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Lenders, don’t overlook real estate investors

A typical real estate investor can bring in four to six loans per year

As the market moves into a post-refi-boom era, loan officers face tough competition for purchase loans. As a result, many originators are looking elsewhere to expand their business. HousingWire recently spoke with William Tessar, president of Civic Financial Services, about the private lending space and how LOs can benefit from serving real estate investors.  

HousingWire: What is the current outlook for the private lending space as the market shifts from a refi boom to a flooded purchase market?

William-J.-Tessar_Photo_2021

William Tessar: Once interest rates rise (and they are ticking up), conventional originators will be flooding the purchase market at the same time — and with inventory at record lows, there will be fierce competition for the same loan. Right now, however, there is an often-overlooked source of business that has the potential for brokers and originators: the real estate investor channel.

Since investors buy multiple properties per year, it can fuel more consistent growth. Outside of a refi boom, a typical customer will refi or purchase a new home once every three to four years, while real estate investors purchase an average of four homes every one year.

To serve real estate investors, however, you need more tools at your disposal than conventional or government loans—especially in a hot market where speed-to-close rules.

HW: How significant is the real estate investor channel in our post-refi market?

WT: Roughly 15% of the average LO’s database is a potential customer looking to acquire or refi an investment property, so if you pass on this business and someone else fills the void then that new lender will have future opportunities to serve that customer, which means you won’t. 

When you add it all up, a typical investor can bring in four to six loans to an originator in one year. There isn’t a single homeowner who will refinance their loan that many times in one year, and this is why originators are looking to private money loans to thrive in a post-refi environment.

HW: What misconceptions do people have about the private lending space?

WT: I was in the conventional lending space for 30-plus years. I joined CIVIC in 2017 because I saw the monumental, untapped potential of the company and the private lending industry as a whole. The perception of hard money and private lending in general had been a murky one of mystery, complexity and instability.

We took the initiative to change this through increased transparency and visibility into the performance of private money loans through securitizations and aligning with some of the largest Wall Street finance companies in the space.

HW: What impact have CIVIC’s securitizations had on the private money sector as a whole?

WT: In successfully closing three of the largest private money, business purpose loans only securitizations (which excluded multifamily properties as well as long term rentals), we brought the structure and discipline of conventional lending to the private money sector. This has increased credibility and confidence of institutional capital market partners in the performance of CIVIC loans as well as opening new doors of opportunity for all private money lenders.

The quality, quantity and consistency of our loans brought Wall Street Institutional capital, seeking higher yield, into the space, while clearly understanding the risk associated with this lending channel.

Today, institutional private lending is no longer an unusual funding source. CIVIC is bridging the gap between conventional and traditional hard money lenders — serving as an institutional private lender and offering affordable access to capital to investors, brokers and correspondent partners.

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