The Journey from Broker to Direct Lender (Insights from Marty Chera)

Bryce: We’re thrilled to have Marty Chera joining us today! Can you introduce yourself? Share your background and give us your elevator pitch, then we’ll dive into some questions about hard money.

Marty: Absolutely! I’m Martin, the general manager, and I’ve been in lending for about 13 years. I started as a loan broker with my son for the first four years, and for the last eight, we’ve been a direct lender specializing in fix-and-flips, ground-up construction, and 30-year permanent loans for both single-family homes and commercial properties. Our retail locations are in Brooklyn, Queens, and the Bronx. Interestingly, when I was in my 20s and 30s, I did some small fix-and-flips myself. Back then, there was no hard money available, so I financed my properties with a checkbook from American Express Centurion Bank.

Bryce: That’s fascinating! You’re revealing your age a bit, but I love it!

Marty: (Laughs) Well, time flies!

Bryce: Let’s talk about your lending focus. You mentioned you primarily operate in New Jersey but also lend in Dallas. Those are two very distinct markets—why Dallas?

Marty: Good question! Our headquarters is in Brooklyn, with an office in New Jersey, but I’ve lived and invested in 46 states. I shifted my focus away from New York about 10-15 years ago due to increasingly challenging landlord laws. I started investing in multifamily projects, sometimes as a co-GP and other times as an LP. Texas is appealing because it’s landlord-friendly and has strong economic growth, job opportunities, and a growing population.

Bryce: That makes sense! Can you give us a brief overview of your company, including typical loan-to-value (LTV) ratios and the types of properties you focus on? Are you mostly single-family, or do you also do small-balance commercial loans?

Marty: Great question! As a nationwide lender specializing in fix-and-flips, we can offer up to 90% of the purchase price and 100% of the rehab costs, providing high leverage for borrowers. We’re not overly credit-sensitive and don’t require extensive financial documentation, making it easier for clients to secure funding. Our hard money loans typically have terms of 12 months of interest-only payments, with rates ranging from 10% to 12%, depending on the borrower. I’m proud to say we ranked number three on Forbes this year for offering a variety of financing products and quick closing turnaround times. Most of our deal volume comes from New York, New Jersey, Texas, Florida, and South Carolina, but we also take on random deals from other locations.

Bryce: Wow, that’s quite diverse! What’s your average loan amount? I know areas like New York and New Jersey can be pricey.

Marty: The typical loan amounts for fix-and-flips vary by state. In New Jersey, they’re often between $300,000 and $500,000, while in New York, they usually start around $700,000 to $800,000. It’s tough to find properties in New York for $300,000 to $500,000 these days! As a direct lender, I’m curious—especially as someone newer to the space—where did you find your capital in the beginning? Was it through friends and family, lines of credit, or bank relationships? What’s your secret?

Marty: Good question! In our first four years, we mainly brokered deals and sourced funds from private investors—friends and family. We offered attractive returns to establish ourselves. It’s essential to focus on loan value, but also on default rates and underwriting. My son David is meticulous about evaluating each opportunity to ensure a safe and profitable exit strategy. We tell borrowers if a deal doesn’t make sense, emphasizing that a good lender should provide value and education. For top-tier borrowers with solid track records, we might take calculated risks on deals that don’t initially look great, trusting their experience. Our default rate is typically reported around 3% to 5%, but we’re proud to maintain ours in the 2% to 3% range due to careful underwriting. As you prove your capabilities to capital markets, you build relationships and grow your volume, enhancing loan performance.

It’s essential to focus on loan value, but also on default rates and underwriting.

Bryce: Got it. So they take a holistic view of your lending business and assess their confidence in you and your model. From there, opportunities open up.

Marty: Exactly! You’ll always need lines of debt and equity from private capital. Today, I’m happy to say we have our first five or six investors contributing to the fund. They receive a percentage not just on their investment but also on our profits in our sister company.

Bryce: Interesting! That’s unique in the industry because most funds, like ours, simply pay investors a flat rate. Can you dive deeper into that profit-sharing model?

Marty: Sure! May I ask what you pay your investors?

Bryce: We offer between 9% and 12%. We typically loan out around 14% with some points up front, and we have tiers—for example, if you invest $50,000, you start at 9%, but if you invest $250,000 or more, you can go up to 12%.

Marty: Okay, so it’s 9% to 12%, paid quarterly or monthly?

Bryce: We’re a bit unique in that we pay out as each project completes. We stagger the projects so investors aren’t waiting six to eight months for payouts. Typically, they see a payment every six to eight weeks, but we don’t do regular disbursements.

Marty: Gotcha. So each investor is effectively investing in the project rather than the fund itself?

Bryce: Exactly! It’s interesting because we pool all the capital like a fund, but we logically separate the capital for each investor on individual projects. We’ve found that investors feel more comfortable knowing exactly which projects they’re invested in, rather than feeling like their money is just floating around.

Marty: Got it. When I first started with private funds, everything went into the fund, and we used that capital to invest in my deals. Now, with our new 506, we don’t even need outside capital because we have multiple lines of credit to fund entire deals. We can close in a matter of weeks. That said, we’re grateful that people still want to invest in our hard money loans, but honestly, we don’t need it at this point.

Bryce: That’s great!

Marty: Now with our 506, we’re doing this strictly for all loans. That’s why I call it a sister company—any financing we do there allows investors to receive 15% of the company’s profits. We take no management fees and don’t even deduct normal costs like partial rent or payroll. If you think about it, that means the return is probably closer to 30-40% since we’re not deducting those legitimate expenses.

Bryce: Oh my goodness, that sounds amazing! I wanted to ask, though—some in the industry are hesitant about institutional capital and lines of credit, especially after the housing crisis in 2007-2008 when many of those sources dried up because everyone was nervous about the economy. People say they’re more comfortable with private capital since it offers more control and doesn’t disappear as quickly. What’s your perspective on that? Has it made you nervous? How do you operate?

Marty: I want to clarify your question. For example, if you have $2 or $3 million, are you using any of that equity to fund every loan?

Bryce: Correct. We’re currently using only private capital.

Marty: So are you processing those loans in a matter of weeks, or are they on your balance sheet?

Bryce: Yeah, we carry all the loans and service them, from origination to payoff.

Marty: Got it. Let’s say you have a good month and do your volume of $3 million. If you can’t fund any more, then your business completely stops, right? That’s not ideal. You want your business to keep growing. I just returned from a lender conference in Vegas, and one thing I can tell you is that capital is out there—whether from institutions, credit lines, wholesale lines, or repo lines. There’s actually more capital than there are deals.

In your case, if your equity is tied up and your business has stopped after funding, that’s not good. You want as much capital as possible to keep your operations running. It can be expensive to spend money, but even if you’re making lower returns, growing your volume leads to happier customers. You don’t want customers going elsewhere because they can’t find your deals.

It can be expensive to spend money, but even if you’re making lower returns, growing your volume leads to happier customers.

Bryce: Interesting. The funny thing is, I keep hearing that profitable deals and borrowers are the difficult part, but that’s the opposite of what we’re seeing. We have more deals than we do capital.

Marty: I bet you’re turning them down.

Bryce: It sounds like we are at the moment, just because we don’t have enough to keep all of them funded.

Marty: Well, this means we should work together!

Bryce: Let’s do it!

Anyway, we’re in Idaho so, selfishly, we’re a small operation, but we have a decent number of listeners who are trying to grow their capital stack. Do you have any specific vendors or partners you’ve worked with in the past that could help us sidestep the whole capital-raising process and tap into some lines of credit, wholesale lines, or repo lines?

Marty: No, it’s strictly friends and family for us. If you’re looking to connect with more capital sources, consider credit unions or forums where you can meet global and family offices. Building these relationships is essential, and you’ll need to show them your numbers and balance sheets. Once you entice them, the capital is definitely out there. Family offices are particularly interested in real estate, whether it’s a project or lending, but you have to find the right forum and connect with the right families.

Bryce: Gotcha.

Marty: Just to add, family offices receive hundreds, if not thousands, of emails weekly looking for capital.

Bryce: Do you have any tips to speed up the process of building those relationships and networking, so you’re not just another email?

Marty: Great question! When I started this business, I was out canvassing the streets day and night—attending every networking event, courthouse, chamber of commerce, and rotary club—until I built a pipeline of contacts. I’d say skip the emails and meet them in person. Many events and forums are even overseas, in places like the UK or China.

My son focused mainly on the U.S.—Florida, New Jersey, New York—but I opened his mind to the potential overseas. Like any business, you need to spend money to make money, and you must take action.

What’s the proper plan? If you have a plan and take action, you’ll get there. Sometimes you might need to tweak it, but focusing on making personal connections is crucial. When you’re out there, whether domestically or internationally, make that connection. Ask when you can call them again or the best time to connect. I don’t just take their cards and chat for 20 minutes; I want to know if I can set up a proper Zoom meeting when I get back to the States in two days.

To recap, I focus on building a memorable connection, not just a phone call. I want them to remember my face, my company, and what we discussed.

Bryce: I love it! That’s very good advice—old school, right? It’s hard to believe that you can still build real relationships in person these days, but that’s how you do it. Very solid advice.

Bryce: I did want to ask about your journey. You mentioned that for 13 years, you were brokering deals before becoming a direct lender. What was the catalyst for you to start brokering? What was your journey like, and what made you switch to funding loans yourself?

Marty: Just to clarify, I’ve been in business for 13 years, but the first four were spent brokering before I became a direct lender.

Bryce: Got it.

Marty: I started in my mother’s basement. I was a successful retailer with four stores, but I could see the writing on the wall—rents were too high, big box stores were thriving, and retail was changing. About a year later, I joined a company that taught me about financing, covering everything from merchant cash advances to SBA loans and hard money. I paid for a week-long course at a place called Commercial Capital Training Group, which is no longer around, based in Albany.

When I returned, I felt lost. I had learned about various products but didn’t know what to do next. To avoid feeling down at home, I sought a different atmosphere. My younger son joined me, and we started making calls about merchant cash advances and equipment financing.

By chance, the marketing efforts of that company led to my first success in commercial real estate. I brokered a deal in Florida and made about $10,000 to $15,000 on a $500,000 property. With my retail background, I was familiar with square footage, location, and rents, so I decided to focus on real estate financing instead of merchant cash advances or SBA loans.

I wasn’t having much success with those other products, and I believe in doing what you enjoy rather than just what you know. I liked real estate, so we shifted our marketing strategy to focus on it. In those first four years, I was just brokering deals. I worked with lenders like Lending One and Lending Home while my son learned how to underwrite deals effectively. He became friends with the underwriters, which helped us submit clean deals.

Over time, our submissions became more reliable, and lenders started to pay attention to us. Four years later, we had built trust with family and friends, who began to invest their capital with us. Our first fund was around $500,000, but we grew from there, reaching $4 or $5 million with our second fund. Recently, we transitioned to a 506(b) offering. It’s all about learning the process and maintaining strong submissions. When I see clean submissions now, I prioritize those brokers because it reminds me of my early days.

Bryce: That’s a very good answer. It’s clear there’s a lot of room for brokers in this space. They’re crucial for maintaining a steady pipeline of deals and building relationships. What distinguishes a good broker from a bad one? You’ve likely seen a bit of everything, so if a broker came to you on a silver platter, what would that look like compared to someone you’d rather not deal with?

Marty: I discussed this at a recent forum with about 100 brokers. Many lenders wouldn’t return my calls when I was starting out, which frustrated me. I would drive hours to walk into their offices and ask what I was doing wrong. Some were helpful, telling me my submissions were subpar, while others simply ignored me.

From these interactions, I learned that a good broker submits clean deals. Often, when I send brokers my application, they just forward it to the customer. The customer fills in half the paperwork, and the broker sends it back without reviewing it. If I get a sloppy submission, I question the broker’s commitment. My time is valuable; if you want to make money, you need to do the work.

I learned that a good broker submits clean deals….if you want to make money, you need to do the work.

I prefer to work with brokers who take their responsibilities seriously. I also avoid brokers who are only focused on making points and don’t consider the lenders. Dealing with multiple brokers who inflate fees is not my style. I’ve learned from my mistakes, and I value brokers who understand the importance of submitting quality work.

Bryce: That’s great advice. You would think it would be common sense—like, hey, fill out the form properly to get what you need. But these days, it seems rarer than it should be. So, imagine I’m a broker. I have a borrower who comes to me with a great deal: the LTV is 70%, and they have solid financials. What kind of fee structure do you typically use? How do you pass that on to the borrower? Is it competitive? Explain the whole process to me as if I were a broker.

Marty: I always start by asking brokers what their clients expect in terms of rates, terms, and leverage. Right now, in hard money lending, most are at 10 to 11% on points, while I can offer rates starting at 1%. It’s crucial to understand what the client is looking for. For example, this morning, a client wanted to pay 9% on a multifamily deal with one point. I told him that my multifamily bridge would be around 10 to 11% and that I needed to see the deal first to avoid overselling.

In hard money lending, rates are generally 10 to 11%. I emphasize that the rate isn’t the only factor to consider. For instance, if you take a 10% rate for six months, you’re effectively paying only 5%. Plus, there’s no prepayment penalty, and it’s interest-only for me. Unlike many lenders who require minimum interest for six to nine months, we don’t have that restriction. I had a customer yesterday who got a quote at 10.75%, while I was at 11.5%. I pointed out that it was just a $200 monthly difference, but I was offering him more leverage. Cash is king, and it’s about explaining that value.

People often focus too much on points instead of what the product can do for them. Many think a lender at 11 or 12% is offering a long-term loan, but I remind them it’s only for 12 months. If you’re in the deal for six months, you’re really paying about 5.5%. It’s about shifting that mindset.

Bryce: That’s huge! I love that perspective. We’ve done about 75 or 80 flip projects before starting to lend, so I can often tell if a deal makes sense within seconds. That skill is valuable for borrowers; you can quickly identify a bad deal. Educating them about this is key, even if they don’t realize it right away. Framing it as, “If you pay this off in six months, you’re really only paying 5 or 6%,” helps avoid getting lost in the details.

Marty: Exactly! If they dispute the points, I can offer options, like lowering the leverage to reduce points. I explain that if you have $100,000 cash and make $100,000 on a property, that’s a 100% return. But if you use OPM (other people’s money) and only put down 10%, that’s a 1,000% return. Their other $90,000 should be diversified, not just sitting in the bank. We need to shift their focus from just points to what the product can truly achieve for them.

Bryce: There’s so much more to it than just that. I love it! You mentioned discounts from Home Depot; can you explain that and your unique value proposition?

Marty: Sure! On our website, ExpressCapitalFinancing.com, we have great affiliate partners, including Home Depot, where we offer borrowers a discount of up to 30% on materials after they close their first deal. This discount applies to specific categories and can be used indefinitely. However, they need to close their first deal with us to qualify.

Marty: That’s just one of the many affiliates we have. If you don’t mind, I’d like to add a quick note.

Bryce: Absolutely. Go ahead!

Marty: Thank you! We have several affiliate partners that help our investors find properties, such as hubs for foreclosure listings and DealMachine, which is great for marketing distressed properties. They can handle mailers, postcards, and more. We often podcast with these vendors to bring value to our clients; that’s our main focus.

Bryce: Marty, you’re a wealth of information! It’s fantastic. I often hear borrowers say, “This guy offers 10.5%, and you’re at 12%.” But there’s so much more to consider, especially with the value you provide through your affiliates. We’ve had renovations costing $150,000 to $200,000. Just think about the 30% savings on materials from Home Depot. Is that worth the 1% difference?

Marty: Absolutely, it’s a no-brainer. The math is compelling. I told a customer yesterday, “You’re looking at a vendor offering 10.5% and another at 10.75%, while I’m at 11.75%. The difference is just $252 a month, adding up to $1,500 over six months. Everything else is the same, but remember, the rate could float higher after six months.” People fixate on the rate, but we need to shift that mindset and show them the bigger picture.

Marty: It’s not just about the rate; it’s also about higher leverage and quicker closings. Besides the Home Depot discount, we offer a line of credit for unlimited deals and financing once they close their first deal. Many lenders limit borrowers to two or three deals, but we don’t. You can handle multiple deals in a day or throughout the year.

Bryce: Oh wow! This is incredible. I have so many questions, but I want to respect your time. What’s next for you? What are your five- or ten-year goals?

Marty: I’m very goal-oriented. Bigger lenders are doing about $100 to $150 million a month. I know a few of them, and they share valuable insights. My goal is to reach $100 to $250 million. Currently, I’m at about $30 to $35 million, so I have a way to go. We’re expanding our team and just opened a larger office in Brooklyn that can fit about 40 more people.

Marty: We’re hiring a business developer and a manager. My Jersey office can fit ten, with four spaces already filled. I aim to reach $100 to $150 million a month in volume. As for the future, I might sell or merge with a larger company. Some companies have reached out about potential purchases, but I’m looking for a bigger conglomerate to buy me, rather than selling outright.

Bryce: That’s great to hear. Given what you’ve shared, I have no doubt you’ll achieve those goals. A lot of people might think a 4 or 5x growth is unrealistic, but you clearly have the expertise and drive to make it happen. Just a couple more questions: if you could go back 20 years and give your former self or a newer lender one or two tips to avoid mistakes or scale faster, what would they be?

Marty: Always be learning—ABL. It’s not just about A-B-C; it’s about continuous learning. Being an entrepreneur isn’t easy. As a business owner, you handle sales, operations, and everything in between. Many think ownership leads to wealth, and it can, but only if you know how to run a business.

Being an entrepreneur isn’t easy. As a business owner, you handle sales, operations, and everything in between. Many think ownership leads to wealth, and it can, but only if you know how to run a business.

When I was 20, my dad brought me into retail, and I grew from one store to four. Did I make mistakes? Absolutely. But I see mistakes as valuable learning experiences. I’m a strong advocate for learning through experience; it can be cheaper and faster than franchising. Franchisees pay a lot for the owner’s experience, but having your own challenges means you’ll seek solutions from friends or local competition.

Always engage with your staff. My two boys prioritize creating a positive team environment. It’s not just about salary; it’s about making the workplace enjoyable. Many of my team members have been with me for years because we take care of them.

We focus on continuous education. After initial training, we offer weekly classes for 90 days. We found that many were forgetting what they learned, leading to struggles and departures. These sessions cover products, programs, and updates, and they’ve proven very helpful.

I hope that gives you some solid insights!

Bryce: That’s great! You’ve shared so many valuable insights. I once heard a quote that said we need reminders more often than we need teaching. That’s what you’re highlighting—driving home those key points with the team. We can get distracted and lose sight of the bigger picture, so continuous education and reiterating the main points is essential. I love it!

Marty: Thank you!

Bryce: I could keep asking questions for another two hours, but I want to respect your time. So, looking ahead, we might need to schedule a follow-up episode because this has been fantastic. For anyone who wants to get in touch with you—whether for loans, advice, partnerships, or to leverage your affiliates—what’s the best way to reach you?

Marty: Our website is expresscapitalfinancing.com. The main office number is (718) 285-0806. If someone wants to reach me directly, my office line is (201) 603-2370. We’re also starting to table fund small loan brokers, meaning clients won’t know about Express Capital Financing; we use a generic name so the broker can advertise without revealing our identity. We can handle fix-and-flips, construction, 30-year permanent loans, and commercial properties.

Bryce: Amazing! That’s such a valuable resource. I’ll definitely send business your way, and I hope some readers will too. Thank you so much for your time, Marty. This has been incredibly helpful!

 

Contact Marty!
Website : expresscapitalfinancing.com
Office Phone : (718) 285-0806
Marty’s Phone : (201) 603-2370

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