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A podcast about private mortgage lending for residential and commercial real estate investors. It's also known as "hard money lending" or "bridge lending." Most of it is short-term financing with terms less than 2 years, but we also cover long-term loans. We focus on loan origination but also share insights about the capital side of the business.
[00:00:00] Rocky: Welcome to Private Lending Insights. I'm your host, Rocky Butani. In this episode, I interviewed Paul Jackson from Residential Capital Partners. They are one of the few lenders that offers a hundred percent financing for rehab projects on a national scale. They've been in business for over 16 years and have funded a few thousand loans from real estate investors.
[00:00:20] In this interview we cover Paul's take on, uh, market trends that he's seeing in 2025. We talked about their lending activity over the past few years. We got into real detail about their loan program and some of their requirements. We talked about their company history, and we also got Paul. Take on some different markets within Texas, uh, even though they lend nationally, Texas is where most of their loans are.
[00:00:47] I hope you find this episode to be insightful. Let's get started. Here's my interview with Paul Jackson. Alright, Paul, thanks for joining me for this episode of Private Lending Insights. How is everything with you? How's everything at Res Cap?
[00:01:01] Paul Jackson: Always. Well, uh, we're just blocking and tackling here, trying to get deals done every day.
[00:01:07] Rocky: Great. And, uh, tell us about, uh, what, what are some of the trends that you're seeing in private lending and in your business? Uh, as of this year,
[00:01:16] Paul Jackson: you know, the, the last three years have been pretty steady. Uh, it's been a little bit more flat than up until the right, I would say, uh, with a lot of the housing stock kind of being, I guess, weighted by the interest rates and movements into senior living with the COVID and, uh.
[00:01:34] Just lack of, of transactions, um, as people are staying their houses long until these interest rates come back down. But, um, we're seeing good volumes. Uh, we're seeing a trend towards ground debt construction. I think a lot of the RTL and DSCR lenders are single family rental investors that are out there might be, uh, sitting on lots that maybe they've been thinking about developing and with the transaction volume kind of maybe.
[00:02:02] Not being as as high as it has been in the past. They're going ahead and building ground up construction. So we're seeing a lot of that in this market right now.
[00:02:13] Rocky: And is construction something that you're considering getting into?
[00:02:17] Paul Jackson: We have been doing ground up construction in Texas for the past six years.
[00:02:21] Um, and, and we're starting to push that out into other markets around the country. Uh, just given the demand that we're seeing, uh, from our account executive team and the borrowers around the country that we do business with on the RTL front as well, the DSER front, they continue to ask for that product and so, uh, we're pushing that.
[00:02:39] Into other states other than just a great state of Texas.
[00:02:43] Rocky: Interesting. And, uh, what are you hearing from your real estate investor clients as far as some of the challenges that they've experienced in the past six to 12 months?
[00:02:53] Paul Jackson: I think the challenges they're mainly facing is, is the older housing stock that they're able to get their hands on.
[00:02:58] Um, you know, if somebody's jumping from a $250,000 house to a $350,000 house, maybe there's low to moderate repairs that are being done on the house because it's relatively new. But the deals we're looking at right now, um, if. Single family investors can get their hands on 'em. They might be a little bit older or a little bit more worn.
[00:03:18] So the, you know, repair budgets to total cost of the deal, you know, might be creeping up and taking 'em a little bit longer. We've seen average duration on our loans tick from five and a half to six and a half months, you know, in a nine to 12 month loan. So, uh, that's definitely a trend we've been seeing.
[00:03:37] Rocky: And how about, uh, defaults in foreclosures? Is uh, is that something that you've seen in your business?
[00:03:43] Paul Jackson: Well, there's always defaults in foreclosures if you're doing enough business, but historically, less than 1% of our loans have been in default in foreclosure. We saw some accumulation of defaults in foreclosure in some of the judicial foreclosure states around the country.
[00:03:58] Kind of kind of backup that was associated with COVID and judicial, foreclosure judges not being in the courthouse to move, you know, foreclosed product out. Um. In general? No. We're, we're seeing kind of historical norms on that front.
[00:04:16] Rocky: That's great. And, uh, do you have any predictions as to what, what things will, how things will play out with the residential real estate market with, uh, with house flipping and construction over the next 12 months?
[00:04:30] Paul Jackson: And my crystal balls as good as yours? Uh. It feels like the 25 basis point rate cut that everybody says the fed's gonna do is gonna be, has already been baked into the market, um, with the 10 year. But, uh, we've seen pricing on our DSCR, you know, get better because of that. Um, hopefully, you know, there's a 2026 comes with some more rate cuts that would maybe unlock some of these, uh, inventory opportunities that are currently kind of stagnant.
[00:05:02] Rocky: Okay, great. And so, so as long as the rate, uh, cuts continue, then there'll be more opportunities for real estate investors to, to buy homes and flip homes. Um, and, and, uh, and, but obviously the interest rates are not. Really affecting the, the RTL loans. Your, your fix and flip loan rates are most likely gonna stay the same, right?
[00:05:25] Paul Jackson: Yeah. They're not, they're not, they're not affecting the pricing that we are offering to our borrowers. But I think our borrowers in the real estate investment community is having a harder time getting folks to consider selling, um, until they figure out where they're gonna land. But, uh, in general, uh, big picture.
[00:05:43] The baby ward population selling into the millennial and Gen Z population. I think that's a 10 year crop. We're still very, uh, you know, optimistic on the runway we've got left in this space. And, and you know, the, the efficiencies that grow over time serving this community.
[00:06:02] Rocky: Uh, let's switch to talking about, about your business.
[00:06:07] Let's start with what some high level stacks from the last two or three years. Um, if you could just give us a, a general sense of, of the loan volume for this year compared to last year and, and maybe going back to 2023.
[00:06:23] Paul Jackson: 23, 24 and 25. Uh, were the first years and 16 years in this business. Then we didn't have double digit or 1.5 times balance sheet growth.
[00:06:33] Um, we did about 200 million a year, the last three years. So it's been flat, uh, which I'll take, uh, you know, given you had COVID hangover interest rates moving up, uh, you know, a, a lot of, um. Questions in the market. You have the war in Israel, you know, you have other things going on in the broader economy.
[00:06:54] So, uh, we've been flat for the last three years, right around $200 million a year. Um, and so we're, we're hoping that we can take that up to, you know, 250 and 300 million in 2026 and beyond.
[00:07:10] Rocky: Nice. And, uh, you know, you're one of the few lenders that I know that, that lends, that does a hundred percent financing for fix and flip deals, and, and you're able to do it in most states around the country.
[00:07:22] And we'll get back to your lending guidelines in a bit, but, uh, but if you could tell us about some of the states that you like lending in and which states around the country you're excited about lending in, uh, for the foreseeable future.
[00:07:36] Paul Jackson: I would say the business friendly states are our most favorite states to lend in, but we're active in the northeast, the Midwest, the southeast, southwest, and the west coast.
[00:07:45] We've not done as much, uh, in the northwest, um, but business friendly states, uh, we, we are still loaning money in judicial foreclosure states. Uh, we might be sharpen our pencil a little bit on underwriting. We might. Do a 90% advance in those states instead of a hundred percent advance, but open for business and feel comfortable there.
[00:08:08] We just, we've got a lot of relationships with, uh, repeat borrowers across the country. So even if it is in a judicial foreclosure state, we're still transacting. We're just being careful.
[00:08:22] Rocky: And according to the data I have from our friends at Fore Casa, it, it seems like over the, the course of the last four years, the, uh, you've, you've had about 20% of your loans in Texas.
[00:08:34] A good amount in New Jersey, Florida, Illinois was one I was surprised to see with, with the high volume. Um, uh, are, has, has the, the states that you London changed over the past? Year or two, for example, Florida having challenges with, uh, you know, with insurance and, and, uh, any of those factors.
[00:08:56] Paul Jackson: I think it's definitely been challenging for our customers, for our clients, for our borrowers in some of those states like Florida, with the pricing pressure they've got on the insurance front.
[00:09:07] Um. We, we, most of the customers we deal with in those states we've been doing business with for a long time. Uh, so, you know, we, we, we know their business, they know our product, and we haven't had any situations. I would say we, we do monitor that, you know, with hurricane season and with you. Floods. We're, we're very active of getting ahead of that to know where our inventory is.
[00:09:32] You know, how's our collateral doing? What did it sustain? Any damage? Knock on wood, we've been lucky to date, uh, on that front. Um, we did have a couple of issues in Florida that got resolved with insurance. Um, praise the Lord. But, uh, we're still active in those states, but like I say, in states where the, the risk might be a little bit higher, we're a little bit.
[00:09:55] Uh, more cautious on our advance. Right. And, and, and more careful on our underwriting.
[00:10:01] Rocky: And how about Illinois? If you could touch on that, that's a, a state that, that's not as desirable for a lot of lenders, but it seems like you've done a, a lot of loans in that state. Obviously Chicago is, is the, the major market there.
[00:10:14] Um, any, any thoughts on that market? Um, is that something you're, you're still, uh, you know, interested in lending into.
[00:10:21] Paul Jackson: We're still doing deals in Chicago. Um, pro probably a lot of that has to do with the fact that we got into this business through a partnership with home investors back in 2009. Home Investors is a franchise, uh, real estate investment firm based in Dallas.
[00:10:37] Um, and they had a lot. Franchisees in Chicago. And so we have deep relationships there with borrowers that we've been doing business with for 16 years. So that's what kind of gives us the comfort level for continuing to lend in those maybe more risky cities or more risky states. Um. And, and, and by virtue of those relationships, we're able to extend credit to new relationships in those states.
[00:11:04] Just, just by kind of doing our homework and checking in with some of the borrowers that we have in those cities. You know, you know, Chicago, uh, we're looking at this deal, you know, what do you think about this market? What do you think about this neighborhood? Uh, and so that, that helps us kind of take underwriting to the local level.
[00:11:21] You know, all politics is local. All real estate is local. Um, being able to check in with. You know, historically strong borrower relationships to vet deals keeps us active in those markets. Saying yes where we can, and, uh, saying no when we should say no.
[00:11:38] Rocky: And when, I remember when we were first getting you listed on private Lender Link, uh, we, we had to mention which states you don't lend in.
[00:11:46] And uh, I was surprised to see Pennsylvania on that list. Uh, but, but it seems like you've done a lot of loans there in the past few years. Uh, what, what's your take on. Pennsylvania and why the change?
[00:11:57] Paul Jackson: You might have caught my underwriter on a Thursday when we were looking at bad deals, but uh, we, you know, that's one of those judicial foreclosure states where we had a little bit of backlog, but we're still doing business there.
[00:12:07] Um, with existing relationships, I think we were maybe a little, um, more conservative when we were coming on board with private lender Link. We could probably remove that restriction and look at the deals on a case by case basis.
[00:12:20] Rocky: Okay. Will do. Um, any other states or or parts of the country that, that you haven't done as much business in, but you'd like to, for example, maybe the, the western states, the Pacific Northwest, uh, any any regions or states that stand out to you?
[00:12:36] Paul Jackson: NN no more than the ones that I mentioned previously. Um, we've been working really hard with some of our banking partners to expand our, I guess, our covenants or our limitations on a state by state basis. We're on a. Loan size basis. So we, we've, we've expanded those to where we can do some larger deals that we historically have not been able to do.
[00:12:57] You know, we've been capped at 1,000,005 now we've got, you know, access to go up to 2 million or three and a half million in some states like California, for example, where. You know, writing an $800,000 loan on a thousand square foot house in la we passed on a lot of business. That may be a 2 million or a $3 million loan with a, you know, four and a half or $6 million value that we should have written.
[00:13:22] Uh, so we're excited about that.
[00:13:26] Rocky: Nice. Uh, all right. Why don't we switch gears and talk about your loan program, which is, is quite unique just because of the high leverage that you offer. So, uh, tell us about your loan program at a high level. Just give us an overview.
[00:13:40] Paul Jackson: We loan a hundred percent up to 75% of the after repair value of the house, and that's a hundred percent on purchase and a hundred percent on repairs, up to 75% of the rv.
[00:13:51] Um. Again, going back to how we got into business, that's, that's really how Home America trained us as a inside captive finance arm up their franchise network. And when their company sold, uh, in 2016 and we started offering our product to the broader market outside of the home investor network, we just stuck to our knitting, uh, and continued to offer.
[00:14:14] The same a hundred percent advance on purchase, a hundred percent on repairs. Now that's typically a low to moderate repair deal where the repairs to total cost are 20 to 25% of the all in budget. Uh, as things get to that 30 or 35% as the repair budget to cost gets to 30 or 35%, we might, uh, financially engineer either a down payment or what we call a repair holdback, where we want to see the borrower get to the other side of a.
[00:14:44] Uh, completed house with a sign in yard for sale. Um, but generally speaking, we're trying to bring borrowers to the closing table with as little out-of-pocket as they can so that it helps them in the investment cycle of that house.
[00:15:02] Rocky: And, and that's typically what most real estate investors look for.
[00:15:05] Obviously the pricing could sway them a little bit, but, uh, talk about the, the after repair value a little bit. 'cause that's, that seems to be where, where it, it would make or break a deal in terms of how much, uh, the borrower has to put down. So if, if the maximum, uh, loan to after repair value is 75%, what does a bar need to do to, to get.
[00:15:28] Uh, approved for that high of a, of an after repair value.
[00:15:32] Paul Jackson: We scrub the ARV really hard, making sure that the value's there. I mean, on average we're probably sitting around the 70% mark. Um, but, um, we, we, we run our own desktop appraisal. Um, obviously we're looking at comps in that neighborhood, uh, that are close to the subject property a half mile away, uh, a mile away.
[00:15:56] Um, so. We've got a couple of different proprietary tools in-house that get us to comfortable with that level of advance rate. Um, and where we're not comfortable, maybe we're still saying yes, but the borrowers come in with a 10% down payment
[00:16:11] Rocky: and does everyone just automatically get the 75% a RV, uh, and their term sheet?
[00:16:19] Or
[00:16:20] Paul Jackson: we've got borrowers bring us deals at 65, they bring us deals at 70. I mean, we're never gonna, we gonna do cash out, re cash out, uh, you know. RTL loans. But um, you know, if it, there, there are certain markets, there are certain customers that, hey, I, I'm in this deal at 72%. There's still plenty of profit in the deal.
[00:16:41] Um, and then, you know, as a part of our underwriting, we're also doing a synthetic profit analysis on each deal to try to help come. Alongside our borrower. Um, not just be a lender, but also look at it through their lens. 'cause we come from a real estate investment background ourselves. Um, is the juice worth the squeeze on this deal?
[00:17:01] You know, chasing a deal that pushes it into a high, higher leverage kind of, you know, territory that doesn't have a lot of profit or. If you make a mistake, the profit EVA operates quickly. Uh, that's never a good idea. So we really wanna see the borrowers come with kind of a one-to-one, uh, outlay of their own capital to the profit that they've got in a deal.
[00:17:25] So if it, if it starts to get squeezed where it's an 85% or you know, 50% ratio, and it's not one-to-one, we're actually talking to the borrowers as a partner and saying, you might want to. Drop this deal and, and invest your money in something where there's more calories in it for you as a investor. 'cause you know, time and money is all we have.
[00:17:48] And if you're gonna go jump into a project that's less, less profitable, uh, it it, it might, you might sacrifice the opportunity on two deals down the road for this deal that you finally got under contract.
[00:18:01] Rocky: Are there any factors that would cause you to, to lower that a RV for a particular investor, like their level of experience or their credit score?
[00:18:11] Paul Jackson: Sure. I mean, you know, experience is, is, you know, kind of paramount in when you're pushing 75%. Um, e even most of our experienced investors are usually wanting to stay at that 70% level just because there's more profit margin in it for them. But, um. If we give an indicative bid out on a particular deal, and you know, credit becomes a concern, maybe we come with a down payment or you shorten or advance to 65 for that deal.
[00:18:40] So 5% down payment instead of a 10% down payment. But we're considering all those factors underwriting each and every loan we do.
[00:18:50] Rocky: Okay. And how about, uh, since we mentioned credit, what is the minimum credit score and how do you guys look at credit when you're qualifying a borrower?
[00:18:59] Paul Jackson: Our minimum credit score is six 20.
[00:19:02] Our average credit score across our portfolio is 700. Um, and we, we do a soft pull of credit through Equifax. So it's, it's not, it's not a tri merge pull or a hard pull, but, um. We wanna know our customer, we wanna know their, uh, their credit rating and, and how they are paying their bills. 'cause we want them to get to the end and sell and make a profit without having to deal with any situations.
[00:19:29] Rocky: And, and during the, the loan term or as the borrower making monthly payments to you?
[00:19:34] Paul Jackson: Yes.
[00:19:37] Rocky: Great. And, uh, and how about, uh, let's talk about pricing. Um, what, what's your typical interest rate at this time and, and points and other fees?
[00:19:46] Paul Jackson: Right now our rates are between nine and a half and call it 12. Um, probably on average in that kind of 10 and a quarter, 10 and a half range across the whole portfolio.
[00:19:57] Um, and our points are usually two to three points.
[00:20:03] Rocky: And, uh, how about, uh, you know, if the borrower is getting a hundred percent funded from the per for the purchase and for the rehab costs, um, what, what? What are they bringing to the table? Are they, are they paying any fees upfront? Are they paying the points upfront?
[00:20:21] Uh, tell us a little bit about that.
[00:20:22] Paul Jackson: Got application fee, a, um, appraisal fee for doing a desktop appraisal. Um, and then any other closing costs from the title company or legal that they have to bring is what they're bringing to the closing table at the title company.
[00:20:37] Rocky: And how about the points? Is that rolled into the loan or did they pay those upfront at the time of closing?
[00:20:42] Paul Jackson: They pay 'em up front. We have rolled them into the loan, um, if there's room, but usually they're paying them upfront. We've got a, you know, we require for borrow to have insurance, you know, hazard insurance on the property during the investment period for the life of the loan. Um, we can provide that form if they don't have an insurance provider or where there's room, we've rolled the insurance into the load as well, so that they don't have to come with that out of pocket at the closing.
[00:21:09] Rocky: But, so typically they're paying the origination fees, uh, at closing, whether it's two or 3% plus whatever, minimal closing costs there are.
[00:21:18] Paul Jackson: That's right.
[00:21:18] Rocky: Okay. And, uh, how about getting the project started? Does the borrower have to front the first phase of the rehab project themselves?
[00:21:29] Paul Jackson: Uh, well, we, we will advance on the, on the, at the title company with the purchase proceeds and we'll hold back all the repair dollars.
[00:21:37] Um, so yeah, they're getting started with their own capital. That's why we also check in their liquidity, uh, during the underwriting process. And then as they make repairs, um, they're submit. Through our repair draw process, you know, pictures of the work they've done. Um, we're verifying that with true picks, uh, to make sure they've done the work.
[00:22:00] Um, with True Pick is just a tool we found that to be really valuable for, uh, speeding up the repair draw process for our customers. Um, it's geo stamped and geo located, so we know that they were at the property taking pictures of things that they've done, uh, and then. You know, with, with, with the inspection and the pictures and the, uh, tree picks, then we advance them the money that they've come out of pocket with on their repairs.
[00:22:28] Rocky: And is there a formula that you have to, you know, to, uh, communicate to the borrower that you know, hey, if, if this is your, uh, project purchase price and rehab budget, here's the percentage of that amount that you need to have in liquidity. Uh, is there some sort of set percentage for that?
[00:22:46] Paul Jackson: We don't accept forage, but we just, um, we kind of have a minimum liquidity of $75,000.
[00:22:53] Uh, and that could vary based upon the number of deals the borrower's doing, how many active they have with us, how many a active loads they have with competitors, um, or other banks. So we want, we want to verify that with Four Casa as well. Um, yeah. Contingent liabilities are key to understanding, to make sure that the liquidity of the borrower is, you know, where it needs to be in order for them to be successful and for us to get rebate.
[00:23:24] Rocky: So, 75,000 minimum liquidity. Uh, what does that entail? Can it be more than just having cash in the bank?
[00:23:33] Paul Jackson: Ash is king. Uh, so we, we, we typically try to keep in it, uh, you know, just. Bank statements and verifying that. And, and then we kind of continue, uh, throughout the year if we're doing repeat business with a borrower, you know, if a loan comes in, I'd say they've closed one in January and they're asking for another one in April.
[00:23:54] We may, you know, ask for an updated bank statement.
[00:23:57] Rocky: Do you consider, uh, other, uh, you know, other assets as liquidity, like, um, you know, retirement account, uh, or, or any other type of, uh, investment account?
[00:24:09] Paul Jackson: We'll look at investment accounts, uh, IRAs and retirement accounts are not really as liquid. Um, so we really try to stick to bank statements and, um, fidelity accounts or, you know, Charles Schwab accounts, something that they can access if there's an issue.
[00:24:27] Rocky: Okay. And, uh, what about borrower requirements, uh, besides having a credit score, besides the minimum liquidity requirements, uh, is there anything else you're looking for in terms of your borrowers?
[00:24:40] Paul Jackson: Typically we want them to have experience in the industry. Um, two deals in the last 12 months, uh, two deals in the last 18 months.
[00:24:48] Some experience in the industry. We've made exceptions on a very rare basis. Uh, if they were. You know, an intern for somebody, or they were a carpenter or a contractor for a flipper, um, for a period of time, or they've got general construction experience, uh, or they're a realtor, you know, or, you know, have some real estate background.
[00:25:10] We've, we've made an exception, but that's typically not the customers that come to our window. You know, most folks that are coming to ask for a loan with REDCap have got experience and can show that with two huts presented through our application process.
[00:25:25] Rocky: Nice. And, and just to clarify, you know, by two HUDs you mean that they've completed two successful flips?
[00:25:31] Yeah. Two s in the recent years, yeah. Okay. Okay. And do you have a, a time threshold for that? Like does it have to be within the past year or do you go back a little further Within the
[00:25:40] Paul Jackson: past 12 to 24 months, you know, have you, you know, sometimes folks are, can't find a deal for a period of time or they're doing this on the side.
[00:25:49] So we try to take all that into consideration.
[00:25:54] Rocky: All right. And so someone has taken a real estate course of some kind, but they've never really been in the industry. Uh, it sounds like that's not like likely gonna be a, an investor that you consider lending to.
[00:26:06] Paul Jackson: Well, that would be the other exception besides, uh, trade experience or contracting experiences.
[00:26:11] You know, home investors have, I've, as I've already mentioned, they've got a lot of newbies that have never done a deal that they've been trained, so. We'll do business with them. Uh, we've got some other relationships, rather real estate training kind of franchise, you know, companies, uh, that, that if we can get comfortable with the training they've received, um, and maybe they've got a mentor in that organization that's gonna oversee them, then we'll stretch and try to do a deal with somebody that's never done business before.
[00:26:45] Rocky: All right. And, uh, how do you feel about, um, you know, let's say an, an investor that doesn't have a lot of experience and they team up with another investor, so they've got, you know, they've got collective experience, uh, within the entity that you're lending to.
[00:26:58] Paul Jackson: We love it. All right. We, we love, we love, uh, young talent partnering up with seasoned vets.
[00:27:09] Rocky: Uh, let's talk about the exit strategy. Obviously most people that rehab properties are, are flipping them, uh, but since you do DSCR loans, it sounds like, like you're okay with, uh, the the long-term hold exit strategy, uh, for Yeah, for a, a long-term rental.
[00:27:26] Paul Jackson: Absolutely. Yeah. We love, we do that all the time, uh, every day.
[00:27:29] Um, you know, I think, I think a lot of the young. Newer investors are, are really keen on getting the profit associated with an R-T-L-T-L in their prime. And as they become more seasoned and they look at the opportunity to hold real estate and build wealth with that real estate, they start looking at the DSCR product.
[00:27:53] Uh, or maybe they wanna do a cash out refi, uh, to get some liquidity for their real estate business on the acquisition front. So they do a cash out refi in the DSCR uh, desk with us. We, there's no better deal than a deal that we have watched, uh, be improved and be completed. And the, I guess, risk profile that I set has been mitigated and gone down over time as the improvement form made.
[00:28:19] And then they want to turn that into a rail property. That's a slam dunk home run. DSCR.
[00:28:27] Rocky: Absolutely. And uh, and then as far as, um, you know, getting new real estate investors, have you had any challenges? I mean, you're, you've got a great program offering the highest leverage possible, uh, in the industry as far as I've seen.
[00:28:42] And you're doing it on a national basis. With a few exceptions. There's a few states you obviously don't lend in, but, um, do you have any, any challenges with, with acquiring real estate investors that push back and say, Hey, maybe your pricing's too high, or, I mean, why would not, why wouldn't everyone work with Res Cap?
[00:29:01] Paul Jackson: I, I agree. They should all work with Res Cap. No, I, you know, I think we've, we've worked really hard over the last 12 months. To close, not only on, uh, new banking facilities, but also bringing on new capital partners to try to make ourselves more competitive with some of the larger players, uh, that have got lower cost of capital.
[00:29:23] So we feel like, um, this year we've consummated a couple of relationships on the capital side of the house. Uh, they're that are gonna help us, you know. Compete better on price, uh, which lowers the payments for the borrowers, uh, increases the profit in the deal and hopefully will let us attract more business.
[00:29:46] Rocky: And, uh, just to clarify the, the property types, uh, as far as I know, you only deal with residential investment properties, right? One to four units, and you're not doing multifamily or mixed use or other property types, right?
[00:30:00] Paul Jackson: Single family, one to four. Um, and then we will look at the kind of a smaller multifamily, five to 15, five to 20 unit deals.
[00:30:11] Rocky: Ah, interesting. Um, is that a new offering? The multi-family? Yeah, that's,
[00:30:15] Paul Jackson: that's, that's been a part of, uh, you know, the work we've been doing this year to have the capital be able to consider doing those deals. In addition to, as I mentioned earlier, the Roundup construction loans across the country.
[00:30:28] Rocky: And with your ground up construction that you've done so far in Texas, is, is that also a high leverage program?
[00:30:36] Paul Jackson: It's a high le, I mean, it's, it's a hundred percent of the vertical costs. We, we, we, we don't, uh, take out the, the, uh, land cost or the horizontal cost of a. Ground up construction deal. So most of our builders on that front have made an investment in land. Uh, they've, uh, completed any work that needs to be done to go vertical.
[00:30:57] So we'll do a hundred percent of the vertical costs, um, within our parameters.
[00:31:04] Rocky: Great. And is that only for, um, an individual project or are you doing this with the larger, uh, subdivision? Uh, with multiple homes?
[00:31:14] Paul Jackson: We've done individual projects. We've done. 30 unit kind of builder rent projects. Uh, most of the borrowers we've worked with on deals like that are building in, you know, five to 10 at a time, getting 'em stabilized, taking us out, and then doing another five or 10 afterwards.
[00:31:33] Rocky: And the, the ground up construction lending rollout, is that, is that ready to go in, in other states or is there a, a, you know, a particular date that you have targeted where that's gonna be offered nationally? We're,
[00:31:44] Paul Jackson: we're ready to go.
[00:31:46] Rocky: Nice. All right. Uh, with that, let's take a quick break and we'll be right back.
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[00:32:54] And we're back with Paul Jackson from Residential Capital Partners. Um, you know the, the first time I heard about your company, I was attending a JUSI conference in Dallas. It was the first time they'd done an event there. And there was a booth there, it had your company name on it and it said a hundred percent financing nationwide.
[00:33:13] And uh, I remember, I was just intrigued 'cause at the time, and even till today, there's, there's hardly any companies that, that offer that on a national basis. So, uh, I remember meeting the gentleman that was. Manning the booth. And then, uh, we chatted and uh, and then he invited me over to your office, uh, in uptown.
[00:33:31] So I came by and, and you know, that's the first time we met was back in May, 2018. And, um, you know, I was just fascinated. I, but I, I still to this day don't really know the history of. Your company in, in the space and, and how this is even possible for you to offer a hundred percent financing. So, uh, if you could just start with telling us about the journey of res cap and then, uh, maybe we'll get into the, uh, the capital side of the business later on.
[00:33:58] Sure.
[00:34:00] Paul Jackson: No, we actually started Residential Capital Partners in the bottom of the global financial crisis in 2008, 2009. Uh, we were. Formerly commercial real estate investors. Um, we'd worked with, uh, stave Capital Partners. Um, the Stave company in 2006 had sold the Jones Lang LaSalle. Uh, so it was really, uh, couple of partners looking at, uh, opportunist Nick commercial real estate deals.
[00:34:30] I like to say that every commercial real estate investor became a debt buyer during the global financial crisis. 'cause, uh. Banks were closed for business, trying to figure out what was going on and, and no real opportunities were trading at that time. So we, we started looking at debt, um, and through looking at mortgage, paper, which a lot of people were buying 'cause the big banks were selling it all off.
[00:34:55] And as they were taking in tarp money, uh, we ran into. The group I mentioned earlier, home Busters of America here in Dallas. One of my friends, uh, from college actually was a franchisee in Arizona. Um, we did, I guess, formed a joint venture with home investors to underwrite the mortgage paper because mortgage paper at that time was.
[00:35:19] Being distributed to buyers and there was no opportunity to pick Texas, you know, or some state that you had experience in. So you had to look at it on a nationwide basis. So we needed somebody with nationwide, uh, ability to be able to underwrite the mortgage paper. And so, uh, we did a lot of mortgage paper during that time and, uh, as we, I guess, got to know the home investor.
[00:35:45] Brand and their, uh, franchisee base across the country. Uh, we said, Hey, in addition to buying mortgage paper, maybe we should also loan money to your franchisees during this period of time. 'cause they were struggling to find financing for, you know, the investments they were making in single family real estate.
[00:36:03] So we formed a, I guess, joint venture with them to provide capital to their franchisee base in 2009. And as a part of that, uh, we actually went to their, uh, office and went through 10 years of history that they had had loaning money to their franchisees. Uh, they were loaning money for a decade before we showed up.
[00:36:23] Uh, their bank blew up during the global financial crisis, so we became the bank. Uh, and so through underwriting the way that they. Loaned money to their franchisee network is how we came up with the product that we have been actively putting on the street now for 16 years. And so it, I guess we were really kind of a captive finance arm for them through 2016 until the company sold, uh, the founder of that company passed away.
[00:36:52] They sold the company to a private equity firm, the private equity firm. Was not interested in the lending side of the business. So we kinda went from being a captive finance partner of home investors to, you know, for lack of, of a better word, like a, a, a bulge bracket private lender to the single family real estate space.
[00:37:11] Um, and so we, that, that, that meant sales marketing applications, uh, underwriting, closing, servicing. So with that effort, after about a year of really getting our hands around all the aspects of private lending from soup to nuts, we said we might as well go out to the broader market. So that was around 2016, uh, when we kind of stepped onto the stage doing business with.
[00:37:39] The real estate community that was not associated with Herve. And so that model has continued to work, um, with a single family real estate investment community. And we're gonna keep trying to grow it and, uh, continue to serve the community.
[00:37:55] Rocky: Amazing. And, uh, with the Home Investors Network, is it, is it now just an option for them to use Res Cap or,
[00:38:02] Paul Jackson: we, we still have a lot of business that we do with home investors.
[00:38:04] They've got other lenders that are serving their franchise network, just like every other bar we're in America today. Uh, that's been one of the most fascinating things about this journey has been, you know, seeing the void of credit. There was, um. In the market in 2009 and then watching the economy heal, uh, watching the larger capital players start to kind of dabble in this R-T-L-D-S-C-R space in 2000 12, 13, 14, to where we are today where you show up at a conference, uh, you talk to borrowers and they've got options with every Wall Street brand in, um, in the world.
[00:38:43] So, um. The capital coming into this space is, you know, gonna continue to grow. There's probably more capital chasing deals today than there was deals chasing capital when we got into it. But hopefully our brand and our presence in the space and the relationships we have with borrowers around the country will continue to allow us to grow and stay active in this industry.
[00:39:08] Rocky: And, uh, tell us about the, the capital side of, of your business. Uh, how, how are you capitalized? Do you deal with a bunch of banks? Do you have a fund? Tell us more.
[00:39:18] Paul Jackson: You know, we, we have, uh, from the beginning we had, uh, you know, relationships with banks and relationships with our capital base, which was primarily, you know, family offices, um, friends and family, high net worth individuals.
[00:39:33] Um. That, that, that worked for us for a long time, for 16 years. But, um, we, we, this year we locked arms with a group based here in Dallas called D two Asset Management. Um, they have a lot of experience in the industry. Uh, we were introduced through mutual friends. Uh. A lot in common, just from the way that we're aligned as partners and the way that we look at the space and the opportunity and the desire to continue to serve the RTL and DSCR investors.
[00:40:03] So, D two Asset Management and Res Cab formerly joined, uh, in August of this year. And so we're gonna continue to try to do what we've been doing the last 16 years, but with capital Partners that have a lot more, uh, breadth of experience and depth of experience in this industry. Uh, they were looking for an originator.
[00:40:25] We were looking for a capital partner, and so it was a good marriage and we're excited about the prospects for the future.
[00:40:32] Rocky: Congrats on that. And, uh, is, is this firm, uh, one that you were selling loans to?
[00:40:38] Paul Jackson: We, we weren't selling loans. They were buying loans. Uh, but they, they, they, they were looking at the world of the, as a loan buyer in, in saying to themselves, you know, really the best opportunity to create value from across the spectrum, both for the borrowers and for the investors that are putting money into this kind of product would be to, you know, partner up with an originator.
[00:41:00] And deploy money through the originator. So going direct to borrower, uh, you know, growing our retail presence. And so they, they were buying loans, but now we're all investing in loans together. A that's our structure going forward.
[00:41:17] Rocky: Hmm. Interesting. Um, you know that we've seen this with other companies in our space, but typically they're acquired by, uh, a hedge fund or, or some other institutional.
[00:41:28] Lending firm that's, uh, that's acquiring a bunch of loans from different lenders and, and they just want a, a steady flow of business. But, but with the, the end goal to be securitizing these loans, do you think that, that your loans that you originate will eventually end up in securitizations?
[00:41:46] Paul Jackson: You know, I'm not sure.
[00:41:47] Um, we've always been a balance sheet lender. We've never sold a loan in 16 years. Uh, our capital partner at D two is. Got, uh, uh, you know, a lot of assets under management and, and is patient capital. I would say, uh, if it made sense to do a securitization, we could consider that. If it makes sense to hold it on our balance sheet, we've got enough dry powder to be able to do that.
[00:42:13] And.
[00:42:14] Rocky: As far as capital goes and, um, and just kind of the health of, of the market. Um, do, are you, do you, are you not affected by what, whatever happens within, let's say, uh, you know, uh, the securitization market, um, some of the challenges other lenders have seen over the years, uh, in terms of, um, you know, whatever market forces there, there have been.
[00:42:39] Um, do you, are you typically unaffected by those.
[00:42:43] Paul Jackson: Yeah, that was a big deal. That's probably why it took us a little bit longer to find the right capital partner. 'cause I think everybody's chasing that opportunity to recognize maybe the efficiencies of the cost of capital associated with the securitization.
[00:42:57] We had never, ever sold loan in 16 years in this business, which was, which was a, uh, a calling card for us. To the borrowers, because we were in control of the capital, we made the decision we could loan a hundred percent of purchase and a hundred percent of repairs up to 70 or 75% of the Air V value. Uh, we came up with it during a global financial crisis.
[00:43:22] Uh, we rode through COVID and kept our doors open when a lot of the Wall Street names that were in this space closed their doors for six to nine months while they waited for the storm to pass. We, we stayed active in the business. So we, we were not looking for any capital partner to join. Uh, our 16 years with we were looking for the right capital partner and D two asset management gave us that partner because, uh, you know, they look at the world the same way we do.
[00:43:50] You know, we love this industry, we love this asset class. We're fine holding in our balance sheet for the duration and growing it. Uh, if for some reason it made sense to do securitization. We'll consider that as smart finance guys, but um, that's not a requirement. That's not an end goal. The end goal is to serve the customers, to lower the cost for them, uh, and to help them do more deals as we continue to grow our capital base.
[00:44:19] Rocky: And, uh, tell us a little bit about your operation. Uh, the number of people, the different offices you have around the country, and, uh, anything else you could mention about that.
[00:44:28] Paul Jackson: Yeah, we've got 15 people here in Dallas, Texas. Um. Walking into the rest cap doors every day. Uh, we've got another, maybe I'd say five or six folks that are what we call lending affiliates.
[00:44:41] Uh, essentially account executives that are out of the office around the country. Uh, and then we've got a dedicated capital markets team, uh, with D two asset management that's made up of six or eight, uh, capital markets. Executives that have been in the space for a long time understand it, uh, and will be helping us try to tailor our solutions for the SFR investors, uh, to make it more attractive to them to come to the window and create a better partnership, which is why, you know, we picked our name.
[00:45:13] You know, we want to be the partner to the investor. We don't wanna just be a lender. We want to help them grow their business as we grow our business.
[00:45:21] Rocky: And in the rare case where you may have to foreclose on a property, take back a property, do you have an infrastructure or, or an investment arm of your company that would handle that?
[00:45:32] Or, or do you just have, uh, your partnerships with the home investor franchisees that, that you would potentially sell the properties too?
[00:45:41] Paul Jackson: Sure. We, we've, we've looked at, um. Selling out of assets that either went non-performing or we had to foreclose on, uh, REO property. Usually the markets are pretty efficient and, you know, we've been able to move product like that, uh, just through the, the natural, uh, course of, you know, share of sale or.
[00:46:04] Deep in Lew, taking aback, selling it to the market, hiring a realtor, um, for properties where maybe the repairs weren't fully complete. We have, you know, used our relationships with borrowers around the country to say, Hey, pick up this deal. It's still a good deal. The borrower had a situation, we had to take it back.
[00:46:23] Let's go. Uh, either make them alone to finish the project, or let's partner somehow some way and, uh, get this project completed and sold so that somebody can. Move into it or buy it and rent it.
[00:46:37] Rocky: Love it. Uh, alright, why don't we switch gears now and, uh, talk a little bit about, about Texas. 'cause that's your home state, that's, you know, where you're based.
[00:46:45] Um, uh, and you know, it's nice to get insights from local lenders and Texas is obviously like a country in itself, but I still. Say that you're a local lender there. Um, and, and obviously most of your loans are, are in Texas. So, um, if you could just give us your thoughts on, on Texas as far as private lending and, and real estate investment activity.
[00:47:08] Uh, you know, here in 2025, what, what markets are hot and what are your general thoughts about Texas in.
[00:47:16] Paul Jackson: Ali, I'm gonna be a Texas homer on this one. I think every market in Texas is all right now. Maybe Austin is experiencing a little bit of a correction 'cause Austin historically has gone up and down, but North Texan's, uh, out my window behind me, you know, Goldman Sachs is moving their global headquarters here to, uh, uptown in Dallas.
[00:47:34] Uh, Morgan Stanley's coming in and building it. 200 or 300,000 square foot office. Uh, there's all sorts of corporate relocations happening in north Texas and Frisco. Um, we're seeing just unparalleled growth in the Dallas-Fort Worth, north Texas market. Uh, we're seeing a lot of growth in, uh, south Texas as well.
[00:47:57] Um. We're doing deals in San Antonio, we're doing deals in Austin, even though it's, uh, maybe a little bit trickier, uh, getting the fluctuations in the market they've experienced. And then we love Houston. So, um, the major metropolitan areas and the major growth areas in Texas, we're leaning into hard. 'cause, you know, we know the markets and we know the, I guess the, uh, the growth that's occurring in all those.
[00:48:26] Cities, uh, not just organic, but lo, you know, relocations, corporate relocations from the West coast and the East coast.
[00:48:35] Rocky: And let's focus on DFW for a minute. Um, what, what parts of the DFW market are, are growing the most? Does it seem like the most of the growth is towards Fort Worth, or, or is it north of Prosper or is it even going out a bit east or south, I guess.
[00:48:55] Paul Jackson: I would say most of the growth in North Texas and the Dallas Fort Worth area is north. You know, Frisco, prosper, Salina. Um, though those are the markets where you're seeing a lot of activity from new construction. But, you know, getting back to the, the basics on what we do, um. Usually in most metropolitan areas, there's a loop around a city that you know has, you know, homes where folks are living and driving into the city to work.
[00:49:26] So the housing stock of baby boomers selling into the millennial millennials and Gen zt pop, uh, is usually somewhere close to that outer loop or the new outer loop, if you will. Uh, when you get into prospers in Salina of North Texas, you're usually talking about. New developments of housing developments that Hillwood or Dr.
[00:49:51] Horton or one of the big national lenders is, uh, building. So the product we see is usually kind of a little bit closer in. Or in the mid cities in Arlington or North Texas. And we do have some Fort Worth deals and Weatherford deals that are west of, uh, Weatherford's, just west of Fort Worth, and in the East Texas, uh, not, or east Texas relative to the Metroplex.
[00:50:17] You're seeing Forney, uh, you're seeing Terrell. Um, there's, there's still some growth that way. We've got a lot of employees actually that live in 40, so, um. Like I said, it's just a, it's a vibrant market here in Dallas Fort Worth and in North Texas,
[00:50:35] Rocky: and it seems like there's not as much growth in, in south of, south of Dallas.
[00:50:41] Is, is there a particular reason why that area hasn't really experienced as much growth as North?
[00:50:48] Paul Jackson: I, I think it's always just been a more difficult housing, uh, market than everything's kind of west, east, and north. But I would say that as, as you maybe jump over South Dallas, uh, looking at walks, I had you down to Waco, uh, what.
[00:51:04] My dad told me when I graduated from college 25, 30 years ago, was the golden triangle of, you know, Dallas, San Antonio, Houston with Austin. Kind of in between. There is gonna be one metropolitan area in 25 years. I didn't believe him when I graduated from college, but now I look up and it actually really has kind of come to fruition and is gonna continue to grow.
[00:51:26] So, you know, we've even seen. Franchise development from home investors growing in Waxahatchee and Waco in markets where they can't get in because the game's locked. But, um, all up and down 35 and 45, you know, these pockets of cities such as the Woodlands, you know, is now. It's maxed out. So what are you seeing?
[00:51:46] You're seeing Conroe become one of the fastest growing cities in Texas, and that's just an outgrowth of the Woodlands. You know, the Woodlands was an outgrowth of Houston and Conroe is now an outgrowth of, um, the Woodlands and even the Howard Hughes Corporation bought, I don't know how many acres, 5, 6, 7 years ago, because they believe that the growth beyond Conroe is gonna continue to move up 45.
[00:52:14] Rocky: And it, it seems like similar to DFW Houston just has an unlimited growth. Like you said, it, it continues to grow north. Obviously they have the Gulf on the south part of, of Houston, but it, it just seems like it, it never ends. It just keeps. Growing outward, whether it's west or north, and um, uh, you know, Dallas a little different.
[00:52:36] 'cause you have, you have the opportunity to grow on all sides. Um, but, but Houston is, um, is, are there any challenges that you see in that market? Um, you know, typically people think about floods.
[00:52:47] Paul Jackson: Yeah, that's definitely, you know, a risk in Houston, um, going back five or six years ago to the, you know, the big flood that they had down there.
[00:52:55] But, um. I think they've done a lot of work in Houston with, uh, you know, their infrastructure to be able to try to prevent that from happening going forward. But, um, Houston's a great market. You know, it's a really strong market, really vibrant market. Um, a lot of industry down there. So I think that's gonna continue to be a market that folks are attracted to.
[00:53:17] I think it's maybe even, you know, moved up the ranks and surpassed Dallas, even though it's an ongoing debate.
[00:53:26] Rocky: Let's move on West to San Antonio. Any thoughts about that market?
[00:53:32] Paul Jackson: We like San Antonio. We've done a lot of business in San Antonio. We've done a lot of business south of San Antonio in the Rio Gray Valley, so, um, it's a strong market and it's growing as well.
[00:53:46] Rocky: The next one close to that is, is Austin. Obviously that's a, a unique market within Texas. Um, are you a bit more cautious lending there? Are you optimistic about the growth of Austin,
[00:53:59] Paul Jackson: uh, long term? Yeah. I'm, I'm optimistic about the growth of Austin. I lived there in. 1997 to 2000. So I experienced the Dell boom, they called 'em billionaires that were buying houses up and inflating the prices.
[00:54:13] And then that forced my wife and I to, you know, chase a house and pay up for it and we didn't get hurt. Um. We made money on the deal, but the swings in Austin, you know, you hear about 'em. I experienced them as a, you know, young married man, uh, fresh outta college, working for JP Morgan. So, yeah, it's, it's experienced a lot of growth.
[00:54:39] A lot of folks moving in from California and Seattle. Um, they've built a lot of highrise, um, you know, apartments and condos in the downtown area. Um. The, the, the real estate on the single family side has, has blown, you know, two x three x its value from, you know, over the past 10 years. But it's a market that corrects a lot faster than other cities, and it accelerates faster and it corrects faster than most every city in the state of Texas.
[00:55:13] Rocky: Okay. And, uh, let's switch to a different market. There's a, you know, you have this part of, of South Texas that's, uh, has had a lot of growth. That's the Rio Grande Valley, Macallan, and the surrounding cities. Do you land in that region and is that some, uh, an area that you're excited about?
[00:55:30] Paul Jackson: Yeah, we loan in, we loan in the Rio Grande Valley, and we're excited about the prospects in that region.
[00:55:35] It's a, um. It's another growing market. They've got a new university system with U UT Re, Rio Grande Valley. They branded it U-T-R-G-V. Uh, they've got a, you know, new hospital, a new nursing school, new medical school. Uh, they've got, you know, hardworking folks in that area. Um, it's a great market. We like it a lot.
[00:56:00] Rocky: Nice. And, uh, last, well, there's a couple more. Um, how about El Paso? Is that an area that you lend in?
[00:56:08] Paul Jackson: We have not historically done a lot of business in El Paso. Um, not to say that we wouldn't, but it's just not been a market that we've done a lot of business in historically.
[00:56:17] Rocky: Okay. And how about West Texas?
[00:56:19] Uh, it seems like, uh, real estate investors in that region struggle with finding lenders, uh, uh, to do business with. Uh, and that's, um, you know, your, your oil country like, uh, cities like Lubbock and Odessa. Is that an area that you lend in?
[00:56:34] Paul Jackson: Lubbock, Midland, Odessa, Abilene, we've done deals in those markets.
[00:56:38] Um, you know, we we're, we're, we're not really set up to do rural homes, uh, just because, uh, the marketability those homes can sometimes stretch given the population. But in, in cities where the MSA is a hundred thousand or more, and we can get comfortable with the, uh. Basics of the eco e ecosystem or the economics of the city like Lubbock, like Midland, like Abilene.
[00:57:09] Um, we're active in those markets if the deal makes sense.
[00:57:13] Rocky: All right, Paul, that's all I had on my list for today. Was there anything else, uh, you wanted to talk about, anything I might have missed?
[00:57:20] Paul Jackson: No, man, I just congrats on your new office. That's a great looking office.
[00:57:25] Rocky: Thank you. Appreciate it. Uh, and congrats on your merger, uh, with D two and, uh, hopefully that, uh, um, helps you expand the business and, um, you know, uh, improves your cost of capital and all the other benefits that come along with it.
[00:57:41] Paul Jackson: Thank you. We're excited. We're, uh, excited to get to market and grow this balance sheet.
[00:57:46] Rocky: Great. Alright Paul, thanks for joining me. Thanks for your time and uh, hope to see you at a conference soon.
[00:57:52] Paul Jackson: Alright, man. I'll see you soon. I'll see you at the end of the month.
[00:57:55] Rocky: Yes, that's right. See you in Scottsdale and PLA.
[00:57:59] And that's a wrap for this episode of Private Lending Insights. Residential Capital Partners is listed on private lender link.com. I put a link to their profile in the description. You could do a search on private lender link.com to find them. They're listed in most of the residential categories. You can call them.
[00:58:16] You could submit a short email form or a detailed loan request form. When you reach out, please mention that you found them on Lender Link. They pay us a monthly fee to be listed so there's no cost to you to reach out to them through our platform. I hope you found this episode to be insightful. Thank you for tuning in and listening all the way to the end.