Welcome to the 7th episode of the #AskAPrivateLender Podcast brought to you by Mortgage Automator. In this episode, we went all the way East to Atlantic Canada. Our guest is Ryan MacNeil, Director of Alternative Lending at Graysbrook Capital. Graysbrook is a household name out East and is regarded as a highly reputable lender.

We talked with Ryan about the specifics of lending in the Atlantic provinces and the challenges some of these markets might present. We also discussed Graysbrook’s recipe for success, their preferred deals, and more!

Listen, watch, or read the interview below. And stay tuned for more episodes coming up!

 

 

 

Lawrence: Ryan, before we get started with Graysbrook and the products you offer, and the type of lending you do, just to find out a little bit more about yourself, how did you get into the private lending space? Was it always something you wanted to do? Did you have other ambitions? Give us the inside scoop.

Ryan: I have definitely a unique path that I’ve pursued to get into private lending. Probably not similar to most, didn’t follow through the bank path. I was actually originally an engineer when I came out of school and quickly realized that that was not the career path I wanted to pursue. After about a year, I decided to go back to business school. I’d always planned on going to business school, but that accelerated my plan. 

I did that and I got into the consumer packaged goods industry actually. I was in Toronto for about a decade. That was an excellent industry, very fast-paced, very competitive, very highly analytical, obviously, sales-driven. So I gained a lot of skills in that space that have helped me transition into the mortgage space and specifically the private mortgage space.

I came over to join Graysbrook in 2017. Graysbrook was originally a family business. It was founded by my father and my uncle back in 2006, they slowly grew the business, and I’m sure we’ll talk a bit more about that, but they were getting to a point where they needed a full-time BDM. They were semi-retired from their previous careers. Neither one of them had mortgage backgrounds either. So they just stumbled into it. Like I said, I joined in 2017, so about three and a half years ago. I basically found out what a mortgage was when I purchased my house about two weeks before starting at Graysbrook.

It was a bit of a learning curve at first, but at the end of the day, it’s just another product to sell. I’m sure you guys are well aware with private lending, it’s not overly complex. You focus on your equity and your exit strategy and those are the two key things. I’ve got to commend the brokers and the industry partners out here in Atlantic Canada as well. They’ve helped me out along the way, and it’s made the transition quite easy. So that’s how I got here.

Lawrence: With your father starting the business, I think you said in 2006, was it something that was always in the back of your mind? Like it’s a business, it’s growing, maybe I’ll be there. Was he someone who was poking you all the time saying, “Hey Ryan, come over here, we have something great for you”? Or was it something that just didn’t really cross your mind until it was that one day where it’s like, “Okay, I’m going to do this.”

Ryan: It was a little bit of poking each other back and forth, I guess, for a couple of years, but certainly we talked about it for multiple years before it actually happened. The timing had to be right, of course. The business had to be at a stage where we could really accelerate growth to justify the incremental hire. But for me, I absolutely loved living in Ontario, I met my wife in Toronto, I had my first kid in Toronto. It was definitely tough to leave and still have tons of good friends up there. But at the same time, being able to come back to the East Coast and the cost of living is a little bit more reasonable out here. It’s several driving factors, having a young family, and obviously the opportunity to join a family business. The stars aligned and the timing was right when I ended up coming.

Lawrence: Let’s talk about Graysbrook. You’re going on 15 years. I know that you just joined in ’17, but I’m sure you’ve heard stories. How has the industry changed where you guys are located from early on to current, or even from ’17 to current? Because there’s a lot of things going on in the world today and people are making moves. They’re pivoting. What are you guys doing right now?

Ryan: Back when they initially started the business, like I said, they didn’t have backgrounds in mortgages, and we were just doing some flips locally in Halifax here. Actually, a pretty prominent mortgage broker had suggested to them, there’s a need for a private lender in Atlantic Canada. You guys should look into that scene. They both looked at each other, and lending money on people’s houses, that sounds crazy, right? 

It was very slow for the first couple of years. I’m sure you guys have seen with the tightening of industry regulations, it was great timing for me in 2017 coming in because that was just getting started. That certainly accelerated the growth in terms of private lending market share, and just being established as the primary brand name out here in Atlantic Canada. Our timing was just perfect to take advantage and ride that wave.

I like to remind them that the substantial growth started in 2017 when I first joined. You put two and two together there… But I can’t take all the credit obviously, with changes in the industry and the brand name having already been established to put us in a good position to take a foothold on the market and just continue growing from there.

Joseph: Graysbrook is a household name on the East Coast. If you ever talk to anybody here, in Toronto or anywhere, and they ask, “Do you know anyone out East?” The first name that comes up from anybody, whether you’re talking about trade shows or anything, it’s Graysbrook. I know maybe you might not have as many competitors as some of the people here in Toronto or BC have, but what did you guys do to differentiate yourself from everybody else to make yourself that household name?

Ryan: I’d say the number one thing that we did is having presence. I mean presence at industry events, at broker socials, or whatever it might be. We aren’t the type to just send our BDM to an event, we want to send whoever we can, right? Our underwriter goes, my father and uncle would often go when they were with the business. We’d often have three to four guys at industry events, and it really made it easier. 

When you’re in a room with 100 brokers and you’ve got tons of different lenders there, you can almost corner the room a little bit. If you have three or four people there, you’re talking to so many different people, and getting your message out there to so many people and in a short amount of time. When we’d get back to the office the next day, we’d have a little pow-wow and chat about who we talked to, who we need to follow up with, and that shaped our strategy going forward. 

I’d say our key thing was having a presence and just being noticed at these events, which is quite important in this industry. From there, I’d say just having a service focus on our broker partners, and speed is another thing as well. We really pride ourselves on our fast turnaround time. I’d say those are the key things, but certainly, presence would be number one in terms of driving the brand.

Lawrence: There’s one thing that I saw on the website that I really liked. I don’t know if it’s changed from what’s going on now, but in-house appraisals. Is that something you guys are still doing consistently?

Ryan: Yes, we do external appraisals for most new deals. But on construction deals, I’ll actually go to a site, talk to the client, confirm their progress. I mean, it’s not too hard to tell if a home is weathertight or not. You don’t always need an appraiser to go out there and check the box. That’s just a little service we offer that can save the client a couple of $100 and make life a little bit easier for them, and you get to develop that personal connection a little bit more.

Lawrence: Product-wise what do you guys do? You guys are doing residential, you’re doing construction. You’re doing reno’s. Tell us what you guys are up to.

Ryan: Yeah, all the standard buckets you’d find with typical private lenders. We started as exclusively residential lenders, your standard equity takeout, or purchases with the strong down payment, but we’ve really found our niche in the last four to five years in the construction and renovation space. That’s really what’s accelerated our growth. 

I’m sure as you guys have seen that, it’s tough for brokers, especially to get solid construction loans and even loans that make sense for a client. We often like to make the comparison that if you’re getting a 4.5%-5% rate at a credit union, and you’re locked in there for five years, vs. going to a private lender, getting your construction done in six months fully open loan, you pay us out when you refinance at a 3% or even less than that in this day and age, you might actually save money. You’re certainly going to save headaches by going that approach, right?

So that proposition has seemed to work and resonate really well with brokers and clients. We often get higher net worth, really strong credit clients coming in for our construction loans. Renovations are another key thing too that we focused on and especially in a market like Halifax that’s fast-growing right now. There’s a lot of opportunity to increase value, especially with rentals. 

We also are starting to focus a lot more on the commercial side of things now as well. Starting to get into some larger stuff there. So that’s the future growth plans, to expand more into this space. But I’d say, for now, it’s certainly been construction and renovations that have been driving the boat for us.

Lawrence: Forgive me, I don’t know the market that well, I assume like everywhere else, it’s a strong market. Like you were just saying, it’s growing. Is there a big market for building residential homes and reselling, or is a lot of the construction stuff for the individual owners themselves, or the rental projects for the owners?

Ryan: I’d say it’s mostly for the owners, but we certainly do a lot of spec homes as well, but it really depends on where you’re talking about too. If you’re in Halifax or near Halifax, that’s a pretty safe, secure market. It would be comparable to maybe like a London or a Kitchener-Waterloo type market in terms of size. Atlantic Canada is very diverse in terms of geography and the population base as well. You can go an hour outside of Halifax and you’re in a town of 10,000 people where your risk profile is completely different. Not only that, we’re talking about four different provinces as well.

In New Brunswick, you’ve got some uniqueness, there’s a couple bigger cities there that we’re happy to lend aggressively in. There are some areas as well that we might not lend at all. Then on top of that, you’ve got Newfoundland, which is completely different and is a more Alberta-like market, I guess. It can be a bit of a boom/bust based on the economy right now. Very dependent on oil and gas of course. 

So we’re much more cautious in that market, at least in times like this, where there’s a substantial amount of unemployment. Stuff might get scrutinized a little bit more there, but we still actively pursue deals, especially in the St John’s area of Newfoundland.

Lawrence: What made you guys decide to expand from just Halifax to PEI, New Brunswick, and Newfoundland?

Ryan: I’d say it was both New Brunswick and Nova Scotia that we started in. It was Halifax and Moncton, Fredericton, St John are the key New Brunswick markets that we started in. The benefit we had, I mentioned none of us really had backgrounds in mortgages, but we’d all lived in several different areas in the Atlantic market, including our underwriters. In most areas of Atlantic Canada, at least one of us would have lived in or would have pretty good knowledge of the market and whether it was a good area to pursue. So that was a key thing for us, and especially going to Newfoundland.

Newfoundland is a significantly different marketing, and it’s actually quite far away. A lot of people are surprised when I tell them it’s quicker to drive from New Brunswick to Toronto than it is from New Brunswick to St John’s. You have to either fly or take a boat to get to Newfoundland, right? Like I said, it’s quite a different market. 

Luckily Derek, my uncle, lived there for several years. He worked with ExxonMobil before starting Graysbrook. He has a very strong market knowledge there. In my first couple of years, we’d go over there together, explore some different towns and areas that we were interested in lending in. So I could get a better sense of it, but you know what? It’s just having the knowledge of the markets, I think that’s been the key thing and in allowing us to feel comfortable enough to expand to the different provinces.

Joseph: Sure. Because I know Quebec, which is a six-hour drive from, let’s say, Toronto, totally different rules. Real estate’s fine, it’s strong. But the rules with notaries, instead of lawyers, I wanted to ask you, how did you guys deal with different legal rules and which provinces are more pro-lender and which ones are more pro-borrower?

Ryan: I’d say all of the markets out here are probably more challenging than Ontario by the sounds of it. New Brunswick and Nova Scotia are okay. The process that you have to go through, it’s not so bad from a legal perspective. 

Newfoundland, I’d have to say, it again is probably the most challenging there. They’ve got laws that were, I think, last updated in 1949, if I’m not mistaken, stating the max amount a broker and a lender can charge as a fee. The way we typically do it, we’d have a fee of a couple points plus our rate in the Maritime provinces. But in Newfoundland, we had to adjust and we basically shot our rate up a couple points more, and then our fees were kept at 1%.

So that was a bit of getting used to. What we’ve done to adapt there is just, we’d typically do fully open mortgages. In Newfoundland, we have some that are closed terms just to allow us a little bit more flexibility, but we always maintain that flexibility with the broker and the client as well. 

If someone’s had a perfect payment history and they have an opportunity to move on from the loan, we’re not going to stop them and charge them a three-month interest penalty in every single scenario. We’re always flexible with something like that, it’s just more so to protect us if need be.

Lawrence: Have you ever thought about coming to Ontario?

Ryan: It’s definitely something we’ve discussed. With COVID now that’s put everyt