Warren Ifergane, CEO, ICG10 Capital, LLC
A Conversation About the Economy, Lending and the Real Estate Industry
Warren Ifergane is the CEO of ICG10 Capital LLC, a private lending company focusing on financing for fix-and-flips, new construction, and long-term rental properties. Currently lending in 44 states, they are very active in secondary cities such as Jacksonville, FL, Kansas City, MO, and Atlanta, GA. With headquarters in Miami, FL, ICG10 funded $250MM in loans in 2022.
REI INK sat down with Ifergane to get his thoughts on the current state of the economy and the real estate investment industry, in general.
Warren, to start with, how about a little background. You were born in Paris, France and moved to the United States when you were seven years old and settled in Miami. Can you give a quick overview of your professional journey?
Eleven years ago, I started as a part-time teller at Bank of America making around $800 per month. I was renting this studio apartment for $600/month after being kicked out from my “father’s” house for no other reason than his wife didn’t like me. I had no money and not even enough income to change the bedsheets that came with the place. The room had no windows and no light and was basically a direct reflection of my life at that point in time. And it was not a safe environment.
After several jobs, I eventually landed a position as a private equity analyst. During that time, I also earned my MBA at Indiana University. Within five years, I was the Executive Director at that hedge fund company managing over $1B in distressed loans and making portfolio management decisions. After that, I started my own lending company, ICG10, and worked 12-16 hours every day to build the business to where it is today.
A question on everybody’s mind is the state of the economy. We have inflation, rising interest rates, a proxy war in Europe, a tremendous national debt and most recently a few bank collapses. What is your take on the economy and how it may impact the real estate investment industry?
Regarding real estate, it is a challenging time for anyone who is involved in real estate on a volume basis, specifically lenders, title companies, realtors, home inspectors, appraisers, etc. But with any challenge, there is the opportunity to get some substantial discounts on properties that have been sitting on the market.
Very importantly, there is a slow-down in transactions as a consequence of supply and demand. Obviously, the Fed raising rates makes it particularly difficult for borrowers to purchase at affordable levels, especially since home prices have not adjusted that much relative to interest rates. But what many people don’t talk about are the ramifications of having near-zero interest rates the last few years.
Approximately 85% of home owners have mortgages below 6% which evidently cripples refinances, but it also does not provide any incentives for current homeowners to list their homes. This basically shut down the “move up” buyers because they would face higher interest rates and higher purchase prices at the same time, which usually isn’t worth it when they are comparing a new home to what they currently own.
In terms of finance and lending, lower transactions are affecting everyone in the space. With that said, banks have been curtailing back even further than the private lending space. So far, the private lending space has been resilient and is really functioning pretty well at fulfilling its major function, which is providing liquidity to “unbankable” or “bankable” but “hurried” customers looking for high leverage.
And the recent bank collapses?
It’s clear our financial system is not designed to withstand the pace of rate hikes we have seen thus far from the Fed. If you’re looking for the immediate reason of the SVB failure, it’s simply because cost of capital and risk-profiles have changed due to these rate increases, crushing valuations on young startups and even treasuries. A deal that seemed to make sense given a certain amount of risk a year ago does not make sense now.
The Fed’s blunt tool is just that, extremely blunt. And SVB made the cardinal sin of mismatching durations (taking short term deposits from customers and investing them at less than 2% on 10-year treasuries.
Right now, we’re not sure of the extent, but I suspect the Fed broke something and a pivot will be in play shortly. This may present buying opportunities if things don’t get too much worse. But the Fed still needs to cut rates to avoid a contagion.
I personally wouldn’t keep my money in any regional bank as the risk is too high to earn cheap saving returns. If you’re going to keep cash, diversify it in some of the major banks that still pay yields.
But all in all, I think this situation may end up being a good thing for real estate down the road.
Your company had an excellent 2022 with $250MM in loans. What are your current thoughts on various strategies, fix-and flip vs buy-and-hold vs short-term rentals?
Everyone has different strategies and personalities. Each one of them can make you massive amounts of money if scaled correctly. So that’s where we try to come in.
I had one borrower who had never done a loan in his life. He met me and I convinced him the best course of action was for him to leverage and scale. Within a couple years, he acquired over 40 rental properties and increased his net worth by 2-3 million dollars, each of them cash flowing very well. That’s what I aim to do: provide access to capital so others can be successful.
At the same time, I have clients that do Airbnb and are crushing it. Most investors buy properties that need renovation, and they fix them up specifically to target the Airbnb clientele.
And I’ve also seen “pure” flippers that make even more money. We have one client who did over 50 flips with us in one year.
So, it’s just a question of mastering your skill, and that really goes for any business.
To learn more, visit www.icg10.com
