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Real Estate Lending With a Focus on Building Relationships
On this week’s episode of THE FINANCIAL COMMUTE, Scott Taylor, CEO of Artes Capital, joins Chris Galeski to discuss private lending and real estate.
Many clients wonder why someone (who is qualified to borrow from a bank) would use a private lender when the interest rate is lower at banks. Sometimes, the time it takes to secure a loan from a bank is the same or more than the time it takes to build a new real estate project. Scott says many clients prioritize certainty of execution and timeliness, and if the loan is short term, the difference in interest rates does not matter much.
Chris and Scott also discuss the current real estate market. Scott says rents are starting to plateau and even decrease in some areas, while operating costs and insurance premiums are increasing exponentially. Rising costs and the inability to raise rents sufficiently to offset expenses are putting real estate owners at risk, especially those with upcoming loan maturities. Because of the banking crisis, many regional and even larger banks have pulled back, creating a capital shortage. Therefore, private lenders may benefit as they can provide loans to quality sponsors that may not have access to traditional financing.
As for Scott’s team at Artes Capital, they are aiming to increase yield for investors while decreasing risk. Scott says Artes is placing more emphasis on identifying higher-quality sponsors to partner with and is mitigating risk by strengthening their loan loss reserve, which provides a financial buffer should they incur losses due to defaulting borrowers.
Disclosure: Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.
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By Chris GaleskiOn this week’s episode of THE FINANCIAL COMMUTE, Scott Taylor, CEO of Artes Capital, joins Chris Galeski to discuss private lending and real estate.
Many clients wonder why someone (who is qualified to borrow from a bank) would use a private lender when the interest rate is lower at banks. Sometimes, the time it takes to secure a loan from a bank is the same or more than the time it takes to build a new real estate project. Scott says many clients prioritize certainty of execution and timeliness, and if the loan is short term, the difference in interest rates does not matter much.
Chris and Scott also discuss the current real estate market. Scott says rents are starting to plateau and even decrease in some areas, while operating costs and insurance premiums are increasing exponentially. Rising costs and the inability to raise rents sufficiently to offset expenses are putting real estate owners at risk, especially those with upcoming loan maturities. Because of the banking crisis, many regional and even larger banks have pulled back, creating a capital shortage. Therefore, private lenders may benefit as they can provide loans to quality sponsors that may not have access to traditional financing.
As for Scott’s team at Artes Capital, they are aiming to increase yield for investors while decreasing risk. Scott says Artes is placing more emphasis on identifying higher-quality sponsors to partner with and is mitigating risk by strengthening their loan loss reserve, which provides a financial buffer should they incur losses due to defaulting borrowers.
Disclosure: Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.