RCN Capital
Building Relationships Beyond the Loan
By Carole VanSickle Ellis
When Jeffrey Tesch, CEO Of RCN Capital, started his company in 2010, he did so with the knowledge that he was tackling a difficult project at a nearly impossible point in history. However, Tesch believed the service RCN could provide would not only be invaluable to the real estate investing community; it would be essential to the housing market recovery. With these ideals in mind, he dove into the private money sector headfirst.
“We started RCN in 2010, smack-dab in the middle of the banking meltdown and foreclosure crisis,” Tesch recalled, adding, “The reason we started the company then was we believed there was an opportunity to deploy capital to investors who were buying properties, fixing them, and providing good, clean homes for families to live in. It was hard for many people to see it in the moment, but it was a great time to be involved in the financial side of the market.”
Tesch said that although at the time starting a new lending company seemed like a nearly impossible task to those “outside” watching the process, his original team members, most of whom still work with RCN, held a firm belief that the complicated lending environment at that time was actually an environment in which investors would be desperate for workable options.
“At that particular time, it looked like a real mess, but in hindsight, it was so clear,” Tesch said. “The banks did not want to own the houses; the investors had the opportunity to buy and fix them, and the only component missing was the capital that would enable these investors to buy those houses.”
RCN filled that gap, and, 13 years later, continues to serve the real estate industry and identify new, creative ways in which to do so.
Alan Johnson, director of originations at RCN, recalled a client for whom RCN’s creative thinking paid off in significant ways more recently. This client had been holding about a dozen properties in a rental portfolio and was looking for a way to boost his cash flow. Although many investors would consult a designated financial advisor in this situation, Johnson’s client asked RCN, and specifically Johnson, for advice as well.
“At that time, rates were extremely low, even in the private-lending sector,” Johnson said. The client ultimately opted to refinance all of his properties, thereby increasing cash flow on every one of them. As a result, he was able to leave his traditional 8-to-5 job and begin investing full-time. Johnson said he recently heard from the investor, who reported that his entire family had been talking about RCN at the dinner table the previous night.
“He said he was just calling to find out more about his [loan origination team] because of what that process had meant for his family,” Johnson said. “It was a ‘Wow’ kind of moment for all of us. That is the kind of thing you cannot put a price tag on.”
A Strong Foundation of Thinking Forward
Tesch and RCN started out with a strong sense of purpose, believing they were meant to support, fortify, and ultimately evolve with the private-money industry.
“As private lenders, it is tempting to think of just ‘customers’ or ‘investors,’ but you really want to think about the customer of the customer as the person you are really serving,” Tesch said.
The customer-of-the-customer, of course, is the end-buyer or resident of the property that a real estate investor has financed and renovated or rehabbed. Tesch believes that thinking of the wellbeing of that eventual permanent or semi-permanent resident creates a lending environment in which the best outcomes are achieved for everyone involved in the investment process from start to finish.
“If you think about the resident, that leads you down a different path than you might otherwise follow,” Tesch said. “For example, if interest rates rise and we think about what that end customer needs (which also gives us insight into what our borrowers and investors really need), then we realize that the end customer needs an affordable mortgage so they can buy the property or an affordable monthly rental rate so they can rent it. That tells us that we need to lend in a way that enables the investor fixing up and selling or renting the home to provide that customer with the ability to pay those rents or get that mortgage. When we provide a product that will help them garner those results, we provide a product that is needed throughout the industry.”
“It all comes down to understanding our perception of our space,” explained Erica LaCentra, RCN’s chief marketing officer. She said that Tesch, a real estate investor himself, had negative experiences in the private lending industry before becoming a private lender. “There was no consistency,” she said, “and some of those lenders in the early 2000s were not particularly interested in whether a borrower could pay off the loan because they were just as happy to take the property from the investor instead of getting the loan payments. From the beginning, RCN has been dedicated to the professionalization and legitimization of the space, so our company has stayed far away from those types of practices.”
According to Johnson, a big part of thinking forward in lending is about relationship building, a passion to which he dedicates a great deal of time at RCN in his role as director of originations. As director, Johnson is heavily involved in training loan originations teams.
“You cannot fake relationship building,” Johnson explained. “You will never build a good relationship by faking anything. When we bring people onto the RCN team, we look for people who listen, who can empathize, and who relate to our clients and the end customer, also. At the end of the day, a satisfied investor means repeat business because investors generally do not do just one loan every five or 10 years. They might do five, 10, or 20 loans a year. The ability to build a really good relationship with customers and clients is one distinguishing factor between us and our competitors.”
Johnson said that one time a client called him because a competitor had offered the client an extremely discounted rate in order to tempt him to leave RCN. Johnson thought the client might be calling to tell him it had been too attractive to resist, but he was pleasantly surprised. “That investor told me there was no way he would leave RCN after everything we had worked on together,” he said. “It just shows how building relationships is so critical because borrowers need to know that you care about their business and their investments, not just the loan.”
Tesch added, “RCN’s hiring practices are another area in which forward thinking determines what we do and how we do it.” The company focuses heavily on empowering employees to be what Tesch describes as “decision-makers” and “career builders.” He said that while this can mean “free-pizza Fridays” and other gimmicky employee-appreciation events, RCN focuses more on helping individuals enrich their work experience and expertise so that they can experience meaningful success in their employment and place of work.
“That other stuff is cool and nice, but for us, it is about building an organization that empowers employees to build careers,” Tesch said. He noted that this has been particularly important since the global COVID-19 pandemic in 2020, when lenders were desperate to acquire and retain employees in order to keep up with the volume of business. Tesch said even at the height of the hiring frenzy, RCN prioritized bringing on people who could be part of the company culture long-term. This meant, among other things, living close enough to the company that the employee could work on-site once that option became available once more.
“Our hiring practices and company culture give our managers tremendous latitude to promote from within, and that is what we are looking for,” Tesch said. “When we hire, we think about hiring employees who will help grow the company from within and then benefit from their success in our company and with our culture.”
Creating an “Unmatched” Level of Service
Just as forward-thinking practices drive RCN’s hiring habits and lending processes, the company’s dedication to an “unmatched” level of service when it comes to the needs of clients and customers drives much of its research and development. For example, Tesch said, RCN’s sister-company, Bridge Loan Network, is one of the leading loan origination systems in the private lending arena today. However, he continued, digital access is just one of RCN’s service facets. Not surprisingly, the company’s top priority in terms of service is its staff and their interactions with clients and customers.
“We are big believers in having the level of service from a human interaction component that will provide our customers with whatever level of service they need whenever they need it,” Tesch explained. “Technology is great, but it only can take you so far.” To that end, RCN prioritizes human interaction whenever a borrower seeks it. “If a broker or customer needs to speak to someone, there should be a person on the other end of the phone and, furthermore, that person should know what they are talking about and be equipped to help the client,”
Tesch concluded.
This determination to provide top-level service manifested itself in a surprising and, briefly, discomforting way in early 2020, when RCN elected to stop originating loans while it sorted out the best way to move forward in a locked-down, remote-work world that was more intensely and invasively regulated than most Americans had ever experienced before.
“RCN was one of the first companies to shut down lending during the pandemic,” Johnson acknowledged boldly. “We realized that by doing that, we would be able to be among the first to come back out and start lending again, which made us stronger than we had been and enabled us to grow fast and still take care of our clients.”
Johnson admitted he had concerns about shutting down operations even briefly, but noted that the corporate response demonstrated how dedicated RCN is to providing transparent, productive options to its clients in every circumstance.
“I was skeptical and asked a lot of questions, but what I heard in response made a lot of sense,” Johnson recalled. “We were determined to make sure investors who had loans still in the draw period during the lockdowns were able to get those draws and complete construction. That meant taking a hit early on to ensure that the people we promised we would take care of, our current borrowers, were taken care of. In the end, we did not end up making loans that were not profitable during the pandemic because we took the time up front to make sure that we understood the situation and to maintain our great relationships with our current book of business.”
The company continued to fulfill obligations to borrowers who already had loans in place, which Johnson described simply as “the right thing to do.” He added, “You make a promise to somebody, you should keep it. We did.”
A Longstanding Practice of Giving Back to the Industry
When Tesch started RCN in 2010, he did so because he believed his company would fill an important gap in what was then referred to as the “hard-money” sector. Today, RCN is focused on filling another need as it works with other private lending professionals to create a standard of best practices designed to improve the lending environment for all private lenders and private-money borrowers.
“We take a lot of pride in giving back to the private lending community, mainly through two trade organizations, the National Private Lenders Association (NPLA) and the American Association of Private Lenders (AAPL),” Tesch said. “We want to make sure that the best practices we employ at RCN are employed throughout the industry because I do not want to ever have another conversation where people assume we are ‘hard money’ lenders. That is not what we are.”
LaCentra chimed in, “We have spent over a decade working hard to distance ourselves and our industry from ‘bad actors’ who are more interested in taking properties back than making good loans. We don’t want properties back. We want to truly work alongside our clients to make sure they are successful as much as we are successful.”
“Sometimes, you just need to slow things down and take some time to walk through things with borrowers,” Johnson added. “You want to be sure your client is not in a situation that is going to hurt them or put them in a position of losing money. When your loan officers are willing to do that, they let investors know that they are important. It is the greatest feeling when someone appreciates the time you take to help them be successful and let them know they are a person, not just a loan.”
“At the end of the day, we are a commercial, private lender with high standards,” Tesch said proudly. “We do things the right way, and we support the industry in becoming more honest and forthright and adopting best practices that all lenders should employ.”
Sidebar
When Good Business Development Means Exceptional Education
RCN and its employees believe that the key to successful lending and borrowing is a sound understanding of how the industry works. To that end, RCN’s chief marketing officer, Erica LaCentra, dedicates a large portion of her time to creating educational materials to serve both borrowers and lenders.
“We have a heavy emphasis on content geared toward our wholesale partners and our direct investor clients,” LaCentra said, noting that RCN has developed an entire business-development platform, Amplify, intended to educate wholesale partners. The platform hosts roughly 20 courses available for self-guided education intended to help wholesale brokers identify the types of deals that are likely to be “fundable” when another investor brings it to a private lender. On the lending side, RCN-sourced educational materials have helped many private-money lenders take their own operations to the next level, with some RCN clients who started out as borrowers now running fully staffed shops and generating significant loan volumes of their own.
“Education is so important to us, as is the mentality that when we educate partners and clients, they grow with us,” LaCentra said. “RCN has numerous clients and partners who have grown with us, and it has been a wonderful experience to see their success grow alongside ours.”
