June 12, 2017

JF1014: Why Haven't You Considered Crowd Funding Your Real Estate Deals?

Imagine a Go Fund Me or Kickstarter campaign for real estate. That’s similar to what Patch of Land offers! Hear one of their sales leadership explain the process, break down how a deal works, and the growth they have seen recently at the firm.

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Ben Shaevitz Real Estate Background:
– Senior Vice President, Loan Production at Patch of Land
– Over 13 years of experience managing sales and customer acquisition in real estate lending organizations
– Spent 6 years at Bank of America as a top producer in third largest loan production office across 50 states
– Holds MBA in Finance from California State University, Northridge
– Based in Los Angeles, California
– Say hi to him at https://patchofland.com/bestever
– Best Ever Book: Do You by Russell Simmons

Click here for a summary of Ben’s Best Ever advice: http://bit.ly/2sBFaxp

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Ben Shaevitz on crowdfunding






Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into that fluffy stuff.

With us today, Ben Shaevitz. How are you doing, Ben?

Ben Shaevitz: I’m doing great, Joe. Thanks for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Ben – he is the senior vice-president of loan production at Patch of Land. He’s got over 13 years of experience managing sales and customer acquisition in real estate lending organizations. He’s got his MBA in finance from Cal State, Northridge, and he’s based in sunny Los Angeles, California. With that being said, Ben, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Ben Shaevitz: I grew up in a real estate family in Silicon Valley. My dad has been a real estate broker since the ’60s and my mom worked as a real estate agent for [unintelligible [00:03:12].23] for almost 30 years. I grew up sitting in open houses and learning from my parents the tricks of the trade, and just kind of fell in love with real estate from an early age.

After college, after moving to Hawaii for a brief stim to just chill out for a while I got my real estate license and immediately just dove right into it. I started working for Bank of America as a loan originator back in 2004. I worked there for seven years, worked my way up the corporate ladder there, and then I worked for another public entity (one of the largest lenders in the country) for seven years after that, and I decided to switch over to private lending, and have been with Patch of Land for almost a year and a half now.

Joe Fairless: What’s your responsibility with Path of Land.

Ben Shaevitz: I run the entire sales organization. I am responsible for running the sales team; I go to conferences all around the country, including yours in Denver just a month or so ago. I deal with new product launches, guidelines, processes and procedures… So pretty much a jack of all trades, but mainly focusing on increasing loan production and customer service.

Joe Fairless: And how long have you been at Patch of Land?

Ben Shaevitz: Almost a year and a half.

Joe Fairless: Okay, a year and a half. When you arrived to today, what have been the best ways to increase the loan production and customer service?

Ben Shaevitz: When I got there, Patch of Land was really still a startup. I had three loan officers when I came on board. We’ve not grown to 11, so we’ve almost quadrupled in just a year, and loan production has grown just as quickly along with that.

One of the ways that I felt was the best way to grow production was really training. It’s all about the customer; the customer has to trust what we’re doing and has to have faith that you have their best interest at heart, so I really feel that that is the heart of sales, and I think that that’s critical to building a long-lasting relationship, and that’s really what we’re trying to do at Patch of Land. We’re not looking for the one-off deal, we’re looking to build lifelong customers.

I really feel that training the existing staff and also bringing one seasoned real estate lending pros was the best way to grow the business, and then also traveling around the country, like I said, to conferences, and really establishing face-to-face relationships with real estate investors around the country.

When you’re at a conference perhaps there are other lenders that do similar things… How do you differentiate what you all do, compared to others?

Ben Shaevitz: Yeah, there’s plenty of lenders out there, that’s for sure. You can see that at any conference you go to. We all have fairly similar programs and fairly similar rates; again, I go back to their trust factor, and just the confidence that you’re gonna close the deal, whether your interest rate is gonna be a quarter percent higher or lower, or you’re gonna charge a half percent more or less… As a real estate investor myself, I think what’s more important to me is trusting that the person I’m working with has my best interest at heart, and that I have confidence in them that they’re gonna get the deal closed. That’s how I started to differentiate myself – I look people in the eye and I tell them, “Look, I’m gonna do what I say I can do, and if I can’t do something, I’m gonna tell you straight up; I’m not gonna string you along and give you maybes for a week.” I really try to be as transparent as possible in an industry that sometimes has a stigma associated with having a lack of transparency. That’s really how we try to differentiate ourselves from the competition.

Joe Fairless: And knowing some of those guidelines as far as “Hey, this isn’t gonna work” or “This is gonna work”, what are some common reasons why when you initially look at a loan package, why it wouldn’t work? What comes up most frequently?

Ben Shaevitz: Experience is big for us. That being said, we do work with first-timers. Profitability of the project… A lot of times we’ll see a deal where somebody’s purchasing a property – just to use easy numbers – for $100,000, it got 25k of rehab and then when you add in the carrying costs and things like that, even though the ARV might be 175k, by the time they’re done with their interest payments and sales commissions to realtors and things like that, the deal really has no profitability. So even though we could do a loan and we could earn a commission on that, we really try to help guide our real estate investors and say, “Look, there’s not a lot of profitability in this deal, and it’s probably not in your best interest to move forward.” Then, ultimately we leave the decision up to them.

That’s one of the things that comes up quite a bit – that there’s not a lot of profitability in the deal. There’s also markets where the average days on market might be 180-200 days… So in the unfortunate event of default, we do have to look at the liquidity of the property in a foreclosure scenario.
Other than that, we are a pretty flexible company in terms of underwriting. We try to underwrite from a makes-sense sort of perspective, and even with first-time investors, that they have good credit and the deal makes sense. We might require a little bit of a larger down payment, but we’re still willing to work with them.

Joe Fairless: And as far as the makes-sense scenario, what’s a typical loan terms that you all provide?

Ben Shaevitz: Generally, it’s a purchase and rehab loan. We’re gonna do anywhere from 75%-85% of the purchase price, and 100% of the rehab funds. So if we have an experienced customer that’s done more than five flips in the last three years and it’s in a good, liquid market with a lot of good comps, and we feel that the borrower is getting into a successful project, we’re almost always gonna lend 80%-85% of the purchase price and 100% of the rehab funds.

Joe Fairless: I wanna take a step back… Both of your parents were real estate agents for decades; you got your real estate license – why not go down that path?

Ben Shaevitz: It was kind of just about the opportunities available. I felt that I was in a situation where I wanted to start earning immediately, and becoming a realtor can sometimes be somewhat of a long process in terms of when you can start earning. Also, no one wants — well, not no one, but I personally didn’t wanna do exactly what my parents did. I had an interest in real estate, but I kind of wanna do something a little bit differently. I had a mentor of mine who knew the branch manager at the Bank of America location where I started, and I went and interviewed and I really liked the atmosphere and the environment and the people that were working there. So I started there, I gave it a shot and I just loved it.

Joe Fairless: Now I wanna transition back to the present. You’ve mentioned earlier the confidence of closing being key, and it really is… I interviewed someone who I believe you met at the conference – Mark Mascia. His company has a little over 500 million dollars in assets. He primarily does medical and retail.

I interviewed him in episode 599, and he talked about a deal where he went with a different lender than he was used to. It came down to closing, they backed out, and he was out not only 200-250k worth of earnest money and due diligence costs, but also he wasn’t able to close the deal because they went with someone else, or something happened where he lost the deal entirely. That’s Armageddon for a real estate investor. Is that something that you heard of, or do people come to you all after something like that has happened?

Ben Shaevitz: Yeah, we get people who come to us because their current lender fell through all the time. If it’s a reputable lender, I’ll say to myself “Well, why didn’t the lender close? Was there a good reason?” Or a lot of times we’ll get people that came from a conventional lender and they were buying an investment property through a conventional lender and it came down to it right to the closing and their debt-to-income ratio went up for whatever reason and they weren’t able to close, or some of their funds were coming from gift funds, or whatever it is. In the conventional lending world it’s very strict. I spent a decade and a half in there, so I know exactly what that’s all about. We do get some people that come to us where their deal fell apart at the last minute, and that’s where we can really provide a really valuable service, because we’ve closed loans in as little as three days. Our average turn time is probably about 7-10 days.

So yeah, we get people that come to us all the time saying another lender couldn’t close, and I have to admit that I am a bit skeptical at first, and that’s why I’ll really take a deep dive into the deal with my head of underwriting, who’s been in the business for 35 years. If it looks like it was an error on the lender’s part, then we’re absolutely willing to move forward. If it looks like it was a reputable lender and they found something that if we found we wouldn’t lend either, then obviously we’re gonna take the proper course of action to protect ourselves and our investors.

Joe Fairless: You mentioned earlier training is a key component to increasing loan production and having quality customer service. What type of training do you all do?

Ben Shaevitz: We do a weekly call monitoring call where I take my entire sales team that’s in the local office and then my external loan officers as well and we listen to phone calls; we listen to good calls, we listen to bad calls, we make sure that every lead is given the same consideration regardless of the lead source. Every lead is valuable, you never know who you’re talking to on the phone, regardless of how they may sound or where they’re from or their experience or anything like that. We try to treat everybody with the same level of respect, and as I said before, we’re trying to earn lifelong customers and referrals, and that’s the way to do it.

So we do a lot of call monitoring, and that’s really what I found in my entire career to be the most effective form of training.

Joe Fairless: Oh yeah, that’s case studies every single week. What are some opportunities for improvement that you typically find in a “bad call”?

Ben Shaevitz: I think a lot of times loans officers will hear one thing and they’ll immediately assume there’s not a deal there. A guy will say, “Oh yeah, if we don’t lend on, for example, a mental health facility or a gas station, or some kind of off the beaten path commercial property”, they’ll go “Yeah, sorry, we don’t lend on that. Thanks so much for calling Patch of Land. Goodbye.” When I get a sales call like that I say “Yeah, I’m sorry, we don’t lend on that type of asset. What else are you working on?” Because a lot of times a guy will come to you with a property that you can’t finance, but he might be working on another deal or another five deals that you can finance, or he might have a brother or a cousin or a friend or a parent that does have a deal that you can work on.

I think that giving every call the opportunity is really key, because if you shut a call off too quickly, 1) they’re not gonna think very highly and your brand isn’t gonna get built in the way that you want, it’s not gonna get the proper respect throughout the real estate community, and 2) there might be a deal there.

Joe Fairless: That’s a tip for every real estate investor that is working with someone who calls them and if there’s not an opportunity on the face or on the surface, then perhaps asking a couple right questions and probing a little bit beneath the surface…

Ben Shaevitz: What I tell my guys is “You’re sales people, you’re not order takers.” Anybody can take orders, anybody can say “Okay, what’s your project? Oh, it’s a hospital… I can’t do it. Okay, bye.” That’s not sales. Sales is probing and building rapport with the customer and finding out what the entirety of their involvement is with real estate investing. Most people, if you dig a little bit deeper, there’s something that you can help them with or something you can help them with in the future.

Joe Fairless: Do you have a built-in component that generates word of mouth referrals or a way to get the word out from existing clients or customers?

Ben Shaevitz: We do from time to time offer a referral program; we’ll do a monthly special, like “Hey, if you refer somebody, you’ll get the appraisal fee waived from your next deal”, and things like that. Other than that, for word of mouth it’s really (as you probably know) traveling the conference circuit; that’s really the best way in terms of building the brand, I feel, for us.

We’re at 3-4 conferences a month, and I really feel that that’s the best way to build the brand. Obviously, it taking care of customers and getting their deals closed is the best publicity you can possibly do, and I believe it’s 67% of our customers repeat, and the average repeat customer repeats four times per year. It’s a pretty incredible stat, and it just goes to show that if you treat customers the right way and you keep your word, they’re gonna come back and again.

Joe Fairless: What’s your conversation like at a conference with someone? How do you approach that?

Ben Shaevitz: Whether it’s a broker or a borrower, I go back to this again and again – I look them in the face and I tell them, “Listen, what I’m telling you is the way it is. You’re gonna talk to ten lenders today, but I want you to know that when you speak to me, the thing that I’m telling you is the truth. When you e-mail me, I’m gonna e-mail you back in five minutes. I’m gonna answer your phone call when you call, and if I can’t, I’ll get back to you as soon as possible.

My first manager when I worked in conventional lending – he had three rules to being a successful salesperson: treat people the way you wanna be treated, under-promise and over-deliver, and return calls promptly. I’ve honestly lived my entire career by those three rules, and it hasn’t failed me yet.

Joe Fairless: Three golden rules really, and I can see how those make sense. What about e-mails? Same thing with e-mails?

Ben Shaevitz: Absolutely. I’m on my e-mail from literally [5:30] AM until [11:30] PM. What would you rather do, Joe? Would you rather pay 9% and never be able to get a hold of your guy and not know if you’re closing and get nervous about your transaction, or would you rather pay 9,25% or 9,5% and be able to get a hold of your guy 24 hours a day and have great confidence that he’s taking care of you, and that he understands that there’s other people at the other side of the transaction, it’s not just his commission? There’s actual people with earnest money deposits down, and there’s realtors depending on the commission… It’s not all about the salesperson, there’s a whole community out there that’s depending on the transaction to close.

Joe Fairless: Oh, absolutely. That is one of the top 3-5 characteristics that I must have in a business partner: being able to communicate with them quickly and get in touch with them quickly. My business partner and I are really good at that with each other, and then also with our investors. I’ve had business partners not from an as high degree of a business partner I have with Frank, my current one, but in certain deals or one-off things, and it’s just terrible when you can’t get in touch with someone you need to. And as you said, earnest money is going hard and you’ve got all these other things… Because it’s not a paint-by-numbers approach when you close a deal. There’s all sorts of left and right turns, and you’ve gotta be able to communicate to make sure that everyone’s moving in the same direction.

Ben Shaevitz: Yeah, agreed. I really think that’s true in any business, but I really feel that it’s especially true in real estate where they paid for an appraisal, they have an earnest money deposit down… I really feel that it’s critical to be totally transparent with whoever you’re dealing with.

Joe Fairless: Based on your experience in real estate and on the lending side, what is your best advice ever for real estate investors?

Ben Shaevitz: My best advice ever for real estate investors would be to not chase the trend. I think that if you’re chasing hot markets, if you find out that a market’s hot, it might be too late already. Also, to not overextend yourself. Make sure that you have 12 months of reserves in the bank in case something happens with your job or with another investment going bad.

I feel that overextending yourself is probably the worst thing that any real estate investor can do, so I would really caution people to know what all their costs are going to be, whether it’s interest, taxes, homeowner’s insurance, repairs… Do your due diligence and make sure that you have the requisite reserves in the bank to weather the storm in case (god forbid) anything happens.

Joe Fairless: On the “Don’t chase the trend thing”, the first deal I bought with my business partner is a 250-unit in Houston, and it was in August 2015. The headlines at the time – every news organization, every newspaper was talking about how oil was never gonna come back. If you’re in the oil industry or if you’re in Houston or anywhere near, or even if you have a relative in Houston, you’re gonna be in trouble. [laughs] And we closed on that deal in August 2015, when nobody else was buying there at all. We bought it for 14.1 million, put in two million. Last December (so about 16 months later) it appraised for over 21 million dollars, and that’s because — a lot of variables, but one of the main variables is we were contrarian investors. We invested in Houston at a time when every single news channel was saying “Oil will never come back.”

Ben Shaevitz: My personal real estate investment is a little bit of a different story. I made the mistake of chasing a trend; I was very young and I had just started making some money, and downtown L.A. was exploding. I bought a new construction, a condominium with huge HOA fees and a mortgage and six-and-five-eighths percent amortized over 30 years. It was a mistake. If you chase a trend like that… Everyone says “Oh, this area is blowing up!”, the people that are telling you that got in way before you did, and it’s probably too late.

Joe Fairless: Yeah… Conversely, I can tell you two deals that have not gone that direction with some single-family home stuff, but this interview is about you, not me, Ben. Are you ready for the Best Ever Lightning Round?

Ben Shaevitz: Yeah, absolutely.

Joe Fairless: Alright, let’s do it. First though, a quick word from our Best Ever partners.

Break: [00:20:00].10] to [00:21:02].15]

Joe Fairless: Ben, what’s the best ever book you’ve read?

Ben Shaevitz: One of my favorite books of all time that I’ve read was by Russell Simmons, a music mogul and entrepreneur; it’s called Do You! It teaches you that you don’t need to take a traditional path to wealth, and it also teaches you to stick to your ethics and morals, and basically treat people the way that you wanna be treated and you’ll be successful.

Joe Fairless: Best ever deal you’ve done, either with Patch of Land or personally?

Ben Shaevitz: I invested in some rental properties (multifamilies) in a college town in Texas, and I feel like investing in college towns is really…

Joe Fairless: Which one?

Ben Shaevitz: It was in Texas [unintelligible [00:21:39].14] I can’t remember the name of it.

Joe Fairless: Lubbock! That’s where I went to school.

Ben Shaevitz: No way!

Joe Fairless: Yeah, I’m a Red Raider.

Ben Shaevitz: That’s awesome. Yeah, back in 2004-2005 we invested in a couple pretty inexpensive rental properties there; we fixed them up a little bit, rented them out for a couple of years and made a pretty nice little profit.

Joe Fairless: Sweet. How did you hear about those properties?

Ben Shaevitz: A friend of mine who works in my office… He was checking out some college towns; we looked at a few different ones, and then we decided on that and it ended up being a really good decision.

Joe Fairless: Sweet. What’s the best ever way you like to give back?

Ben Shaevitz: I like to mentor young real estate entrepreneurs, whether it’s [unintelligible [00:22:18].09] investing in properties, or people who wanna get into the lending business, or property management, or any aspect of real estate. I like to speak to the younger people, the next generation of real estate investors and just kind of teach some of what I’ve learned, whether it was from good experiences or bad.

Joe Fairless: Speaking of bad experiences, what’s a mistake you’ve made on a deal?

Ben Shaevitz: I will refer back to my previous story… That condo in downtown L.A. I feel like I chased a trend and I made a mistake. I think that people should really focus on stable markets, not on sugar spike markets.

Joe Fairless: And where can the Best Ever listeners get in touch with you, Ben?

Ben Shaevitz: They can call us at Patch of Land. They can go to our website, PatchOfLand.com. We actually have a special landing page just for this – you can go to PatchOfLand.com/bestever. Our phone number is right there on our website; they can give us a call. We’ve got a team of ten loan officers there that will handle their request pretty much 24 hours a day.

Joe Fairless: Ben, thank you for being on the show. I love talking sales with you. The primary way that you have grown the business — you mentioned a handful, but one of them is training, and having one tactical thing, the weekly call monitoring where basically you’re doing real-life case studies. One of the lessons learned within that is if you hear one thing, don’t assume it’s not a deal; you want to ask another question, a follow-up question… Holy cow, is that applicable to everyone who’s taking leads via a phone call. Every fix and flipper on this call who has a motivated seller or a non-motivated seller (ever better), what other opportunities do they possess that maybe they don’t even know about? So asking them the right questions…

And then also the three rules to sales that you shared earlier, that your mentor shared with you, that you’ve adhered to… 1) Treat others like you wanna be treated. 2) Under-promise, over-deliver. 3) Returning calls and e-mails promptly, especially if you’re on e-mail as frequently as you are, firing away. So thanks so much for being on the show…

Oh, and lastly, don’t chase a trend – that’s a big one, too. We don’t follow a shiny object, but we want to…

Ben Shaevitz: Yeah, absolutely. And just before we close out, I just wanted to give the phone number. Embarrassingly, I did have to log on to our website to check it. [laughter] It’s 888-959-14-6, and you’ll get one of our friendly loan officers on the phone.

Joe Fairless: Yeah, and one thing I noticed is when you call that number, it says “This call will be recorded”, so they tell you that it’s gonna be recorded, which is appreciated. That’s funny… I called earlier, because we had some tech issues earlier; I called them and they were like “This is being recorded”, and I was like, “Oh, I haven’t heard that in a while.” Now it all comes full circle, because I see what you do with these calls.

Thanks so much for being on the show. I hope you have a best ever day, Ben, and we’ll talk to you soon.

Ben Shaevitz: Thanks so much, Joe. I really appreciate it.

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