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Finding the Funding: How Private Lenders Support Real Estate Investors with Sal Suleymanov

• Ed Mathews

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Ed Mathews:

Greetings and salutations. Real estate undergrounders. It is Ed Mathews with the Real Estate Underground. Thank you so much for joining us today. With us today is Solomon Suleymanov, and I hope I got that right, sir. He is with We Lend and he is a private lender. I always get asked the three big questions when I get stopped at a coffee shop, a grocery store, something like that how do you find the money, how do you find the deals, how do you find the time? Today, hopefully, we're going to solve at least one of those challenges. Let's talk about money, Solomon. Welcome to the show and thanks for your time today.

Solomon "Sal" Suleymanov:

Thank you so much, Ed. I'm glad to be here and hopefully I can educate your listeners.

Ed Mathews:

I know you can. So for those folks that haven't come across yet, you're a Northeast guy, but there's a lot of people out there. Why don't you tell us a little bit about you and Wieland, and your background For sure?

Solomon "Sal" Suleymanov:

My real estate career started back in 2012. I was literally making cold calls to people to see if they were interested in selling their properties. These homes were distressed, whether they'd be physically distressed or financially distressed. I've been through it all. I used to door knock on people's homes, et cetera. So that's how my real estate career got started. Started with wholesaling properties and then, once I started understanding how the market works and how just a real estate transaction works, ended up fixing and flipping properties in the New York City area in the five boroughs. So it was me, along with my brother and my two cousins, that really got this started.

Solomon "Sal" Suleymanov:

And then 2018 came around. We've seen a lot of deal flow by that time. We're doing a good amount of deals, whether it was fixing and flipping or developing. 2018 came around. We saw a good opportunity to come into the lending space and we started lending out money our own personal capital in the beginning and then that snowballed into having investors investing in our fund, et cetera. Yeah, so that's my start in real beginning. And then that snowballed into having investors investing in our fund, et cetera. Yeah, so that's my start in real estate. To date, we've north of $600 million in business purpose loans, and this is nationwide, across the country. Okay, so we're talking Nearly all 48. There are a few states that we're not lending in, whether they require a brick and mortar or licensing, like Vermont, exactly Vermont, north Dakota, south Dakota, but yeah, primarily everywhere.

Ed Mathews:

So let's talk about just real quick. I don't want to drop a term and then not explain what it is. So brick and mortar why don't you tell us why that's a problem for you guys?

Solomon "Sal" Suleymanov:

As private lenders, we're based out in New York City, right? So our headquarters is in New York. We have borrowers that come to us and say, hey, I'm a New York City guy but I'm looking to invest down in Florida. So if our borrower is going down to Florida, we'll follow them and we'll look at their strategy and see if it's a good strategy for them to get into and then we would finance their transaction. Just having a brick and mortar is just no longer feasible. It's just, it is not really not worth it for many lenders. I see many banks, many banks today are closing up a lot of shops because everything's just digital these days. Yeah, exactly.

Ed Mathews:

Our primary bank is Mercury. They're based in Silicon Valley and they, to my knowledge, don't have an office that I can walk into and go shake someone's hand, other than their corporate offices. So when a state like Vermont says, hey, we want you to be a brick and mortar, what that says to me is they're stuck in 1985 and they need you to have a bank, basically an office, in their state. I'm sure there are other reasons, but it makes investment a lot more difficult in those states which, basically, then you're operating either with equity or your own capital, and that is equity. Obviously, it keeps the investor community tamped down in those states, which is unfortunate, but because the fact is that guys like you and guys like us actually serve a really important role in investing and taking down properties that are dilapidated and have seen better days and bringing them back up to community standards and then allowing guys like me to go out and provide those as appointed homes for folks that live in the town and the state.

Ed Mathews:

It's a difficult situation, but the fact is that it's just because the states are stuck back in the 80s. So let's get on to the good stuff. So, in terms of the properties that you tend to lend on. I get the impression that it's a pretty wide array of deals, so can you walk us through what a prototypical if that even exists, a prototypical deal looks like for you?

Solomon "Sal" Suleymanov:

For sure. We lend on various asset classes. The first asset class that we started lending on when we just opened up our company was your typical one to four unit cookie cut, fix and flip product right. I think that's the easiest deal for anyone to come into. You're strictly running numbers. You're buying the property for a million bucks, you're putting in $200,000 in construction. You force appreciation. It's a value add. Now, tomorrow, once the construction is complete, the property may be worth 1.6, 1.7 million bucks. So that's the first asset class that we started lending on and that was what we were very familiar with because that's how we got started in the industry ourselves.

Solomon "Sal" Suleymanov:

The second asset class that we're lending on is, of course, multifamily five plus unit type properties as well. So that's an asset which everyone loves. But of course you have to buy cautiously and I'm sure you've been seeing what's been going on in the past couple of years with the unfortunate, with the yield and the cap rate crunches that everyone has been having. A lot of investors and developers have been caught, unfortunately holding the bag where they bought the property, let's say, for five or 6 million bucks, and today it's only worth maybe half of that, if not less. So that's an asset class we also lend on, of course, mixed use, which is super simple, super easy to lend on. But we've also started dabbling in industrial type properties as well. But for the industrial type properties, we're really sticking to the New York City area right now and we just wanted to make sure we really understand the asset and then, once we really get the meat and bones of the asset, we are definitely going to expand into other states that we're lending in as well.

Ed Mathews:

Yeah.

Solomon "Sal" Suleymanov:

But just having our backyard. Our backyard being New York City, we feel more comfortable doing that in New York and then just expanding nationwide. Yeah, the funny thing about that is a lot of people try to shy away from the New York City market, which I don't blame them, but that's our backyard, that's where we got our experience in and that's where we feel comfortable starting.

Ed Mathews:

The New York. Obviously we're a couple hours outside of New York, here in central Connecticut, and that's fascinating. Like you, look at Fairfield County, which is the Connecticut County that is right up against it. It's where a lot of the probably the folks that are your investors a lot of them live in Fairfield County and they commute into the city when they go. But the fact is that if you look at the two different markets, a four bedroom colonial here in central Connecticut costs you anywhere from I don't know half a million to 800 grand. That same property in Fairfield County, which is 40 minutes away, is a $2 million deal, and it's just because of the proximity to the city and, frankly, the people that live there can absolutely afford it, right, it's?

Ed Mathews:

a different world and it's in Connecticut. It's a tiny state. Don't get scared off of the New York thing, because the fact is that those properties it's more of an appreciation play than a cash flow play. You're going to make a couple, three points on a deal cash flow If you're fortunate. A lot of times you're going to lose money in the short term on cash flow. But when you force that appreciation you're getting a sizable return on that construction and management investment. You're getting a sizable return on that construction and management investment. And so that's where, if you read in the trades about folks forcing appreciation over the last four, five, six years and getting in and out of deals in two years, new York is one of those markets where you can absolutely do that.

Solomon "Sal" Suleymanov:

Yeah, I totally agree with you. And that's funny because I have some of my borrowers that call me and say, hey, I'm really not cash flowing on this property that I'm buying in New York City. Look, there are definitely pros and cons to every single state. One of the biggest pros in New York City is exactly what you said. You hit it on the head. The equity right, it's an equity play here. The values just keep going up in New York and it's crazy. It sounds insane, I know, but saying I know, but that's what's been happening for the past 10 or 15 years and yeah, it's really not a cashflow play here at all.

Solomon "Sal" Suleymanov:

And they're like you know what? I've been looking at deals. They'll tell me I've been looking at deals somewhere, maybe out in Ohio, where I'm buying a single family home for $200,000. What are you really cashflow in there? Right, the percent looks amazing, but the dollar amount just does not make any sense because one small, one small repair that you're Right and you're done, so it makes no sense. But we still lend on those properties out of Ohio. I have no issue doing that. But I just try to have them compare, compare and contrast between the two and usually speaking, they'll stick to the New York city market or they'll go into a market like Connecticut. Right, I have some borrowers that are now purchasing multifamilies in Bridgeport, Connecticut, where they're having a great time. They're stabilizing these assets and they're refinancing it and they're reaping the benefits.

Ed Mathews:

All right, yeah, it's interesting, right, it comes down to what's important to you and where you are in your financial journey.

Ed Mathews:

If you are looking to create large gobs of cash, then you're looking to force appreciation and get in, get it done and get out Perfectly valid.

Ed Mathews:

And that's what, on the small scale, house flippers do and, on the large scale, industrial retail office multifamily investors do. On the much larger scale, and then, from a cashflow perspective, these days, especially multifamily that's why it's very hard to cashflow because of the interest rates, right, and, frankly, the insurance costs. So that's where, like we've had in previous episodes not that long ago, where we've had folks come in talking about self-storage and industrial, which is one of the things you guys are looking at manufacturing and returning it back to the US from Canada, china, mexico and wherever else Apple. So today is the 27th of February and the last couple of days Apple just announced a $500 million investment in bringing a huge part of their manufacturing back from China to here and in that they're going to need industrial buildings or at least industrial land, and guys like Sal here are helping their investors make a pretty good chunk of money on getting ready for that influx of manufacturing.

Solomon "Sal" Suleymanov:

Yep, exactly. And to add to your point, like the SoftBank and OpenAI, they're all investing billions of dollars in the States. A lot of people were afraid. I don't know if you want to get into politics or not, but a lot of people are afraid of these tariffs. But I feel like he's using that as a negotiating tactic and, yeah, exactly, and I feel like it's been working pretty well for him. And there are companies such as Porsche now, car companies, manufacturers such as Porsche and others that are now considering bringing plants over to the United States to avoid these tariffs, and I feel like that's what he really wants to do. He really wants to boost up the United States economy and he really wants to bring a lot of these jobs back home.

Ed Mathews:

The US is one of the largest consumer economies on the planet and manufacturers who value revenue, which I'm pretty sure is every one of them. If you want to do business in the US, you better have a footprint here or it's going to be very difficult. So I get the forget the politics part of it. I get the math right, yeah, and the negotiation strat in terms of getting people to seriously consider moving a chunk of their assembly plants or whatever here to the US. So that's great for growing the middle class. So I get the math, but let's separate from the politics whatever. But I don't care, Frank, for me, I don't care who's in the office, I just want them to get out of my way. That'd be awesome. Same, Okay. So, in terms of the property, so we were talking about $600 million is a lot of lending and obviously you've been doing it for a while, but it also sounds like you're maybe going up market too, in terms of the size of deals that you're working on these days. Right, Absolutely.

Solomon "Sal" Suleymanov:

When we just started, we were just doing those cookie cut one to fours. Our average loan size at that time, I think, was like around roughly like $400,000. Today it's doubled. I think we're like an $800,000 average loan size right now and it's still growing. And one of the biggest reasons that's happening is because, of course, yes, we are expanding our products in the type of deals that we're financing.

Solomon "Sal" Suleymanov:

But a lot of these investors are becoming a lot more savvy and they're just changing up their game plan as to what they're doing to these properties.

Solomon "Sal" Suleymanov:

These regular fix and flip numbers really don't pencil out as much as they used to five to 10 years ago. What they're doing today is they're having conversion plays where they come and they take a two family home and they're converting it into condos right, so they'll have a vertical expansion, They'll add another two floors to the building and now, boom, they just created four condos out of that piece of property and it was a two family which they could have probably sold for maybe up to 2 million bucks. Now they're selling out each condo for at least 2 million bucks and we've seen so many of these going on. Now. It's just amazing to see, and, of course, with that, the loan sizes are going to be going up because the construction costs are going to be a lot higher for you to. Rather than just doing a full cut renovation now, you're doing a vertical expansion where you're putting in at least like $800,000 or $900,000 in construction.

Ed Mathews:

Yeah, I've got a guy that I know, a friend of mine, who's doing something similar on the house flipping side, where he's going around in central and northern Jersey scooping up old ranches, adding a second floor and converting them to four square colonials, and so he's buying a three $400,000 ranch that has seen better days and he's probably getting a better deal than that and he's adding a second floor and doing all the bedroom work in the upstairs, bathrooms and playrooms and all that and turn around and selling those for seven figure deals.

Ed Mathews:

So it's in times like this, where the interest rates have climbed and prices have still not dropped or collected. Talk about when you're buying them and you've got to buy them. Conversion is usually one of the few plays left when you're in a market like this. So it's interesting. I'm actually pretty fired up that you guys have embraced that, because that's most lenders. A lot of lenders don't understand that, because it's hard to project the ARV Exactly.

Solomon "Sal" Suleymanov:

That's the problem, because a lot of these lenders were not developers in their past lives or fix and flippers. Right, we move with our developers because we understand we've done conversion plays on our own before as well, so we understand how that demographic works. So it was just beautiful. It on our own before as well. So we understand how that demographic works. So it was just beautiful, it was just a plug and play for us. And we really understand the markets that we're lending in, which is really important. Yeah, and that's also thanks to technology as well.

Solomon "Sal" Suleymanov:

Right, without technology, it'd be hard to do, but, like you were saying, that's like the last frontier right now for a lot of these developers. Right, is the conversion play Also ground up? Right, there's a lot of ground ups going on. We recently just funded for one of our really good developers a beautiful ground up project in Park Slope, brooklyn, which is a very beautiful area. Yeah, that's a very strong market and those people that are buying in that market are really not rate sensitive, which is key, and we'll get into that, which is a nice way of saying they are very well-moneyed.

Ed Mathews:

Yeah, exactly.

Solomon "Sal" Suleymanov:

And like I have like investors coming up to me sometimes, hey, like, what markets would you recommend to me to invest in? And I would always tell them the most important part is going to a market where you know that there's money. These people are not. They're not afraid of spending, they're not afraid of putting more money down in the event that their lender says I have to drop my leverage.

Ed Mathews:

And they're not rate-sensitive, which is huge Because they're dating the rate right. They know that as soon as things rationalize back into the high fives or wherever it's going to go, that they'll refi and be done, and that's assuming they're refiing. They may just be writing a check Exactly. So it's interesting and one of the things that I think you guys have done and have been really smart about is you stick to your knitting right. Yeah, I know it sounds like you do deals across the U? S, but a lot of like your new programs, for instance, are really focused in your backyard, so you can go out and touch it and see for yourself exactly what an investor developer is looking to do, which is great for protecting your investors, which is admirable, because the temptation it would be to spray that capital all over the US and it gets really hard to herd those cats after a while.

Solomon "Sal" Suleymanov:

Yeah, it's very tempting. To date we had zero principal loss, so we funded across 1,300 loans 600 million. Thankfully, to date, zero principal loss in our fund, which, yeah, knock on wood, it feels great and it's really a big thanks to our prior, our past life of being developers and flippers and my partner, moses, which is also my brother. He's really head of credit where he looks at every single loan before we fund it and just make sure that one the sponsor is purchasing a property that they're actually making money on. There's so many lenders out there. I feel like they're more of a loan to own than they're to be a partner to the developer where they don't really care about the economics. The way they're looking at it is hey, you know what? Maybe I'll take over this property in the next couple of years.

Solomon "Sal" Suleymanov:

For us, it's important for these sponsors to be purchasing these properties, that they're making money, right. We want to make sure the exit is clear and there is a profit. But all two is super important for us is their track record right, their experience If someone's coming in for a conversion play and it's their first time flipping a property or maybe this is their second or third flip and now they want to get into this heavy rehab job with a heavy lift, we say, whoa, you got to slow down a bit. We don't really want to. We're not comfortable financing this project unless you come in and partner with someone that has the conversion play experience and listen a lot.

Solomon "Sal" Suleymanov:

Some of these people. They get upset, they don't want to work with us. They go to another lender that funds them and then they come across so many issues and I've personally witnessed that with a borrower that came to us for that loan. He got a loan from another lender, had no experience with converting. It was also a vertical expansion and he saw us maybe like a year and a half later. He's you guys are smart for not lending on this. We're like why I'm stuck in this project right now? He's having issues with the expansion and we're like all right, we understand it sucks, but it's important to be able to partner up with someone that has the experience.

Ed Mathews:

It's really critical right, and it's something that I admired about your business when I was getting ready for our conversation today, and that is that having that experience, from my perspective, is really valuable in three ways. One is, obviously, it protects your investor base. The other two, though, it also protects your clients, right. You can suss out a deal if they're being a little rosy on the projections, whether that's the project scope of work or whatever, or the ARV that's your wheelhouse. It has been for years, and so you're able to suss out if that makes sense. The other part of it is if they feel like they're getting stuck I would imagine a lot of them, the smart ones at least pick up the phone and call you and say hey, what would you do if I just got this curve ball, not really sure what to do with it, what do you think? And so having that experience is valuable.

Solomon "Sal" Suleymanov:

It definitely is. And what I tell my sales guys, too, is you're not just dealing with these people and you're jumping on a call and say, hey, do you have a loan for me? Do you have a deal for me? You want to create value, right? You're like you're adding value to these people, yep.

Ed Mathews:

It's an exchange. You're absolutely right.

Solomon "Sal" Suleymanov:

If the person's having an issue with their GC the GC walked out on their project and we've seen this many times try to connect them with another GC that we have in our database. Or, if they're looking for deal flow, connect them with a wholesaler, you know, if they need an architect, et cetera, like an expediter, whatever it is. Try to connect with these people, with someone, so this project can move along. And one you're helping your client. You're killing two birds with one stone. You're helping your client. And two that client's able to pay off that loan with no issues, right?

Ed Mathews:

And then go do another project, which is exactly. That's right, and so it's a, like I said, it's a value exchange, like you said. All right, hey man, I can talk about this. You've built one hell of a business and congratulations on that. One of the things that we like to do in this show is to get to know you a little bit right, and I want to take you through our lightning round. We call it the final five, do it and basically five questions. Here we go Define purpose for me. What's your purpose? What gets you out of bed on Monday morning?

Solomon "Sal" Suleymanov:

Purpose? That's a great question. I would say family. That's huge for me and my parents came to this country with literally a hundred dollars in their pocket from the former Soviet union. So as a first generation immigrant, I was born here and I still consider myself an immigrant. For us it's like the stability. So the hustle and the drive really translates to stability and just making sure that we're stable and I'm not married yet, nor do I have any kids, but making sure I'm able to provide for my family but also have the stability important for me.

Ed Mathews:

I'm also curious about mentors that you've had along the way, and so what's the best advice you ever got, and who gave it to you?

Solomon "Sal" Suleymanov:

Ooh, that is a good one, the best advice, and who gave it to me? That is a tough question. I recently got a coach great person, great guy. I have two coaches I have a life coach and I also have a business coach. My life coach once said to me you have to slow it down a little bit, just relax and just enjoy what you have. I think that's really important Just slow down, take it easy and look at the picture, see what you've created and just enjoy it. So right on.

Ed Mathews:

I love that. So, professionally speaking, what is the biggest mistake you ever made and how did you recover At least the biggest mistake you're willing to talk about? I think you learn a lot from mistakes, right, so it's an opportunity to learn, yeah.

Solomon "Sal" Suleymanov:

So the biggest mistake? There was one big mistake that we made on a property that we were flipping in New York city once, which was a nightmare of a deal. We were flipping a property in the Bronx I was like a two family home and we decided to save a couple of bucks. So, rather than gutting out the full basement and digging down in the basement and making the basement larger, we're like you know what this property is going to sell, we're going to have no issues, et cetera. So we maybe saved I would want to say $60,000 or $70,000 digging out the basement, we left the property as is. We gutted everything out. It took us about two years to get rid of that property, maybe a little bit less than two years, but we lost money on that deal.

Solomon "Sal" Suleymanov:

We did have a private lender on that deal as well. We borrowed money on it. Of course, he made all the money. We paid him interest on a monthly basis. He got paid out at the end of the day, but I think we lost like $60,000 or $70,000 on that flip. But yeah, the biggest mistake is don't be cheap.

Ed Mathews:

Don't cut coin. I think that's huge yeah right on. So I'm always curious about how leaders like you are sharpening the saw, so to speak, right, whether that's through podcasts or books or audio books or whatever. So I'm curious how do you take in information and who are you paying attention to these?

Solomon "Sal" Suleymanov:

days, so I do it in various ways. I love podcasts. That's one way I get my information. I also read books, so I'm sure you know the author, robert Green. I do. He's a great author. I was actually listening to his audio book this morning. So I also do listen to audio books, but I also do read. There's a really good book that really changed our company around. I believe it's called Measure what Matters. I forgot the author's name, but that's a really good book. It talks about OKRs, your objectives for your company, et cetera. That really helped our company move in a direction that we wanted to move and do what we would want to do with the company in a really great way.

Ed Mathews:

Recommendation for that book came from actually from our business coach, the author of that is a guy I actually used to work for, indirectly. His name was John Doerr, and he is yeah, wow, I just looked it up. I cheated so I had read the book. I couldn't remember who wrote it either, but the yeah, and he's in the pantheon of of great Silicon Valley entrepreneurs. Guy really knows what he's talking about, yeah, and I worked with his sister too, and she was one of the smartest human beings I've ever met in my entire life. I never met him, though, but anyway, so that's great. Yeah, I think I couldn't agree more. It's. Those are excellent books, and Robert Green, I didn't look that one up. Is that the law of 48?

Solomon "Sal" Suleymanov:

Laws of power. There's also another book I'm going to look it up.

Ed Mathews:

Yeah, I'll look them up and we'll put them in the show notes so that way everybody can access them All. Right, last one, what does?

Solomon "Sal" Suleymanov:

success mean to me.

Ed Mathews:

How do?

Solomon "Sal" Suleymanov:

you define it as a company or for my personal stuff.

Ed Mathews:

Yeah, you.

Solomon "Sal" Suleymanov:

I think success for me is this might sound a little weird, but being healthy and having money is great, but I think is using that money as financial freedom. I would say it's huge. Just do whatever you would want to do. Right, if you want to fly out to I don't know, you want to go to Europe tomorrow, you can take your whole family, take a beautiful trip out there. So stability again, that comes from the immigrant aspect of things, financial freedom and, I think, most important, health and your, just your family income.

Ed Mathews:

I mean, it's interesting. So I'm older than you by a lot, I assume, but you always read about the old guy who's on his deathbed and they that guy never wishes he worked more. Yeah, it's always. I wish I spent time with these people. I wish I traveled, I wish I did this, I wish I did that You're. It's very prescient, Okay, yeah, so when not talking about lending or real estate or any of the your professional endeavors, what do you like to do for fun?

Solomon "Sal" Suleymanov:

What do I like to do for fun? That is a very good question. I'm a gearhead, so I love cars. Okay, tell me more. What kind of car? In the summertime, whenever I get a chance, I take my car out on the racetrack Beautiful time. I usually go to Palmer, massachusetts. They have a really great racetrack, sure, or?

Ed Mathews:

Lime Rock is not too far from you too.

Solomon "Sal" Suleymanov:

Yes, you're right, I haven't been to that one, but I'm probably going this summer. I'm also part of a car club, so I usually hang out over there. What kind of cars usually hang out over there? Talk about cars. They have a classic and exotic cars. So you have nice european specs, you have some cool old school porsches like a 993 or like a 964, and then you have american muscle with the beautiful shelbys and the cobras, and then your newer stuff like the mclarens and the ferraris. But yeah, so what do you? I have an amg gtr. Yeah, it's a beautiful car. It's 2020. The handling on that car is insane. I was in the car market. I was trying to figure out if I'm going to get either an Audi R8 or an AMG GTR. Coincidentally, I was in Vegas at the same time, so I was like you know what, let me go to speed Vegas. So they had that track over there, yep. So I took both cars out. I fell in love with it. I'm like all right, I have to pull the trigger on this car. That's awesome.

Ed Mathews:

Congrats and enjoy the hell out of it, thank you. So if folks want to learn more about you, or WeLend, or States Capital, your fund what's the best way to reach it?

Solomon "Sal" Suleymanov:

You guys can check us out on Instagram or on any social media platform. It's WeLend LLC. Or you can reach out directly to me. I'll give you guys my business line it's 212-257-3888. Along with my Instagram. It's Sal underscore Solomons. I'm sure Ed is going to add that to the pop for you guys. Yeah, that's how you guys can reach us.

Ed Mathews:

All right, Sal Suleymanov, I greatly appreciate your insights and your time today. This was a great conversation. I'm grateful for the opportunity to speak with you, so thanks for joining us.

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