Building Wealth by Building Homes: Why Are We Comfortable with Construction Lending, You Ask?

Most lenders are afraid of land and construction loans, and for good reason. Risks include entitlement risk, cost overruns, schedule delays, mechanics liens, changes in market conditions, and lease-up/sales risk. However, with deep experience in development, construction, and construction lending, we understand the process and see it as an opportunity.

How Does Enact Partners Mitigate the Risks that Other Lenders Fear?

Experience – Enact Partners founder and president, Michael Schumacher, spent 20 years in real estate design and development, at one time working as VP of Commercial Development for a well-known multi-billion-dollar REIT. Chris Meinhardt, our senior underwriter, was a construction project engineer building heavy civil projects including the Toy Story Midway Mania ride at Disney’s California Adventure theme park. He later spent nine years doing commercial real estate lending at Torrey Pines Bank, where he underwrote loans of up to $80 million for retail, medical office, and large-scale speculative housing developments.

Feasibility Review – Our team includes seasoned development consultants who provide us with another set of eyes. They review the project plans, entitlements, vet the contractor’s budget, and consult with various governmental agencies to make sure the borrower’s plan is feasible.

Market Analysis – We have an extensive network of real estate market analysts, brokers, appraisers, and realtors that aids us in keeping a close eye on real estate market changes. We are also active in several industry associations that help us keep our finger on the pulse of the real estate market.

Holdback and Fund Control – At closing, any loan funds allocated to permits and construction are held in our control. We employ a stringent fund control process to ensure that loan funds are only disbursed for work that is already complete, and that all subcontractors are paid for their work. The amount of total disbursed loan funds increases as construction progresses, ensuring that our loan dollars are used to add value to the property.

Helping People Feels Good – Enact Partners and its investors recently financed the construction of 63 brand new homes in Merced, CA and the horizontal construction of 23 residential lots in Big Bear, CA (see above). This project provided jobs for contractors and subcontractors and helped 86 families realize the “American Dream” of owning a home.

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