Real Estate Intelligent Interview Series: Multifamily Lending and Finance Expert

TELL US A LITTLE BIT ABOUT YOURSELF. HOW DID YOU GET STARTED IN THIS BUSINESS?

My mortgage career started back in 2000 and, as with many good things, it was completely by accident. I moved from Iowa to Arizona, and I managed a sales team for a telecommunications company. About three months after I was here, they went out of business. I was jobless and I had no idea what I was going to do. I went looking for a job and knocked on every door I could find. I walked into a mortgage training job and fell in love with that type of sale and deal structure, and especially the complexity and creativity it took to get deals done. I got started selling second mortgages at 26% over the phone nationwide. I worked myself up from there to a full-fledged loan officer, and I did residential loans for the first eight years of my career. When the mortgage crash hit, I pivoted from residential and started working in investment and commercial. I joined Express Capital Mortgage in 2012. I’m still with them today, and it’s been an amazing ride ever since. The transition from residential lending to investment was the best thing I’ve ever done. I never thought in a million years coming from a farm in Iowa that I was going to be doing commercial mortgages and lending in Phoenix, Arizona. There’s nothing else I could see myself doing now that would be any more fulfilling.

WHAT KINDS OF DEALS ARE YOU WORKING ON RIGHT NOW?

Development and construction are extremely hot in today’s market. We are seeing the most opportunity in either value add or new construction. There’s also a lot of refinancing going on, pulling cash out due to the appreciation of properties. Our market is improving so greatly that a lot of clients have substantial appreciation in their homes and their investments, and they are refinancing, pulling cash out for their next investments. Overall, the bulk of our pipeline is new construction and refinancing of existing property.

HOW WOULD YOU DESCRIBE THE MARKET TODAY AND WHERE DO YOU SEE IT GOING IN THE NEXT 5 YEARS?

I think the market is excellent right now. For many reasons, I don’t foresee a market crash like we saw in 2008. We may see a correction, but I don’t anticipate people losing their homes and mass foreclosures. The banks learned from 2008. However, there may be some things we don’t foresee. People talk about interest rates going up. I’ve never found that interest rates are a huge selling point. For example, in 2006 when the market was hot and everyone was refinancing, rates were in the sixes. When you go to a client and say you can buy this house and your rate is 5%, and they go across the street and the rate is 3% but they don’t qualify, the client is going to take the 5% because they want to buy the house. I’ve found that getting the deal done with the most successful outcome is far more important to my clients than the lowest interest rate. People will continue to buy homes and develop property. Some may be priced out of the market if interest rates go up, but all in all, interest rates aren’t a huge concern for me. My clients just want to get their deals done.

WHAT KINDS OF CONVERSATIONS ARE YOU CURRENTLY HAVING WITH BUYERS AND INVESTORS?

Buyers are frustrated. They want to be in this market and expand their portfolios. It is harder for them due to low inventory and current pricing. At the same time there’s excitement. People are excited to invest in Phoenix and across the state of Arizona because they believe future is bright.

HOW HAS UNDERWRITING CHANGED IN THE LAST YEAR IN THE MULTIFAMILY SECTOR?

Overall, not a lot has changed in the structure of underwriting. But there are certain banks and companies that have become more stringent to protect themselves from variability in the market. Deals are still getting done, banks are flush, and lending is readily available. In my experience, the criteria hasn’t become tougher from the underwriting standpoint. What has become more complicated for our clients is higher prices and rents that have been slow to catch up. Cash flow is under some pressure and cap rates are going down.

THERE HAS BEEN A LOT OF BUZZ AROUND BUILD FOR RENT PRODUCT. WHAT IS YOUR EXPERIENCE WITH THIS PRODUCT?

Build-for-rent is a strong product and our clients have seen good returns in this space. The model works incredibly well, especially here in Arizona where people are consistently relocating For various reasons, many people just aren’t ready to own a home and, if you can’t buy, you must rent. The Phoenix market is insulated from the pressures of other markets due to the numbers of people consistently moving here, and the COVID-19 pandemic has increased this trend.  Economists predict and we believe the build-for-rent model will be sustained and continue to thrive in this market.   

WHAT DO YOU WISH YOU’D KNOWN AT THE BEGINNING OF YOUR REAL ESTATE LENDING CAREER THAT YOU KNOW NOW?

 Patience. It takes time to build a strong clientele and often to close deals, especially the larger ones. In the beginning, I wish I had slowed down and enjoyed the journey and the people a bit more. Right now, I am enjoying my job and helping my clients achieve their goals immensely. In this business, it is so important to have patience through the ups and downs. Trust the journey and trust yourself. I’ve been in real estate lending for 21 years now.  I’ve learned there will be good times and tougher times, but I always come out the other side knowing more and better at doing my job.