Saurabh Shah is a PropTech entrepreneur with extensive experience in real estate investments, asset management, and business development across the United States and South Asia.
Currently, he is working at the intersection of real estate and technology to disrupt the traditional real estate financing model with his company, InstaLend, which he co-founded.
Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Saurabh Shah. He is a PropTech entrepreneur with extensive experience in real estate investments, asset management, and business development across the United States and South Asia. Currently, he is working at the intersection of real estate and technology to disrupt the traditional real estate financing model with his company, InstaLend, which he co-founded. Thank you so much for being on the show!
Saurabh:
Thanks, Charles. Good to be here. So
Charles:
It’s a little different from other people that we have, guests that we have that come on the show in the sense that you are really working with investors and you are also a tech investor. But can you give us a little background of a little bit about your personal and professional background before launching insulin with your partner?
Saurabh:
Sure. so personally I’m originally from India in Mumbai. I, I came to the US in 2008 to pursue my master’s in financial engineering at NYU. That was a two year program. I wanted to kind of move out from engineering into finance, and I was looking for a good mix of the two walls. So the program was right up my alley. And York City is where I’ve always aspired to be given Wall Street is at New York and my, my affinity to be working with numbers and lending and finance. So that was that’s it where I’m from originally. That’s how I got started in the us. You know, once I finished my program, I started working in investment banking. That was my first job out of school. So that was a great experience. You know, I, I did the hours, I did the grant work.
Saurabh:
I learned everything as to, you know, what bankers do, what is burning, the midnight oil, putting together decks models, and that’s where my love for numbers grew. And I did that for about seven years, eight years. Then spent some time in private equity where I focused exclusively on real estate investments in South Asia, and understood more on the lending aspect working with creditors, understanding how real estate as an asset class works. And then finally in 2019 my business partner, who also is my brother we decided to start. And you know, to be completely honest, the, the inception of was really putting together a source of capital, which which had more of a common sense underwriting approach and was put together more from solving the problems that we encountered. And what I mean by that is you know, while I was doing banking and private equity we were investing in real estate in the us.
Saurabh:
So we were buying fixed up properties you know, we were doing it out of state. We were doing in states like Illinois, Michigan, Georgia, Ohio. And we really understood the challenges that comes you know, for an investor when they have to go and get financing, either, you know, the LTVs are too low or it’s too slow to close on because you’re working with conventional it’s a full dock with income qualification or your interest rates are super high with a local hard money lender. So we married the experience of investing in real estate and you know wall Street where we spent a couple years working together and we decided to start in instant, which which was catered to individual investors like you and I, who were interested in investing in residential real estate within the us. So
Charles:
Can you explain a little bit about some of the lending products that install Lend does offer to its clients?
Saurabh:
Sure. so we are a full service shock, but what I mean by that is we offer financing across the short-term products, which is typically up to 12 months. And we also do lend on the long-term 30 or mortgages. And, and the way the products break up between the two is for 12 months. You know, we have a product known as Fix and Flip, which is for investors who wanna buy fixed up properties. You know, we’ll give them up to 90% financing on purchase cover, a hundred percent of their rehab. And then once the properties fixed up, they either sell it or they become, landlords are bringing in tenants. The second short term product we offer up to 12 to 18 months is ground up, new construction for investors, or you’re gonna buy a piece of land and build a house on there.
Saurabh:
And again, this is all investments only, no primary homes. And the second product, which I spoke about, which is the 30 year mortgages we offer a program called DSCR which is pretty pretty common in our world now. Debt service coverage ratio, it’s geared for anybody who wants to be a landlord. You either want to buy a turnkey property or you own properties with tenants, and you are just gonna pull some cash out. So this is this is the DSCR program that we offer on long-term leases which is at least 12 months. We also do the same for properties which are short-term dentals. So if you have an Airbnb or a <inaudible> and you are looking to get A-D-S-C-R mortgage we do lend on those. And the last product we have is is a portfolio loan, which is basically geared for investors who have a bundle of properties either to fix up or they have a bunch of properties they own as landlords, and they wanna just roll it up into one single blanket mortgage.
Charles:
Nice, nice. Yeah, I mean, I, as you mentioned before, I think you have investors get this idea if they’re working with a hard money lender, you know, like a private money lender, a wealthy person in their area, you might get faster commitments and a little bit more straightforward process where you usually will. However, the fees and the rates are usually higher. And then when, say we’re working in doing, working with a local bank or something like this, it’s usually a little bit more straightforward in the sense that there’s usually only like three people on that loan committee. They’re locally based, it’s a little easier to get loans pushed through. And there’s more of, like what you said, common sense underwriting. Can you explain a little bit about how the loan process with install end really differs from a traditional lender and kind of like what your competitive differentiators?
Saurabh:
Sure. so firstly, we are an asset based lender. What I mean by that is we focus our underwriting on the subject property, whether it’s an acquisition or a refi. We are not looking to qualify your personal income. So unlike banks or other conventional sources of capital, this is not DTI. So we are not asking for investors tax returns or pay stubs or W twos. All we are looking to do is get an appraisal for the property. And based on the value in the appraisal, we make the loan. Now, of course, the loan LTB is also tied to credit and experience. So we’re looking at a six 80 minimum credit, but we only do soft credit checks. We don’t do a hard pull, so it doesn’t affect your credit. It doesn’t you know, ding your score. That’s that’s something we wanna make sure, you know, is more from a common sense perspective.
Saurabh:
‘Cause You may be doing your one property to, or you may be doing your a hundred property. We can’t be, we can’t be doing a hard check on you every single time you’re looking to get financing from us. In terms of experience you know we again wanna make sure that experience qualification is not too rigid. So as long as you understand how real estate as an asset class works you know, we have qualifiers for experience. Just as an example. Say you’ve never invested you know, you’ve always been on the fence, but you’ve been a GC and you’ve always done rehab for other investors. So having a GC license will also count as experience. Similarly, if you are a licensed realtor you may have never invested in yourself, but you understand how real estate as an asset class works, we will give you credit for that experience.
Saurabh:
So these are the credit and experience qualifiers. Outside of that, we really take pride in like I said, you know trying to close quick, but with a reasonable reasonable term sheet. So we get you, we get you a proof of funds to start with. If you need to get a property under contract. That’s typically where investors first, you know, start building a relationship with us. The proof of funds as issued the same day, it’s typically within a couple hours. And then once you have a property under contract and you get us a scope of work we can close a loan within seven to 10 days. So we get you a term sheet the same day, and based on based on the appraisal, which typically takes three to five days, we’ll go ahead and get underwriting completed in that timeline when appraisals are getting done and close probably by the 10th day.
Saurabh:
Now of course, this ability to quick close quickly also depends on the investors’ ability to get us what we need as quickly as possible. So it, it’s about, you know, working, you know, on the dances on the two legs. But we, we do close pretty quick and our loans are structured as business purpose. So they go to your business entity like an LLC or a corp. So it doesn’t affect your personal credit, it doesn’t affect your utilization. It allows you to do multiple loans at the same time with us, we don’t have caps where, hey, you, you’ve done five loans, you need to pay us back to borrow more. We, we do take pride and we do merit underwriting specific to assets only. So all loans are asset based and it allows you the ability to scale quickly and close in a short period of time.
Saurabh:
Outside of this in terms of rates and points, which is where most lenders compete, we we typically for fix and flips are in the range of nine to 10 and half percent interest only monthly payments and no prepay penalties. We do charge up to two points depending on how far along we’re in the relationship. You know, the more business we do together, the better the terms get. Or if you have a competing term sheet we do have the flexibility to, you know, match or beat. And in terms of how we also compete is it depends how investors are sourcing properties. You know, in today’s time and age I don’t know how many investors are earning properties through MLS or are you working with realtors and are you working off market deals or, what we’ve seen commonly is a lot of wholesalers, you know, flipping sign flipping contracts to investors.
Saurabh:
So if we have investors who have properties through wholesalers, we will cover the wholesale fee as part of a loan amount. So you don’t have to come out of pocket. If you’re a bird investor, you know where you are buying, rehabbing, renting and then refinancing, and all you’re looking to do is fix our property and then bring in a tenant. We will do a full DSCR 75 LT v cash out as early as the 90th day. So we only have a three month seasoning for max L. So I feel these are these are terms and you know, guidelines which are pretty competitive in the landscape, which allows us to work and give the best terms to our clients.
Charles:
So I was speaking to this investor, new investor probably like a year ago or something, and they were talking to me about did they get proof of their first fix and flip loan, and they weren’t aware of how the kind of rehab funding draws worked, which is kind of amazing and surprising that that never came up during the process. But for investors that are looking at doing a, I guess, a heavier rehab or a fix and flip, can you talk a little bit about how funding draws work with you and how it might differ from other lenders out there? And I know when I speak to private lenders, this is like something that they really focus on getting out to their investors as soon as possible.
Saurabh:
Absolutely. Yeah, that’s, that’s a big part of the relationship building with us and the clients. So typically for rehab funds these funds are held in a rehab escrow at closing, and they’re released as reimbursements towards the work completed. Now keep in mind, we don’t mandate a particular rehab schedule or the number of draws. We allow investors to have that flexibility on, hey, as in when you finish work, as in when you need the funds, you can request a draw. Where we, we’ve used technology to help us gain an advantage or an edge is you know, we used to do third party inspection reports pre COVID, and now we’ve migrated to a self-inspection model where we basically send you a link, which you open up on your mobile phone at the property. So it is geotagged, you take those pictures for the items that are completed and you hit submit. So it comes to us through a portal and we have the ability to send you the draw funds the same day. So we’ve cut down the turnaround time on releasing a draw, which was about five days through a third party inspector to now the same day with a self-inspection.
Charles:
Yeah, that’s really powerful because even usually it takes multiple days with other lenders to get that draw out. And I know a lot of private lenders, they like to meet the investor at the property, which is great for that relationship and to write ’em that check, but obviously, like, you know, everybody’s busy, it’s difficult to get that all sorted out. So that, that’s a great way of moving it forward. One thing we’re talking about, kind of speeding up the process is I always see, like with appraisals, and it’s something that’s like a, it’s a third party, obviously the investor doesn’t have any connection or shouldn’t have any connection with the appraiser, but how do you guys do that to like streamline the process through to really keep it? Because seven to 10 days is a pretty, you know, it’s a pretty tight timeline for closing on the loan. So we
Saurabh:
Do have local appraisals andan we work with AMCs, so we have a panel these are appraisals we worked with over the course of the last six years. We built a relationship. We’ve also have we also have a good amount of data across these markets given the number of loans we’ve done. So we also have the ability from our internal science team to look at appraisals, to look at comms, to have a good sense on where the market is, where the values are, and what the trends are. So that allows us to, you know, again, work competitively and get this turned around in three to five days.
Charles:
Interesting. Okay. How can a an investor really best prepare themselves for a fast or faster pre-approval and closing? You said your pre-approvals are only within a few hours, but to speed up and to keep everything. ‘Cause obviously it’s something where you’re waiting on documentation, the whole thing stops until that happens or whatever that item is that you’re waiting on. What would you say are some of the things that best prepare investors beforehand, before they go and actually speak to you about a pre-approval or they get something on their contract or they’re ready to get something on contract, how to get all their ducks in a row and, you know, what would you say some of the normal factors are in that process that really slow it down? Sure.
Saurabh:
So for new investors, I think it’s important to get an LLC set up. Like I said, these loans are structured as business purpose. So while you can still, you know, get us get a property under contract in your personal name we will pre-approve you an individual name, but eventually the loan has to close in your business entity. So getting that head start on setting up an LLC which pretty is, which is pretty easy in today’s time. You can go online and you can set it up in a few hours. I would say that’s the first step. Outside of that, try and make sure you have a licensed GC who is doing your rehab because it’s your first deal. So you wanna make sure your scope of budget is drawn up correctly, both from a costing perspective and from making sure that you can wrap it up within the loan tenure.
Saurabh:
So you know, it’s not going overboard from a timing perspective. You wanna go and work the property, that’s a great idea to know what the current status of the property is, the description on the budget, what are those line items, where, where is work being done, just so that you know, you are not completely out of sync on having this delegated completely to a third party GC and not really knowing on the ground level where, where, where these upgrades are happening. And I would say if, if your strategy, if your exit strategy, again, it could either be a flip or it could be you know, bringing in a tenant. If y’all are gonna flip it, then start building relationships, have a good realtor on board. ’cause Eventually you will wanna list the property and you will wanna have a good team working with you.
Saurabh:
If you’re looking to do A-D-S-C-R and you know, that’s your strategy to not do one but do multiple of these eventually you will need a property management company to come in and manage your properties. So start looking for good property management companies, build a relationship, all these things, if you take a head start today, then by the time you finish your rehab which typically is six to eight months, you know, you’ll land up with maybe two or three such relationships that you will then wanna narrow down on. So when you finish your rehab and you’re ready for an exit, you are in a good place to, you know, finalize what these relationships are and what your exit is. Outside of that, I would just say just keep your docs together. I mean, keep be organized. If you’ve done multiple deals, keep your HUDs on your deals that you’ve closed. Keep your credit, you know, at least at six 80 you can, you can continue to monitor it through various apps to make sure that hey, you know, this is not going below the minimum. But that’s that’s all I can think of in terms of, you know, what are some best practices for someone to, you know, work quickly with us
Charles:
And keep all your docs in order and you know, credit. And then also building up a team, which is a major thing no matter what type of kind of investment strategy you’re taking within real estate as I find because there’s so many people that are involved in the process from looking at properties, buying, managing, and also selling. So what would you say is, ’cause when you’re doing fix and flip loans, and if I speak to maybe private lenders, everybody has a different take on how they do it, but if if someone, someone has a fix and flip loan out with you, I would say probably like they probably do like a 12 month term or something like this. What happens if they can’t sell it? Like what is the, usually your process, every deal’s different, but what would you say your process is typically how you work that out to give ’em a little bit of extra time or to, you know, make it so it’s still a win-win for everybody, even if it takes a few more months?
Saurabh:
Absolutely. So one thing we do we do actively is we monitor your drug progress on your rehab to make sure that hey, you’re coming along fine on your rehab to meet your 12 month time. And you know, sometimes that may not happen for multiple reasons. Say you need to build permits and that gets delayed. So you can’t start work and hey, now you are looking at more than 12 months to get the property work completed. So we do offer extensions you know, two extensions of three months each, depending on how far along the investor is and how much time they need to finish. So this, this gives you the flexibility to wrap up your work, should there be any spills whether it’s a cost overrun, time overrun permits are you changing your GC or life just happened and you know, you need some more time. So yeah.
Charles:
Do you find a lot of your investors that are doing a birth strategy where they’re buying the rent, the or rehabbing, all this type of stuff, and then they’re renting it and then refinancing, are they keeping that refinanced usually in-house with your firm? Is that usually how the plan is?
Saurabh:
I mean that’s what we’ve seen. We have a pretty sticky process. You know, I mean like I said, we, we try to keep it more of a common sense UNR approach. So investors like working with us and since we already have a lot of the information on, you know, our investor, which is credit experience appraisals done for the property, it’s just an easier lift to get the board, the final DSCR done because you don’t have to work with a different lender and then churn through the same underwriting process again by producing the same docs. So it’s, it’s peace of mind for our investors. Our rates are pretty competitive on DSCR. We start at 6% in today’s time. Like I said, we only have a three month seasoning. We do allow for vacation rentals on DSCR, so we are offering a pretty competitive product and we are also offering, you know, the nuances, the nitty liquidities that come along with it for the derivative assets like vacation rentals, which not a lot of lenders focus on. So we often find ourselves as, you know, coming out of the front with our investors because you know, they wanna work with a lender, which is a full service shop, but at the same time it’s pretty competitive. And servicing the relationship is a real focus. So we’ve been able to win these deals and keep them in house. Yeah,
Charles:
The seasoning, having a short seasoning is something that I think most investors, maybe especially new ones, are not like checking off that box because if you’re paying 10, 12%, whatever the rate is to you, you gotta keep that, you know, three months, six months, nine months, whatever it is. Now you’re just paying while you have a tenant in there, you’re just overpaying for this debt where you could just refinance it much faster if it’s only three months seasoning. I mean, it’s pretty straightforward process where you’re just making sure that the person they put in there actually is paying the rent. You know what I mean?
Saurabh:
Exactly. Yeah.
Charles:
So, you know, you are a real estate investor, that’s why you started this company with your brother, what would you say? And then also working with a number of different investors, what we see is some common mistakes you see real estate investors making. This can be any part of the real estate process. But you know, I I imagine you have a number of ’em around financing. Sure.
Saurabh:
So one thing we have we have, you know, rather we would like to point out is where we often see investors make some mistakes is on that scope of work. You know, sometimes, and it’s, it’s very simple, right? If you’re doing a birth strategy, annual scope of work, is it, it, it, it kind of mirrors what a property which is built to sell looks like. You don’t need to spend that much money because you’re not selling it to get all that equity out, right? It’s not a home you’re building to sell to a primary homeowner. You are just rehabbing a home to keep it rent ready. So the rehab budget for a rent ready home is very different and it should be light compared to the rehab budget that you have for a property to sell. So o often new investors for some investors you know, they, they’re, they’re pretty excited about getting the upgrades done to make, to, to make the house look as as good as possible.
Saurabh:
And I think that that’s an aspect where you save money and also you preserve your equity, right? Because the less you, the less cost basis and you are anyway getting a cash out at 75 LTV, the more on the equity that you can pull out. So I would say that’s, that’s, you know, that’s something you should keep your eye on to really understand what is your exit strategy, right when you are getting into the project to know how do your numbers tie in and where do you really need to compensate versus where you need to, you know, keep more of a high level approach. That’s the number one thing that comes to my mind.
Charles:
No, that’s a lot of great information. I think estimates, estimates and you know, everything like that when you’re pricing out for your underwriting is something that even experienced investors get caught up on. It’s not just something for new investors, but it’s definitely something that you have to really pad that reserve budget if it’s your first time out or if there’s a lot of unknowns depending on how much inspection you really did at the property before actually buying it. Yep.
Saurabh:
Well
Charles:
Thank you so much for coming on today. How can our listeners learn more about you? And so
Saurabh:
All our information, including a portfolio of the loans that we have funded is available on our website, which is install lend.com. You can request a pre-approval through a portal you can request a loan submission, an application through the portal everything resides there. You can also reach out to me through the portal.
Charles:
One last thing I want to just make a note of here is what states are you nationwide? How does that work with Insta Insulin? We
Saurabh:
Are nationwide, with the exception of the Dakotas.
Charles:
Alright, well thank you so much for coming on. We’ll put the link into the show notes and looking forward to connecting with you here in the near future. Thank
Saurabh:
You so much. Had a great time.
Saurabh Shah is a PropTech entrepreneur with extensive experience in real estate investments, asset management, and business development across the United States and South Asia.
Currently, he is working at the intersection of real estate and technology to disrupt the traditional real estate financing model with his company, InstaLend, which he co-founded.
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