Rehab Lending, Loan Costs and Private Lending Conferences
I recently attended a conference of Private Lenders in Las Vegas, which was great. Being in Las Vegas is always fun (kind of like Disneyland for adults) and the conference was terrific. For as many years as I have been in the non-consumer lending business, it still surprises me that there are things I don’t know and things I can learn.
For example, a segment of the discussion was about working with Family Offices. I didn’t know what this term meant, and being too embarrassed to raise my hand and make my ignorance public, I looked it up from my seat. Wikipedia defines a family office as “ . . . a private company that manages investments and trust for a single wealthy family. . . “. Who knew that such things existed in significant numbers? Having handled the marketing and networking for RFG since its inception, I thought I was fairly knowledgeable regarding the different market segments to work with, but recently discovered this market niche that I did not know existed.
Another thing I learned during the conference was the huge variation in interest rates and points charged by private lenders across the country. While RFG’s rates fall in the middle of the rates where we do business, we are much higher than some areas of the country, and much lower than others. I was not aware of how large the geographic spread is.
Further, I learned how unique RFG’s funding, lending product, and process are. We were one of only three rehab lenders and appeared to have a much more solid footing than the others. One of the complaints from the other lenders was that they find themselves out of funds to close loans they have committed to, causing them to breach their agreements with their customers, and were asking for pointers on cash management. RFG has never, and will never, be in that position.
The money that RFG lends comes from a pool of funds collected from investors of the company. In addition, it has a line of credit that it can draw from when the investor dollars are fully deployed. We also look at our pipeline of loans to be made and loans to be paid off to determine our cash needs for the upcoming month and are able to adjust our cash position to commit to only those loans which we know we will have the cash to close with absolute certainty. I did, however, pick up some pointers on cash management during the discussions.
The point isn’t about Family Offices, lending rates or cash flow. It’s that there is always something new out there and always something to be learned, even when you are an “expert” at what you are doing. You need to take advantage of every opportunity to do something that will improve your knowledge base – should that opportunity be in Las Vegas, all the better!