As our listeners know, lending and financing are critical components of real estate—not just for building wealth, but for getting properties and building a business plan, too.
Today, I’m excited to introduce you to Strategic Partner Travis Sperr of Renovo Financial. He has a great product: direct private money lending. Essentially, it’s a very flexible loan product for residential, commercial, long and short term real estate. To better explain it, he’s going to walk us through 5 different loan products and scenarios.
- Listen to the podcast “#363: Flexible Lending: Direct Private Money with Travis Sperr” on the Denver Real Estate Investing Podcast
- Watch the YouTube video (at the bottom).
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
How I Know Travis
Travis is one of the first people I met out here, thanks to my mentor Charles Roberts. At the time, Travis was a hard money lender focused. We quickly became friends and started collaborating together. He’s been a great resource for me and clients over the years. Plus Travis is an experienced investor: from house hacking a triplex in Aurora new construction development projects.
Late last year, he made the transition to Renovo Financial, which gave him the opportunity to do both long and short term financing using private money. My ears perked up when I heard this, since I’ve been looking for lending products like this. Great person + great loan products = no brainer!
What Does Renovo Financial Do?
Renovo’s vast product suite of loans means they have something for everyone in the investor space. Their clients are strictly investors; they can’t loan on owner-occupied properties. They also can’t loan to individuals, only entities.
Among other types of loans, they finance fix and flips, new construction, and long term financing on properties of 1-50 units. Their flexibility allows them to assist clients getting into a property, make repAmong other types of loans, they finance fix and flips, new construction, and long term financing on properties of 1-50 units. Their flexibility allows them to assist clients getting into a property, make repairs on it, and then help them with long term financing. Their debt service coverage ratio loan focuses on the property’s income, rather than an individual’s debt to income.
EverEvery deal starts with financing, whether it’s acquiring it, rehabbing it, or refinancing it. Their loans fall into two buckets: bridge debt and long term debt. Renovo uses bridge debt to refer to any loan that isn’t a term loan, such as fix and flips, new construction, or rehabbing to rent out. It’s a loan that’s generally less than 18 months, though they can go up to 2 years for ground up construction.
To illustrate how their loans work, Travis gave us 5 scenarios he commonly works with.
1. Fix and Flip
Clients for this type of loan range from someone who will do a few flips a year as a hobby to those who make their living with this kind of work, completing 30-50 properties a year. It’s possible to get 85-90% loan to cost, meaning clients can put down as little as 10% for buying and doing the rehab on the property.
Since Travis has 10 years of experience working in the fix and flip industry, he’s particularly knowledgeable about Since Travis has 10 years of experience working in this industry, he’s particularly knowledgeable about these types of loans. He has local expertise paired with the ability to tailor products to be the best fit for his clients.
2. Ground Up Construction
There’s a fair amount of construction in the Denver area right now, so loans in this field are in high demand. Renovo Financial has competitive products that finance up to 90% of costs for ground up construction.
Types of clients for these loans range from builders of large single family homes worth $3MM each, to build for rent townhomes. This is a good product for builders of 1-50 unit properties and Renovo requires less equity than banks typically do. The pricing is a little higher, but it balances out well for clients.
One challenge many clients face is the presale requirement that banks often have when it comes to ground up construction. Often, they won’t give builders the loan until the builders have sold a few of their yet to be built units. This can lead to builders taking a hit when they build, since they don’t know how much construction will actually cost. Renovo Financial doesn’t have presale requirements, which makes this loan product particularly attractive.
3. Value Add
Value add is a very hot term in real estate right now, from single family residences to commercial multifamily. For this example, we’re focusing on the commercial multifamily space of 5+ units. The client will do some construction on the property first, and then lease out the units to increase the property’s net operating income (NOI), which increases the value.
This is another loan that can finance 90% of the purchase and rehabbing costs. Clients have the option to do a bridge loan with a higher interest rate that has the benefit of higher leverage.
The amount of money clients have to leave in deals in real estate can be difficult, from putting down The amount of money clients have to leave in deals in real estate can be difficult, from putting down 25%, funding repairs, and holding the property until it can be refinanced. Renovo knows that capital is finite, so they do everything they can to help their clients keep cash on hand while they’re in growth mode.
They give clients the option to get higher leverage on their purchase, take time to stabilize the property, and then refinance with significantly less money. It’s important for clients to know what leverage they can get and at what price.
Long Term Financing
4. Residential (1-4 units) Loans
It’s not uncommon for investors and real estate professionals to have trouble qualifying for traditional long-term loans. Renovo Financial offers loans based on the debt service coverage ratio (DSCR) of the property. They offer very low DSCR ratios compared to the industry norm. But Renovo offers such an aggressive product because their goal is to work with experienced operators who can handle these deals. As rents continue to go up over the years, clients should be able to outperform that ratio over time, but this gives them the ability to get into the building in the first place. They have options for ARM loans and 30 year-fixed loans!
5. Commercial Multifamily and Mixed Used Loans
A recent deal that Travis closed highlights the benefits of their commercial rental loans. An investor was having trouble getting an 11 unit qualified with traditional bank lending. They only looked at the historical rents, which were too low to qualify for the investor’s needs. Travis was able to step in and get financing in place. They could look beyond the historical rents and created an interest-only period to help with cash flow.
These are great options for investors who need long term debt through private money lending.
Connect with Travis
Travis would love to talk to anyone who’s curious if Renovo has the right loan product for them. A quick 15-minute conversation can help him figure out what you’re trying to accomplish and the best way to get there. You can schedule your call here: https://meetings.hubspot.com/travis-sperr.