New York's private lending market is undergoing a significant transformation as investors pivot from quick-turn fix-and-flip projects to larger, more complex construction loans. Ruben Izgelov, CEO and Founder of We Lend, a private direct lender based in New York, reports that a growing share of the company's loan volume now funds ground-up construction, condo conversions, and building extensions, a trend he expects to continue through the rest of the year.
We Lend has historically been known for financing quick-turnaround fix-and-flip loans in New York and New Jersey, but Izgelov says that reputation is outdated. The firm is backed by the entire capital stack and makes every underwriting and funding decision in-house, allowing it to take on projects that go far beyond standard cosmetic renovations.
According to Izgelov, the standard fix-and-flip model—buying a property, putting $50,000 to $100,000 into cosmetic work, and reselling—no longer generates the returns it once did. Rising costs and tighter margins have pushed investors toward larger, more involved projects. "Our borrowers' returns have been compressing," Izgelov said. "The general fix and flip model doesn't work as much as it used to, so investors have had to get creative, and that requires heavier, more substantial construction and rehab work."
That shift shows up in the numbers. Construction budgets on deals coming through We Lend have grown from $100,000 to $200,000 into the $1 million to $2 million range, and in some cases the construction budget now exceeds the purchase price of the property itself.
Managing the increased risk associated with larger projects requires a disciplined approach. Izgelov said We Lend manages risk by staying narrowly focused on markets it knows well and by requiring documentation most lenders skip. Before financing a conversion or extension, the firm requires an architect's letter confirming the work can proceed as of right, without a rezoning or variance application. On larger jobs, the company also requires general contractors to sign completion guarantees. "We want GCs committed to the project just as much as the borrower is, without having to personally guarantee the loan. They're guaranteeing that the project gets completed," Izgelov said. "That keeps the playing field level between the borrower and the GC, especially when the borrower hasn't worked at this scale before."
Two recent deals illustrate the range of projects We Lend finances. In one, a borrower bought an eight-unit building as a bank-owned property after the previous lender declined to finance improvements. We Lend financed the conversion of that building into 16 fully leased units. The borrower is now in discussions with several banks about a refinance that would return some of the original equity for the next project. In a separate deal in an affluent New Jersey suburb, a borrower was about 85 percent finished building a 22,000-square-foot spec home when a lot line sale to a neighbor required paying off an existing private loan. We Lend restructured and refinanced that loan, providing the payoff along with a small cash infusion to complete the remaining construction.
Izgelov cautions that the biggest miscalculation he sees from fix-and-flip investors moving into larger projects is the timeline. A typical fix-and-flip loan runs six to eight months, while ground-up construction, major conversions, and extensions often take much longer. He advises borrowers to budget carefully for interest payments over that term and to consider built-in extension options or longer loan terms. "We offer 18-month terms, and we've done at least one loan at 24 months," he said. He also warned against building to a trend rather than to demand. "If there's demand for a project of that size or caliber, great. But don't build a mega mansion in a neighborhood that can't support it just because that's the trend."
More information on how We Lend structures its loans is available on the company's How It Works page.
