

Plus, there’s the convenience. If I had to find a new accountant or lawyer every year, I wouldn’t be very happy.

When investors are looking for a private lender, what kinds of red flags should they watch for?

If a lender charges a high application fee – say, $1,000 on a residential bridge loan – run the other way. (We charge an appraisal fee, but we don’t charge an application fee.)

If you can’t get a lender to put things in writing, such as a term sheet or an approval letter, be very hesitant.

Does your lender have a professional website and email address, or are they contacting you from a Gmail or Yahoo account? Check out their LinkedIn profiles, too. This will give you a better idea of the size of the organization, as well as its capacity and level of experience.

ABOUT LENDING ONE

Matt Neisser co-founded LendingOne in 2014 with CEO Bill Green. As COO, Neisser oversees daily operations at the Florida-based direct private lender.

LendingOne and its affiliates have provided more than $300 million in real estate capital. LendingOne is part of the Crestar Group of Companies, which has interests in private equity, real estate and specialty finance.

For more information, visit www.lendingone.com.