August Is A Month To Ask: ‘What Will Be Your Legacy?’

Hard Money In Real Estate Is An Overlooked Option For Self-Determined People, Says Investment Banker

Just as New Year’s Day serves as a timely reminder of one’s personal goals, August now offers a different perspective on a similar theme as “What Will Be Your Legacy?” Month.

While No. 1 on most people’s list is likely being remembered as someone who loved and cherished their loved ones, investment banker Salvatore M. Buscemi says career accomplishments that provide for one’s family must be a close No. 2.

“In the financial world, legacy usually means leaving money for the betterment of others, including family, community or an otherwise good cause,” says Buscemi, managing director of Dandrew Partners LLC in New York City and author of “Making the Yield: Real Estate Hard Money Lending Uncovered” (www.MakingTheYield.com).

“Monetary success within one’s lifetime, and leaving something behind, is a kind of tangible legacy that is the result of a noble effort.”

Buscemi offers a path for the entrepreneurial-minded to meet that No. 2 priority for one’s legacy – hard money lending in real estate.

• Hard money lending is one of the oldest professions known to humanity. Ever since Bronze Age Sumerians were writing on clay tablets in cuneiform, people have had the need for cash flow. Hard money lending is a type of community lending. Like a bank, investors make short-term loans to small businesses that buy and repair distressed properties. Then, businesses refinance properties with conventional bank loans and repay the short-term loans at higher interest rates. This generates more profitable returns for the original lenders.
• It’s a safe form of lending, as long as the criteria are met. Hard money loans, also called bridge loans, fall within the peer-to-peer lending category. If you have a cash-strapped client and you’re the lender, you’ll want a minimum amount of protection in the form of equal-value collateral.
  

  “If a client has missed several payments, then you have their collateral to resell and claim back your money with interest,” he says. “However, hard money lending features a human touch that traditional bank loans do not have. Along with a past history indicating a good investment, lenders may have an intuitive sense from a client that he or she will be a worthy and smart investment.”

• Don’t just trust your intuition – back it up! Do your homework before loaning money. What does that entail? First, consider their credit, and dig into the details therein. Clients who know how to rehab property, or have a network of contacts in place to do so, bode well. Education and job history are also areas to consider.
  

  “Additional measures include various forms of insurance that you can buy and building in agreed-upon prepayment penalties,” Buscemi says. “You’ll need to do more research. Initially, it’s just important to know that there are many protective measures available when you want to make a healthy profit from loaning your money.”

• Local and more intimate business relationships help protect from global, geopolitical shocks. Many investors are sick and tired of arbitrary factors that may occur overseas that have drastically reduced their portfolio in the past. Hard money lending puts personal interaction at a high priority; it cuts out plenty of unforeseeable risks. Keeping clients with local properties helps prevent lenders from being blindsided by unknowable factors.

About Salvatore M. Buscemi

Salvatore M. Buscemi, author of “Making the Yield: Real Estate Hard Money Lending Uncovered,” is managing director of Dandrew Partners LLC in New York City (www.dandrewmedia.com). The company specializes in placing capital from prominent institutional investors into middle-market distressed commercial real estate investments. He began his career at Goldman Sachs, where he worked four years as an investment banker. A frequent speaker on hard money lending, Mr. Buscemi also co-founded Dandrew Strategies LLC, a $30 million real estate solutions provider in the secondary mortgage market specializing in non-performing residential mortgage portfolios.