COVID-19 Impact on U.S. Hard Money Lenders
Earlier this month, our VP Jeff LaMotte was interviewed by Real Estate Bees along with peers on the affect this pandemic has had on the private money market. This survey included information collected from over 2,000 active hard money lenders and Jeff was asked some specific questions as an industry expert. During the COVID-19 crisis, many non-QM and hard money lenders closed up shop due to the future’s uncertainties with this virus, but businesses like Val-Chris Investments remained open, continuing to serve the needs of our private money clients!
Here is some of what Jeff had to say in the interview:
What unexpected opportunities has the pandemic opened for hard money lenders?
Key takeaways from the hard money lenders’ answers:
- As institutional lenders have temporarily stopped operations, this has opened doors for private and hard money lenders to gain more customers as they are one of the very few sources with available capital.
- With limited players in the market, this allowed private and hard money lenders to choose their transactions very carefully, with preference on low-risk transactions, to be able to earn higher returns.
- Lenders have chosen to be strategic in their lending activities, employing prudent tactics such as increasing interest rates while lowering loan-to-value ratios, to stay competitive amidst an uncertain economy.
- Commercial lenders currently enjoy a slew of new customers needing funding for their new business ideas (e.g., online ordering and grocery delivery) that came about during the pandemic. Commercial lenders see a goldmine in these new businesses pursuing micro-fulfillment endeavors to meet the current demands of consumers.
- The pandemic has given lenders an opportunity to assess their operations and implement improvements to elevate customer experience. Lenders are looking into making their internal processes more efficient, adopting technology for borrowers, and strengthening relationships with investors.
- Due to the stay-at-home orders, investors have seen less competition in terms of buying and development opportunities. This has prompted them to be more aggressive in their borrowing activities, which gave hard money lenders the opportunity to set more appealing terms.
“Hard money lenders have been a long time favorite for quick and easy business purpose loans and I don’t think that has changed. While many lenders have closed up shop or implemented a temporary hold on all lending, we have been busy filling the gap other types of lenders are afraid to fill.” said Jeff LaMotte
What marketing channels do you prefer to use during the pandemic over the rest and why?
Key takeaways from the hard money lenders’ answers:
- Keeping in touch with previous clients is a time-tested marketing approach that will serve lenders well in the time of pandemic.
- It is important to keep an established referral base, composed of satisfied customers, brokers, and other lenders, which can help boost marketing efforts.
- Word of mouth, phone calls, and referrals remain effective methods for gaining new customers, especially when involved in hard money deals.
- While traditional methods for marketing stand the test of time, lenders should be able to ride the waves of technology by integrating digital tools like social media platforms, email campaigns, and SEO-related efforts to take advantage of a market that spends more time on smartphones now than ever before.
- Updating newsletters is a smart marketing approach to provide industry-related information that investors will find useful.
- Company websites, Google Adwords, and Craigslist help generate leads. Creating educational videos, on the other hand, can also help gain new customers.
- Local REIA groups remain good sources of customers, especially when lenders need to strengthen their position in the local markets they serve.
Jeff LaMotte’s reply? “Digital. It’s still the easiest and most cost-efficient way to reach as many people as possible. Regardless of the current economic stability or strength, people will continue to carry their smartphones and check their emails daily.”
