Building Trust in Hard Money Loans: Proven Strategies

Stephen Schmidt (01:31)
to the show where we interview the nation’s leading real estate entrepreneurs and let me tell you what folks I got a Really cool one in the studio for you today someone that I actually haven’t interviewed With their specific niche and only that niche yet. And so it’s gonna be a special treat for all you listeners I’m back at it again. It’s your host Stephen Schmidt and today in the studio. I’ve got Edward Yarbra with me

And Edward Yarbra has been in the lending space for almost a decade. Got started in the business very, very young. And what’s cool about Edward’s business with New Republic funding, I think I said that right, is he only focuses on helping people to get into properties and loans where you’re not gonna live in the building. So as investors, we know how important that is, having an alternative source of capital.

And it also means if you’re an established investor and understand the market that this might be your next go-to guy for your lending purposes. So we’re going to get into a great conversation here today. But before we do that, just remember here at Investor Fuel, we help real estate investors, service providers, and real estate entrepreneurs, 2 5X their businesses so they can build the businesses they’ve always wanted in order to live the lives they always dreamed of. With that being said, we’re back at it like a bad habit. And Edward, welcome to the show.

Edward Yarbra (02:53)
Thank you, Stephen. It’s pleasure to be here.

Stephen Schmidt (02:56)
I’m grateful to have you here in the studio today, my friend. So tell us a little bit about how you actually got started in this space. Let’s maybe start there. And how have things evolved for you over the last nine years of being in the biz, doing loans, and how did you land on the strategy and where you’re at today?

Edward Yarbra (03:14)
Yes, well, I actually got trained by a old time friend’s family member who trained me into a business that his dad taught him. And so from there, his dad taught him hard money lending and I learned how to broker hard money loans at the start of this and was a hard money broker for about the first three, almost three and a half years of my career.

With that though, I maintained a hundred percent borrowable repayment performance. so maintaining a strong track record instead of just throwing deals out there for commissions, I opened up some opportunities for myself to become a direct lender, which allowed me to start to help investors in a more direct capacity rather than.

where I was just trying to broker their deals and help them get a loan closed, now I’m able to help investors model their deals for the best chance for their overall success.

Stephen Schmidt (04:14)
Hmm, absolutely. Now, so, because one of the things that we talked about pre-show is, is obviously you help people that specifically have the intent of essentially like on the construction side or with the intent of this is going to be an investment property. mean, ultimately, like it’s not for somebody that wants to get into a single family home and that’s where they’re going to live with their 17 kids, right?

Edward Yarbra (04:15)
That’s it.

Yep, absolutely. And I mean, we’ll do anything from a multifamily building to a retail commercial plaza down to the standard one to four unit single family properties. the thing is, ⁓ commercial, we’ll do some owner occupied depending on it, but it can’t be multifamily. Nothing with a residential component. No homeowner loans. That’s the one regulation is we are the private market. We’re the private sector.

Homeowner lending and private lending are two completely different markets and that’s hard money lending private money lending similar ideas. It’s just a separation from your conventional homeowner lending

and with that Depends on what anybody wants to do whether it’s going to be ground-up construction fix and flip or even construction completion we are

in that niche of the market is even if somebody stalls out on a construction project because they didn’t bid it right, stalled out or you know their lender ran out of money, we’ll come in and save projects which is where you don’t have a lot of lenders who are out there and understanding of that position.

Stephen Schmidt (06:42)
Now how

did, let me make sure I phrase this question the way that I wanted to hit. So.

Obviously you have your background crazy success rate with 100 % repayment and then you get into this space What do you think? Separates you from everybody else that’s that’s out there lending because I mean lenders as you know dime a dozen You can fight you can throw a rock and hit one on the street corner So what do you think has really separated you and helped you to become successful in the space compared to your average lender? What do you think that’s that’s been about you?

Edward Yarbra (07:17)
my personalized financial modeling collaboration and

I guess, creative capability in that space. I have, the way I learned how to work the transactions has allowed me to look at them, I guess, from a different perspective than you would stand as standard. So I’m not looking at it as, here, start to finish. I’m looking at it where I’m gonna build a financial model that A is gonna close escrow, but

Stephen Schmidt (07:31)
Mm.

Edward Yarbra (07:54)
B is still going lead to the most lucrative outcome for the investor, not necessarily just the lender or the broker benefit. And sometimes, you know, that always upsets the broker, doesn’t exactly make the lender the most amount of money. But in the end, the more investors that are out there making more money, the better the economy is for all of us. So therefore that’s

where we set ourselves aside as I take the time to really get into the structure that most lenders won’t and explain a lot of facets in detail of how to model a transaction for its best chance for success.

Stephen Schmidt (08:42)
Sure. Other than the obvious that we’ve already hit on, right? What’s something that makes a dealer or a client like an instant no for you?

Edward Yarbra (08:55)
Usually it’s the lack of experience expressed during the initial intake conversations. So I have people come across and they’ll instantly come across asking for gap funding or if we can give them equity or if they have JV funding available through us, which we do have some private consultation options. We don’t give equity where a private lender can’t say we provide equity. But that said,

I mean, that really is a turn off on it just because the first thing you’re coming to a lender and saying is, I need a loan, but I don’t even have the money to qualify to get the loan from you. And so what we’ve come up with is people get, you know, that first 20, 50, maybe even let’s call it a hundred thousand dollars in the bank. And then all of a sudden they start getting millionaire dreams.

projects and they say I have a hundred thousand dollars that’s ten percent of a million why don’t I try to syndicate and go do a ten million dollar loan and it’s truthfully it doesn’t work like that and it shows a very large lack of experience especially when they go from residential to that commercial jump because then they go from paying for an appraisal or an appraisal plus that

CMA report, is the desktop analysis of the appraisal for a DSCR loan. So you go through either just paying for one or potentially two reports on a residential transaction. So now you have to pay commercial due diligence and order, verify neutral third party unbiased reports that verify all the data you give to your lender.

and they instantly scream even if you show them all the reductions, itemize it and everything else. Streams in experience and turns the lender off to where after that point forward, you know, I’m real hesitant on even putting too much more work into the file because most of the time what they’re telling me upfront is they don’t even have the money to do the deal with me. So why spend our resources when they don’t have the resources to do what they need to do.

Stephen Schmidt (11:48)
Totally makes sense. They’re almost in a way putting the cart before the horse.

Edward Yarbra (11:53)
Absolutely, all the time, unfortunately.

Stephen Schmidt (11:56)
and you’re able to sniff that out because you have a really good due diligence process.

Edward Yarbra (12:01)
Absolutely, that is 100 % what our process is set up for. A lot of people find some of our questions or processes redundant or even sometimes overbearing, but we’re not the group that charges up fees. We do it all for free. You have to pay for your own due diligence. You have to pay for appraisals. If it’s commercial, you have to pay for your own third-party reports. Yes, your lender orders them.

Stephen Schmidt (12:03)
Ha

Edward Yarbra (12:26)
but it’s to make sure that it’s an unbiased third party neutral report that nobody has had any influence on. So we have raw data to compare to what’s been provided to us. And with that, that’s really, we do everything upfront though, no application fees, none of that. It seems overbearing to the client, but we’re doing all that extra time and effort.

just to ensure that the project’s gonna be successful for both A, the client, and B, ourselves and our capital providers.

Stephen Schmidt (13:01)
to ultimately make sure that it’s the right fit.

Edward Yarbra (13:05)
Yes, 100 % because a lot of clients will come in and they think it’s the right fit or even the right investment and it’s not. And they don’t see it themselves. There’s a lot of times where I’ve shown clients they’re going to end up losing money and they decide to sell off their asset going to something else. Yes, I lose the loan. I don’t make any money off of it. But again, it’s not what it’s always necessarily.

what I’m in it for since I’ve become a lender. Yes, I’m not a licensed professional to give certain investment advice, et cetera, but I can always give my professional opinion based upon my experience. with that, even if an investment doesn’t look right, I’ll underwrite it first for a borrower or investor, buyer, whatever, and let them know, listen, this isn’t going to work out for you the way you think it’s going to. Do I lose the loan? Yeah. Do they usually shop it to the rest of the market?

Stephen Schmidt (13:35)
you

Edward Yarbra (14:02)
Yes, but with that being said, we help the client achieve what they’re looking to achieve nine times out of 10, even after they go shopping to the rest of the market, find out that what we’re telling them was the truth because we lead with our best foot forward, even if it’s not what they want to hear. ⁓

Stephen Schmidt (14:23)
which ultimately

gives you a great competitive edge in the long run because it builds trust.

Edward Yarbra (14:32)
Absolutely. And I mean, sometimes it builds a little bit of animosity as well. I can’t say that that’s not the case. I have investors that cuss me out and tell me they’ll never talk to me again. How dare I say this about them or their project, yada, yada, yada. But then I talked to them six, seven months later and they’re talking about, listen, it’s business. We understand.

Stephen Schmidt (14:39)
Sure.

Edward Yarbra (14:58)
Can we please just get our loan done now? We realize that this is just the way it is. And I’m like, yeah, no hard feelings. It is business. It is the way it is. And it’s really just about trying to get deals done.

Stephen Schmidt (15:12)
What does the future look like for you? You’ve obviously created some incredible success in the decade that you’ve been in it. You still have a long career ahead of you. So what does the next decade look like? And really what are you focused on in the next 12 to 24 months with the volatility of the market? of rates still being high. Not sure if those are going to get dropped by the Fed at some point. What are you really focusing on right now in this season?

Edward Yarbra (15:39)
I realistically focus on the market’s current environment in front of me at the exact moment because as you just said, its volatility is unpredictable. Therefore, you can’t really think too far down the road and have too futuristic of an insight on what you’re going to do with it. That’s why we tend to be a one-stop shop is because we’re prepared for any of the market shifts and program shifts, multifamily as we…

had discussed prior is getting ready to have its slight difficulties there with them five, seven and 10 year notes and everybody being afraid to leave that 2 % money, which that new note balloons or comes due and you don’t pay it and you default, you lose your asset. What was the point of 2 % money at that point anyways? And so we’re going to see some market volatility there. I’ve been recommending people focus a little more on residential.

until the market shifts subtly for the multifamily then jump in when it’s time.

Stephen Schmidt (16:45)
And so for you in your own business goals, what is the growth trajectory that you’re on?

Edward Yarbra (16:52)
The growth trajectory we’re on is building our team and slowly just increasing opportunities for investors to achieve their overall goals. We’re building our capital resources and alternative solutions all the time, coming up with more more creative programs and looking to build platforms to help investors have the capital they need.

for the projects they want even outside of your alternative lending solutions. And so with that, that’ll be things that our institutions rolling out within the next 12 to 24 months. And with that, it’s just an opportunity for our team to grow and help investors grow more. We plan to expand just realistically our network outreach to…

the broader investor market rather than just your broker market because brokers aren’t as in it for the investor as one would hope. And then also come up with, like I said, the alternative solutions for the investors that are going to be even better than coming to me as a lender that are going to benefit them in ways to where they just have the capital resource available as long as their project makes sense. It’s not so much about

okay what’s your credit score? It’s going to be more of a personalized experience for a per investor basis once our platform’s been completed.

Stephen Schmidt (18:32)
you communicate at a very high level to the extent, one of the things that I recognize is filler words with people and you use almost zero filler words, which is pretty incredible for somebody that isn’t a full-time podcaster, let’s say, or however you would wanna box that in. Is that intentional or are you just like naturally gifted in a way? What have you done to up your own communication and personal development over the years?

Edward Yarbra (19:00)
I love that

you call it naturally gifted. I guess I’d say I’m naturally gifted in that way. When I am typing, you should see it. have to use a couple of them, robotic assistance for my typing because I miss all of the filler words in my sentences, even when I’m trying to just explain loan programs or have conversations with borrowers, even to where I’m leaving out words that help.

them correlate the details that this is a yeah and just go straight to the exact topics and specific words minus all the extra in between semantical irrelevant rhetoric that’s just unnecessary and yeah I guess it just I appreciate you calling it a natural gift that’s just what that has to be.

Stephen Schmidt (19:29)
grease the wheels a little bit.

Sure.

Well, it’s because certain people like myself have to work very, very hard on watching that in our communication. Whereas you, what I love about it is you’re so deliberate in how you communicate. Every word has a specific purpose. And what that tells me about your personality is that you’re very detail oriented and you’re probably very rarely wrong about things. ⁓

Edward Yarbra (20:22)
I try to be very detail oriented and being wrong in this business can be detrimental. mean, it could affect my capital providers and lose them tens to if not hundreds of millions of dollars if I make a wrong decision. As well as an investor, who cares where they’re at in their investment career, whether I lose them $10,000 or I lose a big investor on a, you know,

multi-million dollar deal, few hundred thousand dollars that they didn’t expect to lose. It’s still losing somebody money and that’s not something that I want to do so therefore it takes being very very detail oriented and then yeah when I see somebody get impacted by me making a incorrect decision I’m a little hard on myself on that aspect so I try not to be wrong as often as possible.

Stephen Schmidt (21:21)
Sure.

When you went from solopreneur to running a team, during that transition, how was that for you? And really more so, what was it like going from it’s just me to now I’ve got this whole team to manage and fill in the gaps of this piece here, this piece there? And what are some of the unique leadership qualities that you have in running your team?

Edward Yarbra (21:49)
Well, I did have a business partner who helped me, you know, started up, show me the things. So didn’t feel like I was doing it by myself for a long time. But then after that, once they retired and it was me all on my own and I was left with my lending company that I had started and getting into it. And then I met my head processor here, who’s also ⁓ my fiance and she has

been in the medical industry. She’s also got a lot of prestigious educational business development background. So therefore she was able to help me start understanding how to get myself more structured and organized to lead a team because lending and financial modeling is what I’m good at.

I’m good at doing loans, understanding the programs, and connecting the dots. I know where to take point A and point B and get them to point C because they can’t get there individually, but I know who point A is and who point B is, and I know that them together, they can achieve the goal, which is point C. And so it’s just basically being able to connect people together, being a problem solver, a…

People Connector, whatever you want to call it, on top of financial modeling and processing, underwriting. I know how to do the title work, the insurance work. I know most of what the attorneys have to understand for the loan process, unfortunately, because there’s a lot of times where, you know, you got to be able to cover all the departments to make sure things function smoothly. And with that, she has actually helped me

advance in that leadership perspective because with all those different hats at one time, I can get very scattered at it and have a lot of different things going on where she helped me build the team now that I do have around me. And it’s very fortunate, but the team I have around me sees the benefit and value and experience that I can provide to.

what they understand and so they’re using their brokering and marketing and personal networking capabilities to integrate that into our team effort for me to lend on transactions to investors, developers, just landlords, whoever’s really qualified for their investment capital and the team is starting to show me how I can rely on them.

I’ve been somebody who’s been very focused on controlling every aspect of it. And the team is teaching me how to be a leader, I should say, which is a very interesting approach on it, but that is the truth.

Stephen Schmidt (24:50)
If you had to go back to the

beginning when you started, but you could take all the knowledge that you’ve gained over the last decade, what would you do different and what would you do the same?

Edward Yarbra (25:03)
I would probably start building a team sooner. I would start having more trust in individuals sooner than I did and understanding that if we all share a common goal of success, that there’s contentious, animistic room for negativity.

where people are going to try to do something nefarious or illicit that could harm the business, which is business that I’ve been building for almost 10 years. So it took a lot of time to have that trust. But now that I know how it operates, I would go back and be a little more trusting of individuals who wanted the opportunity or experience because I think they could have at this point down the road been a very large value add benefit.

to my company as it exists today.

And as to what I would keep is everything else, truthfully.

Stephen Schmidt (26:11)
Edward, where can these fine folks connect with you for more, learn more about what you’re working on, maybe go get a loan from you, where should they go to connect with you for more?

Edward Yarbra (26:18)
NewRepublicFunding.com or connect on Facebook. I believe that you and I are connected on Facebook as well, Stephen. If not, I will get connected with you. ⁓ Anybody who follows you or is connected with you, we do also run our large group on Facebook of 35,000 people or so. But I would just recommend go to the website or look up NewRepublicFunding.com on Facebook even.

listed on there and you’ll find us, our services, then contact us directly. You’ll get a hold of either me or one of our very few team members who are in the primary office that are able to help you structure your deal and achieve your goal.

Stephen Schmidt (27:06)
There you go folks, we’re gonna show them some love from the real estate pros and investor fuel community. We appreciate Edward coming on, dropping some nuggets and look forward to watching your continued success my friend. Thanks everybody for listening, we’ll see you in the next episode.

Edward Yarbra (27:19)
Thank you everybody, thank you Steve.