REI INK

Indianapolis, Indiana

The “Crossroads of America” Gears Up for a Busy 2024 By Carole VanSickle Ellis In January 2023, Zillow analysts released their much-anticipated “hottest housing markets” list. Not surprisingly, last year’s list was dominated by the south and southeast; only two midwestern cities even made the list. This year, however, Indiana’s “Crossroads of America,” Indianapolis, catapulted to number four on the list, leaping over all of last year’s frontrunners to snag the spot. Zillow analysts placed only three markets ahead of Indy: Buffalo, New York; Cincinnati, Ohio; and Columbus, Ohio. “2024’s hottest markets all boast solid economic fundamentals, relatively fast-moving for-sale housing inventory, plentiful likely buyers, and expectations for stable home values,” observed Zillow economic analyst Anushna Prakash. She added, “[The top 5] should stand out as strong in a housing market still buffeted by low inventory and relatively high mortgage rates and prices.” The real estate data giant bases its rankings on analysis of forecast home value growth, recent housing market velocity, and projected changes in the labor market, home construction activity, and number of households, Prakash noted. For investors already active in Indianapolis and the surrounding area, the news that the market is heating up is nothing new. However, investors like Dustin Malloy, CEO and founder of Cash4Homes and an active wholesaler in the area, are thrilled by the activity and insist that rising demand in the area is affecting their businesses positively despite relatively low inventory. “There is always someone in a situation you can help sellers out of while making great income on the transaction,” Malloy explained, adding, “There are lots of buyers, and many will buyyour deals with only one call.” Malloy, who is active throughout central Indiana, noted there is a substantial demand not only for larger three- or four-bedroom properties, but also smaller two-bedroom units to serve as rentals in the area. Many developers have reported seeing falling demand for smaller single-family rental (SFR) properties elsewhere in the United States, which makes the steady demand in Indianapolis intriguing and somewhat unusual. Bruce McNeilage, co-founder and CEO of Kinloch Partners, a real estate investment company specializing in SFR development and management in the southeast, noted, “We have been following growth patterns outside the urban core [in southeastern markets] because the value is better for us and our residents and fits their lifestyle.” While this trending demand for larger properties may emerge in the Midwest a year or more down the road, demand for all sizes of rental stock has skyrocketed so dramatically in the past 12 months that competition in Indianapolis has nearly doubled for each rental unit. According to the U.S. Census Bureau, nearly two-thirds of Gen Z renters in the Indianapolis area are spending one-third or more of their annual income on rent. While rents in many major metro areas around the country have eased off or even fallen in recent months, the Harvard Joint Center for Housing Studies reported midyear 2023 that Indianapolis had posted 7.7% rent growth year-over-year. However, the center predicted rents in still-warm markets would “likely also slow in the future… [based on] softening of other rent indicators.” Until this happens, Indianapolis renters may find smaller, older properties more affordable and attractive. So far, however, all systems (and rental investments) appear to be “go” in the Indianapolis area. “We consider Indianapolis to be an excellent destination for cash-flow rental properties,” said Marco Santarelli, founder and CEO of Norada Real Estate Investments. “Indianapolis has a record of being one of the best long-term real estate investments in the U.S. over the past 10 years.” A Growing Economy Going Full Speed Ahead As the home of the famous Indianapolis 500, Indianapolis gets its fair share of speedway jokes and “full speed ahead” references. The Indianapolis Motor Speedway, itself, is an incredible economic engine for the area, generating $1 billion in annual economic activity as a result of events and operations at the venue itself. “Of this total, more than half — $566.4 million — is attributed to the Month of May and the world-famous Indianapolis 500 Mile Race,” observed Forbes contributor Bruce Martin in October 2023. Martin was reporting results from a newly published study by the Indiana University Public Policy Institute that focused on breaking down economic activity related to the speedway. In the report, the researchers credited the speedway alone with 8,440 “direct and indirect full-time equivalent jobs, totaling and estimated $360 million in labor income.” Investors should note short-term rental activity in the area spikes during speedway events, with Airbnb reporting hosts in the Indianapolis area collectively made more than $1 million in the two weeks leading up to the race in 2021. A “typical host” earns more than $1,000 over the race weekend, Airbnb representatives said. The speedway is only one facet of Indianapolis’s accelerating economic momentum, however. Statewide, the Indiana Economic Development Corporation (IEDC) is leveraging a variety of investor- and business-friendly programs to incentivize economic growth in the area. In Lebanon, Indiana, a suburb of Indianapolis roughly 20 minutes from the city center, Eli Lilly and Company recently broke ground on a $3.7 billion investment that will ultimately bring in a projected 700 direct jobs. The manufacturing operations center is part of the LEAP Research and Innovation District in Lebanon. The district consists of 9,000 specially designated acres on the Indiana I-65 Hard Tech Corridor and boasts, according to the IEDC, “an experienced workforce of 1 million+ within a radius of 60 minutes.” The Indianapolis Chamber of Commerce notes there are many local and municipal programs designed to keep the Indy economy growing, also. In a recently published report on the topic, the chamber reported average hourly wages of $44/hour, $134.7 million in active tax abatement projects, and a “land strategy” incorporating public land, Opportunity Zones, and remediated properties in order to “catalyze investments” from developers and target businesses. The program is part of an evolving initiative that has already created a highly attractive industry ecosystem in the area with the top six industries

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Facing Interest Rate Risk with Confidence

Leverage Financial Risk Management Tools to Tame Interest Rate Risk By Michael Riddle & Geoffrey Sharp Making money in private lending requires navigating a minefield of risks every day. From mitigating legal risk with tight procedures or credit risk with careful underwriting, lenders must constantly be vigilant to identify and neutralize threats to their business. Perhaps no major risk they face is more overlooked than the interest rate risk assumed when locking a loan. The biggest impacts of interest rate risk are hard to miss. Many real estate lenders did not weather the storms caused by the historically-fast increase in rates from 2022 to 2023. With the benefit of hindsight, we can grasp how significantly rates contributed to the reduction in resale value of loans and reduced demand for home purchases and refinancings. Even though the seismic impacts appear to have subsided, and we seem unlikely to face another 5% rise in rates in a two-year period, we still find ourselves with an inverted yield curve. Lenders who spent years profiting from the “carry trade” of borrowing at low, stable, variable, short-term rates and investing at higher, longer-term rates (especially fixed) find that this math does not work. Those who were fortunate enough to survive the transition to higher interest rates recognize that the gap between the interest rate terms of their funding and investments represents interest rate risk. Lenders respond to rate risk in three ways, and these responses can mean the difference between profit and loss. Eris SOFR Swap futures provide lenders one of the best tools to respond confidently. Response 1 Ignore the risk because “everyone knows rates are going down” With recent inflation data trending down and the Federal Reserve forecasting multiple rate cuts in 2024, it is tempting to assume the storm of rising rates has subsided and lenders can return to business as usual. But as any long-time lender can attest, the road is littered with the bodies of those who tried to predict the direction and pace of interest rate moves. Among the primary drivers of interest rate increases are events that cause chaos and uncertainty, such as wars, terrorist attacks, pandemics and large-scale supply-chain disruptions. Unfortunately, these types of events seem to have increased in occurrence and likelihood in recent years. Assuming rates will go down in the coming years and failing to prepare your business for other possibilities amounts to betting against uncertainty and chaos. Is that wise? Some market watchers may observe that term rates are currently 100-200 basis points lower than daily Secured Overnight Financing Rate (SOFR, the replacement to LIBOR and index underlying most hedging activity) and conclude that “market consensus” or the “wisdom of crowds” points to lower rates. But basing business decisions on forward rates remains inherently speculative, and markets often fail to predict their own futures well. Today’s term rates may represent the most likely path of rates, but without putting in place financial hedges, one cannot assure that outcome. Even if current market rates are broadly correct and rates end up lower in a year than they are now, who can predict the path they will take to get there? SOFR may end up 100-200 basis points lower overall, but the path may involve weeks or months of increasing rates. A rise of perhaps 10 basis points over a month would seem insignificant over the course of a year, but its impact on a portfolio of loans that have been locked and are awaiting sale or securitization during that period can be significant. The reality is that predicting interest rates over any appreciable breadth of time is impossible. Private lenders specialize in sourcing funds and deploying them to promising projects, not predicting the direction and pace of macroeconomic factors. It requires humility to recognize that one possesses neither the time nor the expertise to forecast the future, and the frequency with which even so-called economic “experts” miss their predictions should remind us that lenders are at their best when they focus on lending. Response 2 Constrain lending practices to limit exposure Perhaps the most common private lender response to interest rate risk is to modify lending behavior to decrease exposure to rates at the expense of competitiveness and commercial upside. First, a lender who funds at SOFR plus a spread can mitigate risk by lending exclusively on variable rate terms, such as SOFR plus a higher spread. While this is an effective way to avoid spread compression from rising rates, the increasingly-competitive market for deploying funds limits the number of qualified borrowers willing to accept these terms. Lenders are faced with the choice to do fewer deals, loosen their lending standards, or lend at fixed rates and assume the rate risk. Second, lenders often seek to re-sell their loans as quickly as possible, treating them as “hot potatoes” to be moved at any price in case the market turns quickly. But this approach potentially limits their upside, as they sacrifice the premium available for amassing larger packages of loans for resale or securitization. Third, many lenders configure their fixed rate loan terms to use rate levels that build in some insurance in the event rates increase. While this approach contains elements of prudent risk management, the challenge is to pick the right rate for every single loan. Picking the wrong rate not only runs the risk of loss from incorrect forecasting (rate rises exceed the buffer levels), it also decreases the competitiveness of the lender’s loan offering. Lenders who build in “extra juice” in the fixed rate as a profit buffer risk pricing themselves out of the market compared both to firms who are more aggressive in taking rate risk, and to those who manage risk through well-calibrated financial hedges like those described below. Response 3 Market-based loan pricing and simple, cost-effective hedges Fortunately, financial markets provide lenders the tools to observe dynamically the markets’ consensus for SOFR’s path over time, and to lock in rates and preserve lending spreads on the day

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The Hidden Link Between Fraud and Technology

Recognizing and Mitigating Risks is Paramount in Safeguarding Investments By Alexander Fahsel In the rapidly evolving landscape of real estate, the digital transformation has ushered in a new era of convenience and efficiency. From virtual tours to blockchain-based transactions, technology has revamped the way we buy, sell, and perceive property. However, this shift is not without its pitfalls. As we delve into the intricacies of the real estate market’s digital metamorphosis, a concerning trend emerges — the rise of technology-fueled fraud. This alarming development signifies a dual-edge of technological advancement, where the benefits of digital efficiency are counterbalanced by the escalating risks of sophisticated frauds. According to the FBI, Boston Division, “Nationwide, in 2021, 11,578 people reported losing $350,328,166 due to rental scams which is a 64% increase from the previous year. The actual losses are most likely much higher because many people are hesitant to report they were scammed.” In this exploration, we aim to uncover the hidden link between these technological innovations and the surge in deceptive practices plaguing the digital real estate market. Understanding this connection is not just an academic exercise; it is a crucial endeavor for every stakeholder in the real estate arena. From individual buyers and sellers to industry giants, recognizing and mitigating these risks is paramount in safeguarding investments and maintaining the integrity of this rapidly digitizing market. The Digital Transformation of Real Estate The real estate sector, long known for its reliance on traditional and in-person transactions, is undergoing a seismic digital transformation. This shift, while streamlining processes and broadening market access, has inadvertently opened the floodgates to a new breed of cybercrime. Recent case studies, like the surge in apartment application fraud fueled by social media platforms such as TikTok, Instagram, and Facebook, underscore this alarming trend. As highlighted in a Bisnow article written by Jarred Schenke, these platforms have become hotbeds for fraudsters, where stolen identities and fabricated credentials are traded like commodities, leading to significant financial losses and legal complexities in the rental market. This transition into a digital arena has diversified the types of fraud encountered. From identity theft, where personal information is hijacked for unlawful gains, to fake listings that lure unsuspecting victims into fraudulent transactions, while costing operators and investors hundreds of thousands due to illegal occupants, the spectrum of cybercrime in real estate is both vast and complex. Each type presents unique psychological and technical challenges. Fraudsters are adept at exploiting the inherent trust people place in digital processes and the vulnerabilities of online platforms. Understanding these crimes goes beyond recognizing their modus operandi; it requires an in-depth analysis of the psychological manipulation techniques used and the technical loopholes exploited. This approach is crucial in assessing the full impact of real estate cybercrime, which extends beyond financial losses. It erodes trust in digital platforms, hampers the growth of online real estate marketplaces, and necessitates a reevaluation of digital security measures. The real estate industry, at this digital crossroads, faces a pressing need to fortify its cyber defenses, ensuring a safe transition into its digital future. The Role of Technology in Facilitating Fraud In the realm of real estate, technology’s rapid evolution has undeniably streamlined numerous processes, yet it has also inadvertently paved the way for sophisticated forms of fraud. This paradox becomes especially apparent when examining how certain technological features, specifically automation and anonymity, have become double-edged swords. Automation, designed to expedite transactions and reduce manual errors, has been manipulated by fraudsters to generate fake listings and documents at an alarming rate. The ease and speed with which these fraudulent materials can be produced pose a significant challenge to detection and prevention efforts. Furthermore, the veil of anonymity that digital platforms often provide has been a boon for scammers. They exploit this feature to create false identities or to impersonate real estate professionals, thus deceiving unsuspecting buyers and sellers. This anonymity not only makes it difficult to trace and prosecute these fraudsters but also erodes trust in the digital real estate ecosystem. When we turn our focus to the cybersecurity aspect of these platforms, the picture remains concerning. Despite advancements in technology, many digital real estate platforms still exhibit glaring vulnerabilities. These range from inadequate verification processes and weak encryption standards to loopholes in data storage and transfer protocols. Such weaknesses are easily exploited by cybercriminals to gain unauthorized access to sensitive personal and financial information. The current state of cybersecurity in real estate reflects a sector struggling to keep pace with its own digital transformation. As the industry continues to embrace technology, the need for robust, adaptable cybersecurity measures becomes increasingly critical. This includes not just technological solutions, but also comprehensive education and awareness programs for all stakeholders in the real estate transaction process. Bridging these gaps is essential to safeguard the integrity of digital real estate transactions and to ensure that the benefits of technology do not continue to be undermined by its vulnerabilities. Combating Cybercrime: Technological Solutions and Best Practices In the digital real estate arena, the fight against cybercrime is increasingly being spearheaded by advanced technologies like Artificial Intelligence (AI) and Machine Learning (ML). These sophisticated tools are a game-changer in detecting and preventing fraud. AI and ML algorithms excel in uncovering subtle patterns and irregularities that humans might overlook, making them indispensable in identifying fraud risks. By meticulously analyzing vast datasets — encompassing transaction records, communication logs, and behavioral patterns— these systems can pinpoint unusual activities that signal potential fraud. For example, ML models can detect anomalies in listing data or spot unusual patterns in online real estate interactions, offering early warnings of possible scams. This technological intervention is crucial in outsmarting the sophisticated tactics employed by modern cybercriminals. However, technology alone is not a panacea. It is equally crucial for consumers and professionals to stay vigilant. Simple yet effective measures can significantly mitigate risks. For instance, verifying the legitimacy of online listings, double-checking email addresses for subtle anomalies, and being wary of deals that seem too good to

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Imagine This on the Horizon…

Thinking Outside the Box to Solve the Housing Shortage By Suzanne Andresen We have recently seen some concerning legislative attempts to continue the demonizing of real estate investors who are allegedly gobbling up all the assets in front of homeowners. Let’s look a little deeper into this and really contemplate the “evil landlords.” We can start with a quote from David Howard, CEO of the National Rental Home Council. Howard is regularly in DC lobbying for the rental real estate industry. He recently shared the bill “End Hedge Fund Control of American Homes Act” proposed by Senator Jeff Merkley (D-OR) and Representative Adam Smith (D-WA). This is a bill targeting the legitimate development, investment, and ownership activities of America’s leading providers and builders of professionally managed single-family rental homes and communities. Those evil landlords. What we fail to take into consideration is the intent of the rental tenant’s perspective. My niece who is 26, has no intention of purchasing a home and just entered into her fourth lease, after several moves back home for extended time frames. It had nothing to do with the cost of rent, as my brother was paying her rent for a one-bedroom apartment in midtown Manhattan. She simply moved out mid-lease and back home to live with her mom. My brother continued to pay the rent, and actually could have sublet the unit for years. I negotiated the lease for him the October following the COVID outbreak. As I watched the vacancy rate rise as it showed the units available on their floor plan website, I kept calling back and asking when they wanted to accept my offer? They eventually did, and we had a smoking good deal with sublet rights. At today’s market rate and with the rental control components to NYC housing, he would have cleared $1,000+ per month. That said, there is clearly a housing shortage, and we need to collaboratively try to figure out how to fix some of the most important issues. There is some truth in prominent cities having an increased focus for some of the REITs investment strategies. But there is also a similar, less interesting element to the less popular cities. There are actual zombie housing markets, but some of this goes a bit deeper than just the image of the house or location. We all know the challenges home buyers face as they diligently put money aside in savings for their down payment and closing costs. Now let’s look at the REO and zombie assets these first-time homebuyers feel they can afford. The most likely financing will be a 203K loan product or something similar. This is a significant challenge for a first-time home buyer to attempt. We have seen a shortage of materials all over the country, with costs increasing every month. Now imagine the miscalculations of the new homebuyers as they run out of money and are only 92% complete, with no additional funding available. They face default and the loss of their American Dream along with the years of diligent savings. Heartbreaking, and not the cause of any real estate investor. There are additional shortcomings along the way. Let’s take a step back and look at the now-vacant house. If it is not located in an up-and-coming market, it may go into foreclosure or even a tax sale. Foreclosures are great opportunities for the next buyer if there is one. When there is not — the town gets it back. They have the right to have a tax sale but may keep the asset on their books for years. My town has several. Some are land only and one is actually 27 acres on the water. As an elected official, I think there is opportunity on the horizon. At the same time, the allocated taxes for the properties have not been paid for years, essentially diminishing the services the town can offer. I have a solution. Ever hear of a 529? It is a tax-advantaged savings plan to encourage savings for future education costs, paid to qualified tuition plans. This is authorized through Section 529 of the Internal Revenue Code. It is sponsored by a state, state agencies or educational institutions and administered through an approved financial institution. Let’s call this a 529-C, for college education. Now let’s create a 529-R for rental conversions to homeownership. Each month a tenant can contribute up to 4% or whatever the tax law allows, which can be matched by the landlord — all tax free. Similar to the 529-C, the account follows the tenant from state to state, and years of contributions are accrued. Let’s go back to a tenant, not yet ready to buy a home. Like my niece, she could have been depositing and receiving matched funds into her 529-R account for years. What a terrific solution, fostering home ownership, when the buyer is ready. The person who opens the 529-R plan account is called the account holder or the saver. The person the account is opened for is called the beneficiary or the tenant. The account holder and the beneficiary can be the same person. Next issue— solved. What happens if the tenant never buys a home? As of 2024, the following rules apply to 529 plan rollovers to Roth IRAs: The 529 plan must be under the beneficiary’s name for a minimum of 15 years. Yearly conversions cannot exceed annual Roth IRA contribution limits. The lifetime 529 to Roth IRA rollover limit is $35,000. We could replicate this to the 529-R. Now we have created a conversion strategy for a lifelong tenant, who can either purchase a house or contribute to their IRA — or both, if they have saved enough through the years. Now the tenant and landlord are partners in homeownership. What a terrific solution. Are the landlords and real estate investors still demons? I think not.

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The Easy Times Are Over

How to Give Yourself That Elusive Edge By William Gottfried Tough times for your rental portfolio lately? You may be thinking you should get conservative by hunkering down, reducing headcount, cutting software expenses, and riding out the down cycle. You’re welcome to try that approach, but you just might end up becoming that distressed seller everyone is waiting on. At least for now, the easy times are over in multifamily real estate. In 2023, rents fell 0.7%, marking the second weakest year of rent growth in the last eight years, behind only 2020 and its pandemic-related wackiness. The national vacancy rate has been steadily rising for more than a year, nearly doubling since bottoming out at an all-time low of 3.9% in October 2021. The hottest sunbelt markets and other usual suspects still see the most demand, but rents are flat or falling in 11 of those 12 hottest markets because they are oversupplied with new deliveries. Additionally, today’s interest rate environment limits the multifamily buyer pool and reduces disposition optionality for many sellers. Until recently, multifamily ownership felt like a game of musical chairs and the game was easy. First, take advantage of record-low interest rates to buy basically any deal. Next, label it “Value-Add.” Then, renovate one or two common areas and upgrade 10%-15% of the units. Finally, sell to the next guy with all that coveted “meat left on the bone.” Your buyer would then do the same and on and on it went until rates went up and the music stopped. As an operator, what do you do now? You’re looking at some combination of a limited CapEx budget, no ability to call capital, a looming floating rate refinance, stagnating or negative rent growth, lots of competition, few options to refinance or sell, and investors looking for answers about yield. There will be winners and losers coming out of this reset. The winners will be the ones who innovate and proactively seek an edge while their peers get reactive and cheap, hoping for the best with no real plan. Now that you can no longer count on 5, 10, 15, even 20% rent growth on the other side of your trade-outs, you need to be intentional about reducing variable expenses and squeezing as much yield as possible from your properties. The multifamily market may be deeply challenging, but it is also a time of great opportunity where you can separate yourself from the competition. Five Steps to Stay Afloat and Give Yourself That Elusive Edge 1. Focus on renewals and occupancy Where you used to wait excitedly for leases to turn over so you could capture that new peak market rate, now you need to get defensive. Get units leased and worry about rent bumps next year, even if it is more loss-to-lease than you underwrote. I promise you the two-month vacancy will hurt performance a lot more than slumping trade-outs and raise many more questions with your investors about your fitness to see them through hard times. At the end of the day, 90-93% occupancy can give you breathing room to start focusing on reducing other expenses. 2. Turn units fast When move-outs do happen, make sure you are attacking the turnover process. Waiting to get units ready until they are pre-leased means you’re operating reactively and doing the minimum. How can you test rent rates, finish-outs, concession options, etc. if you never have any rentable inventory to work with? Challenging your property staff and make-ready technicians to turn units quickly also gamifies the turnover process and allows you to pay incentives and rewards to your staff. Finding good people is hard enough but retaining them is even more difficult. Align your incentives and pay the team well when they reduce your vacancy loss. 3. Tighten up your tech stack Separate your “nice-to-haves” from your “need-to-haves.” You must be tech-forward if you want to get ahead as an operator/manager. Eliminate the whiteboards, notepads, and endless Excel trackers that give no real-time data, visibility, or accountability up and down your organization. Focus instead on your OpTech. What is going to cut vacancy loss? How can you truly measure resident satisfaction? What can you utilize to detect leaks in real-time? How can you get data about vendor performance and reduce contract services costs? Question everyone trying to sell you software or trying to renew an existing contract. If they cannot articulate exactly how they increase revenue or decrease those expenses, they’re not a need-to-have. 4. Prioritize customer service No matter how innovative you get or how many AI chatbots you enlist, owning, operating, and managing apartments is still a customer service business. And nothing will sink you faster than bad customer service. When residents have issues, they want to be heard by an actual human being. Do not reduce headcount if it means slower maintenance times, fewer property walks and longer lines outside the management office. Instead, get your team running more efficiently. Getting units ready faster will free up your technicians and managers to do literally anything else such as dealing with those resident concerns, work orders, and keeping the property clean and attractive. And what a great way to juice renewals and resident satisfaction! 5. Work with like-minded partners If you do not think you’re getting any edge from your current property manager, you’re probably right. If you are a management company still using whiteboards and notepads to track turns, you have already fallen behind. If your contractors and subs refuse to use smartphones or even email, then find new ones. Everyone in our industry must change their mindset. It cannot be a cram down from the top. You need smart employees and vendors who are eager to adopt new technology. Like-minded folks are out there, eager for their opportunity to unseat lazy incumbents who have gorged themselves on year-over-year double digit rent bumps who simply cannot adjust to our new reality. Lead from the front on these initiatives. Your staff may have a

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Brian Valdivia, CEO, Beltway Lending

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A Conversation About the Real Estate Industry and Private Lending Brian Valdivia is the Chief Executive Officer of Beltway Lending, a highly specialized “refi shop” for real estate investors, which was also founded by seasoned real estate investors. Their firsthand industry knowledge and experience allows them to more quickly understand real estate investors’ goals and financial strengths.  Beltway’s team processed over $100 Million in loans last year alone while maintaining a perfect 5-star rating. Beltway Lending prides itself on having the fastest, most pain-free lending process in the industry. REI INK sat down with Brian to discuss the real estate investment industry and specifically private lending. Brian, how did you get started in the private lending industry? Interestingly enough, after graduating from the University of Baltimore Merrick School of Business with a degree in Business Administration/Finance, I began building and managing pawn shops in Maryland. That business was a tremendous success. Afterwards, I became a financial analyst with Northrop Grumman, an American multinational aerospace and defense technology company. In May of 2021, I purchased my first rental property. I quickly decided that to become truly successful in the real estate investment space, I needed to become an expert on the lending industry. It was not enough to just be “book smart.” So, I went to work for a while for a lending company to learn as much as I could about the industry. I left that company in July 2022 and started Beltway Lending. But during that time, I also focused on growing my real estate portfolio, and today I own about 141 rental properties across the state of Maryland. What were the early days of Beltway like? I consider myself an expert at operations and processes. Immediately, I established a Debt Service Coverage Ratio (DSCR) loan program. Beltway grew very, very quickly, initially doing about $40M in DSCR loans. In 2023, we did approximately $114M in DSCR loans. When I started Beltway, it was my intention of doing ten loans per month. We currently do 75-85 loans per month and now have 14 full-time employees. That meteoric rise is amazing, not only growing your real estate portfolio from one to 141 in less than three years, but the rapid growth in the amount of loans you are making. What do you attribute your success to? Beltway Lending was founded “By Investors for Investors.” We can close a DSCR loan in as little as 22 days, whereas it takes our competitors about 35-45 days. Tim Herbert, my Sales Manager, has the ability to scrub application files very quickly and find solutions to any problems almost immediately. And the rest of my team is just as phenomenal. Also, we do not accept excuses or delays during the loan processing cycle. We have a great reputation in the industry as well. We always do what we say we are going to do. Because of that, all our business is done by referrals. I think we spent a grand total of $8,700 on marketing-related expenses last year. That is unheard of. There are a few people I absolutely need to give credit to for the advice and guidance as Beltway was beginning to take shape. There is certainly more than I could list here, but Jack Bevier from the Dominion Group and Warren Braverman from Poplar were both invaluable resources. Finally, I would be remiss if I did not give credit to the entire team at Beltway Lending. The team goes well above and beyond anything that Ross and I would have ever imagined. Our leadership team consisting of Lilly, Melissa, and Tim, outwork anyone that I have met in this industry. What differentiates Beltway from its competitors? First off, we do not have to spend money on marketing, which cuts down on our overhead. Next, would be the amount of time it takes us to close a loan, a mere 22 days. And we actually listen to people and solve problems. Beltway is HUGE on providing outstanding customer service. Regarding our service area, we are approximately 55% on the East coast with the remaining 45% spread out across the country. What does the future hold for Beltway Lending? We want to continue branching out across the country and very importantly, we want to open up more to the Hispanic community. The Hispanic community is tremendously underserved inthe real estate space. I feel we can connect some of the dots and bring them into this industry that creates millionaires out of regular people. This year, I want to originate $140M in DSCR loans and become a “household name.” I want to be the first company people think of when they want to begin investing or need a loan. What are your thoughts on the current economy and what the future holds? I do not want to comment on the economy. Nobody knows what is going to happen and nobody has a clear crystal ball, all crystal balls are foggy. However, regarding real estate, 2024 will be a hot year. Rates are finally dropping and hopefully homes will become more affordable. I do feel bad for retail homebuyers because they will continually be in “multi-offer” situations which will be difficult for them. Any words of wisdom for the real estate investor? Don’t wait. One of my favorite sayings is that “Time is undefeated.” Buy a property and wait…do not wait to buy a property. Discover more about Beltway Lending at https://beltwaylending.com/.

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