Alyssa Walko, former real estate agent turned lender, joins our Storii Time hosts to walk us through hard money loans— the ins, the outs, the myths, and when to use them.
Alyssa: Hi, everyone.
Saad: How are doing?
Mike: Sup, Alyssa.
Alyssa: Thanks for having me. I feel like I’m on FaceTime with my friends.
Mike: It’s basically what it is.
Saad: Yeah, exactly. Thanks for joining us, Alyssa. I think this is your first time meeting Mike too, right?
Alyssa: Yeah, over FaceTime, I guess. Yeah, yeah, yeah, yeah, cool. Welcome! Mike, Alyssa, Alyssa, Mike. For those of you joining that are popping in, she’s a…do you guys call yourself loan officers as hard money lenders? You still do, right?
Alyssa: So, private money lenders.
Mike: Private money lenders.
Saad: She works at Cardinal Capital Group–-one of the things that is really helpful and interesting about Alyssa is she’s an agent turned private money lender, which I think puts her in a very unique position to help her clients, to help other agents, to help developers, obviously.
Saad: One of the things that we want to tap into, in terms of her knowledge, is how does private money lending work? And the reason I think that’s a really important discussion is there’s a lot of stigma out there about what private money is; what hard money is.
Saad: I think let’s kick it off with that Alyssa, if you don’t mind.
Saad: What are some of those myths about hard money that people should know about? And why can it be beneficial not just for flippers or developers, but for just the general public to know about?
Alyssa: Yeah, absolutely. And Mike, just for your knowledge, I actually met Saad as an agent. I was a developer-focused agent, met Saad at one of my broker opens that we had at Somerville and so that’s how we got acquainted with each other.
Mike: That’s awesome. I’m glad you’re here.
Alyssa: Yeah, absolutely. Yeah. So I’m Alyssa Walko with Cardinal Capital. We are a private money lender and our bread and butter is New England. We have offices in the South End, here in Boston, Mass and two offices in the Connecticut area–West Hartford and Madison specifically.
Mike: I was there for Christmas.
Alyssa: Oh, cool. Okay.
Mike: Yeah. Yeah.
Alyssa: Awesome. Yeah. It’s a beautiful little coastal town.
Mike: It is. Yeah.
Alyssa: Yeah. It’s a quick train ride over there. So it’s really convenient to get to for us, Boston folk, and we go back and forth to do site visits and to collaborate with our other colleagues as well.
Alyssa: But yeah, for the transition itself and Saad you were talking a little bit about the kind of the agent background and kind of what that looks like for helping folks and our borrowers…we’re kind of seeing for their developments, their builds, things like the underwriting aspect, knowing the market aspect, right?
Alyssa: And so I think one of the questions that I get from borrowers who may or may not have worked with private money is, oh, it’s too expensive, right? It’s too expensive, but too expensive relative to a bank, right? And I’m not gonna say that private money lenders are gonna be competitive with banks in regard to rates or fees, right?
Alyssa: But where we win the client and the reason why we have so many of these institutional builders, guys and gals that work with us is because of leverages, right? Is because we can really hone in on not only leverages, but timeline turnaround, right? And for yourselves as agents, it’s like, hey, in scenarios, bank financing fell through, or the bank keeps asking for extensions or something like that. We can step in, in that scenario…maybe not super fun on our end behind the scenes, but we can close in two days, right? We can close in two days, we can make that happen. Right? When a seller might kind of stick their feet into the ground and say, “Hey, no extensions here. It’s going to go back in the market.” Well, that’s where we kind of come in. Right?. And we can say, you know, we swoop in when a bank slows down, when the private, when another private lender may change terms, you know, we’re that kind of reputable lender there.
Alyssa: And, know, for years as a developer-focused agent, I was working with these guys and they’re like, “Hey, I need, um, I need some recommendations on financing.” And so it was, “Hey, I’m working hand in hand with Cardinal there” because we want to make sure that who we refer in this industry is a direct reflection, right? On kind of our network, our capabilities and getting anyone to the finish line. So, working indirectly and directly with Cardinal for years previously as a developer’s agent, I knew how they worked.
Alyssa: And that was also something really tactful that I love with what I do is that we are a very tactful team in the sense that as borrowers, you’re kind of like, okay, who is my team? Who is the face behind these emails? In some senses, right? And it’s like, you know, kind of merging the lifestyle of an agent, these site visits, things like that, these networking events.
Alyssa: I met a lot of them, you know, if not everyone that I can make them make, right? With us, we’re partners and not just lenders in the sense that, myself as an account manager, you know, who’s on your team as an account manager, an underwriter, a processor and our asset manager, right?
Alyssa: And so, cannot say enough great things, you know, about my team and as borrowers, it’s kind of like…okay…hey, you can close in two days, hey, you can close in five days, but the loan’s closed, what are my next steps here? You’ll never have that question when it comes to us.
Alyssa: The second your loan closes, we send you, “hey, I’m wondering about draws, this person, wondering about, you know, another mid-construction refi that you might have, come back to me, right?” And things like that. we are really tactful with every step of the way, because it’s like, okay, we can get this across the finish line. The loan is closed in two to three days. But who am I dealing with in the next 13 months? That is honestly, sometimes, more important. Well, most times more important. Who here am I going to be talking to? So, I think that’s kind of like the gist of, you know, I guess my background, the transition, and kind of why I love my team so much.
Alyssa: If you guys have any like specific questions or assumptions…let me know.
Saad: Yeah, well, first of all a bunch of people have joined: interior demolition, Mikey C, Velra223..interior demolitions at high a bunch of times. We’ve got Tyler Lum. We’ve got George Lum. I mean, I’m guessing these are, these are folks that you might know. But we’ve got Mina here. So a bunch of people guys.
Saad: We’re talking to Alyssa here today about hard money. We’re talking about the myths, the ins, then the outs. If you guys have any questions, definitely leave them in the comments, and we’ll make sure that Alyssa addresses them. If not today, definitely maybe in a follow-up or something like that.
Saad: But Alyssa, when I think about hard money, I think what most people in the industry think about hard money, it’s about flipping. It’s about developers. It’s about, you mentioned it, like, somebody who might be in a bind and needs like speed to get something done, right? Is there an ideal client in your view that could be a really good fit for hard money or for private lending? Is there a specific buyer profile that makes it a good match?
Alyssa: Right, I actually was on the phone with a new borrower, the other day. He was like… “I have a big portfolio, what can you do?” And high level, what we can do is, we can do acquisition and construction. We can do a bridge loan, if you’re trying to secure the property fast and you know, efficiently, right? If the seller says I need this moved next week, right? And you’re like, okay, well, I’m a little bit further along with ZBA and plans, things like that, right? So, we can secure that up for you. If you’re a mid-construction builder and you’re looking for maybe replenishing your budget, you’re looking for extra interest reserves, we can do a mid- construction refi. Things like if you are somebody who has a portfolio and maybe inventory is not moving, or the market’s a little slower and you know that all too well, we can also do a real cashouts. Instead of like, can I pull out cash somewhere and put it towards another project? To kind of get things across the finish line. And also we do in terms of, know, these are kind of these 12, 18 month terms, right? But we can also do DSCR loans, at the same time. So if you’re looking at something and you’re like, hey, I have a two family, for example, and I’m looking to add a third unit, what we can do is we can say, hey, okay, if the sellout isn’t where it necessarily like where it needs to be, and you want to refinance into a long term, stabilize the asset, get a cash flow property, that’s something we can also do.
Alyssa: So, I was explaining this all to the borrower on the phone and he was like, “wow, you got a menu.” Also what I love to take pride in is like, really talking to the borrower and saying, “hey, like, not only what’s important to you, but what does the rest of your portfolio look like? Where do you want this current property to go that you want us to work with you to finance?” Because exactly what you were saying…what’s the ideal borrower? Ideal borrowers are all different, right? So like borrower A, for example, might have a huge rental portfolio where they’re really cashflow heavy. So they have a guaranteed kind of cashflow income monthly. So they might want more towards the front end of their purchase, for example. Whereas borrower B might say, hey, I am a fix and flip guy, you know, if I’m a fix and flip girl, I really like, that’s my bread and butter. So, they might not be as cashflow positive as this rental landlord, so to say. So they might be looking to be more dynamic in their deal flow and want more to stay liquid through the lifetime of their loans. So we might look to say, “how do we get the most toward your budget? How do we get you the most months of interest reserves financed?” So, I think it’s kind of like our ideal borrower is kind of like, we work with their ideal terms and leverages saying like, hey, this is where we shake out, you know, what does this look like for you? What do you prioritize, if that kind of makes sense? So it’s not like a one-size-fits-all.
Saad: Yeah. So it seems like there’s a lot of customization when it comes to.
Alyssa: 100%
Saad: What about in terms of terms? By terms, I mean like the maturity of the loan. Is it always shorter than a normal conventional loan? Like, you think about 30 years, you think about 20 years and 15 years, is that possible in hard money or is it typically much shorter?
Alyssa: Yeah, so the bulk of our loans are 12 to 18 months, right? So, we start with the borrower, “hey, how long do you expect this to take?” And sometimes if it’s a builder who’s saying this is primarily a cosmetic light rehab, we’ll still do a 12-month long-term.
Saad: Mm-hmm.
[technical issues]
Saad: I think we lost Alyssa.
Mike: Yeah, I’d say.
Saad: We can’t hear you anymore. We can see you.
Alyssa: Oh, can hear me?
Saad: Yeah, now you go. Yeah,
Alyssa: OK, sorry. I got a call.
Mike: Oh, yeah. All right, now we’re good.
Saad: Now now we’re getting into it.
Alyssa: All right, now we’re into celebration. I was getting a call there, so I had to swipe out of it.
Saad: All good, all good.
Saad: So I’m not sure where I got cut off, but. I think I was talking about the 12, 18 months.
Mike: You said it cause you said a cosmetic…
Alyssa: Yeah. So the majority of our loans are 12 to 18 months. And so we don’t have prepayment penalties, right? So there’s never going to be a penalty for a fantastic builder who’s out of it in six, nine months. It’s like amazing, right? The better you can get to the finish line, get things sold, get things stabilized. You know, we can all reach that finish line. So we don’t have a prepayment penalty.
Alyssa: Um, but yes, majority are 12 to 18 months for, if we’re kind of refinancing into a DSCR, you know, either, sell out is not selling out, you know, or maybe the market’s taking a pivot. Those are kind of your, I would say like typical conventional 30-year, right. And we can look at that over a 30 year.
Saad: Got it. Yeah. I just, I just did a DCR, DSCR loan for a recent purchase. And that’s why I asked is because, you know, that is a 30 year. It sounds like what you’re seeing is these folks, they get into a loan. One thing that’s common is…if something’s not selling out or if they have a flip project that’s like, again, sitting on the market or something like that…common strategy is to refinance into a DSCR type of product.
Alyssa: Exactly, exactly that and that’s also the conversation that I like to have on the front end too, with the borrower. It’s like, hey, ah you know, the market’s not maybe where you want to be. If your original intent was to sell this, fine, we can refinance on DSCR.
Alyssa: But I also like to have the conversation, for example, like, hey, Saad, you’re considering a DSCR, but is this something that you kind of want to refinance and then maybe after two to four years, sell, you know, and kind of say, okay, maybe I’ll have a…a renter come stabilize the property and then kind of put feelers out there, maybe a little off-market action, maybe kind of like, you know, still soft marketing this. So I always say like, is that, is that a possibility because there is a prepayment penalty with the DSCR loans, right? And so that’s what I love to tell folks that, you know, upfront, cause it’s like, Hey, you know, that’s something you consider, right? Just kind of laying out your options and road mapping collaboratively with the borrower, which route do you want to go down? If that makes sense, you know, like what, what do you see? Like, what is your three, five tenure plan with this property? And then let’s kind of work backwards from there and then find the best course.
Mike: Gotcha. Great. I have one simple question, then actually just like a hypothetical scenario, but the simple, the simple question is…when you get the loan, is the money released over the course of the allotted time or is the loan all upfront and you’re paying the interest on it in totality right away?
Alyssa: Yeah, great question. So the way that it works is you close in long tomorrow, right? We have borrowers that draw on their loans weekly, monthly or not at all, right? So, then it’s kind of like, “hey, do you need money?” So, the way that that works over the course and the lifetime of the loan is as you draw, will then be, the interest will be charged as you draw. Right? So you can, we don’t tell you, you know, the frequency of that you need to draw. So, that’s kind of how it works. Right. And it’s a kind of over the total loan.
Alyssa: I mean, what we can do is also up to 90 % LTC, which is huge, right? Because it’s kind of guys that say, you know, what does this look like for the course of what can I expect essentially? And so what’s awesome is that we have a fantastic asset management team and kind of what I was talking about earlier is like, hey, you work with me on the front end, right?
Alyssa: You, kind of get across the finish line, we get your level of love, but then it’s like to your point, what now? So, how do I get it? So I actually just got off the phone with a client of mine and directly who will be his asset manager post-close. And so we have a great team. They’ll give you their contact numbers. They’ll give you their emails. And for better or for worse, they’ll answer your call at any time of the day, right? Because we have to. We don’t answer. Nothing’s getting done. Right? And for all of us. And so it was great and really beneficial too for borrowers to be able to connect with all of us on our team, even pos-t, even pre-loan closing so that they know exactly what the next steps are. And the asset manager can speak on, Hey, this is what’s going to happen for the inspections. This is how you can expect your draws. This is the platform, you know, that we use in order for you to stay on top of, you know, all these draws, how they work, top of your budget…and that’s something that we help folks with as well. Some of the builders that we work with have been doing this for 10 years, someone’s been working for 10 months, right? So it’s the same tactful process that we use for everybody. But it’s really nice to just kind of stay dynamic with everyone.
Mike: Awesome.
Saad:Yeah. So obviously, there are other hard money or private financing tech companies out there. And you mentioned, you know, one of the key things that you guys bring to the table is that, you’re a true partner and you mentioned there’s like several people involved in the journey, not just when it closes, but what happens after, especially in a 12 to 18 month timeframe, like you need things to be tight, right? Is there anything else that separates Cardinal Capital Group from other players in the space, whether local or national.
Alyssa: Yeah. Yeah, absolutely. So we are New England-based, like I said, you know, offices between Boston to Connecticut. So, I think, you know, especially coming from the agent side of it, it’s pretty rare to know what your what your lender looks like, right? In the sense that who am I talking to here? And as a builder, it’s really nice to know that, you know, actually just came from Lexington today where we did a mid-construction refinance for a borrower of ours. And he was like, wow, I’ve actually never had a lender come to my site, let alone meet them in person. Right. And so that’s where we’re real lenders, not partners. And, we actually did a content shoot there for him as well, where we talked about, of course, you know, the process of the mid- construction refi, but also his experience. And he mentioned himself, you know, in this video is yet to be released, but I’m assuming within the next week or two, but he himself was talking about, you know, I’ve worked with lenders that feel like my opposition, sometimes, you know, where I have to jump through hurdles, right? And banks, you have to provide yearly financials on annually, they’ll kind of check in or monthly…. “Can I see your budget? Can I rehash this?” Things like that, you know, we work with you on that. We don’t need, we don’t go through all those financials on an annual basis, but we work with you to ensure that you always know we’re on the same page. We’ll come up to your property to advertise your project. And then actually funny enough, as a past agent, I even had some agents feel like, “Hey, where is this?” So maybe to sell for them too. And so I just put them in touch with the builder. But just kind of really being like, you care about us on the front end because we always know who we’re talking to. But you’re putting your money where your mouth is, literally, by coming out to the site visits and being like, oh, you’re advertising my property. You’re walking the property. You know what we’re building here. We’re a local lender that has the ability to do that. So it’s just making sure, and I think you both would agree, it’s like working with people you like in this industry is super important. You work with friends, you work with people you’re friendly with, you work with people that can get it done, and you know that. So it’s just about reliability at the same time as it is about, you know, actually delivering.
Saad: Yeah. We work with a lot of lenders and obviously the type of business that you guys are in, the type of projects and that you’re financing and things like that, a little bit different, but I can’t say that many lenders actually show up to the house that they’re potentially financing. That’s pretty rare, a definite differentiator. So that’s pretty awesome.
Alyssa: Yeah, absolutely. And your project is just as important to us, right? You know, it’s, we want to make sure you’re good throughout the project, right? So it’s like our job isn’t done unless you’re done, right? So we wanna make sure that you know that.
Saad: Awesome. One thing I’m super excited about…obviously you guys can help consumers, you can help builders, you can help flippers, you can help people who are in a bind, what have you. Myself as an agent, and I’ve shared this with Mike, it’s exciting to know that we have, yes, we have the conventional financing lenders, but to have somebody else who is an expert in this area and has worked with developers in the past as an agent. I think that’s a huge value add for our team. So excited to kind of like, you know, continue this partnership and, you know, work on different opportunities together. Case in point, I’ve got that listing or off-market listing in the South End and I’m excited to see what numbers Alyssa puts together. I owe her some numbers first. Yeah. can actually do her job. But, you know, basically providing the renovation numbers, the after-market value, or sorry, after-renovation value and things like that. Those are gonna be super helpful for me to properly market this listing, right? So even if it is off-market. So, that’s a huge value add for me that I haven’t had in the past.
Alyssa: Yeah, okay, absolutely. And I’m really excited to see what you do with the off-market listing. And of course, sales on the back end will be really fun one. But yeah, absolutely. Like love working with you guys both on that kind of stuff, right? You’re off-market or on-market development listings. You know, we can look at because it’s like, you know, you can send it to 10 Bob the builders and it’s like, how do I buy this? You know, what do I need to buy this? Right? That’s kind of, you know, the first thing when you go shopping, it’s like, okay, I want to buy this. How much is it? How do I buy this? How do I get the financing?
Saad: Right. I know, and I know there’s a couple of agents listening in here. One thing that I think was really powerful, I think it was you that shared it with me, was like being able to put these numbers in the actual deck that we’re putting together for people, so they don’t have to go doing like the research and the guesswork and things like that. They have somebody they can reach out to with real hard numbers right there in front of them. So they can make a decision faster. Good for the agent, good for the seller. It’s probably much better for the buyer too because there’s less confusion and less running around that they need to do. There’s huge value there. Now that we’re doing, Mike and I and the team, are doing more, not just listings, but more development type of opportunities. We’re going to need your help.
Alyssa: So, absolutely. excited for that. Yeah. Yeah. I mean, we all need to spin the wheel, right? And you all need to kind of work together. More value can help each other and essentially educate each other and what you do, the more value you can add to your client and things like that. So your net worth is your network. So, it’s a big thing in our industry.
Saad: Any final questions or Alyssa, any final thoughts?
Mike: Yeah, I think I’ll go. I think it would be beneficial for anybody listening to just go over a hypothetical situation or it’s actually real. But, so I have a client who has a four-family in Lowell. They also have a lot that’s been subdivided and approved for another two units. So you’re talking six total. His goal at the beginning was to renovate each one as people moved out of the existing building. He did that for one of them. He then demoed two and then ran into a problem with the code, which now needs to be an irrigation system, that did not have before because it’s a unit or a four-unit building. So, and he’s running a different company to the side. So I think the dream is kind of like slowly coming to an end of like this thing and just needs to kind of sell it. Okay. So how, so how do we market it? I guess like, where would you come in in terms of like, if I’m trying to sell this entire portfolio now, where some things are like mid-build.
Alyssa: Right.
Mike: and other things are approved, what you come in, basically kind of what you did with Saad too, just curious as to that thought process.
Alyssa: Yeah, exactly. A few things in this, well…real scenario. Yeah. A few things in this real scenario is that what we would consider, right, so say Bob the Builder comes in and he’s considering this. What he would consider is saying, “OK, Am I buying this project with plans approved, with permits approved, with ZBA? And what is that?” Right? So hypothetically, because I’m not sure what it could be zoned for or permitted for what would have you, is that if it was for 10 units, for example, right, and Bob wants to come in and build 10 units. So, one thing that this builder would have to consider is what his sellout or her sellout would be for 10 units. What would the budget be as a guestimate, right? If they’re working with the GC or if they are a GC, their best guess. Of course, the acquisition and that takes into account what your acquisition would potentially be considering if you’re selling it fully approved or not. So, a bunch of things, we kind of work backwards to be able to determine the correct financing, right? Because we provide financing on several products…Light rehab, heavy rehab, ground up construction, if it’s a current mid-construction, a written term refinance, right? So we kind of take what this project could be, I’m assuming it maybe be, well, it would be a ground-up construction if they were kind of knocking all down these structures, buildings and units hypothetically, right? So we kind of work backwards on what the final product would be, what the budget would be, what the sellout would be, and then be able to underwrite that from there.
Mike: Okay, I understand.
Saad: Yeah. Yeah. That’s exactly what we’re doing now. So, Alyssa literally gave me a list of here’s the things I that was obviously, I mean, I’m a to-do list type of guy. Having that list is super helpful. You know, one of those things is missing and I need to get that. And once I have it, then she can go to work.
Alyssa: Right? give me what I need.
Saad: So, yeah, if you’re an agent listening, I mean, you know, obviously, uh awesome partner, reach out to Alyssa, follow her. She has great content, too. And, you’ll be hearing…Alyssa will definitely be like, I mean, it’d be really cool to do some, like, joint content….Yeah. And some of the things that we’re working on that we have coming down the pipe. So we’re gonna come from Alyssa for sure.
Alyssa: OK, awesome. Well, thank you, guys. Thanks for having me.
Mike: Thanks, Alyssa.
Alyssa: Yeah, absolutely. And let me know, if we want to connect on that too, on this kind of real hypothetical scenario.
Mike: Yeah, yeah, yeah, yeah.
Alyssa: We can help you out.
Mike: You’ll get an email shortly.
Alyssa: OK, perfect. Awesome.
Saad: Alyssa, thank you so much.
Alyssa: Well, thanks, guys. Have a good night. Appreciate it.
Mike: You too.
Saad: That’s Alyssa. That’s Mike. I’m Saad. This is StoriiTime. See you guys soon.
Mike: Bye, everybody. Bye-bye. Bye.
This Instagram live is transcribed for your easy reading. If you want to catch Storii Time live, every week, follow @saadmun1r and @photolowski on Instagram.