CEO Kevin Wolfer on overcoming risks and bureaucracy with Kennedy Funding’s lending tactics
This article was produced in partnership with Kennedy Funding
In commercial real estate, securing a land loan under tight deadlines can be a high-stakes endeavor, particularly when traditional and private lenders balk at the challenge. Securing a land loan in a tight timeframe is notoriously challenging.
Traditional lenders often shy away from land altogether due to its perceived high risks, such as the uncertainty of land value appreciation, environmental issues, and the lack of immediate income generation from undeveloped land. Most private lenders, even those specializing in hard money loans, are hesitant due to these heightened risks and the complexities involved in accurately valuing land and assessing its potential.
Unlike commercial banks, which are bogged down by extensive bureaucratic procedures, including lengthy appraisal and due diligence processes, Kennedy Funding’s strategy is nimble and rapid. CEO/President Kevin Wolfer (pictured) explained that, as a direct private lender, Kennedy Funding can evaluate a deal and express interest within the same day it is received. This efficiency extends to requiring only short-form restricted appraisals and being proactive in obtaining necessary surveys, titles, and environmental reports, working tirelessly to ensure all prerequisites are met promptly.
Cutting through red tape
“Our team is equipped to make swift decisions, avoiding the delays of traditional committee reviews. We prioritize direct lines of credit and partnerships with financial institutions and high net worth individuals to ensure quick access to resources,” Wolfer highlighted.
“The focus is on the land’s potential and environmental status rather than conventional financial indicators. By understanding the zoning, entitlements, and market value, we can expedite the closing process effectively.”
Securing a land loan requires thorough evaluation of the property’s value, zoning, entitlement status, and environmental cleanliness. It’s important to address potential issues, like contaminants or protected species, that could impede development. A detailed survey, approved by the title company, is essential for smooth transactions.
The ability to act quickly and decisively in the lending market, according to Wolfer, is contingent upon having one’s own lines of credit and solid relationships with hedge and high net worth individuals Kennedy Funding’s extensive network of over 25,000 brokers, consultants, and attorneys, cultivated over 35 years, plays a crucial role in its ability to secure deals and move towards rapid closings.
Risks and challenges
Acknowledging the high default rates inherent in private lending, particularly for land loans, Wolfer did point out, “Unlike banks with sub-1% default rates, as private lenders, we face significantly higher risks, with default rates around 20-30%. This means while 70-80 percent of our loans are repaid without issues, a notable portion, 20-25%, encounter problems, often leading to foreclosures.
“However, traditional lenders promise specific closing dates but fail to deliver, retracting their commitments as the deadline approaches—60 days, 30 days, or even 10 days out—citing changes in loan committee parameters. This is where Kennedy will come in. Borrowers will jump to us and we can move quickly.”
The key advantage of private lenders is their grasp of the urgency when a client has made a non-refundable deposit, especially when banks withdraw their support. For example, if a borrower has placed a 10% non-refundable deposit on a $5 million purchase, they risk losing $500,000. In such scenarios, borrowers need a direct private lender that can expedite the process, collaborating closely with attorneys to finalize the deal without bureaucratic delays.
As Wolfer said: “While our services may come at a higher cost compared to traditional banks, we remain significantly more cost-effective than bringing in a financial partner, offering a balance between speed and expense.”
Future directions
Looking ahead, Kennedy Funding remains resilient amidst fluctuating interest rates and market uncertainties, thanks to its market-proof lending model. For potential borrowers, Wolfer’s advice is clear: be prepared with essential documents like surveys and phase 1 environmental reports before seeking financing. This preparedness is crucial for expediting the closing process, especially in international dealings where local equivalents to environmental standards are required.
Kennedy Funding’s reach extends beyond the United States, with significant business coming from countries like Peru and Brazil. This global footprint underscores its capability to meet the diverse needs of clients worldwide.
The ability to close quickly can mean the difference between seizing a lucrative opportunity and watching it slip through your fingers, along with the non-refundable deposits and pre-investments made in anticipation of the deal closing. Kennedy Funding, specializes in closing land loans swiftly—often within 10 days. This rapid turnaround is largely unheard of in the industry.
