Unlocking Success: 5 Secrets of Private Lending with Sarah Downey

Dylan Silver (00:01.25)
Hey folks, welcome back to the show. I’m your host, Dylan Silver. And today on the show, I have Senior Vice President of Loan Bids. She’s based out of Springfield, Missouri, and they connect investors with customized financing options, Sarah Downey. Sarah, welcome to the show.

Sarah Downey (00:22.865)
Thanks for having me.

Dylan Silver (00:25.08)
Pleasure to have you on here. This is a very niche and interesting and new area of business that I didn’t know existed. So y’all are effectively brokering private money and hard money loans.

Sarah Downey (00:42.055)
Correct. And I think, you know, a lot of times in our industry and private lending specifically, know, mortgage brokers are typically just kind of a one man shop focusing on one or two loans at a time. And we’ve really built out a huge operation to really be kind of the trusted advisors and partners to real estate investors. You know, if anybody is busy and doesn’t have the time to look for the best financing, it’s real estate investors. They’re flipping projects. They’re managing their rental properties.

And so we really want to be on their side of the table to help them navigate private lending and just kind of be a good marketplace for them. So when they have their next transaction or are looking forward to transact, we can help support them in ways that going direct to a lender, they wouldn’t be able to have that much support and just kind of transparency about where they win, what their implications are and what’s reasonable.

Dylan Silver (01:38.178)
You know, when I think about, and we talked about this before hopping on the pod, when I think about the private money, hard money space, there’s so many different companies and different people. I said before hopping on, sometimes it feels like…

I’m just dealing with as a wholesale and then as an investor, just a bunch of bros who got money stacked to the ceiling and are lending it out versus flipping it themselves. And I’m like, where’s the guidelines? Right? How do I know what’s up with this last second appraisal that just fire bombed everything and now we’re scrambling at the last second. And, you know, I think that’s, I didn’t know that there was any entity that or business that does what y’all do. And so I think

Sarah Downey (02:03.132)
totally.

Sarah Downey (02:08.924)
for sure.

Dylan Silver (02:19.63)
Having a resource, you guys are vetting the lenders and making it seamless for folks is huge, because there’s so much lack of uniformity. Like you said before, it’s a little bit of the wild, wild west, which I like. But also, that can be difficult navigating it by yourself.

Sarah Downey (02:30.364)
for sure.

Sarah Downey (02:36.762)
Yeah, definitely. I think, you know, obviously the most important thing on the transaction is like confidence and funding and closing, right? Whether you’re a real estate agent or investor, like you want to know that the person that you’re looking for financing with actually can close. And like we have, you know, built these relationships with lenders to really vet them. And we want to make sure that obviously the transaction gets done. We don’t want to, you know, work for nothing with the investor in mind. And so, you know, we’ve really tried

to build those strong partnerships. But again, like I think one thing that’s super important is that we really are the hub not only just for the pricing and financing, but also for the processing. So, you know, if you are a real estate investor, especially for someone who’s flipping and then refinancing, you can just work with our team instead of having to work with each of these private lenders individually and restarting every single time you come to our team, we collect your paperwork. And when you come back,

and you have another project, even if that same lender that we worked with the first time isn’t the best fit, you don’t have to restart the paperwork. Our team works to kind of transition it over onto the new lenders, know, fill in the gaps of different items that we didn’t have. And so another reason for it just being super beneficial to real estate investors and saving time is the paperwork headache on top of just navigating the right pricing. So that is another huge asset just with working with us is we really want to be

kind of like on your deal team like just like you’d have a title agent or you know an insurance agent like we don’t want you to have to waste time navigating who’s the best lender we want to support you in that and the paperwork and just be on your team.

Dylan Silver (04:21.654)
Now are you operating in every state?

Sarah Downey (04:24.826)
Yeah, so we’re in about 41 states, so pretty much nationwide. I would say, you know, most of our investors, if we can’t work in the state that you work in, one of our lending partners can operate there as well. So we can refer you out to them. You may not get quite as much support from us, but usually we have not had issues covering the nation, especially those hotspot areas that most real estate investors are working in is where basically if private lenders are lending there, we’re

supporting real estate investors there.

Dylan Silver (04:57.442)
So now someone is coming to you and they say, I have a deal and this is how much I think the rehab budget is and this is how much I think the ARV is going to be, this is the timeline that I’m gonna do this deal in and this is how much that I’m bringing, are then you having to go and sort of triage this situation yourself or are you then pairing it with an investor and then seeing what the feedback from the investor is?

Sarah Downey (05:14.865)
Yeah.

Sarah Downey (05:27.704)
No, we usually have such good relationships with our lending partners that if their pricing changes or their guidelines change, like we get updates daily, you know, if it changes twice a day, we get those updates. so our our account executives, so you would you would call us as an investor and say, hey, here’s the deal. Like I need to close by this time. All of those things that you just mentioned. And they would say, OK, you know, are there any implications? And again, probably ask you questions that you didn’t think about just to make sure that they’re really

Dylan Silver (05:56.29)
Yeah.

Sarah Downey (05:57.591)
vetting the maybe not just the pros but potentially cons in the transaction because those are the things that come up you know after the underwriting and you’re like I just need to close so we want to catch those things up front too and so they would you know maybe ask you a couple questions and then spit out you know hey here’s a couple different options of lending programs for you let’s talk about what’s really important to you you know is it are you you know speed is that the most important thing because the sellers are really you know

height on their timeline or down payment, leverages, rates, what’s important to you and those options will have a variation of different components for you to review and look at. And then after that, you basically say, I like option two and then our team jumps in, gets your paperwork started. If there is an appraisal ordered or evaluation, we get that going as soon as possible, because we know times have the essence.

Dylan Silver (06:56.152)
Sure.

Sarah Downey (06:57.414)
basically how works. It’s pretty easy to get started.

Dylan Silver (07:00.544)
Now, if someone is brand new to being a flipper, but they’ve got excellent credit and they’ve got multiple $10,000 saved, maybe they know some contractors, I’ve seen it be incredibly difficult. And this is just my limited experience with this. I’ve seen it be incredibly difficult for them to get a hard money loan without at least

Sarah Downey (07:04.773)
Sure.

Sarah Downey (07:08.891)
Yum.

Dylan Silver (07:23.938)
having some track record because I’ve seen this on a regional level. It’s very regional I think in some cases and some cases not. There’s also some national hard money lenders that may not have the same type of evaluation process but in many cases maybe some of the more regional at least that I’ve experienced is difficult to get going. But once you have a couple of deals under your belt then the lenders tend to see that and maybe have a greater degree of

Sarah Downey (07:46.96)
for sure.

Dylan Silver (07:52.75)
of trust there. if I’m someone who’s starting out, and I’ve got a deal, and I’m looking at buying it for, you know, pennies on the dollar, so it’s a good deal for me. And it’s a newer home, let’s call it, I shouldn’t say newer, but let’s call it last 40 years, you know, 80s build. And I’m trying to figure out, well, how much money do I have to come to the table with, you know, how much what what documents do I need to have prepared? Is it even going to be possible?

Sarah Downey (07:56.24)
Yeah.

Sarah Downey (08:06.874)
Yeah.

Sarah Downey (08:19.42)
Totally.

Dylan Silver (08:20.982)
And also, I’m going to throw this one out there. If I need proof of funds to submit with my offer, am I going to be able to get that? Are these questions that you get often? And how’s that hand?

Sarah Downey (08:26.502)
Sure.

Sarah Downey (08:31.736)
All the time. just to start, think, you know, kind of hitting off some of those questions. we do have a lot of private lending options that, especially for fix and flips, will lend with zero experience, especially if you’ve got decent credit. So if you’ve only been working with local private money lenders, you know, just opening up some national doors, I would say we definitely have options for real estate investors that are first time flippers. New construction is a little bit harder, obviously.

But we do have a couple options for that. I would say as a new flipper without experience the one big thing that you’re gonna see is probably your leverage is gonna be tighter so you may only get 85 % of the loan to cost versus 90 You know or higher leverages, so you probably will have to come with a little bit more cash to close But if you have the cash if you have the credit we definitely have multiple options And we may have some that if your credit is strong you can get up a little bit higher level

leverage. So to just kind of bust that myth first, like we definitely have some options for new real estate investors, but I think it is very important that you kind of hit on an important part with fix and flip is for those of you that are listening that want to be flippers or are flippers, the most important thing that I think a lot of real estate investors do not keep tabs on is their experience and their track record. So it can take a lot of time and in some contexts, like I said, that we have lender

that don’t, you know, as heavily value experience, which is nice, but I would say you’re going to get better pricing and better leverage with the more experience you have because they’re going to be able to say, your success rate is good. You’re, you know, closing off of, you know, the sale is faster. They want to look at those timelines and that will give them more confidence to give you higher leverage and to close quicker. So, you know, as either a newbie, a really good option would be to partner up with somebody that’s

Sarah Downey (10:32.382)
already doing it, but get yourself on title. Get yourself in an LLC with each other, so that you can actually be on title and consider that your experience. So don’t just help them with a hammer, but actually say, can I have 10 % ownership in your LLC on your next project? And I will help with some hard labor or something just to get that experience, because it will help you get better leverage on your transaction, because they are really looking at ownership in a flip, not just did you

help someone. And so keeping track of that experience or that track record is super important and just keeping it up to date. So I would say most lenders are wanting to look within the last 24 months. We have some that’ll kind of look back over the last five years, three to five years as well. But first answer your question. We do have options for no experience flippers. But as a flipper, if that is really the market that you’re trying to tap into, experience is what’s going to give you

better pricing and potentially we do have a few options that can do 100 % financing, but they’re going to want to look at your experience. you know, again, you hit a couple different things. I think I answered most of them, but experience is very important. But there are options out there. So for real estate investors that are wanting to get started or people that are maybe you’ve only done DSCR, but you want to try to flip, you know, you’ve only done rentals or Airbnb’s. You’re like, I want to, I want to try one of these.

Dylan Silver (11:46.614)
I think that’s most of it.

Sarah Downey (12:02.164)
we do have options through loan bids to get a transaction done. And if you have rentals, we may be able to utilize that towards your experience as well.

Dylan Silver (12:11.916)
Now for proof of funds, how does that work? mean, of course, each one is going to be different. But if someone was needing proof of funds to submit for their offers, is that something that certain lenders are able to or willing to provide? And if so, what’s typical as far as getting the proof of funds?

Sarah Downey (12:20.922)
Sure.

Sarah Downey (12:28.86)
Yeah, so I know it’s going to look a little different than what you’re going to get from your conventional lender. If you go to a bank where they’re going to give you a pre-approval letter or pre-qualification, if you need one, typically after the deal is pre-flighted in some of the initial stages, we do a soft credit pull just to make sure we check the property out and pre-flight it. We can provide you with a pre-qualification letter in our name and are happy to communicate with sellers, real estate agents.

to provide them with an update because like I said previously, we are very in tune with our lender’s guidelines, pricing, updates. We don’t have to just rely on them with every question, right? So we’re able to pre-flight. We have most of their guidelines in our folders. And so we don’t have to wait for approval from them to see, to know if your deal is gonna fit in their credit box or not.

Dylan Silver (13:26.818)
Wow, this is a huge deal. This is a very big deal, I for people that are starting out. I was thinking about a deal that I was looking at recently, a couple deals actually, you know, talking with people who are starting out and asking me for my feedback, and they’re talking about fix and flip and asking me, I mean, and they’re real newbies, but they’ve got good credit and they’ve got, you know, money, lots of money saved or enough money saved where they could potentially get this process started.

Sarah Downey (13:28.796)
Yeah.

Sarah Downey (13:49.691)
Right.

Sarah Downey (13:56.092)
for sure.

Dylan Silver (13:56.738)
you know, but they might not be able to conduct a whole flip or they can’t conduct a whole flip and take down a property, purchase a property just based off the cash that they have saved. So what do they do? And a lot of times the questions that I get, it’s I’m having to wear multiple hats. So I’m thinking, well, maybe for this person based on their experience level, talk about experience, it’s probably not good, even though it might sound nice for them to be looking at doing flips, because they are they’re not swinging a hammer that’s not in their wheelhouse. And for me to

Sarah Downey (14:04.572)
Right.

Sarah Downey (14:12.38)
Mm-hmm.

Dylan Silver (14:27.404)
work with them and make offers for them on properties that are like very gonna need a full gut rehab is gonna be a huge undertaking for them. And maybe they need more of a rental. But then there’s other people who are like, well, actually, I’m kind of a carpenter. Like I’ve been doing this for a while. And I’m looking at this. Now, how am I gonna get a personal loan for this? And then I’m having to walk through what is hard money, right? And then how that process works. And so I think, you know,

Sarah Downey (14:32.25)
Right. Right. Right.

Sarah Downey (14:51.078)
Right, right.

Dylan Silver (14:57.344)
even though this is all that to me and you know you’re in the game so of course you’re dealing with this every day to a lot of people on the outside looking in even people who are involved as contractors they might not really be familiar with with this space and so it’s it’s news to some people and I think a lot of people on the outside that there they have the ability to basically get a private money loan for a short shortened period of time that’ll be maybe

Sarah Downey (15:13.212)
sure.

Sarah Downey (15:21.424)
Yes.

Dylan Silver (15:25.55)
at a higher rate than what you would over certainly a higher rate than what you would look at a longer term traditional mortgage, but that they’re also getting money to then fix and flip the property. And so this just opens it up to so many people. And on a basic level, like when I’m talking about this with in bet with potential investors, and I’m sure you deal with this all the time, Sarah is, it’s like, well, where do I begin? What’s the starting point?

Sarah Downey (15:38.736)
right.

Sarah Downey (15:50.714)
Right. For sure.

Dylan Silver (15:52.078)
because now I gotta look at properties and now I gotta look at getting qualified. And so when people are reaching out to loan bids and your staff and you are interacting with them, what’s maybe the biggest growth point that you’re having to see and work past with new investors? it evaluating properties or do you guys stay somewhat hands off of that as far as giving people guidance?

Sarah Downey (16:18.052)
No, I mean, we can definitely look at comparables. And I think that is important as a real estate investor, know, somebody that’s newer. They may not have the resources, you know, to pull those numbers, right? The as is values versus the ARV. So we can definitely support them and actually looking at it, if they come and they say, I think this is worth this much. Can you kind of run an internal valuation to see? We have tools and resources to support kind of pre-evaluation reviews.

use before the appraisal. Same thing with market rent, just some tools to see if their rental is going to be worth it. Because a lot of our rental loans are done based off of that DSCR ratio of if the expenses don’t make sense, you don’t want this loan either. If the lender won’t approve it, you don’t want it because you’re going to be really tight on your cash flow. I would say we really want to try to educate them on, we do work with a lot of new borrowers.

Dylan Silver (17:02.499)
Yeah.

Sarah Downey (17:17.906)
that’s new rentals, owners, which is a strategy that they still have to navigate, just how to market, have to gauge the market rent, or fix and flip, right? And we have seen some markets change in valuations, right? Some have more inventory, some we’ve seen drop. And so, you know, we’ve watched ARVs come in lower occasionally in certain markets, you know, across the country. But I think overall, we have tools and resources to help support them. If we feel like they’re off base, our accountants

executives aren’t just kind AI behind the scenes. Like they’re going to look at the project and try to really advise them on like we don’t want to put them in a bad deal, right? Because first of all, we want them to be successful and we don’t want to put them with one of our lenders and like kind of say, hey, this person’s going to default. Yeah, like we also don’t want our default rate to be high with our lending partners. So it really goes both ways of like, you know, we talk about in our office, like wild transparency and like just

Dylan Silver (17:53.912)
down.

Dylan Silver (17:58.936)
Yeah.

Dylan Silver (18:05.375)
default or something like this.

Sarah Downey (18:17.663)
really being upfront with especially new investors on just educating them. You know, but I would say I think one of the biggest things that I would advise just even from personally investing is that I think you get a lot of people that are coming in and they don’t have their personal finances in order, their personal credit in order, and jumping into real estate could be really not a great option for them. You know, just to tie up all of their capital.

a project if they don’t have partners in the project that have experience and know the market know how to like you said swing the hammer and do those things like I think you know if I were just at a table like non you know bias like not on the private lending side like that’s what I would tell them is like do you have your own you know capital is this something that you’re wanting to do on the side you know and then for those people that you know maybe they don’t have quite as much capital but they have a lot of experience right you’re like you’re

Dylan Silver (18:54.808)
Yeah.

Sarah Downey (19:17.553)
saying you’re a general contractor or somebody who’s been doing it for somebody else for a long time, but maybe they’ve never done it for themselves, right? And they want to make it their job. Like I think there are options to do that. You know, they obviously want to make sure they have enough funds to just cover the cost of the project. But I think, like you said, we have options for those first timers to really get started and we’ll try to help navigate them through the lending process if it’s new to them. We don’t just ask them

Yeah, go ahead.

Dylan Silver (19:47.784)
I also think it’s, I wanna say if folks aren’t right able to jump into a fix and flip, but they want to, and I’m in this position myself. I’m like, you’re talking about finances and order and all this stuff, and me thinking, I don’t think I’m ready to leverage this, put up this much risk really, I expose myself to this much risk.

Sarah Downey (20:03.046)
Yeah.

Sarah Downey (20:10.438)
Great.

Dylan Silver (20:14.53)
great as it can be. I also know experienced flippers who lose money on flips. And we’re talking about experienced flippers. So if they of course, I am not an experienced flipper. But I think there’s so many ways for folks to still kind of stay in the game or or or be right on the sidelines looking in that just because you can’t do a flip doesn’t mean that there’s not you know, ways to make money in adjacent spaces. You know, I’ve seen people who

Sarah Downey (20:19.738)
Right. Yeah.

Sarah Downey (20:33.02)
you

Sarah Downey (20:42.012)
for sure.

Dylan Silver (20:44.408)
you know, just send referrals to hard money lenders. You know, I’ve seen, you know, the same thing can be said for all wholesalers, right? Wholesalers aren’t doing flips. But, and the reason why I bring this up is because there’s a trajectory I’ve seen now so many times, so many times people go from wholesaling to then more wholesaling. Now they’re doing it on volume. Then maybe they do a fix and flip. Now from that fix and flip, they’re doing multiple. Maybe they get into short term, midterm, you know, corporate housing.

Sarah Downey (20:51.206)
Yeah.

Dylan Silver (21:13.302)
long term homes. Next thing you know, it’s 10 years down the line and they’re buying notes. And then they’re the person lending the money out. And it’s like in this condensed time period, you see, but at the same point in time, those first couple years, and I’m sure you talk with people about this, those first couple years, you’re kind of wanting to jump in, you really do. But if it’s not the right time, you’re gonna save yourself a lot of heartache if you wait a little bit.

Sarah Downey (21:18.064)
sure. Yeah.

Sarah Downey (21:41.085)
for sure.

Dylan Silver (21:41.198)
and jump in when you’ve got all the ducks in a row.

Sarah Downey (21:43.591)
For sure. Well, and I mean, again, there are so many different roads that you could go down with real estate, which is why I love it, right? There’s so many, you know, service providers. There’s so many opportunities within it. But I think one of the things that we’ve learned is like even on the space that we work in is that just to stay, at least for me, I think my advice to somebody is to stay focused on one thing for a good period of time and get really, really good at that one thing to be able to then pull capital out of.

that product, whether it’s an asset class or if you’re wholesaling, get really, really good at wholesaling and then maybe you try to do something else within wholesaling or maybe that’s when you try to flip instead of, it could be very much like chasing a million different things at once because there’s a lot of different opportunities that come up in real estate and in lending. But again, I think, I’m of the mindset of just focusing in on that really

Dylan Silver (22:30.392)
Yeah.

Sarah Downey (22:43.514)
one area first and getting really, really good at that and then capitalizing potentially on something else. Not saying that I don’t think that you have to have some kind of ability to transition and adapt, personally, right? I invest in real estate individually and I also work in private lending, but I just know that like, hey, I could make more money in flipping, but I don’t have the bandwidth for that in my life. And so I think that’s one thing.

Dylan Silver (22:55.694)
It’s a pivot, yeah.

Sarah Downey (23:13.384)
is just trying to focus in. If I could give real estate investor advice, is just getting really good at whatever market you’re in, whatever asset class you’re in, and getting really good at that first, and then letting that kind of work for itself. So if you have a team, right, we have a lot of real estate investors that do that kind of BRRR method where they may transplant in a market. We had one guy who literally just was paying a wholesaler at first, and then he decided to,

Dylan Silver (23:34.179)
Yeah.

Sarah Downey (23:43.447)
hire that wholesaler and that wholesaler is managing all those projects and then they’re converting those all into rentals and managing them. And so I think if you build out a good process in that market with what you’re doing and you get really good at knowing your numbers and knowing, you know, and having a team do it for you, then it just makes it easier to either try a different market out or try a different asset class. And it doesn’t feel as risky because you know that on the back end you have your flip rentals in

at one area that is really moving and groovy because otherwise I feel like you could be doing a lot of really good things not well and not maybe making the capital that you want versus just focusing in on a market that you know really well, an asset class that you know really well and just being really good at that first.

Dylan Silver (24:23.245)
Yeah.

Dylan Silver (24:31.872)
I think lock to your point locking in on one thing. If you’re a fix and flipper, right? And maybe you’re a fix and flipper, but you’re you’re thinking, well, how do I make more money because I’m paying these wholesalers? Well, what happens if you get an in house wholesaler, right? And now the wholesalers find in your deals, rather than you having to become a wholesaler, which is what I’ve seen some people try to do. And now you’re maybe losing money paying for leads in wholesale that you’re working yourself. And you’re also trying to, you know,

Sarah Downey (24:47.055)
Right.

Sarah Downey (24:51.864)
Exactly.

Sarah Downey (24:58.95)
for sure.

Dylan Silver (25:01.73)
grow and scale your fix and flip business, there’s ways to do it where you’re not having to wear a bunch of different hats. But Sarah, we are coming up on time here. Where can folks go to learn more about loan bids and maybe to reach out to you?

Sarah Downey (25:08.614)
Yeah.

Yeah.

For sure.

Yeah, for sure. So I would say the best place if you have any more questions is just go to LoanBidz.com and from there you’ll be able to just navigate pretty easily on how to connect with us if you have a transaction or if you just want to do a strategy session with one of our account executives. There’s our contact information on there along with some articles and just some more information for you just in general about the market if you like the tips and things that we talked about or you can reach out to me directly as well. I don’t know if you guys will share my information.

Again, I work more on the ops side, so I’m happy to help, but I would love to connect you with one of our account executives and they can really help strategize with you, whether you have a project or are looking to come up with one in the next few months.

Dylan Silver (26:03.968)
It’s loanbidzwithaz.com,

Sarah Downey (26:05.254)
With a Z, LoanBidz with a Z, yep, exactly. Awesome. Yeah, thank you.

Dylan Silver (26:09.646)
All right, Sarah, thank you so much for coming on the show here today. It’s exciting to be part of this space and I think, you know, I have a couple people in the back of my mind when I’m thinking I gotta send them to LoanBidz, you know, see if they can get some assistance there. Thank you for coming on here today, Sarah.

Sarah Downey (26:21.478)
Totally.

For sure. Yeah, thanks for having me. Yeah, thanks again.