Industry First: Benchmarking the Non-Conventional Lending Space

We set out to do what had never been done in the private money lending, hard money lending or non-conventional lending space: we wanted to know just how big the space was, how every lender was doing, and what could do to bring the industry tighter together as a community and solve collective problems. As of today, those lenders who helped put the benchmark report together are received their copies of it. I am truly grateful. But more than that, I am truly excited to share with you what has never been done before: tell you a lot about the non-conventional lending space, and its impact on the global community.

The report comprised 32 pages of hard data, analysis and our discussion as to the results and effects of such a report.

While most of the conclusions were interesting, there were quite a few that were surprising, confusing, and at the same time hopeful.

We're going to publish the top 3 things you want to know.

So how big is the non-conventional lending space anyway?

This has always been opaque and people have thrown out random numbers anywhere from $30 billion to $60 billion. However, it is much, much larger than that. Our analysts crushed the numbers and the size of the non-conventional lending space is $768 billion to $1.54 trillion dollars.

Wow. We all knew it was large, but I am not sure any of us truly knew how large the private money lending and nonconventional lending space truly was. What does it mean? It means that even in its heyday, the subprime market originated $1.3 trillion dollars worth of consumer loans. Thus, the hard money lending industry is, by comparison, approximately half the size of the subprime market in its heyday.

Where are non-conventional lenders lending their money?

Great question. We found that almost 90% of lenders do fix and flip (rehabilitation) loans. That's fairly significant and, to my memory, has never been as one-dimensional in the non-conventional lending space. Even during the subprime (not non-conventional lending) crisis, our industry was never so one-dimensional.

Anthony, what about our yields? What's going on there?

Well, you won't be surprised there. They're declining. But like I said, there were some surprising things too.

The 58 percent isn't the surprise. It's the 26% that is. You mean to tell me that 90% of hard money lenders are in the fix and flip business but 26% are staying the same? While that may be technically true, all things being equal they aren't staying the same. Non-Conventional lenders are increasing their risk profile to maintain their yields in many capital-intensive markets, including California and Texas.

So what does all this mean?

Strap in. Those of you entering the lending market may want to consider going into owner-occupied lending even from a business purpose perspective. We're going through a correction in the next couple of years, and while most of you will weather the storm, you may want to think about buying an umbrella. It's going to get rainy and windy out there soon.