The Evolving World of Private Lending: Tips from a Pro Investor

Stephen Schmidt (00:02.831)
Welcome back to the show where we interview the nation’s leading real estate entrepreneurs It’s your host back at it again Stephen Schmidt in the house and I got a real special treat with you guys I got the guy who his name I didn’t have to ask to pronounce because it’s actually an easier one for me I got Jake Knight in the studio today and we’re gonna have an absolutely wonderful conversation Jake has an incredible background He brings 22 years of real estate and spirit starting out in the lending space and then back in 2017

Started investing full-time. He’s done a ton of flip properties in the Bay Area down and where he’s located here in California And we’re gonna get into talking about hard money today and the lending process It’s something he’s really focusing on now and then building out his portfolio to buy and hold for the retirement plan So I’m sure you guys are gonna get a ton of value out of this But before we get started just remember at investor fuel we help real estate entrepreneurs service providers and real estate professionals 2 to 5x their businesses so they can build the businesses they’ve always wanted

in order to live the lives they’ve always dreamed of. That being said, Jake, welcome to the show today.

Jake Knight (01:05.294)
Thanks for having us, Steven.

Stephen Schmidt (01:06.959)
You bet, man. I’m really excited to get into our topic today because I don’t talk to a whole, I talk to quite a few lenders, but not a lot that I talk to you specifically about like the hard money, private money space. So I’m really, really interested in glancing insights from you for our listeners here today. for everybody’s benefit, I know we had some time to chat pre-show, but can you give us a little bit of your, your background, what got you started in the real estate space and some of the evolutions that you’ve been through over the last 22 years and how you got to where you’re at now.

Jake Knight (01:35.822)
So I started about maybe 22 years ago around 2002, 2003, right out of high school. Right before I got into the business, I wanted to be a real estate investor. And so my mom and I were both getting into real estate at the same time. We were going to some Rich Dad Poor Dad seminars, reading the books that were out, which were probably only like five maybe that I could get my hands on. There wasn’t a whole lot of content.

This was really pre-internet, know, that we know it. So there’s only so many resources and I didn’t know what a real was. I didn’t know about networking other than going to seminars. So being kind of young and not really sure of myself and I just didn’t really know how to go about it, right? I didn’t know what to do with the information that I was reading. So I got a job working in the mortgage business to learn how to do a real estate deal.

And that ended up turning into my career at the time. was doing well. This is kind of the run up before the crash. Real estate was smoking hot and really couldn’t go wrong. So I thought I had found my place in my career. And then the crash happened. I was spit out. I was laid off three times in actually 2007. So 2008, I had no idea what I wanted to do. I started going back to school. I moved to New York for a little bit.

got a job doing tech sales for a couple years and then realized just you know I didn’t feel like I was in the place I wanted to be so got back into lending and wanted to get out of residential because everybody I knew was getting laid off again and again and moving from company to company and it just didn’t seem like a great life so I got a job in commercial lending and became an underwriter so I was responsible for looking at business loans

Multifamily loans that kind of thing making credit decisions. And then it was around 2016 that I had discovered bigger pockets and turnkey Investing and all these things in my mind just went crazy. I just went all in to learn how to do it I wish I had seen it sooner, you know, that’s one regret we all have regrets in real estate investing But one of them was not even just figuring out what wholesaling was

Jake Knight (03:49.678)
You know in 2012 for example, you know could have done really well with that. But you know, I found my place. I try not to dwell on it too much. So I started trying to find deals and networking and consuming anything I could that was investing related and finally did a deal Did another deal did a third deal and was able to leave my full-time job around 2017 and since then I’ve done maybe 90 something projects

which is a lot of fits and flips around the Bay Area and Sacramento. I’ve also bought rentals and flips across the country. And then fast forward to recently, I wanted to get back into lending. I always liked doing it. And as an investor, I’ve done a ton of hard money and VCR loans for my own deals. So when I wanted to get back in lending, was

only this side of lending that I wanted to do. I didn’t want to do any conventional loans, working with consumers. I wanted to be able to offer value to other investors because of my own experience of lending and as an investor. I thought that was really where I wanted to be. So now I work with a company called Conventis. They’re based in San Francisco, but we’re a nationwide hard money lender, really competitive pricing for experienced investors.

I’ll still do some investing here and there, but the deals I can buy now, I’ll be able to hold them all versus flipping most of what I bought, which was really how I paid the bills and everything. So that’s where we’re at now.

Stephen Schmidt (05:31.886)
Now, so when you started getting back into lending, are you doing primarily that through an institution? Is this your own money? Are you managing other people’s money? Tell us a little bit about your structure right now and kind of what maybe your ideal lendy would be too.

Jake Knight (05:47.502)
Absolutely. So I work for a national hard money lending company. I’m a loan officer there. So I’m responsible for basically business development among other loan officers that work there as well. We’re all responsible with a sales force basically. So we’re lending through our company, nothing in my personal funds or anything like that. Yeah.

Stephen Schmidt (06:12.364)
Okay, awesome. So who are like the perfect people that you want to work with the most?

Jake Knight (06:18.349)
It’s basically investors like I was or like I am. It’s basically people who are fixing and flipping, buying rental properties, doing ground up construction or like single family or multi-family, small subdivisions or multi-family, whether they’re using a bridge loan for multi-family to buy it before stabilizing it, or if they’ve already stabilized it and they want to get a long-term loan, that’s another product we have. So it’s really…

residential investor prototype that’s our client.

Stephen Schmidt (06:51.246)
Okay, now so with your own real estate investing journey and what you’re working towards as far as you know buying and actually holding all the properties versus buying and selling them to you know put food on the table you know whatever that looks like lifestyle wise right what what’s going to be your strategy for that are you currently buying properties looking for deals or or what’s kind of your your endgame with that

Jake Knight (07:18.391)
Point where I’m going to take a little time off. I still have some some deals in the pipeline that are mostly completed and or are for sale already on the market. I have one more that we just got the keys to. So, but I really want to focus my time on the lending business. So when I do come across properties, it’ll be through existing realtor relationships, maybe some marketing that I’ve already put out into the world that will come in.

And I’ll probably kind of recalibrate in the next six months or so, figure out how I want to be, how I want to approach it. You know, what’s my strategy? You every once in a while, we kind of pivot a little bit, right? Like what I was doing in 2022 is different than 2024 and different than when it was 2016. So I have some ideas on what I want to do, but I’m not completely sure yet. Co-living model.

you know, buying a house on terms and doing some pill living stuff sounds interesting, but. You know, that may be a phase that I that I get over a few months. I’m not sure. Yeah.

Stephen Schmidt (08:22.295)
Yeah, sure. It’s kind like the world’s your oyster at this point. one of the interesting things about you though that you have, which I find is a trend for people that…

are in California, right? Because of the market in California. But you find a lot of people that are in Cali that are also investing in other states versus like a smaller market, let’s say, like your Birmingham, Alabama market, for example, where it’s like it’s big, but like you could still find good deals in it, right? Under the median, et cetera. What attracted you to investing in some of those other properties, flips, rentals, et cetera, in other states? And what was your strategy?

doing that versus it being all local.

Jake Knight (09:06.613)
Yeah, I had a couple properties that I had kept locally, ended up selling them to invest in other properties. But what appealed to me out of state was, especially with the first one, obviously the lower price points where the rent ratios made a lot more sense. I could find a deal and basically renovate it, refinance it, and get all of my capital out, or maybe just a little bit still in the deal. But when you leave that little money in the deal, you’re

ROI is really high. So I was able to find deals in a bunch of different markets. I was a little bit different. I didn’t focus on like one or two markets and say, I’m going to go deep into these markets. went a little more broad and really tried to find the better deals and then learn how to build a team in that market, for example, which I think is not as hard as people make it out to be. But my goal with those was

find good cash flow numbers and just acquire more real estate more quickly than if I had bought one property in California which you know it’s just math if you’re buying a four or five hundred or six hundred thousand dollar property in California if you bought three of those out of state you know your your rent ratios look a lot better with the ones out of state so your money goes further and it’s just

Yeah, I found it not too difficult to explore a new market, find a property, get it rehabbed, you know, and get it under management as as possible.

Stephen Schmidt (10:40.509)
This actually brings up a…

Jake Knight (10:41.355)
He’s such a bit setback.

Stephen Schmidt (10:43.391)
interesting question that I kind of have personally that I find is a trend too in places that are more of like a rural market. And this actually is going to relate more to what you do like on the lending side of things. But in those rural markets, why is it so much harder or more challenging, let’s say maybe to get proper funding to be able to take projects on? know a lot of like, know, think small town USA, right? Like why is it that lenders are a little more hesitant to give in those areas on deals?

Is it just because of the volatility of not as many people or what are some of those insights that you could share?

Jake Knight (11:18.721)
Yeah, and, you know, personally, I’ve only ever bought 1 world deal and I used it. I bought it with private financing, right? Somebody in my network of person, not a company. So don’t have a ton of experience lending or buying in rural areas. But I do believe that. It is really, it’s like the lack of population. You don’t have, I’m sorry. You don’t have a lot of population growth. You don’t have a lot of job growth. So you could, you know, the house was vacant, the higher likelihood that.

you know, maybe it goes vacant for six months versus, you know, three weeks. The data is also more readily available on a bigger market, right? You know what the vacancy rates are. You have better access to labor in the urban markets. So there’s a few things like that. A lot of it has to do with just the lack of population or growth.

Stephen Schmidt (12:10.125)
Yeah, that makes a lot of sense. So, let me ask you this, what gets you excited about what you’re doing right now as a loan officer and what do you really see in that space, especially with everything we’ve gone through the past three years and kind of what’s moving forward? What are you seeing on the horizon in the…

Jake Knight (12:27.701)
Yeah, the industry, the private lending industry is expanding a lot. There’s a lot of new players in the game. Companies are getting more competitive, which is great news for borrowers, especially on the Pits and Flip side. The rental side, what we call the DSCR side, the debt service coverage ratio, that’s the primary loan product for rental properties. It’s a little more rate sensitive, and right now rates are a little bit high here in June of 2025.

Most people listening to this know that if they’re shopping or refinance, it’s quite painful right now. But I’m excited also with the opportunity to connect with a lot of other investors. The company I work for is very competitive with our pricing. I believe if you’re in sales, it’s a lot more enjoyable when you’re selling a product you can get behind. And I had been a borrower of this company a few times and realized that I liked working with them.

way more than I did with other lenders. So I’m excited to kind of now offer that product to other investors, right? Speak the language with them. So that’s why I’m excited.

Stephen Schmidt (13:36.449)
Yeah, 100%. What’s your strategy for building long-term relationships in the business? mean, you mentioned wanting to connect with more investors and whatnot. And I think you make a valuable point of like, it’s so much easier to do sales for something that you’ve also had a personal experience with because you are able to actually relate just on a much deeper level of someone that just kind of has like a book understanding of it. So like, what’s your secret to actually like building those relationships?

Jake Knight (14:04.543)
A lot of it’s in person when possible, right? Going to lunches, going to the events, going a little above and beyond that, right? Like visiting investors or builders at the job site when possible. I think just the in-person thing goes so much further in developing that relationship. Now, I’ll still work with investors out of the area, out of driving distance, or even nationwide, but

I think my favorite strategy of connecting and building relationships is always just face to face when possible. So whenever I do hold outreach to local investors, I try to include that, hey, I’m local, would love to meet up or take you to a coffee or something if that’s of interest to you. Also, when I was an investor, borrowing from my lenders, that was never offered to me.

I probably would have taken it right I mean just to have a better relationship with your banks or your lenders usually can benefit you but most of my lenders were you know I had to like bug them to get a call back or to answer my call even if I was doing multiple ones at the same time it was you know I was just a number for them it seemed like.

Stephen Schmidt (15:24.588)
Why do you think that was?

Jake Knight (15:26.829)
Um, some of them, you know, worked at really big companies and I don’t think they were incentivized to really, you know, go deep into the relationship. It was more of a numbers thing for them. Um, or maybe they just hadn’t really been, you know, a relationship manager role before. And so it was never really taught, you know, they were never really taught to go out and kind of build relationships, right? It was just more of a numbers game and,

I’ve been in different sales roles in my career and I’ve had some like corporate training for sales for, you know, for the C suite and everything. luckily I’ve kind of had that training formally. And so I think that gives me an advantage, but you know, I can’t really speak for what their ideas were. Maybe it just didn’t, maybe their incentives weren’t in place to do that. You know, their incentives were just to be on the phone all day or something.

Stephen Schmidt (16:16.182)
Mm.

Stephen Schmidt (16:19.69)
Yeah. How many, do you have quite a bit of local groups in your area? That’s kind of one of the things I find with a lot of different people that I speak with is local is great, but a lot of times people have to go like outside their area to make those relationships. And I mean, with what you do, correct me if I’m wrong here, but I mean, you can theoretically lend to pretty much almost anybody in the nation, right?

Jake Knight (16:23.415)
for the interesting results.

Jake Knight (16:29.003)
Yeah.

Jake Knight (16:41.165)
I can, I think we’re in 48 states. And so, yeah, I mean, most of the country is wide open. I can work with you. And I have, you know, maybe half a dozen events, you monthly events within a driving range, comfortable driving range, at least. I’m also going to launch a couple of local events. one, I live in a city with almost 200,000 people and there’s not a single investor meetup.

So I’ll be hosting my first event this month and maybe launching a you know one or two others that are a little bit maybe like an hour hour and a half away from me which I also realized that there’s no regular meetings there but they’re well populated areas so I think you know any dense suburban or urban area there’s going to have you know a lot of investors and people who are interested in investing and so they just need somebody to set it up and they’ll come.

So, here’s some of that.

Stephen Schmidt (17:39.062)
So you’re saying that even where you’re at as big as it is, there’s almost nothing that is being hosted right now for actual investors?

Jake Knight (17:42.605)
Well, you can do it.

Jake Knight (17:49.806)
To be, yeah, so I live in the Sacramento Metro in Sacramento. There’s, um, there’s probably four or five regular ones that have been around for a while, but I live on the, an adjacent city in an adjacent city and my city has 200,000 people, but no meetups. So the closest meetup is a good 30 minute drive into the Sacramento area and Northern Sacramento. Um, so, you know, there’s even if I went to the next meetup and just kind of drew a map, you know, there’s probably three or 400,000 people.

Stephen Schmidt (18:00.374)
Mm-hmm.

Jake Knight (18:19.949)
That are not going to a regular meetup or maybe they don’t have one close to them is what I’m

Stephen Schmidt (18:27.798)
No kidding, that’s wild. Have you ever been in any national groups? you go to conferences? mean, how important has mentorship been to you in your journey? Or have you just gotten that through where you’ve worked and locally?

Jake Knight (18:39.029)
Yeah, I used to, you know, probably pre-COVID, I was more active in, you know, like, of national stuff. I don’t think I ever have flown anywhere outside of California, been to like San Diego maybe. I never really went to like the bigger ones, know, like the bigger pockets, summits, that kind of thing. I was really active locally pre-COVID and then in COVID, when COVID hit, I moved to this area.

Stephen Schmidt (18:59.404)
Mm-hmm.

Jake Knight (19:07.093)
and after COVID, I don’t think there was anything going on for a year or more. And then, then I was just busy working and I kind of. You know, it was just focusing on, you know, my family and running a business and everything. And I started some other businesses that didn’t work out, but, so I just recently got back into it. was like, why didn’t I, why did I take so much time off from networking? Even if you’re. You don’t have any specific things to sell or any specific needs. There’s still so much to gain from.

know so much you can learn and just knowing that you know the people you make friendships so there’s so much more to it and I wish I had not taken a break from it.

Stephen Schmidt (19:46.093)
Man, that’s really interesting. think a lot of times what I found too is when you are kind of figuring things out and you haven’t been in an established business for years and years years and years and then you have something like COVID happen, it is a lot easier to kind of stick to yourself. You know what I mean? Because it’s like, well, I don’t have anything to sell. So what’s worth the time, but you never know who you’re going to end up meeting in one of those rooms, right?

Jake Knight (20:02.165)
Yeah, right.

Jake Knight (20:09.933)
100 % I’m a big believer in that I wouldn’t have been able to get my investing career started without. You know, a few of the local meetups where I was living at the time and they were just incremental instrumental in my career.

Stephen Schmidt (20:22.262)
Right, and I mean, you obviously, you mentioned Bigger Pockets, you know, as being like a really instrumental thing for you back in the beginning when you started on the investing side. What was it like when you started that and you started listening to Bigger Pockets and then you were like, my gosh, how was I missing this for years?

Jake Knight (20:40.393)
I a lot of your listeners, no matter what level they are, have gone through what I went through, which is that excitement, that adrenaline, that vision of my future will be a lot different than I had planned. And so I vividly remember, I think about it sometimes, how my life changed, because right before that, I was working a desk job, I was still trying to get my degree, mid-30s.

Stephen Schmidt (20:54.646)
Sure.

Jake Knight (21:07.053)
I’m not really sure what I was going to do with the rest of my life, even though I was almost halfway through it. even just the idea of becoming an investor and all of the benefits that came with it, my world was changed. And I just was like, permitted, I have to make this thing work. You get self doubt sometimes, like, maybe I won’t, maybe I’ll fail. And I don’t know if I’m cut out for this. But once you get that first deal and if it goes well,

well enough then you have a lot more confidence and you really just you know go full speed.

Stephen Schmidt (21:44.3)
Sure, you bet. If you had to go back to the beginning when you got started, let’s just take it to 2017, right? Because again, you’ve kind of evolved through the years. If you had to go back to when you got started in investing and you knew what you know today and you could take that back with you, what would you have done differently and what would you have done the same?

Jake Knight (22:10.669)
I would have probably, mean, obviously with the benefit of a hindsight, would have gone harder, faster. And I say that only because I know that market was going to keep going up for another eight years or so. But at the time I thought we were at a peak again, because it had been, I don’t know, six to eight years since the crash, depending on when you considered it to be at the bottom. And I kept …

Stephen Schmidt (22:35.499)
Hmm.

Jake Knight (22:40.365)
telling my wife, I think, you we could be at a peak again and then go down again. I don’t know. So I was still kind of cautious and not just like going all in. and so that would have been what I’ve done differently. I would have just said, buy more of these things. And in the Bay area where I was living and working mostly, there was so much appreciation that I probably passed on deals that I could have done and probably could have, you know, made good money on, but

I’ve always been a little bit more conservative with my underwriting, know, scared to lose money. So I passed on a lot of stuff. That’s another regret. It’s just like, I should have done more deals. I should have done these things that I thought were not home runs. know, triples are fine. Doubles are fine. So, and the second part of the question was, remind me again.

Stephen Schmidt (23:31.723)
What would you have done the same?

Jake Knight (23:33.515)
What I’ve done the same. Man, I think what I did that I liked and that I wouldn’t have changed was that for the first few deals, I joint ventured with more experienced investors. And that was a way for me to learn and earn, keep myself safe, keep our money safe. We didn’t have a lot of money at the time. So it was kind of like, this you know, this better work.

And I think that was like the right thing to do. I don’t remember who taught me to do that or if I just kind of figured it out on my own, but I just found a few investors through the meetings and they were willing to work with me if I brought a deal, let me split it. But I got to see how they found contractors, how they renovated it. I could ask them questions, it was an open phone line with them. So I think I did my first three deals with partners and that was something that I think all new investors should do.

Stephen Schmidt (24:30.059)
That’s great. Find somebody you trust to cut your learning curve in half. That’s really what it comes down to, right? That’s awesome. Well, Jake, thanks so much for joining us. If people want to learn more about you, what you’re working on, where should they go for that?

Jake Knight (24:38.01)
That’s right. Yes.

Jake Knight (24:47.798)
They can go to invent this or cd lending.com or. We can put my email address and phone number here in the show notes if that’s okay.

Stephen Schmidt (24:57.899)
There you go. Yeah, you bet.

Well, thanks again for being here man. If anybody wants to connect with them go do that and we’ll get you plugged in. Show them some love from the Fuel family and the Real Estate Pros and we hope you got as much out of this episode as I did. We’ll see you in the next episode folks. Thanks again for being here, Jake.

Jake Knight (25:20.354)
Thanks, Stephen.