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Are Cockroaches Lurking in Real Estate Direct Lending?
By Jan Brzeski, Founder, Sage Credit Investment Partners
Commenting on several high-profile bad loans in private corporate credit, JPMorganChase CEO and Chairman Jamie Dimon recently warned that "when you see one cockroach, there are probably more." Although real estate direct lending has gotten less attention than corporate private credit in the current cycle, it is worthwhile to consider some leading indicators for trouble.
When borrowers and lenders wink at each other, watch out
A recent trip to North Carolina gave me pause. I met a homebuilder selling 7–8 entry-level homes a month under $300,000 across central NC. Strong demand, sound model.
The problem isn't him — it's his lenders. Some are offering 90% financing, with a few loans approaching 100% of project cost. Borrowers are quietly coached that they can get even more leverage if they pad their construction budgets, and originators sell this as a feature. It rhymes with the pre-2008 game of musical chairs: everyone knew it would end, nobody wanted to stop the music. This niche is too small to threaten the broader economy, but when borrowers are being guided to mislead their lenders, something is off.
A 95% loan-to-cost loan has no margin of safety
Lenders defend these loans by pointing to experienced borrowers whose finished projects pencil out to a 70% loan-to-value. Fine in theory. But if the borrower stops executing — say, a health issue — the lender can't realistically take over dozens of half-built homes and recover the full loan.
So why does this niche get leverage that apartment buyers and shopping center developers (typically capped around 75%) never see? A few reasons:
Low historical losses. True, but home values haven't meaningfully dropped since this niche emerged post-2008, outside a few Texas and Florida cities.
Houses are liquid. Plenty of buyers, both investors and owner-occupants.
Wall Street loves RTLs. Residential transitional loans have become bond fodder. Once the securitization machine starts humming, standards drop to keep it fed — and bankers paid.
High-leverage fix-and-flip loans: what comes next
The credit cycle is predictable in shape and unpredictable in timing. Standards loosen, then tighten. The question is always when.
Securitization is where the swings show up first. Think of it as cartilage between slow-moving private markets and the instantly emotional public ones. The window stays open for months or years, then slams shut in days. We saw this in 2008 and again after Covid.
When it slams, the most aggressive lenders — the ones living off cheap Wall Street financing rather than their own balance sheets — stop originating overnight. The disciplined players left standing get to reset terms. We don't know what triggers the next reset. We only know there will be one.
What rational investors can do now
Keep a margin of safety. Require real borrower cash. Not every developer wants 100% financing — some have learned that all-leverage careers come with brutal highs and lows. Lending to the slow-and-steady ones often beats chasing the cowboys.
Be willing to grow slowly, or not at all. Capital is plentiful and the temptation to deploy it on whatever terms are available is real. But the same logic that rewards patient developers rewards patient lenders.
Hunt for overlooked niches. Howard Marks calls it second-level thinking — looking past what everyone already sees. North Carolina is growing fast and a great place to live; but with some homebuilder borrowers being handed near-100% financing, there is real risk for whoever ends up holding these loans. The market is wide. There's almost always a "best available strategy" — a corner where you're paid for the risk you're taking, even when the rest of it is frothy.
What's the overlooked niche you'd point to right now?
Jan Brzeski is the founder of Sage Credit Investment Partners (SCIP). To learn more about SCIP, text him at 310-428-9109 or email contact@scipfinance.com.
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By Jan Brzeski, Founder, Sage Credit Investment Partners
Every lending business runs on two ingredients: capital to lend and borrowers who need financing. When lenders fail, it is because one or both have dried up. Below are some of the leading challenges that trip up non-bank lenders, whether they make loans on real estate or any other type of assets.
Bad loans
One thing I appreciate about investment management is that the score is always on the scoreboard. Every lender eventually takes losses — the question is whether those losses are survivable across a full real estate cycle (typically ten years or more).
A bad track record is like a car that has been through a major crash: impossible to hide, and hard to sell. The single most common reason a lender goes out of business is that investors lose confidence in the leadership team’s judgment. Once that confidence is gone, capital stops coming in.
Poor liquidity mismanagement
A lender can fail on liquidity even when its loans are performing. The causes are varied: expected payoffs get delayed; a fund faces a wave of redemption requests; origination volume outpaces available capital; a credit line gets called; or a construction lender fails to plan ahead adequately for construction draws.
Fund managers need to plan for a wide range of scenarios. Open-ended funds — frequently preferred by wealth managers for income-oriented funds — make this harder than closed-end structures, because redemption timing is unpredictable. Institutional investors in closed-end funds give managers years of runway; retail-oriented open-ended funds don’t.
Inferior returns
Even a well-run fund with a strong track record can wind down if returns fall below what investors can get elsewhere. Capital is patient, but not infinitely so. Returns must be greater than the risk-free rate available from money market funds or treasury bills, and the margin needs to be enough to justify the extra risk and reduced liquidity.
Poor succession planning
Key-person risk is another quiet threat. Many private lending funds are built around their founders, and an unexpected departure or incapacitation can unsettle investors even if the loan book is healthy. Succession planning — a bench of experienced executives who can execute the same strategy — is the mitigation, but it’s more common in larger shops than in smaller ones.
The fear factor
Finally, sector-wide fear can override individual performance. The recent capital flight from corporate private credit is a good example. After years of strong inflows, many open-ended funds are experiencing large redemption requests. Concerns about AI’s effect on software-sector borrowers are real, but probably don’t fully explain the shift in sentiment — investor psychology tends to overshoot in both directions.
When there aren’t enough loans
The mirror problem — not enough loan originations — is less common but worth noting. Without loans, cash builds up, returns fall, and a wind-down eventually follows as the existing portfolio pays off.
A persistent origination drought usually signals one of a few things: uncompetitive pricing; a team that isn’t seeing enough deal flow; or a mandate defined so narrowly that the manager can’t adapt when the market shifts. Sometimes, though, it’s a deliberate choice. A founder nearing retirement, or one who genuinely believes the opportunity set has deteriorated, may decide the right move is to stop making new loans and let the book run off gracefully. That’s not failure — it’s an orderly exit.
Jan Brzeski is the founder of Sage Credit Investment Partners.
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The Second Half of 2026 — Peering around the Corner
By Derrick B. Grüner, Esq., CCMO & General Counsel, RWA Group
I get asked the same question constantly, at conferences, on calls, over dinner: Where is this market headed, and why? Clearly misidentified as an expert, I in fact do not have a crystal ball. After 15 years in the RTL C-Suite, however, here’s how I’m reading the tea leaves heading into the back half of 2026 — and what it means for private lenders financing residential construction across the country’s major metros.
Interest Rates
Let’s start with the variable everyone fixates on. The Federal Reserve has held its target range at 3.50%–3.75% for four straight meetings, and the June Summary of Economic Projections showed officials split — nine penciling in another hike this year, nine others expecting a hold or cut. Barring a genuine market shock unlike what we have experienced in this cycle, don’t expect rates to move more than 25 to 50 basis points in either direction by year-end. When the committee itself can’t agree on direction, betting on a big move either way is a bet against the data and common sense (not always the same thing).
For context, the 30-year fixed has sat in the mid-6% range for most of 2026 — nowhere near the 2.65% low of January 2021, and nowhere near the 18.63% peak of 1981. We’re roughly where the market sat in the early 2000s, hardly an interest rate catastrophe. Builders built and consumers bought through 18% rates. They’ll navigate a 6.5% environment as well. Furthermore, builders are far less rate-sensitive than consumers. A builder underwrites a project’s economics over an 18- to 24-month horizon; a consumer underwrites a monthly payment they’ll live with for 30 years. Conflating those two risk calculations is one of the more common mistakes I see newer entrants make.
We also can’t ignore the “trapped homeowner” effect: millions locked into sub-4% mortgages in 2020–2021 have every incentive to stay put, choking off resale inventory. But life doesn’t pause for the Fed. Families still grow. At the end of the day, three kids and two bedrooms is still three kids and two bedrooms, regardless of what the 10-year Treasury is doing. Rates change the math around the margins — they don’t change the underlying need for supply.
Housing Demand
Our private lending industry is solving the housing shortage one home at a time, but the composition of that solution is shifting. The Urban Institute’s recent research puts numbers behind what many of us feel anecdotally: residential transitional lending, once dominated by fix-and-flip, financed more than $25 billion in one-to-four-family ground-up construction in 2025, plus another $35 billion in renovation lending. Total private lending volume was estimated at roughly $155 billion for the year, with RTL loans making up just over half. Capital is following the actual supply problem, not chasing arbitrage on existing stock.
How big is that problem? Take your pick of estimates. Realtor.com pegs the national supply gap at 4.03 million homes as of 2025, up from 3.8 million the year before. The White House Council of Economic Advisers, using pre-2008 building trends as its baseline, puts the shortfall at 10 million or more. Other estimates — Moody’s, Goldman Sachs, Zillow, Brookings, McKinsey — land anywhere between 2 million and 8 million. The range is wide, but the direction isn’t in dispute: we’re meaningfully underbuilt, and closing that gap will take the better part of a decade at anything close to the current pace.
Two durable, non-cyclical forces drive that gap. First, family formation: in 2025, roughly 1.41 million new households formed against just 1.36 million housing starts, and one report estimates 1.82 million Millennial and Gen Z households were “missing” — unable to form independent households at all, the highest count in four years. Add to this that Millennials overtook Boomers as the nation’s largest generation back in 2019, per Pew Research Center analysis of Census Bureau data, and the gap has only grown since as Boomers age out — a demographic tailwind for housing demand that isn’t going away. Second, sustained in-migration into high-growth Sun Belt metros, where states like Florida keep adding several hundred thousand net new residents a year even as national population growth slows. Neither force is particularly rate-sensitive, and neither is reversing.
New product categories are emerging to help close the gap, and lenders who understand them early will have a real advantage. ADUs are rapidly moving from a fringe zoning workaround to a mainstream financing product — more than 2.8 million permits have been issued nationally, and in places like Orange County, CA, ADU permits (1,916 in 2025, up 40% year-over-year) now outpace single-family permits (1,459). Manufactured housing is transforming too, and to be clear: I don’t mean the trailer parks of decades past. The industry produced roughly 103,000 new homes in 2025 at an average price near $115,000 — under a third of the roughly $400,000 median price of an existing site-built home — with shipments up 5% year-over-year even as site-built starts softened. Both categories require lenders to rethink appraisal methodology, draw schedules, and exit strategy, but the ones who build that expertise now will be well positioned as these products go mainstream.
Affordability
Affordability is the word everyone uses, and almost no one defines the same way. Is it a macro challenge — a national supply-demand imbalance visible in median home price versus median income? Or a micro challenge that plays out differently in every submarket and household budget? I’d argue it’s both, which is exactly why there’s no real consensus on what “affordable” means in practice.
The macro case is straightforward to state, if not to solve: since 2000, home prices nationally have climbed roughly 82% while incomes are up only about 12%, a gap low rates masked for years and higher rates have now fully exposed. The minimum income needed to comfortably qualify for a median-priced starter home is now estimated near $86,000 — above what most first-time buyers actually earn. But a home affordable in one MSA is out of reach in another, and an area-median-income household in a high-growth market may be functionally priced out even as national indices show modest improvement. For example, Florida was once considered a low-cost/low-wage state. It is now a high-cost/low-wage state, putting pressure on both first-time buyers and fixed income retirees. Policy conversations tend to pick one framing or the other and talk past each other as a result. Until builders, lenders, regulators, and policymakers agree on a shared definition of “affordable,” we’ll keep proposing solutions to a problem we haven’t agreed on defining — which is an argument for underwriting market-by-market rather than off national headlines.
Market Survival Pro Tips
In conclusion, if this cycle has taught, or re-taught, private lenders anything, it’s discipline. Capital is abundant, competition for good deals is fierce, and the temptation to loosen standards in the name of growth is constant. A few rules worth posting (or re-posting) above your desk:
Don’t chase loans, choose loans. Volume for volume’s sake is how healthy portfolios turn into distressed ones.
Don’t make a loan you wouldn’t fund out of your own pocket. The simplest gut-check in the business, and it’s astonishing how often it gets skipped.
Lenders don’t dictate the market — the market dictates to lenders. Pricing and structure follow reality, not the other way around.
Meet the market where it is, not where you wish it were, or where it was eighteen months ago.
Remain credit-centric. Collateral matters, but the sponsor and the underlying credit decision matter even more. A strong borrower can navigate a soft market; a weak borrower can blow up a strong one. A collection of weak borrowers and over-leveraged assets can be nuclear.
Create strategic alliances. No single lender, builder, or capital source navigates this cycle alone.
Don’t do stupid [stuff]. Go back through this industry’s losses over the years and, almost without exception, you’ll find someone ignored one of the rules above.
None of this is complicated, but it’s uncomfortable in a market where the pull toward growth is constant. The lenders who keep their footing through the second half of 2026 will be the ones who treat these as rules rather than suggestions — and who understand that patience and credit discipline aren’t the opposite of growth. They’re the foundation of it.
Derrick B. Grüner, Esq. is CCMO & General Counsel of RWA Group.
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Where Derrick and his team put these ideas to work — 15+ years of RTL C-suite discipline serving private lenders financing residential construction across the country’s major metros.
By Kendra Rommel, Co-Founder & Principal, Futures Financial
There's a version of private lending that most people in this industry have forgotten. Or maybe they never knew it to begin with…
It doesn't involve warehouse lines. It doesn't involve a capital markets team, a securitization desk, or quarterly earnings calls with institutional partners who are watching your loan tape like hawks. It involves a person or a small group of people who have built real wealth and want their money to work harder than a savings account or a stock portfolio can. And on the other side, there's a real estate investor with a real project who just needs a lender that will actually show up. That's it. That's the whole idea.
Hard money, at its core, was never supposed to be complicated. It was relationship capital. It was trust made liquid. The high-net-worth individual who funded your deal didn't need a rating agency to tell them the collateral was good. They looked at the deal and the borrower and made a decision. Fast, clear, and painless.
Somewhere along the way, many lenders in this space decided that the path to growth lay in institutional capital. And I understand the pull. Institutions can write big checks. They can fund volume that individual investors simply can't match. If you want to scale quickly, that's the obvious answer.
But here's what nobody talks about openly enough: institutional capital comes with institutional demands. And those demands don't always align with what's actually good for borrowers, or for the deals themselves.
When you take on institutional money, you take on their guidelines. Their overlays. Their reporting requirements. Their timelines have nothing to do with your borrower's closing date. Suddenly, the tension between what you promised your borrowers and what your capital source requires you to deliver is real.
I've watched lenders in this space bend themselves into knots trying to thread that needle. They want the production volume that institutional capital unlocks, but they also want to maintain the identity of a true private lender. And more often than not, one of those things wins. And it's usually not the identity.
Our deliberate choice
At Futures Financial, we made a deliberate choice to stay true to the original model. Our capital comes from high-net-worth individuals who understand real estate and risk, and who choose to put their money here because they trust us. That trust is not abstract. It's earned through performance, transparency, and honesty about what we can and can't do.
That means our underwriting decisions are ours. Our speed is real. When we say we can close, we can close. Not because we have a slick marketing message, but because the people who fund our loans don't have a committee meeting to schedule before giving us the green light.
Am I saying this model doesn't have challenges? Not at all.
Building and maintaining a private capital base is not passive work. These are real relationships that require real communication. When markets shift, when a deal goes sideways, when rates move in ways nobody predicted, you don't send an email to an institution. You pick up the phone, and you talk to people. You explain what's happening and what you're doing about it. That takes time. It takes honesty. It takes a standard of accountability that is genuinely harder to maintain than writing a quarterly report.
Volume isn't the same as a real lending business
We live in a market that pushes production at all costs. Volume is celebrated. Big loan counts make headlines. The implicit message is that if you're not growing fast, you're falling behind. I'd push back on that.
Sustainable growth in private lending is not about how many loans you close in a quarter. It's about whether the loans you closed last year are still performing. It's about whether the investors who funded those deals are still your partners. It's about whether the borrowers you worked with came back to you for the next project. Those numbers don't always make for a flashy pitch deck, but they're the ones that actually tell you if a lending business is real.
There's something worth protecting about the way this industry started. The idea that capital doesn't have to be bureaucratic. That a good deal with a capable borrower can get funded by a person who believes in both. That speed and integrity aren't opposites.
We're not anti-institution. We're just pro-relationship. And in private lending, I think that distinction matters more than ever.
The projects that need painless execution deserve a lender whose hands aren't tied. And the high-net-worth individuals who trust us with their capital deserve a team that treats that responsibility seriously, not as a funding source to be optimized, but as a partnership to be honored.
That's the version of hard money I believe in. And that's the version we're building, one deal at a time.
Kendra Rommel is the Co-Founder and Principal of Futures Financial, a private real estate lender offering bridge, fix-and-flip, ground-up construction, and DSCR loans nationwide. Learn more at futuresfinancial.com.
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Bridge, fix-and-flip, ground-up construction, and DSCR loans — funded by people, not committees. Capital that shows up when you need it to close.
Back to Basics: Why Relationship-Driven Real Estate Investing Matters Again
By Nichole Cloud, Director of Business Operations, Rehab Financial Group, LP
Today's real estate market has forced investors to rethink more than just deal structure. Rising interest rates, compressed margins, and slower dispositions are pushing investors back toward something the industry briefly moved away from: relationship-driven business.
At Rehab Financial Group, we've watched this shift happen in real time, and it's changed how we think about our role in the industry.
For years, real estate leaned heavily into automation and digital networking. The efficiency gains were real, but so was the tradeoff: genuine relationships often took a back seat. Investors aren't just looking for financing anymore. They're looking for trusted partners, honest conversations, and people who truly understand their local markets.
The gap Deals on Draft was built to fill
The idea behind Deals on Draft is straightforward: create a smaller, more personal setting where investors, realtors, and industry professionals can have meaningful conversations. While large conferences and industry events still provide value, there's something different about being in a smaller room where people can speak openly about what's moving in a neighborhood, where deals are stalling, and what they're actually seeing on the ground. That kind of ground-level intelligence only comes from the community.
Because at the end of the day, real estate has always been a people business. For most borrowers, their lender exists somewhere behind a screen. They know their sales rep and not much else. At Deals on Draft, that changes. Borrowers get to meet the underwriters, the CFO, and the people who are actively working on their loans and making decisions. They can ask anything. No filter, no formality.
Speed isn't the whole story anymore
Speed still matters, but it's no longer the entire story. Reliability, communication, and experience have moved to the top of the list. Investors want partners who understand how quickly conditions can change and who will work through challenges alongside them, not just show up when things are easy.
That mindset has always been central to how Rehab Financial Group operates, and it's exactly what we continue to hear from investors across the industry.
The response to Deals on Draft has reinforced something we strongly suspected: people still want to do business with people. In-person events create stronger partnerships, more honest conversations, and long-term opportunities that are difficult to replicate behind a screen.
Our next Deals on Draft event will take place on June 25th in Pittsburgh, and we're looking forward to continuing to build meaningful connections within the real estate investing community.
Technology will always have a place in this industry, but long-term success will belong to professionals who can combine modern efficiency with strong personal relationships. The investors best positioned for long-term success will be the ones who continue showing up, building their networks, and staying connected to the communities where they invest.
Sometimes, the smartest move is simply getting back to basics.
Nichole Cloud is the Director of Business Operations at Rehab Financial Group, LP — a direct private lender specializing in financing for real estate investors nationwide.
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Platform Original · Loan Schedule & General Ledger
When the Loan Schedule and General Ledger Do Not Agree: What Private Lenders Need to Know
By Derrick Foote, CPA & Owner, Duner & Foote CPAs · Irvine, California ·
DunerCPA.com
Private lenders often rely on a loan schedule or servicing platform to monitor individual loans, borrower payments, interest, fees, maturity dates, and other loan-level activity. At the same time, the accounting department relies on the general ledger to prepare the organization's financial statements. Because these records serve different purposes and may be maintained by different people, service providers, or systems, they may not agree automatically.
Some differences may be valid and expected. Others may indicate incomplete information, incorrect classifications, or transactions that were recorded in one system but not the other. The objective of a reconciliation is not simply to force the two records to match. It is to establish a documented bridge showing that the correct loan population is included, activity has been classified appropriately, and significant differences have been identified, supported, and reviewed by management.
Two Records Serving Different Purposes
A loan schedule or servicing system generally maintains detailed information for individual loans. Depending on the platform and servicing arrangement, this information may include:
Original and outstanding principal
Borrower payment history
Interest calculations
Maturity dates
Late charges and other borrower fees
Modifications and extensions
Default and foreclosure activity
Partial and full payoffs
The general ledger records transactions by financial-statement account. It may contain summarized entries and accounting adjustments that are not maintained in the servicing system, including deferred loan fees, allowances, impairment-related adjustments, accruals, and transfers to real estate owned.
Begin With the Same Population
Before comparing balances, management should confirm that the two records cover the same entity, reporting date, loans, and ownership interests. This is particularly important when a private lender:
Services loans for affiliated or unrelated parties
Sells whole loans or participation interests
Retains only a fractional interest in certain loans
Uses separate entities or funds to hold different portfolios
Transfers loans between funds or related entities
Uses a servicing platform containing both owned and serviced-only loans
A servicing report may show the total amount owed by the borrower even when the reporting entity owns only part of the loan. It may also contain loans that the entity services but does not own. Comparing that report directly with the general ledger can create an apparent difference that is actually caused by an inconsistent reporting population. The reconciliation should clearly document which loans and ownership percentages belong to the reporting entity.
Why the Records May Not Agree
Differences may arise when transactions are recorded at different times, classified differently, or entered manually into one system without a corresponding entry in the other. Common causes include:
Transactions processed on different dates
Backdated servicing entries
General-ledger entries posted in summarized batches
Manual journal entries not communicated to servicing personnel
Servicing reports generated before subsequent accounting adjustments
Inconsistent reporting cutoff dates
Delays in communicating modifications, extensions, defaults, foreclosures, or payoffs
Incomplete or failed system interfaces
The existence of a difference does not automatically indicate an error. The concern arises when no one can determine its cause, support the amount, or conclude whether the underlying accounting is appropriate.
Agreeing Totals May Still Hide Errors
A reconciliation should not be limited to comparing one total portfolio balance. One transaction may affect several accounts. For example, a payoff may include:
Outstanding principal
Regular interest
Default interest
Late or extension charges
Legal expenses
Prepayment or other borrower fees
The total cash receipt may be correct even when the individual components are recorded incorrectly. Principal could be overstated while interest or fee income is understated, causing the combined amount to agree while the financial-statement classifications remain incorrect.
For this reason, management should separately reconcile the meaningful components of the portfolio, including principal, accrued interest, fees, advances, participations, and real-estate-owned activity when applicable.
Not Every Reconciling Item Must Disappear
Some reconciling items are temporary. For example, a borrower payment received near period-end may be recorded by the bank before it is posted to the servicing system. These items should generally include an explanation, supporting documentation, the affected loan or account, and the date on which the item subsequently cleared.
Other differences may be permanent because of how the systems are designed. A servicing platform may not maintain deferred fee balances or accounting allowances. It may report the entire borrower obligation rather than the lender's ownership share.
A Practical Reconciliation Process
A useful reconciliation generally includes the following steps.
Define the reporting population. Identify the entity, reporting date, included loans, ownership percentages, serviced-only loans, participations, and any transfers between entities or funds.
Map servicing information to the general ledger. Document which servicing fields correspond to principal, accrued interest, fees, advances, investor balances, and other applicable general-ledger accounts.
Reconcile beginning balances and activity. Whenever practicable, reconcile a rollforward rather than only the ending balance: beginning balance, plus fundings and other additions, less principal collections, payoffs, sales, transfers, and write-offs, equals the ending balance. This approach helps identify when a difference arose and the type of transaction that caused it.
Investigate differences by loan or account. Determine whether each difference relates to timing, classification, ownership, incomplete information, a system limitation, or an error.
Document support and conclusions. Link significant reconciling items to bank records, servicing reports, settlement statements, participation records, legal documents, journal entries, or other relevant support.
Record and review necessary adjustments. Accounting adjustments should be prepared and approved by authorized personnel. Unresolved items should be assigned to a responsible person and tracked to completion or incorporated into a permanent reconciliation bridge. The reconciliation should show who prepared it, who reviewed it, and when the review was completed.
Do Not Wait Until the Audit
The appropriate reconciliation frequency depends on the number of loans, transaction volume, portfolio complexity, system capabilities, and investor or regulatory reporting requirements. For an active portfolio, a monthly reconciliation is often the most practical approach because transactions remain recent and supporting records are readily available. A lower-volume organization may determine that a quarterly process is appropriate based on its operations and reporting requirements.
Regardless of the precise frequency, year-end should not be the first time the servicing records and general ledger are compared. Regular reconciliations help management:
Identify processing and communication problems earlier
Prevent unresolved items from accumulating
Improve borrower and investor reporting
Produce more reliable management information
Reduce the effort required during financial-statement preparation and audit
Management and Auditor Responsibilities
Management is responsible for maintaining the organization's accounting records, evaluating reconciling items, determining the appropriate accounting treatment, and reviewing and approving adjustments.
The auditor may test the reconciliation, evaluate supporting evidence, ask questions about unusual items, and propose adjustments identified during the audit. However, management should understand and accept responsibility for the underlying records, assumptions, and conclusions. An audit should evaluate management's reconciliation process; it should not be the organization's primary reconciliation process.
Keeping Servicing and Accounting Aligned
A loan schedule and general ledger do not need to contain identical information or the same level of detail. They should, however, tell a consistent financial story. A strong reconciliation confirms that both records cover the appropriate loan population, explains differences by financial-statement component, and establishes accountability for unresolved items. When this process is performed and reviewed regularly, private lenders are better positioned to identify issues promptly, improve financial reporting, and prepare efficiently for year-end.
Contact Duner & Foote CPAs to discuss how your organization's loan-servicing and accounting records are reconciled and whether the process is appropriately designed for the size and complexity of your portfolio.
About the Author
Derrick Foote is a CPA and the owner of Duner & Foote CPAs, an
Irvine, California accounting firm serving private lenders and related investment vehicles.
Reach the firm at
DerrickFoote@Dunercpa.com
or (949) 263-0030 · 18818 Teller Avenue, Suite 265, Irvine, CA 92612 ·
DunerCPA.com.
Short-Term Rental Tax Rules: What VRBO and Airbnb Owners Need to Know
By Derrick Foote, CPA & Owner, Duner & Foote CPAs · Irvine, California ·
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With the continued growth of short-term rental platforms such as VRBO and Airbnb, many taxpayers are asking whether these activities qualify for special tax treatment. In certain situations, short-term rentals can provide a significant tax advantage by allowing losses to be treated as non-passive, making them deductible against other sources of income.
Because most rental real estate activities are generally classified as passive under the tax rules (unless you meet the real estate professional standard), this exception can create valuable tax planning opportunities.
The 7-Day Rule
If the average rental period for your property is 7 days or less, the activity may not be treated as a rental activity for passive loss purposes. If you also materially participate in the operation of the property, any losses may be treated as non-passive and could potentially offset wages, business income, and other non-passive income.
What Is Material Participation?
Material participation generally means you are actively involved in operating the rental. Common ways to qualify include:
Participating more than 500 hours during the year, or
Performing substantially all of the work related to the activity, or
Participating more than 100 hours and more than anyone else involved
Please keep in mind that having a property manager can drastically reduce your ability to qualify under the material participation rules.
Common activities that may support material participation include:
Managing reservations and guest communications
Coordinating cleaning and maintenance services
Handling check-ins and check-outs
Managing pricing and advertising
Overseeing day-to-day operations of the property
If Rentals Average More Than 7 Days?
If the average guest stay exceeds 7 days, the activity will generally be treated as a traditional rental activity and remain subject to the passive activity loss rules. In that case, losses may be limited unless another exception applies.
Documentation Is Essential
To support your position, maintain:
VRBO/Airbnb booking reports and rental records
A contemporaneous log of hours worked
Emails, calendars, invoices, and receipts showing your involvement
Records of guest communications, maintenance, and management activities
Short-term rentals can offer significant tax benefits when structured properly. If your average rental period is 7 days or less and you materially participate in the activity, you may be able to deduct losses that would otherwise be limited under the passive activity rules. Accelerated depreciation methodologies become a significant benefit under this scenario if the activity can be treated as non-passive.
Derrick Foote is a CPA and the owner of Duner & Foote CPAs, an
Irvine, California accounting firm serving private lenders and business owners.
Reach the firm at
DerrickFoote@Dunercpa.com
or (949) 263-0030 · 18818 Teller Avenue, Suite 265, Irvine, CA 92612 ·
Contact us.
Constructive Capital · Business-Purpose DSCR Lending
Constructive Capital Earns Top-5 Ranking by The Mortgage Research Network
Constructive Loans, LLC (dba Constructive Capital) · as republished by
REI INK
Constructive Loans, doing business as Constructive Capital, ranked as the fifth-largest lender of real estate investor refinance loans during 2025, according to a Mortgage Research Network analysis of Home Mortgage Disclosure Act (HMDA) data.
The ranking is particularly notable because Constructive Capital earned its position while remaining focused on business-purpose debt service coverage ratio (DSCR) lending, whereas industry giants such as UWM and Rocket also generate significant investor volume through agency loans for non-owner-occupied properties.
Mortgage Research noted that lending to real estate investors differs from traditional owner-occupied mortgage lending and highlighted the diverse mix of lenders serving the market. Constructive was recognized among lenders specializing in financing investment properties, underscoring its expertise in serving real estate investors through their vast mortgage broker network.
“Mortgage brokers have more high-quality wholesale options than ever for serving real estate investors. UWM and Rocket enable brokers to keep many investor loan types within a single platform, such as agency non-owner occupied, and Kiavi has built a strong reputation in fix-and-flip financing. Constructive Capital provides a streamlined business-purpose DSCR lending platform designed to simplify the process, shorten turn times, and help investors compete more effectively in today’s market.”
Constructive Capital is the wholesale channel of
Constructive Loans, LLC, providing business-purpose DSCR lending through mortgage brokers nationwide.
Get in touch with the team at
constructiveloans.com/contact.
The Cost of Being Generic in a Specialized Industry
By Lesley Boyd, CEO & Co-Founder, Parallel Marketing LLC
A prospective client called me last year convinced her problem was visibility. Her team needed more posts, more ads; a bigger presence. I asked her to send over what they were already putting out. Ten minutes into reading it, the actual problem was obvious, and it had nothing to do with volume. Nothing she’d published said anything a competitor couldn’t have said just as easily. Different logo, same words.
That’s the failure I see most often in specialized fields, and it costs far more than it looks like it should.
Generic messaging survives because nobody gets fired for it. Calling a company “trusted” or “customer-focused” is defensible in a way that a sharper, riskier claim isn’t. For a marketing team working against a deadline, that safety is appealing. Nobody has to argue with legal about it. Nobody has to worry it’ll age badly.
But an audience that actually knows the field can tell the difference between safe and substantive almost instantly. Buyers in a specialized industry have read a hundred versions of “innovative solutions” and “customer-first values.” They stopped noticing that language years ago. When a company leans on it anyway, it doesn’t read as professional. It reads as though the people behind it haven’t actually spent much time in the world they’re marketing.
This shows up most clearly on the pages a company treats as least important, the about page, the FAQ, the boilerplate paragraph at the bottom of every press release. Those are usually the first things written and the last things revisited, which means they tend to carry the vaguest language in the entire site long after everything else has been sharpened. A buyer doing real diligence often reads exactly those overlooked pages closely, because they’re looking for the parts a company didn’t spend much time polishing, on the theory that unpolished language reveals what a company actually thinks rather than what it wants to be seen saying.
What Specificity Actually Signals
Naming a real friction point, the specific regulatory pressure, the exact tradeoff a buyer is actually weighing, does something generic language can’t. It tells the reader someone behind the brand has genuinely done the work. That signal carries more weight than any tagline, and it’s also why so few companies attempt it.
Specificity is risky in a way vagueness never is. A specific claim can be wrong. It can be challenged by a competitor, or picked apart by a buyer who knows the subject well. Vague language avoids all of that by saying almost nothing. The tradeoff is that it also fails to say anything memorable, which in a small field where every credible voice is competing for the same limited attention, is its own kind of risk. Just a quieter one.
Back to the client from the opening. Once her team started naming the actual tradeoffs her buyers were weighing instead of the safe generalities, reach became less important. A smaller number of the right people started paying attention, instead of a larger number scrolling past.
The Real Cost, and Why It’s Bigger Now
The expense of staying generic isn’t really the wasted content budget. It’s the compounding cost of never becoming the name someone thinks of first. Specialized industries have a small number of genuinely credible voices. Being remembered requires being distinct, and being distinct requires saying something an audience hasn’t already heard from three other companies this month.
There’s also a newer cost that didn’t used to exist. Vague, safe language gives an AI system almost nothing to cite when someone asks it who the credible options are in a specific field. Specific claims and concrete proof points are what get surfaced. A page full of careful, inoffensive generalities is functionally invisible to a system trying to answer a direct question.
What Leadership Actually Has to Do
None of this gets solved by hiring a better copywriter. It gets solved when leadership is willing to put something specific enough on the record that a competitor could push back, or specific enough that it could theoretically age poorly. That’s an uncomfortable ask for organizations that have spent years rewarding caution in their public language.
It also requires leadership to sit through the discomfort of a first draft that names something plainly, rather than reaching immediately for the softer version. I’ve watched that instinct happen in real time during review meetings, a specific claim gets written, someone flags it as risky, and by the third round of edits it’s been rounded back down into the same safe language the company started with. Breaking that cycle usually takes someone in the room willing to ask why the softer version is actually better, rather than just more comfortable.
The companies I’ve seen actually pull ahead aren’t the ones with the largest budgets. They’re the ones willing to sound like themselves, with whatever friction and specificity that requires, instead of sounding like a perfectly acceptable version of everyone else in the room.
About the Author
Lesley Boyd is CEO and Co-Founder of Parallel Marketing LLC, a
strategic marketing firm that helps organizations in specialized, relationship-driven industries
build brand authority through partnerships, events, and thought leadership. This article is part
of a series exploring how marketing leadership is evolving in modern industries.
Explore Platform →
Platform Original Content · Executive Op-Ed
Elizabeth Morales
No machine has ever stayed awake at night because it could not stop thinking about someone it loved.
Executive Op-Ed
What the Machines Can’t Write
By Elizabeth Morales · A note for anyone wondering what’s still ours to do, now that the machines can write, code, and decide.
Five years ago, I wrote a note called Light Your Own Fire, Kid. It was 2021, and the world had just lived through a year that reshuffled what mattered to all of us. We had watched people we loved through screens instead of across tables. Some of us lost people we loved that year, in ways too fast and too quiet, with no template for how to grieve through a screen. We had learned, the hard way, what we actually could not live without. I wrote the piece so my then seven-year-old could as she got older and young folks would have an easy read on a handful of plain, general rules for living, the ones I wished someone had handed me sooner. I sent them out into the world hoping they would outlast the moment and find whoever happened to need them. I did not think I would ever want to write a sequel.
But that same instinct is the impetus behind this note. Something else has reshuffled the deck since then. Enter AI. No need to spell it out. A machine can now write a first draft in nine seconds, price a decision faster than I can pour my morning tea, and answer almost anything I once had to research for hours or call a mentor about. It is remarkable, and if you let it be, it is also a little frightening, not because the technology is cruel, but because it is neutral, patient, and tireless in a way nothing human has ever been. That is exactly what makes it frightening: it forces a question most of us never expected to have to answer. Now that the machines can do all that, what is mine to do and how do I get the best out of me?
Good news is we’ve been here before, and each time, it was the people living through it, not some future generation, who figured out the answer. What we are living through now is widely called the Fourth Industrial Revolution. The first, starting in the late 1700s, replaced hand labor with steam power and the mechanized loom. Entire trades vanished, but the weavers who lost their looms did not vanish with them. Plenty became the mechanics, foremen, and shop owners who ran the very mills that replaced them, learning a new trade in the time it took to keep feeding their families. The second, around the turn of the 20th century, brought electricity and the assembly line and reorganized how millions of us spent our days. Within a handful of years, the clerks and laborers who feared it most had become the supervisors, tradespeople, and specialists the new factories needed, often working fewer hours for better pay than before. The third, starting in the mid 1900s, brought computers and robotics onto the factory floor and asked office workers to learn an entirely new language almost overnight. The typists and switchboard operators who watched it arrive did not sit still either, many retraining within a year or two to become the programmers, analysts, and small business owners who built the very industries we now call old-fashioned. Every single time, we thought the machine had written our last chapter. Every single time, we picked up the pen ourselves, and the part of us that leads, comforts, imagines, and connects turned out to be the part no machine could touch.
It is not only the great, sweeping revolutions that tell this story. It is closer than that, close enough that most of us lived it firsthand. Blockbuster owned Friday nights until Netflix figured out we did not want to leave the house. Kodak invented the digital camera and then spent years protecting a film business the world had already stopped wanting. The BlackBerry that businesspeople could not put down became a relic within a handful of years once the iPhone arrived. The Walkman went the same way, first to the MP3 player, then to a phone that could do both. Even the car in the driveway went electric again, a century after gasoline first pushed electric cars aside. The dot-com boom that felt like the whole future arriving at once was barely 30 years ago, and Google is not even three decades old. If you are thirty-five right now, you were sitting in a kindergarten classroom the year the internet found its way into ordinary homes, and thirty-five is not old, not even close. That is not a small life. That is a front row seat to more reinvention than almost any generation before us ever got, and it is thrilling, if you let yourself see it that way instead of frightening.
There is a kind of person who wants to see the next wave before it crests, rather than scrambling to catch up once it breaks. Call it restlessness, call it curiosity, call it a refusal to get too comfortable with any one version of how things are done. Stephen Covey called it sharpening the saw: setting aside time to keep learning the next thing before life ever forces you to. More appetite than discipline; a pull toward the edge of what is next before it is safe, or certain, or fully understood. The people who came out ahead through every shift like the ones above were rarely the ones who knew the most going in. They were the curious ones, already halfway toward whatever came next before anyone told them they had to be.
This time around curiosity is still the answer but with this technological revolution there is one important difference. It is not replacing our hands or our factories first. It is reaching straight for the things we assumed were most safely ours: our words, our judgment, our ideas. That is why it feels so personal and why this is not only economic but human as well. But if history has taught us anything, it is this: we do not just adapt to these moments. We use them to remember what was never replaceable in the first place.
If a machine can do so much of what we used to call “the work,” what is actually, unmistakably, irreplaceably ours to do?
I have turned that question as something that reaches into how I lead, how I show up for the people who trust me, how I want to have spent this one life. Here is what I keep landing on:
Judgment is not the same as information.
A machine can hand you every fact ever written down, instantly, without hesitation, and without caring whether it is the right fact for this exact moment. It cannot feel a room shift and adjust. That is judgment, and judgment is not downloaded. It is built the slow way, one hard call at a time, one mistake you never made twice, one gut feeling you learned to trust because it had earned your trust. Use the shortcut for the facts. Guard the long road that built your wisdom. Nobody can walk it for you, and nobody can shortcut it out of you either.
Your voice is not a prompt.
A machine can imitate a thousand writing styles. It can probably imitate mine by the time you read this. But it has never stood in a hospital hallway at three in the morning. It has never watched its own hands shake before a decision that mattered. It has not lived your specific losses, your particular stubbornness, the exact shape of your laugh. Somewhere inside you is a sentence only you could write, built from things only you have survived. Say it. The world does not need another perfect paragraph. It needs your true one.
Presence became the rarest gift you can give.
When everyone can generate more content, more answers, more noise, actual attention becomes almost sacred. Put the phone face down. Ask the second question, the one that shows you were actually listening to the first answer. Remember the name of someone’s kid, their dog, the thing they were nervous about the last time you spoke. People will forget most of what you told them. They will never forget how it felt to be truly seen by you, especially in a year when almost nothing else was looking.
Struggle is not a glitch to route around.
It is tempting, so tempting, to let a tool absorb every hard, uncomfortable, character building moment of your day. Resist that, at least sometimes, on purpose. The struggle is not standing between you and the good life. It is building it, quietly, rep by rep, the same way muscle is built by resistance and not by ease. Outsource all of it and you may end up remarkably efficient and strangely empty. Keep some of the climb for yourself. You will need the strength later, and there is no shortcut to strength.
Empathy does not scale, and it was never supposed to.
A machine can summarize a hundred surveys about how your people are feeling. It cannot sit across from one person having the worst week of their entire year and simply know, without a word spoken, that today is not the day for feedback, that today calls for a cup of coffee and ten quiet minutes instead. I have watched people carry each other through layoffs, through fires, through the kind of years none of us signed up for. Not one spreadsheet ever held someone’s hand. Protect the parts of your work, and your life, that require a human being in the room. They are the parts that matter most.
Curiosity is the only fuel that never runs out.
When answers become cheap and instant, questions become the valuable currency. Ask better ones. Ask why, not only what. Ask what you might be missing, on purpose, out loud, in front of other people, even when it makes you feel uncomfortable. Someone will have the same question. The people who thrive now are not the ones holding the most information. They are the ones who never stopped being amazed by the world enough to keep asking about it.
You still have to choose what is true.
A machine is fluent, and fluent is not the same as correct. It can sound entirely sure of something that is entirely wrong, and it will not lose a night of sleep over being wrong the way you would. Keep your own judgment switched on. Go to the primary source. Trust, then verify, then trust a little more carefully the next time. That discernment, that quiet refusal to accept the easy answer without checking it, might be the most human skill of this whole era.
Community still cannot be automated, thank God.
Mentorship. Friendship. The people who show up at your door when the server is down and the world feels heavier than any bad quarter ever could. That network is still built the old way, one real, awkward, unscripted conversation at a time. Do not let a chat window quietly replace the people who actually hold you up when you cannot hold yourself up. Call them. Don’t text. Call.
Purpose is felt, not calculated.
A model can tell you the statistically optimal next career move, the highest projected salary, the most efficient five-year plan. It cannot tell you what will make you want to get out of bed on a gray Tuesday in February for no reason you could explain to anyone else. That answer does not live in a dataset. It lives somewhere quieter, somewhere only you can hear it, and it is still, stubbornly, gloriously yours to find.
Be the kind of human worth learning from.
Somewhere, right now, a system is being shaped by watching how people work, write, lead, and treat each other when they think no one important is watching. Be someone worth learning from anyway. Be the person who is kind to the new hire, who tells the truth when a lie would be easier, who stays five extra minutes to make sure someone else does not feel alone. Make your small corner of this world a little more honest, a little kinder, a little more alive than you found it. That ripple goes further than you will ever get to see.
That’s the list. Underneath all ten of those, though, there is something simpler I keep coming back to. I think about the people who came before all of this. The ones who built things by hand, who wrote letters instead of prompts, who sat with grief because there was no algorithm to soften it, who fell in love the slow, clumsy, human way, with no filter, no autocomplete, no way to know how the story would end. Not one of them needed an upgrade. They were already, completely, enough. So are you.
No machine has ever stayed awake at night because it could not stop thinking about someone it loved. You have. Staring at a ceiling, running through everything you wish you had said. That is not a flaw in your design. That is the whole design.
You were never here to type the memo, clear the inbox, or outrun a machine built to outrun everyone. You were here for the parts no machine will ever touch. The way you make people feel long after they forget what you said. The scar that made you wiser. The love you have not said out loud yet, to the person who needs to hear it before one of you runs out of time. The fire that was always, only, yours to light.
There is nothing to prove here, and no race to win. Let the machines keep the first draft, the numbers, the noise. Keep the loving, the noticing, the staying for yourself. That was always the only part that mattered.
Light your own fire, still. Someone out there will remember exactly how you made them feel long after they have forgotten every word you ever said. Go be gloriously, stubbornly, unmistakably human, while you still have the time. That is the one part of the story no machine will ever get to write.
About the Author
Elizabeth Morales writes on leadership, resilience, and what remains
unmistakably human in a moment of accelerating change. “What the Machines
Can’t Write” is a companion to her 2021 note “Light Your Own Fire, Kid.”
From PLATFORM · The weekly editorial brief for private lending
The Playbook Is Dead. Most B2B Marketers Just Haven't Noticed Yet.
By Brandwyn Boyle, Co-Founder, PLATFORM
There's a version of a marketing strategy that's been passed around the private lending world for the better part of a decade. Post consistently on LinkedIn. Run targeted Meta campaigns, sponsor the right conferences, build a drip sequence…maybe shoot a video or two. It wasn't glamorous, but it worked, and it worked well enough that most firms stopped questioning it.
The problem is it doesn't work anymore. And the firms that haven't figured that out yet are slowly bleeding reach, wasting their budgets, and wondering why their pipelines have gone quiet.
This isn't a story about the future. It's a story about what already happened and why so many marketing leaders in niche B2B spaces like ours are still operating as if it didn't.
Social Media Reach: The Quiet Collapse
The numbers on organic social media are not ambiguous. LinkedIn organic reach for company pages dropped between 60% and 66% from 2024 into early 2026, the result of algorithm changes in late 2024 that shifted the platform from distributing content based on your network to distributing it based on topic interest. For a niche B2B vertical like private lending, where your entire addressable audience might be 40,000 people globally, that shift was crippling. Posts that used to reach 5,000 to 10,000 people are now pulling 800 to 1,200 impressions. The audience didn't shrink. The platform just stopped showing them your content.
LinkedIn organic reach for company posts: ~10,000 impressions in 2023, ~1,200 in 2026.
Facebook for business pages is in a similar position. Organic reach has sat below 5% for years, with some industry analyses putting the real number closer to 2%. That means if you have 10,000 followers, roughly 200 people see what you post. The platform hasn't been a viable organic channel for B2B since the mid-2010s, but firms kept posting anyway, and most still do.
The reason these channels collapsed isn't complicated. When every company on earth floods the same platforms with the same type of content, the platforms respond by throttling distribution and pushing brands toward paid. That's not a conspiracy. That's just the business model catching up with the marketing strategy everyone copied from everyone else.
Paid Ads: Paying More to Reach Less
If organic reach dying was the first problem, the rising cost of paid reach is the second. And they happened at the same time, which is what made the last two years so difficult for niche B2B marketers who were already operating with smaller budgets than their consumer brand counterparts.
Average CPMs on Meta rose more than 20% from 2025 to 2026, climbing from $11.82 to $14.19. Cost per acquisition jumped 38% in the same window. For B2B advertisers on the platform, click-through rates average just 0.78%, well below the broader industry mean. Meanwhile, Meta now hosts 11.8 million active advertisers competing in the same auction. More bidders, higher floors, and a B2B audience that was never a great fit for the platform to begin with.
Meta advertising costs (CPM and CPA), 2025 vs. 2026. CPA up ~38% year over year.
LinkedIn's paid side is more relevant to our world, but it comes with its own issues. Cost per click on LinkedIn has climbed steadily and now sits among the highest of any major platform, routinely running $8 to $15 per click depending on your targeting. For a niche vertical targeting a small, specific professional audience, you're spending significant budget to reach the same few thousand people over and over again, most of whom have already seen your brand and decided what they think.
The advertising environment got more expensive because it got more crowded. Saturation drove costs up and returns down, and that was well underway before any new technology entered the picture.
Why It Happened When It Did
It's worth being honest about the timeline here, because the narrative that technology broke marketing gets the sequence backward.
These channels were already saturating by 2021 and 2022. The decline in organic reach on Facebook started years before that. LinkedIn's algorithm shift in 2024 was a reaction to a platform already drowning in low-quality brand content, not a cause of the problem. The cost increases in paid advertising reflect years of more brands pouring more budget into the same finite inventory.
AI-generated content has accelerated the volume problem in recent years, flooding feeds with even more material that looks and sounds like everything else. But the saturation that broke these channels was a human achievement. We did it with templated blog posts, recycled graphics, and the mistaken belief that showing up consistently on a platform was the same thing as being seen.
What This Means for the Private Lending Space
Niche B2B markets like ours face a specific version of this problem that consumer brands don't. Our audiences are small and identifiable, which should be an advantage. But it also means saturation hits harder and faster. When the same 40,000 people have seen the same 200 companies posting the same content for five years, the bar to actually get someone's attention is meaningfully higher than it was when these platforms were new.
The firms that pull ahead won't do so by finding a better template or a smarter ad configuration. They're going to do it by returning to something that predates all these platforms: direct, specific, valuable communication with the people they're actually trying to reach. Owned channels they control. Relationships that don't depend on an algorithm to exist. Ideas original enough that people share them because they're worth sharing.
The playbook that worked a decade ago isn't coming back. The CMOs and marketing leaders who recognize that early enough to build something different are the ones whose firms will have something to show for it. The ones still waiting for the platforms to fix themselves are going to keep paying more for less, and wondering why nothing is moving…well, there's your answer.
Brandwyn Boyle is Co-Founder of PLATFORM — the weekly editorial brief for private lending. Two decades in media, ads, PR, and tech across brands including Apple, T-Mobile, Motorola, Turner Broadcasting, ID Analytics, and Symantec.
Building something different?
Reach the private lending industry through PLATFORM
An owned editorial channel that puts your firm in front of the operators, investors, and capital allocators moving the industry — without begging an algorithm to show up.
The Economic & Housing Market Update — and what a Stech Family Office–style investor does about it.
By Dave Stech, Stech Family Office
Let me start by saying: I spent way too many years in corporate America.
And yeah, I was in senior leadership at places like Kodak and Disney…which had its perks. But I also had zero freedom.
And here's the part that hits a nerve for a lot of high-achieving professionals: my problem wasn't ignorance. It wasn't laziness. It was comfort. I was successful enough to stay where I was…but boxed in enough to hate it.
When I finally did leave, it was a clean break—except for one thing: I had to figure out what to do with my 401(k). A well-meaning friend referred me to his broker at Merrill Lynch and I transferred the whole six-figure sum.
I'll spare you the gory details. Let's just say I learned a lesson the hard way.
That's how I'll start today: one win, one lesson—because if you're reading this, you're probably someone who has achieved "success" inside someone else's system… and you're realizing the same thing I did:
You can't delegate your family's financial future to people for whom there's no downside. No consequences. You have to control it yourself.
A quick look back: why my State of the Union is worth your time
My first "State of the Union for Real Estate Investors" was at Harvard 21 years ago.
In 2005, I showed them my research and said, "Get out," and they basically laughed me out of the room.
In 2008 (after it turned out I was right) they invited me back and I told them, "I'm going ALL-IN in Vegas!"
In 2011, after Vegas became the #1 buy-market in the country, they asked me back again and I said: "Go ALL-IN everywhere!"
Those weren't guesses. They were cycle calls—based on the kind of market timing and macro pattern recognition that's been the backbone of how our family invests.
And somewhere in the middle of all that, something bigger happened: my sons joined me. We became the Stech Family Office. And now I get to do three things every day, with my sons: Make Money, Do Good, and Have Fun.
Not long ago, I was introduced at a conference as "the head of the most successful private lending family in America." I remember thinking, wow… look how far we've come in such a short period of time.
And then I had the sobering thought that frames this entire article:
What you don't know, your kids will inherit.
That's not a motivational quote. That's a generational law. So keep reading. :)
Part 1: The Economic Update
The "shape" of this economy isn't a single story
If you're waiting for the economy to feel like one coherent storyline again, you might want to grab some crossword puzzles or something. It's likely going to be a while.
Because this cycle isn't one wave. It's a set of lanes moving at different speeds… and the separation between those lanes is widening.
In other words, there's a strong argument the economy isn't simply "strong" or "weak." It's split.
The technical word for the split: dispersion
In the same economy, outcomes can disperse. They spread out.
High dispersion = high variability
Low dispersion = high consistency
When dispersion is high, you get big gaps in outcomes across households, companies, and asset classes—all at the same time. In other words, a "K-shaped" economy.
And once you see that, you stop asking, "Is the economy good or bad?" (a low-resolution question). You start asking, "Which lane am I in—and what lane am I building my strategy for?"
The K-shaped economy is real (and it's not subtle)
Look at consumer spending. In the aggregate, spending can look "fine," in the sense that it continues to stay positive quarter over quarter (as it did in Q1, in orange).
Source: WolfStreet
But underneath, you can see the K. A narrow cohort is carrying the load: the top 10%. The top 10% of income earners now account for 49% of all consumer spending.
Source: Oaktree Capital
And if you're a high-income professional, business owner, or investor… there's a good chance you're in that cohort. That's not a flex. It's a warning. Because it means:
one part of the economy continues to spend and invest,
while the broader population is increasingly forced into trade-offs.
The stock market is split too
You may own "500 stocks"… but your outcome is not diversified.
Most people look at the S&P and think: index = safety. But in a high-dispersion environment, even "the index" can become a concentrated bet.
As you can see here, market breadth is shrinking; the top 10 largest companies now make up 40% of the S&P's "weight" (in blue). And even more troubling, the top 10 make up 56% of its "risk contribution" (in orange) — meaning if the S&P moves tomorrow, more than half of that move is coming from the top 10.
When the market is cap-weighted and a handful of mega-caps keep getting bigger, you get what I call: the diversification illusion. You own 500 companies… but your outcome is increasingly dominated by the same crowded trade.
And the internal market math is screaming that reality:
A small group of AI-related names has driven over 75% of overall returns since the launch of ChatGPT.
If you strip out the Information Technology sector (where companies like Nvidia, Microsoft and Apple reside) and Communication Services (home to Google and Meta), the S&P would have only returned 6% in 2025.
Source: Oaktree Capital
So the question isn't "Is the stock market up?" The question is: How much concentration risk are you pretending you don't have?
Because when leaders wobble, the entire index starts behaving like a single position.
The Fed is back… quietly
The "Sneaky Fed" and a new sheriff.
After nearly four well-publicized years of quantitative tightening, the Fed has been adding to the balance sheet again—quietly, steadily, and on purpose.
When they do this—when the Fed buys short-dated government debt and credits reserves back into the banking system—you can call it what it is: liquidity support. A form of quantitative easing… even if they don't shout it from the rooftops. They're trying to prop up markets (and GDP) without calling it stimulus.
Now here's the twist: the Fed is likely in for a shake-up here soon. The new Fed Chair—Kevin Warsh—is looking more hawkish, more interested in Fed independence, and more willing to keep interest rates high in the name of controlling inflation.
Whether or not you agree with any one political storyline, the investment takeaway is simple: Don't build your financial strategy on "the Fed will save us."
Historically, easing cycles take years to play out, and they're often messy—rates can go down, then back up, then down again. And even with cuts, you can still live in a world where money isn't "cheap," credit isn't "loose," and borrowers still pay up for speed and certainty.
Hope is not a strategy, as the saying goes.
The labor market: why the script isn't working this time
There's a simple mental model most people carry vis-à-vis interest-rate policy and the labor market:
That intuitive chain of cause-and-effect has basically held true for decades.
Which is exactly why this cycle is confusing everyone: the first part of the script happened… but not the latter.
Easing shows up first in financial conditions and market pricing. But the labor market only truly re-accelerates when employers regain hiring intent. And right now, that intent is not coming back the way the old model says it should.
If we break it down by sector, on a "trend-adjusted" basis (i.e. a "difference from normal" basis)… job openings today are down compared to openings a year ago in 14 of the 17 major sectors.
Source: Mauldin Economics
Even the healthcare sector—responsible for ~53% of all hiring over the last few years—is throttling down job openings.
Bottom line: excluding the post-pandemic volatility years of 2020–2022… 2026 is shaping up to be the slowest year for job growth in a long time.
Source: Mauldin Economics
It's simple technical analysis: the averages step down from ~177K (2023) to ~64K (2024) to ~33K (2025). That is not "still strong, just cooling." It's now a different operating speed.
From a technical-analysis standpoint, once you're in a low-growth channel, you tend to stay there until something forces a reset.
Will more easing force a reset? Eventually, yes, it probably will. But only if the current low-growth channel is primarily a rate/credit-demand problem.
If it's a "structure" problem (i.e. an increasingly K-shaped economy where growth is concentrated, incremental spending goes to capex over headcount, and uncertainty keeps firms cautious), you can have plenty of easing and still not get the labor reset you're looking for.
Part 2: The Housing Market Update
Supply is rising… but the market found a "low-liquidity equilibrium"
Inventory (active listings) has been growing—but the pace has cooled meaningfully. And then something unusual happened: active listings basically flattened for a long stretch in the back half of 2025.
Source: Realtor.com
That "flatline" is a clue. It's the market adapting. Not by blowing inventory out… but by shifting into what I call a low-liquidity equilibrium.
A low-liquidity equilibrium is when the market looks balanced on paper, but only because both sides are constrained—and nobody feels any urgency to blink.
Optional sellers throttle supply because they don't want to give up their mortgage rate (and then overpay for the next house at today's payment).
Buyers ration demand because the payment is punitive. They either can't afford it, or they refuse to.
So sales happen at the margins: concessions, price reductions, negotiation, and time—rather than through high transaction volume.
So yes, inventory is up. But remember, the market is rebuilding supply from a historically starved baseline.
Source: Resiclub Analytics
So two things can be true at once:
We can still be below pre-COVID inventory norms (as we are nationally, and in all the brownish states above),
But the market doesn't feel like a seller's market. It feels more like a buyer's market: low-intent, low-demand, and sluggish.
Demand is sending mixed signals: the funnel is leaking
The housing demand "funnel" is not one number. It consists of three core stages, each with its own metrics.
Financing intent (mortgage applications) typically improves when rates improve. And that's played out for most of 2026: applications have been mostly above the 2025 pace for most of the year.
But "on-the-ground" shopping can stay weak because people run the payment math and bail. And that's what we've been seeing: Redfin's Homebuyer Demand Index—built off requests for tours and other homebuyer services—is down -21% YoY, which is as low as it's been at any point since COVID.
To be clear, these are people raising their hands, not just poking around online. As of mid-March, there are 21% fewer of them than there were when interest rates were ~100 bps higher.
Signed contracts (pending sales) are the final piece of the demand funnel.
In a word, they're looking anemic—near record lows as of Q2'26. And the reason is pretty simple: sellers are anchored to yesterday's price, and buyers are more conditional.
So you end up with a market where more people re-enter at the top of the funnel, but fewer people make it through the bottom. That's not a booming market. That's a low-liquidity market.
Why flippers matter: they're the "edge indicator"
Fix-and-flippers represent a minority of total sales, but they matter because they're the definitional "marginal" participant.
They operate on:
thin time windows,
tight spreads,
and hard constraints.
They're forced to react faster than owner-occupants. So when you want to know where price discovery is heading, flippers are often the canary in the coal mine.
And the data tells an interesting story:
Flip volume has cooled from the peak but stabilized above pre-2020 baselines.
Source: SFR Analytics
Gross ROIs have trended toward historic highs.
Source: SFR Analytics
Which sounds counterintuitive: how can flippers be profiting more in this tighter market? Well, you have to remember what flipping really is: it's a spread business.
When rates rise and the market gets choosy, a lot of amateur, "light-rehab" operators step back. That can reduce bidding pressure on the "ugly" inventory… where many of the true pros live.
And sentiment among flippers improved toward the end of 2025, with many expecting to do more throughout 2026.
Source: JBREC
At an index score of 62, flippers are saying they're more optimistic about the market than they've been at any point in the last 6 quarters (since 3Q'24). In fact, this uptick is the largest quarter-over-quarter jump in 3 years.
As a private lender, that's music to my ears, because it signals something simple:
Active operators still need capital—and they'll pay for velocity and certainty.
The real conclusion: what do you do with this?
Let's cut through the noise. As an investor, there's one thing we can all agree on:
It is incumbent upon you to make the best risk-adjusted decisions you can at every point in the market cycle.
So ask yourself the question we ask ourselves:
What ONE passive investment strategy do you truly believe in right now? What asset class do you have real conviction will generate passive, recurring income with controlled risk in an overpriced, overheated, uncertain environment?
If you don't have that answer, that's not a character flaw. That's just information.
So let's talk about the options objectively:
Stocks? Uncertain—and increasingly concentrated.
"Alternative" assets you don't understand? If you don't control the outcome and you don't know who's pulling strings, you're effectively gambling.
Commercial / multifamily? There may be distress—but most people don't know what they're doing there, and the distress cycle isn't necessarily finished.
Single-family rentals near a market peak? The effort-to-return equation is worse than most people admit, and the old "rules" don't pencil the way they used to.
But there is one strategy that benefits from an environment where:
money isn't cheap,
underwriting is tighter,
and borrowers still need speed and certainty.
That strategy is private (hard money) lending.
Here's the principle
Smart real estate investors pivot throughout a market cycle to optimize risk-adjusted returns.
When the market is at or near peak conditions, we shift away from owning more long-term exposure… and toward controlling real estate short-term. Because when you control real estate rather than own it:
you reduce exposure to downside price risk,
you can still generate double-digit, passive, recurring income (often interest),
and you keep your capital liquid—ready to redeploy when a better opportunity presents itself.
And yes—there are always deals in every market. But in a market like this, great deals are needles buried in haystacks of risk.
So here's the better question:
Wouldn't it be better to find a haystack… where the needles come to you?
That's what being the bank is.
So what should you do next? (3 moves)
1) Make the economy your economy: win The Money Game
Your goal isn't to predict the next headline. Your goal is to build a personal system that does what our Family Office system does:
Generate cash (aka income),
Accumulate wealth (in the form of assets that both throw off cash AND go up in value),
Keep more of both (legally and intelligently, through vehicles like Self-Directed IRAs),
And steadily improve your effort-to-return ratio.
2) Go get the free library (and the advanced ebooks)
Go to justbethebank.com/vault for our Family Office's library of free resources, including three advanced ebooks I've written on private lending—over 100 pages of the most valuable, most ready-to-implement material I've ever put on paper. Yours, FREE.
3) Get on the Market & Investment Alerts list
If you want ongoing research, updates, and investor-grade market insights—get yourself added to the alerts list so you're not relying on the news cycle (or your broker's hot takes) to make decisions.
Dave Stech is the founder of the Stech Family Office and Just Be The Bank. To learn more, visit justbethebank.com.
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What Happens After You Apply for a Residential Transition Loan (RTL)?
By Zach Curtis, Rehab Financial Group, LP
Today's real estate market is extremely competitive, and investors are motivated to move fast just as their capital needs to keep pace. When applying for a loan, borrowers tend to focus on matters such as rates, leverage, and loan terms. However, the subsequent application process is just as important as the terms themselves.
A lender's internal process ultimately determines the speed and efficiency in which it takes a deal to reach the closing table. At Rehab Financial Group (RFG), the post-application phase is structured with intention to reduce friction, minimize delays, and improve certainty of execution.
Part of RFG's purpose is to inform our investors, so they have a complete understanding of what happens behind the scenes. This has proven to aid in a positive experience as informed investors are better equipped to prepare documentation, respond quickly to requests, and stay ahead of deadlines.
Our fix-and-flip loan application method is designed to be a short, yet thorough evaluation, so borrowers can proceed with their projects as soon as possible.
Initial Review: Confirming Eligibility and Alignment
Once an application is submitted, the first step is a strategic review of the deal's core components. This analysis includes evaluating the property type, loan-to-value (LTV), projected after-repair value (ARV), the borrower's experience, and overall project feasibility.
This stage is about alignment between RFG and the borrower. We confirm that the deal fits within its lending guidelines, and both the borrower and us have our expectations clearly defined. When the opportunity meets our criteria, the borrower receives a Term Sheet, which outlines structure, pricing, and key requirements.
Our goal is to remain as transparent as possible to allow investors to move forward confidently, knowing their project has passed an initial eligibility review. While it may be tedious to gather additional information from the borrower, it's imperative we have as much information as we need to ensure all aspects of the loan are cleared to close.
Processing: Review and Services
Once the Term Sheet is completed, the file transitions into the processing stage. At this point, our focus shifts from qualification to verification. Our processors conduct a detailed review of the borrower's documentation, scope of work, budget, and application. Any missing items or inconsistencies are identified and resolved proactively.
Upon completion of that review, third-party services are ordered. Those services consist of an appraisal, feasibility study, and title work. These third-party services protect both the borrower and the lender. The appraisal validates the property's current and projected value, the feasibility study confirms the renovation plan and budget are realistic, and title work ensures clean ownership and clear transfer at closing. Together, they reduce risk and provide the confidence needed to fund the project responsibly.
Processing: Building a Complete Loan File
While awaiting the completion of the ordered services, we prioritize assembling a comprehensive and well-organized loan package first. This preparation significantly reduces downstream delays and unnecessary condition cycles.
For investors working within tight contract timelines, that preparation matters.
One-Touch Underwriting: Reducing Phone Tag
One of the most common sources of delay in real estate lending is repeated underwriting conditions — files unnecessarily going back and forth due to missing documentation or incomplete information.
We refer to this practice as "one-touch underwriting." Avoiding repetitive inquiries allows our team to center on submitting a fully vetted and complete file to underwriting the first time. We streamline the approval process and minimize surprises by gathering all required documents and services upfront.
What does this "complete package" look like? The borrower's completed file has all the necessary documents, services, and complete application — from there the file will be Approved, Denied, or, on rare occasion, sent back to client partners for clarification.
Losing a deal can mean losing months of opportunity in this competitive market. We are focused on giving the borrower fast service to ensure they are not losing out on any valuable time. Providing predictability becomes a significant advantage in the private lending industry.
Why Process Drives Performance
In real estate investing, timing is everything. A structured, proactive loan process — from initial eligibility review through one-touch underwriting — helps ensure that capital is delivered when opportunity demands it.
Competitive rates and strong leverage structures will always matter, regardless of the current market. However, the internal mechanics of a lender's process often determine whether a deal closes smoothly or becomes unnecessarily complicated.
Zach Curtis is with Rehab Financial Group, LP — a direct private lender specializing in financing for real estate investors nationwide.
About Rehab Financial Group
Learn more about Rehab Financial Group
A direct private lender specializing in financing for real estate investors nationwide — one-touch underwriting, transparent term sheets, on-time closings.
