By Lee Barnathan, California Business Journal.
Bob Eakin looks around and sees mortgage brokers — especially those in the private-lending industry and in the “fix-and-flip” business — come and go within two to five years. Most are younger people – some even young enough to be Eakin’s children.
Eakin, 54 and a self-described “work hard, old school, high touch, fast response” guy, completed his first loan in 1988. After having done just about everything in the mortgage-loan industry, he has found his niche with JCAP Private Lending, which specializes in short-term, investor-funded real-estate bridge loans.
That is a short-term loan of usually 12-18 months that, as Eakin puts it, “is a fast solution while you work out your problem and get traditional funding or sell the property.
“The economy is always on the move,” he adds. “Entrepreneurs ask what can we do to grow their business? We get to partner with them.”
Most of Eakin’s business loans are “secured by real estate.”
The first loan Eakin did as JCAP was a two-unit condo on the ocean in Newport Beach. The seller was in bankruptcy court, the buyer had 21 days to secure a loan after a judge approved the sale or he would lose his deposit. It was a high-stress deal that a traditional bank would not touch.
In one week, Eakin secured $2 million.
“That’s what we do. Every day,” he says. “We’re not the final solution. We are just assisting in getting them closer to the finish line.”
JCAP funds 1st and 2nd mortgages for cash-out, purchase or remodeling. They are asset-based lenders so very little documentation is required.
One intriguing available loan is the fix-and-flip, which Eakin says the cable channel HGTV made popular (in fact, the popularity could be tied to its show “Flip or Flop,” which takes place in Orange County; JCAP is based on Costa Mesa).
Suddenly, many new private lenders appeared to fund those who wanted to buy a house, repair it and sell it for a quick profit. Eakin’s experience tells him it’s a risky proposition because the TV show fails to show how so many things could go wrong.
Here are some of those potential problems: careless workmanship, bad electrical wiring, doors that don’t open and close properly, mismatched metals, malfunctioning air conditioning, safety features that aren’t safe, the plumber not showing up. All of which results in the budget skyrocketing and the entire project taking longer than expected.
This is why Eakin only has 10 percent of JCAP’s entire portfolio tied into these types of loans, although he quickly points out that much of the $68 billion private mortgage industry is into fix and flips.
Eakin’s primary customers have good credit and need cash to invest in their business, buy another property, or get cash from a property that they inherited. JCAP, so called because all of Eakin’s kids’ names start with J, and CAP stands for capital, serves the mortgage broker and investor community.
Mortgage brokers use JCAP for short-term funding when they need more time to secure long-term money. If a commercial bank requires a higher FICO, more reserves, or stabilized rents, JCAP can fund quickly with a short-term loan — until the borrower meets the bank’s requirements.
With investors, Eakin shows them that $100,000 on a first or second mortgage can yield between eight and 12 percent — “quite a bit better than a 12 month CD,” he quickly points out.
“Non-profits give us their money to invest,” he adds, “then we get them more money, and they give it away. I dig it. My phone rings all day long with new investors and brokers with new scenarios.”
Is it any wonder that Eakin has been rated in the U.S. top 50 of mortgage lenders in both origination volume and number of loans closed? He has funded over $1 billion in loans.
“I’m the chronic hard-worker, up at 5:30 a.m. thinking about my investors and clients,” he says. “They tell their friends, those friends come back, and then suddenly you’ve got a big business.”
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