Realty411 Magazine The Future of Real Estate is Here | Page 55

No Fluff!
The Godfather of Hard
Money on Private Money
Lending in Today’s Market
L
By Robb Magley
“Hard money”
lending gets its
Leonard Rosen
name from the
practice of basing
loans strictly on the hard equity and hard
asset – “no fluff,” said Rosen, no long
stories about a borrower’s 20-year plan for
a particular property.
“The only questions are, one, what is
the property’s value, and two, how much
equity does the borrower have in it?” said
Rosen. “The loan is based on the amount
of equity they have in the real property –
that’s it.”
These loans have been a part of the
marketplace for half a century, according
to Rosen, but since 2008 and the real
estate “implosion,” private money lending
has grown to fill the gap left by traditional
lenders.
“(The banks) have extremely tight
lending criteria now, from a credit-
worthiness standpoint and a regulatory
standpoint,” said Rosen. “They are not
taking the normal business risks they were
over the past 10 years; unless you have
stellar credit, and a piece of real estate that
you have significant equity in, the chances
of getting any kind of real estate financing
from them is very slim.”
Enter the “hard money” investors. The
loans are primarily used in commercial
real estate, investor fix-and-flips, or any
short-term project where borrowing
is used to solve a problem or bridge a
situation until the implementation of an
exit plan – for example, to refinance or
sell a property within a year or so.
“Sometimes investors will buy property
on the courthouse steps, or REOs from the
bank, and they’ll get them at wholesale
prices,” said Rosen. “Imagine a property’s
worth $100,000, and an investor has
$35,000 into it. In comes the hard money
eonard Rosen is known
alternately as “the Godfather
of hard money” (he’s been in
the business for 35 years) and
“the Pitbull.” Unsurprisingly,
the second nickname has a good story
behind it.
“Back in 1982 was my debut as
a six o’clock anchor on the national
cable network, Financial News
Network,” said Rosen. “My very first
night going on I was nervous. We had
put all of what I was going to say on
a teleprompter – 13 minutes of me
speaking. As I was getting ready, and
the director was counting me down,
he said ‘6 ... 5 ... 4 ... 3 ... Leonard,
I’m sorry, we lost everything on the
teleprompter ... 2 ... 1 ... you’re live.’”
He laughed. “And I do this,” he said.
“I went 14 minutes, live, first time on
national television. The guy walked
up to me after and said, ‘Only a pitbull
could make that happen.’ And it just
kind of stuck.”
It’s hard to find a more fervent
booster for the industry, whether you
call it “hard money” or just “private
money lending”; Rosen’s “Pitbull
Conference,” which teaches the ins-
and-outs of these loans for real estate,
has produced 31 national conferences,
with the next one set for February 20th
in Ft. Lauderdale. And he doesn’t see
enthusiasm for the product dying down
any time soon.
“I think it’s one of the best
investments in today’s marketplace,”
said Rosen. “I think being a hard
money lender is a great opportunity,
and I think being an investor who
invests with a hard money lender is a
great opportunity.”
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PAGE 55 • 2014

lender with the remaining $65,000; the
investor improves the property, puts it on
the market, sells it, pays the hard money
lender back, makes a profit – everybody
wins.”
And, if the borrower doesn’t pay, the
hard money lender is in first position to
take the property. Rosen points out that
most lenders have no interest in being in
the real estate business. “They want to be
in the lending business,” he said. “But if
they have to take it, they can.”
One of the big keys to making the
investment more secure for the hard
money lender, according to Rosen, is to
underwrite the asset correctly; loaning
too much for a property can spell disaster
should the need to liquidate arise.
“Every asset, and this includes real
estate, has a retail value and a wholesale
value,” said Rosen. “A retail value is what
a property is worth given a 12-month
marketing time to liquidate the property;
the wholesale value is whatever the
property is worth in a ‘fire sale’. If I had
to sell this property in 30 days, what is
it worth? Those are going to be different
numbers.” A hard money lender has to
lend based on that lower value, so they
have comfortable “cushion” built-in – just
in case they suddenly find themselves in
the real estate business.
Rosen’s conferences put a lot of
focus on a trend he’s watched become
increasingly important in his industry:
the creation of real estate funds, where a
lender deploys not only his own capital
but also that of a group of small investors
under him.
Continued on pg. 61

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