With the Right Players You Can Accomplish Anything

Famously known as the “Dream Team,” the 1992 United States men’s Olympic basketball team not only won the gold medal but went down in history as one of the best sports teams ever assembled. “Made up of the greatest collection of basketball talent on the planet.”

Every winning team is dependent on the skills and talents of each of its members. To win single-handedly in a team sport is impossible; it requires collaboration, trust and synergy. The world of private lending is no different. In order to provide your borrowers a positive experience and successful outcome. It’s important to develop and maintain a trusted network that works together to get results. So, who should you have on your Dream Team?

Settlement Company

Private lenders know distressed properties often have complicated title issues. The rapid of private lending is that borrowers almost always need to close quickly. A good settlement company and attorney can help you navigate complex title issues and move fast. Finding a settlement company that understands private lending is important, and using the same company routinely builds a positive relationship benefiting all parties.

Lender’s Counsel

This is your defensive line. They don’t let anything get past them, and they verify all paperwork is in order before closing, protecting you from costly surprises down the road. From drawing up promissory notes and guaranty agreements, to reviewing LLC docs and draw schedules. They make sure your interests and capital are protected throughout the closing and lending process.

Appraisers

Appraisals are an insurance policy for lenders, verifying the “as-is” and “after-renovation” values, confirming your comps and due diligence. Having a good local appraiser on your team who knows your neighborhoods well, ensures accurate appraisals with local knowledge and insight.

Insurance Agent

All renovation projects require builder’s risk insurance, and having a go-to insurance agent who knows exactly what your lender requirements are saves time and simplifies the process for your borrowers. Policies differ regarding coverage limits and terms, so it’s important to make sure you as a lender are covered in case of an accident on the jobsite. Making sure you are correctly listed as a mortgagee is important as well as making sure the policy is assignable if the loan is sold.

Third Party Inspectors

A third party inspector’s job is to inspect the property before each project draw or milestone. Having a seasoned and trusted inspector who understands your criteria for paying draws is critical. They understand, for example, whether you pay for partial work or for materials on-site versus installed. The benefits of having a third-party inspector versus doing inspections in-house include: freeing up time for your core employees, having a neutral third party who decides how much borrowers get from each draw, and can be the “bad guy” to borrowers.

A good lender will not only have an all-star lineup for themselves, but will help their borrowers understand the importance of having their own Dream Team.

These are a few of the potential players on your borrowers team:

Wholesalers

They are always on the search for great deals on distressed properties, and can help a borrower find the perfect investment property, often priced well below market. The process of finding these below market deals is time consuming and often involves a lot of networking and word-of-mouth. Borrowers are smart to use wholesalers to find deals rather than try to do it all themselves.
A good Realtor will be able to help a borrower navigate the myriad of properties available, and offer advice on the best one for them given the neighborhood, buy price and potential exit price. He or she will know, based on comps and market knowledge, a good ‘buy” price for a property, and will also be able to use his/her negotiating and creative skills to outmaneuver other contracts in multiple bid situations.

Architects

Projects that require extensive renovations, condo conversions, or zoning changes will require an architect. An experienced architect creates aesthetically pleasing plans that include detailed specs for building materials and any necessary engineering. These detailed plans and specs are critical when applying for permits, and are used when getting “apples to apples” bids from contractors and subcontractors. Some lower budget projects do not need an architect but may still be worth considering as many architects also help manage a job through its completion.

Permit Expediter

Depending on the jurisdiction of the renovation, getting permits can be one of the largest hurdles. Providing borrowers access to someone who is familiar with the permitting process can save your borrowers time, money and stress. In Washington D.C., for example, many retired employees from the permitting department work as permit expediters. They understand the permit process, know the legal shortcuts, and can cut the time to get permits from months to weeks.

Attorney

There can be a lot of paperwork, jargon and potential legal hurdles involved in real estate transactions specifically those that deal with distressed or short sale properties. Giving a borrower access to a trusted attorney can make the process easier to understand and navigate. Most settlement companies have excellent real estate attorneys who can handle everything from complicated short sales to Tenant Protection Act issues, and can answer specific borrower questions throughout the process.

Contractors

Unless your borrower is a seasoned pro at home renovations, contractors are a must. A good contractor understands the local market and is trustworthy. Experience is the most important trait to look for in a contractor. However, there are others, such as: how well they know the permitting processes and how to quickly obtain a permit, has a trusted list of subcontractors who are ready to work, someone who knows what to do if something goes wrong, and one who knows to build in a contingency “buffer” into the budget. When you narrow it down, choose the contractor who not only covers all the above but who has the patients to handle budget and schedule changes throughout the renovation process. We all know there will be changes and issues that “pop-up” over the course of any renovation.

Stagers

A good team always has a good coach. As the coach, putting together all the right players in the right positions for yourself and for your borrower, leads to success for everyone.