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Speaker 1: Do you take our worcome to property sites mate?

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Speaker 2: Thank you, thanks for having me Mark, you must welcome.

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Speaker 1: So you are the founder and managing director of arch

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Speaker 1: your Wealth. Maybe just to be a little bit at

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Speaker 1: art your Wealth. You know that where did that company begin?

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Speaker 2: Et cetera Sure sure Archer Wealth? Where private lender based

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Speaker 2: in Sydney Bonda Junction? Where the company began? That's hard

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Speaker 2: to say. I started this in twenty fifteen when I

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Speaker 2: started my mortgage broking business and the goal was really

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Speaker 2: to start a bank, and that's where the journey began,

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Speaker 2: and through friends and family and through mentors, over time

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Speaker 2: it became okay, well, first thing I want to do

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Speaker 2: is solve problems that are imminent that I can actually

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Speaker 2: help with. The key thing I found was there's a

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Speaker 2: lot of i'd say issues that I saw with private

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Speaker 2: lending and that was a good segment for me to

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Speaker 2: start and then eventually turned this into a bank. So

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Speaker 2: everything we're doing right now is a strug way to

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Speaker 2: go from where we were to where we are now.

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Speaker 2: We've done around just over five hundred million in the

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Speaker 2: last twenty four months and that's a direct result of

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Speaker 2: just us following the process of going from a private

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Speaker 2: lending firm to eventually a non bank lender to.

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Speaker 1: A non bank lanker lender. But do you have aspirations

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Speaker 1: India for non bank to ADI like that bank a bank.

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Speaker 2: So funny you asked me that it's yes and no

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Speaker 2: because my friends, who are quite large non bank lenders,

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Speaker 2: they are guiding me into not going down the path

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Speaker 2: of ADI because apparently it's you're going to be restricted.

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Speaker 2: I won't be able to do the things.

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Speaker 1: So I would give you the same advice as I'll

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Speaker 1: give you this exactly the same advice. Well, like, if

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Speaker 1: you want to become a banker, that's cool because we

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Speaker 1: need more banks in astory, we need more competition. But

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Speaker 1: the regulatory environment's pretty tough.

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Speaker 2: Absolutely. I mean, I guess the entire private credit exists

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Speaker 2: off the back of the restrictions that are put on

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Speaker 2: the banks are very very aware.

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Speaker 1: So you don't want to lose the very freedom that

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Speaker 1: you currently have that is making your business a good business.

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Speaker 1: So private lender. Not many people know what a private

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Speaker 1: lender is. So private lenders it's a new term that

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Speaker 1: seems to have been invented by the marketplace, particularly the

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Speaker 1: commentators and the media, and of course in some cases

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Speaker 1: banks don't like private lenders because they're stealing their lunch.

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Speaker 1: And also, you know you're a new formal lender. You're

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Speaker 1: not really a new formal lender, but you're sort of

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Speaker 1: forming a new industry. It never you's been an industry,

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Speaker 1: always been private lenders around, but they has now become

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Speaker 1: an industry. Absolutely an industry. So obviously you're lending money

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Speaker 1: on one side, but on the other side, you want

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Speaker 1: see borrowing money unless you're five hundred millions come out

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Speaker 1: of your pocket. So maybe you can explain where the

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Speaker 1: money that you lend, where that comes from? Sure, how

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Speaker 1: you raise that?

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Speaker 2: I'll give you a quick rundown on how we actually

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Speaker 2: started back in twenty fifteen, I had no funds, had

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Speaker 2: a dream, and it took me four years to get

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Speaker 2: to a place in twenty nineteen to be able to

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Speaker 2: start lending money. Unfortunately, nothing I was doing was working,

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Speaker 2: so I kind of got frustrated and lavished myself and

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Speaker 2: started lending my own money out. And then one of

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Speaker 2: my friends that had found out about it, so he

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Speaker 2: invested five mil from his SMSF and then another friends

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Speaker 2: dad came on board, so all, we had just under

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Speaker 2: thirty mil for a long time until twenty twenty one.

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Speaker 2: Then we started raising money through structured warehouse facilities. Of

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Speaker 2: the two of the top fifty AFI which listers in

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Speaker 2: Australia now back us, one of them has given us

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Speaker 2: a commitment of two hundred mil, so it's been just

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Speaker 2: showing performance over time and currently we're also going through

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Speaker 2: a round one hundred and forty million dollar warehouse. So

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Speaker 2: funnily enough, all the restrictions that are put on the banks,

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Speaker 2: they are still our biggest supporters because we end up

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Speaker 2: getting the funding from them anyway. They're not restricted with

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Speaker 2: upper regulations when they're doing structured warehouse facilities and that's

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Speaker 2: most of the good private lenders in the country today.

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Speaker 1: So what you're saying is that the from not all

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Speaker 1: the banks is probably be maybe one of two banks

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Speaker 1: to do it, probably Westpac and NA, but definitely would

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Speaker 1: be starters. The other ones don't really like doing this,

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Speaker 1: but they give you a warehouse which basically means they'll

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Speaker 1: lend you wholesign money through the investment part of the

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Speaker 1: bank as opposed to the retail other bank, and they'll

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Speaker 1: give you warehouse money but for every one hundred dollars

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Speaker 1: they give you, generally speaking, they ask you to put

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Speaker 1: a bit of your own money and find some correct,

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Speaker 1: find the risk money. So you know, if I lend,

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Speaker 1: I guess I think just for our audience, I think

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Speaker 1: what you're saying is correct me if I'm wrong in

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Speaker 1: your case. But a bank, retail, one of the big

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Speaker 1: banks here will lend you, will give you a warehouse,

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Speaker 1: basically lending your money. They'll give you, let's say, one

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Speaker 1: hundred million for argument sake, correct, they say to you,

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Speaker 1: and these are the things we like you to lend for.

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Speaker 1: So you know, they give you characteristics of the property

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Speaker 1: of the person whatever. But for every one hundred dollars

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Speaker 1: you lend, we'll only fund ninety dollars, and you've got

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Speaker 1: to find ten dollars of your own or something along

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Speaker 1: those lines.

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Speaker 2: A bit worse than that. So yeah, that's why I

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Speaker 2: said one hundred forty mili includes ten mili off your

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Speaker 2: heard many one hundred mili from the bank, and thirty

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Speaker 2: mili is usually measanine lets, but they call many funds. Yeah,

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Speaker 2: they do that for us.

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Speaker 1: Then and the person you're you're you put your million,

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Speaker 1: and that example and you might say I want twelve

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Speaker 1: percent prandom, and the mes might say, well, you know

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Speaker 1: who're putting in the other twenty five million or thirty

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Speaker 1: five million, whatever is, we want, you know, eleven percent.

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Speaker 1: And then the bank who puts in the other hundred

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Speaker 1: they might say, well, we want eight percent whatever. It

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Speaker 1: doesn't really matter, and you blend all your costs correct

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Speaker 1: and you get a blended cost of maybe ten to

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Speaker 1: a half percent on that example something along of those

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Speaker 1: absolutely right, and then you can lend it. Then you

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Speaker 1: go off and lend it to your customer, and you

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Speaker 1: might lend it at twelve and you pick up the difference.

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Speaker 1: So along those lines that.

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Speaker 2: You find it absolutely yes, just the margins are a

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Speaker 2: lot lower and the rates are a lot lower. So

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Speaker 2: the main thing we care about, I mean, it's it's

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Speaker 2: funny the business has changed so much. Mark. When I

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Speaker 2: first started, you had this hierarchy. People will go to

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Speaker 2: the banks, and most of our borrows are either property

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Speaker 2: developers or they're small to medium businesses, and they'll go

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Speaker 2: to the bank. Then they'll go to the second tiers.

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Speaker 2: Then they'll go to their non banks like blue Stone, Liberty,

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Speaker 2: the Trobe. Then they'll go to private lenders. What's happened

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Speaker 2: and what I find so interesting is most of our

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Speaker 2: clients are bankable clients.

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Speaker 1: Now I'll give which you mean by what you mean

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Speaker 1: by that is they can go to the bank.

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Speaker 2: They can go to the bank, but they don't.

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Speaker 1: Why would you?

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Speaker 2: Because the three things that we are amazing at. When

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Speaker 2: I say we, I mean most good private lenders is speed.

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Speaker 2: We can do stuff within days and maybe a couple

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Speaker 2: of weeks, not months. Certainty when we say we're going

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Speaker 2: to do the deal, we've already done the d DR

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Speaker 2: frame we're going to do the deal. And then the

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Speaker 2: last one is flexibility. And flexibility is a big one

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Speaker 2: because a lot of the times banks are rigid in

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Speaker 2: the way they operate through no fault off, they're on.

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Speaker 1: Yeah, there's covenants and all this correct, the complicated stuff correct.

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Speaker 2: So we don't have that. If the deal makes sense,

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Speaker 2: we just go to investors and go, this is a deal.

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Speaker 2: That's how we think we should do it. These are

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Speaker 2: the parameters we're going to work in against going within weeks, so.

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Speaker 1: You don't have the money's sort of sitting idly in

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Speaker 1: an account ready to lend. You go on deal by deal.

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Speaker 1: So like if you're going to lend, yeah, you go

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Speaker 1: to me. You'll take my deal to your investors and say,

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Speaker 1: are you in on this deal? Correct? And you've probably

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Speaker 1: got a whole list of people here you go and

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Speaker 1: see if this personal need to go the next one

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Speaker 1: or whatever.

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Speaker 2: So yes, So we have three ways we find Archerworld.

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Speaker 2: The first one is their structured warehouse that we have

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Speaker 2: that we can draw on really just we need to

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Speaker 2: twenty four hours notice. The second one is peer to

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Speaker 2: peer model where we have a bunch of investors, family officers.

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Speaker 2: We go, hey, there's the deal. We need the funds

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Speaker 2: within twenty four hours to forty eight hours because they're parameters.

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Speaker 2: You take the parameters, money just comes in. The third

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Speaker 2: one is the fund itself that we have where the

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Speaker 2: funds do sit there. We try to avoid calling money

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Speaker 2: into the fund because it's the same investors, because then

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Speaker 2: you pay interest on that.

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Speaker 1: So our goal is always you pay interests on that

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Speaker 1: we do, yeah, well you're waiting to place the money, correct,

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Speaker 1: so we negative carry.

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Speaker 2: Correct, So we try to be efficient with the capital.

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Speaker 2: And that's most private lenders that I know of that

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Speaker 2: operate in the same way.

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Speaker 1: So there has been a bit written about this stuff. Gee,

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Speaker 1: and you know, no, I dare say it's probably fuel

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Speaker 1: by the banking system. But they're saying that there's private

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Speaker 1: lending market is not dodgy, but perhaps is. You know,

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Speaker 1: they're trying to equate it to the GFC. You know,

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Speaker 1: like these guys lending money to people they shouldn't be

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Speaker 1: lending money to, and somehow the whole thing is going

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Speaker 1: to collapse. How do you reply to that? Well, what

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Speaker 1: do you say, particularly if brokers are listening to this

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Speaker 1: because they want to put their clients into this, So

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Speaker 1: what do you say to that? What's your response?

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Speaker 2: Mark? Here's what I'll tell you. Why I started. So

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Speaker 2: I had a client, really old client he I felt about.

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Speaker 2: I'm from Melbourne. So this guy flew down from Perth

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Speaker 2: to come to see me. From Perth to come to

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Speaker 2: see me, and I promised him. And I was a

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Speaker 2: brand new brokers, coming straight out of the big banks.

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Speaker 2: I didn't know there were such thing as fraud at

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Speaker 2: that level. This poor man came in and I gave

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Speaker 2: him a term sheet from this supposed lender. The lender

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Speaker 2: basically said, really great rate, really great lbre but you

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Speaker 2: just gotta pay me fifteen grand upfront, and I convinced

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Speaker 2: my but my, I did some research on the lenders,

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Speaker 2: few people said he was okay. Turns out it was

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Speaker 2: all a scam. Basically, the guy took the money up

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Speaker 2: front and then he just changed the terms completely to

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Speaker 2: the point you couldn't say yes. And I remember just

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Speaker 2: sitting They're going there has to be a better way

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Speaker 2: to do business than that, and that's why I'm like,

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Speaker 2: I want to try it. I'll do it better than this.

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Speaker 2: And then, as I've seen over the last ten years,

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Speaker 2: the industry is completely changed. When I see private lenders,

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Speaker 2: there is still way too many sharks in the industry,

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Speaker 2: and there is way too many broker partners that we

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Speaker 2: also fund, or white label where they pretend to be lenders,

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Speaker 2: but sometimes they don't necessarily do the right thing, where

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Speaker 2: they just charge up front fees and put cavias. That's

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Speaker 2: really wrong way to go about it. The thing I

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Speaker 2: keep hearing and I really really really hope it happens

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Speaker 2: is ACIK is now starting to look into the industry

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Speaker 2: as a whole. I think it's a very very good thing.

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Speaker 2: Regulation is great because all it's going to do is

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Speaker 2: read out the bad players and make it cleaner. Now,

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Speaker 2: there are few really basic things, and I've written about

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Speaker 2: that a lot myself. There's really basic things you can

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Speaker 2: do when you are dealing with private lenders, just basic

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Speaker 2: due diligence. Like sometimes stuff like really low rate, really

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Speaker 2: low upfront fee, establishment fee, but there's a huge upfront

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Speaker 2: fee to get those doesn't sound right. Go to their website,

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Speaker 2: check their Google reviews. Sometimes they don't have an about

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Speaker 2: us page. You don't know who the actual person is

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Speaker 2: that you're dealing with. So it's just just basic due

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Speaker 2: diligence that you can do if you'l the broker or

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Speaker 2: the borrow if you're the broker or the borrow correct.

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Speaker 2: And the second thing is even if some lenders are legit,

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Speaker 2: the main main thing where people come unstuck is terms

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Speaker 2: that are too onerous and people end up in default.

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Speaker 2: I remember I was talking to one of my banks

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Speaker 2: that is doing a warehouse and he said, even one

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Speaker 2: of their borrow lenders has what's called lender to own,

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Speaker 2: So you're basically lending money to people to then buy

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Speaker 2: their houses backwards. You're being aggressive in your recovery.

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Speaker 1: You mean, if something goes wrong.

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Speaker 2: Yes, But the thing is, it's so easy to make

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Speaker 2: things go wrong in the contrast the way they're written,

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Speaker 2: which is why the fair cont Unfair contract terms came

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Speaker 2: into effect in November twenty twenty three. So ACIK is

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Speaker 2: tightening up on this, and I really hope they do

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Speaker 2: it quicker because the industry needs regulation, and I hope

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Speaker 2: it happens.

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Speaker 1: So what do YouTube what's a typical borrower community? Exactly? Like,

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Speaker 1: let's say I've heard these examples, and I mean, I've

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Speaker 1: got to declare early that you are on our panel,

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Speaker 1: Yellow Big Road panel, You're one of our panel lenders.

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Speaker 1: So what about someone wants to buy a house for

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Speaker 1: thirty million dollars, sakes house to live in, but it

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Speaker 1: has to sold their other house for maybe they're trying

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Speaker 1: to trying to sell a house for fifty million dollars.

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Speaker 1: They might just want to get a small house because

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Speaker 1: kids are all left or something like that, but they

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Speaker 1: need to sell the other house. The asset rich cash poor.

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Speaker 1: Is that an example of someone who would borrow for me?

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Speaker 2: Absolutely not no, because that is exactly what ACIK is

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Speaker 2: coming down on lenders. I'm not sure if you've heard

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Speaker 2: about Oak where It's basically these are coded loans. You

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Speaker 2: do not want to play in the colder space, and

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Speaker 2: private lenders like us exist for two reasons. Number one,

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Speaker 2: we're just helping developers. Number two is small to medium businesses.

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Speaker 2: I'll give you a couple examples. So we had a

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Speaker 2: borrow we settled two weeks ago. He ran his tatoo

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Speaker 2: parlor from a basement in Sydney, CBD in one of

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Speaker 2: the buildings. He went to the bank and the bank

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Speaker 2: couldn't work out the value, actually couldn't work out how

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Speaker 2: to value the property, and it just delayed the whole process.

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Speaker 2: The guy was about to lose the actual side because

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Speaker 2: he has been renting there for ten years and he

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Speaker 2: needed to be able to buy it otherwise they were

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Speaker 2: going to sell it to someone else. Now this example,

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Speaker 2: we came in, we settled the deal within We've got

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Speaker 2: the valuation, everything don within seven days, so within ten

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Speaker 2: days the deal was done, just before it was about

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Speaker 2: to the contract was about to expire. Now in this example,

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Speaker 2: the key thing I look for is what is the

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Speaker 2: actual exit Because we are short term lenders anywhere from

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Speaker 2: three three months to thirty six months max. In this

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Speaker 2: specific case, it was a twelve month loan. I said

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Speaker 2: to the guy. He goes, I just want the money

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Speaker 2: for six months. I'll say no, because you're opening yourself

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Speaker 2: up to going into defaults. So rather give you twelve

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Speaker 2: months and then you can get out in three months

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Speaker 2: and that's okay. So the exit was the bank, so

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Speaker 2: actually making sure the guy doesn't get into trouble. So

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Speaker 2: I called up his bank that he was dealing with

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Speaker 2: to confirm whether or not they will take the loan,

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Speaker 2: and they said, yes, We're just need more time to

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Speaker 2: do evaluation.

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Speaker 1: So that's what you might mean by an exit. Someone

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Speaker 1: to refinance the deal, pay you back. And because I

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Speaker 1: think what people need to understand is that these are

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Speaker 1: relatively speaking, short term lines, correct, and you want to

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Speaker 1: because you know, you want to get repaid back in

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Speaker 1: as you said, maximum thirty six months. Whatever the deal is,

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Speaker 1: you agree, but you want to get make sure you

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Speaker 1: get repaid. Part of your due diligence. Your assessment is

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Speaker 1: being convinced that the borrower has an exit correct his

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Speaker 1: ability to exit, you know, maybe in the solar property,

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Speaker 1: or maybe they're you know, so another property, or maybe

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Speaker 1: at least I got the assets that they can sell

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Speaker 1: absolutely or they've got super or something's there that they

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Speaker 1: can actually, you know, get liquidity from what's your minimum loan.

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Speaker 2: Or like one hundred grand? Oh really yes, and why

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Speaker 2: not to do it?

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Speaker 1: But it's always secured, always secured.

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Speaker 2: So maybe I should expand a bit more on what

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Speaker 2: private lending is in general. So private credit is a

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Speaker 2: term that gets thrown around a lot. As for RBA,

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Speaker 2: it makes up two and a half percent of total

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Speaker 2: business debt in Australia, which is around one point six trillion.

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Speaker 2: But that's a forty billion dollar number, which I don't

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Speaker 2: think is right, and neither does ey. Ey estimates it

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Speaker 2: to be at one hundred and eighty eight billion, which

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Speaker 2: includes corporate debt. But what we do specifically is secured

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Speaker 2: against real estate. That part of the market is around

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Speaker 2: seventy eight billion is what ey estimates, which I think

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Speaker 2: is about right. So they're saying it's going to double

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Speaker 2: in the next five years, which doesn't sound unreasonable considering

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Speaker 2: I've seen it ten x in the last ten years

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Speaker 2: since I've been at it. So for me, there's two

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Speaker 2: things that make up a private lender private loan. The

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Speaker 2: purpose of funds has to be business use or commercial

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Speaker 2: development or property development. And the boring entity has to

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Speaker 2: be a corporate entity. So these two things are the

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Speaker 2: key things. And the terms always short anywhere from three

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Speaker 2: to six to twelve to thirty six months.

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Speaker 1: Right, and and your rates well meant.

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Speaker 2: Can I can tell you?

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Speaker 1: So it's a range.

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Speaker 2: The range would be so right now, I'm thinking because

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Speaker 2: of the rates have come down so much. If you're

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Speaker 2: paying say a bank six and a half percent on

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Speaker 2: an interest strongly an investment loan, you'll be paying a

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Speaker 2: non bank seven and a half percent, like drobes and

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Speaker 2: liberties and stuff, You'll be paying us between seven and

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Speaker 2: a half or seven nine nine to eight nine nine.

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Speaker 2: So the rate difference is not actually huge, Yeah, but

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Speaker 2: what it makes difference is when you get the money,

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Speaker 2: the speed is there, the certainties there, and the flexibility

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Speaker 2: is there.

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Speaker 1: Yeah, so you're really private lending is sort of like

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Speaker 1: short term lender correct or short to medium perhaps I

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Speaker 1: don't know, it depends, but definitely short term lender. So

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Speaker 1: it's a bit of a it's a stepping stone for

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Speaker 1: them to get full finance either that or liquid ap

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Speaker 1: asset completely. They've got some sort of plantly. So yeah,

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Speaker 1: because private lenders has all sorts of connotations. There's actually

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Speaker 1: a crappy word. Nearly really you really nearly need to

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Speaker 1: come up with a new word.

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Speaker 2: We call it non bank lending, which is a more term.

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Speaker 1: Yeah, non bank. You're not a bank, You're a lender, correct, Yeah,

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Speaker 1: not not a private lender because private lenders sort of

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Speaker 1: has all sorts of connotations. You're going to get stitched

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Speaker 1: up and stuff like that. And now brokers they have

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Speaker 1: access to your product.

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Speaker 2: Absolutely.

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Speaker 1: Yeah, so you're on pretty much all the brokers panels're

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Speaker 1: on a lot of them.

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Speaker 2: No, So he's the thing YBr was the first lender

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Speaker 2: we wanted to be on the panel with, and the

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Speaker 2: reason for that was, up until now, we didn't need

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Speaker 2: to be on broker panels, on the lender panels, Yeah,

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Speaker 2: because it was just so easy for us to give

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Speaker 2: a great example. At the moment, we look at between

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Speaker 2: four hundred to five hundred million dollars in deal flow

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Speaker 2: every month. Wow, it's just because there's so much business

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Speaker 2: out there and I'll find maybe ten percent. That doesn't

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Speaker 2: mean there is around ninety percent is rubbish. It just

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Speaker 2: means we only want to find ten percent at this stage,

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Speaker 2: and we'll jump it up to twenty percent as we grow.

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Speaker 2: Now having said that, there was normal capacity for me

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Speaker 2: to actually get onto another lender panel aggregator panel. Sorry,

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Speaker 2: and when the opportunity came up, I was a very

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Speaker 2: thoughtful decision because for me it was I value helping

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Speaker 2: small to medium enterprise businesses. I know you guys, do

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Speaker 2: I know you personally do so I need to align

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Speaker 2: myself with organizations that are in the same mission as

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Speaker 2: I am, and that's why we're here.

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Speaker 1: Okay, excellent, So well, I should tell you remember that

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Speaker 1: you can go to the YBr A website to get

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Speaker 1: aybr branch or generally, and we do have this Archer

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Speaker 1: product on our panels and it's been successful and we

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Speaker 1: endorse these guys. So I appreciate your honesty and your

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00:19:06,000 --> 00:19:09,159
Speaker 1: differntns today made then, thanks for introducing the audience to

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Speaker 1: some of which are borrows, some which are brocused, and

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Speaker 1: some of which are small business owners. But thanks for

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Speaker 1: introducing us to the world of private lending. It's actually

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Speaker 1: it's here to stay. Whether that's right now for or not,

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Speaker 1: it's another matter, but it is here to stay. Here

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Speaker 1: is here to stay, and you guys do a great job.

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Speaker 1: And by the way, you're occupying a church with the

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Speaker 1: banks don't occupy, which makes sense to me. Absolutely, everybody's

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Speaker 1: in toil to borrow money if they've got a good purpose.

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Speaker 2: Absolutely. The gap which private lending fills is simply this

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Speaker 2: when the bank's pulled out of funding developers because their

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Speaker 2: income is too inconsistent and small to medium businesses. That

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Speaker 2: is literally why the private credit industry kind of popped

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Speaker 2: up in Australia. What's so interesting for me is in

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Speaker 2: US it accounts for fifty percent of all lending and

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Speaker 2: in Australia it's two and a half percent according to IRBA.

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Speaker 2: I know it's more, but it's my goal is to

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Speaker 2: hopefully at least he's come past ten to fifteen percent

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Speaker 2: of total lending because majority of it is still controlled

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Speaker 2: by banks for good reason.

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Speaker 1: Well stay in the non bank sector, mate, because we

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Speaker 1: need more people like you and stay away from the banking.

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Speaker 1: Jee Tager, founder and managing director of Archwal Thanks for

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Speaker 1: much

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Speaker 2: Thank you so much, Mark, thanks for having me