Bad Deals Still Get Funded: What Lenders Really Look For in Real Estate Deals

Dana Lefkowitz (00:00)
Two things, first, be upfront when you were looking at getting loan about what you bring to the table. We see a lot of deals come across our desk and they say, hey, we have a 10 track record or we’ve done 15 flips. When we get into it, it’s not. Oftentimes they’re only about three year look back or a credit challenges. You wanna make sure you understand where your credit is.

Scott Bursey (01:55)
Welcome back to the Real Estate Pros podcast. I’m your host, Scott Bursey. Today, we’re diving deep into the financing side of the investment game. And I’m thrilled to be joined by Dana Lefkowitz, an expert from Lendoor. Dana, thanks for coming on the show.

Dana Lefkowitz (02:13)
Hey Scott, thanks for having us today. We’re excited to be here. Look forward to chatting with you.

Scott Bursey (02:18)
Absolutely, this is a pleasure. Before we dive into the how, I want to know about the who. For those just meeting you, tell us about the path that led you to real estate and the core mission that drives your work today.

Dana Lefkowitz (02:35)
Honestly took an interesting turn and to get in the real estate lending side. So I was in the car business for almost 20 years owned and ran some small used car dealerships and it really teaches you how to read people fast and to read deals and to look at analytics and to understand, you know, when deals make sense and when deals don’t got into hard money lending in 2020. I’ll start a fund with a partner here in Phoenix and expanded nationwide.

And then about a year and a half ago, me and my co-founder here decided to split off and start Lendoor. Wanted to make it more of ⁓ a boutique lending firm focusing with ⁓ ground up borrowers and long-term borrowers, more full service and catering to that.

Scott Bursey (03:19)
That’s awesome. Let’s jump right into the big picture. The lending landscape seems to shift constantly these days. From your perspective at Lendoor, what is the single biggest opportunity or challenge for that matter you see for the real estate investors navigating financing right now?

Dana Lefkowitz (03:41)
To be honest, the biggest challenge is, mean, there’s a lot of institutional capital that’s ⁓ come into the lending space and working with borrowers on it. The problem with that is getting that down to the end borrowers and the, ⁓ I will say, misconceptions that come along with it. ⁓ Wall Street’s actively investing in the real estate development market. They want to be in it. They realize that these loads have a good return.

The issue with that is that translating that down to borrowers and having originators like us that really understand the deal, we’re active investors ourselves. I’ve personally flipped homes, personally owned some rental assets and helped with some ground up projects. And that’s the key here is to get from the money down to the end borrower and translate that to make sure that the goals arrive on both sides. Wall Street’s getting their returns.

And then the borrower is also getting a good deal for them and executing quickly on it.

Scott Bursey (04:39)
Absolutely. That’s a critical distinction for our listeners to understand. It sounds like being hyper aware of your specific debt structure is more critical than ever. And I got to ask you this. Exactly. Couldn’t agree with you more Dana. Many investors are looking beyond traditional conventional financing. What makes Lendoor’s approach or a specific product you offer?

Dana Lefkowitz (04:51)
Leverage is good until it’s not.

Scott Bursey (05:09)
a superior fit for today’s active real estate investor, particularly those who fix and flip or use the BRRRR method strategies.

Dana Lefkowitz (06:10)
So we actually ⁓ really focus on keeping our underwrite as simple as possible. There’s a lot of large firms and that’s why we really want to focus on being the boutique full service lender to real estate investors. And with that being said, keeping the underwrite, like I said, as simple as possible. For example, our DSCR program and all of our loans are only a soft pull and that helps minimize the inquiries to the bar and we move quickly.

And when it comes to DSCR, we’ve taken a DSCR loan from a full package or start to finish in eight business days. ⁓ There’s a lot of companies out there that do DSCR. And the problem is, some of the bigger names, the huge originators around the country, they’ve gotten so large that they are forced to run it through an entire cycle of personnel for underwriting and back and forth with conditions and everything. We’re really a…

which a quick and efficient operation we have to be honest, our DSCR team consists of about three people between processing and underwriting. So they are rock stars. You know, they really know, understand the product and know how to move quickly. With that being said, we have some of the highest industry leverages out there and some of the most effective programs when it comes to short-term rentals and takeouts like that.

Scott Bursey (07:28)
That level of flexibility is exactly what modern investors need to scale quickly. It changes their timeline significantly when you know you have a reliable partner. That’s huge. And Dana, financing due diligence is often underestimated.

Dana Lefkowitz (07:41)
Mm-hmm.

Scott Bursey (07:47)
In your experience dealing with hundreds of deals, what is the most common mistake real estate investors make when applying for loans or structuring the capital stack and how can they avoid it?

Dana Lefkowitz (08:01)
Two things, first, be upfront when you were looking at getting loan about what you bring to the table. We see a lot of deals come across our desk and they say, hey, we have a 10 track record or we’ve done 15 flips. When we get into it, it’s not. Oftentimes they’re only about three year look back or a credit challenges. You wanna make sure you understand where your credit is.

We can work with all types of credits down to 620 FICO for a flip or a DSCR loan.

But on the same token, when you submit it for a loan, you say it’s a 700 FICO, but it’s significantly less, that’s going to just make it for a difficult problem down the road. The other thing is understanding, when the lender is looking at a deal, we’re looking at it to help you. We always want to structure a deal to see the borrower succeed. And so a lot of times when we’re looking at ones where the ARVs may not make sense, they say it’s a flip for sale exit.

We’re looking at the data and sometimes unfortunately borrowers can be overly optimistic. I’ve been a flipper myself. I’ve been involved with many projects and we all want to exit these on making money. I mean, that’s what we’re here to do. Whether it’s a buy and hold or buy and keep strategy, you want to have the values make sense on the exit. But taking a hard honest look at the data points, what the comps are and not the most optimistic one look sometimes is tough. You have to face yourself and say, hey, what are the real comps here?

and being comfortable with accepting that, the best case and the worst case scenario.

Scott Bursey (09:31)
Certainly in regards to that prequalification and having all that documentation squared away upfront is the difference between closing a deal and watching it slip away. So I couldn’t agree with you more on that. Dana, looking ahead 12 to 18 months, what technology or regulatory change do you anticipate will have the biggest impact on real estate lending? And how should an investor prepare for today?

Dana Lefkowitz (10:35)
Two things. We’re seeing a lot of the wholesale industry being impacted with a statewide regulation and everything like that. We are, as a lender, shifting to really be accommodating to double closes. We’ve always been, but we’re going to be seeing a lot more and more of that. So being aware of what the wholesale situation as an investor or wholesaler is crucial to that. And then the other part is obviously AI is going to be infiltrating every part of our industries. ⁓ Utilizing technology has been a big front.

for us to review deals quickly. know, borrowers can be doing the same thing. It’s amazing how powerful AI can be to analyze a deal quickly if you’re looking at it for a buy and hold or a buy and flip or a build to really look at the deal metrics on it and make a decision faster. Whereas, you know, obviously in the old days to get that data took a lot longer.

Scott Bursey (11:28)
Absolutely. Automation combined with personalized service. It definitely sounds like the future of high level lending. Our audience needs to stay on top of that ⁓ in different platform shifts. There’s no question about that. What’s one takeaway or some golden nuggets you’d like to share about your operation,

Dana Lefkowitz (11:51)
⁓ Well, we actually coined the term of what’s called a hybrid lender. ⁓ So what that means, I don’t think I’ve ever heard anybody drop that is we’re direct with two primary partner funds. Those are gonna be our direct funds that we’re able to close and fund with quickly and effectively. But we also set up an agreements with our funds that if it doesn’t fit that box, we can take these deals ⁓ as a more of a broker corresponding relationship. ⁓

For example, actually came into play last week on a deal that we closed. It was a luxury mid-swing flip in South Carolina. ⁓ Two previous lenders or brokers had been working on this transaction and they got three different appraisals. They showed it to one of our partner funds, completely unrelated to us as a Wall Street fund. And one appraisal was at 4 million, one was at five and a half, and the other one was at seven. At that point in time, after looking at this appraisal, three different appraisals and pretty big spread between them,

partner fund that we’re familiar with, know, completely unrelated to us to the other lender told them, Hey, we’re out. This numbers are all over the place. It doesn’t make sense. We were able to get in there and take a look at the comps really eliminated a lot of the noise and look at the $5.5 million middle appraisal and get it transferred and look at that and take that to our other primary fund and say this makes sense. ⁓ just closing funded yesterday. So, you know, it’s, it’s really understanding the market and sometimes too much information can be bad.

in that situation it definitely was and you know get five different appraisers in the room and get five different results I’m sure you’ve all seen.

Scott Bursey (13:23)
Absolutely. Yes. Couldn’t agree more. ⁓ It can ⁓ short your circuit, so to speak. And finally, Dana, if you could give us one piece of advice to a real estate professional listening right now, someone who wants to optimize their financing strategy in the next quarter, let’s say. What advice would that be?

Dana Lefkowitz (13:31)
Yeah.

That’s a tough one. ⁓ Data, data, data, I would say. Do your research. There’s a lot of tools between AI, AirDNA, if you’re going to be doing a buy and hold, invest in the data. ⁓ We’re big believers in the data points, our data points. Obviously, we can only look back at data and can’t project from a crystal ball, but the data never lies. We get a lot of borrowers that call us about looking at BIRs for AirBnBs and everything. The first thing I’m doing is

hang on, let’s pull this up on AirDNA and look at what the market’s actually supporting. So we’re huge fans of that.

Scott Bursey (15:07)
Dana, that is fantastic. Point of advice. Thank you so much for breaking down the lending environment and sharing the insights from Lendoor with us today. We covered a lot of ground here today and I know people are going to want to tap into your brain. For the listeners who want to build with ⁓ you or just follow you, follow your play-by-play, your blueprint. What’s the best way for them to reach you?

Dana Lefkowitz (15:34)
⁓ Well, through our website, social media or email, if you go right to our website, it’s all listed right there, lendoor.com. You can submit your deal right there. There’s a deal submission tab. Like I mentioned earlier, we’ve really invested heavily into the tech. So we respond to quotes within normally same day, matter of hours, we guarantee normally within 24 hours. So it’s a quick five points data information there to fill that out and we can get your terms back right away. And if you have any questions, all of our information is listed there as well with our staff.

Scott Bursey (16:04)
Thank you for joining us today, Dana, and for sharing those vital insights.
And for our listeners, we appreciate you. If you caught a vibe or found some gems in this episode, do us a favor, hit the subscribe button. We’ve got a heavy lineup of guests just like Dana coming your way in the near future. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.