Surviving Market Meltdowns – Kevin Green’s 16-Year Journey in Private Lending

Bryce: Today we have a special guest, Mr. Kevin Green. We’ve got some fun topics to jump into. First and foremost, Kevin, can you give us your high-level introduction, your elevator pitch? Tell us about yourself.

Kevin: Sure! I’m Kevin Green. I’ve been in the business since 1998. I started as a broker, thinking that was my career path, but eventually found my niche in private and hard money lending. Growing up in a real estate family in Silicon Valley, I’ve been exposed to it since childhood. My mom, now 84, is still selling real estate in the Bay Area and is a wealth of knowledge. After college, I moved back to San Francisco, where I began my real estate career working for a private money lender. I later spent about 11 or 12 years with another company north of the city. As the market changed and internal issues arose, I partnered with Matt Cortez to start our own company, Right For Capital.

Bryce: Wow! 2008 was an interesting time to get into hard money lending. What was that experience like, especially when the world was falling apart around you?

Kevin: It was definitely interesting. I was brokering at the time and found it unchallenging, just being a slave to institutional lenders and their guidelines. When I got a job offer to work in hard money, the market was starting to melt down, but at the time, it felt like everything was fine. Then suddenly, the wheels fell off. It was tough, but I wouldn’t take it back because those challenges taught me valuable lessons about the industry. When things started picking up again, I was able to apply those lessons and avoid past mistakes. It was hard, but a great learning experience. In hindsight, I wish I had bought more houses back then because no one knew what was coming.

Bryce: Right, it’s always easy to say that now!

Kevin: Exactly. It was difficult, but it shaped my perspective and how I approach lending and investing today. We’ve been through tough cycles, and many in the industry today haven’t experienced that, which gives us a unique advantage in assessing risk and making informed decisions.

Bryce: Knowing that you’ve been through a down market, are you doing anything specific to insulate your business in today’s environment, or is it business as usual?

Kevin: We actually do quite a bit. When we look at a loan, we underwrite it specifically for the worst-case scenario. Right now, we’re seeing a lot of high-leverage rehab loans—85%, 90%—and we avoid that world because we think it’s too risky for our investors. There are certain segments of the market, like high-level rehab projects and general office spaces, where we just don’t want to engage unless it’s a very good credit tenant, like a medical office fully occupied by doctors.

We assess each loan on a case-by-case basis and try not to get caught up in what competitors are doing. We focus on the merits of each transaction rather than following trends. This business is always changing, and we need to be cautious about our decisions. Our goal is to keep our borrowers and brokers happy with smooth transactions, not to fix major problems.

This business is always changing, and we need to be cautious about our decisions.

Bryce: That’s a very good point. It’s easy for businesses to look at competitors and think they should follow suit, but it can be more effective to stay focused on your own strategy.

Kevin: Exactly. We have a framework for what we want to pursue, based on what our investors are looking for. If a deal falls outside that framework, it’s fine; we simply pass and move on to the next transaction.

Bryce: Are you comfortable sharing details about your company, like loan volume and origination sizes?

Kevin: Sure! Our loan volume has definitely been down over the past 18 months. Previously, Matt and I were doing about $25 to $30 million a year on average. Now, in 2024, you could probably cut that down by 50% due to the low transaction volume in California. Rates have been around 7.5% to 8%, and the commercial market has been a bit sideways. However, it seems to be picking back up, and I’m hopeful we’ll return to that $30 million range.

Our sweet spot is loans between $500,000 and $2 million. Below $500,000, we’ll do those loans, but we prefer to focus on that range. Interestingly, while we used to handle larger loans without issue, many investors have pulled back on those now. The smaller loans are currently getting funded more easily, while larger, complicated transactions are being managed by debt funds.

Bryce: That’s interesting.

Kevin: Yeah, it’s been a weird market with inflation and the issues in commercial debt and office buildings. We’re taking a step back to identify good loans that feel safe for our investors, but it’s definitely been an interesting time, and I expect things to keep changing. If you ask me the same question next year, my answer might be very different!

Bryce: Elaborate a little bit more on your investor makeup. It sounds like you’re doing a direct placement or syndication type structure rather than a fund. Do you have 50 investors, or are these just friends and family—small mom-and-pop stuff? Where’s all your capital coming from?

Kevin: Yeah, all of the above. We have friends and family, previous people we’ve worked with, and people who have heard about us through word of mouth, like, “Hey, we did this deal, and it paid off. These guys are great.” We put them into our investor database. It’s funny; everybody I talk to in this business has a database of about 500 investors, but they tend to work consistently with 20 to 30 of them.

Kevin: We have close to 100 in our database, but we really enjoy working with about 20 on a consistent basis. There’s a mutually beneficial business relationship where we present them good loans, and they pay off. They’re like, “Hey, that was great. Let’s do another one.”

Bryce: Let’s do it again.

Kevin: The issue we’ve seen— and I don’t know if you’ve noticed this on your side—is that people can get a money market or CD at 5.5% with no risk. They’re thinking, “Why would I want a 9% or 10% yield in real estate right now when I can get a treasury?”

Kevin: I think that will change as rates come down, and people will be looking for yield again. But for the past 18 to 24 months, it’s been, “I don’t want to take risks when I can get this yield on a treasury or a money market.”

Bryce: Oh, that’s a very interesting point.

Kevin: Yeah.

Bryce: So, it sounds like you have your borrowers, a loan comes into your pipeline, and then you underwrite and vet that deal. From there, you reach out and say, “Hey, we’ve got this loan pending. Who wants to invest in it?” Is that how it works?

Kevin: Exactly. We’ll do a pre-underwrite, either myself or Matt will underwrite it, or we’ll do it together. Sometimes, if it’s a bit tricky, it’s like a mini capital committee. If I say, “I don’t know,” then we think, “Maybe this isn’t the right transaction.”

Kevin: We’ll do the pre-underwrite, vet it, and present it to our investors, saying, “Here’s the transaction, this is the yield to you, here’s the story, the exit strategy, the amount needed, and the location.” Sometimes we do appraisals, sometimes we don’t, depending on the situation. The accuracy of some AVM models is wild; the technology is really good, especially for purchases versus refinances.

Kevin: We put it out to our investor database. They commit based on a percentage; sometimes they want the whole thing. That’s usually how we work. We were going to do a fund, but we feel like the timing isn’t right to raise capital given where interest rates are.

Kevin: People can get low-risk yield right now. When rates start coming back down, and the spread changes, we’ll probably do a fund. But for now, we just syndicate to our doctors, and that works.

Bryce: That was going to be my next question—if there was a specific reason you hadn’t done the fund, whether it was strategic, or just didn’t fit your business model. But that sounds like a good idea.

Kevin: Yeah, right now, a lot of coworkers and friends in the industry—what I’d call friendly competitors—are having a very difficult time raising capital. We’ve talked about it, and while we’re considering it, now is probably not the best time to do it. Things are in motion, but it’s not like we have to rush to raise capital right now.

Bryce: Yeah, absolutely.

Kevin: I feel like capital right now is not the issue; there’s always money available. The real challenge is quality deal flow. For me, it’s about finding good transactions. I invest a lot in my own trust deeds because when my investors see that I’m putting my money in, it shows I believe in the deal. If I wouldn’t put my parents’ or grandparents’ or even my nieces’ and nephews’ college funds into a transaction, then I shouldn’t be doing it. That’s a principle that has always stuck with me.

I feel like capital right now is not the issue; there’s always money available. The real challenge is quality deal flow.

Bryce: I love that. You know, it’s interesting because we also invest a lot in our own deals. I’m way more comfortable losing my own money than I would be losing my parents’ or aunts’ or uncles’. I’d hate to have to go to them and say, “Well, we lost your money. I’m really sorry about that.” That’s a very good rule to follow. I once heard something similar about borrowers—you know, those people who are just like animals. They’re creative, hungry, and doing big things. Those are the kinds of borrowers I love. I’m 100% confident funding their deals because I know they’ll perform.

Bryce: But if someone seems wishy-washy, like they can’t even handle their own personal finances, what makes me think they can manage their business finances, let alone mine? That’s a safety check we use to decide when to pass on a deal.

Kevin: Yeah, for sure. It’s a funny business. It has changed, especially with large institutional capital flowing into our sector. They claim to be private money lenders, but I just laugh because they’re really institutional-backed. My definition of private money is what you and I do—peer-to-peer lending, matching borrowers and investors. When they say they’re private money after trading a $300 million pool to some guy in New York, that’s not private money at all.

Kevin: The business has shifted from its original roots. Back in the day, there was probably someone at a saloon saying, “Joe wants to buy land for his cattle, and this guy over here has money to lend.” Now, it’s become more institutionalized because these larger players realized they could get good yields on low LTV assets and wanted in on it. It’s interesting how it’s been packaged for investors.

Bryce: Absolutely. So, to piggyback off that, do you incorporate any institutional capital into your lending stack? It sounds like you don’t, and it’s all 100% private investors.

Kevin: Correct. We have a couple of corresponding relationships for very large transactions, like a $60 million construction loan, but that’s beyond our typical capital stack. We have relationships in those cases, but for about 90% to 95% of our transactions, it’s all small, non-Wall Street investors. They might be high-net-worth individuals from various backgrounds, but we don’t sell anything to Wall Street or operate in that model.

Bryce: Right. Knowing that, and that there’s so much money in the space, how do you personally separate yourselves from the competition? What’s your unique advantage compared to larger nationwide lenders like Chiave or PeerStreet?

Kevin: Well, history has had its problems, but the key is that you’re talking directly to decision-makers. We can make decisions quickly—either I or Matt can handle a deal, so speed in execution is crucial. We’re not dependent on an underwriter or bogged down by multiple channels. If it makes sense, we can do things without an appraisal and think outside the box. For instance, we’ve done some great land loans this year in urban infill locations that might surprise some people.

Kevin: When you see a loan with a 30% LTV in a major MSA, five blocks from the beach, it’s a no-brainer. We can say yes to that without hesitation, and if something goes sideways, my investor would be happy to own that property. That’s our unique selling proposition—we move fast. Based on our knowledge, experience, and location, we know what to look for. If something doesn’t feel right, we’ll pass.

Kevin: Many Wall Street firms hire young sales reps who are out pounding the pavement but don’t have any underwriting or funding authority. They’re just marketing. If someone needs a quick solution, like cross-collateralizing a commercial building with a house, we can make that work efficiently. We’re not limited to a strict lending box; we’ve tackled some interesting scenarios over the years.

Bryce: So, you’re speaking directly to decision-makers, not random sales reps. You’re the ones directing the funds, and you can make those yes or no calls.

Kevin: Exactly. We know what our investors want and what they’re comfortable funding. Often, I can tell within 30 seconds if a deal is worth pursuing based on my experience. Speed is essential in our business. How many times have you heard, “The bank said no, and we’re supposed to close in three days”?

Bryce: Every day.

Kevin: Right? It’s constant. I often wonder why they didn’t reach out a month ago; we could have alleviated that stress. Instead, they trust the salesperson who then takes it up the chain, and by the time it gets to the VP, it’s a no.

Bryce: So what’s your opinion on the “loan to own” model? Some lenders are okay with foreclosing on a project because they want the property. Do you like that approach, or would you rather avoid owning these properties?

Kevin: I prefer not to own the properties if possible. My focus is on getting the deal done and ensuring my investors are satisfied. I’m not in this to become a landlord; I want to facilitate good transactions and build solid relationships with my investors.

We’re not alone in this. Our investors aren’t just loaned out. In California, things can get tricky; nothing is easy here. I can’t speak for other states, but in California, we want to avoid problems. When underwriting a deal, I always consider the worst-case scenario. If things go sideways, I need to be comfortable with the idea of foreclosure, and I believe my investor would be too. But I’m confident that a good transaction won’t end up in foreclosure because someone will buy it at the courthouse steps.

Usually, the worst-case scenario doesn’t happen. It’s only recently that I’ve had some challenges, largely beyond our control. It can be tough because borrowers often panic when they realize they have equity and will go to great lengths to protect it, even if they know they’re in the wrong. There always seems to be an attorney willing to take on their case, which can cost everyone time and money. We try to avoid that situation altogether.

It’s interesting; no one has a problem borrowing the money, but the issues tend to arise when it’s time to pay it back. It’s rare to find someone who outright refuses the money, but when it comes time to repay, that’s when the scrambling begins.

Bryce: Right? You better start working on it.

Kevin: Exactly. So, do you find the same issues in Idaho?

Bryce: Fortunately, we’re new to the space, and we haven’t had any issues with foreclosures yet—our default rate is 0%. But I know it’s not a matter of if, but when. I’m curious about your experiences since we haven’t faced that yet. Any recommendations or tips you’d share based on what you know now?

Kevin: On the deals that went south, one was a nightmare due to a fire at the property—there was nothing we could have done. Often, borrowers panic when they’re backed into a corner. My advice to any borrower is to communicate with your private money lender. If there’s a problem, picking up the phone to call me or Matt goes a long way. Let us know you need help.

We want to avoid situations where threats or lawyers are involved. It’s better to work together toward an amicable solution where everyone feels satisfied and gets paid off.

I think one key is being open and honest. For instance, we recently dealt with a construction project in San Francisco. There was a stop work order issued, but we only found out when we reached maturity. Had the borrower communicated that three months earlier, we could have worked through it immediately instead of discovering it at the last minute.

It’s better to work together toward an amicable solution where everyone feels satisfied and gets paid off. I think one key is being open and honest.

Bryce: It’s interesting you say that. Borrowers often feel intimidated and hesitate to come forward when something isn’t working. But lenders are there to help.

Before becoming a lender, I personally dealt with almost 100 fix-and-flip projects. We faced issues with permits and stop work orders. Lenders are on your side; if you succeed, it benefits everyone involved. It’s in everyone’s best interest for the loan to perform. Yet, borrowers often think they can hide the problem, but that just doesn’t work. It’s funny how that tendency persists.

Kevin: Yeah, exactly. It’s like a snowball; once a problem starts rolling downhill, it just gets worse. We’ve discussed high-level stuff, like those lenders doing 85% or 90% loans, and I see more problems with those. I’m not sure how some of those big fix-and-flip companies manage it, but I often spot red flags, like when a project is only 60% done and they ask for more draws. That raises alarms for me.

We don’t want to rearrange deck chairs on the Titanic. We refuse to inherit someone else’s problems. We’ll look at maturity defaults and situations where properties are fine, but we stay away from half-completed constructions or scenarios where the borrower is slow to pay because the lender wants their money back. We never want to be the last ones in, and we don’t engage in bailout deals. It’s a simple business model, and we prefer to keep it uncomplicated—our investors want that too.

Bryce: Right. It’s a very straightforward business model as long as everything goes according to plan, which it usually does—99% of the time. But there’s always that edge case.

Kevin: Exactly. If we do our jobs properly and underwrite correctly, 95% to 98% of the time, there shouldn’t be any problems. We just want to minimize those outlier scenarios.

Bryce: It’s nothing. We try to mitigate that as much as possible.

Kevin: Yes, we can mitigate risks quite effectively upfront. There are always unexpected events, but we can usually assess a borrower quickly. In just 30 minutes, I can determine if a deal makes sense.

Bryce: Not so much.

Kevin: Yeah, not so much.

Bryce: I want to switch gears here for a moment. You’re the first lender I’ve spoken to who both lives and lends in California. Most of the time, people we talk to avoid California altogether. Are you familiar with the rules, regulations, and licensing? What makes lending in California so challenging?

Kevin: Okay, I’ll preface this by saying I’m not an attorney, so I’m not giving legal advice—please don’t sue me! California is a unique state. We get many calls from out-of-state lenders wanting to do business here. They often don’t realize that if you’re brokering a loan into California, you’re supposed to be licensed by the California Department of State.

Nevada is tough, Arizona can be challenging, and New York has stringent rules, especially for consumer loans. In California, I hold a broker’s license and have gone through the necessary processes, like having a California corporate license. You can also get an NMLS license depending on the institution you work for.

There’s also the CFL, or California Finance Lender license, which most mortgage banks have. There are so many regulations and nuances, like restrictions on referral fees and other specifics that make it a bit of a minefield.

Bryce: Sounds complicated.

Kevin: It really is. Fortunately, we have excellent attorneys who specialize in private money lending and knowledgeable compliance people who help us navigate the regulations. If we ever have a question, it’s easy to reach out to our attorney for guidance. For a small fee, their advice can save us hours of headaches and thousands of dollars. We have a good handle on most issues, but sometimes something new pops up that we haven’t seen before, and a quick email can clarify how to stay compliant.

Bryce: Interesting. Even after 20 years, you’re still encountering situations and circumstances you haven’t dealt with before.

Kevin: It’s crazy! I know you’re in Idaho, so you probably hear all the stories about how wild things can be in California. Sometimes I think about how beautiful it is here, but I’ve lived here my whole life, so I’m not going anywhere. For example, there was a ruling last year, the “Moon case,” which was quite significant. A hard money line went sideways, and the borrower argued that an extension wasn’t legal due to usury. The court decided that only the original broker who sold the house to the borrower could grant an extension, not the lender. I was stunned!

For about 14 or 15 months, we couldn’t do extensions unless we had a specific CFL license. Now, Governor Newsom is set to clarify that if there’s a broker involved in the extension, we can proceed. That should kick in January 1st. Until now, not being able to do extensions has been absurd.

Staying on top of compliance in California is tough. Even on commercial loans, it all matters. The Department of State is rigorous, and if you’re not compliant, audits can be painful. We have to stay updated on changing laws, which seem to evolve weekly. I feel like we do well in this area, and we surround ourselves with knowledgeable people. If there’s ever a question, it’s just a phone call or email away. We always err on the side of caution.

Bryce: You want to dot your i’s and cross your t’s.

Kevin: Absolutely. We aim for 100% compliance, so if anything does go wrong, we’re covered. Our investors and brokers are covered, as long as everyone has done their part correctly. We want to avoid problems in this business, but they can arise. The more groundwork we lay before a loan is signed, the smoother it is if something goes south.

It’s like football—teams practice tirelessly before the first snap, preparing for anything that might happen. Similarly, we put in the effort before the loan signing, so we know everything will be fine if any issues arise. It hasn’t happened often, but it’s all part of the business.

Bryce: Yeah, nobody wants to fumble that ball, especially if you’re on the receiving end.

Kevin: Exactly.

Bryce:Last question for you: if you could go back in time, knowing what you know now, starting over from scratch, what’s the one piece of advice you would give to your former self or even to me as a new lender? What would you do differently?

Kevin: I’d say, for myself and for brokers out there, KNOW YOUR NUMBERS. If it’s a commercial building or a multifamily property, understanding the details is crucial. I had to learn this over time, thanks to mentors who guided me when I was starting out. I thought it was all about the rate and loan-to-value (LTV). So, I’d tell my younger self to focus on the numbers—what’s the rent roll, what’s the lease rollover for commercial properties? For fix and flips, understand the loan-to-cost and the sponsor’s liquidity and resume. Knowing the story and the numbers has helped me vet deals quickly, which I didn’t grasp when I first got into the business.

Bryce: Absolutely.

Kevin: Really understanding the numbers now seems easy, but back then, I didn’t even know what they meant. Real estate has its own language with so many acronyms, and you have to be well-versed in it. I work with both residential and commercial professionals, but very few are skilled in both. If I could go back, I would have jumped straight into commercial lending as a banker or broker. My learning curve would have been much smoother. Now I love what I do, but I sometimes think about how different it could have been if I’d focused on commercial earlier.

Real estate has its own language with so many acronyms, and you have to be well-versed in it.

Bryce: You seem to have made it!

Kevin: Yeah, it’s been a journey. This industry has its challenges, especially for residential realtors right now with new commission rules. But the beauty of this business is that you can create a good life for yourself. I can surf in the mornings, check my emails, and then dive into work. I love that I’m not tied to a corporate desk—I can build a life, support my family, and help people along the way. Even when I grouse about the business, at the end of the day, I feel pretty happy.

Bryce: What other type of business gives you that flexibility and lifestyle?

Kevin: Exactly! It’s a great thing for sure. Where are you in Idaho?

Bryce: So, we’re in Idaho Falls. It’s about four hours east of Boise. It’s a smaller town, so not super common on the map.

Kevin: That market’s probably growing quickly right now.

Bryce: It is, especially during COVID. Idaho and Utah saw some insane appreciation—Idaho was around 23% year over year, either number one or number two in the nation. It was just nuts.

Kevin: Gotta love it!

Bryce: Well, Kevin, seriously, what a wealth of information. Thank you so much for your time and expertise. This has been great. If anybody wants to get a hold of you, what’s the best way to do that?

Kevin: You can call me direct at (415) 793-3403 or email me at [email protected]. I love talking to people, so just reach out!

Bryce: I love it. If we have any California stuff, we’ll definitely direct it your way because nobody else knows how to handle it. You might see an influx of business.

Kevin: I would love to look at it. Compliance-wise, it’s a challenge, but there’s still good value and demand in many areas of California. Coastal California, Silicon Valley, the Bay Area, Sacramento—there’s still a lot of demand and not enough housing.

Bryce: Yeah, it’s a consistent issue.

Kevin: That’s a whole other article!

Bryce: I know! That’s outside the scope of this, but we could definitely keep talking.

Kevin: For sure.

Bryce: Well again, Kevin, thank you so much!

 

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Email : [email protected]

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