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Below is our recent interview with Stephen Pollack, CEO at Anchor Loans:
Q: Can you tell us something more about Anchor Loans history?
A: After completing my graduate degree in optometry at UC Berkeley, I opened an optometry practice in Stockton, California, but after a few years I found that I was not passionate about the business and decided to hand that practice off to my partner and explore a career change. I had already started to invest in a few rental properties at that time and had become successful playing poker professionally. I met Anchor Loans co-founder Jeff Lipton during a poker tournament and he later introduced me to his friend, Dan Harrington, who had recently won the 1995 World Series of Poker. Together we found that poker was an excellent training ground for real estate investing because consistently winning at either of them requires a strict reliance on numbers (never luck) and a keen ability to analyze all of the available data. Jeff and Dan became my real estate investment partners, and we all gained experience investing in properties. After a few years, we saw an opportunity to simultaneously provide financing to fix-and-flip investors while offering trust deed investors a healthy return on their investment. In 1998, Anchor Loans had its humble beginnings in a spare bedroom in Pico Rivera, California and within a few months our operations grew, so we rented out commercial office space in Santa Monica. Since our founding, Anchor has expanded into 46 states and D.C., and since 2016 we’ve funded over $1billion in loans every year. We are currently the largest lender in the nation for fix-and-flip financing.
Q: What are Anchor Loans core values?
A: Our number one priority is developing lasting partnerships with our borrowers through excellent customer service. Over 85% of our existing borrowers are repeat customers who have done multiple projects with us over the years—and over 70% of our new borrowers were referred by an existing customer—so developing a trustworthy relationship with borrowers is at the core of our business model.
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Q: What are Anchor Loans biggest accomplishments?
A: Among our most noteworthy accomplishments is the fact that we have been profitable every year since our founding—even through the 2008 downturn when many in our industry suffered devastating losses. Anchor is also proud to have been recognized in 2018 on the Inc 5000 list of America’s fastest growing companies, with 564% growth over the last three years. In 2016 we were the first hard money lender to fund over $1 billion in loans to fix-and-flip investors, and we have continued on that trajectory with over $1.1 billion in 2017 and over $1.4 billion in 2018.
Q: What technological innovations has Anchor utilized to help growth?
A: Anchor’s proprietary fintech is enhanced with artificial intelligence, and it distinguishes us from our competitors with intuitive, streamlined loan evaluation and fast funding. We close loans for our borrowers in as few as 3-10 business days—even faster for a rush deal. Our fintech was developed in-house by our team of financial, real estate and technology experts and it is unique in the way it aggregates and analyzes data. Every aspect of our customer service model is impacted by the speed and accuracy of our fintech, including borrower approval, project evaluation, loan processing, loan funding, construction support, payment automation, default prevention and intervention, and many more of our vital business operations. Anchor’s fintech is at the core of our reputation for fast, reliable funding and it is a key factor in our rapid growth into the number one spot in our industry.
Q: Can you describe the ideal borrower-lender relationship, and say why that is so important?
A: The ideal borrower-lender relationship is built on transparency and mutual trust. It is a top priority at Anchor to provide our borrowers with all of the information they need to succeed and grow their businesses, and we ask loan applicants to help us by being honest about any credit challenges or other possible hurdles Anchor can help with at the starting line. We approach each borrower relationship as a partnership, and we take pride in watching our borrowers benefit from the leverage our financing provides. Anchor was founded by real estate entrepreneurs, so we know first-hand what our customers are facing, and along with financing, we also provide expert advice to help them achieve their goals. In the event one of our borrower falls behind, we have a series of strategic interventions we offer before resorting to foreclosure. Since the credit crisis, Anchor has funded over 15,000 loans and our foreclosure rate is less than 1%.
Q: What has Anchor Loans’ growth strategy been over the past 20 years? When and how has it changed?
A: In the beginning, we saw an opportunity in the market where there weren’t too many options for real estate investors to get quick reliable financing for short-term investments. In terms of locality, we started out in California, but always envisioned growing nationally and we are now lending in 46 states plus Washington D.C. Part of our growth strategy has been understanding and predicting real estate cycles. In 2006, we paid attention to the economic data and we predicted the market would shift—so we tightened our underwriting and leverage accordingly. That forward thinking allowed us to survive during the economic downturn in 2008. Because we did our homework and assessed the risks, we were able to flourish thereafter. A huge part of our growth strategy has been centered around building meaningful partnerships with our borrowers through excellent customer service. We only succeed when our borrowers succeed, so we do everything in our power to help borrowers achieve their business goals.
Q: What are some things you are passionate about, and how do these translate to your business?
A: I am passionate about reading, learning and trying new things – all of which translate to growing and innovating at the company level.
Q: How is Anchor Loans able to process loans more quickly than other lenders?
A: In addition to our proprietary Fintech, we have an in-house valuations team to accurately assess all of the property-related criteria we need in order to fund loans. Our average funding turnaround is 5 days, but we can fund in as little as 48 hours. A large part of our speed and reliability is due to our incredible staff at Anchor Loans, who are experts in their field and are quick to communicate with borrowers throughout the process.
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Q: Where do you see opportunities for growth in the Fix-and-Flip market?
A: Fix-and-Flip investors who have had success with SFR should consider other property types, such as duplexes and other multi-family units. Other opportunities for growth are in developing more efficient rehab processes, and in growing end-user markets—that is, educating buyers of the advantages of rehabbed properties over new construction.
Q: What is one piece of advice you would give a new investor, and why?
A: As a new house flipping investor you must understand the concept of value—as it will be the crux of your success. Accurately assessing value is an acquired skill and it requires going through a list of criteria your project must meet before the process starts. Is the home being sold at a discounted rate? What are the accurate repair costs? How long will it take to flip? Is the house in a good location? Are there schools nearby? What are similar homes currently selling for in that neighborhood? With all of that in mind, what does your after-repair value (ARV) look like? Your ability to accurately assess value will grow with each successful flip, and it is askill you will definitely need to compete and succeed in this industry.
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