In this HousingWire Executive Interview, Tom Davis, Chief Marketing Officer at Deephaven, discusses opportunities in the non-QM investor loan space as we enter the new year. He emphasizes the importance of a diverse product portfolio including DSCR and business purpose loans, to better serve customers. Davis also highlights Deephaven’s edge in products such as their Ground-Up Construction and Fix-and-Flip products, which provide builders with valuable tools and training. Davis believes that by aligning with the right lender and expanding product offerings, innovators can position themselves as valuable partners in a volatile market.
HousingWire: With investor exposure still playing an important role in the current housing market, what (or where) are the most important opportunities for originators to enter the non-QM investor loan space?
Tom Davis: Investor transactions are still close to 28% of the overall buying market. There are many opportunities in the investor space if you offer the right products. Having a full suite of investor products including non-QM allows you to serve both first-time investors and professional investors. Many investors choose to close in the name of an LLC. Do you have a business loan in your offer? If not, now is the time to partner with a non-QM lender to make sure you don’t miss out on opportunities that can really make a difference to your portfolio.
Having a complete investor product portfolio is the difference between a yes or no for an investor who doesn’t meet agency guidelines. Agency loans have restrictions such as loan amounts, which only allow up to ten properties and do not accept five to nine units.
Non-QM opens doors for real estate investors. Close one real estate investor loan and you have a repeat client for life!
HW: Debt Service Coverage Ratio (DSCR) loans have become important for investors. Can you explain how these loans benefit investors and founders, especially in our current market environment?
TD: DSCR loans are one of the easiest and fastest loans to close. They allow real estate investors to qualify for the rental income of the property being studied. It is a very convenient option compared to agency loans. You qualify for local income, satisfy a few other requirements and be done.
Features of this popular loan for real estate investors include the ability to withdraw cash to purchase additional investment properties. Investor demand for products has made DSCR loan rates more competitive and sometimes more competitive than Agency investor loans.
Originators should understand that DSCR and non-QM loans allow them to differentiate themselves and strengthen Realtor relationships in today’s challenging market. Helping Realtors close more deals is very important. It will lead to more referrals for Realtors and you. Word gets out and the next thing you know, you’re the go-to expert for investors and Realtors.
HW: We are seeing an uptick in low-end construction. What specific benefits does Deephaven offer to founders working with investors on these types of projects?
TD: There will be price increases throughout 2024 to 2025 due to a shortage of 5-7 million homes. The growth of low-rise buildings will be high to accommodate the increase in population and to meet the demand due to the limited supply. New construction volume levels rose to a 10-year high with a 33% share. With this kind of release of needs and demand, the founders have to find out how to help the investor clients with new construction projects.
Deephaven offers an advantage and a competitive edge with our Ground-Up Construction loans. We are able to access and finance business objectives with loans up to $10 million for builders, developers and experienced real estate investors. We also have webinars and training for designers to become experts in the space.
HW: The fix-and-flip market continues to see strong demand despite inventory challenges. How does Deephaven support innovators serving clients in this space?
TD: We support founders by offering a Fix-and-Flip product and teach them how to market it to their investor clients. These loans offer developers a solution to the housing shortage. They have the opportunity to help renovate old, vacant homes in many cities and put them back on the market.
The Fix-and-Flip program is great for working with investors and tapping into that market. Deephaven can help founders on how to succeed in the investor environment.
The bottom line is that investors are excellent sources because they often do repeat business with the founder. Developers adding a full line of investor products including DSCR, Fix and Flip and Ground-Up Construction loans bring a solution to bringing more homes back to market. Rehabs will be very important to reopen the inventory. The inventor who makes this happen will also be of great help.
HW: From a broader industry perspective, what strategies should founders consider when positioning themselves to help investor clients successfully in a challenging market?
TD: We expect the investor space to continue to grow with new construction and investor transactions covering a large percentage of the market. A smart strategy would be to align with a lender that can provide a comprehensive list of investor loans. This will allow them to serve investors, builders and developers.
A housing shortage does not mean a shortage of investor activity. There are many opportunities to be found by being part of the solution. Pick up the phone and contact Deephaven to find out how we can be the most effective resource for investors. We are a one stop shop for investors for any type of project they wish to undertake. The best strategy in today’s market is to continue to learn more about adding new product offerings to serve all borrowers. Non-QM is the place to look.
HW: For lenders or originators interested in expanding their non-QM offerings, what steps would you recommend, and how can they learn more about working with Deephaven?
TD: As we enter 2025, I highly recommend that founders think about their plan and goals. Entering new construction in the investor markets should be part of your plan in 2025. Investors encounter challenges trying to build their portfolios every day. Be their go-to resource for the answers and solutions they need. Learn to become a product knowledge expert.
How? Like I said, work with Deephaven for training. Other suggestions are to listen to panels, visit investor clubs or networking groups and become a member. Get visibility and increase awareness of your Realtor base and the investor community in your local market. Start with Deephaven and see what happens.
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