“Hard Money” Flipper Cashes In On Crisis

After unloading 21 properties in poor New Haven neighborhoods, Wade Beecher kicked the front steps of a porch on Adeline Street — preparing for his next profitable resale of a distressed foreclosed-upon house.

Beecher (pictured) snapped up 38 houses in town starting last October, houses that had been abandoned and left in the hands of often distant lenders during a foreclosure crisis. He fixed up the homes, put in tenants, started collecting rents.

Then in July he unloaded 21 of the houses back to the people who lent him the money at high interest to buy them.

Such transactions, financed by so-called ​“hard money,” are fueling the speedy repair of abandoned houses going cheap in the wake of the crisis. Conducted in the names of multiple hard-to-trace limited liability corporations (LLCs) with terms known only to the parties themselves, the transactions are conducted below the radar by financiers, realtors and experienced property flippers like Beecher. The LLCs help the principals limit how much people can sue them for if deals go bad.

The deals are clearly producing bucks for Wade Beecher. He has picked up another five houses since unloading the last 21 houses, he said while overseeing the final work at 32 Adeline.

Beecher, who’s 53, lives in Branford. He started buying, rehabbing, and reselling New Haven houses 25 years ago, in fits and spurts. Mostly when banks went bust and property became cheap.

“I have houses in Mexico and in Santa Domingo, [bought] from the last time the banks went under,” Beecher said.

“I wait for these times. I make my money on everybody’s misfortunes. I’ll stay in New Haven [this time] probably until May. Then I’ll start branching out to East Haven, Guilford, Branford.”

The ​“Hard” Way

In the current foreclosure crisis, out-of-state lenders have inherited properties throughout the city that they need to get rid of. They use local brokers who know which local investors or rehabbers to contact to take the properties off their hands — people like Beecher.

Beecher knows conventional banks won’t lend him money to buy the houses. They’re not worth much until he fixes them up. So he in turn arranges ​“hard money” deals with people like Juan Miguel Salas-Romer.

An outfit called ​“Sunrise Financial LLC” lent Beecher — or an LLC he created for the transactions — a good chunk of the money to buy a group of 21 homes in Fair Haven, Newhallville, the Hill, and Edgewood last fall. Troubled out-of-state lenders like Washington Mutual had ended up with the houses after borrowers defaulted; in some cases the federal government was in charge of unloading them.

Beecher said he generally pays in the range of 13.99 percent plus 2 points on these ​“hard money” mortgages, far higher terms than offered in conventional loans; and with a quicker turnaround expected for repayment.

The lender looks to get that money back fast, in, say, six months to a year. A borrower like Beecher makes money by quickly doing repairs on the homes, then collecting rents from tenants for a while; the endgame is often to sell the house to another buyer for more money. After 25 years in the business, Beecher said, he has a network of trusted subcontractors who can help him clear out junk, bring houses up to code, and paint them in just three to four weeks. And he has developed a network of good tenants who lead him to other good tenants. He said he likes to wait six more months after completion to resell the property, when he knows the houses are in good shape with solid tenants in them.

Beecher — or his LLC — didn’t technically sell the 21 properties back to Sunrise in late July. He sold them to ​“New Haven Redevelopers LLC.” That LLC turns out to have the same address as Sunrise LLC: a sixth-floor suite at the 900 Chapel St. office building, a suite shared by eight lawyers and lenders.

Juan Salas-Romer is the managing partner of both LLCs, Beecher’s lender and buyer. (The sales prices were listed as $1.)

In the case of the 21 houses, the understanding was that Beecher would give the properties back quickly to Sunrise, Beecher said. Why? Sunrise’s Salas-Romer doesn’t have expertise in repairing houses or finding good tenants, Beecher said. So he was willing to put enough of a profit for Beecher in the deal to take ownership and manage them for a while first.

“We both got what we wanted,” Beecher said. ​“They got their building. I got my money. It was a win-win.”

Salas-Romer gave the same explanation in a conversation Monday.

He said he started his Sunrise lending firm five years ago. He just set up New Haven Redevelopers as a new project, to move into the property ownership and repair end of the business.

In those five years, Salas-Romer said, he has seen conventional lenders pull back from mortgages to help many people buy first homes or fix up distressed properties in the city, especially since the onset of the recession. Meanwhile, a market has grown: working families who no longer can qualify for mortgages and need to rent instead.

He said he’d like to see his firm help repair abandoned properties throughout the city. He’d also like to identify tenants who after a few years would qualify to buy the homes. In some cases they may have a solid record of employment for a year, but banks are insisting on three years. The banks ​“are making a mistake by not going in to this niche market,” Salas-Romer argued. He said he hopes the soon-to-open community lender in New Haven, Start Bank, will fill the gap, along with lenders like himself.

As a property owner, said Salas-Romer, who was born in Venezuela and now lives in Guilford, he’s also looking into how to help ​“save the planet” by installing solar panels in the houses he acquires.

The Tenants’ View

Some of the renters in the 21 houses Beecher returned to New Haven Redevelopers weren’t as pleased to learn of the sales this past month.

In an unusual twist on the urban flipping story, they said they liked their landlord, Beecher. They wanted him to stay.

“Mr. Wade, you called, and he was here the same day. If he didn’t come himself, he sent somebody,” said a first-floor tenant who moved into a Norton Street house in April — and now said she’s considering moving out. ​“He’s cool. He’s older. But he’s real down to earth.”

“Wade was cool,” agreed Theresa Messina (at right in above photo), who rents on Winthrop Avenue, although she said she’s been stuck with a bill she doesn’t owe from the gas company connected to a heater Beecher installed. (Beecher said she doesn’t owe the money; the new landlord does.)

“I was upset with Wade when he sold the property. He said this was one of the properties he wanted to keep. It happened so fast,” said Marie Poindexter, a Milford Hospital head cook supervisor who rents on Brownell Street. ​“He came out of his own bed” to fix a leak in the bathroom, she said.

Rafael Ramos, deputy director of the Livable City Initiative (LCI), confirmed that the city doesn’t receive many complaints about Beecher. ​“His houses are all right. He takes care of his stuff,” Ramos said.

Poindexter and the Norton Street tenant (who declined to give her name) complained about the management company hired by the new owners. They said the company hasn’t responded to requests for repairs. The woman they deal with at the management company said that the ​“transition” in ownership caused a lag, during which the company hadn’t yet signed a contract. She said those problems are being ironed out now.

“Our intent is different from a lot of other investors,” insisted Neal Chorney, an underwriter who works for Salas-Romer. He said New Haven Redevelopers LLC ​“wants to hold onto the property for a good number of years” and take good care of the 21 properties.

Porch Needs Work

Meanwhile, Beecher is off on his next set of flips. Like the Adeline Street house.

Last week the building was buzzing with painters and carpenters and electricians. Debris filled a Dumpster. Fresh paint fumes wafted onto the street. Beecher expected to meet a four-week deadline to move tenants in.

First he looked for missed problems. Kicking the stairs beneath the frame of a new front porch, he noticed a loose board. He promised to fix it.

He waved to a neighbor in the street. The man waved back. Beecher said he counts on the man to watch the house. In return he lets the man use the Dumpster. Tenants and neighbors regularly let him know if he has inadvertently rented to a drug dealer, for instance, so he can boot them, he claimed.

“We all came in the world the same way,” Beecher said. ​“We came in diapers. We’ll leave in diapers.”

Until then, he has a market crash to ride, until it comes time for another trip below the border.

Following are the address of the 21 properties Beecher flipped:
150 Farren Ave.
205 Ferry St.
264 Peck St.
114 Lloyd St.
184 James St.
252 James St.
315 Newhall St.
603 Howard Ave.
176 Bassett St.
32 Harding Pl.
38 Elliott St.
17 Ann St.
613 Washington Ave.
37 Truman St.
15 Downes St.
158 West St.
129 Winthrop Ave.
392 Norton St.
105 Brownell St.
41 – 3 Orchard St.
81 – 3 Mill River St.