Latest / Private Lending Insights / Lender Link Report : February 2025
Transcript
- 0:00:00 Rocky Butani Welcome to Private Lending Insights. I'm your host, Rocky Butani. This is a solo episode, just me talking about private lending. We're going to touch a little on what happened in 2024, my predictions for 2025, and I'll tell you what's happening at LenderLink right now, what we've got planned for the future, and we'll also talk about private lending industry conferences. Looking back at 2024, it was an amazing year for private lending, for most private lending companies that I've talked to. There are some lenders that have struggled in 2024 with loan volume, but maybe that's compared to the past. Overall, from what I've seen and what I've heard, is 2024 was a good year. For some lenders, 2024 was a record -breaking year, and this is in a high interest rate environment. There were a lot of lenders I've seen that have done a lot of DSCR loan volume. Not the majority of their loan volume, but on average, maybe for most lenders, DSCR long -term rental loans were about 20 to 40 percent of their business, and then the rest was still a majority short -term lending. Primarily rehab, but also bridge loans, ground -up construction loans. And we're talking mostly about residential investment property lenders, not multifamily and not commercial real estate. That's kind of a separate sector. Those sectors have had their own challenges and not had record loan volume. In my last industry update, I mentioned something about defaults and there not being too many. I was really comparing that to 2023, but I wasn't clear and I didn't have any data to back it up. And a few people had pointed out to me that it was contrary to what they're seeing in their businesses. So as far as defaults go, the majority of loan defaults have been maturity defaults where the term ends, the lender's not willing to give the borrower an extension, so the borrower has to go out and refinance just until they get their property sold or whatever the case is. Now, a lot of lenders have told me recently that a small percentage of the defaults have been payment defaults, and that's just a tough situation for the borrower that it's not likely for them to get refinanced. You're not going to have a private lender that sees a borrower who's defaulted and not making payments to their current lender. How are they going to be able to make payments to the new lender unless they cash out equity? but that's too risky for a lender, so it's not a likely scenario. In the future, I'll do my best to back up those type of statements with hard data, which I haven't had in the past. But as of this week, I now have access to Forcasa, which is an amazing platform that provides an incredible amount of information about what's happening in private lending. You can see what all the lenders doing in terms of loan volume. You could see all the transactions that are happening. You can see which lenders are selling their loans to which loan buyers. You can see all the foreclosure filings. You can learn about borrowers and their history. It's just an incredible amount of information. So in future solo episodes I'll be sharing a bunch of stats that I'm getting formed for CASA. We also have collaborations with other data partners, such as Lightning Docs and Liquid Logics, which is also doing businesses analytics logics. And we have a new collaboration with SFR Analytics. So I'll be sharing some stats that I gather from all of these different data platforms in the future. So 2024 has shown us that in a struggling real estate market with lower transaction volume and a high interest rate environment, private lending still can do really well. And that's one of the reasons I got into this business is because it does well when the real estate market is strong and it does well when times are tough. In 2009, I operated a marketing service for commercial real estate owners and it was a failed business model. It had potential, but the recession hit, it was 2009, and I was looking for something new to get into. I was looking for a sector of the real estate industry that could still do well, even in a downturn. And that was private lending. I discovered it and knew it was a good opportunity. and it's just been amazing to see how this industry has grown and exploded, and overall, it's still a good time to be in private lending. There's still new lenders that I see getting into the business, so there will always be a demand for private lending, and I don't know if there'll always be the amount of loan volume and the demand from real estate investors to justify all the capital that's flooding our industry and all the new private lending companies that are starting up, but we'll see how that goes in the future. Okay, that's enough of the past. Let's look forward to the future. My guess is 2025 will be similar to 2024. I think private lending is gonna have a good year. Looks like interest rates are not gonna change a whole lot. Even if they do, rates don't change that fast in private lending. It takes a while for private lending rates to come down if the broader market interest rates come down. That said, another factor may cause interest rates to reduce in private lending, and that's the securitization market. The past year there's been an explosion of securitization deals that have happened, including rated securitizations. That means that there's way more capital available, there's a lot more potential loan buyers, and that influx of capital may eventually get to a point where it reduces the cost of capital to lenders, and maybe they can bring their interest rates down a bit, where the average we've seen over the past year, across the country, is around 11%. Maybe that comes down to 10 .5%, maybe it comes down to 10%. My guess is we won't see the national average interest rates come down until later in the year, if they are going to come down at all. As far as DSCR rental loan volume, I believe that's going to still be strong in 2025, even if rates don't come down. We've seen what's happened in the last year where the rates were still high. Yeah, it's been harder for deals to pencil, but the volume speaks for itself. There's still been a lot of deals that have happened, so I don't think that the rates are going to be a huge factor. I've seen a lot of DSCR lenders now offering reduced prepay penalty terms, or sometimes no prepay, and it looks like it's not even costing as much as it did in the past to have that option. So you'll still have real estate investors who'll get a DSCR rental loan even if the rates are high. Maybe they can refinance in the next year or two or whenever rates come down. So I think DSCR volume is still going to be strong in 2025. One trend I've seen over the last six months is a lot more national private lending companies start wholesale programs. And there's a lot of options right now for wholesaling where you've got white label options, table funding, broker programs, there's a lot more. And we're actually building out a new wholesale section on privatelenderlink .com. So that should be launched in the next few weeks and we'll be listing companies that are offering wholesale programs to brokers and to lenders as well. So it's not only going to be DSCR, it could be short -term lending, and these are situations where maybe there's no points being charged in the deal to the borrower, and the broker is the one charging the points. It could be where the points from the lender are reduced. There's a variety of different structures, so we'll talk more about that in the future once we get that new section on our site and then we'll get some wholesale lending companies on our podcast to to talk more about them in detail. The increase in wholesale programs is a symptom of the securitizations because there's a lot more capital available in the space. A lot of the big lenders have tons of capital available to them so to increase their volume they offer these wholesale programs to get more deals from brokers. If you're a real estate investor, you may not care about securitizations. This is more something that is relevant to private lending companies, and they're important to brokers as well. It's just a way to gauge the health of the private lending market. It could be an indicator of where rates are going to go, where, you know, lenders can expand their offerings, they can come up with new lending programs when there's a lot of capital in the space, and securitizations have been the primary source of capital that's led to the explosive growth in private lending deals in the past 10 years. I'd like to set up a resource on privatelenderlink .com to track and publish all the securitizations that are happening in private lending and keep that up to date on a monthly basis or or as deals happen and report that to you and my updates. So maybe we'll set that up in the next 60 days. We just need to find a good source for that information and it shouldn't be too difficult to set that up. In the next two weeks I'll produce an episode to focus on data where we talk about what's happened in the last quarter or what's happening in 2024. So look out for that episode coming soon. In addition to that, we've got a few interviews that are going to be released in the month of February. We've got Center Street Lending where we talk about ground -up construction loans. Security Financial Services is a private lending company in San Francisco that lends in Northern California. I interviewed Charlie from Clear Sky Financial out of Virginia. They lend in the DMV market. And we've got Jeff Tesh from RCN Capital lined up as well. He's just a wealth of information, so he can provide a lot of insights into what's happening in the market. We'll get his predictions for 2025 and a lot more. My goal is to publish one episode per week, but you'll see some weeks where there'll be two episodes, sometimes even three, it just really depends on the timing. We've got a lot of guests to interview. Most of our podcast episodes are going to be interviews with lenders that are listed on private lender link .com, but we'll mix it up a little bit. I'll do some solo episodes. We'll get some of our data partners involved. We'll get some service providers and other industry experts. In every solo episode I record, I'll provide an update on a few lenders that we've added or that are in the pipeline to be added to PrivateLenderLink .com. So a few that we've added recently. One of the the more unique lenders we added is KeyPoint Credit Union and this is the first time that we've added a non -private lender to the platform. So KeyPoint Credit Union offers five -year or ten -year commercial real estate loans So their loan amounts range from a million to ten million. They may go a little bit lower if it's multifamily. So it's only for multifamily five or more units and for select commercial real estate property types. They don't do any owner -user. The most unique thing about KeyPoint is they don't charge any prepayment penalties. So you can get a loan for a commercial property that's a five -year term, and you have the flexibility to pay it off at any time. So if you want to learn more about KeyPoint, do a search on privatelenderlink .com, and you want to select the loan type as commercial, long -term, or multi -family long -term. They do business in about 40 -plus states, so in most states you'll find them listed, check out their profile, and learn a lot more about them. We recently added another commercial real estate lender, but this one's a bridge lender and it's called Spectra Lending. They lend on most commercial property types, including land and including cannabis use properties. They don't lend on office or places of worship. Those are the two main ones that they highlight that are excluded. The most unique thing about this lender is their interest rate structure. They charge two and a percent per month. So if you're, you know, if you go over five months, your pricing is just going to be a lot higher than other bridge loan lenders out there. But if you need a loan for just one month, two months, three months, the pricing seems to be pretty attractive. They lend in about 20 to 25 states. Loan amounts range from $750 ,000 up to $10 million. I don't know much about this company. I haven't met anyone from this company. From the research I've done, they seem to be a good lending company, but try them out. Let me know if you have any feedback. I would love to hear that. To find them on PrivateLenderLink .com, do a search for Multifamily Bridge or Commercial Real Estate Bridge. Another lender we added in December is called WeLend. These guys are based in New York. They lend in primarily the Northeast. They love lending in New York, which is rare, because most lenders throughout the country just avoid New York altogether just because of their foreclosure process. But try out WeLend if you've got a deal in New York, New Jersey, Pennsylvania, or the Philadelphia market. They're good guys. I've known them since they started back in 2018, but we never did business, they're finally listed on PrivateLenderLink .com. So check them out for any residential investment property deals or multifamily as well. Let's switch gears and talk about what's happening at LenderLink in 2025. The past year, our traffic has been solid. It's increased quite a bit. We've proven to be a great resource for real estate investors and for brokers and even for lenders. But the next thing that's coming for LenderLink, which is something that's coming for a lot of companies, and that is AI. So we're building a new AI system which will make it a lot more efficient and easier for people to get lender recommendations. We'll still have the ability for people to search for lenders and look at their profiles and do their own research and pick and choose who they want to contact. But the AI system we're building is if someone wanted to enter some information about their deal and get instant recommendations and even instant quotes. So that's a system we're working on building. It's a, quite a big undertaking. There's the knowledge base to build to, to really train the AI system on, on private lending and other types of lending. So that's one part of the project. Then there is building the database, which we already have a database of lenders programs, but it has to be enhanced, it has to be restructured. In addition to the knowledge base and the lender database, the third component is the user interface. And that's a whole nother project to build out a sophisticated interface where people can save their chats where they can instantly see an executive summary based on the chat. So there's a lot of work to be done, but that is underway. We'll talk a lot more about AI in future episodes, and we'll keep you updated on our progress, but this is a really exciting project for us, and I look forward to bringing it to market in the near future. Before we wrap up this episode, I want to talk about industry conferences, and I mean private lending industry conferences specifically. Not general real estate, commercial real estate, real estate investing, note investing. This is only about private lending events. In the past I've tried to attend every single private lending conference. The last one or two years I've scaled back a little bit and this year is going to be light on the conference schedule as well just because I need to focus on this AI project and that takes up a lot of time. Some people say in private lending there's too many conferences, but I think it's a healthy amount. It's good to have a variety because there's a variety of locations. There's different timings that work for certain people. You know, you don't have everyone in the industry available to attend all these conferences, so it's good to have a lot of options. There's several companies that host events in our industry. There's the NPLA, the National Private Lenders Association, hosts three conferences a year. You've got LeverageCon, also known as National Lending Experts. They've historically done about three conferences a year as well. There's Geraci Conferences. They've got Innovate and Captivate. Consistently, they've had just two conferences over the last few years. Then there's the Private Lender Expo, which is the one of two that I have not attended yet. There's a new one called American Lending Conference, and that's one that I'm going to be attending in March. They've only done two so far. This will be the third conference. The one in March is in Las Vegas, or more specifically Henderson. So that's one that I've got on the calendar. Then And there's one of the Geraci conferences is May 1st and 2nd at the Wynn in Las Vegas. So that one's on the calendar. And then I'll try to make it to a LeverageCon conference after that. NPLA, their next conference is in March. I've been to that in the past. That's in Miami. A really good conference, but I just don't want to make the trek out to the East Coast at this time. But highly recommended. They just announced that they're going to host their fall conference in Scottsdale, which is one of my favorite cities, so I'm definitely going to make that at the end of September. And there's the American Association of Private Lenders conference, which happens once a year in November around Veterans Day weekend. I have attended that conference every single year since 2013, and I'll definitely be there again this year. Another conference series I've attended a lot in the past several years is the California Mortgage Association. Obviously, it's only for California -related lending, but it's a great organization. I've been heavily involved in it. I've managed the marketing or been the marketing committee chair. I stepped down from that position, but I was heavily involved in it, and it was really eye -opening to see how much work all of the board members and the members do to advance private lending and to to fight regulations. So that's a great organization, highly recommended if you're a broker or a lender or even a trust deed investor in California. I likely won't make it to their spring conference which is happening in early March in Indian Wells near Palm Springs, but I'll definitely make it to their fall conference which will be in Monterey in October. If you want to see a list of all the industry conferences out there, we've got a page on privatelenderlink .com that lists everything we updated recently. So if you want to check that out, I'll put a link to that in the description. You could also do a Google search for private lending events or private lending conferences and you'll find us at the top of that list in the search results. Just to give you a heads up, there is a video on that page that is really old. It was recorded in 2021. A lot of things have changed since then. I'll try to shoot a new video to cover private lending events in the next two months. And where I'll get into details, I'll share my thoughts on each conference. But in the meantime, if you take a look at that page on our site, I added a little blurb about each event to give you some insights on how many people attend and what the pricing's like. So take a look at that and use that as a resource. Now another resource that we've set up for events is a Google spreadsheet with a lot of industry conferences that go beyond private lending. And that may be easier for some people to digest. It could be a good way to learn about other industry -related conferences. In order to get that, you just need to subscribe to our mailing list, which you could do on our website. If you just go privatelenderlink .com. Scroll to the bottom, you'll see a section where you can enter your email address to join our mailing list, and we just send out one newsletter per month. Just subscribe, check it out. If you don't like the content, you can unsubscribe, but just confirm that you've subscribed, and then we'll share the link with you to that Google spreadsheet. So this year's conference schedule is going to be light for me, but maybe I'll ramp it up next year once we have our new AI project off the ground. And that's a wrap for this episode of Private Lending Insights. You can find these episodes on YouTube and on our website. Just go to privatelenderlink.com and click News & Content in the main menu. If you like the content, subscribe on YouTube or on your favorite podcast platform. Thank you for tuning in and thank you for listening all the to the end.