Columbus Business First - ReCasa Financial Group

VOL. 21, NO. 45
THE CENTRAL OHIO BUSINESS AUTHORITY
COMMERCIAL REAL ESTATE
A L L
T H E
P I E C E S
JULY 1, 2005
ReCasa
casts itself
as specialist
in rehab
lending
BY SARAH IRVIN P FOR BUSINESS FIRST
I
magine going from sharing a
cubicle on the fourth floor of
Bank One to fulfilling a
lifelong entrepreneurial dream
of launching a company that serves
a niche market.
Richard
Rudek, left,
president of
ReCasa Financial
Group LLC, and Mark
Quinlan, CEO, stand on
the porch of a rental
property being rehabbed
on North Miami Avenue
that their company
financed.
PHOTO ILLUSTRATION BY JANET ADAMS/
JOHN LAUER P BUSINESS FIRST
Two Columbus businessmen — Mark
Quinlan and Richard Rudek — did just that
when they started ReCasa Financial Group
LLC in 2000. The company provides 100
percent financing to commercial clients for
the purchase and rehabilitation of
residential properties.
“We had two disparate skill sets and came
up with the idea of marrying them together.
We were young guys who aspired to be
entrepreneurs,” said Quinlan, chairman and
CEO. “We wanted to lend to rehabbers and
we knew how to structure companies and
raise capital.”
Quinlan and Rudek, the company’s president and chief operating officer, recognized
their common goals during a commercial
lending training class in 1989. At the time,
they were working in the same office at
Bank One in Columbus. They forged a
friendship and shortly after that first training class, they decided to start an investment club together. On the way home from
a meeting one night, they came up with the
LOCAL RECASA PROJECTS
REHAB: Borrowers
receive 100 percent of
amount needed
idea for ReCasa. From 1994 to 1995 they
worked on developing a business plan for
the company.
Quinlan’s background was in commercial
lending and funding nonbank financial
institutions in niche asset classes, while
Rudek worked in small business lending
where he had plenty of experience working
with rehabbers.
“A classic deal for us is when a borrower
buys the house for $40,000 and needs
$20,000 to fix it up and $5,000 for soft costs
(closing costs, etc.). We lend that borrower
100 percent of what they need, up to 80
percent of the as-repaired value or what the
property will be worth once it is improved
— 100 percent financing is not in a bank’s
vocabulary when it comes to real estate,”
Quinlan said.
ReCasa loaned that particular borrower
enough money to buy the house up front
and the $20,000 for rehabbing, was disbursed in draws.
“An inspector comes out and confirms
that the project is progressing and our
money is being used to buy drywall, not
Camaros,” Quinlan said. “So we’ve lent
$65,000 and, based on our analysis, it is
going to be worth $90,000 or $100,000
when the rehab is completed.”
Price structure
ReCasa determines its prices based on a
floating rate that is typically prime plus 4
percent to 6 percent, plus fees and points
that depend on the particulars of the borrower and the deal.
“From December 2003 to December
2004, we grew our portfolio by 150 percent. We’re on track to double it this year,”
Quinlan said. “Our success is a combination of growth in current markets and adding new markets selectively. We have a list
of 12 tier one cities that we’re evaluating.”
ReCasa currently services all of Ohio,
western and central Pennsylvania, Indianapolis, Detroit, Louisville, Ky., and Nashville, Tenn. A typical loan ranges from
$15,000 to $250,000, has a nine-month term
and is secured by a first mortgage on the
subject property in addition to second mortgages on other properties.
In addition to being a profitable business,
ReCasa offers many benefits to communities.
“There are a number of societal goods we are helping improve communities and
we have a lot of female and African-American entrepreneurs who may not have much
luck borrowing from the banks,” Quinlan
said. “If you have a decent to good credit
score, chances are we’ll give you the loan.
With no money down, you can buy, fix and
sell for a substantial profit or refinance as a
rental and retain a cash-flowing asset.”
Tami Wallacke, a real estate agent and
investor, was referred to ReCasa through a
mortgage broker.
“I think the biggest benefit is no money
down on an investment property which really opens up the playing field to a lot of
people who normally couldn’t play this
game,” Wallacke said. “The other benefit
to ReCasa is that they move much quicker
than a traditional bank, which tells me they
aren’t as stringent as a traditional lender.
They’ve gotten me to close (on a loan)
within days.”
Despite the fact that ReCasa is more lenient
than a traditional lender, they do say no a lot.
“If we’re not careful, we could be the
pusher that allows the junkie to overdose.
Our clients could take on more than they
can chew,” said Quinlan. “We come from
big company backgrounds and instill a discipline that helps them. If a client comes to
us and says ‘I want to do five deals.’ We say
‘No. Let’s start with one and build up gradually if you succeed.’”
ReCasa’s clients can bring in a substantial amount of money through these deals.
“If clients can sell two to three properties
per year, it’s nice supplemental income of
$7,500 to $25,000 plus per deal. If their
strategy is to keep the property as a rental,
they have built up equity in the same dollar amounts,” said Rudek.
They do caution their clients that this is
not a get-rich-quick scheme. The final sale
price, once the rehab project is complete,
reflects a high degree of risk and a lot of sweat
equity on the borrowers’ part, Rudek said.
“We like to think we bring credibility to
the industry. Our clients know it’s going to
take hard work, and they’re not going to be
Carlton Sheets zillionaires in six months,”
he said.
Wallacke agreed with the comment.
“You’re not going to quit your day job.
Of course, eventually you can work toward
that. My husband was a police officer, and
after several years and 24 rental properties,
he was able to make the transition to fulltime. When the paychecks come, it’s really
The following list represents a sampling of paid-off
loans originated by ReCasa in the Greater
Columbus area.*
*Purchase price represents how much the borrower paid for
the property, which is a sub-set of the next figure, the loan
amount.The final valuation is what the property sold for, or
its appraised value.
Mount Vernon Avenue
Columbus (East side)
$110,000
Final valuation
L
$67,000
ReCasa loan
L
$18,700
Purchase price
Lambert Avenue
Groveport
$115,500
Final valuation
L
$74,800
ReCasa loan
L
$61,000
Purchase price
Wetmore Road
Columbus (North side)
$160,000
Final valuation
L
$103,500
ReCasa loan
L
$87,000
Purchase price
Richardson Avenue
Columbus (West side)
$88,500
Final valuation
L
$62,200
ReCasa loan
L
$47,000
Purchase price
1989
1990
1991
1992
1993
1994
1995
1997
1998
1999
2000
2001
2003
2004
FINANCE:
Clients
can
earn
a1996substantial
amount
of2002money
Mark Quinlan and
Rich Rudek meet.
The partners develop
a business plan for
ReCasa.
RECASA TODAY
Quinlan and
Rudek are senior
managers and
shareholders in
RFC Capital Corp.
Employees: 14
Expected loans,2005: Approximately
500 clients will obtain loans.
Vision statement: “ReCasa and our
clients – improving America’s
communities,one house at a time.”
1989
1990
1991
1992
1993
Involved in sale of
RFC to Textron
Financial Corp.;
planning for
organizing ReCasa
completed in the
fall.
1994
1995
1996
Jan.1,2000 ReCasa
opens for business (dayto-day operations are
conducted by their sole
employee,Jerry Garman,
senior vice president).
Fall – Mark
Quinlan,Rich
Rudek and Steve
Keller chief
accounting officer
come on board
full-time at
ReCasa.
ReCasa was Quinlan’s and
Rudek’s night job – they
work on it after their
respective families go to
bed and they complete
any day job homework.
1997
1998
1999
2000
2001
2002
2005
2003
2004
2005
Source: ReCasa
nice, but they can be few and far between.”
Quinlan and Rudek said they enjoy the fact
that this market is avoided by other lenders.
“People ask us why the banks don’t do
this. Because they are regulated by the OCC
(U.S. Office of the Comptroller of the Currency) which frowns on 100 percent financing, and these types of loans are too risky
and too costly for them to go through all
the paperwork for the size of the loan,”
Rudek said.
Despite their company’s successes,
including being named a finalist for the
2005 Ernst & Young Entrepreneur of the Year
award, Quinlan and Rudek remain grounded.
“We don’t take ourselves too seriously.
We offer our team big company sophistication with small company dynamics and
access to decision makers,” Quinlan said.
JANET ADAMS P BUSINESS FIRST
Richard Rudek, left, and Mark Quinlan of
ReCasa Financial Group, review loan
documents for the rehab of a property on
North Miami Avenue (above).
Reprinted with permission from the Columbus Business First. ©2005, all rights reserved.
Reprinted by Scoop ReprintSource 1-800-767-3263
ReCasa Financial Group
Loan Program
•
•
•
•
•
100% financing of purchase, improvements and soft costs
Up to 80% of completed value of property
Value typically based on sales comparables versus appraisal
1– 4 family non-owner occupied properties
Prequalify at no cost—bid on properties with confidence
For First Loan or Prequalification
•
•
•
•
•
Tax returns for the last two years (personal and business, if applicable)
Personal Financial Statement(s)*
Bank statement for last two months
Payroll stubs for last two months
Schedule of real estate owned, inclusive of property address, date purchased,
purchase price, current value, current lender(s), loan amounts outstanding,
monthly rental income, monthly payments (indicate if PITI)*
• Completed Rehabber Questionnaire (available at our website or by calling)
* We will accept your form of these documents or you can obtain blank forms by
*visiting our website www.recasafinancial.com
For Each Project
•
•
•
•
•
•
Description of subject property (# of bedrooms, bathrooms, square footage, etc.)
4 Comparable sales to subject property
List of improvements with associated costs
Purchase Contract with all addendums
Your plans for the project when completed (i.e. sell or refinance)
Name of seller and length of time seller has owned property
130 East Chestnut Street, Suite 200
Columbus, Ohio 43215
p : 614.221.6770
f : 614.221.6390
www.recasafinancial.com
ReCasa and our clients—improving America’s communities, one house at a time.