Banks are spooked, investors are wary and everyone is ready to write off real estate lending for a while?
It's a perfect time, says Darren Proulx, to begin matching well-secured borrowers with investors who are weary of making a pittance on their certificates of deposit in a bank.
Proulx, a veteran of real estate investing, is launching Sparks-based Newmark Investment and Loan Inc., a lender that specializes in private funding of loans secured by real estate.
Most of the other companies that were making so-called "hard money" loans during the real estate boom today are struggling under the weight of real estate values that have fallen dramatically.
But that's an opportunity, Proulx believes.
Newmark Investment and Loan Inc. looks to loan money to business borrowers who have real estate equity they can put up as security.
Typically, he says, the company will lend up to 70 percent of the value of residential properties, 50 or 55 percent of the value of commercial properties and 30 percent of the value of raw land.
The company's loans aren't inexpensive. Borrowers will typically pay 11.5 percent to 12 percent interest, along with points equivalent to 5 to 10 percent of the loan value.
For the right project and the right borrower, however, that financing may make sense, Proulx says. Builders who want to complete half-finished homes that they've picked up inexpensively, for instance, might find hard money attractive.
The company will match investors to individual deeds of trust on individual properties, he says. Investors will acquire fractionalized interest in loans, and Newmark won't create investment pools.
The direct matching of investors and loans, Proulx believes, will increase the likelihood that investors undertake due diligence before they put their money up.
Investors are expected to make 9 or 10 percent on the money they lend through the Newmark programs. That, Proulx says, should begin to draw money off the sidelines.
Newmark Investment and Loan, which put more than seven months into the process of winning state licensing as a mortgage broker, will make its profits from the spread between the rate it charges borrowers and the interest it pays investors, and it also will collect the upfront points.
Proulx previously operated Land Resource Investments Inc., which assembled groups of investors to purchase land in the path of urban growth.
That company, which was among the fastest-growing firms in the nation tracked by Inc. Magazine in 2008, now is largely inactive, Proulx says.
