Today we interview Mario Padilla, the CEO of Crescent Lenders, a California hard money lending company for commercial and residential real estate investors.
Hard Money loans are typically used by real estate professionals who need quick access to cash to capitalize on great deals, perform fix-and-flips or buy out another investor in a development.
He offers some insight as to how and why he started a hard money lending business and also what the future holds for the industry.
Table of Contents
1. What did you do before you started your Hard Money Lending business?
- Corporate Banking — underwriter evaluating credit risk — in the U.S. and Latin America. Assessing credit risk of Fortune 1000 companies (for commercial paper backup line of credit) and was Director of Credit in Latin America for a NYSE publicly listed U.S. Corporation (working with partners from IFC – an affiliate of the World Bank and FMO The Netherlands Development Finance Company). Primary function is evaluating credit risk of the loan requests secured by California Real Estate collateral. The process in assessing the risk is a relatively simple process. A site visit of the collateral/real estate is also required on those loans which are approved for funding. Loan documents must me prepared for the borrower to sign. We fund the loan and close the transaction. Back-office duties includes preparing an Investment Book for the Beneficiary (investor) which includes, all of the supporting documents (i.e. appraisal, loan application, sales agreement, escrow instructions, etc).
2. Why did you choose to start a Hard Money Lending business? Was it due to the economy and traditional banks tightening up lending in 2008?
- Living in California where real estate is a lucrative business and having a lending background specializing in risk assessment – it was a natural progression for me to start a real estate financing company.
3. What obstacles did you have to overcome to get your business off the ground?
- Like any start-up the first 2-3 years are the toughest. The company didn’t become profitable until its 5th year. The U.S. was in a deep recession when I started Park Avenue Capital (a recession which was largely driven by the real estate marketplace).
4. What do you see for the future of your business and the Hard Money Lending industry as a whole?
- This industry of private lending secured by real estate has been around for a very long time and its not going anywhere. There may be some changes due to technology with direct buyer to lender. However, there has been little to no impact with various players who have tried to enter this marketplace through a technology based platform. The money I manage is based on trust. The company has a long track record based on relationships.. There are some things that technology and web-based platforms cannot duplicate. That may change but it may be awhile before technology feels like a human touch.
5. Has the Hard Money Lending industry changed at all in the last 10 years?
- Hard money lending is basically the same business it has always been. The most notable thing is that there are more players in the industry bringing down the lending rates slightly and having to compete for the best loans. Competition is always there no matter what industry you’re in —that’s what makes it a fun.
6. Do you see the private money industry going through any changes in the next 10 years?
- Tough to know how things may change going forward but this industry hasn’t changed in any significant way in the past 50 years.
7. How big of a threat are peer to peer lending sites such as PeerStreet and YieldStreet to smaller independent lenders such as yourself?
- Peer to Peer – no competition.. It seems to me that this attracts smaller investors (and the results in some cases has been catastrophic with companies going out of business in this space). Most investors that have a minimum of $1.0 million to $10 million are not using these websites.
8. What would you do differently in the first few years of starting your business?
- I would have to think hard about this one… In the end I simply feel I got lucky. Lucky to have the energy to put all the time/work the past 30 years in banking..
9. Did you have someone who helped you get started? Maybe a mentor?
- I didn’t have a mentor but I was introduced to the business by someone who ended becoming a great friend.
10. What is your favorite part about being a hard money lender?
- Several things. I enjoy making people money on both sides – the investor and the borrower. Brokering happiness. For some reason money makes everyone happy. I am still trying to figure this one out.
11.What advice do you have for people who want to start a hard money lending business?
- It’s an extremely simple business. This is about as easy as it comes. If you like a challenge then this is not for you.
12. What is your best piece of advice for someone who wants to get started in this industry?
- The business is based on trust and always doing right by your investors. They will always stick by you so long as they trust you with their money and they never lose any money with you.
About Carson Derrow
