Funding Door is Focused on Real Estate Entrepreneurs
by Carole Vansickle Ellis
Five years ago, Devang Patel, founder and CEO of lender Funding Door, decided to take his years of experience working with both real estate investors and lenders on products and strategies to scale their businesses and leverage that experience to create a meaningful lending service of his own. The result was Funding Door.
“I am extremely grateful for both the experiences and the people I learned from,” Patel said. “Funding Door is really the culmination of those lessons in discipline, credit, reliable execution, and long-term relationships with entrepreneurs who are trying to build something meaningful.”
Patel has firsthand experience with the investing side of lending as well. While working at Barclays in 2007 as the financial crisis was unfolding, he saw up close “how poor risk management can affect employees, businesses, and entire communities.” Patel continued, “That experience taught me that growth without disciplined credit and risk-management of your business is just not sustainable, and how impactful those decisions can be in a negative way.”
Learning Business in a Distressed Period of Time
It was during that time at Barclays in the mid-2000s that Patel first began thinking about investing in real estate and bought his first rental property. “Owning a tangible asset really meant a lot to me: I could see it, improve it, lease it, fix it, and directly influence the actual outcome through execution,” he explained. Then, he discovered just how hard it really was to get a mortgage. He knew in the future he wanted to improve the processes around dedicated investor loan products.
“It was a really interesting vantage point to learn the business during a distressed time because I got to see what went wrong and sort of reverse-engineer how I would build a business,” Patel said. “There were a lot of distressed assets out there, and I bought some more properties and learned from a boots-on-the-ground perspective.”
Part of that perspective caused him to realize that while institutional markets are often mind-boggling and oversized, which can create the feeling that the industry or space has always existed as a behemoth, the truth is that “every institutional market begins with a real problem, experienced by real people,” Patel said. In the case of real estate financing for investors, one individual experiencing the very real problem of obtaining financing for investment properties was Patel, himself.
“I probably would have lost that first deal today,” Patel recalled. “It took months to get a mortgage.” His career later took him to B2R Finance and then Toorak Capital Partners, where he was an early employee and helped build a nationwide correspondent network and loan-acquisition platform. Those experiences gave him the knowledge and confidence to launch Funding Door.
“I want Funding Door to represent purposeful capital and be a long-term partner that understands what entrepreneurs are trying to build,” Patel said. He continued, “I want to help them build responsibly as well.”
Solving New Problems & Seeking Evolving Solutions
Patel noted his path has not been what he described as “a dramatic, entrepreneurial leap,” but, instead, the result of “a series of smaller decisions.” Because of his firsthand experience in investing in real estate, he is always on the lookout for new ways in which to support the industry and the investors evolving with it.
“Our purpose is not to simply close individual loans; it is to provide discipline and reliable capital and to become a long-term partner to investors and brokers,” Patel explained. One way in which Funding Door does this is by responding to market shifts that change popular asset classes and how they perform.
For example, during the COVID-19 pandemic, demand for vacation homes skyrocketed. Unlike long-term rentals, short-term rentals offer the potential for higher rental income in many cases, but that income is not always as predictable as long-term rental revenues. Although vacation rentals represent a smaller part of Funding Door’s business than its core DSCR, fix-and-flip, and ground-up construction programs, they illustrate the type of evolving asset class that requires more nuanced underwriting.
“Vacation rentals are attractive properties, but underwriting them is more complicated because revenue can be seasonal and operating expenses are higher,” Patel explained. “At Funding Door, we look beyond projected nightly income and focus also on the property’s location, historical performance, long-term rents, borrower liquidity, and whether the loan would make sense under more conservative scenarios.”
At present, Funding Door offers three lending products in addition to its vacation rental loan product: residential bridge loans, long-term rental loans, and new construction loans. Patel said the most challenging element common to these offerings is in keeping up with how the changing market affects how investors and underwriters understand the different types of assets and associated loans. “From our perspective, we have seen lots of people succeed with our loan products, but we know the market can change on a borrower after the loan has been closed. Because of that, we are always really careful to be certain our underwriting makes sense and aligns with the product today.”
Patel concluded, “When you start a business, it is no longer about yourself. It is about the people and the culture that make and build the company. One of my proudest accomplishments has been building Funding Door. I have an exceptionally talented team that helped me do it, and working with them to earn the trust of our borrowers, brokers, and each other has been the most meaningful part of the journey.”
Learn more about Funding Door at FundingDoor.com.
