T hough his roots might be far from residential and commercial financing, RCN Capital CEO Jeffrey Tesch’s first foray into real estate investing opened his eyes to a world of opportunity. In the 1990s, while Tesch oper- ated several Subway restaurant franchises, he sought hard-money lenders to fuel his first real estate deals. On several occasions, Tesch encountered less-than-scrupulous lenders that soured his experience. Not only did the lenders inflict various fees to simply discuss a loan, Tesch said communication was poor, the delays were long, the terms often shifted, and the total cost at the signing table was more than what was first promised. “It took days without hearing anything, sometimes a week, and then if you're lucky, you’d get a commitment letter,” Tesch recalled. “And the commitment letter may or may not hold up at closing — it’s the bait and switch commitment to get you to the table. They’d say ‘Well, unfortunately, this came in a little higher because the treasury market is fluctuating.’ They’d use any excuse to change the terms at closing. That was real- ly the experience I always had with hard-money lenders.” While less than ideal, the lacklus- ter lending experience ultimately proved to be an invaluable spring- board into Tesch’s current venture, RCN Capital. With more than 20 years of prioritizing meticulous cus- tomer service at his Subway fran- chises, Tesch contemplated how he could create a lending organization that stood by its word and provided lessors a quality experience. It didn’t take long for Tesch to realize that his firm could differ- entiate itself through integrity and strong customer service. And thus
I had no formal training in commercial lending at all. But I did knowwhat my experiences were with hard money as a real estate investor and I did knowhow I could take the lessons learned from running the Subways from a consumer perspective and put those best practices into building out a commercial lending platform that, at the end of the day, was servicing the consumer…My roots are in consumer service."
A NEWFRONTIER Based in South Windsor,
in 2010, with his lending expe- riences fresh in his mind, Tesch launched RCN Capital. “When I exited the Subway busi- ness and entered the commercial lending business, I took all of that knowledge that I had from the Subway brand regarding consumer service and I brought it with me to build out RCN Capital,” he said. “From what I learned about cus- tomer service back in my restau- rant days, I knew exactly how not to treat customers when starting in the lending industry.” Without professional lending ex- perience, Tesch leaned on what he knew best — customer service. “I had no formal training in com- mercial lending at all,” Tesch said. “But I did know what my experienc- es were with hard money as a real estate investor and I did know how I could take the lessons learned from running the Subways from a consumer perspective and put those best practices into building out a commercial lending platform that, at the end of the day, was servicing the consumer. … My roots are in consumer service.”
Conn., RCN Capital now provides time-sensitive, bridge financing to real estate investors to fund their non-owner occupied residential and commercial properties. It also offers bridge loans and provides real estate-backed lines of credit. Over the years, RCN Capital has grown to employ 70 people, under- write thousands of loans ranging from $50,000 to $2.5 million and originate more than $1 billion throughout the United States. In addition to its priority of customer service, Tesch said RCN Capital quickly grew thanks in part to its timing. Coming out of the Great Reces- sion, Tesch said that RCN Capital focused on taking what was then known as hard-money lending and elevating that to become a commer- cialized lending product. It specifi- cally serviced real estate investors that were buying distressed assets and foreclosures, helping investors return the properties to occupancy status and put them on the market. “We certainly wanted to build a
share is in part thanks to Tesch’s perspective on how to earn and keep customers’ business. Tesch said he often shares that perspec- tive with his team via an analogy. “I often say to the team when we're doing team meetings, ‘You folks are selling gasoline out there and when you're driving down the road, the gas station that you're going to pull into is the one that's clean, bright, and the one you're going to get the best experience at because the price is all just about the same,” he said. “I look at it the same exact way here at RCN Cap- ital. It's a commoditized product, and the only way we win is with our staff really being engaged with our customers. I believe we're winning because of the level of customer service that we're giving to our consumers.”
business that was going to profes- sionalize a segment of the lending world that was seedy and often not a pleasure to deal with,” Tesch said. “But, more importantly, we saw a tremendous opportunity to grow a business that was bringing value to neighborhoods that often had an eyesore. And the only way that eye- sore was going to be cured was if an investor came in and was willing to take a risk. … At the end of the day, we wanted to make a profit, but we wanted to build something that we were really proud of.” That approach paid dividends. Through 2016, Tesch said that RCN Capital doubled its portfolio every year and continued adding staff to meet the swelling demand. As the volume of customers seeking to revamp foreclosures declined, RCN Capital evolved to
serve a more diverse customer base. The company began to help investors seeking not only to fix- and-flip homes, but also renovate and acquire long-term rental homes and multi-unit buildings. The company’s 30-year, long-term loan program has been particularly popular, Tesch added. “We're having such a great year because we entered the 30-year rental market, or the 30-year single-family, one-to-four non-owner-occupied rent- al loan space,” he said. “We entered it in a big way at the beginning of 2018, and for us it took a good six months for our team to get a handle on it. We have a lot of loan officers who needed to get comfortable with it. … In the beginning of 2019, our team was so well versed in it that we were capturing market share left and right.” That success in capturing market
14 | think realty housing news report :: october / november 2019
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