It’s no secret that skyrocketing interest rates significantly damaged the private lending industry in 2022. But for New York-based Roc360, the crisis wasn’t about losing ground; rather, it was an opportunity to expand its portfolio.

The company made two acquisitions in the first half of 2023, both direct lenders. The firm purchased Finance of America Commercial in March and added Civic Financial Services (CIVIC) in May. Roc360 Co-Founder Eric Abramovich says the company’s prudence ahead of the interest rate hike led directly to its ability to make the investments.

“These companies were similar in nature in that they were directly affected by the market environment with last year’s interest rates going up faster than they have ever before,” Abramovich said. “That caused a lot of problems for a lot of market players, and both of these were collateral damage. When these acquisition opportunities came up, we were able to plug and play two more brands into our technology and platforms.”

While 2022 brought plenty of bumps and bruises to many lenders, Abramovich compares Roc360’s success during that time to charting a successful airplane flight.

“If you think about a single-engine airplane versus a plane with multiple engines, that’s very similar to what happened to a lot of companies last year,” he said. “Lenders that had only one engine – one funding source – were not able to prudently manage their balance sheets last year. When that one engine went out, they could no longer sustain their business. But when you have diversity of capital and different sources of capital, it will keep you going through tough times.”

Mastering the Basics

Acquisitions are the latest in the ongoing growth of Roc360, a vertically integrated platform servicing real estate investors. Since 2014, the company has grown to more than 300 employees and has been in the business of white-label table funding for third party originators. They have launched several brands of their own including Roc Capital, Elmsure, Wimba Title, Anqa Rewards, and Tamarisk Appraisals.

The success of Roc360 since its inception, especially during times of heightened instability, has not merely been a happy accident. Throughout the years, Abramovich and his partners have relentlessly focused on the most important and basic factor in the business of lending – finance – to guide their decision making.

“You have three variables at play in lending: finance, sales, and technology,” Abramovich says. “Sales is first for a lot of people, or they get enamored with tech and want to focus on that. In a volatile market, however, it’s pretty important to have finance come first. A lot of our competitors had finance as their last priority of the three.”

The Future of Fix-and-Flip

“Roughly $1.6 trillion is spent a year in consumer housing, but only about $50 billion of that is in properties that are getting fixed and flipped,” Abramovich says. “How does that make sense in a country where $25 trillion worth of housing stock is 40 years or older? Something has to unleash that. We don’t know what it is yet, but we envision a day where people are buying and selling houses with the convenience of how they buy and sell stocks now.”

Abramovich references Uber and Facebook as the sort of paradigm-shift examples that he is expecting to see in the residential real estate investment business in the near future – the new business model unlocked by technology that turns an industry upside down. He thinks some of the pieces are already in place, with others, like new advancements in artificial intelligence (AI), quickly on their way.

Harnessing the Right Tech

The intersection of technology and real estate financing is booming. Roc360 is actively identifying opportunities to enhance their operations and provide increasingly innovative solutions for the private lending industry.

“We have proprietary things that are already helping us see where the opportunities are, extract leads, and penetrate the market as much as possible,” Abramovich says. “When you combine AI with outstanding loan management, you unlock the potential to use technology with ChatGPT-like capabilities, allowing you to become more efficient.  It’s not far off. Zillow is already using 3D visualization to let people take tours of properties. During the COVID-19 lockdown, you had people buying property sight unseen because of those tools.”

While COVID and the interest rate hike have presented many challenges, Abramovich believes the path to continued success is by sticking to the core values that have been a hallmark of Roc360 since the beginning.

“There are players out there that misprice loans and do things that enhance their origination volume. Those sales tactics are not always great,” he said. “We believe in one of our core values, which is to be a fiduciary for our investors and make good, responsible loans. We’re feeling good about what we’re doing for Mom-and-Pop real estate investors. Persistence is key. You have to push through the hard times and stay disciplined.”