April 3, 2024 • 27 mins
Thank you to our sponosor inspectify.com
Summary
In this episode, Jeff Utecht interviews Jeff Bumgardner from Builder's Capital. They discuss Jeff's background in real estate and his experience flipping houses in Seattle. They then dive into an overview of Builder's Capital and their approach to construction financing. Jeff shares some unique challenges and opportunities for real estate investors, including the importance of zoning changes and entitlements. They also discuss the financing options and terms offered by Builder's Capital. The episode concludes with contact information for Builder's Capital and a reminder of the value their loan product provides to real estate investors.
Chapters
00:00 Introduction and Background
02:58 Flipping Houses in Seattle
06:06 Overview of Builder's Capital
11:00 Challenges and Opportunities for Real Estate Investors
22:55 Contact Information and Conclusion
About Jeff Bumgardner
Studied city planning in grad school back east, did highrise multifamily development, moved to seattle to work on Citybldr tech, did some house flips and wholesaling, work for Builders Capital putting together construction financing for residential builders and developers.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
That's pretty awesome.
That's pretty awesome.
All right.
All right.
We're recording.
Here we go.
That's pretty cool.
We can talk about that afterwards.
I want to hear more about that.
So here we go.
All right.
Welcome back to the Washington State realestate investing podcast.
I'm excited today to be joined by Jefffrom Builders Capital.
Maybe we'll get into this in the podcastitself, but full disclosure, my wife and I
(00:24):
are filling out paperwork to get a loanproduct from Builders Capital.
When I reached out to Jeff, I had no cluethat we would be talking about Builders
Capital in today's episode, but it justfits quite nicely.
So Jeff, welcome to the podcast.
Tell listeners a little bit aboutyourself, your background in real estate.
(00:45):
Thanks, Jeff.
Yeah, Jeff, I'm Governor.
I guess I got started in real estate aftergrad school, studied city planning, did
apartment development on the East Coastprimarily, a combination of ground up,
value adds.
Let's see, moved to Seattle maybe 10 yearsago, worked for a tech company called City
(01:07):
Builder, building really cool softwarethat helps us identify essentially,
like development opportunities.
I think of it as land acquisitionsoftware, but it has a lot of uses outside
of that.
And then spent some time working for awholesaler, did some flips myself in
(01:31):
Seattle, which was fun.
And I was a borrower with Builders Capitaltwice when I was in Seattle.
So I knew these guys and a buddy of minewas at Broadmark.
maybe last year and we checked in.
Last time we spoke, or I guess last timein a while that we spoke, he had moved
(01:53):
over to Builders Capital.
And so we spent a little while talkingabout that.
And I said, you know, this seems like acool opportunity.
I'm in Idaho, so finding anything likehalf relevant to real estate out here is
tough.
And...
Yeah, so I joined up with them and it'sbeen great.
(02:15):
There's a huge need for the products thatwe offer and the guys are all like top
notch.
I really enjoy working there.
So, yeah, excited to be here and talk alittle bit about it.
Yeah, that's great.
Talk a little bit about the, what are theflips you did here in Seattle?
Is it in the greater Seattle area orsomewhere?
Yeah, they were both in Leschi.
(02:35):
I lived in Leschi.
And so, you know, the flips were like, canI walk to it?
You know, is it close to Home Depot?
And, you know, I met all that criteria.
So one was like a historic Victorian inLeschi and another one was like a small
(02:56):
craftsman in Leschi.
And they were great.
I mean, every project you learn on themand.
I remember the first one I did withBuilders Capital.
I'm walking through the house after Ibought it and my wife's there, right?
And she's like, the floors aren't level.
(03:16):
And I was like, yeah, it's an old house.
Who cares, right?
And she's like, you can't sell a housewith the floor.
I can roll a marble down the floor.
And so anyway, I had to demo the entirechimney and jack the house up.
It ended up being like quite a bit of painand suffering, but it was fun.
(03:38):
Yeah, we had a good time.
great.
That's awesome.
Yeah.
That's one of our new things now too, ishow far is it?
Like when we started in our real estatejourney, we never thought about how far
were you from a hardware store or a HomeDepot.
And now we're the same thing.
Like if it's less than 30 minutes from aHome Depot, then that's a project we'll
consider.
Cause I tell you, run into the store, runinto the store all the time.
(04:00):
We'll eat into your time for sure.
Well, talk to us a little bit aboutBuilder's Capital and the approach.
that is used for loans specifically toreal estate investors.
Yeah, so Builders Capital has been aroundfor, I don't know, almost two decades,
started in Seattle.
(04:21):
We used to have an office in likeGeorgetown area by the Rainier Brewery.
Now the office is in Puyallup.
Three founders, Kurt Altig, Robert Hadley,Rob Trent.
Rob Trent was a home builder, Salta one ofthe big four, as I understand it.
(04:43):
Kurt Altig is like an investment guy, WallStreet type guy, and Robert Hadley is like
fourth or fifth generation real estateguy.
So all like super knowledgeable, veryproficient at what they do.
And we exist primarily to provideconstruction financing for ground up new
(05:05):
construction.
Obviously, we did value add and still dosome value add, but primarily we're
working with home builders, developers toget these residential construction
projects off the ground and stabilized.
(05:25):
We are the largest private residentialconstruction lender in the country, so
we're pretty good at what we do.
We've got access to a lot of capital.
We did $3 billion in originations lastyear.
We'll do four and a half this year.
So yeah, just uniquely positioned, I'dsay, to provide that just from post
(05:51):
entitlement through construction andstabilization capital.
And we do it at 85 % of the cost rightnow.
So we're taking most of the capital stack.
A lot of borrowers come to us and they'relike,
I've been raising money for six months andwe're like, you can stop now because
instead of raising money, which isexpensive and forces you to give up some
(06:16):
ownership of the project, you're going touse Builder's Capital and we're going to
take over that equity piece in a lot ofcases and fund these deals.
We have the flexibility that banks don'thave and that we're typically not.
super focused on like restricting startsor the draw process.
(06:39):
Like it's very easy compared to atraditional lender.
You submit the draw application.
We send somebody out or we don't sendsomeone out depending on how big the
request is.
You know, we approve it within four daysand we fund within four days.
And so it's just like really fast comparedto, you know, most developers who are
(06:59):
submitting pay apps to a bank and
you know, 30 days later funding those.
So yeah, there's some flexibility.
fund all sizes of projects righteverything from single -family all the way
up to huge apartment complexes
Yeah, we'll do everything.
I would say the smallest loom size is,it's actually 500 ,000.
(07:22):
I tell people it's a million because it'slike the same amount of work to do a $500
,000 house as it is to do a $50 millioncondo building.
But yeah, we'll do pretty much everythingresidential.
We'll do mixed use, but we can't providevalue on the exit for the commercial or
non -residential portion.
So it's got to be less than 20 % of thegross floor area and there's some other.
(07:45):
like some other things that we gotta payattention to.
But for the most part, yeah, we're seeingsubdivisions, big home builders that wanna
scale their business and are feeling likethey've got all their equity tied up in
the dirt or in their land bank or in theiractive projects.
(08:06):
We'll come in and recapitalize them out ofthat.
So.
If you own a piece of dirt, we'll give youthe value as long as you've owned it for
12 months, we'll give you the full valueof what it's worth today.
So a lot of these guys buy a piece ofdirt, rezone it or entitle it, subdivide
it, and now they've got like, it's likeworth 20 times what they paid for it.
(08:27):
A lender might say, no, we'll give you thevalue that you paid for the dirt.
And we'll say, no, we're gonna give youthe equity value for every one of those
lots, which is huge.
That's oftentimes like,
you're 15 % of the loan to cost that youneed to bring to the table.
So a lot of these guys are closing with nocash and we're just funding the whole
(08:49):
deal, which is cool.
Yeah.
cool.
And I mean, a big part of this is becauseof the founders of the company were
construction, right?
Or in the construction business and tryingand just realizing that there's this gap a
lot of times between actually gettingsomething built and getting a stabilized
loan on it.
(09:10):
Can you kind of talk about that?
I mean, I think that's it is a reallyunique position.
I know when we were reaching out toprivate money for our latest, our latest,
um,
project and we came across BuilderCapital, it really was exactly what we
were looking for.
Like, look, we just need a loan that canget us to the end and get this thing
(09:31):
built.
And, you know, working with banks, it'sjust so difficult, especially if you're
already in your real estate investingjourney, like we are, and I've got 10
loans out in my name and my wife.
has income, but you have to jump throughthe hoops and they don't understand the
schedule ease.
And it's just like, I'm just like, I justsomebody give us the money so we can build
(09:52):
the stupid thing.
And that's what I really liked about kindof your approach.
Yeah, we're an asset -based lender, right?
Some people say hard money, some peoplesay private, some people say asset -based,
whatever it is.
We don't care necessarily how much moneyyou make, which is the complete opposite
of your traditional lender.
(10:12):
I can remember when I was doing this inSeattle, I have a house that's worth $2
million and I have a bunch of real estate,but I'm working for a startup, and the
banks are like,
Yeah, sorry, like, you know, I don't careif you have $100 million in the bank,
like, we can't do the deal because youwork for a startup, you know?
And so Builders Capital is great becausethey're like, okay, like, we understand
(10:36):
what the land's worth, we understand whatthis other collateral is worth, and, you
know, we see that you have liquidity thatsupports, you know, this risk profile, so
we're going to do the deal.
And that's why, you know, that's why Iended up being a customer all those years
ago, because it worked for me.
where traditional income -based bankingdidn't really fit.
(11:02):
Yeah.
As a loan officer for Builders Capital,what are some of the unique challenges
that you've ran into or opportunities thatyou think right now, kind of given where
the market is that you see for an investorthat there's some spots out there that
they should be considering?
(11:24):
I mean, you know, my background is cityplanning, so I'm always paying attention
to zoning changes.
And when I was working at City Builder,you know, we, I guess, seized on some of
the shoreline up zones, you know, around145th and we're able to like provide a lot
(11:47):
of value for some of those homeowners byjust saying, look like your property is
worth more to.
a builder developer than it is to somehome buyer that's going to come along.
So let's just get you and the otherneighbors here together and, you know,
package this up so that a multifamilybuilder can make you an offer that exceeds
what you're going to find just for thehouse.
(12:10):
You know, the dirt's worth more than thehouse.
I think, you know, if I had more free timethan I have right now, given how busy we
are, I would probably be out there tryingto tie up dirt.
you know, in the UGA that is either partof a rezone in the comp plan, like 30
years out, or maybe it's already beenrezoned, but it's just underutilized.
(12:34):
And I would just get that entitled.
And you see like, Lake Union Partnersstarted doing that, you know, that's how
they got their start.
They were just like, entitling dirt, andthen they got into the development and now
they're, you know, like really highquality, like numerous markets.
Mm -hmm.
mean, that's a great way to get started.
(12:55):
If you can put together just theentitlements and it doesn't cost a lot of
money, you know, some of these homeownersare willing to ride it out for a year or
two while you go through that.
Yeah, there's a lot of sweat equity there,you know, going to council meetings and
getting that all approved, but you'regoing to see such a tremendous lift doing
that, that.
(13:17):
I think it makes sense.
You can option off a piece of dirt fornext to nothing.
In some cases, if the property ownertrusts you or whatever, it's being used as
parking or ag or whatever it is.
Sure.
Yeah.
And I think, you know, with the recentbills passed here in the state of
Washington, where basically everyresidential, every residential property is
(13:41):
now zoned up to four units.
Uh, you know, if you're, what is it?
I think it's over 75 ,000 population ofover 75 ,000.
I'll just read an article that VancouverWashington is having to change their laws
to allow these new state laws to takeimpact.
And you just think about what does that doto lots?
And if you can seize on a big enough lotthat you could fit a duplex or try it like
(14:04):
almost every residential lot now can be upto four units with very little red tape
involved.
I just think it's an interesting approachto be thinking about, okay, where are
those zonings?
Where is that happening?
And how can you maybe seize on thoseopportunities right now?
Yeah, and I think maybe for like guys thatare getting started who are listening to
(14:25):
this, like the architects are a greatresource.
Like they can, it takes them five minutes.
They know exactly what the setbacks areand you know, how to maximize the thing.
And I wouldn't hesitate to call.
I think it was, I think a buddy of mine,Hugh, Hugh, I forget what his name is,
maybe Hugh Schaffner or something.
(14:48):
I remember he was doing this like yearsago and he just had like a machine where
you just brought on the site and you werelike, hey, I can buy this.
And he's like, yeah, you should buy that.
Here's what we can do with it.
Here's how much it costs.
Here's what it's worth at the end.
You know, boom, boom, boom, boom.
So that's the kind of stuff that I think,you know, if you don't want to take a big
(15:08):
risk, that's like super risk adjusted.
You know exactly what you can do with it.
It's not like some of these biggerdevelopment projects where you got to go
like,
kiss the ring and ask, please, can I justbuild something that's not going to cost a
thousand bucks a foot.
Yeah.
Yeah, exactly.
And that's where we are with this projectthat we're doing in Spokane is part of the
(15:30):
part of buying this project was rightafter, you know, when all these these new
laws were coming through and we knew therewas enough land there to build a duplex
behind the original duplex that's in thefront.
And so rather than having these, they werejust like an old Model T garage.
I call them Model T garages, you know, thething from the 1920s back there.
And we just we demoed it.
(15:51):
And there's plenty of space back there nowto build another duplex.
So we've just taken, we bought a duplexand we're going to turn it into a, it'll
be five, actually five units by the timewe're done.
Um, and the city is, I mean, that's whatthe city wants us to do.
And so the city is literally helping andsupporting us any way they can to get
these projects done because housing isstill a need in Spokane, specifically in
(16:13):
the area that we bought.
And so it's been really interesting to beworking with the city of their same.
I mean, basically we just had a meetinglast week with them.
They're like, thank you.
Thank you for doing this.
Cause this is exactly what we want to behappening in these spaces that these lots
are big enough that they can fit thesehomes, you know, and how do we re
-leverage this, this land in a way that ismore useful, especially within city
(16:34):
centers, I think it's, it's pretty unique.
So.
I think Spokane is a great example ofthat.
It's like the small lot ordinance orwhatever they just passed.
Like that product, that townhouse product,it didn't exist six months ago in Spokane,
right?
And now you go through like the land usepermitting records and there are like a
(16:57):
dozen developers that are doing exactlywhat you're doing.
Like they paid attention to that.
You know, they maybe buy a house that'son, you know.
a half an acre and now you've got fivelots and you can subdivide that up and you
can do five townhomes.
And it's kind of risk adjusted because,you know, worst cases, you just bought it
(17:17):
for what the house is worth, you know, soif you had to, you know, for whatever
reason, I guess you, you know, maybemiscalculate and you can only divide up it
into four lots, like you still got thehouse plus three.
It's like free equity, free land basis,you know, so.
Yeah, I love that.
I would definitely go full steam aheadwith that.
(17:42):
And we underwrote a deal in Spokane and Ilike that.
I think the market's great.
It's, you know, whatever.
It's just, I think it's got a lot goingfor it.
So.
I think there's a lot happening in Spokaneright now.
We're very excited to still be investingover there.
So that's our thing.
If an investor is listening to this andthey're thinking, okay, I have a project
(18:06):
coming up.
I'm looking for, you know, some money tohelp me support me in this project.
What's the best way forward?
Is it best for an investor to buy thedirt, then reach out to builders capital?
Does builders capital support the buyingof the dirt and the building?
What's the timing of things that yourecommend to investors?
(18:28):
I would say the thing that matters themost to Builders Capital is that they have
a permit to do the site work or they canget the permit fairly quickly.
We do not want to be in the business ofentitlement and subdivision work.
We do fund site work, horizontal, whateveryou call it, development.
(18:52):
There's like a million different things.
Coming from development is funny.
I call development like hard and softcosts, right?
But at Builders Capital and the lenderside, we call development the site work.
And so you'll see those different termstossed around quite a bit, but we'll fund
it only as a way to essentially haveaccess to funding the vertical
(19:16):
construction as well.
We will fund the purchase.
We can also fund the refi, so we can refithem out for the purchase price if...
you know, if they buy it or tie it up andthen they want to entitle it and then they
want us to come in and take them out of itor close on it.
Let's say they put down, you know, 20 %and we'll come in and we'll bring in the
(19:40):
other 80%.
They can leave the 20 % in at the end ofthe day.
Like there's complete flexibility on our,on our end to be able to structure deals
that work for these investors.
You know, obviously.
nobody's going to fund 100 % of theproject, right?
So they're either going to bring in thedirt and that'll be their equity or
(20:01):
they're going to bring in equity and youknow, we take down the dirt.
But yeah, we can do the purchase, we cando the site work, all the curb and gutter,
you know, infrastructure, and then we'llfund the construction.
Awesome.
Can you talk a little bit about what therates are?
I mean, we're recording this on March 25for people because I know rates are
(20:23):
constantly on the flux or what do what doterms look like from from builders capital
side?
Yeah, I say they're fairly competitive.
Obviously not meant to compete directlywith lenders, but also higher leverage, so
like more loan proceeds.
I think for our 12 month term, likestandard loan, we're looking at 11 to four
(20:48):
roughly.
And you're gonna pay points up front, liketwo to three points, but it'll be rolled
into the loan.
Actually, that's one of the interestingthings about this product is, you know,
there's a bunch of like title and, youknow, loan closing fees and, you know,
whatever, flood certs and all thatnonsense.
(21:09):
That stuff all gets funded as part of theloan.
So at the end of the day, like if there'senough equity in the dirt or, you know,
you guys are coming to the table with likea substantial asset, we'll fund the rest,
including the interest carry.
So all our loans are structured with aself -funding interest reserve for the
(21:30):
life of the loan.
And that'll be drawn on as those loanproceeds are distributed.
And these borrowers are generally notcoming out of pocket for anything once
we've done the loan.
So if you need to come in with another 10million or...
(21:50):
$100 ,000 or whatever, depending on thesize of the loan.
Once you've made that contributioninitially, everything else, like we like
to say that the project is fully fundedwhen we come on as the lender.
We do need to be in first position,something to think about.
So if you do have another lender, maybedid the loan just to close on the
(22:13):
property, we'll take them out and that'llbe part of the refi upfront.
So we work with a lot of other lenders.
Sometimes they stay in as subordinateddebt.
Sometimes we take them out if they need tobe in first position.
So.
Yeah.
Well, I mean, that makes sense.
If you're leveraging up to 85%, you know,if you can take that out, you're going to
(22:36):
want to be in first position.
I totally see it.
Totally understand that part.
Yeah, that's our recourse.
In the handful of cases where a projectdoes go sideways, that's what we're left
with at the end of the day.
It's like, okay, we take this projectback.
Yeah, yeah, yeah, that's great.
Don't do that.
(22:57):
Yeah, don't do that.
No, no, it's always good, you know, havingyour project, having your bells and
whistles.
And, you know, as somebody, as I startedat the beginning, full disclosure, my wife
and I are filling out paperwork right nowto see if we can put together a deal with
Builders Capital.
And I will say it's been very easy havinga couple meetings with Builder Capital and
just filling out some paperwork andgetting the ball rolling.
(23:20):
It's just nice to know there are productslike this to support investors who are
trying to grow their portfolio.
And especially today, just knowing thebanks are very tight, especially when it
comes to investment properties.
That's what we're finding anyway.
Trying to do something else around and getprojects done.
(23:41):
So it's just a great little loan project.
I think it's just great that people knowabout it.
It's a local product, like you said, hereout of Puyallup, Washington.
So it's also great to be local as well.
So that's great as well.
If somebody is listening to this and theywant to reach out to find out more or
contact you, what's the best way for themto be able to do that?
(24:02):
I mean, they can go on our website andthey can fill out a pricing request.
You can feel free to email me.
My last name is Bumgarner, so good luckgetting in touch with me.
If you could spell that, then I guess youwin.
Yeah, they can just reach out to you,Jeff, and you can pass along my contact
info.
You know, everybody at the company is likesuper knowledgeable, well -educated about
(24:26):
the space, about the loan products, so.
you know, whoever you end up getting onthe phone, they'll be able to take care of
you and, you know, get you the thing thatmakes the most sense for your project.
You know, if it's like got no site workinvolved, then it's a new construction
line.
If it's got site work involved, it's anall in one.
(24:47):
There's some bridge products that comearound from time to time, but for the most
part, like 90 % of our borrowers are justlike either.
need to do the site work or I already didall the site work out of pocket and you
know maybe with a different lender ormaybe personally and I just need you guys
to come in and fund the rest.
Yeah so I would say just builderscapital.com, Jeff Bumgardner, you know find me on
(25:12):
LinkedIn or wherever you, TikTok orwhatever you guys are doing these days.
make sure there's a, we'll make surethere's a link to your LinkedIn profile
into the website, of course, atbuilderscapital .com.
We'll make sure that's in the show notesfor anybody that wants to reach out.
Again, I think it's just a great loanproduct in a great space and you know,
(25:33):
that it's ran by and started by acontractor and investment people that just
understand that, you know, investors needthis product.
I mean, this is the kind of product thatwe need to be able to get that.
you get to a place where you can get aloan out on something and get something
built quickly without having to jumpthrough a bunch of hoops.
So I think it's just a great product and Iwanted to make sure listeners were aware
(25:55):
of it if they weren't.
So thank you for joining us.
I really appreciate it.
Yeah.
Yeah, I appreciate you having me on.
Thanks, Jeff.
Yep.
That's pretty awesome.
That's pretty awesome.
All right.
All right.
We're recording.
Here we go.
That's pretty cool.
We can talk about that afterwards.
I want to hear more about that.
So here we go.
All right.
Welcome back to the Washington State realestate investing podcast.
I'm excited today to be joined by Jefffrom Builders Capital.
Maybe we'll get into this in the podcastitself, but full disclosure, my wife and I
(00:24):
are filling out paperwork to get a loanproduct from Builders Capital.
When I reached out to Jeff, I had no cluethat we would be talking about Builders
Capital in today's episode, but it justfits quite nicely.
So Jeff, welcome to the podcast.
Tell listeners a little bit aboutyourself, your background in real estate.
(00:45):
Thanks, Jeff.
Yeah, Jeff, I'm Governor.
I guess I got started in real estate aftergrad school, studied city planning, did
apartment development on the East Coastprimarily, a combination of ground up,
value adds.
Let's see, moved to Seattle maybe 10 yearsago, worked for a tech company called City
(01:07):
Builder, building really cool softwarethat helps us identify essentially,
like development opportunities.
I think of it as land acquisitionsoftware, but it has a lot of uses outside
of that.
And then spent some time working for awholesaler, did some flips myself in
(01:31):
Seattle, which was fun.
And I was a borrower with Builders Capitaltwice when I was in Seattle.
So I knew these guys and a buddy of minewas at Broadmark.
maybe last year and we checked in.
Last time we spoke, or I guess last timein a while that we spoke, he had moved
(01:53):
over to Builders Capital.
And so we spent a little while talkingabout that.
And I said, you know, this seems like acool opportunity.
I'm in Idaho, so finding anything likehalf relevant to real estate out here is
tough.
And...
Yeah, so I joined up with them and it'sbeen great.
(02:15):
There's a huge need for the products thatwe offer and the guys are all like top
notch.
I really enjoy working there.
So, yeah, excited to be here and talk alittle bit about it.
Yeah, that's great.
Talk a little bit about the, what are theflips you did here in Seattle?
Is it in the greater Seattle area orsomewhere?
Yeah, they were both in Leschi.
(02:35):
I lived in Leschi.
And so, you know, the flips were like, canI walk to it?
You know, is it close to Home Depot?
And, you know, I met all that criteria.
So one was like a historic Victorian inLeschi and another one was like a small
(02:56):
craftsman in Leschi.
And they were great.
I mean, every project you learn on themand.
I remember the first one I did withBuilders Capital.
I'm walking through the house after Ibought it and my wife's there, right?
And she's like, the floors aren't level.
(03:16):
And I was like, yeah, it's an old house.
Who cares, right?
And she's like, you can't sell a housewith the floor.
I can roll a marble down the floor.
And so anyway, I had to demo the entirechimney and jack the house up.
It ended up being like quite a bit of painand suffering, but it was fun.
(03:38):
Yeah, we had a good time.
great.
That's awesome.
Yeah.
That's one of our new things now too, ishow far is it?
Like when we started in our real estatejourney, we never thought about how far
were you from a hardware store or a HomeDepot.
And now we're the same thing.
Like if it's less than 30 minutes from aHome Depot, then that's a project we'll
consider.
Cause I tell you, run into the store, runinto the store all the time.
(04:00):
We'll eat into your time for sure.
Well, talk to us a little bit aboutBuilder's Capital and the approach.
that is used for loans specifically toreal estate investors.
Yeah, so Builders Capital has been aroundfor, I don't know, almost two decades,
started in Seattle.
(04:21):
We used to have an office in likeGeorgetown area by the Rainier Brewery.
Now the office is in Puyallup.
Three founders, Kurt Altig, Robert Hadley,Rob Trent.
Rob Trent was a home builder, Salta one ofthe big four, as I understand it.
(04:43):
Kurt Altig is like an investment guy, WallStreet type guy, and Robert Hadley is like
fourth or fifth generation real estateguy.
So all like super knowledgeable, veryproficient at what they do.
And we exist primarily to provideconstruction financing for ground up new
(05:05):
construction.
Obviously, we did value add and still dosome value add, but primarily we're
working with home builders, developers toget these residential construction
projects off the ground and stabilized.
(05:25):
We are the largest private residentialconstruction lender in the country, so
we're pretty good at what we do.
We've got access to a lot of capital.
We did $3 billion in originations lastyear.
We'll do four and a half this year.
So yeah, just uniquely positioned, I'dsay, to provide that just from post
(05:51):
entitlement through construction andstabilization capital.
And we do it at 85 % of the cost rightnow.
So we're taking most of the capital stack.
A lot of borrowers come to us and they'relike,
I've been raising money for six months andwe're like, you can stop now because
instead of raising money, which isexpensive and forces you to give up some
(06:16):
ownership of the project, you're going touse Builder's Capital and we're going to
take over that equity piece in a lot ofcases and fund these deals.
We have the flexibility that banks don'thave and that we're typically not.
super focused on like restricting startsor the draw process.
(06:39):
Like it's very easy compared to atraditional lender.
You submit the draw application.
We send somebody out or we don't sendsomeone out depending on how big the
request is.
You know, we approve it within four daysand we fund within four days.
And so it's just like really fast comparedto, you know, most developers who are
(06:59):
submitting pay apps to a bank and
you know, 30 days later funding those.
So yeah, there's some flexibility.
fund all sizes of projects righteverything from single -family all the way
up to huge apartment complexes
Yeah, we'll do everything.
I would say the smallest loom size is,it's actually 500 ,000.
(07:22):
I tell people it's a million because it'slike the same amount of work to do a $500
,000 house as it is to do a $50 millioncondo building.
But yeah, we'll do pretty much everythingresidential.
We'll do mixed use, but we can't providevalue on the exit for the commercial or
non -residential portion.
So it's got to be less than 20 % of thegross floor area and there's some other.
(07:45):
like some other things that we gotta payattention to.
But for the most part, yeah, we're seeingsubdivisions, big home builders that wanna
scale their business and are feeling likethey've got all their equity tied up in
the dirt or in their land bank or in theiractive projects.
(08:06):
We'll come in and recapitalize them out ofthat.
So.
If you own a piece of dirt, we'll give youthe value as long as you've owned it for
12 months, we'll give you the full valueof what it's worth today.
So a lot of these guys buy a piece ofdirt, rezone it or entitle it, subdivide
it, and now they've got like, it's likeworth 20 times what they paid for it.
(08:27):
A lender might say, no, we'll give you thevalue that you paid for the dirt.
And we'll say, no, we're gonna give youthe equity value for every one of those
lots, which is huge.
That's oftentimes like,
you're 15 % of the loan to cost that youneed to bring to the table.
So a lot of these guys are closing with nocash and we're just funding the whole
(08:49):
deal, which is cool.
Yeah.
cool.
And I mean, a big part of this is becauseof the founders of the company were
construction, right?
Or in the construction business and tryingand just realizing that there's this gap a
lot of times between actually gettingsomething built and getting a stabilized
loan on it.
(09:10):
Can you kind of talk about that?
I mean, I think that's it is a reallyunique position.
I know when we were reaching out toprivate money for our latest, our latest,
um,
project and we came across BuilderCapital, it really was exactly what we
were looking for.
Like, look, we just need a loan that canget us to the end and get this thing
(09:31):
built.
And, you know, working with banks, it'sjust so difficult, especially if you're
already in your real estate investingjourney, like we are, and I've got 10
loans out in my name and my wife.
has income, but you have to jump throughthe hoops and they don't understand the
schedule ease.
And it's just like, I'm just like, I justsomebody give us the money so we can build
(09:52):
the stupid thing.
And that's what I really liked about kindof your approach.
Yeah, we're an asset -based lender, right?
Some people say hard money, some peoplesay private, some people say asset -based,
whatever it is.
We don't care necessarily how much moneyyou make, which is the complete opposite
of your traditional lender.
(10:12):
I can remember when I was doing this inSeattle, I have a house that's worth $2
million and I have a bunch of real estate,but I'm working for a startup, and the
banks are like,
Yeah, sorry, like, you know, I don't careif you have $100 million in the bank,
like, we can't do the deal because youwork for a startup, you know?
And so Builders Capital is great becausethey're like, okay, like, we understand
(10:36):
what the land's worth, we understand whatthis other collateral is worth, and, you
know, we see that you have liquidity thatsupports, you know, this risk profile, so
we're going to do the deal.
And that's why, you know, that's why Iended up being a customer all those years
ago, because it worked for me.
where traditional income -based bankingdidn't really fit.
(11:02):
Yeah.
As a loan officer for Builders Capital,what are some of the unique challenges
that you've ran into or opportunities thatyou think right now, kind of given where
the market is that you see for an investorthat there's some spots out there that
they should be considering?
(11:24):
I mean, you know, my background is cityplanning, so I'm always paying attention
to zoning changes.
And when I was working at City Builder,you know, we, I guess, seized on some of
the shoreline up zones, you know, around145th and we're able to like provide a lot
(11:47):
of value for some of those homeowners byjust saying, look like your property is
worth more to.
a builder developer than it is to somehome buyer that's going to come along.
So let's just get you and the otherneighbors here together and, you know,
package this up so that a multifamilybuilder can make you an offer that exceeds
what you're going to find just for thehouse.
(12:10):
You know, the dirt's worth more than thehouse.
I think, you know, if I had more free timethan I have right now, given how busy we
are, I would probably be out there tryingto tie up dirt.
you know, in the UGA that is either partof a rezone in the comp plan, like 30
years out, or maybe it's already beenrezoned, but it's just underutilized.
(12:34):
And I would just get that entitled.
And you see like, Lake Union Partnersstarted doing that, you know, that's how
they got their start.
They were just like, entitling dirt, andthen they got into the development and now
they're, you know, like really highquality, like numerous markets.
Mm -hmm.
mean, that's a great way to get started.
(12:55):
If you can put together just theentitlements and it doesn't cost a lot of
money, you know, some of these homeownersare willing to ride it out for a year or
two while you go through that.
Yeah, there's a lot of sweat equity there,you know, going to council meetings and
getting that all approved, but you'regoing to see such a tremendous lift doing
that, that.
(13:17):
I think it makes sense.
You can option off a piece of dirt fornext to nothing.
In some cases, if the property ownertrusts you or whatever, it's being used as
parking or ag or whatever it is.
Sure.
Yeah.
And I think, you know, with the recentbills passed here in the state of
Washington, where basically everyresidential, every residential property is
(13:41):
now zoned up to four units.
Uh, you know, if you're, what is it?
I think it's over 75 ,000 population ofover 75 ,000.
I'll just read an article that VancouverWashington is having to change their laws
to allow these new state laws to takeimpact.
And you just think about what does that doto lots?
And if you can seize on a big enough lotthat you could fit a duplex or try it like
(14:04):
almost every residential lot now can be upto four units with very little red tape
involved.
I just think it's an interesting approachto be thinking about, okay, where are
those zonings?
Where is that happening?
And how can you maybe seize on thoseopportunities right now?
Yeah, and I think maybe for like guys thatare getting started who are listening to
(14:25):
this, like the architects are a greatresource.
Like they can, it takes them five minutes.
They know exactly what the setbacks areand you know, how to maximize the thing.
And I wouldn't hesitate to call.
I think it was, I think a buddy of mine,Hugh, Hugh, I forget what his name is,
maybe Hugh Schaffner or something.
(14:48):
I remember he was doing this like yearsago and he just had like a machine where
you just brought on the site and you werelike, hey, I can buy this.
And he's like, yeah, you should buy that.
Here's what we can do with it.
Here's how much it costs.
Here's what it's worth at the end.
You know, boom, boom, boom, boom.
So that's the kind of stuff that I think,you know, if you don't want to take a big
(15:08):
risk, that's like super risk adjusted.
You know exactly what you can do with it.
It's not like some of these biggerdevelopment projects where you got to go
like,
kiss the ring and ask, please, can I justbuild something that's not going to cost a
thousand bucks a foot.
Yeah.
Yeah, exactly.
And that's where we are with this projectthat we're doing in Spokane is part of the
(15:30):
part of buying this project was rightafter, you know, when all these these new
laws were coming through and we knew therewas enough land there to build a duplex
behind the original duplex that's in thefront.
And so rather than having these, they werejust like an old Model T garage.
I call them Model T garages, you know, thething from the 1920s back there.
And we just we demoed it.
(15:51):
And there's plenty of space back there nowto build another duplex.
So we've just taken, we bought a duplexand we're going to turn it into a, it'll
be five, actually five units by the timewe're done.
Um, and the city is, I mean, that's whatthe city wants us to do.
And so the city is literally helping andsupporting us any way they can to get
these projects done because housing isstill a need in Spokane, specifically in
(16:13):
the area that we bought.
And so it's been really interesting to beworking with the city of their same.
I mean, basically we just had a meetinglast week with them.
They're like, thank you.
Thank you for doing this.
Cause this is exactly what we want to behappening in these spaces that these lots
are big enough that they can fit thesehomes, you know, and how do we re
-leverage this, this land in a way that ismore useful, especially within city
(16:34):
centers, I think it's, it's pretty unique.
So.
I think Spokane is a great example ofthat.
It's like the small lot ordinance orwhatever they just passed.
Like that product, that townhouse product,it didn't exist six months ago in Spokane,
right?
And now you go through like the land usepermitting records and there are like a
(16:57):
dozen developers that are doing exactlywhat you're doing.
Like they paid attention to that.
You know, they maybe buy a house that'son, you know.
a half an acre and now you've got fivelots and you can subdivide that up and you
can do five townhomes.
And it's kind of risk adjusted because,you know, worst cases, you just bought it
(17:17):
for what the house is worth, you know, soif you had to, you know, for whatever
reason, I guess you, you know, maybemiscalculate and you can only divide up it
into four lots, like you still got thehouse plus three.
It's like free equity, free land basis,you know, so.
Yeah, I love that.
I would definitely go full steam aheadwith that.
(17:42):
And we underwrote a deal in Spokane and Ilike that.
I think the market's great.
It's, you know, whatever.
It's just, I think it's got a lot goingfor it.
So.
I think there's a lot happening in Spokaneright now.
We're very excited to still be investingover there.
So that's our thing.
If an investor is listening to this andthey're thinking, okay, I have a project
(18:06):
coming up.
I'm looking for, you know, some money tohelp me support me in this project.
What's the best way forward?
Is it best for an investor to buy thedirt, then reach out to builders capital?
Does builders capital support the buyingof the dirt and the building?
What's the timing of things that yourecommend to investors?
(18:28):
I would say the thing that matters themost to Builders Capital is that they have
a permit to do the site work or they canget the permit fairly quickly.
We do not want to be in the business ofentitlement and subdivision work.
We do fund site work, horizontal, whateveryou call it, development.
(18:52):
There's like a million different things.
Coming from development is funny.
I call development like hard and softcosts, right?
But at Builders Capital and the lenderside, we call development the site work.
And so you'll see those different termstossed around quite a bit, but we'll fund
it only as a way to essentially haveaccess to funding the vertical
(19:16):
construction as well.
We will fund the purchase.
We can also fund the refi, so we can refithem out for the purchase price if...
you know, if they buy it or tie it up andthen they want to entitle it and then they
want us to come in and take them out of itor close on it.
Let's say they put down, you know, 20 %and we'll come in and we'll bring in the
(19:40):
other 80%.
They can leave the 20 % in at the end ofthe day.
Like there's complete flexibility on our,on our end to be able to structure deals
that work for these investors.
You know, obviously.
nobody's going to fund 100 % of theproject, right?
So they're either going to bring in thedirt and that'll be their equity or
(20:01):
they're going to bring in equity and youknow, we take down the dirt.
But yeah, we can do the purchase, we cando the site work, all the curb and gutter,
you know, infrastructure, and then we'llfund the construction.
Awesome.
Can you talk a little bit about what therates are?
I mean, we're recording this on March 25for people because I know rates are
(20:23):
constantly on the flux or what do what doterms look like from from builders capital
side?
Yeah, I say they're fairly competitive.
Obviously not meant to compete directlywith lenders, but also higher leverage, so
like more loan proceeds.
I think for our 12 month term, likestandard loan, we're looking at 11 to four
(20:48):
roughly.
And you're gonna pay points up front, liketwo to three points, but it'll be rolled
into the loan.
Actually, that's one of the interestingthings about this product is, you know,
there's a bunch of like title and, youknow, loan closing fees and, you know,
whatever, flood certs and all thatnonsense.
(21:09):
That stuff all gets funded as part of theloan.
So at the end of the day, like if there'senough equity in the dirt or, you know,
you guys are coming to the table with likea substantial asset, we'll fund the rest,
including the interest carry.
So all our loans are structured with aself -funding interest reserve for the
(21:30):
life of the loan.
And that'll be drawn on as those loanproceeds are distributed.
And these borrowers are generally notcoming out of pocket for anything once
we've done the loan.
So if you need to come in with another 10million or...
(21:50):
$100 ,000 or whatever, depending on thesize of the loan.
Once you've made that contributioninitially, everything else, like we like
to say that the project is fully fundedwhen we come on as the lender.
We do need to be in first position,something to think about.
So if you do have another lender, maybedid the loan just to close on the
(22:13):
property, we'll take them out and that'llbe part of the refi upfront.
So we work with a lot of other lenders.
Sometimes they stay in as subordinateddebt.
Sometimes we take them out if they need tobe in first position.
So.
Yeah.
Well, I mean, that makes sense.
If you're leveraging up to 85%, you know,if you can take that out, you're going to
(22:36):
want to be in first position.
I totally see it.
Totally understand that part.
Yeah, that's our recourse.
In the handful of cases where a projectdoes go sideways, that's what we're left
with at the end of the day.
It's like, okay, we take this projectback.
Yeah, yeah, yeah, that's great.
Don't do that.
(22:57):
Yeah, don't do that.
No, no, it's always good, you know, havingyour project, having your bells and
whistles.
And, you know, as somebody, as I startedat the beginning, full disclosure, my wife
and I are filling out paperwork right nowto see if we can put together a deal with
Builders Capital.
And I will say it's been very easy havinga couple meetings with Builder Capital and
just filling out some paperwork andgetting the ball rolling.
(23:20):
It's just nice to know there are productslike this to support investors who are
trying to grow their portfolio.
And especially today, just knowing thebanks are very tight, especially when it
comes to investment properties.
That's what we're finding anyway.
Trying to do something else around and getprojects done.
(23:41):
So it's just a great little loan project.
I think it's just great that people knowabout it.
It's a local product, like you said, hereout of Puyallup, Washington.
So it's also great to be local as well.
So that's great as well.
If somebody is listening to this and theywant to reach out to find out more or
contact you, what's the best way for themto be able to do that?
(24:02):
I mean, they can go on our website andthey can fill out a pricing request.
You can feel free to email me.
My last name is Bumgarner, so good luckgetting in touch with me.
If you could spell that, then I guess youwin.
Yeah, they can just reach out to you,Jeff, and you can pass along my contact
info.
You know, everybody at the company is likesuper knowledgeable, well -educated about
(24:26):
the space, about the loan products, so.
you know, whoever you end up getting onthe phone, they'll be able to take care of
you and, you know, get you the thing thatmakes the most sense for your project.
You know, if it's like got no site workinvolved, then it's a new construction
line.
If it's got site work involved, it's anall in one.
(24:47):
There's some bridge products that comearound from time to time, but for the most
part, like 90 % of our borrowers are justlike either.
need to do the site work or I already didall the site work out of pocket and you
know maybe with a different lender ormaybe personally and I just need you guys
to come in and fund the rest.
Yeah so I would say just builderscapital.com, Jeff Bumgardner, you know find me on
(25:12):
LinkedIn or wherever you, TikTok orwhatever you guys are doing these days.
make sure there's a, we'll make surethere's a link to your LinkedIn profile
into the website, of course, atbuilderscapital .com.
We'll make sure that's in the show notesfor anybody that wants to reach out.
Again, I think it's just a great loanproduct in a great space and you know,
(25:33):
that it's ran by and started by acontractor and investment people that just
understand that, you know, investors needthis product.
I mean, this is the kind of product thatwe need to be able to get that.
you get to a place where you can get aloan out on something and get something
built quickly without having to jumpthrough a bunch of hoops.
So I think it's just a great product and Iwanted to make sure listeners were aware
(25:55):
of it if they weren't.
So thank you for joining us.
I really appreciate it.
Yeah.
Yeah, I appreciate you having me on.
Thanks, Jeff.
Yep.
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