Is Your Private Lender Technologically Ready for 2020?
YOUR CAPITAL COULD DRY UP IF YOUR LENDER IS NOT PREPARED FOR THE NEW DECADE.
by Eric Tran, Universal Commercial Capital
eal estate in 2020 will exist in a unique envi- ronment: a market in which private capital is
when it comes to keeping your business.
clamoring for placement. In 2020, most experts agree that institutional money will reach new levels of des- peration when it comes to generating the yields its investors demand. This desperation will drive many “mega-funds” into the private capital space in real estate, and it could mean great opportunities for real estate investors. However, investors who fail to understand how their lender is adapting to an increasingly competitive and technologically advanced marketplace could end up unable to leverage any capital whatsoever. Even if you have a preferred private lender already, you ignore these new developments at your own risk. There are three primary indicators that your private lender is technologically ready for the new decade: Historically, many private lenders have refused to make loans in cities with populations smaller than 20,000, and the majority have avoided tertiary markets and most secondary markets entirely. With iBuyers increasingly distorting the market metrics in prima- ry markets and most 24- and 18-hour cities, if your private lender is not lending in the markets where you can be competitive, then they are no longer competitive NO. 1 They lend in markets where you may have a competitive advantage.
NO. 2 They are open to having “the blockchain conversation.” When you think of blockchain, you probably think of cryptocurrency. That is where most of the headlines are. However, blockchain technology is increasingly relevant in private lending because it is extremely secure. With cybersecurity an increasing issue for every real estate investor, your private lender must be able to explain how they are protecting your privacy and the security of your business. You may not need to leverage blockchain tech yet, but your lender must be able to explain how they keep data secure on their side of the equation. NO. 3 Their fees are feasible for you. With the competition rising across the private capital sector, many lenders are slashing interest rates and then quietly hiking their fees. Read through the fine print with your lender to make sure your quest for the lowest rate is not leading you to overpay in the fees department. •
Eric Tran is the CEO of Universal Commercial Capital, a private lender based in Southern California specializing in Fix and Flip and Rent and Hold loans. Universal Commercial Capital also offers a no- tax-return, non-recourse apartment lending program. Learn more at UniversalCommercialCapital.com.
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