U.S QUARTERLY FLIPPING RATES: 2002 - 2018: FLIPPING RATES HAVE TRENDED UP SINCE 2010
SOURCE: CoreLogic Public Records & Author’s Calculations
2.5 Year
2-Year
1.5-Year
1-Year
6 Months
10% 12% 14% 16%
0% 2% 4% 6% 8%
flip homes. This has generated a great deal of public attention on an industry that was traditionally exclusive to dedicated builders, developers, and real estate investors. As data from CoreLogic shows, the number of home flippers has continually risen since 2010. With a variety of financing options now available and more knowledge available to the general public, it’s no surprise that many folks have carved out careers as real estate investors (ultimately creating a need for more capital). THE RETURN OFWALL STREET As many investors have reached a large-enough scale and achieved sustainable success, Wall Street has taken notice. They’ve paid attention to what hard money lenders have done right, and they want a piece of the action. That’s why names like Morgan Stanley, Credit Suisse, Goldman Sachs, Wells Fargo, and Deutsche Bank have entered the world of fix-and-flip loans. These banks extend lines of credit to lenders, lowering the cost of funding their loans. The arrival of Wall Street in the hard money marketplace has led to securitizations, the ultimate proof that reflects institutional acceptance and support of the industry. And, perhaps most importantly, the securitization of hard money lending has driven down the cost of capital for lenders, which has, in turn, driven down the rates that real estate investors can get. As Wall Street becomes more involved in private lending, we can expect the industry to become increasingly legitimate in the eyes of investment bankers. If hard money lenders can continue to offer reasonable rates and terms (along with the other benefits), private
lending will only continue to grow. It’s important to keep in mind that we’ve enjoyed good times in the housing market for nearly a decade. The bull cycle has been very long. So far, things still look good for 2020. But success in hard money lending and real estate investing requires being prepared for rainy days. That’s why you have to make sure you have a long-term game plan. New technology will remain an important factor in all aspects of hard money lending, from lead generation and property searches to risk modeling and asset management. Private money lenders will continue to innovate to offer improved financing products for investors. We also expect to see continued diversification among hard money lenders (women and minorities are under- represented). But the competitive landscape is changing. New names and fresh faces will allow hard money to tap into a much larger, total addressable market. The great success and staying power of hard money following the last housing crisis bodes well for the future. Major players in hard money lending filled a crucial gap in the economy and helped the housing market recover. The hard money industry has finally found its place in the mainstream. As someone who has been working in this industry for over a decade, I’m very excited for what is to come. •
Nathan (Nate) Trunfio is a real estate lending and investing expert, with a career that has spanned the entire real estate financing spectrum. He is the President of DLP Direct Lending Partners, a national private lender, and has developed a multimedia platform, Talking Loudly with Nate, which leverages his expert position to
provide other investors insight into all aspects of real estate investing.
78 | think realty magazine :: march 2020
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